It is a great pleasure to serve under your chairmanship, Mrs. Humble. We know each other from our work on the Select Committee on Work and Pensions in years gone by.

I am particularly pleased to have this opportunity to review with the Minister the state of health care in Shropshire. I will mostly discuss the facilities in my constituency of Ludlow, but I will touch on the county’s wider health care economy. I am delighted to see so many colleagues from Shropshire here today. I will, of course, be pleased to accept their contributions, which may be more focused on the acute hospitals in their constituencies, whereas I will focus mostly on the community hospitals in mine.

I begin with a slight sense of déjà vu. One of the first Westminster Hall debates that I was fortunate to secure in the year following my election to this place was on the same topic of health care services in Shropshire. That debate was held on 25 January 2006, during the period in which I was helping to lead the campaign to save all three community hospitals in my constituency, which faced the real threat of closure because of severe financial deficits in the local health care economy.

I fear that we are in danger of coming full circle, because after a couple of years of getting NHS finances in Shropshire into balance, the county again faces a severe deficit. However, before I turn to those issues and look to the Minister for some answers, I would like to touch briefly on some positive achievements in Shropshire health care since those dark days.

I recall a cold, wet Saturday morning a couple of weeks before that debate in early 2006, when I led a march of more than 4,000 people from a rally in the castle grounds in Bridgnorth to the community hospital, which was threatened with closure. Within two years, Bridgnorth community hospital had been transformed, with the opening of a new wing re-establishing the maternity unit with additional out-patient services and clinics. The hospital’s manager, who oversaw that significant redevelopment, has just been promoted, and rightly so—Bridgnorth’s loss will be Wolverhampton’s gain. I place on the record my thanks to her and to the Bridgnorth general practitioners, particularly Dr. Pam Yuille, who campaigned so hard to ensure that that development went ahead. The town’s GP practice has also been relocated to a new purpose-built health centre adjacent to the hospital, with improved parking and access for the GPs to in-patient beds next door.

On the same day in January 2006, some 2,000 people marched through the streets of Bishops Castle to demand that Stone House community hospital should be saved. This was a much tougher fight for lots of reasons, not least because of divisions within the community that we resolved in part through the establishment of the Bishops Castle Stone House forum, which I was pleased to chair and through which Shropshire County primary care trust and all interested groups in the community could work together to support refurbishment of the hospital, which I am pleased to say is under way.

Shropshire County PCT, led by its responsive chief executive Jo Chambers, is investing some £1.2 million in that major refurbishment, the first phase of which took place in 2008-09, with an upgrade to the roof and new windows. In the completed project there will be a new main entrance and much-improved reception area, 16 in-patient beds, of which four will be en suite single rooms, and a significantly expanded out-patient and ambulatory care zone, which together will enable an extended range of GP, nurse and therapy-led clinics to be delivered locally.

The redevelopment will occur in two phases. The first phase, which commenced last month and will end in October, will mainly refurbish the in-patient areas and the second phase—from November, concluding in March 2010—will focus on out-patients and the ambulatory physiotherapy areas. During the refurbishment, existing services continue to be provided locally, which is critical given the physical isolation of this very rural population, which is served by the community hospital.

There will be 10 in-patient beds remaining available throughout the build period and out-patient clinics will be moved temporarily to the Bishops Castle GP practice, although physiotherapy will remain on the site. One of the 16 in-patient beds will be a bespoke palliative care patient room with an adjoining relatives’ room and shared access to a walled garden outside. This will become increasingly important as the ageing demographic of the area places greater demands on end-of-life care. I will return to that in a moment.

This has been a real community effort, with significant input to the design of the facilities by local GPs and hospital staff, and fundraising for equipment organised by the hospital’s league of friends and staff, who, with the PCT, have secured Department of Health-King’s Fund funding through the Enhancing the Healing Environment programme, which the Minister will be familiar with. I shall single out a local GP, Dr. Adrian Penney, who raised some £10,000 for this palliative care scheme by participating in the five peaks challenge last year. Those people are all to be congratulated, and those are the two main success stories in my part of Shropshire in recent years.

I congratulate the hon. Gentleman on securing the debate. Does he agree that the experiences that he has described are a role model for what could be done on my side of the border, right next to him, to carry on supporting the operations of Welshpool, Machynlleth, Llanidloes and Newtown hospitals, all of which have been threatened with closure at certain times? He has proved that a proper strategic initiative, led by him and supported by local people, supports local health services and is ultimately cheaper than shutting local services down and sending people to district hospitals.

I am grateful that the hon. Gentleman has joined today’s debate, not only because we share a border—some of his constituents will take advantage of the facilities in Bishops Castle, because it is adjacent—but because Shrewsbury hospital is the main acute centre for his constituents. We share a lot of health issues in Shropshire and across the border into Wales, but although he is right in saying that it is important that the local community get together and work with the local commissioner, I suspect that the Welsh Assembly plays an important role with regard to his constituents.

I would like to say well done to my hon. Friend on securing the debate. Acute hospitals have been mentioned. Given Shropshire’s growing population—on the Welsh border side of the county, on the eastern side and on the south-eastern side, where that affects his constituents—is it not vital that the acute hospitals retain their 24-hour, seven-days-a-week accident and emergency facilities, particularly the paediatric unit at the Princess Royal hospital? Does he agree that it should not just have a sign over the door showing that it is open 24 hours a day, seven days a week, but should deliver consultants and doctors throughout the night so that his constituents, and mine on the eastern side and in central parts of the county, are not rushed, under threat and by blue light, all the way over to Shrewsbury?

My hon. Friend makes an important point, particularly for his constituents, who have the benefit of the Princess Royal hospital, with its A and E unit.

I will mention some of the pressures that the whole county is placing on the two A and E units, because it is clear that there has been a significant increase in A and E usage and I would be interested to hear the Minister say whether that is a national problem or one that can be solved locally, perhaps through more efficient processes for helping people to get out of the acute hospitals, freeing up beds to help to address some of the problems in A and E.

Let me mention some of the difficulties. There are three primary challenges to health care in Shropshire, particularly in my part of the county, which I urge the Minister to address in his speech. Four years ago the financial deficits in Shropshire were centred on the acute hospital trust, which had racked up more than £34 million of deficits under its previous management. The current chief executive, Tom Taylor, and his team have done a good job in turning around the fortunes of Shrewsbury and Telford Hospital NHS Trust, which is working hard to achieve its goal of foundation trust status with the aim of submitting an application for that status by the end of the year.

Active financial disciplines have been introduced so that from peak losses of some £12 million annually, the trust is on track to generate in the current financial year its second successive surplus of £4 million from an income base of some £247 million—just over a third of the total spent in the county by the NHS. A consequence of restructuring the acute third of Shropshire’s health care economy has been to shift the financial deficit from the acute trust to the commissioners, primarily Shropshire County PCT, which will have a deficit of £11.5 million in the current year if no action is taken.

I agree with my hon. Friend about progress on reducing the deficit, but does he agree that a large part of that deficit resulted from the previous chief executive, who submitted a fake CV and had inappropriate qualifications for being a chief executive? When I tackled the then Secretary of State for Health about the matter, I was told that not everyone’s CV can be checked. I hope that my hon. Friend agrees that the Government have learned from what happened in Shropshire and that the CVs of those who apply to become chief executives of trusts will be better scrutinised.

My hon. Friend raises two important points. One is that due diligence when recruiting for senior health service posts has had to improve, and it has. Secondly, a more fundamental point is that under this Government NHS restructuring has given rise to the opportunity for administrative chaos, which unfortunately beset Shropshire in the Government’s earlier years. In 10 years, they have introduced nine complete reorganisations of how health care is administered in this country. With such dramatic changes at all levels in the health service, it is not surprising that there were management failures.

When some 300 PCTs were introduced more or less overnight, the Government had to find suitably qualified managers to manage each PCT and acute trust. They found that challenging, and one of the worst examples of poor recruitment occurred in Shropshire’s acute trust. That problem is behind us, and I hope that the Government have learned how to recruit and how to minimise reorganisation. I believe that reorganisation is off the agenda for the time being, which is very welcome.

On the specifics of the deficit, first, it is not yet crystal clear to me how the deficit has arisen, but we have been told by PCT management that some £4.5 million of the £11.5 million annual deficit relates to what it describes as legacy issues in the contract with the acute hospitals relating to underlying demand. I think that is code for difficulty in assessing the tariff introduced through payment by results in relation to the actual cost of the procedures performed, or difficulty in estimating the demand for service involved with moving from one system to another. It is not clear exactly what it means.

The second aspect, which is more identifiable, is that some £2 million of cost from new investments in key service developments—in upstream interventions and preventive services—has helped to contribute to the deficit.

The third aspect, and the one for which the Government have most responsibility, is the introduction of the national payment-by-results tariff, which directly increased the contract between the PCTs and the acutes by some £4.5 million for no additional activity. The deficit is being shunted from one side of the health care economy to the other. Is the movement of resources from one side to the other—from primary to secondary, or vice versa—indicative of a national problem? If it is local to Shropshire, will the Minister give some guidance on how it can be resolved and whether experience from other areas can be brought to bear?

Another significant issue relates to capacity constraints in the Shropshire health care economy, most of which result from Shropshire’s peculiar demographics. The Minister, who comes from an almost neighbouring constituency, will be familiar with the attractions of Shropshire as a place to live. We benefit from significant inward migration of retired people. The county has an above-average population of over-65s and an above-average and increasing population of over-85s. That is significantly above average in my constituency in the southern third of the county. At the last count, almost 25 per cent. of the population was over 65, and the proportion of over-85s is rising rapidly. That inevitably puts demands on our health service that commensurately affect other areas with less.

One of my concerns, which has been highlighted in material provided by some of the GPs who have contacted MPs in recent weeks, is that a lack of recognition of the demographic challenge in allocating funds from the Department of Health to providers around the country is giving rise to a significant shortfall in funding. Dr. Rummens, chairman of Shropshire’s local medical committee, wrote to me and other Shropshire MPs, suggesting that Shropshire County PCT is underfunded by 3.8 per cent., calculated using Government’s own fair shares formula, which is equivalent to some £15 million of relative underfunding. The Minister will recall from what I have just said that that is more than enough to cope with the deficit that has been identified in the PCT this year.

What is the Minister doing about the fair funding formula, and can he offer any encouragement to Shropshire that it may receive a better reflection of the challenges posed by the demographic circumstances when looking forward to funding formulae in the next comprehensive spending review? I realise that he is relatively new to his post and that he may not be in post when the allocations are made, but I look forward to his response.

To illustrate how capacity constraints are affecting Shropshire—this picks up a point made by my hon. Friend the Member for The Wrekin (Mark Pritchard)—demand for accident and emergency services reached unprecedented levels in 2008-09, with some 3.7 per cent. more emergency admissions during the year than during the previous year. There has been a 30 per cent. increase in ambulance transfers to the Princess Royal hospital in Telford, compared with a 6 per cent. increase in ambulance transfers to the Royal Shrewsbury hospital previously.

We recently had a briefing from the management of the acute hospital at one of the Shropshire MPs’ regular quarterly sessions, which the hon. Member for Montgomeryshire (Lembit Öpik) also attends. Their analysis suggested that clinicians felt that, at any one time, up to 60 patients in the two acute hospitals did not require the specialist care offered by those hospitals and could have been cared for in rehabilitation beds in community hospitals. There is a shortage of rehabilitation beds in the two major conurbations in the county—Shrewsbury and Telford—because their provision comes through the acute hospitals. The community hospitals are located in the smaller, outlying towns. There are three in my constituency, two of which I have mentioned already.

There has been pressure on the community hospitals to shrink the number of beds to find efficiency savings. There is pressure on the acute hospital to provide somewhere for patients to be released to once they have undergone treatment through A and E or regular admission. The solution that the acute hospital would like to put in place to deal with the problem of bed blocking and throughput through the hospital is to introduce a further 30 rehabilitation beds in Telford. I am sure that the hon. Member for Telford (David Wright), were he here, and my hon. Friend the Member for The Wrekin would welcome the addition of rehabilitation wards in their community, but so would we elsewhere in the county, because one problem that flows from the pressure on space is that it clogs up the admissions process throughout the system.

We have also been told by Dr. Rummens that we suffer in our acute hospitals from many of the same problems that we read occur elsewhere in the country, with patients being unable to be admitted through A and E, partly to ensure that the A and E departments meet their target waiting times, but partly because of the bed blocking problem elsewhere in the hospital, to which I have referred. In his letter of 7 May, he said that one of his colleagues, a GP in the Shrewsbury area, said:

“Last time I did a Shropdoc session there were 24 patients waiting to get into the Medical Emergency Centre, many of whom were waiting in ambulances that were not allowed to unload the patient”.

We read about that in national newspapers from time to time. I have never before heard a Shropshire GP giving hard evidence that it is happening in our county now. I think that the reason for it is, as I said, that there are not enough rehabilitation beds—step-down beds—in the county at times of intense pressure. Of course, the pressures at this time of year are somewhat less than they normally are in the winter. We have been told that Shropshire, mercifully, has not suffered a significant number of hospital admissions because of swine flu. That does not appear to be giving rise to the pressure. I think that it has more to do with the demographic factors to which I referred.

The importance of rehabilitation beds and the role that the community hospitals can play in providing a step down from acute care is my third and main point. It relates to the third community hospital in my constituency—the hospital at Ludlow. I should like to take the Minister back to that Saturday in January 2006 when, after marching in Bridgnorth in the morning, I sped across my constituency—well, I travelled across my constituency within the speed limit, of course, but quite rapidly, because I had to get from a morning march to an afternoon march in Ludlow. Some 4,000 people assembled in Castle square and marched through the town to a rally at St. Peter’s church, opposite the community hospital in Ludlow. That was in reaction to the threat, which was even more real in that case, posed to their hospital. Although we managed to save the hospital from closure, we could not prevent the closure of the mental health ward there.

The community has subsequently worked painstakingly with the PCT—particularly through the league of friends, which has been ably led by Mr. Peter Corfield as chairman, and the careful work of the two GP surgeries, led in this regard by Dr. Dorian Yahram and Dr. Graham Cook—to encourage the PCT to place the redevelopment of Ludlow community hospital at the top of its priority list. The hospital continues to work from a site that includes the listed administration block, which was formerly the Victorian poorhouse in the town. It is disparately set out on a constrained site, with buildings that were perhaps fit for purpose when they were constructed—in some cases in Victorian times and in other cases in the 1950s and ’60s. There is no doubt now in the PCT’s mind that Ludlow is its top priority for redevelopment.

We received considerable encouragement from the West Midlands strategic health authority, whose chairman Elisabeth Buggins and then chief executive Cynthia Bower, who has, of course, moved on to dizzier heights in the Department of Health, visited the hospital at my invitation 18 months ago and endorsed the proposals put together by Shropshire County PCT for a redevelopment to take health care facilities into the 21st century. The PCT and local clinicians on the ground were encouraged to develop a vision that would provide an innovative plan for integrated health care services as envisaged under the White Paper, “Our health, our care, our say: a new direction for community services”.

The plan that has been put together is innovative in a number of ways, not least in that it is built around co-location involving the two GP surgeries, both of which have their own constraints: one has no space at all—even its filing area is shared with a broom cupboard—and the other has also run out of capacity. They will be co-located with the hospital. A site has been identified and work has gone so far as to include the inevitable, as it is these days, bat survey to ensure that the development of the site does not disturb the resident bat population in the fine line of oak trees that borders the site. That illustrates the extent to which plans are well advanced. We had been given every encouragement by the PCT to believe that that was something that it wished to proceed with, and there had been every suggestion by the SHA that it was the SHA’s top priority project for a community hospital redevelopment in the west midlands. I was under the impression that those plans—the outline business case—had been presented by the SHA to the Department of Health. It seems as though the Department decided to put the onus on the SHA to take things forward.

The primary source of funding for the proposal, which has not been costed to the last quote at this point, because it was an outline business case, was a £30 million scheme. A sum of £30 million for a community the size of Ludlow was quite a big ask, and we in the community were somewhat concerned about where the funding would come from. We were therefore greatly relieved when the then Secretary of State, the right hon. Member for Leicester, West (Ms Hewitt), made an announcement in the House on 5 July 2006. The Hansard reference is volume 448, columns 816 to 832. In her statement on community hospitals, she announced the establishment of the community hospital redevelopment fund. She said that a £750 million fund would be available over a five-year period. If I may, I shall quote from her speech, because it has come to light that the prospects of using that fund, not only for the community of Ludlow but for the county’s PCT and the SHA overall, appear to have been stymied by the fund having been terminated, although that word has not yet been used by a Minister. I am looking to this Minister to give us some reassurance on the fund’s precise status. In her speech announcing the fund, the then Secretary of State said that the Government would make available

“up to £150 million of capital…in each of the next five years, starting this year—a total of up to £750 million—for the development of a new generation of community hospitals and services.”—[Official Report, 5 July 2006; Vol. 448, c. 816.]

That speech was given in 2006, so the words “starting this year” suggested that there might be some spending in 2006-07 and that there would certainly be some in 2007-08. We are now in the middle of 2009, and we had a reasonable expectation that some of the money, which had been specifically set aside from the Department’s capital budgets, would now be available.

In a parliamentary question in December 2008, I asked how much of the money had been spent, and I received a written answer saying that £248.1 million had been committed by the end of 2008—18 months after the scheme had been announced. Again, that gave those of us in Ludlow who were concerned about the issue some comfort that money was being allocated and spent, and there was evidence in the answer that I received that buildings were starting to come out of the ground all around the country.

Hon. Members can imagine our surprise, therefore, when Shropshire County PCT received a letter from West Midlands SHA on 1 May, stating:

“Andy Stubbing, Head of Capital and Revenue Investment Branches at the Department of Health, has said that ‘the Treasury is unlikely to agree further releases of funding for this programme.’ Instead SHAs will have to apply for funding through PFI schemes”—

private finance initiative schemes. That came as a bit of a bombshell to us: although we could look at PFI schemes, and a great deal of work is going on to consider LIFT—local improvement finance trust—and Express LIFT, as well as other schemes that the Department is encouraging, we were under the impression that the community hospital redevelopment fund was there precisely to fund the sort of projects that we had proposed with the blessing of the NHS hierarchy.

I raised the issue with the present Secretary of State during the Second Reading of the Health Bill on 8 June, which was his first working day in office. I did not therefore expect him to give me an instant answer, and he admitted that he could not do so, but he did agree to write to me. True to his word, he did so, which was helpful—or it appeared to be. Just before I received the Secretary of State’s letter, I received another from the Minister of State, Department of Health, the hon. Member for Lincoln (Gillian Merron). In her letter, which is dated 22 June, she said:

“I can however assure you that there are no plans to remove funding from the Community Hospital Programme.”

Being a relatively new Member, I took the view that a letter from a Minister of State saying that there were no plans to remove funding from the programme was quite a positive indication that there had perhaps been some mistake. The Minister of State’s letter appeared directly to contradict what the SHA had told the PCT, and that appeared to be good news.

I then received the Secretary of State’s letter, which is dated 22 and 23 June—I am not quite sure when it was sent. He made two points that are of interest. First, he referred to his predecessor’s original announcement, saying:

“The £750 million was assumed to be required across a period of five years or so, spanning the CSR 2007 years, 2008-09, 2009-10 and 2010-11, and subsequent years for which”

the Department of Health

“has yet to receive an indication of capital resources from HMT”—

Her Majesty’s Treasury. That is a slightly different way of describing what his predecessor had described as a £750 million programme starting in 2005-06. The current Secretary of State is suggesting that the programme is meant to run from 2008-09, whereas we know from his predecessor’s answer in Hansard that the money was already committed in 2007-08. The current Secretary of State is trying to introduce a bit of wriggle room to suggest that the programme is being backdated, rather than front-loaded, which is what was apparent from what had been said before.

The second thing that the Secretary of State said in his letter is also important:

“HMT approval for additional funding would be unlikely because of the current pressures on the Department’s capital settlement. However, that does not necessarily mean that ‘no more funds would be made available’”—

that is a quote from my letter to the Secretary of State—

“but that future access to the funds would be determined by HMT.”

There you have it. On 22 June, one Minister says that there are no plans to remove funding from the community hospital programme. Then, probably on 23 June, her boss says that future access to the funds will be determined by the Treasury. Either we have a community hospital redevelopment fund that has funding or we do not. The Minister would do the country a service if he could clarify whether there is any money in the pot and, if so, whether we can have access to it. If not, let us come clean and establish that there is no money, and those of us who are working hard to come up with schemes to improve health facilities in our constituencies can focus on that.

Will the hon. Gentleman confirm that the penultimate sentence in the letter from my right hon. Friend the Secretary of State says:

“However, that does not necessarily mean that ‘no more funds would be made available’, but that future access to the funds would be determined by HMT”?

In other words, there is funding, but there needs to be HMT approval for it. The hon. Gentleman is making a mystery of something that seems very straightforward.

I am grateful to the Minister for paying attention to what I was saying—that is precisely the sentence that I have just read out to him. Two years ago, the Secretary of State’s predecessor said that £750 million was available and that the capital would be spent at the rate of up to £150 million a year

“in each of the next five years, starting this year”.—[Official Report, 5 July 2006; Vol. 448, c. 816.]

That is where the problem lies: one Secretary of State has said that money is available, while a subsequent Secretary of State has said, “No, there isn’t.”

I had actually brought my remarks to a close. I look forward to the Minister picking up this issue in his winding-up speech.

rose—

Order. Three hon. Gentlemen are seeking to catch my eye. I advise them that I hope to call the Front-Bench spokespeople at 10.30 am. If hon. Members take that into account in their contributions, I hope to be able to fit everyone in.

It is pleasure to serve under you, Mrs. Humble, and I will be as brief as I can.

I congratulate my hon. Friend the Member for Ludlow (Mr. Dunne) on securing the debate. As he said, this is the second such debate—there really is a sense of déjà vu and continuity. At the time of the previous debate, we went to see the then Secretary of State, the right hon. Member for Leicester, West (Ms Hewitt), for a private meeting. We actually congratulated her on parts of her White Paper and pressed her—this was confirmed in letters—to stick to the proposals on community health. We strongly supported those proposals. Indeed, I led a march through Whitchurch while my hon. Friend was marching around his constituency on behalf of community hospitals.

Let me give one example of what we are talking about. Some 75 per cent. of diabetic patients in Shropshire are treated by GPs, while 75 per cent. of diabetic patients in Birmingham are treated in district general hospitals. Our doctors reckon that there would probably be about a 20 per cent. saving if their GP practices could be enhanced with more facilities.

The Government came up with a White Paper, and I do not want to embarrass the Minister, but the then Secretary of State made the following useful statement:

“community facilities that are needed for the long term must not be lost in response to short-term budgetary pressures. So we will expect primary care trusts to reconsider such proposals against the principles of the White Paper.”—[Official Report, 30 January 2006; Vol. 442, c. 24.]

We were assured at the time that funds would be there for such community projects.

There has been expansion of GP practice facilities in Market Drayton, and I have been heavily involved in the expansion at Oswestry, which is going ahead. I should like the Minister’s assurance that the funds that PCTs were assured of, for the GP practice extensions, will continue. I am not asking for any more money; those moneys were promised. I want to name two practices in particular. I took doctors from the Ellesmere and Wem practices to see the present Minister for Regional Economic Development and Co-ordination when she was a Health Minister, and she made all the right noises about community care. Three years further on I should like assurances that the funds are there for the PCT.

With respect to Ellesmere, the White Paper called for collaboration with the local authority. Before it was dissolved into the new unitary authority, the outgoing North Shropshire district council bought the ground. The population in my constituency is expanding, and, as my hon. Friend the Member for Ludlow has said, ageing, so I should like to know that the funds set aside at the time of the White Paper are available for the extensions. I think 18 practices across Shropshire have been allocated priority, but the two that I would pick out would be Ellesmere and Wem.

Will the Minister confirm how the NHS funding formula works? My hon. Friend touched on it, but as I see things there is a lag in Shropshire. We have an increasing population, because of people moving in, but it is also an ageing population, and I should like an explanation of the notion of distance from target. I understand that that is about an amount that an area is deemed to warrant, under a formula, but does not yet receive, on the understanding that the target figure is to be worked towards, over the years. For counties such as Shropshire the delay in reaching that fair-share allocation can represent a significant current shortfall. Combined with particular financial pressures in commissioning services, given the elderly population that I mentioned, in a large and thinly populated rural area, that can cause the PCT problems. I reiterate that I am not asking for more money—the moneys I am talking about have been allocated, but there seems to be a drag in the system.

To cheer the Minister up I shall move to some good news, which is that I am happy to have the jewel in the crown of Shropshire health care in my constituency. That is the Robert Jones and Agnes Hunt orthopaedic hospital, which is a shining example of how health care can be provided. I was chomping through my drearily healthy breakfast about a year ago when I saw a list of hospitals that had been rated by the Healthcare Commission. I was not surprised, but delighted, to see that the orthopaedic hospital came top, with a score of 92 out of 100, on a range of scores. It had a higher score than any other trust nationally on four questions, and it was the top scorer in six out of eight headline categories across the west midlands. The key thing is that it has got its costs down by about 10 per cent. in the past couple of years. Above all it has zero MRSA—there is no MRSA there, despite an enormous increase in its activity. It employs 1,200 people and £80 million goes to the local economy; it is the biggest organisation near Oswestry. It is a very successful organisation, and is critical for the local area.

In addition there is charity work, which I think is rare in the NHS—I should declare an interest for my involvement in the Institute of Orthopaedics. That has led to the building of the Leopold Muller centre. A couple of weeks ago I went round the Torch centre, which probably has the most sophisticated gait laboratory in western Europe, which deals with the treatment of children with acute spina bifida or muscular dystrophy. That is at the crossing point of medicine, mechanical engineering and physics. I do not entirely understand it, but I enormously admire the work that is done there. An application has been made for national designation for muscular dystrophy services, and I wonder whether the Minister can clarify when that may come through.

The trust has cleared its debts and is now pressing on to foundation status; that goes back to my meeting with the right hon. Member for Leicester, West. I hope that it will happen in the next 12 months. The process has been dragging on.

What seems to be the sticking point is the fact that there are probably only four top orthopaedic hospitals in the country that can do revision operations; they rework operations that may have gone wrong or may not have been quite so skilfully done in other hospitals. That is immensely complex and difficult work. About 1,000 such operations a year are done there. Only the Nuffield orthopaedic centre in Oxford, the Royal orthopaedic hospital at the Woodlands in Birmingham, the Royal National orthopaedic hospital at Stanmore in London, and Wrightington hospital, which happens to be in the Secretary of State’s patch, can carry out such operations.

There is haggling about the tariff. It was increased last year, but the operations are so complex and difficult that there is still a problem, and that might be a block in the quest for foundation status. What are the Minister’s proposals on that? It would, bluntly, be humiliating for the country if those operations had to be conducted abroad, which might be an option if the hospital could not afford to carry on doing them. It is the cutting edge of medicine. As before, I am not asking for more money. The trust has saved the NHS substantial sums by efficiency gains. We just ask that the correct sums should be paid for a quite small number of very difficult operations. I am very much in favour of foundation status. The orthopaedic hospital is a classic example of a smaller operation with a really tight team and a tremendous team spirit throughout the place, which really delivers.

In the past I have felt that there has been a bit of prejudice in the west midlands authorities against that world-class operation, tucked away in the north-west of the west midlands. I met an Australian on an aeroplane once—I shall not bore hon. Members by doing the accent—who said, “I have been to this amazing hospital; it’s entirely surrounded by sheep.” It is isolated, but it delivers the care that it does partly because that is the attraction for the people who work there. There has been a sea change. I pay tribute to Elisabeth Buggins, the chairman of the strategic health authority, who has been to the hospital a couple of times and understands its value. She supports its drive for foundation status. However, I should like an answer on the vexed question of the tariffs for revision operations. The orthopaedic hospital has a sports injury service. Three consultants work on sports injuries. What links does the Minister have with his colleagues working on the Olympics, with a view to making sure that the hospital could benefit from that?

To move on, rapidly, from good news to bad news, a ludicrous vexed area is the nonsense of redesignating the status of GP practices that can dispense medicines. The Shawbury practice raised that with me last summer. I do not see why the Government have brought in the new regulations, which are wholly damaging and negative. We saw them off in Shawbury, thanks to a spirited campaign. I probably had more letters about that last summer than about anything else. Sadly, the issue has moved on to Gobowen, a large village a couple of miles outside Oswestry. I had many letters from furious constituents who are used to going to the GP and getting their medicines at the same time. The pharmacists there have local knowledge and access to medical records. The system is wholly beneficial. However, under the new regulations, if another company puts in a bid for a pharmacy, and if the designation of the area is considered and the rurality is withdrawn, the doctors’ surgery can no longer dispense. In Gobowen the utter nonsense of the situation is that the company that put in the bid does not yet plan to build a pharmacy. That is a wholly negative development and it is nonsense. It is all to do with the designation of rurality.

I have been in constant communication with the Minister’s predecessors. I have a letter from the Minister of State, Department of Health, the hon. Member for Corby (Phil Hope), who said that the question is decided by the PCT, and I got a letter from the PCT saying that it is required by national regulations first to determine the rurality of the area as defined under the pharmacy regulations. Then there is a ludicrous passage in which the PCT just repeats what it is made to do by central Government regulations, and says:

“The regulations also clearly state that the fact that an area is classified as ‘controlled’ (ie not rural in character), or that a decision is taken to remove such a classification, does not necessarily mean that it is urban.”

If you can understand that, Mrs. Humble, you are doing well.

Councillor Joyce Barrow has recently been elected the councillor for Morda, another village just outside Oswestry, which must be rural because it comes within Oswestry rural parish council, and it is likely to have its services removed. One of the excuses about Gobowen was that there are other services, such as a post office. However, the Government have removed the post office from Morda and there is really very little there. I have had a furious letter from the surgery saying that that will damage patient care. Will the Minister explain why the regulations were introduced? The PCT has said that it had no option but to implement them. [Interruption.] I should be grateful if the Minister would listen to me rather than to the hon. Member for Coventry, South (Mr. Cunningham).

It is causing real upset. Doctors tell me that it will damage patient care. I am all for freedom of choice. If someone wants to build a pharmacy, if they can compete, good for them, but why should we upset a system under which doctors have detailed knowledge of their patients and patients do not have to suffer the inconvenience of using a taxi or the infrequent bus service to go into town to get their medicines? I do not see any merit in what the Government are doing, and I would like to see things reviewed. I would like an answer from the Minister.

I congratulate my hon. Friend the Member for Ludlow (Mr. Dunne) on securing this important debate.

I pay tribute to the hard-working members of staff at the Royal Shrewsbury hospital—the doctors and nurses, the cleaning staff and all involved in providing care at that important health care facility in Shropshire. I pay tribute also to the chief executive and the chair of the Shrewsbury and Telford Hospital NHS Trust for their hard work, Mr. Taylor and Dr. Bamford respectively.

The most important thing that I want to get across in my truncated speech—we are running out of time—is that Shrewsbury is a border town. We live cheek by jowl with the Welsh community just across the border, which uses our hospital facilities. A political map of England will show that all the seats in that part of the country are held by Conservative or Liberal Democrat Members. Although I have repeatedly raised my concerns with Ministers on how English hospitals are losing out as a result of Welsh devolution, little progress has been made because the Government do not understand the grave consequences and are not prepared to act.

The Royal Shrewsbury hospital loses approximately £2 million a year because the Welsh Assembly has different ways of paying for treatment. That loss cannot be allowed to continue. I aim my remarks at my hon. Friend the Member for Guildford (Anne Milton), the shadow Minister for Health, who will doubtless soon be making decisions on the matter. When we finally get a Conservative Government, I hope that there will be some redress, so that my constituents do not continue losing out.

Not only the financial aspects, but issues to do with drugs and waiting times concern me. One of the most emotional and fraught experiences that I have had as an MP is trying to secure live-saving drugs for my constituents; they are not entitled to them, whereas people who live just a few miles across the border in Wales that use my hospital are automatically allowed those drugs. I feel passionately about the United Kingdom, and I believe that we are one country. Allowing such a postcode lottery to continue is doing untold damage to the Union.

I declare an interest in that the Royal Shrewsbury hospital saved my life on 13 April 1988, and the Gobowen hospital helped me to start walking again.

I challenge the hon. Gentleman: I believe that those Welsh patients provide a net contribution to the Royal Shrewsbury. If they went somewhere else—perhaps to Hereford or Aberystwyth—Shrewsbury might have to become smaller. He may criticise the benefits of devolution to my constituents, but I advise him to look at the figures again. On balance, the Royal Shrewsbury hospital gains a net benefit from my Montgomeryshire constituents going there for their health care.

I do not want to get engaged in cross-border parliamentary warfare, but if the hon. Gentleman speaks to the chief executive of the Royal Shrewsbury, as I have done, he will discover that the hospital has lost out. Of course we welcome Welsh patients coming across the border to use our hospital’s facilities, but the Welsh Assembly must start paying the same for medication as English authorities. That is what leads to the losses in English hospitals.

We pay too much for car parking at our hospital. We have to pay £2 to leave our cars at the Royal Shrewsbury. When my daughter was being born there, I remember thinking that I would have to leave the labour ward and rush out to fill the meter, because parking tickets expire at midnight and one has to buy another ticket. We are the fourth-wealthiest economy in the world, yet we are charging people to leave their motor vehicles. Many come, not as I did for the birth of my daughter, for a relatively short period, but for much longer, as they have relatives with long-term illnesses at the hospital. For people on limited incomes, paying £2 a day is bad.

I remember that the windows of the maternity ward at the Royal Shrewsbury hospital have to be sealed for security reasons. It was sweltering when my daughter was born, but the hospital did not have air conditioning or fans. I hope that the Minister will do everything possible to ensure that the maternity services at the hospital have better ventilation or air conditioning, so that people have a more conducive atmosphere.

The league of friends at Royal Shrewsbury hospital is a group of volunteers that raise hundreds of thousands of pounds every year for the hospital. It runs tea and coffee shops, sells goods and runs events throughout Shropshire to raise funds to buy vital equipment. That equipment should be provided by the state through taxation, but as a result of the lack of Government funding, the league of friends, a local charity, is increasingly burdened with having to find ever more money. I ran the London marathon a few years ago. It nearly killed me, but I raised £9,000 for the league of friends. Should I be re-elected, I may do it again because of the tremendous benefits that the group is able to give the hospital.

My constituents in Shrewsbury have raised aspects of the problem of long-term care for the elderly, as did my hon. Friends the Members for Ludlow and for North Shropshire (Mr. Paterson). For many of my constituents, it is the biggest health care issue. Many of my constituents have had to sell their relatives’ homes in order to pay for their care. The BBC website says this morning that the Government are considering asking people in England to take out care insurance to pay for long-term care in their old age.

The question of long-term care is hugely important to my constituents. There are many senior citizens in Shrewsbury. We have an above-average population of senior citizens, and they are looking to this Government, or to the next Conservative Government, for some form of answer. It is unacceptable that people who have been thrifty and have saved should have to sell their assets and their homes to pay for long-term care.

I end by trying to indicate to the Minister the passion that everyone feels about health care services in Shropshire. We want a fair deal, and I look forward to hearing the Minister’s response.

I am aware of the time, Mrs. Humble. I have delegations arriving here from Welshpool, so I hope that the Minister will forgive me, on condition that I do not ask him any questions, if I leave a little early.

As has been said, my constituency neighbours Shropshire, and my Montgomeryshire constituents depend heavily on the health care services of the Royal Shrewsbury hospital and, particularly, the Gobowen hospital. I cannot praise enough the efforts of the staff at those facilities, not least because of my experience there. I also praise the efforts of Tom Taylor in putting into order accounts and finances that have gone dreadfully wrong.

I wish to add two further observations. First, it seems that the most effective way to provide the care that my constituents need is for the district general hospital in north Shrewsbury to do what only it can, but to allow convalescence in the other four hospitals—at Llanidloes, Newtown, Machynlleth and Welshpool. Bed spaces are cheaper there and a collective approach could make a huge difference.

Secondly, technology should enable us to do outreach work much more creatively and extensively. By using modern technology, some sophisticated diagnosis and treatment could once again be devolved back to those smaller hospitals. That, too, would reduce the pressure on the Royal Shrewsbury hospital. I have no doubt that technology will make a difference, but it would be better if we did that strategically.

Finally, I thank Tom Taylor for bringing things into order at the Royal Shrewsbury hospital. Unquestionably, his leadership has turned around by 180° the dreadful situation that his predecessor had left to fester. The hospital is a cross-border lifeline for my constituents, and I thank its staff and leadership for all that they do. I hope that, collectively, we can create a cohesive strategy embodying the work of the small, local hospitals and using modern technology to improve their reach and to save funds and lives.

I congratulate the hon. Member for Ludlow (Mr. Dunne), a former Work and Pensions Committee colleague, on securing this important debate. I have enjoyed listening to the description of the issues in his constituency and the constituencies of other Shropshire Members. I know Ludlow reasonably well: my wife lived there for some years when a child and my brother-in-law Josh was born there, which presumably explains why he is a Manchester United fan—I never quite worked that out. However, it is a wonderful part of the country and one that I am always pleased to visit.

The case laid out by the hon. Gentleman and other hon. Members demonstrates the stark contrast between Ministers’ rhetoric and the reality of the NHS in the 21st century. The rhetoric is about localism, but in reality we have the most over-centralised health service in the world. I am afraid that that is an issue for us all. Few MPs have a community hospital in their constituency, but I am one of them—the excellent Wharfedale hospital—and very few of those MPs have not had to spend considerable time supporting those facilities, and often campaigning against cuts, service reductions and, on too many occasions, the threat of closure.

The hon. Gentleman alluded to a 2006 statement made by the former Secretary of State for Health, the right hon. Member for Leicester, West (Ms Hewitt), and the commitment to dedicate £750 million to community hospitals. Three years on, however, not even half that has been invested in those important health facilities. That is of real concern to communities in Shropshire and in Yorkshire, and up and down the country. I shall read some of the words accompanying the announcement. The 2006 statement said:

“Developments in medical technology are making it possible to provide far more care in local communities, closer to where people live”.

Is that how people perceive the health service? I say not.

The statement continued:

“Services could include in-patient and out-patient facilities, diagnostic tests, specialist clinics, minor surgery, health and social care services for people with long term conditions, dentistry, rehabilitation and palliative care… we expect to see a strategic shift in how the NHS provides care, with a reduction of funding to support the provision of more convenient services in local communities.”—[Official Report, 5 July 2006; Vol. 448, c. 816-17.]

Those warm words simply do not represent the experiences of people throughout the country, which is that many services that could be provided more locally are not. They have to travel increasingly large distances. In my constituency, people have to travel the 11 miles from Otley to the large hospitals in Leeds such as Leeds general infirmary and St. James’s university hospital.

In more rural constituencies, such as those of the hon. Gentleman and my hon. Friend the Member for Montgomeryshire (Lembit Öpik), some people regularly have to travel large distances to access important services that are often an hour and a half’s drive away. That simply is not acceptable. We should be trying to make as many services as possible accessible locally.

I wish to make another important point that comes up every time we debate local health services. The modern NHS is not accountable. It takes marches of thousands of people in the streets of our towns and MPs organising petitions, protests and public meetings to get any sort of accountability in local health services. Whatever Ministers or civil servants say, local health managers are not accountable to local people. They are accountable in this bizarre chain to strategic health authorities, which, as we all know, are not only enormously wasteful, but the puppets of the Secretary of State. They oversee a wide area and ensure that his bidding on general policy is done in local areas. That is entirely inappropriate and wasteful.

What should be a people’s health service has fallen into the hands of managers who do not see themselves as accountable. I have seen many examples in the health service in my constituency of a paternalist attitude. The managers say, “We know best. We know what our priorities are. We will deliver them and make decisions with little or no consultation.” When there is consultation, it is usually inadequate and often simply a fig leaf, enabling them to rubber-stamp a decision already made.

There are campaigns throughout the country not only on community hospitals, but on other important health facilities and health centres. It takes such people power to bring any kind of accountability. When will the Government address that clear democratic deficit? If they did so, they would not have to listen time and again to MPs complaining that even we find it difficult to influence decisions on behalf of our constituents, except through such petitions, marches and protests.

The Liberal Democrats will enter the next election with a policy to replace PCTs with partially elected health boards. We can debate whether that is a good idea, but it acknowledges a problem that cannot be ignored and needs policy solutions. We have put one on the table to be discussed: involve local people in decisions so that they can kick out, through elections, hospital trust managers making unpopular decisions and PCT bosses making unpopular local strategic decisions. Without that accountability, all the warm words about localism and accountability are not only just words, but rather insulting to the many people who take part in marches and sign petitions.

The sad reality is that the health service is unaccountable and desperately over-centralised, and does not respond to the needs and demands of local people. Until that changes we cannot make the best use of the energy of our health professionals and managers who are passionate about the care that they provide. Health services are so tightly controlled from Whitehall and the Departments. That must change if we are ever to give the NHS back to the communities, where health service decisions should be made.

I congratulate my hon. Friend the Member for Ludlow (Mr. Dunne) on securing this debate. He has clearly spent a lot of time participating in marches around his constituency. He talked about 4,000 people marching in protest at the threats to Bridgenorth hospital, and he mentioned Bishops Castle community hospital. It was encouraging to hear him talk in such glowing terms about the community effort that has gone into the design of not only services but buildings. Clearly, a lesson in best practice can be learned about designing services that are responsive to local people’s needs and that make people feel that the NHS is responding to their concerns.

My hon. Friend mentioned Ludlow community hospital and the closure of the mental health ward. As a shadow spokesman with responsibilities for mental health, I caution against the loss of mental health beds. The closure of such beds has resulted in a rise in the prison population. Whether people are in prison or in mental health hospitals, they must receive the care and services that they need.

My hon. Friend told a very frustrating story about how the hospital and the local people were encouraged to redevelop services. Both the PCT and the strategic health authority described Ludlow as a top priority. Mention was made of the community hospital redevelopment fund. Despite the Minister’s intervention, I am still not clear whether or not the fund is there. That shows the confusion about some of the Government’s announcements. The Minister shakes his head. Either we are all being very dim or he is not paying attention, and I suggest that it is the latter.

Will the hon. Lady give way?

The Minister will have a chance to address the points when he replies to the debate. [Interruption.] Okay, I will give way.

I should be grateful if the hon. Lady did not make personal asides and then stop me from intervening, because it is discourteous. As I have said already, the fund is available, and it needs the consent of both the Department of Health and the Treasury. It is very simple and straightforward, and there is nothing obscure about it.

I certainly did not mean any discourtesy to the Minister. I was driven by frustration over the lack of clarity. By implication, I do not think that we are all being very dim either. None the less, we need more clarity. The Minister has not explained why the money is not being spent at the rate at which it was originally intended to be spent.

As for community hospitals, I certainly have one in my constituency. Cranleigh village hospital is extremely important. I am often unconvinced by both the modelling and the drivers of such hospitals, which relate, I am convinced, to short-term budgetary pressures, rather than to clinical improvements. The Government’s White Paper, “Our health, our care, our say: a new direction for community services” made it absolutely clear that decisions should be made on the basis of improving clinical outcomes. Yet, all too often, the drivers are the financial pressures.

My hon. Friend the Member for Ludlow also raised the issue of financial deficits and the yo-yoing between PCTs and acute trusts. That is confusing not only for local people but for the trusts, and we need to have some clarity about where those deficits lie. In my PCT, I have had considerable difficulty discovering why, with a 5.2 per cent. increase in funding, the PCT has to save £60 million. I cannot make sense of the figures.

Will the Minister reassure us that there will be no more reorganisation of services in the lifetime of this Government? As he is new to his brief, I refer him to the Health Committee’s report on reorganisation, which makes it clear that reorganisation causes chaos, a fall in due diligence—we heard about the chief executive who got his job with a fake CV—loss of focus and management failures. Moreover, will the Minister explain the deficits and what attempts the Government are making to ensure that we know exactly where such deficits lie?

My hon. Friend also raised the issue of demographics and our increasingly older population. Again, as the Minister is new to his brief, I refer him to an excellent Health Committee report, in which I was involved, about financial deficits and to the work of Professor Sheila Asantha, who considered the issue of funding. In particular, she examined whether rural areas were getting sufficient funding to deliver the required services, particularly as they tend to be more difficult and expensive to provide in those areas.

My hon. Friend the Member for Shrewsbury and Atcham (Daniel Kawczynski) spoke in glowing terms about the expertise in Oswestry and the need to harness and invest in that expertise. We have pockets of superb practice in this country. We must ensure that we do not have clumsy funding formulae and tariffs that put such services under threat. He also eloquently described the anger that many GPs feel over the dispensing problems in rural areas. In this debate, we have had a run around every single issue relating to NHS services that faces many hon. Members. I know that my hon. Friend is not alone in his concern about GP dispensing.

The hon. Member for Montgomeryshire (Lembit Öpik) and my hon. Friend the Member for North Shropshire (Mr. Paterson) praised the Royal Shrewsbury hospital. My hon. Friend always describes his local services and workers in glowing terms. As someone who worked in the NHS for 25 years, I can say how much staff appreciate being mentioned in such terms. He also mentioned some very complex cross-border issues, such as waiting times and availability of drugs. Even in this Chamber today, we saw the issue bubble up as the heat began to rise. I dare say that my hon. Friend and the hon. Gentleman could have gone on for some time and taken the complex issue further.

I recently spoke at a league of friends conference. There is no doubt that the organisation does a tremendous job in raising money. Sometimes it helps to fund equipment and services, which are right on the border of what the state and chargeable provision should provide.

The Government are publishing a Green Paper on social care and long-term care. I do not want to take up any more of the Minister’s time, because there are a number of points on which we should like to hear some clarity. Moreover, I should like to give my hon. Friends and other hon. Members the opportunity to intervene on the Minister if they do not get the full clarity that they would like.

As I said, I have worked in the NHS for 25 years, and I came to the House because I did not think that enough people with front-line experience of the NHS were working in Parliament. There is no doubt in my mind that there is a disconnect between what the Government believe is happening and what is actually happening on the ground. So often, we see the frustration of hon. Members as they try to describe what is happening in their constituencies. They often say that what the Government say is happening is just not taking place. There is a yawning gap between some of the modelling behind the Department of Health and what works on the ground. We saw that in the White Paper, which explicitly says that changes should not be made because of short-term budgetary pressures, but that is exactly why changes are made.

The Government cannot make grand statements and get press coverage for the £750 million that they are spending on the community hospital fund only for it to disappear before our eyes. We do not see the withdrawal of such funds plastered all over the press, but we see the announcement of them everywhere. We need clarity on the matter. Although the Minister intervened on me, I still do not believe that we have that clarity. I look forward to the Minister’s comments and to him being able to reassure my hon. Friends that health services, particularly those in rural areas, are safe in the Government’s hands.

I have 10 minutes left in which to reply. The hon. Member for Guildford (Anne Milton) said that she was going to give me some of her time, but she has given me only about 30 seconds.

Ten minutes.

I have 10 minutes overall in which to reply, and the hon. Lady took nine minutes and 30 seconds to respond. She is entitled to that time, but she should not then say that she is allocating some of her time to allow me to respond more fully. The hon. Member for Ludlow (Mr. Dunne), whom I congratulate on securing this debate, took 35 minutes to set out his case, and the hon. Members for North Shropshire (Mr. Paterson) and for Shrewsbury and Atcham (Daniel Kawczynski) raised a series of important issues on which I should have liked more time to respond, but they will have to forgive me if I am unable to do so in detail on some of them. I am happy to respond to the gestures of the hon. Member for North Shropshire and write to the hon. Gentlemen.

Let me say that I am concerned about the representations that were made in respect of Ludlow community hospital. Before I respond specifically to those, I pay tribute, as Ministers always should, to the hard work and dedication shown by health service staff throughout Shropshire in providing a high-quality health service for patients.

Funding overall for the NHS has tripled since 1997. Between 2004 and 2010-11, funding to Shropshire County PCT will increase from £230.5 million to £436.6 million. That represents an increase of more than £200 million in only seven years. Back in 1997, it was not uncommon for people to have to wait 18 months or even two years for an operation in the NHS. However, because of our reforms and increased investment in the Shropshire County PCT area, 92 per cent. of admitted patients and 98 per cent. of non-admitted patients are currently seen and begin their treatment within 18 weeks of referral. That demonstrates the dramatic effect that the Government’s policies have had on waiting times.

In addition, we are establishing new GP health centres in Shropshire, which will be based in Shrewsbury. They will open in September and can be used by some of the hon. Members’ constituents. The Market Drayton primary care centre, which opened in 2005, provides GP services for some 15,000 patients and other health services for the wider community. The hon. Member for Ludlow mentioned Bridgnorth hospital, which has been transformed, and the new services coming from the £1.2 million spent at Bishops Castle. Those are just a few examples of how the extra funding provided by the Government, combined with the dedication of health service staff, have made some real improvements for the local population.

However, the hon. Gentleman also spoke about the local financial deficit. The financial situation is indeed challenging, but the SHA and the PCT have assured us that they are confident that a balanced financial position will be achieved by the year’s end. Revenue allocations for 2009 to 2011 are based on, and calculated using, the most up-to-date population data from the Office for National Statistics. There is always a lag of a few years, but that is not all that long. Allocations seek to reflect the Department for Communities and Local Government’s growth areas and growth points and the increasing numbers of retirees. Shropshire County PCT will receive a revenue allocation of £412.6 million in 2009-10 and £436.6 million in 2010-11. As I said, that represents an increase of £45.6 million or 11.7 per cent. in funding.

In the time I have left, I shall turn to Ludlow community hospital. I appreciate how important the issue is to the hon. Member for Ludlow and his constituents, and I am aware of the petition on the No. 10 website posted by Friends of Ludlow Hospital. Community services provide essential care to many vulnerable people, families and communities, from health promotion to end-of-life care. Such care is often provided by community nurses and therapists and in local centres and community hospitals, and it accounts for a substantial part of NHS funding—approximately £10 billion annually. The Government have developed a strategy for transforming community services, which has involved hundreds of clinicians and other stakeholders. The strategy will reduce inequalities, secure high-quality care and promote productivity and innovation.

The Government continue to ensure that we provide support for the community hospital programme. Investment in community services remains a high priority for us. The Government programme consists of two elements: £500 million for conventional infrastructure investment, which relates to proposals for new buildings, and £250 million for community ventures. We intended the latter to be innovative joint ventures with the private sector, involving many services and some infrastructure. Let me be clear: that funding was there if projects were proposed. That has happened in some years and 28 projects have secured elements of the funding.

The money has contributed to a range of services, including community hospitals, and more generally to other important and welcome community projects. I can confirm that the Department of Health will continue to consider schemes for community hospitals. They will be subject to the same approval process as all capital investment, thus ensuring that any further spending is affordable and that it provides value for money. For projects due to start in 2010-11, decisions will be subject to the strategies that PCTs produce for the development of their estates and the outcomes of the next spending review.

I appreciate the concerns about Ludlow community hospital. In 2007, Shropshire County PCT proposed a scheme for consideration as a community venture, requesting £20 million in capital investment. That was fine, but when it was examined, it was determined that the scheme would not stand up as a community venture project. The PCT worked to develop the scope of the venture but seems to have concluded eventually that staff conditions, particularly pensions, made the scheme impractical. The project therefore did not go ahead in the form that was originally proposed.

Subsequently, last May, a new idea was proposed. I have no problem with that. The new idea appears to be valued at around £30.4 million and the PCT has submitted the strategic outline to the SHA. The most important thing is to ensure that the Ludlow scheme is assessed and prioritised appropriately in the context of the regional health economy. The local NHS needs to compare the costs of, and benefits that will be delivered by, a proposed scheme against its other priorities. If the local NHS is to make the right decisions, the PCT will need to develop an outline business case, the purpose of which is to identify in more detail the preferred option for the delivery of the scheme.

There are a number of funding options—it is not true that the community hospitals scheme is the only option. The PCT needs to negotiate with the SHA about the priority that the latter has within its regional formulae.

I should point out to the Minister that the SHA had determined that the scheme was its No. 1 priority for the fund. That is what it wants help with.

The hon. Gentleman says, “for the fund,” but I must tell him that there are a number of potential sources of funding. Frankly, on the face it, the project looks good, but it needs to be within the overall allocations for the SHA. I was interested to note that Elisabeth Buggins, the chair of the SHA, gave active encouragement for the project, but I would also be interested to know where it stands in the SHA’s overall plans for the region. At the moment, if the project is asking for funding under only one category and does not have wider potential sources of funding, it stands less chance of going ahead.

We will see how the project develops. I hope that it progresses, that it gets into the SHA’s regional plans and that it is given the priority that the hon. Gentleman would like. It appears that Mrs. Buggins also wants that to happen. Let us wait and see whether the SHA gives it that priority.

I consulted as widely as I could in the time available about what the future of the east coast main line service should look like. I spoke to National Express East Coast, of course; to Ministers; to former managing directors of the east coast main line, from both the time when British Rail managed the service and the Great North Eastern Railway period; to trade unions; to transport consultants and to journalists. I spoke to Yorkshire Forward about the business implications of the disruption to the franchise, and, with the help of my local daily paper, The Press, I consulted the public and received a lot of interesting comments from people inside the rail industry and service users.

The east coast main line is the most strategically important railway, in economic terms, within the UK. It delivers more passenger kilometres than the west coast main line. The service is economically vital to the whole east of the country, especially the east midlands, Yorkshire and the Humber, the north-east and Scotland. In 2002, Halcrow conducted a study to examine the economic value of the east coast main line to Yorkshire and the Humber. Halcrow believes that it added £100 million to the local economy in 2002, that it directly sustains 11,000 jobs, primarily in transport and tourism, and that it indirectly contributes far more to the region. Businesses locate in Yorkshire because they can depend on a fast and reliable train service that gets businessmen and women from Leeds or York to London in two hours and from Doncaster to London in an hour and a half. That is vital to business location decisions. A loss of confidence in the quality or reliability of the service would result in a fall in inward investment, as businesses would not risk basing themselves 200 miles away from such an important market as London.

When the figures are updated from 2002 to the present and the other regions are added, it is clear that hundreds of millions of pounds of economic activity depend on this railway. In the short term, therefore, the Government must safeguard the quality, frequency and punctuality of services. I believe that the Secretary of State was right to intervene as he did on 1 July when National Express made its statement to the stock exchange. Ironically, National Express East Coast has reduced train cancellations and improved punctuality while it has been running the service, but the Government must ensure that those service improvements do not slip, which is a danger at the tail end of a franchise. It is what happened while GNER was running the service after it lost the franchise.

I agree with what the hon. Gentleman is saying, particularly about maintaining the current service, but does he share my concerns about the report in The Sunday Telegraph that, before the removal of the franchise, National Express and the Government discussed reducing services on the line as a cost-cutting measure? That would be disastrous to my constituency and many other areas served by the line.

I have consulted widely and have no evidence that the company considered that. In my conversations with National Express about the current circumstances, it said that the one thing that it wanted to avoid at all cost was making savage cuts to balance its budget, which is why it made the statement on 1 July about its financial position. It is right that the Government responded as they did, because cutting services is not the answer. It would be economically damaging to Scotland and economically disastrous for the east of England.

I congratulate the hon. Gentleman on securing this important debate. Does he agree that we must look again at the award of the franchise to National Express? Concerns were raised at the time, and the rival bids from GNER and Virgin had many merits that were overlooked for financial reasons. Does he also agree that we need to consider a longer period of public ownership to ensure stability, which is what all of us here crave?

I obviously made a mistake in giving way to the hon. Gentleman. It is so obvious that I sought this debate in order to raise those questions that he might have had the patience to wait to hear what I have to say. He will have his own opportunity to contribute.

This is the second time within three years that the franchise has gone belly up. It is not a quirk or a technical problem; I believe that it is a signal that the franchising model is not robust enough and not fit for purpose for a railway of such great strategic and economic importance. Franchising is supposed to transfer risk to the private sector, but twice in three years the Government have been left to pick up the pieces.

Since 1999, National Express’s UK rail business has made a profit of £491 million, but because National Express was allowed to create a special purpose company, it appears to have limited its corporate liability for the east coast main line business to a £40 million bond. I do not believe that that is a satisfactory transfer of risk to the private sector. The franchising model appears to allow train operating companies to make money in good times and leave the taxpayer to pick up the tab in bad times.

I, too, congratulate the hon. Gentleman on securing the debate. Is he not being slightly disingenuous by not putting fully into context the fact that the franchise system will always involve revenue payments made directly from the taxpayer over time? Some train operating companies have been paid the revenue payments earlier than others. There was always going to be some support. It is not simply a question of making profits in good times and the taxpayer picking up the tab in bad times.

Again, I hope that the hon. Gentleman will listen to the argument that I am making. He might then rise to say that he agrees with me, but if he disagrees, he will of course have the opportunity to state his case.

I turn to the railway business itself. Apart from the top, board-level franchise managers, the staff who run the railway—the managers, engineers, drivers, train crews, ticket office staff, station staff and telesales staff—are all the same people, whoever runs the franchise. The question is therefore whether franchising is a good way of choosing that top management. I doubt that it is, because so many of the train operating company’s costs are fixed by others, such as track access charges and rolling stock leasing costs. Many of the other costs faced by operating companies are pretty inflexible. The premiums paid to the Government are agreed years in advance. Staff costs are not flexible either.

The only major variable available to a train operating company is passenger numbers and the resulting revenue. It is clear from the GNER collapse and the National Express East Coast situation that it is impossible to predict accurately passenger numbers and revenue seven years ahead. If a bidder overestimates the growth in passenger numbers and revenue, as GNER and National Express East Coast did, they will default on their obligations to the Government and the public. If they underestimate such growth and display a lack of ambition in their business plan, they will make windfall profits, although they may have to share those with the Government under cap and collar arrangements. There must be a better way to determine who manages a service such as the east coast main line.

I applaud the Government’s decision to set up a publicly owned company to run the east coast main line in the likely event that National Express East Coast defaults. The cost of setting up that company will be the same whether it runs the service for one year, three years or a longer period. I urge the Government to use a period of public ownership to rebuild business confidence in the service, restore staff morale and create a better business model for the running of the service.

I have spoken to a director of the publicly owned company that took over the Connex franchise after it collapsed. He served on the board of that public sector company for three years. The company ran the railway in the public sector for two and a half years. I believe that the Government will need at least a similar period to consolidate and stabilise the east coast main line. I say to the Government: please do not rush into refranchising. They should take sufficient time to work out what went wrong and should change the system to make the business model fit for purpose.

Some people say that they know the answers already, but I believe that they have sectional and vested interests. Plenty of people in the private sector are calling for longer franchises. They say rightly that that would encourage higher levels of investment. However, GNER and National Express East Coast did not fail because their franchises were too short. Both came to grief because they miscalculated the revenue growth. Longer franchises would make the risk of such miscalculations greater.

The Conservative party says that the Department for Transport has been greedy and that it charged too much for the franchise.

Over a longer franchise period, there is the prospect of revenue growth recovering, which does not exist over a shorter franchise period.

That is true, but as we have seen from the National Express East Coast situation, when there is a short-term squeeze on revenue, the company walks away from the franchise even though there is the prospect of long-term growth. A longer franchise period would not prevent a franchise collapse of the kind we saw with GNER and appear to be seeing with National Express East Coast.

As I was saying, in answer to the statement by the Minister of State, Department for Transport in the Commons on 1 July, the shadow Secretary of State for Transport accused the Department of charging too much for the franchise. It was not the Department for Transport that wrote the bids, but hard-headed businessmen who had assessed what the franchise would be worth to their businesses. The National Express East Coast bid was not the highest cash bid submitted in the last franchising period, but the second highest. It was selected because the Government were not confident that the highest bid was viable. It is hard to take the Conservative party’s complaints seriously. Franchising was a poisoned chalice that it imposed on the railways. It has brought some benefits, but at the cost of an unacceptable level of instability.

What are the alternatives? First, I would like the Government to re-examine the role of Network Rail. Should it remain the monopoly infrastructure provider, or would it be better to have a vertical railway whereby the Department franchises the track and the trains? If Network Rail remains as the sole national provider, should it be a public corporation rather than a public interest company? That would make it more accountable to the Government and the public. Should track access charges be variable? Network Rail is largely insulated from the economic downturn. Should the track access charges that it obtains depend on the revenue of the train operating companies? That would give Network Rail a vested interest in working with train operating companies to make them as efficient as possible and profitable.

Secondly, I would like the Government to examine what should be contracted out. Should they contract out a full franchise or something less? For example, they could contract out the top level management of a public transport service, possibly on a profit share basis. That would apply a cap and collar arrangement from day one.

Thirdly, I would like the Government to consider whether it is right to contract out the core service or entire service in a region or on a line to a single company, as under the GNER and National Express East Coast model, or whether it would be better to contract out train paths, such as with Grand Central and Hull Trains. Must there be a pre-eminent train operating company in a region or on a line? For example, Leeds has a half-hourly service to London. I note that the hon. Member for Leeds, North-West (Greg Mulholland) has now left the debate. Why should there not be two train operating companies each running an hourly service so that they compete with each other on quality and price?

Fourthly, should the public sector be able to bid when the Government put franchises out to contract? It is of course possible because Deutsche Bahn and SNCF can bid. Why should a British public sector transport company not be able to submit a bid? At a recent meeting between Yorkshire Labour MPs and the Prime Minister, my hon. Friend the Member for Morley and Rothwell (Colin Challen) asked why a public sector operator cannot bid. The Prime Minister rightly asked who that public sector bidder would be. I can think of three potential public sector bidders. The first is the public sector company that the Government are establishing to run the franchise in the event that National Express East Coast defaults. A second possible public sector bidder is Network Rail. Finally, the residual British Rail Board could bid.

When the Railways Act 1993 was at Committee stage in the House of Commons, there were long and intense debates about whether British Rail would be able to bid for franchises. As far as I am aware, the relevant section has never been rescinded. Of course, British Rail did not bid at the time because it was under a firm steer from the Department for Transport not to do so. It was not a private sector company and therefore was not encouraged to bid, despite being permitted to do so legally. As far as I am aware, that provision is still on the statute book and there is still a British Rail residual body. It would be worth the Government’s while considering whether it could put in a bid.

Fifthly, the Government should consider whether the publicly owned company that they are in the process of establishing to run this franchise in the short term should be given an extended period in which to run the line. It could be given seven years—the length of a typical franchise—in which to improve the service and to rebuild business and passenger confidence. That, of course, would be a return to nationalisation. I am not putting such an argument forward for ideological reasons; I am doing so because a period of public ownership would test whether a public sector supplier would compete well with private sector providers on quality and value for money. Of course, if the Minister has considered all those matters, he will tell us what the answers are. However, if he has not done so, I hope that the Government will hold back on the timetable for refranchising to allow those questions—and those that I imagine other hon. Members will ask—to be fully considered. I have seldom seen Westminster Hall as full as this for an Adjournment debate, which shows just how important this issue is.

Many people share my view that the Government should pause for thought. I asked Yorkshire Forward to consult businesses in my region and, at its prompting, the CBI has been consulting its members, whose views are coming back. One large plc that is based in my constituency suggests that the Government should

“get potential fanchisees to compete on a different basis.”

Jonathan Metcalfe, a former managing director of GNER, supports

“publicly specified and privately delivered rail operations”

but advises it is very important that the Government

“reflect fully on the most appropriate re-franchising arrangements.”

In the Commons on 1 July, the Minister of State, Department for Transport said:

“It is the Government’s intention to tender for a new east coast franchise operator from the end of 2010.”—[Official Report, 1 July 2009; Vol. 495, c. 425.]

However, at a meeting yesterday, the Secretary of State for Transport said that the new public sector company will run the service for “at least a year.” I hope that the Government will not commit to having a new franchise in place by the end of next year because that would rush matters and run the serious risk of the east coast main line franchisee failing once again.

We need a serious public debate about these issues, and that will take time. Information about the costs of running the railway, the number of passengers carried and the quality of service should be in the public domain. Before the debate, I tabled a number of named day questions to my hon. Friend the Minister. I know that it is difficult to answer questions fully when one is up against the tight time constraint of a named day question, but the answers I received were sketchy to say the least. I will re-table the questions and invite the Government to provide more detailed information, because the details on passenger numbers, revenues and the surpluses made—both in the British Rail days and since then—need to be in the public domain to enable a wise and sensible decision on the future of the line to be made.

I have been reading the history of BR and, in the 1980s, the Conservative Government had difficulties in establishing the profit line for the BR intercity service, but it is clear that the profit line was of broadly the same level as that being made by the franchisees of intercity services at the moment. Therefore, it is possible for the public sector to make good money out of a commercial railway, although, of course, the social railway will continue to need Government support.

In relation to York, I say this to the Minister. On 1 July, the Minister of State, Department for Transport called me to explain what the Government were doing. At that time, I said to him that, when the publicly owned company takes over the franchise, it is important that it retains its headquarters in York. Geographically, York is at the centre of the line and, when there is a major incident, I have seen managers run out of the railway offices and jump on a train. Within two hours, they can be where they are needed—whether it is a train crash or some other incident. York is a geographically sensible place for the headquarters to be and it is, of course, where the service’s headquarters have been for a century. I was pleased that when the Minister made his statement to the House on 1 July, he was able to give me an assurance that the headquarters would stay in York as long as the publicly owned company was running the service. For the sake of stability, to restore staff confidence and morale, and to safeguard hundreds of jobs in my constituency, I hope that, this time, if the Government refranchise the service, they will require the headquarters to remain in York.

There has also been great controversy about the establishment of ticket barriers at York station. When I spoke to the Secretary of State about that, he said that his hands were, in effect, tied because one of the conditions of the National Express East Coast franchise was that barriers could be installed. If National Express loses the franchise, which seems almost certain, that condition will, of course, no longer exist, so I ask the Government to consider that matter again. Among others, I have spoken to someone who was a manager of the east coast main line when InterCity was running the service. He took out the barriers in 1988 or 1989 and achieved a revenue increase by putting ticket collectors on the train.

The Secretary of State has talked about using a period of public sector consolidation to improve the quality of the service, for example, in relation to car parking, bicycle parking and on-train catering. Those are all good things, and I applaud him for taking those matters on board. However, they do not deal with the strategic question, which is that this railway is of fundamental economic importance to Yorkshire, the north-east of England, the east midlands and Scotland. There has been a hiatus twice in three years; there cannot be another hiatus. The Government need to stop and consider how they have appointed the management of this railway line in the past. They also need to change how they have determined who will manage the service in order to prevent the vulnerabilities that have led to the two franchise collapses.

rose—

Order. There are several hon. Members who wish to speak in the debate. I advise those who wish to contribute that I will call Front-Bench speakers at 12 o’clock, so if hon. Members limit their contributions, I will try to allow as many as possible to contribute.

It is a pleasure to follow the hon. Member for City of York (Hugh Bayley), not least because he speaks about the railways with passion and a degree of knowledge and experience. However, we must bear in mind the circumstances in which the decision was taken and the statement relayed. It is worth repeating the point that it is not acceptable for the Secretary of State for Transport, Lord Adonis, effectively to make the announcement on the issue at 7.22 am on the “Today” programme while we in the House of Commons had to wait until half-past 7 that evening to be told the same thing. So doing disregards the new Speaker’s rules.

The hon. Gentleman failed to give us the context of the failure, or seeming failure, of National Express East Coast. He assumes that the matter is just about a commercial enterprise, that there is no greater Government or ministerial context and that the franchise system has failed. Obviously, in doing so he pays homage to the traditional visceral hatred of privatisation that we see among those on the Labour Back Benches. Two weeks ago, there was a knee-jerk reaction from various people who see what has happened as a green light to proceed with full renationalisation and an opportunity to roll back the progress made under privatisation.

The hon. Gentleman fails to concede that the micro-management and interference of Ministers, the Department for Transport and the Government generally have played a part in what has occurred over the past few months. He says that he wants a serious public debate, but so do we all. That is at variance, however, with his contention that the current situation will lead to instability and lack of clarity, which will be bad for business in Yorkshire and the Humber and along the east coast main line in the rest of the country, including my constituency.

I do not believe that we need a long period of 18 months or more of quasi-nationalisation, which would not be good for the industry, and certainly not for the east coast main line. It is, of course, a prestigious line, and we are all sorry that it is in its current position. I believe that Great North Eastern Railway was a good train operator, and were it not for the problems with the chapter 11 situation that afflicted Sea Containers in 2007, it would still be running a fairly good service. GNER would have had to cut costs and cope with a difficult economic situation, but it would still be running the line.

Clearly, National Express overbid for the franchise in 2007 and its model’s predictions for passenger numbers, revenue and similar data were faulty. However, we should remember that that franchising model was overseen by the Department for Transport and Ministers, and that there was no great difference of opinion on the predictive modelling, as the Department concurred with National Express’s predictions, so it would be unfair and disingenuous to blame only the franchisee for its current situation.

The model was predicated on revenue growth of 10 per cent. and an estimated 4 per cent. increase in passenger numbers, but over the 18 months since then we have seen falling passenger numbers, fewer journeys and declining passenger revenues. In the period immediately before the recession kicked in, passenger revenues rose by about 11 per cent. during the quarterly period in the middle of 2007.

The success of the east coast main line and the long-term financial viability of the franchisee matters a great deal to my constituency, which has a strong heritage as a railway town—perhaps not as strong as York’s, but close. For us, the redevelopment of the station quarter and the North Westgate development in Peterborough are an integral part of the wider regeneration of the city, and having a railway station that acts as a good, professional facility is vital to my constituents, not least because Peterborough’s economic prospects are as a transport and logistics hub at the confluence of the east midlands, the east of England and the greater south-east. Hitherto, the availability of a fast and efficient service only 50 minutes from London has been of significant benefit to Peterborough’s economic competitiveness in the travel-to-work area.

We are in the current situation because of the value judgments and decisions of the Secretary of State for Transport, Lord Adonis. He is responsible for the current situation. Two weeks ago he told the media—before he told Parliament, incidentally—that the Department

“does not renegotiate rail franchises”.

That raises the question, why did the Department spend five months from February 2009 negotiating with National Express, the parent company, if it was not prepared, ultimately, to vary the franchise arrangements in any way? At the same time, other train operating companies, such as First Great Western and Virgin West Coast, have received taxpayer subsidy at an earlier juncture than was possible for National Express East Coast, which would have received that support from December 2011, as the hon. Member for City of York mentioned. We should remember that National Express has not yet defaulted on its payments with regard to the east coast main line operation and that before the downturn revenues were growing ahead of the target set when the franchise was awarded.

The Department for Transport had an opportunity earlier this year to maintain the franchise, with a cash sum to the Treasury, until the taxpayer subsidy could be given to the company in December 2011, but it rejected the offer and plunged the east coast main line franchise into uncertainty and confusion, and ultimately the inevitable incompetence of the Government running that vital railway franchise. Ultimately, taxpayers will absorb most of the loss if the revenue on the franchise is below target growth. As we heard from the hon. Gentleman, growth in the first quarter of this year was down to just 0.3 per cent., which clearly does not auger well.

I disagree with the hon. Gentleman because it is imperative that the Government move quickly to relet the franchise as soon as possible, but he is right that we need to know the cost to the taxpayer of that likely process over the next 18 months. We have to ask what impact there will be on other budgets as a result of the public subsidy needed to keep the franchise as a pseudo-nationalised franchise. That is important, if other vital programmes are to be affected.

We also need to look at franchise length. As the right hon. Member for Berwick-upon-Tweed (Sir Alan Beith) said, it is no coincidence that the most successful train operating company, Chiltern Railways, has an exceptionally long franchise, compared to the others, so we must consider that. It is something that neither the Minister nor the hon. Member for City of York can disregard. We cannot go back to nationalisation, despite what some hon. Members might say. Even The Independent, which is not traditionally a great friend of private enterprise or the Conservative party, said on 2 July that

“there is no case for resurrecting the inefficient British Rail… the railways have generally improved in private hands over the past 15 years. Passenger numbers are at their highest levels since the Second World War and the quality of rolling stock is much higher.”

We need to look at governance structures and review the cap-and-collar regime. We need to accept that there is likely to be some cost-cutting in the short term, but I believe that that is worth while if the medium and long-term financial viability of the franchise is preserved and can continue in private hands. We must remain focused on the strategic and economic importance of the east coast main line and ensure that we continue to deliver a professional, fast, quality and value-for-money service for the benefit of our constituents across the country.

I do not disagree with the hon. Member for City of York on the issue of disaggregated franchises, because there might be merit in that and we should look at it. Nor do I disagree that we should look at contracting out top-level management. The new Conservative Government, who I hope will be elected in the middle of next year, will undoubtedly look at that point, and my hon. Friend the Member for Wimbledon (Stephen Hammond), the shadow Minister, will perhaps refer to it.

Finally, we need further institutional disruption in Network Rail like we need a hole in the head. We should leave Network Rail well alone, because disruption will not work and there is no case for it. We are in a difficult position, so we should relet the franchise quickly, put away notions of renationalisation and get that service working for our constituents and the benefit of the whole country.

It is a great pleasure to follow the hon. Member for Peterborough (Mr. Jackson), and I congratulate my hon. Friend the Member for City of York (Hugh Bayley), who is my constituency neighbour, on securing the debate.

Given the short time available, I wish to make only two points. The first concerns the open-access operators on the line, Hull Trains and Grand Central, which my hon. Friend mentioned and which I regard as important. I also want to argue briefly why I think there is merit in the Government being firm, bold and clear in saying that they will run the east coast main line franchise in the public sector as a public sector comparator to the rest of the industry for 10 to 15 years to give certainty.

There are three open-access operators in the country, and two of them are on the east coast main line. One of the real benefits of rail privatisation was that for the first time it was possible for new operators to risk money and institute new services for underserved areas of the country. My constituents in Selby lost their east coast main line connection when the mines came to Selby and the railway was diverted. It was truly a red-letter day when GNER and Hull Trains both put Selby back on the map. Seeing Selby on the board at King’s Cross station is a little like having a lower division football team.

Selby railway station is a friendly place. I recall at the height of the expenses row—I must have been looking very bleak—the manageress coming up to me and hugging me. She said, “You look like you need a hug, love.” There we are—a very friendly place.

Grand Central Railway is the other open-access operator. It had a bad start, but last week it was named by Passenger Focus as the second most popular of all the railway companies in the country, after a vote by ordinary passengers. The company that beat it, Wrexham and Shropshire, is also an open-access operator. We should value such operators’ innovation and the risks that they take.

Hull Trains, which has been taken over by First Group, needs to raise its game. It is letting the people of Selby down with too many cancellations. First Group, as the parent company, needs to put that right in the coming weeks.

I agree with my hon. Friend about the barriers at York station. They are potentially a barrier to competition as well as to people. Grand Central allows passengers to buy tickets on the train, unlike National Express, which discourages that. It has to be looked at.

The Government resisted open-access for many years. The Department for Transport was not keen on Grand Central or Hull Trains because they disrupted the franchise system, but they are a valuable part of the railway and should be maintained.

Moving on to the franchise itself, there is a need for certainty. As my hon. Friend said, business in the north-east and in Yorkshire and down the central spine of the country depends on the franchise. I do not think that we can continue this debate for too long, to be honest. There is a general election coming and it is essential that all the parties are clear about what will happen to this major franchise.

I have been inspired by the hon. Member for Lewes (Norman Baker), who, along with many others, put forward the idea of a public sector comparator. Why should we not see who is right? Why should we not have one of the major franchises run by the public sector for a long period—10 to 15 years—to see what happens? In 2008, the rail business of the year in the United Kingdom was a nationalised railway. It is called Translink and it just happens to be in Northern Ireland. There is a public sector comparator in Northern Ireland, so why can we not have one on the mainland? Otherwise, we will have a debate that goes on for possibly a year or more.

Just saying that we will keep the line in public sector hands for a year, 18 months or some indeterminate period is the worst of all worlds. If that is what we are going to do, we might as well refranchise immediately, as the hon. Member for Peterborough suggested. We need some clarity and certainty, and I strongly urge the Minister to consider the possibility of keeping the franchise in the public sector so that we can plan for the next 10 to 15 years. We are coming up to a general election. I would be absolutely confident, as a Labour MP in Yorkshire, that that would be a popular policy. We could go into the election saying that we would keep the line in public sector hands, and presumably the Conservatives would oppose that.

I finish with the words of Lord Adonis, who recently told the New Statesman:

“If I could rerun the past… I would have tried to pull the plug on rail privatisation in the mid-1990s… So much about transport is basically about action versus inaction… and I am an action merchant.”

I believe that there are many—not just on the Labour Benches, but on the Liberal Benches—who would agree that it is time for action, not indecision, Lord Adonis.

Will the hon. Gentleman give way?

I was about to conclude, but I give way to the hon. Gentleman.

I know that the hon. Gentleman is concluding, but does he want to quote what Lord Adonis said about British Rail in that New Statesman article?

It is not highlighted in my copy, and, as I have had my five minutes, I would not want to detain hon. Members. I am sure that the hon. Gentleman will remind us of Lord Adonis’s many and wonderfully varied sayings when he gets up to speak.

I congratulate the hon. Member for City of York (Hugh Bayley) on securing this important debate. I agree with much of what he said, particularly about the economic importance of the line, which applies to my constituency as much as it does to his. I shall not go over that again, other than to say that there is a big employer in my constituency, GlaxoSmithKline, whose factory, after a rollercoaster ride, was not closed. It continues to work. I recently had a meeting with the company’s management, who stressed to me the importance for its operation of having a rail line to Montrose. That should be borne in mind.

The news about National Express came as a great blow to my constituency, although I was pleased that Lord Adonis quickly made a statement on the future of the line and gave a clear undertaking that there would be no disruption to the service. That was much appreciated. However, there is continuing concern about what the future holds for that line. I shall concentrate in my brief contribution on my constituency and the Scottish situation.

The Government have made it clear that they intend to try to find a new franchisee for the line. I have no ideological feeling one way or the other as to whether it should be the public sector. I have no objection to the public sector or the private sector running it. What I want for my constituents and the businesses in my constituency is certainty for the future. Twice the franchise has been removed from an existing operator. That causes concern, and we do not want to get into such a situation again. We want assurance that the line will continue to operate in the future. That is important.

I regularly use the line to come to London from Montrose. The journey takes six and one half hours. It is a marginal decision as to whether one should fly or take the train. It is probably quicker to fly, but it is much less hassle to take the train, and many of us prefer to take the train for that reason and for climate change reasons. We are less concerned about who runs it than that it is well run and that we have a regular service.

The situation in Scotland is complicated by the fact that, although National Express runs the franchise, it does not run the stations. They are run under a separate franchise given by the Scottish Government. In fact, the stations in my constituency are run by ScotRail. I ask the Minister whether there has been any discussion with the Scottish Government on the new company that will be set up to run the line, should National Express give it up, and what the position will be of the UK and Scottish Governments on the future of the franchise and the new company.

Trains currently stop in my constituency at Montrose and Arbroath, and throughout Fife. They provide an important service to London. The downside is that, north of Edinburgh, the service is much slower than it is through England. That is for various reasons. The line is not electrified, but that is another issue; I shall not open that can of worms now. However, it is a successful line.

I tried to find the passenger figures for the line. It appears that since National Express took over in 2007, it has failed to submit any data on passenger journeys to the Office of the Rail Regulator, but figures in the company’s accounts seem to indicate that passenger journeys increased from 18.1 million to 18.7 million between December 2007 and December 2008. That seems fairly reasonable, given the trajectory of figures from GNER, which show that passenger journeys increased from 11.9 million to 17.6 million between 1996 and 2006. Travel on the line remains popular.

From my own unscientific view of travelling on the train regularly, I would accept that there probably has been a decrease in numbers during the recession, but not by a horrendously significant amount. It would be interesting to see the data and to find out what brought National Express to the position that it is now in. To be fair, my experience is that it runs a good service on the line, and I feel some regret that it appears to be on the way out.

My constituency and other parts of the north-east are haunted by worry about what will happen to services if the line is refranchised. We must be honest and accept that many of the journeys are made through England and up to Edinburgh. It has been reported, for example, as I mentioned in an intervention, that in talks on the franchise between National Express and the Department there was discussion about cutting off-peak half-hourly services from King’s Cross to Leeds to an hourly service. I am concerned that, if the line is refranchised, there will be a lesser service, particularly north of Edinburgh, which would be a disaster for my constituency for business and environmental reasons, and in respect of holidays, as many of my constituents travel on the train to catch holiday flights at the airports around London.

Clearly, whoever takes over the franchise will not enter into the same agreement as National Express and, presumably, it will not do so on the basis of the same sort of figure, because the massive amount paid for that seems to be the cause of the problem. I ask the Minister for a categorical assurance that, in the event of the franchise being awarded to another operator, it will continue at least with the current level of service and that trains will continue to stop at stations throughout the north-east of Scotland, particularly at Arbroath and Montrose in my constituency. If a new operator sought to cut down those services, that would have a terrible effect on the north-east of Scotland.

We need investment in the line. We need electrification. We need, eventually or as quickly as possible, a high-speed rail line, but in the meantime, we must at least maintain the service that we have; I seek an assurance on that from the Minister. Lord Adonis will be having a meeting with interested Members of Parliament on Monday, at which I hope he will say more about that. I stress that, for my constituents and for the north-east of Scotland, that is the important point.

I, too, congratulate my hon. Friend the Member for City of York (Hugh Bayley) on securing this important debate.

Casting my mind back a few weeks to a debate in Westminster Hall on rail services to Grimsby and Cleethorpes, I recall that I mentioned that National Express was discussing putting in a direct service to those towns from the capital city, so, unlike my hon. Friend the Member for Selby (Mr. Grogan), who can see his constituency on the board at King’s Cross, we have not quite got that far yet. Therefore, my main question to my hon. Friend the Minister is what will happen to those future developments on the line? Is it still possible for us to get the one return service a day from King’s Cross to Grimsby and Cleethorpes that was promised, particularly given some of the major industrial investment along the Humber bank at the moment?

[John Cummings in the Chair]

I am glad that we are having this debate. I want to contribute briefly to it because of the vast importance of the east coast main line to the north-east of England and to eastern Scotland. Two companies have walked away from the franchise. We cannot go on like this. We cannot have repeated franchise abandonment, because it has a demoralising effect on staff, it causes a loss of confidence among customers, particularly among business customers, who plan over a long period, and there is the danger that we will not get rolling stock improvement and acquisition that is badly needed, given the tired state of some of the rolling stock on the service at the moment.

I shall mention in a moment what should now happen with the bidding process, but first I express the hope, which other hon. Members have expressed, that some recent grievances are dealt with as a side-benefit of the disaster of National Express’s walking away from the franchise. Let us put a stop to the nonsense of installing ticket barriers, not just at York, but at Newcastle and other stations, which will bring to the railway system the disadvantages of air travel. One of the competitive advantages of that system is that it is easy to get on a train and there is less danger of people being caught in a queue and missing it. Let us also get rid of the odious seat reservation charge, which was one of National Express’s most foolish decisions.

I am particularly concerned that the Minister ensures that in any new specification, including for the period of public ownership, services from Berwick and Alnmouth and the limited service from Morpeth are maintained. Given that the Secretary of State has committed himself to improvements, can we please have some real effort behind the improvement of car parking at Alnmouth and Berwick and the introduction of a proper train information system at Alnmouth, so that passengers are not left standing on an empty platform late at night with not the faintest idea of whether a train has been delayed or will arrive? Every station that I go to in the south-east of England has an efficient train information system, and many stations in other parts of the country have such provision. Alnmouth station ought to have that, particularly because there are periods when it is unstaffed.

I do not want the service to be split between several operators, as the hon. Member for City of York (Hugh Bayley) suggested. We already have three operators north of Newcastle—Arriva, CrossCountry and Northern—and we do not want to confuse the service more. I remind the Minister that Northern runs services on the east coast main line, including one to Belford that nobody can get on because there is still no rail platform there. I hope that the Minister will put his weight behind carrying that proposal through to a solution. I do not want the service to be further split between more operators and I do not want another failed franchise bidder.

I agree that there is merit in not rushing this process. I am attracted by the suggestion of my right hon. Friend the Member for Gordon (Malcolm Bruce), which he will no doubt develop when he catches your eye, Mr. Cummings, as I hope he will, on a public sector comparator on the line, at least for a period. That could be a positive way forward.

The line is essential to the region. The services from centres such as Berwick, Alnmouth and Morpeth  serve a wide area and must be maintained. We want some consistency and confidence in the operation of this vital service.

We discussed the future of the rail industry in this Chamber on 3 June, when we predicted that franchises would be handed back within weeks. We were proved right. Concerns were raised in a submission by the National Union of Rail, Maritime and Transport Workers to the Transport Committee in October 2007 about the fact that, if the country went into recession and passenger numbers fell, there would be problems with the franchisers and that we would, as a Government, need to stand ready to intervene directly.

I cannot understand the nature of today’s debate. Two franchisers have failed on this line in three years, yet the solution seems to be more franchising. I do not understand why we do not learn lessons from what has happened. National Express has taken the Government for a ride. It has made £500 million profit out of a public subsidy of £2.5 billion. It has increased the fares this year as follows: regulated at 6 per cent. and unregulated at 7.4 per cent. On the east coast and the East Anglia lines, it has laid off 750 workers. Cannot we get the message that we are being ripped off?

The proposal that we advanced when the south-eastern trains franchise company, Connex, went down was to put the line in the public sector. We wanted a public sector comparator at least to prove its worth so that we could see whether forms of public ownership could work elsewhere, but the Government reprivatised. A public sector comparator should be used as an example, because some believe that we can demonstrate that the public ownership option can work. If we had a comparator option, at least that would sharpen up the opportunities to increase the efficiency of other rail providers. That is the whole point.

Standing back from ideology, it is about trying to get a rational, pragmatic approach on how we go forward on the matter. I can think of nothing worse than rushing to reprivatise within 15 months, with the turbulence, yet again, of a franchise exercise. Remember the costs of franchising, which we discovered in respect of London Underground: £400 million was spent on consultants, accountants and others to set up a private finance initiative disaster. I am urging people to stand back.

Let me say one thing about the myths about British Rail. The last independent study, by Catalyst in 1995, said that, in comparison with the rest of Europe, for the levels of investment, British Rail was the most efficient service in Europe. We now know that infrastructure costs have gone up fivefold since privatisation and that fares have increased dramatically and impacted on the overall service. Therefore, let us at least come with some objectivity to the debate. On this exercise, at least allow us to have a public sector option, which will enable us to demonstrate that the public sector can have a role to play in the rail industry.

I am keen to call the winding-up speeches at 12.

Thank you, Mr. Cummings. I will be very brief indeed.

Aberdeen is a wonderful place and it contributes an enormous amount to the national economy, but it is a long way from everywhere. One of the things that I think people have been most concerned about is that Aberdeen does not get a fair deal on railway services. Indeed, although there is a franchise from London to Aberdeen, very often the northern part of the line is the neglected part, as the hon. Member for Angus (Mr. Weir) will know.

We want to ensure that, first, there is a full operation of the line, that runs absolutely from London to Aberdeen, with a full service provided throughout the line. Furthermore, I believe that the case for a public sector comparator is a good one.

Secondly and lastly, we want to ensure that we have a sensible and competitive fare structure. It is ridiculous that people trying to book a long time in advance find that it is cheaper to fly than to use the railways. Surely a public owner could find a way to encourage people on to the railways rather than off them and on to air travel.

I agree with all that my right hon. Friend the Member for Gordon (Malcolm Bruce) has just said, so I will not repeat any of it. Instead, let me pick up on the statement by the Secretary of State for Transport on the “Today” programme, which has already been referred to. I want to be very fair about it. The Secretary of State was responding to a press release from National Express; that is entirely different from a Government-oriented release coming ahead of a parliamentary statement. Therefore, I clear him on that count. However, there is an issue about Members of the House of Lords being in the Cabinet and there not being a statement in the Commons until half-past 7 that evening. The Government either need to have the Secretary of State making statements in the Commons, even though that would break procedure, or we must have the Minister of State making a statement in the Commons ahead of the Secretary of State making a statement. We cannot be treated like that again on major statements about this matter.

On the franchise offer, it is a sad state of affairs for Members along the east coast line and for others who are rightly concerned about the disruption, the uncertainty and the hiatus that is being caused, as well as the message that is being sent to the travelling public and, indeed, the consequences for public finances of yet another failure of the franchise. Clearly, there are lessons for National Express, but there are also lessons for the Treasury and the Department for Transport on how the franchise process works.

Richard Bowker said on behalf of National Express, when he launched the bid for the franchise:

“We will not bid at levels that we think are unsustainable or undeliverable. There is no point in being a hero for a day and a villain forever more afterwards.”

He seems to have got that calculation slightly adrift.

The DFT recognised that there was an issue about the level of the National Express bid, even if the Treasury did not. Dr. Mike Mitchell, the director general for rail in the DFT, told the Public Affairs Committee on 21 January that the east coast franchise had been placed at the Government’s highest “red” financial risk and the DFT was quite rightly making provision for what would happen if the franchise fell over. As I say, that was way back in January. We then had further indications from National Express that it was in financial difficulty. As the hon. Member for Peterborough (Mr. Jackson) has already said, there were discussions over quite a long period between the DFT and National Express about the way forward.

In those circumstances, it is rather odd that the DFT is still not able to say whether or not it will invoke cross-default procedures for the other two National Express franchises. One might have thought that, after a number of months of anticipation, it would have the answer immediately to hand. Will the DFT invoke cross-default procedures for the other two National Express franchises, for East Anglia and c2c, which runs out to Southend and Shoeburyness, or will it not do so? We still do not have an answer to that question, so let me ask the Minister now when will we have an answer, because the uncertainty that applies to the east coast line is now affecting other franchise areas.

I just want to draw the hon. Gentleman’s attention to the fact that cross-default does not come into play until the current franchisee hands the keys back, which has not yet happened.

That is true, of course, but it means more months of uncertainty for people in East Anglia—including people in the Norwich, North area—and for people who live along the line out to Southend and Shoeburyness.

Indeed, there is an oddity about this business of whether or not National Express has defaulted. The National Express statement on 1 July made it plain that it had failed in discussions with the DFT—that is what National Express said—and it expected to hand the keys back, as the Minister puts it, late in 2009. Lord Adonis then made a statement, effectively saying that National Express had defaulted in all but name; he certainly gave the impression that it was a cast-iron case of the company defaulting. National Express then said, in a further statement in response to the Secretary of State:

“National Express East Coast is continuing to run the East Coast business… Despite suggestions that the Government is taking over the running of East Coast today, this is absolutely NOT true. Further comments that the National Express Group has “financial problems” which have led to it “defaulting” on its commitments to East Coast are also NOT true.”

There appears to be some dispute between National Express and the Government. Of course, the possibility therefore exists that we will not have a default—at least, National Express maintains that that is a possibility—and that it will continue to run the east coast service, so that this debate will, in a sense, become unnecessary.

What is clear, however, is that the passengers on the east coast line, the members of the staff employed by National Express on the line and all those who depend on the line for economic reasons are in a period of uncertainty, which is causing disruption and problems for the economy, the future of the railways and those of us who believe in attracting people on to the railways and away from more carbon-intensive means of transport. The sooner that the matter is sorted out, the better. We cannot drift on with it for several months, although, unfortunately, that appears to be what will happen.

I believe that, if we are to have a default, it is right that we should have a cross-default invoked. Otherwise, the message certainly goes out to the industry that it can walk away from that which it does not like and keep that which is profitable. That would not be a satisfactory outcome for the taxpayer—we cannot have that. So the company has to pay a penalty if it walks away from the east coast franchise.

National Express has released a statement that says:

“The Group would oppose any attempt by the DfT to cross default, in order to protect shareholder value.”

Perhaps we can send a message from this debate that we will take National Express on, if necessary.

I very much hope that the Secretary of State is looking at that issue. Indeed, reading between the lines—I do not know whether or not this is a fair assessment—the officials in the DFT were willing to look at a business arrangement involving a management contract and negotiations with National Express. To be fair to the Ministers, they said no to that. That is how I read the situation; perhaps the Minister can clarify whether or not that happened.

We have a cost in place already, of course. A new public sector company has been set up—the East Coast Main Line Company. Elaine Holt has been appointed to run that company and, no doubt, an infrastructure is in place. Therefore, can the Minister tell us how much has been spent already on the public sector body that has been set up to run the east coast main line in the event of a default? Is Elaine Holt already being paid for her job? What are her terms of employment? Furthermore, if National Express does not default, how much money will be wasted in the shadow process that has been established to date?

To pick up on an important local point, it is also vital, for stability, that the headquarters of the line remains in York. The hon. Member for City of York (Hugh Bayley) made that point himself and Andrew Waller, the Liberal Democrat leader of the city council in York, has made a similar point to me, so there is cross-party agreement on that important issue. As other Members have already said, if National Express finally defaults, we must look long and hard at where we go with that franchise and the franchise process more generally.

As other Members have already said, it seems quite clear that the idea of a public service comparator is sensible. First, it gives stability to that franchise; it lets people have confidence that there will be no further change of ownership, delivery and everything else within another 18 months to two years. Secondly, it enables the DFT, with those in the industry, to say, “How can we rearrange the franchise, so that we put passengers first? Let’s have some passenger-oriented outputs, rather than simply having Treasury-driven outputs. What do the passengers want out of this?” That would drive up performance and not just on the east coast main line. By the way, I do not think that National Express is particularly bad, which was the point that the hon. Member for Angus (Mr. Weir) made. None the less, that process would still drive up performance and get rid of these nonsensical own goals, such as £5 reservation tickets and getting rid of some of the buffet facilities. Some of those actions have cut costs but damaged passenger confidence in the service. We should therefore use that public service comparator to tell other franchise holders, “Well, this is happening on the east coast main line. It is very popular. Why don’t you extend it to other areas of your operation as well?” Without that public service comparator, I do not think that we have the tools or the leverage to pull up the rest of the industry in a way that I would like.

There is a case for longer franchises, but they must be based on a five-year review period, to find out whether passenger-oriented targets are being met. If we drive things towards the passenger rather than towards the Treasury, we will end up with a better railway system than we might otherwise end up with. It is very important that the Government, having got in this situation partly but not entirely through their own making, now set some very clear signals about where the east coast main line is going, in what time scale and at what cost. The longer that we delay, the more uncertainty that we have, the more that the railway suffers, the more that the train passengers suffer and the more that the people employed by the railway suffer. Those are not outcomes that I wish to see.

This is an important debate, as several hon. Members said, and I congratulate the hon. Member for City of York (Hugh Bayley) on securing it. He made some comments about the Conservative party and the view on franchising. He will know, if he has read our documents, that we have indicated that we think that there should be a quantitative as well as a qualitative judgment, and we agree that franchises should be longer.

The hon. Member for Selby (Mr. Grogan) quoted Lord Adonis and his wise words. I think that he will find, if he reads the rest of the article in the New Statesman—I do not have it with me today, but I read it last night—that Lord Adonis said that he was not starry-eyed and no one would want to go back to the bad old days of British Rail and a nationalised industry. I am sure that the hon. Gentleman will correct me if that is not quite what Lord Adonis said, but I am pretty certain that that is what the wise words are.

The hon. Member for Lewes (Norman Baker) says that he clears the Secretary of State on the point about the procedures, the announcements and the technicalities at 7 o’clock. I cannot agree, because if the Secretary of State was only responding to a statement from National Express, he assembled in 22 minutes a panoply of apparatus to put in place a takeover. If he was only responding—I know how the process works, having worked in the corporate world—he would almost certainly have seen that statement the night before and could even have instructed one of his Ministers to come to the House at 10 o’clock the night before and make a statement. The reality was that 12 hours after the stock exchange, eleven and a half hours after the “Today” programme and four hours after the House of Lords, the House of Commons heard about it—then and only then. I am sure that the Minister will say, “Ah, but the House of Commons could have accessed the statement at 7 am.” Will he tell us exactly what was open at 7 o’clock in the morning? Was it the Library? Was it the Vote Office? Where could a Member of Parliament have obtained the statement from Lord Adonis at 7 o’clock in the morning?

It is only fair to put it on the record and try to get the hon. Gentleman to acknowledge that there were plans to make the statement in the House of Commons much earlier. Several attempts were made to make the statement earlier in the day, but the Opposition—his party—objected to those timings.

No, without wishing to pull the hon. Lady up, that is simply not true. It was indicated by her own side that the statement in the House could happen at 5 o’clock and Mr. Speaker rejected that. Also, as the Minister of State attends Cabinet, he is surely competent and should have been able to make that statement at 12.30.

The one thing about which we can all agree is that the Government rightly say that they do not want any impact on passengers. However, much of what is happening and much of this debate is still clouded by a huge lack of clarity and huge uncertainty. As the hon. Member for Lewes said, there is some dispute about what the company actually said and what the Government actually said. Can the Minister therefore confirm that the east coast main line franchise has not been nationalised, that National Express Group has not yet been stripped of its franchise—I think that he confirmed that in an intervention a few moments ago—and that it is still running the franchise until it fails to meet its obligations? When does he anticipate that those obligations will fail to be met? If, in the mad world that the Prime Minister seems to believe in, there was a huge bounce in the economy in the next month and National Express East Coast started to meet the obligations again, would all this be an irrelevance?

The statement that has been made requires careful examination. Are the Government convinced that the way in which they made the statement that they intend to take National Express into a public special vehicle, rather than allowing the franchise to go into default, will not have adverse legal consequences? The Government rightly said that they would not renegotiate the terms of the franchise. Can the Minister confirm today what meetings the east coast group had with the Government before 1 May? Can he confirm the report published in The Sunday Telegraph on 5 July that, if the Government had taken the options offered to them by National Express Group at that stage, the liability for the taxpayer would have been between £120 million and £200 million, not £1.4 billion?

Can the Minister confirm that there was a letter between the Department and National Express Group? There was an allegation in that regard in the 15 to 28 July edition of Rail magazine. It stated that

“a letter of May 1, on Adonis’ behalf, allegedly discussed a deal which would have seen NEG renegotiate on and hand over a £100m compensation payment.”

Can the Minister confirm that that letter exists and that there would have been a compensation payment of £100 million?

I think that it is misleading to suggest that, if National Express defaults, that will cost the taxpayer £1.4 billion. It is clear that a publicly owned company running the service will make broadly the same surplus as National Express. I have talked to Andrew Adonis about that. There is no prospect whatever of the Department losing £1.4 billion.

I will come on to the hon. Gentleman’s point about exactly what the Minister thinks the forgone income and the income gained might be.

Are the Government satisfied that, as they will take over the franchise, the holding company’s liabilities—the £40 million loan and the £32 million performance bond—are still liable? Can the Minister confirm that that is the cap to the holding company’s liability? This is very important for the point about cross-default: can he confirm that the contract in existence is with National Express East Coast, not National Express Group? If so, there is a financial firewall between the holding company, National Express East Coast and the Government. That will certainly protect the company and adversely impact any possibility of the taxpayer or the Government being able to initiate cross-default.

The statement says that all other rail companies are fulfilling their contracts, but we know that there is a watch list in the DFT; that has been widely talked about. Can the Minister today talk about the arrangements that he is putting in place to ensure that the Government are doing their due diligence? If, in similar circumstances, they find another holding company making the same announcement, is it their intention to do the same thing?

On the point made by the hon. Member for City of York in his intervention, did the Government analyse the option of offering a management contract to National Express or any other operator? What would have been the cost and what potential income would have been generated? What is the total cost of the new public liability holding? The special vehicle—the public liability holding company—is to take over the day-to-day running of the east coast franchise. That is what the Minister of State said, but he failed to tell us exactly what capital the Government intend to put into that body. Exactly what working capital will they put into that body?

Clearly, in the period after National Express is taken over by the public liability holding company until the franchise is taken over, some income may well be generated. Does the Minister expect that the new company will derive substantially the same revenue and the same profit as the holding company? If not, will the Government say exactly how the shortfall between the total premium payment of £1.4 billion and whatever is derived will be made up? Has the Treasury given a commitment to pay extra money? Will fares increase, or will public transport be cut elsewhere?

The Government have rightly said that franchisees should not be able to run profitable franchises and hand back non-profitable franchises and that that would be the worst of all worlds, certainly for the user—the passenger—the taxpayer and other rail companies, because it breeds uncertainty. So far, threats have been made, but no action has been taken. We have had talk of other defaulters not remaining in the rail industry, and the Minister of State has talked about keeping all options open.

I accept that there is commercial sensitivity about whether we might want to exercise the cross-default option, but the same clearly does not apply—this is where I agree entirely with the hon. Member for Lewes—to legal advice that is not commercially sensitive and that relates to the circumstances in which the cross-default option may or may not be exercised. Crucially, if the Government have a contract only with the operational company, not the holding company, is there any potential liability for cross-default?

In a moment, the Minister will undoubtedly talk about the franchising system and use the fig leaf of the National Audit Office, which said that the system is “generally well thought through”. Although the NAO uses the word “generally”, we should be clear that that does not apply to the way in which the franchising process worked with the east coast main line.

How much blame can be attached to the Government? They introduced the franchising system; they specified the current franchise; they wrote the contract; and they capped National Express Group’s holding company liability. They must therefore accept an amount of responsibility. We are not sure quite what the cost to the taxpayer will be, and we will be able to assess that only over the weeks and months to come.

First, I congratulate my hon. Friend the Member for City of York (Hugh Bayley) on securing the debate and giving us an opportunity to discuss rail services on the east coast main line. Clearly, the subject is of interest to many Members of the House.

In addressing the many issues that have been raised, I doubt that I will be able to cover the swathe of hypotheticals offered by the Opposition Front-Bench spokesman, the hon. Member for Wimbledon (Stephen Hammond), which were invariably spurious.

The east coast main line is an exceptionally valuable asset in the national transport system. It provides the fastest surface transport between London and the Yorkshire and Humber region, north-east England, Edinburgh and beyond. It is also vital for freight, particularly as part of the link from major ports to distribution centres in large conurbations and to coal-fired power stations.

The east coast main line is a busy route, which is used by six of the 16 passenger train operating companies, two open-access operators, which my hon. Friend the Member for Selby (Mr. Grogan) mentioned, and freight operators. Its value is underlined by the demand to run additional services. Last year, for example, the Office of Rail Regulation considered applications for additional passenger services from not only National Express East Coast and the two existing open-access operators, but two aspirant open-access operators.

At this time, there is rightly a focus on the difficulties of National Express East Coast. However, before I talk about the Government’s plans for the future of the franchise, it is worth reminding ourselves that the overall story of the east coast main line is one of success.

GNER was the first inter-city franchisee on the route and during its initial franchise it set the pace for the rest of the industry in quality and customer service. The number of weekday services grew from 100 at privatisation to 112. In 2006, it grew again to the current 136, with the introduction of half-hourly services to Leeds.

The timetable is set to grow again, and my hon. Friend the Member for Cleethorpes (Shona McIsaac) will be pleased to hear that from December 2010 there will be an additional 25 services a day, including a two-hourly service between Lincoln and London. For the first time in many years, that service will provide a regular direct train service to her area.

Not my constituency.

Not directly to my hon. Friend’s constituency.

Punctuality, which is passengers’ No. 1 concern, has improved dramatically. It has risen steadily since National Express East Coast took over the franchise, with the moving annual average rising from 81.7 to 87.6 per cent. Daily punctuality levels are now frequently above 90 per cent., and several 100 per cent. days have been achieved.

We have seen tremendous innovation on the route, with wi-fi being introduced first to 10 trains and then to the whole east coast inter-city fleet—I have ambitions to see that on the service that I use every week. Stations on the route have also benefited from substantial and sustained investment, with the quality of the facilities being offered being recognised at places such as Durham, which was declared station of the year at the 2008 national rail awards.

Finally, we should remember that the inter-city east coast franchise is one of those rare breeds that return a premium to the Department, and that premium is reinvested in the railway industry. Events of the recent past may have reduced the premiums available, but we can still confidently expect a significant return.

The Department for Transport recently appointed a new franchisee to the South Central franchise following a strongly contested competition. That demonstrates the market’s belief in the franchise system. The recent events surrounding National Express East Coast, the current inter-city east coast franchisee, have generated significant interest and debate. None of us takes any pleasure in the failure of a business or in a company’s inability to fulfil its contract to the Government. My hon. Friend the Member for City of York asserted that train operating companies take all the benefit while the Government take all the pain, but I draw his attention to the fact that companies normally have revenue risk for four years, after which Government revenue support comes into effect. However, the revenue share mechanism commences from day one, so excess profits are immediately shared with the Government.

Will the Minister give way?

I would rather not because I have limited time.

The National Express bid was predicated on growth rates that, although reasonable at the time, proved undeliverable in the current economic climate. That has led National Express to conclude that it will be unable to maintain the franchise into the foreseeable future. The Secretary of State has made it abundantly clear that the DFT does not renegotiate franchises. At a point in the future, therefore, the DFT will take over the operation of the inter-city east coast franchise through Directly Operated Railways, a DFT company established for that purpose.

I should say to the hon. Member for Peterborough (Mr. Jackson) that the departmental officials who originally evaluated the bid judged it to be deliverable. The National Express bid was not the highest. I also reject his assertion that we spent five months negotiating with National Express. We have not negotiated with National Express and we never renegotiate franchises.

We plan to operate the business for about 12 to 18 months while a competition is undertaken to select a new private sector operator. The Government’s role in running trains is purely short term, as required by the Railways Act 1993.

This is, of course, the second time in three years that an inter-city east coast franchisee has been unable to continue for the full duration of its franchise. In both cases, external economic circumstances were a factor, as was the inability of the bids submitted to withstand those changed circumstances.

Some have argued that those two failures demonstrate that the franchising system is fatally flawed. I disagree with that view. Across the industry, passenger numbers are at their highest since the 1940s, punctuality is above 90 per cent. and customer satisfaction is rising. That all points to the fact that we are talking about an isolated failure in an otherwise successful system.

There are two important points to remember in the current situation. First, the Government are protecting passengers by taking control of the inter-city east coast franchise. Our aim is to secure a seamless transition from National Express East Coast to Directly Operated Railways and to a new franchisee in due course. Secondly, the Government are protecting taxpayers by holding franchisees to their agreements and not renegotiating contracts, which some could interpret as reward for failure. Risk sharing and risk transfer are part of the franchise system. Franchisees must be able to shoulder the risk in hard times, just as they benefit in good times.

The hon. Member for Peterborough asserted that other operators have received revenue support sooner than four years into the franchise. It is true that the First Great Western franchise included a provision whereby revenue support became available after two years, but that was an exceptional arrangement.

A written statement on the First Great Western franchise is being made today. Is this another key being handed back in?

No, there is no indication that that is what the statement is about. Hon. Members will find that it is about performance against the recovery plan that was put in place for First Great Western. Franchise bids must be sustainable and deliverable in the long term. Franchisees must be able to stand behind their bids for the duration of the franchise. We expect nothing less.

The east coast main line is a long route with many stakeholders who have clear views as to what the franchise should provide, and I have listened with great interest to the views expressed today. Hon. Members will be pleased to hear that the DFT is preparing for a full public consultation on the new inter-city east coast franchise. I encourage all those associated with the route to participate in that valuable exercise, which will shape the next period in this important route’s history. I think that that answers the five points raised by my hon. Friend the Member for City of York, as well as those raised by the hon. Member for Angus (Mr. Weir) on the service specification.

It is a pleasure to serve under your chairmanship, Mr. Cummings. I thank Mr. Speaker for granting me this debate on an important and sensitive constituency issue. I am also delighted at the attendance of the Minister, and look forward to her detailed responses. She is known to be a rising star in the Government and is always willing to listen to a reasoned argument. The debate will not be party political, but I hope it will be constructive and deal with an extremely difficult situation.

In April, Her Majesty’s inspectorate of prisons published a report on Her Majesty’s prison Wellingborough. The report was damning and criticised many areas of the prison, including its cleanliness, governance and resettlement programme. After the publication of the report, whose findings followed an inspection in August 2008, the Ministry of Justice decided to put the prison out to market testing and has opened it up to bids from the public, private and third sectors.

Wellingborough prison had several problem areas, which were highlighted in the report, but I hope to show the significant improvements that the current team has made. I want to make it clear that I am not against the Secretary of State’s decision to put the prison out to market testing. He is one of the very best members of the Government, and has kept me personally informed throughout the process. In fact, I received a telephone call at 6.30 one morning; it was the No. 10 Downing street hotline and I was told, “I have Mr. Straw on the line for you.” “At that time in the morning?” I thought. “Downing street? Jack Straw?” Had there been a coup overnight? Had he become Prime Minister and was I about to be offered a job? Alas, the telephone call was about HMP Wellingborough.

Having received the report, the Secretary of State had to act; there was no way it could be ignored. He was right to put the prison out to market testing. However, I believe that the prison’s current governance system could be the best equipped to improve standards there further. I shall do whatever I can to support the governor and prison officers in putting together the best possible bid. In the end, I want the bid that is best for the taxpayer and the inmates to win the contract to run the prison. I believe that a locally based business plan drawn up by the management and prison officers could be not only the best, but the most radical bid.

HM prison Wellingborough is a medium-sized category C training prison that was opened in the 1960s. Wellingborough has the capacity to hold 646 male inmates in nine residential wings. At the time of the inspection there were 635 inmates and 380 staff. When the prison opened, it was a borstal or young offenders institution, but it has since become a jail for adult male sentenced prisoners who are serving 18 months or longer. Much of Wellingborough’s catchment area includes the London courts. At any one time about 40 per cent. of the prison population is from minority ethnic groups. The local Wellingborough population has a minority ethnic group of 11 per cent., but many of the inmates come from south of Wellingborough.

Despite the large amount of land surrounding HMP Wellingborough, the prison has not expanded as it could have to house the growing population. There is a major problem with overcrowding in the prison—a situation that is, of course, common across the country. Yesterday, the prison population was 83,776, which is only 34 lower than the highest head count ever.

The report on Wellingborough by Her Majesty’s chief inspector of prisons listed a number of areas that were poor in performance and needed improving. Several of those weaknesses were causes for real concern. They included failure to provide the basics of training and resettlement of prisoners. The report stated:

“We found 200 prisoners, around 30 per cent. of the population, locked in their cells during the core of the day.”

However, I believe that highlighting some things as weaknesses would aggrieve the law-abiding people of our society. The report recommended that all prisoners should be given a shower and a free telephone call on their first night in the prison. Many people will find it hard to believe that a prison is failing because only a percentage of inmates can have a shower on their first night. Many people will also be aggrieved to learn that one way in which the prison was failing was in not providing prisoners with their own kettle. It is important to remember that it is a prison, not a holiday camp.

Of the more serious weaknesses highlighted in the report, drug abuse and the availability of drugs were a concern. There was significant evidence of bullying resulting from drug-related debt. The inspection report stated that

“42 per cent. of prisoners, against a 30 per cent. comparator, thought that it was easy or very easy to get illegal drugs within the establishment.”

It went on to say that

“48 per cent. of prisoners compared with 27 per cent. in comparator prisons said that they had felt unsafe in the prison and 33 per cent. compared with the 21 per cent. comparator said they had been threatened or intimidated by another prisoner or group of prisoners.”

However, it is important to state that the report’s findings were gathered at the beginning of August last year—nearly a year ago. Since then, a huge amount of work by the governor and prison officers has resulted in major improvements.

Another concern from the report was that living conditions on the residential units on A to E wings were unsatisfactory and many areas of the prison were dirty and litter-strewn. There was also a problem with vermin. However, I understand that the cleanliness issues have now been resolved. Wellingborough is a training prison and it should prepare inmates for life outside following their release. The report found that there were

“insufficient activities for the 635 inmates and that these activities had not been planned or directed with a view to improving prisoners’ skills and employability.”

For a training prison that was a definite concern that needed to be tackled immediately.

I had hoped at this point to be able to give a list of improvements, as provided by either the governor’s office at Wellingborough prison, the Ministry of Justice or the Minister’s office, but unfortunately, despite several requests, the information has been refused. I received an e-mail from a civil servant that stated:

“Thank you for your e-mail. Unfortunately I don’t think we are in a position to help you. As I am sure you understand, as Civil Servants it would be inappropriate to provide you with material that you would then use to argue against Government policy.”

That is clearly absolutely unacceptable. Civil servants are there to provide information on a factual basis, not to provide only information that supports the Government’s case. In a democracy it is vital that opposition parties should be given the fullest possible data so that they can create well argued critiques of Government policy. The e-mail implies that if I had been supporting Government policy those concerned would have been happy to supply the information, but because I might have been arguing against Government policy it was withheld. It was not as if I was asking for national security details.

I am not familiar with the e-mail that the hon. Gentleman cites, but I would be happy to take it away at the end of the debate and make inquiries. As a Minister, I would expect my civil servants to provide factual publicly available information to Members of Parliament who request it.

I am grateful. I did not want to get the civil servant into trouble, but I shall give the e-mail to the Minister. I merely wanted to know what improvements Wellingborough prison had made since the report was compiled. I know that those details are available, but I simply could not get hold of them. The information I am using today was either obtained as a result of research by my staff or provided by the Prison Officers Association.

I seek clarification on the criteria that the Government use to propose prisons for market testing. In a written answer, the Minister stated:

“Public sector prisons were short listed for market test if identified as either poorly performing or high cost. Final selection… was made on the basis of a number of operational criteria and took account of wider evidence, such as HM Inspectorate of Prisons reports.”—[Official Report, 16 June 2009; Vol. 494, c. 265W.]

HMP Wellingborough is cost-effective. According to the Prison Offices Association, it is the 12th most cost-effective of 37 category C training prisons. In 2007-08, the average cost for a category C training prison was £23,471 per place per year. In the same period, the cost of Wellingborough was £21,311 per place per year. That is a saving of £2,160 per prisoner and 9.2 per cent. less than the national average.

I believe that the current local management team and prison officers at HMP Wellingborough should remain in place after the market testing exercise because of the prison’s ability to make significant improvements at a time when funding for prisons is low. On the 2008-09 third-quarter weighted score card, Wellingborough was the fourth most improved state prison in the country. Given the current improvements, if the prison was inspected now it would not be considered for market testing.

In the improvement areas of reducing offending, decency, diversity, equality and security, Wellingborough met half the targets. On organisational effectiveness and maintaining order and control, it achieved 80 per cent. of the targets. Those currently involved in governance at the prison have worked hard to improve standards for the inmates and for the taxpayer. It is clear that this is not a high-cost prison, and given the recent improvements it is not poorly performing.

It is important to consider what effect the proposed private sector takeover has had on the prison staff. The publication of the report and the subsequent decision to put the prison out to market tender has of course had an effect on staff morale. Through my “Listening to Wellingborough and Rushden” campaign, I have met with the prison governor and his officers. The prison officers at Wellingborough do a hard job in difficult circumstances, and it has not been made easier by the overcrowding problem.

I went to listen to the concerns of prison officers over the pay dispute, on the picket line outside Wellingborough prison. I found the officers to be genuine and hard-working, but they loathed being outside the prison rather than inside looking after the inmates. At the time, they had a real grievance. By law, they were not allowed to go on strike and their pay on return was set by an independent tribunal. The Government backtracked on that independent review and did not fully implement it. They were wrong, and I told them so. On 25 March 2008, in a debate in Westminster Hall, I said:

“As there is a prison in my constituency, the final point that I should make is that when the prison officers went on strike, I went to talk to them on the picket line. They are a terrific bunch of men and women, who dedicate their lives to public service. To be on a picket line was unnatural for them—they did not want to be there. They could not wait to get back to the prison, but they had been driven into a situation in which they felt they had no alternative. The Government were wholly wrong to break an agreement”.—[Official Report, 25 March 2008; Vol. 474, c. 34WH.]

Recently, I had a meeting with the prison governor to discuss the improvements that have been made at the prison and to listen to his plans to make a bid in the market testing exercise. I also met a local prison officer and a representative from the national union. I note that local prison officers care so much about Wellingborough prison that they offered their assistance, supporting the market testing bid despite the national union’s opposition. The Prison Officers Association fully supports Wellingborough’s bid and will assist the governor in that application.

The Prison Officers Association has many concerns about privately run prisons, which it says can be cheaper than state prisons only because they have cheaper staff costs and lower staff levels, leading to a greater number of assaults on staff. I, too, have concerns about privately run prisons. From recently published information, it would seem that private prisons are on average not as well run as those owned by the state. As a Thatcherite Conservative, I believe in the private sector and that in competitive areas private solutions are normally best, but we are talking about a public service for which there is no marketplace and no real competition.

Data recently obtained under the Freedom of Information Act 2000 by More 4 News has shown that private prisons in Britain are performing worse than those run by the state. Four of the 10 private prisons assessed under the prison performance assessment tool scored the second lowest rating of 2, which is classed as requiring development. Those low ratings brought the average performance of private prisons below that of state-run prisons. In the third quarter last year, the average overall score for private prisons was 2.6 out of a rating total of 4. In state-run prisons during the same period, the average was 2.85. Moreover, separate figures released under the Freedom of Information Act show that nearly twice as many prisoner complaints are upheld in private prisons than are upheld in state-run institutions.

I pose a number of questions to the Minister; I have given her prior notice of them. First, what criteria were used to determine specifically whether HMP Wellingborough should be market tested? Secondly, if a prison rated poorly performing improves in every area, is it not possible for it to have another inspection before the deadline for bids closes? Thirdly, when does the bid for taking over the contract to run Wellingborough prison close? What is the date?

Fourthly, what information do the private and public sectors have to provide for a bid to be accepted, and is that information the same for both sectors? Fifthly, if the local management team wins the bid, how will it operate? Will it be like a management buy-out? Will the prison be run independently or be reabsorbed into the National Offender Management Service? Sixthly, what criteria will be used in determining what bid should be successful? How much weighting will be given to the cost per prisoner? How much weighting will be given to education and retraining, and how much to security?

Seventhly, who will determine the bid? Will it be an independent body or the Secretary of State? Eighthly, will the bids be published in full, so that taxpayers can see what was on offer? Ninthly, on exactly what date will the bid be awarded? Finally, if two bids are deemed to be roughly equal, will preference be given to the private sector or the public?

I hope I have demonstrated that Wellingborough prison has improved significantly since its inspection last year. I want that improvement to continue, whether it be in the public or the private sector.

I congratulate the hon. Member for Wellingborough (Mr. Bone) on securing this debate and welcome the opportunity to discuss not only HMP Wellingborough, but prison competition policy more generally.

The Government have a duty to the public to provide efficient and effective prison services—I do not think that the hon. Gentleman took issue with that—and the system must both punish and reform offenders, while protecting the public. Investing in prison and probation services has been a key priority for the Government: prison places have increased by about 25,000—to 85,000—and spending has risen by a similar proportion, while the probation case load has risen by 52 per cent. and spending by 70 per cent. in real terms. We are the first Government since the second world war to oversee a sustained reduction in crime: crime is down 39 per cent. since 1997, the chances of being a victim are the lowest for a generation and adult reoffending fell by 23 per cent. between 2000 and 2006. Those statistics are in no small part a tribute to the entire criminal justice system and, in particular, to the work done by staff in the prison system. I therefore pay tribute to staff at Wellingborough prison and across the system for the often difficult and sometimes dangerous work that they do. They often deal, on a daily basis, with difficulties that many of us would find difficult to handle on a one-off basis.

Our approach to building on our achievements was outlined in a statement made to the House on 27 April by my right hon. Friend the Secretary of State for Justice and in the accompanying document. An element of the policy is to increase the use of competition in prisons and probation. We are using competition to challenge existing service providers—in the public and private sectors—to improve performance, to encourage new entrants into the prison and probation markets, if that can increase efficiency and innovation, and to provide better outcomes for communities and the taxpayer.

Initially, we sought to deliver the efficiency improvements through the work force modernisation reform package, which was based on a three-year pay deal for staff in public prisons—it was worth more than 10 per cent. in cash terms over the period—linked to necessary but limited reforms. Despite the fact that initial negotiations appeared successful, the Prison Officers Association and the Prison Governors Association turned down that negotiated deal. We made it clear to all the trade unions with which we negotiated that the rejection of work force reform would lead to accelerated market testing, and through that programme, we are now seeking to deliver some of the required efficiencies.

A 2005 Department of Trade and Industry report on market-based approaches found that introducing competition among suppliers can lead to lower costs and better quality services. I am not about to argue that one sector or another, whether the public or private, as in this case, always does better than the other—that would be an ideological approach that I do not take. However, we need continuous improvement. Greater competition in the market for prison services will ensure an impetus to improvement, and we shall select the organisations best able to deliver our services efficiently, whatever sector they are from. That is part of what the competition policy is about.

The hon. Gentleman sought some background on how the decision to market-test at Wellingborough was reached. All public sector prisons were considered on the grounds of performance and cost. A shortlist of candidates was produced containing all prisons either seen as high cost, relative to similar prisons, or where performance was rated at level 2 or lower for two or more consecutive quarters according to our published performance ratings. He made some fair comments about Wellingborough prison’s performance difficulties over the past few years and highlighted some findings in the most recently published report by Her Majesty’s inspectorate of prisons.

The hon. Gentleman is quite right that a level 2 establishment is defined as “requiring development”. In general, the National Offender Managements Service views such an establishment as one that is basically stable, secure and providing a limited but decent regime, but that is experiencing significant problems in meeting targets and/or major operational problems. In quarter 4 of 2008-09, there were 18 prisons at level 4, 98 at level 3, 17 at level 2 and none at level 1. In addition, 48 prisons were identified as being relatively high cost, with potential savings of £500,000 or more available over the spending review period. Wellingborough prison was assessed as providing less than that in potential savings.

HMP Wellingborough has, however, been assessed as a level 2 establishment for seven consecutive quarters since quarter 2 of 2007-08—more than 21 months. Further evidence was available that improvements are necessary at Wellingborough. The hon. Gentleman himself referred to the recent report by Her Majesty’s inspectorate of prisons. In August 2008, the chief inspector described Wellingborough as one of the weakest prisons recently inspected. The report states that nearly half the prisoners surveyed feel unsafe, owing to the high level of bullying, and that Wellingborough fails to provide the basics of training and resettlement, which should be at the core of its work. The hon. Gentleman very fairly set out some of those conclusions.

The final selection from the shortlist—whether based on high costs relative to similar prisons, poor performance or a combination of the two—was made on the basis of a number of operational criteria. Those included the future direction of our capacity programme, potential market interest in the establishments and the location and condition of the prison. On that basis, Wellingborough and Birmingham prisons were selected as the leading candidates to be market-tested this year. I want to make it clear that we view competition not as a punishment tool, but as a way to encourage improvement. From what the hon. Gentleman said, it is clear that the poor inspection report and ongoing low rating have provided a spur to improvement at Wellingborough prison. That is good. The public sector provider could mount a bid. As my right hon. Friend the Secretary of State made clear, we encourage and welcome strong public sector bids in these competitions, and I hope that Wellingborough prison can make a bid that offers the greatest value for money. If it does, it will be awarded the contract.

I shall answer some of the hon. Gentleman’s specific questions. I hope that I have already answered his question about what specific criteria were used to determine whether HMP Wellingborough should be market-tested. He also asked whether, if a prison rated as poorly performing improves in every area, it could be inspected again before the competition policy is applied. We have announced a market test at Wellingborough and Birmingham, and to be true to our word, we need to go through with them to show that we are serious about the competition policy, which we are. I am encouraged that, as he said, improvements are being made at Wellingborough and that a great effort is being made. That will improve the public sector provider’s chance of winning the competition—if it makes the best bid, it will win the competition.

The hon. Gentleman asked when the bidding process for taking over the contract to run the prison will close. I cannot give him a precise date, but it will be launched later this year, and I expect it to take about eight months to complete the process and announce a winner. He also asked what information the private and public sectors have to provide to have a bid accepted and whether the information is the same for bidders from both sectors. All bidders will be required to submit information on the same areas, and the information requirements will be set out in the information-to-tender document, which will be published after the launch of the competition. It will be clear at that stage precisely what is being asked and what kind of information will be sought. There will be a level playing field in that sense.

The hon. Gentleman asked how, if the local management team wins the bid, it will operate. Will it be run independently or go back to being run as part of NOMS? If a public service provider wins the competition, the ongoing relationship with NOMS and the relevant director of offender management will be managed through a service level agreement, which is very similar to the way in which—

Order. We now move to the next debate.

I want to raise some vital funding issues that could have a profound impact on the care and support of nearly 1 million of our fellow citizens who are learning disabled or who have significant learning difficulties. Many of them are in a vulnerable position. We have a particular duty to speak up for such people because, in many cases, they are not in a position to do so for themselves.

Although the funding pressures were drawn to my attention by Oxfordshire county council, which provided me with an excellent briefing, their impact will be felt throughout England, especially in those areas in which the council is on the floor of the revenue support grant settlement. The difficulties to which I refer arise from the transfer, from 2011-12 onwards, of social care funding for adults with learning disabilities from the NHS to councils, which have a responsibility for social services. Such difficulties are compounded by the local government revenue support system and by the rising need for support for learning disabled people.

The transfer itself, the initial stages of which were due to complete last month, is right in principle; learning disability is not an illness. The individuals concerned require varying degrees of domiciliary, community and accommodation support, and it is right that such support is provided through the social care system. The transfer of responsibility covers the wide range of social care services, such as domiciliary and personal support, training and counselling services, day centres and day services, short-break centres, supported accommodation and residential care. I understand that primary care trusts will continue to fund and commission NHS specialist staff, such as community nurses, psychiatrists and speech and language therapists, as well as assessment and treatment services.

There is a problem with the financial aspects of the transfer. For example, what level of provision will be made at the point of transfer, and how will it increase in future years? The initial amount to be transferred is being agreed between each local authority and the local PCT, and is largely based on historic expenditure. I understand that that has been difficult to work out, and that it varies across the country. Moreover, the transfer is taking place from an NHS budget that has increased more rapidly than local authority financing and is likely to continue to increase at a faster rate than that of local authorities. Even if the initial transfer is at a fair and adequate level—it is not hard to see how that might be the subject of dispute—the danger is that the budget could be squeezed in future years because the combination of Government and council tax payer funding cannot keep pace with the required growth in costs. That problem is particularly severe for councils such as Oxfordshire which are on the floor of the revenue support grant.

Figures given to me by Oxfordshire show the scale of the problem. Initial estimates suggest that some £21.5 million or more will transfer initially from the PCT to the council. However, if we use a GDP deflator of 2.75 per cent. to predict inflationary costs in future years, that cost will rise to £23 million in 2012-13 and £24.7 million in 2013-14. In practice, the cost pressures are likely to rise significantly faster than that because more learning disabled children are surviving at birth and, happily, more of those who do are living into adulthood. Now, if the cost has to be met from within general revenue support and council tax funding, the amount available to pay for it in Oxfordshire will only go up by 1 per cent. a year because Oxfordshire, like a number of other authorities, is on the grant floor. Therefore, even if the transfer is adequate in year one, in year two, in Oxfordshire’s case, there will be a shortfall of £1.3 million, and one of £2.8 million in year three. The gap will continue to widen by £1.8 million a year.

The implications of that can be translated into a council tax pressure, which Oxfordshire estimates would amount to 2.6 per cent. over and above the council tax the authority would otherwise plan, or £33 a year on a band D council tax payer, and that would go on rising by at least £13 a year—probably significantly more—because of demographic pressures, to which I referred earlier.

I understand that the Department of Health has done some work and come up with similar conclusions. It talks of the risk of substantial gaps in funding, big variations across the country and particular problems facing social services authorities that are on the revenue support grant floor. There is a real danger here of us drifting to disaster in the funding of services for learning disabled adults. The consequence could be a mix of cuts in services, which would be totally wrong and unacceptable given that such services are already hardly adequate in many areas; cuts in other services that will already be under pressure, not least in Oxfordshire by the council’s decision to cut staff by 10 per cent.; and significant increases in council tax. The only fair way to resolve the situation is to protect the funding of services for learning disabled adults by accompanying the transfer—from NHS to local councils—with a permanent specific grant, ideally based on need and not simply the initial transfer value, and increasing that each year, taking into account increasing need.

I know that idea runs counter to the generally sensible vogue for removing ring fences and specific grants to local councils and putting the money into general revenue support grants, so that councils can make decisions based on local priorities. However, in this case, it is not only justified but necessary if we are to ensure that funding for support for learning disabled adults is to be provided at an adequate level.

One other option would be to ensure that the revenue support grant settlement took full account of the needs of adults with learning disabilities, but that would not be easy to resolve. If the Government were to go down that route, there would have to be some particular provision for councils that are on the revenue support grant floor and subject to the squeeze that I described earlier.

I hope that, in his reply, my hon. Friend the Minister can make the following assurances. The first is that the Government are on top of the issue and looking with urgency at how it can be resolved. I know that, when policy issues involve significant sums of money, more than one Department and have inherent complexity, it often takes longer to sort them out. This challenge needs to be gripped and sorted, and I hope that my hon. Friend will assure us that that is happening and that he will go from this debate and talk to his Secretary of State and senior officials to ensure that it is.

Secondly, I hope that my hon. Friend can assure us that there will be close consultation between organisations representing learning disabled people, such as Mencap, other interested parties, such as the Local Government Association, and councils, such as my own in Oxfordshire, which are potentially so adversely affected. I hope overall that he can assure us that some means by which to protect funding for services for learning disabled adults will be found.

The Government will today set out important options for the future of social care, and it is crucial that the needs of learning disabled people are not only remembered but at the forefront of our thinking. The challenge of future funding must be turned into an opportunity properly to fund and support the quality of life of learning disabled people. I look forward to the Minister telling us the Government’s plans to do just that.

I congratulate my right hon. Friend the Member for Oxford, East (Mr. Smith) on securing this debate. He rightly focused his remarks on the longer-term consequences of the transfer of responsibility for the commissioning and funding of social care services from PCTs to local authorities. However, if he will forgive me, I shall first place that in the wider context of the Government’s strategy to make policy to meet the needs of all individuals, which is the general direction of travel.

The focus of policy making in the past couple of years has been on the critical issue of putting people with learning disabilities and the people who care for and support them in the driving seat, which my right hon. Friend rightly supports. The focus is on giving them more control over the care and treatment that they receive. That philosophy was absolutely integral to “Valuing People Now”, which was our three-year, cross-Government strategy published in January, and more recently to “Valuing Employment Now”, which is all about creating real jobs for people with learning disabilities.

I am pleased to be able to tell my right hon. Friend that people with learning disabilities now have more control. Two thousand or so now receive direct payments that they can use to pay for the care or services that they want. People with learning disabilities have more freedom. Many more live in homes of their own and have the opportunities to enjoy a richer and more varied social life, and—I am sure that this is true in his constituency—many have better community-based support. For example, the number living on NHS campuses has dropped from about 3,000 in 2006 to 1,000 today. Overall spend on adults with learning disabilities increased from £1.7 billion in 1997-98 to nearly £3.5 billion in 2007-08, which is a £1.8 billion increase, equivalent to a 96 per cent. real-terms increase between 1997 and 2008.

I hope that my right hon. Friend agrees that a great deal has been achieved. We have laid down the blueprint for a fairer deal for people with learning disabilities across all public services.

I certainly endorse empowerment, independent living and the support to which people with learning disabilities must be entitled. The Minister referred to the 96 per cent. increase in spending. I am not sure whether it is a coincidence, but between 1995-96 and 2003-04, local authority spending on services for people with learning disabilities increased by 96 per cent. That compares with a 72 per cent. increase in total spend on personal social services. Although the increase is welcome, does the discrepancy not show that meeting future needs will be likely to involve a proportionately greater demand from people with learning disabilities on social services budgets?

I understand my right hon. Friend’s point. Indeed, there has been a commitment by many local authorities to support adults in the social care system. That is to be welcomed and it is a sign of local authorities responding to the needs of their communities. The social care system has always involved a mixture of central and local government support for adults of all ages, including people who have retired. We could do more—despite the good things that have happened so far—to transform those health and social care services.

I shall explain what we are doing on transferring responsibility for commissioning and funding care for people with learning disabilities from the NHS to social service authorities, and the longer-term consequences of doing so. We want to promote better commissioning and services, both in PCTs and local authorities. I am very conscious that there is a patchiness across the country in that provision, which I believe reflects the lack of consistency in the commissioning standards of PCTs and local authorities.

My right hon. Friend will be aware that the consultation document, “Valuing People Now: From progress to transformation”, proposed the transfer of learning disability social care commissioning and funding from PCTs to local government from April this year. We received more than 2,000 responses to the consultation on that principle, which he said he supports, involving more than 10,000 people. Seventy-six per cent. agreed with the specific proposal to transfer commissioning responsibility. That change will allow the NHS to focus on its primary health care responsibility for people with learning disabilities and, at the same time, give local authorities a lead role in delivering high-quality, community-based care services.

Of course, local authorities already have a role in delivering the transformation of social care and the goals set out in “Valuing People Now”. That role will be strengthened when funding and commissioning are fully aligned. We are confident that that will result in better services for people with learning disability and services that are built around the needs of individuals.

In August last year, we issued guidance to all PCT chief executives and directors of adult social care setting out that policy intention. The guidance set out the key areas for transfer and those that will remain in the NHS. The transfer does not include resources for generalist or specialist health care, for forensic and offender services, or for continuing care.

For 2009-10 and 2010-11, the transfer of specialist social care funding for people with learning disabilities will be made locally from PCTs to local authorities. All agreements should have been reached with the full involvement of learning disability partnership boards. I emphasise that because my right hon. Friend spoke about engaging people with learning disabilities and their carers and families in the process. By involving the boards, we are ensuring that people with learning disabilities and their families are fully involved in the decision-making process.

Where are we now? We asked local authorities and PCTs to reach a final agreement on the amounts to be transferred for 2009-10 by 31 March 2009 and asked them to confirm to the Department of Health that the transfer had been made locally by 30 June, which was a few days ago. More than 130 returns were made by 31 March and 50 per cent. of areas reported that they had transferred funds by the 30 June deadline. The latest estimates show that more than £1 billion has been agreed for transfer. However, we are still in the process of analysing the results as they come in.

Agreement has been reached in Oxfordshire, as my right hon. Friend probably already knows, and it is recognised as an area of good practice, with an established pooled budget and a strong commitment to joint working from Oxfordshire county council and Oxfordshire PCT. I am pleased to say that there are many examples of local authorities and the NHS successfully working their way through a multiplicity—that is how he put it—of difficult issues to agree a transfer sum in their report on the commissioning transfer process.

Did I hear the Minister correctly? If 50 per cent. had confirmed by the end of June, 50 per cent. had not. Does he share my concern about that? When will the figure become 100 per cent?

My right hon. Friend swiftly picked up on the figures that I gave. He is right: the figures mean that half are yet to be completed. We have evidence from the returns that we have received of under-reporting in many areas, and there is a wide variation in the amounts that have been declared for transfer. He and I share that concern. It is critical that we have accurate returns on the total spend on social care by NHS bodies. For those returns whose figures look unusual or cause concerns, we are considering how the Department, in collaboration with regional colleagues, can support and validate transfer amounts. We are in the process of ensuring that we achieve outcomes across the country, but I am delighted that his local authority and PCT have reached an agreed figure.

What will happen from 2011 onwards? The intention is that allocations of social care resources will be made directly from the Department of Health to local authorities. That is how the future system will work; it will no longer go through the PCTs. We will consider the best way to achieve the allocation beyond 2011 after PCTs and local authorities have reported the outcomes of their local agreements and the results have been analysed at a national level in discussion with other Departments, including, as my right hon. Friend hinted, the Department for Communities and Local Government and the Treasury. He asked that I come away from this debate with that purpose in mind; he can be assured that his request is already in train. We are aware of the issue of different authorities being at different stages. It is a cross-Government concern that I, as the Minister with responsibility for care services, must discuss with my colleagues in other Departments, not least the Treasury.

Can my hon. Friend give me an assurance that the position of authorities such as Oxfordshire that are on the revenue support grant settlement floor and therefore subject to that particular situation will be addressed specifically?

My right hon. Friend is trying to lead me into territory in which he, as a former Secretary of State, probably knows that I am unable to give commitments. I cannot say exactly what the outcome of the negotiations on 2011 and beyond will be. However, he has made a powerful point as a constituency MP on behalf of his county, pointing out in his earlier remarks and his question to me the consequences and possible impact of the system of floors and ceilings. I will ensure that his questions and comments are brought to the attention of those making such decisions. We are certainly mindful of his and others’ concerns with regard to that question.

Not only will we have internal discussions about such questions, but we will consult on the determination of the allocations before we allocate directly to local authorities. We will of course consult local authorities, as well as NHS bodies, the Association of Directors of Adult Social Services, the Local Government Association and the NHS Confederation. We will consult others through the partnership boards, as I said, so that organisations such as Mencap that are represented on disability boards throughout the country will have their opportunity to contribute on questions such as those asked by my right hon. Friend.

Whatever happens, we know that PCTs and local authorities will need to work together to commission services. Although the transfer will move across local authorities, there is an important role for greater integration of health and social care services through joint commissioning, joint strategic needs analysis and joint working, so that individuals’ needs are always treated in the round and they are provided with seamless services, whether care services, health services or both. The outcome must be in the best interests of those with learning disabilities. I cannot give my right hon. Friend the categorical assurance that he seeks in advance of those debates, but I can assure him that the consultation will allow those questions to be fully articulated so that Ministers in different Departments, not least the Treasury, will hear individuals’ concerns.

I appreciate those commitments on consultation. Can my hon. Friend give any indication of the time scale in which the ultimate method for allocation for 2011-12 will be settled? Although 2011 seems a long way off in terms of planning local authority and central Government budgets, it is not. The firmer and earlier an indication is given, the better people will be able to plan.

I am not sure that I can give my right hon. Friend a time scale today, as we are in 2009, although I take his point that the earlier that discussions can be had and concluded, the better, in order to enable planning. I emphasise that we must understand the patterns fully from this year’s returns on the transfers being made in order to plan and model what the future should be like. Once the returns are in and we have analysed them, we will be in a better position to do that modelling and arrive at a timetable, which is an even bigger job of work to be done.

The transfers are not straightforward, as my right hon. Friend knows; he discussed how complex they can be. There must be sufficient resources to cover the job of commissioning, as well as other expenditure. Even if the transfer continues, we wish commissioning to be a joint process between PCTs and local authorities. There will be issues involving the Transfer of Undertakings (Protection of Employment) Regulations 1981 and so on that will need to be taken into account. The issues are not straightforward, but his point about “the earlier the better” is well made, and I will certainly draw it to the attention of those concerned.

It is worth reminding my right hon. Friend that the allocations to local authorities represent a range of factors in the decision about what should be allocated. Issues such as inflation, different demographics, relative need, deprivation, ethnicity and so on were all included in the discussions about working through formulas. We certainly want to ensure that local commissioning, through whatever allocations are made, take such factors into account as well.

I have emphasised the importance of joint working between the NHS, local PCTs and local authorities, whatever the transfer of resources is. We want to ensure that not only social care but health care improve. My right hon. Friend will know that we recently introduced a new directed enhanced service for annual health checks for people with learning disabilities. I stress that because it is important that doctors keep a close eye on the health of people with learning disabilities in order to pick up on any early warning signs and to be able to give them the necessary advice and referrals if they need help. We must ensure jointly that people with learning disabilities receive personalised plans to support both their health and their care needs.

My right hon. Friend will know that the NHS operating framework makes it clear that primary care trusts must secure health services that make reasonable adjustments for people with learning disabilities. We are working a lot with strategic health authorities on those issues as well. There is a lot going on. The system and the transfer are complex, but they need to be done at a pace that suits the issues that he raised about what will happen beyond 2011. We must ensure that we root our conclusions properly in factual analysis.

In conclusion, the transfer process is about improving services for adults with learning disabilities. It is the right thing to do, and we must take the time to get it right, not just for this year and the next but, as my right hon. Friend put it, so that future negotiations can ensure that needs continue to be met. I do not apologise for saying that we have put a huge amount of extra resource into the system, as have some local authorities. At one point, there was an £8 billion growth in spend. That demonstrates this Government’s commitment to the people in most need.

Working in partnership, local and central Government, health and social care services and the third sector and other local providers must consider the needs of people with learning disabilities and how we can put resources in place to meet those needs and ensure quality of care and the principles of choice and control, in order to give people independence in living and to move away from old-fashioned ways of caring for people with learning disabilities into new ways of working. The personalisation of our services is critical. My right hon. Friend is right to raise the issue of funding for the future. I hope that he will work with me as we publish our care and support Green Paper today to take forward the bigger agenda of transforming our social care system.

I begin with a quote:

“members of the gypsy and traveller communities should have the same rights and responsibilities as every other citizen.”

That is a statement of Government policy, as set out by the Office of the Deputy Prime Minister in circular 01/2006. I endorse that statement wholeheartedly. I recognise the important and diverse needs across our communities from Gypsies and Travellers to the settled population. I agree with the Government that both groups have the same rights and responsibilities.

I initiated this debate because I wanted to alert the Minister to the way in which the implementation of that strategy is failing on the ground. It appears to be an entirely proper process. Unmet need should be identified systematically and sites for Gypsies and Travellers found proactively and strategically. However, there is a feeling among the people who have contacted me that people do not have equal rights and responsibilities, but that there are separate rules and outcomes for different groups. The Government’s goal of fostering community cohesion and undermining conflict is not being achieved because of that perception. I want to consider how the situation could be improved.

I will begin with the example of green belt development on the edge of communities. Many villages in my constituency are surrounded by green belt. When the children of families in such villages grow up, there is often nowhere in their village for them to live. When a house becomes available, it is unaffordable for a young adult. Such people would dearly love to buy a piece of land on the edge of the village, build a house and live there, but they cannot because it is green belt. All too frequently, such land is sold to a Gypsy or Traveller family because the land is cheap. It is cheap because it is not possible to get planning permission to build on it, otherwise it would be expensive.

In some cases, the Gypsy or Traveller family will move on to the land at 5 o’clock on a Friday night, just as the council is clocking off. By Monday morning, there are hard-standings, driveways and connections to mains services. When the council enforcement process grinds into action, a planning application for a residential pitch is submitted. Because there is a planning application, the council holds off on enforcement. The application grinds through the process of site visits and so on over many weeks and months and is eventually turned down. The applicant then appeals and the case goes to the Planning Inspectorate, which says that although the land is green belt, there are not enough proper Gypsy and Traveller sites in the authority, and it therefore gives permission. That happens time and again in my area.

Many Gypsy and Traveller sites are immaculate. I can think of one not far from where I live that looks lovely and is well maintained. We are not always talking about some scruffy caravans down the road. Some sites are a credit to the area that they are in. However, the problem is the sense that such things would not be allowed for the settled community and that a different set of rules apply for Gypsies and Travellers.

Will the hon. Gentleman give way?

I will not, because I am short of time.

The Minister might say in his response that, if the council had provided enough sites in the first place, such things would not happen. In 2006, my local authority, South Gloucestershire council, was directed by the Secretary of State for Communities and Local Government to produce a Gypsy and Traveller development plan document. The goal was for 53 residential pitches and 25 transit caravans, based on the Gypsy and Traveller accommodation assessment. We are halfway through the two-year consultation, but that process is being forestalled and undermined because sites that have been submitted as potential sites are suddenly coming forward for planning permission.

The Minister’s office kindly contacted me before the debate to ask what I wanted to raise, and I mentioned the application at Hall End in Rangeworthy. That site has a complex history, but, in a nutshell, the council has been taking enforcement action for six years. It started when someone moved a caravan on to the site and started operating a transport business. They created track and hard-standing in a rural area. An appeal was dismissed in 2004. Even the High Court ordered enforcement by July 2008. For five or six years, the council has said that this is not a good site for caravans or buildings.

There have been planning applications for the site. In 2004, there was an application for a bungalow. That was rejected

“due to its location in the open countryside outside of defined settlements”

and was deemed “unacceptable in principle”. Just a normal house was a no-go. In 2005, there was a change of use application for the stationing of one residential caravan for the personal use of the applicants. That was refused and a subsequent appeal was turned down because the applicants were not Gypsies or Travellers. Members of the settled community are not allowed to live in caravans in such rural areas because it interferes with the rural landscape.

Two years later, an application was submitted for five Gypsy caravan pitches with five hard-standings, five day rooms and driveways. A pitch could include a permanent caravan, a mobile caravan, a day room, driveways and so on, so five pitches could involve 15 or 20 caravans and buildings. After six years of enforcement action and the refusal of applications for a bungalow and a single caravan, the council recommended the acceptance of an application for five pitches.

Interestingly, council policy H12 for Gypsy and Traveller sites states that

“preferably sites should be within a reasonable distance of local services and facilities such as shops, doctors’ surgeries and primary schools, though more remote sites may be acceptable”.

The site in question is not a reasonable distance from any of those services and facilities. The council officer said that the statement that

“more remote sites may be acceptable”

offered a get-out clause, so that he could ignore all the desirable features of sites and approve the site. The site has shocking drainage. My understanding from the papers is that the sewage would be drained into a ditch. Although it is not a good place for a site, the council recommended approval and suggested a condition that

“the land is not occupied by persons other than gypsies and travellers. The criteria for considering the provision of a Gypsy and Traveller site is assessed against different criteria.”

The officers recommended approval principally because of an “urgent unmet need” for such sites.

Despite the Government policy document on Gypsy and Traveller sites that states that everyone has the same rights and responsibilities, residents of villages see Gypsies and Travellers being treated differently in relation to green belt developments. Residents near Hall End have seen a piece of land that they could not put a bungalow or a residential caravan on being recommended for approval by the council for five pitches because it was a Gypsy and Traveller application. One can see why people become resentful—not because they object to Gypsies and Travellers having somewhere decent to live, but because they want one rule to apply to everybody. That is not happening.

In particular, I wish to draw the Minister’s attention to the fact that the Hall End site was earmarked in the draft planning document, which in theory will not be finalised until 2010. It appears as though anyone who applies for a site that might be earmarked in that document will get planning permission. Perversely, there is now such pressure to give permission that the sites are not being prioritised through a systematic, rational and strategic system. Instead, pretty much anyone who applies will get approval to fulfil the unmet need.

Such approval conflicts with the Government’s Gypsy and Traveller site strategy of May 2008, “Designing Gypsy and Traveller Sites: Good Practice Guide”, which outlines 23 recommendations, one of which is that

“poorly located sites, with no easy access to major roads or public transport services”

should be avoided. That describes the Hall End site. The document advises that there should be

“Easy access to local services, and to social contact with other residents”.

There will not be any at this site. It says that

“locations that are inappropriate for ordinary residential dwellings”

should be avoided. An application for a bungalow on the site was turned down. It even says that Travellers do not like isolation or great distances to facilities. The Hall End application therefore goes against not only what the settled population wants, but the preferences of Travellers. The applicant was not a Traveller, but the application was made for a Traveller site because other uses had been turned down. The document states:

“Sewerage for permanent sites should normally be through mains systems.”

There is no mains sewerage on the Hall End site.

We can start to see how the Government’s guidelines, policies and values seem right when we read them but, when it comes to an individual application, they get overridden because of the unmet-need figure. One resident has said that he thinks the whole development plan document process has been undermined. The local ward councillor and my Liberal Democrat colleagues—a group of people who are generally known for being sympathetic to the needs of Gypsies and Travellers and who are not know for being hostile—all opposed the decision to approve the application, because they felt that it was the wrong site. However, on the committee, they were outvoted by one by councillors from a completely different place in the authority. Again, in terms of local accountability, local residents feel that they have been ignored.

In the context of the DPD, the resident I mentioned told me in a letter that the decision to approve the application

“has seriously damaged the Council’s reputation and members of the public now feel that the DPD exercise is purely a PR exercise and that all of the sites will now go through without consultation”.

What set out to be a consultative and strategic process is being undermined, and I do not think that the Government ever intended that to happen. I think that they wanted a process, consultation, iteration, eventual approval and for things then to move forward, but what is happening is that the gun is being jumped almost daily.

So what about the DPD process? That process is now degenerating into what I would call planning anarchy—that is the sort of situation that we are in. How great is the unmet need? The Gypsy and Traveller accommodation assessment calculated that we needed an extra 73 pitches: 32 because of household growth, 18 based on unauthorised developments, nine from unauthorised encampments, 12 as a result of additional identified need—basically, from waiting lists—and two from people moving from houses on to sites. That gives a total of 73 pitches, which, minus the 15 vacancies, leaves 58 pitches as the target. However, that was two years ago. One of the problems is that things have changed since then, and because private authorised sites are being given the go-ahead all the time in our area, the council is working towards a target of 58 that is now out of date.

The target of 58 included sites that were unauthorised when the count was done, but because those sites are now authorised, double counting is going on. The needs of families have been met by authorising the site, but they have not been taken off the total because it was based on measuring unmet need and looking at unauthorised sites.

Within the authority area, as those private sites have become authorised, the illegal encampments have come down. In January 2008, there were 19 families on unauthorised sites, with 46 caravans. In January 2009—a year later—there are only 11 families on unauthorised sites, with 14 caravans. So there are half as many families, with a third the number of caravans. That is a sign that the unmet need is being met, yet the total target is still that from two years ago. In a sense, the authority is saying not that there is no unmet need, but that the figures are out of date and do not reflect what has happened since then, as private sites have become authorised. I hope that the Minister is willing to consider whether the authority has been given the right target. Likewise, when the assessment was done in October 2007, the council had 33 private site pitches. There are now 50 families living on authorised private sites with planning permission. So provision is being made, but no account is being taken of that in the process.

I should like to mention a couple of other sites in relation to which there are concerns that things are not being done consistently. A new supersite on Tanhouse lane, which is north of Yate, has come forward as a result of the classic case of the owner of the land applying for planning permission and, on being turned down, saying, “Right. I’ll put it forward for a Gypsy or Traveller site.” There is talk of having 10 to 12 pitches, which could involve up to 50 caravans, outbuildings and all the rest of it in, again, an unsuitable place. The residents do not feel confident that the unsuitability of the site will have any bearing on the decision, because they have seen what happened down the road with the Hall End site.

In addition, my colleague, Councillor Claire Young from Westerleigh ward, has alerted me to a proposed transit site on an industrial estate. There are good arguments for why there are problems with that site, yet residents and business people do not feel that they will be listened to, because of the drive to hit the numerical targets, which we question. Another example of how there seems to be one rule for one and one rule for another can be found in relation to the existing site at Bank road, Pilning in my constituency. Down the road, an additional site has been earmarked for consultation. As soon as it was included in the draft planning document, people with caravans moved on to the site, where they should not be. When we challenged the council, it said:

“the uncertain planning position of the site…means that it is not currently expedient for the planning enforcement team to pursue formal enforcement action against the number of caravans and/or pitches on the site.”

In other words, once something is in the draft document, people move on and the council says, “Well, technically, we should move them off, but the land might get permission or be earmarked in a years’ time, so we won’t do anything.” Residents are therefore saying, “Hang on a minute. This is a consultation document, yet the council is acting as if these sites have been given permission already and is not taking enforcement action.” The site on Bank road is on a floodplain, and permission would never be given to build a house out of bricks and mortar there, so why is the site appropriate for Travellers? Again, there is a sense that the rules are not being applied evenly.

The underlying problem is the DPD process and the target that the council has been given. The figures are having unforeseen consequences, and I query them for two reasons. First is the reason that I have already given: over the past two years, private sites have been given the go-ahead, but they are not coming off the total that the authority is being asked to meet, so there is double counting. The other reason is that the main driver of the extra numbers is an assumption of 3 per cent. growth a year in Gypsy and Traveller numbers. My maths tells me that 3 per cent. compound interest for 24 years would double the Gypsy and Traveller population. Will the Minister clarify whether everywhere in the country is being asked to assume a 3 per cent. growth rate in the Gypsy and Traveller population? Presumably, if that is the assumption, the Gypsy and Traveller population should double in 24 years. The settled population will clearly not double in 24 years, so why is that the assumption for the Gypsy and Traveller population? Presumably, the figure would then double again in another 24 years. That number seems hard to understand or justify, yet it is driving what I call planning anarchy across the authority.

So where do we go from here? The DPD process is good in principle—it is right to try to be proactive and to identify future sites—but it is creating resentment among the settled community; people feel that there is one rule for one and one rule for another. Sites that are not good are getting the go-ahead, which was surely never the intention, and the deliberative, consultative engagement process is being second-guessed on the ground.

I appreciate that I have spoken for slightly too long, but I ask the Minister whether he is willing to reflect on what I have said and whether he will meet me, council leaders and officers from the area to go through exactly what is happening on the ground. There is, quite properly, a willingness to identify sites for the legitimate needs of Gypsy and Traveller families, and rightly so, but the process is not working as it should. I was nervous about even choosing the topic for debate, because it is so easy to get it wrong. I am concerned that, if people such as the Minister and I say nothing about these issues—I believe that he, too, values equality and fairness—when there is legitimate concern among local residents, we will create a void into which something much more unsavoury will come. We all have a responsibility to ensure that that does not happen.

It is a pleasure to be engaging in this debate under your stewardship, Mr. Cummings. I congratulate the hon. Member for Northavon (Steve Webb)—I hope that I have pronounced his constituency correctly; we were discussing how to say it earlier—on securing the debate.

The location of sites for Gypsy and Traveller caravans is important to the hon. Gentleman and his constituents, and I understand the concerns that he is articulating on their behalf. As he has said, it is vital that we discuss these issues constructively, in the context of the fair, decent and tolerant society in which we all wish to live. I completely accept his argument that it is important for people who believe in fairness to engage in such discussions. I think that he alluded to the fact that, if dealt with inappropriately, such matters can become quite toxic.

Fairness is what the Department for Communities and Local Government—my Department—and the Government are all about, but fairness does not mean treating everybody equally; it means addressing the different needs of different people. The need to provide adequate site provision for Gypsies and Travellers is a challenging one for local authorities, but that is just one of the many challenges that authorities regularly deal with, to provide balanced and fair services to all in their locality.

The hon. Gentleman will have considered the needs of his Gypsy and Traveller constituents alongside his constituents in the settled community. At the heart of the issues debated today is the shortage of authorised sites, which forces many Gypsies and Travellers on to unauthorised sites. The Government believe that everyone in the community should be given the opportunity to have a decent place to live. In England, that opportunity is not yet available to about one in five Gypsy and Traveller families who have no authorised place to live.

We are committed to increasing the number of authorised, good-quality sites, just as we are to increasing the supply of quality conventional housing, focusing in particular on the kind of local families who the hon. Gentleman mentioned, such as the young who want to stay in the area and the elderly. Increased site provision, alongside the effective use of enforcement powers and a joined-up approach between the various organisations with a role in Gypsy, Traveller and broader housing issues is critical to addressing the issues that we are debating today.

There are incentives for everyone—Gypsies and Travellers, local authorities and the settled community—to increase site provision. That will reduce unauthorised camping and the tensions that that can cause with the settled community. It will reduce the need for, and cost of, enforcement action, which is estimated to cost local authorities £18 million a year, thus leading to savings for local taxpayers.

The hon. Gentleman referred to some of his concerns about the maths, as carried out by his local authority. The regional spatial strategy will take full account of the Gypsy and Traveller accommodation assessment, provide the strategic framework for pitch allocations and advise on the number of pitches needed in each local authority. That recommendation will take account of new permissions granted. Councils can certainly take account of new permissions granted after the regional spatial strategy figures are agreed.

Members will appreciate that, given the Secretary of State’s quasi-judicial role in the planning process, I can comment on neither the individual planning cases to which the hon. Gentleman has referred, nor the current position with regard to the regional spatial strategy in the south-west, in relation to which the Secretary of State is considering responses to the proposed changes published last year.

I am aware that there is a perception that the planning system is biased in favour of Gypsies and Travellers, and that is certainly the perception of many people in the hon. Gentleman’s constituency. I would like to make it clear that the law applies equally in that regard to Gypsies and Travellers and to those in settled communities.

There is considerable evidence of a significant underlying need for site provision in south Gloucestershire. That is supported by several data sources, including independent research commissioned by South Gloucestershire district council as part of the west of England partnership that fed into the regional spatial strategy. I know that that was not the hon. Gentleman’s primary argument, which was that some of the unmet need has, in fact, been satisfied. Therefore, it is an issue of the local authority and its maths. As I have pointed out, the local authority ought to be taking stock of those areas where permission has been granted.

The evidence shows that there is a clear and immediate need for more authorised sites, so I am pleased by the progress being made by the district council in preparing an allocations development plan document, which will identify appropriate locations for sites. I am aware that the consultation has just closed on some additional sites that the council had suggested, and no doubt there will be further consultation once it has decided which sites should be included. I very much hope that local residents and Gypsy and Traveller groups will play a full part in those consultation processes, as that is the best way to ensure a fully informed policy. Policies cannot always please everyone all the time, but if we can be confident that everyone has had the chance at least to contribute to the debate meaningfully, the council will be able to develop the plans fully, aware of all the facts.

In the interim, there remains a significant need for accommodation for Gypsies and Travellers in the district. I do not accept the view that applications for planning permission should not be considered until the development plan document has been completed. Even with the best endeavours of all concerned, that might take some time. In the meantime, proposals for Gypsy and Traveller sites should be considered by the local authority against existing development plan policies that are relevant. That is exactly what would happen with any other type of development in similar circumstances.

When officers look at those applications, they list the emerging development plan document as a relevant factor, so the fact that it is even being consulted on is given weight. Therefore, the entire process is being second-guessed. We will get to the end of the consultation process, but most of the sites in the document will already have come on stream. Does not that undermine the consultation process itself?

I fully understand where the hon. Gentleman is coming from. I hope that I have dealt with some of his genuine concerns about how the maths works within the local authority. He asked me to meet him and other colleagues to discuss that in more detail, which I am certainly willing to do, because not only is that issue affecting the council in his constituency, but there are things that we can glean for elsewhere.

I believe that the hon. Gentleman has come to the debate in a genuine and responsible manner. It is an issue that many MPs are concerned about and that we have to get right. There are often issues of cohesion and community harmony at stake, and there are many misconceptions. He would be the first person to try to disabuse people of views that were not only repugnant in some cases, but simply wrong factually, and that element of incorrectness leads to some of the more distasteful comments that we sometimes hear in our communities. He is right to focus on fairness, because ultimately the challenge for us, in positions of responsibility, is to get the message across that things are occurring fairly, and where they are not, to deal with them in a way that gives people confidence that we are serious about fairness.

The hon. Gentleman also mentioned the population growth figures. In the absence of any locally available evidence, research has concluded that 3 per cent. growth is reflective of the population growth in that community. I cannot tell hon. Members how good that research is because I have not seen it—I passed a message back to my officials and they sent one back to me, and Members know how it works. I am more than happy to look at the figures as well, because it is important that people have confidence in them. Where there is a lack of confidence, that needs to be dealt with—it cannot be left to one side because it is convenient.

The framework put in place by the Government does not require local authorities to provide the sites, but simply to identify suitable locations. As with the settled population, many Gypsies and Travellers prefer their own sites. Some of them, however, will not have the necessary resources, so access to social rented sites will be necessary. That information should be incorporated within the authority’s Gypsy and Traveller accommodation assessment. The Government provide significant resources to fund the capital cost of providing local authority or registered social landlord sites. Between 2006 and 2008, we approved £54.6 million of funding that will deliver over 400 additional pitches and refurbish 120 sites.

The south-west region has been allocated £9 million between 2009 and 2011. The grant is now administered by the Homes and Communities Agency, which will enable it to factor in the needs of Gypsy and Traveller communities as part of its single conversation with local authorities and delivery partners. Bids for funding in 2009-10 have now closed, but I encourage local authorities and registered social landlords to begin the work now to prepare bids for next year. The framework that we have put in place is crucial to making progress on site provision and, coupled with effective enforcement action and a joined-up approach on the issues, will help to create the kind of fair, tolerant and cohesive communities that both the hon. Gentleman and I would like to see.

I congratulate the hon. Gentleman once again on securing the debate and reiterate my commendation for the efforts being made in south Gloucestershire to address the issues discussed today and, importantly, to address them responsibly, of which both he and I are equally aware.