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11 Nov 2010 : Column 523
5.1 pm

Tom Greatrex (Rutherglen and Hamilton West) (Lab/Co-op): Like others, I congratulate the right hon. Member for Wokingham (Mr Redwood) on securing the debate. Like my hon. Friend the Member for Edinburgh South (Ian Murray), I enjoy listening to the right hon. Gentleman's contributions and-I have to admit-occasionally reading them on his website. I do not often agree with him, but they are enlightening none the less.

What has been good about today's debate is that, with a couple of exceptions, speeches have been made and issues have been raised that do not necessarily follow the scripts that people get from time to time. People have discussed some real and serious matters and there has been agreement across the Chamber on a number of issues. In particular, I was struck by the speech of the hon. Member for Northampton South (Mr Binley), who I know has a strong interest in manufacturing. In the couple of minutes I have available, I want to make a few points about manufacturing and that part of industry.

The Government frequently talk about rebalancing the economy and they are right to do so. It is crucial that we learn some of the lessons of the past. One of the lessons, frankly, despite the amount of wealth that the financial services sector might create, is that being over-exposed in one sector causes immense damage. We need to rebalance the economy and we need to do that by looking for export markets. That is why I am quite pleased that the Government have taken the initiative in going to India and China to develop those markets. I hope that they will go to other places, too.

Crucially, we are not the only country trying to do that. Every developed economy is looking to the developing economies and BRIC economies-those of Brazil, Russia, India and China-to develop export markets. We need investment in the technology to get the products that people want and to develop the skills that we need and the technology that people want to buy. That is crucial and brings us to the points made in this debate about levels of investment in particular.

Anyone who was in the Chamber during Energy and Climate Change questions earlier will have heard Ministers waxing lyrical about the huge potential of the green economy. That potential can be realised only with the right investment, including from banks. The green investment bank should be up and running as quickly as possible and should be running as a bank, not as some grant-giving body. I hope that the relevant bits of the Government-whether that is the Treasury, the Department of Energy and Climate Change or the Department for Business, Innovation and Skills-get on with that as quickly as possibly because it is crucial. It is particularly crucial in constituencies such as mine, which has had a proud manufacturing past and deserves to have a future. Economic growth and our growth in manufacturing cannot be driven towards just one part of the country. As others have said, it needs to take place across the whole country and that is why it is very important that we get the green investment bank up and running.

Ian Murray: I know we are tight for time, but this is a crucial point. Is it not strange that no Members from the Scottish National party have been in the Chamber for the entirety of this wonderful debate on growth and how the UK economy should grow?

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Tom Greatrex: I thank my hon. Friend for his intervention. Given the amount of time left, I shall say only that I am disappointed but not surprised by that.

Other Members have referred to the recent PricewaterhouseCoopers report. I am sure that the Minister has read it a number of times, but I draw his attention to a specific part of it, which calls on the Government to tackle the "financing gaps" by focusing investment

As my right hon. Friend the Member for Wolverhampton South East (Mr McFadden) has said, there is a place for the Government, as well as banks and other sources of investment, in getting that investment right, developing industries and getting the skills and jobs that will save the public purse money in terms of benefits and other payments, so that communities and constituencies across the UK have a stake in the future of the economy. We should not be tied to any particular sector; we should be looking across the whole country and getting people into skilled jobs and into export markets that will benefit us all in the long run.

5.6 pm

Mel Stride (Central Devon) (Con): I welcome the opportunity to speak in this debate about growth. As my hon. Friend the Member for Mid Norfolk (George Freeman) pointed out, if the Government had not taken such prompt action on the deficit, kept our triple A credit rating status and ensured that our interest rates remained low so that our businesses could expand and consumer expenditure could be protected, there would be little point in talking about any form of growth.

I want to speak briefly about our fiscal consolidation. I am pleased that the Government have struck a balance between expenditure reductions and tax increases, with a weighting more towards the former. As my hon. Friend the Member for Bedford (Richard Fuller), who is sporting a splendid haircut, has pointed out, the importance of getting taxation on business down is absolutely key. I welcome the fact that tax will fall from 28% to 24% for larger corporates and to 20% for small businesses. That is important not only for growing our companies here but for attracting inward investment. In the Republic of Ireland, for example, the headline rate is just 12.5% and it has secured inward investment of about 2.5 times the EU average given the size of its economy.

The hon. Member for Copeland (Mr Reed) suggested that we on the Government Benches are anti-public sector. We are not, but we do recognise that productivity rates in the private sector are considerably greater than in the public sector. As the public sector slims down and the private sector expands, we can expect growth to come through that route.

Monetary policy and the dangers of quantitative easing formed a major part of the speech of my right hon. Friend the Member for Wokingham (Mr Redwood), and I fully subscribe to his concerns. Questions must be asked about injecting the economy in that way-by printing money, using electronic money to buy gilts, bonds and to some degree commercial paper-and the first of which is whether it works. We can look at the experience in Japan, where interest rates hit 0% in 2000-01 and a lot of quantitative easing was put into the system over the following six years. Although growth
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occurred, there was consensus among many economists that it was due to the approach of recapitalising the banks and getting them lending rather than to the money that had been put in and the creation of dishonest money in the system. When quantitative easing is being considered, almost by definition the economy is slowing down and there are deflationary and recessionary pressures on it. It is at such a moment that the banks are least likely to start lending the money that is being put into the system.

We need to be very careful about where we are in the cycle with inflation when we talk about quantitative easing. In the past two years, inflation has gone above 5% and down as low as 1.1%. It is now above 3% and, according to the Bank of England, is heading further north. We need to be absolutely certain that some of the temporary effects of low sterling and the costs of energy and oil coming through are not mistaken for a considerable rise in inflation going forward in the longer term. Other issues, such as the level of capacity in the economy and the low wage rate increases of about 2% that we have had recently, are equally important.

My final point on quantitative easing is that it would not be advisable to take away the authority of the Monetary Policy Committee to make such decisions. It should be exactly as it is with interest rate policy: the MPC should have the final say. I know that I differ from my right hon. Friend the Member for Wokingham on that, but I firmly believe it.

5.10 pm

Yasmin Qureshi (Bolton South East) (Lab): I wanted to contribute to the debate initially by talking about growth policy, but we have heard Conservative Members suggest that the economic situation we are in is due entirely to the Labour party's activities, so it might be worth taking a trip down memory lane to see what it was like in 1997 when the Labour Government came to power. We had 3 million people unemployed; interest rates and inflation were at record highs; there were so many problems to be dealt with. What did we do? We invested. We invested in building more hospitals and more schools and in refurbishing our hospitals and schools. We invested in refurbishing 1.5 million substandard accommodations and homes that had been left neglected by the Tories for years and years. As a result of that investment, we created many jobs and flourishing sectors.

At the same time, we worked with the City and helped the financial sector. It is interesting to note that Conservative Members believe that we had something against bankers and those involved in the financial sector; of course we recognise that the financial sector is very important. It was the Labour Government who, when faced with various problems, invested billions to steady our financial sector so that it could grow. That prevented the loss of about 500,000 jobs. We have no need to hear Conservative Members telling us that we have done nothing to help people in the banking sector, that we are somehow their enemies or that we do not care about them.

As a result of that investment, economic growth has recently been restored. I heard the Prime Minister say from the Dispatch Box a few weeks ago that Labour Members would be unhappy to hear about economic growth in our country. Why would we be unhappy
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about that, particularly given that our policies underpinned that growth? If we had stuck to the Conservative or Lib Dem policy of doing nothing, we would have been in a worse situation. The truth is that we are delighted about economic growth and we take credit for regenerating the economy and saving the country from the banking crisis.

The Con-Dem Government want a massive reduction in spending. The cuts are ideologically driven and are not being made in the best interests of the country. We know not only that 500,000 people will lose their jobs in the public sector, but that 1.5 million people are likely to lose their jobs in the private sector. I urge the Government to reconsider what they are doing; they should not be driven ideologically to do so.

5.13 pm

Jeremy Lefroy (Stafford) (Con): I will confine my remarks to two areas: exports, about which the hon. Members for Rutherglen and Hamilton West (Tom Greatrex) and for Glasgow North East (Mr Bain) have already spoken; and access to finance, about which a number of hon. Members have spoken.

It is salutary to look at export performance over the past decade. Since 2000, Germany's share of world trade has risen by 17.9%, that of France and Italy has remained roughly the same, but the UK's share has fallen by 20%. That is partly due to the depreciation of the pound, but that is not the only reason. To put it bluntly, we have been falling behind our European neighbours and competitors. It is hardly a coincidence that the country that has concentrated most on its export markets-Germany-is the one currently experiencing the strongest growth.

Graham Jones (Hyndburn) (Lab): Will the hon. Gentleman give way?

Jeremy Lefroy: I am afraid that I will not, because other Members wish to speak.

A recent report by the Institute of Chartered Accountants, of which I am a member, showed that businesses that are globally engaged are more optimistic about their prospects than those that are not. Some 70% of companies, including half of all micro-businesses, are involved in business overseas, and what is of real significance, as Members have pointed out, is that much of the growth in exports has been in exports to emerging economies rather than to the developed world. Indeed, in the first four months of this year, exports to emerging economies from the UK grew at more than 30%. While attention is naturally and rightly on China and India, we should not forget the growing markets of central and south America, much of Asia and, not least, Africa. Sub-Saharan Africa is growing at 5%, and many countries look to the UK as a natural trading partner. The door is wide open, but many of our companies are simply not walking through it.

What do we need to do? First, we need to overcome a fear of excessive risk. The past two years have shown us that nowhere is risk-free, and the ratio of reward to risk in many developing countries is high. Secondly, there are concerns about payment, and we could do more through the export credit guarantee scheme. We should look at the schemes of some of our European competitors,
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which are better on short-term finance. Thirdly, on support for businesses, Britain has a real advantage in its superb embassies and high commissions throughout the world, and I welcome the Government's commitment to ensuring that they increasingly support British trade.

We should also mention the advantages that our international development programme brings. Where we work with a country to overcome its poverty, we also help to create the conditions in which business-British business-can flourish. In Kenya, for instance, UK overseas development assistance in 2008 was £77 million, but our exports there were almost £200 million in goods alone. Fourthly, we need constantly to encourage people to learn the languages that make doing business with Britain throughout the globe easier, and we need to restore our pre-eminence in export finance. British banks once financed much of global trade, and I should like a new breed of enterprising British merchant banks to spring up and do that.

That brings me, briefly, to the second driver of growth: finance. There has been a lot of argument about how much banks are lending to businesses, especially small and medium-sized enterprises. I welcome the expansion of the export finance guarantee scheme, but it would be even more helpful if some of the £45 billion of unused capacity in existing bank facilities, which even one bank says it has, could be loaned to viable businesses. Businesses are crying out for it.

I welcome, too, the Government's recognition of the importance of equity investment, with the expansion of the enterprise capital fund. Better still, they are exploring options to relax EU regulations on promoting the activity of business angels, but again I look to banks to show their true mettle and innate generosity of spirit. The British Bankers Association has announced a £1.5 billion business growth equity fund, but I urge the association to go much further, as we need it.

5.17 pm

Owen Smith (Pontypridd) (Lab): I, too, thank the right hon. Member for Wokingham (Mr Redwood) for securing today's debate. I always admire the ingenuity with which he manages to weave into most of his speeches his perennial faith in the fallacy of the Laffer curve and his plea that we go easy on the banks. Today, he did so in respect of the capital holding legislation that is meant to protect us from the next recession that the banks might cause, as they caused the last one.

I should like, however, to make a plea for more evidence than Laffer uses in order to support our economic policy, because we do not have one that is based on evidence. We have a hit-and-hope policy that is based on faith. We know-the Government have told us endlessly-that the deficit was too high; investor confidence was diving; we could not afford to pay back our debt; we looked very much like Greece; the only answer was to cut 8% or thereabouts of GDP, which would restore confidence and we would see heroic growth, such as we had never seen, of 2.5% per year and an enormous explosion in the private jobs market.

The trouble is that neither economic theory nor the evidence supports that argument. I cannot really address the economic theory in too much detail given the time, but history and most economists would agree that when
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we contract growth by about 1%, that leads to a 0.5% contraction in GDP. That is what history has shown, and that could leave us with a 4% contraction in GDP due to the 8% effective reduction in spending over the next four to five years.

Instead, I shall consider the current evidence that we have to support the Government's theory, because that is all it is-a theory. In order to have growth, we must have investor confidence, and we must, as the hon. Member for Stafford (Jeremy Lefroy) said, have an export-led recovery. Investor confidence is not present in the economy: that much is clear to us. The private sector is holding surpluses, not investing. I worked as a director of a biotech company for a long while before I came here, and I know that the biotech and pharmaceutical industries are not investing-they are laying people off, not taking them on.

Next, we need confidence that we are going to see some growth in the economy. Much has been made of the fact that we had 0.8% growth in the last quarter and 1.2% previously. As I said, the construction industry is what has driven much of that, but last week's purchasing managers index for construction managers shows that the order book is drying up; they are looking at 1% growth in the last month. The construction industry is laying people off, not taking them on.

The markets are telling the Government that they do not have confidence in the economy. The yield on five-year bonds is down at -0.44%, which differs from the 3.5% rates that we were seeing in 2008. That is the market giving its view, in pricing terms, that there will be no or low growth in the economy. Merrill Lynch said this week:

HSBC said:

That is the reality of the situation that we face right now.

The International Monetary Fund has said that the Government need to develop a plan B. Olivier Blanchard, its chief economist, has said that he fears that the way in which the contraction is being front-loaded is going to damage our economy. It is places such as Wales, and my constituency of Pontypridd, that will see the worst impact of a further recession. The Government must come up with a plan B, and quickly.

5.21 pm

James Morris (Halesowen and Rowley Regis) (Con): I welcome the debate introduced by the right hon. Member for Wokingham (Mr Redwood). It comes at a crucial time for the area that I represent in the west midlands and the wider black country. I want to speak briefly about the growth challenge in the black country and the wider west midlands.

We have inherited some deep underlying problems after a period where we have had very low levels of private sector jobs growth, where unemployment is much higher than in other regions, and where growth has been lower than the UK average. Annual growth in gross value-added between 2002 and 2007 was the lowest of all regions in the United Kingdom. Rates of innovation have been poor, and productivity has been low. Labour Members talk about the effectiveness of
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the regional development agencies, but that is the reality of the economic situation that we face in the wider west midlands.

We have big, long-term challenges to address in the black country, so how do we do it? We need to promote enterprise, as many hon. Members have noted. We need to concentrate on stimulating the small and medium-sized enterprise sector. Organisations such as the Black Country chamber of commerce and the Federation of Small Businesses have been putting a great deal of effort into ensuring that we build on our SME base. We also need to build on the existing capabilities in the black country, where we still have a vibrant SME-based manufacturing industry. We also have companies involved in metal recycling, which does not sound very glamorous but is an innovative and important business in the black country.

We need to focus with laser precision on the generation of private sector jobs in the black country, and we need to drive innovation and raise skill levels. I strongly believe that a focused black country local enterprise partnership, working with those local authorities and with businesses, can deliver much more than was delivered by the one-size-fits-all regional development agency. I urge the Minister to sign off on that black country LEP if possible, once certain issues have been addressed, so that we can get on with the job of dealing with the long-term problems that we have inherited.

We need to build on the great industrial and enterprise heritage of the black country, with its long history of industrial innovation. We need to promote manufacturing, champion enterprise and develop the skill base in the black country economy, and we need to drive the private sector job growth that will be critical to the future of that economy.

5.25 pm

Joan Walley (Stoke-on-Trent North) (Lab): In the four minutes that I have, I wish to say to the House that a Backbench Business Committee-led debate of this kind shows that there is huge consensus. The debate is about what Parliament can do to impress upon Ministers the importance of addressing the growth agenda.

I have agreed with many contributors about investment in transport. We need the Government to reconsider extended trains along the west coast main line to deal with overcrowding. We also need to consider national infrastructure and be ready for the digital age, ensuring that right across the country, we have state-of-the-art technology such as the broadband that is needed to inspire growth.

In line with what the hon. Member for Brighton, Pavilion (Caroline Lucas) said about the green economy, it is vital that we link the issue of growth with sustainability. Having chaired a conference led by the Aldersgate group in the City on Tuesday night, may I tell the Minister that the importance of the green investment bank cannot be overestimated? It is vital that he and his colleagues in Government apply the principles of the green investment bank in a cross-cutting way, so that people across the UK can take part in providing the £3 trillion or so of investment that is needed. That will create jobs in energy efficiency and enable us to provide insulation in homes. Those jobs will allow us to meet our carbon reduction targets, which is vital.

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I would not be me if I did not make a parochial case for Stoke-on-Trent and north Staffordshire, just like the hon. Member for Halesowen and Rowley Regis (James Morris) did for the west midlands. I say to the Minister that this debate is not taking place in isolation. It has to be followed up in a cross-cutting way, and the Government must look favourably at the local enterprise partnership bid that is currently being drawn up across Staffordshire, including in Stoke-on-Trent. We need to consider the ceramics industry, and consider the problems with intensive users of energy, about which he knows, so that we can get the advantages of the green investment bank into Stoke-on-Trent.

We need to deal with the legacy of the coalfield communities, where further investment is needed, like that at Chatterley Whitfield. We need a cross-cutting agenda, working with various organisations such as the Prince's Regeneration Trust, so that, with the voluntary sector, we can make enterprise happen. That matter needs to be addressed right across education provision, and we need extra investment in the further education college in Stoke-on-Trent.

Above all, we need a step change in sustainability. I say to the Minister that if we are to get people back into jobs and off benefits, those jobs need to be private sector-led. We urgently need Government recognition that an area such as Stoke-on-Trent, which was identified by the BBC as the third least resilient area in attempting to fight the recession, needs special attention. If the Minister cares to, he can visit my constituency as many times as he would like so that we can get that message across.

5.29 pm

Alison McGovern (Wirral South) (Lab): I never thought that I would stand in a Back-Bench debate on growth-the debate is most welcome-and quote Lord Lamont, but I am going to. Speaking of the 1992 exchange rate mechanism crisis, he said:

The lesson that I take from that quote is that we forget the global picture at our peril. I have been pleased to listen to other Members reference the circumstances in which we find ourselves. We are trying to drive forward growth at a time when the world faces very difficult circumstances. We are not alone in our pursuit of growth, and we all need to heed that important point.

I want to make three extremely swift points in response to that global challenge. I can make the first very swiftly, because it has already been made this afternoon. On regional development agencies and growth policy in the regions, the Government appear to have wiped the slate clean. We have seen success with the regional development agencies, but there is a lack of understanding of the good practice that went on in them. In developing local economic partnerships, the Government might ask, in areas such as mine in the north-west, where the regional development agencies had success, what needs to be carried forward into the local economic partnerships to make sure that the RDAs' practice of development-what one business I spoke to in the Wirral called their ability "to roll their sleeves up and help us out"-is not lost.

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My second point, which has also been mentioned, relates to the importance of rebalancing. Like other hon. Members this afternoon, when I look at the global economy I wonder how we might provide and sell things that are needed around the world. I know from my constituency that science-led business is important in that. With the investment in superfast broadband and the other things that we hope to see in the Wirral, I hope that we will continue to be champions of science-led business, just as we have been historically, with Unilever at the heart of our borough. Through our expertise, we can lead the way.

Finally, we have real opportunities for export, given our historic links with India and China. I leave the Minister with one thought. The local economic partnerships need to be able to stand on the world stage and argue for those trade relationships. We all need to think what powers those local economic partnerships need so that they can stand on the global stage and argue for investment in Britain.

5.32 pm

Sheila Gilmore (Edinburgh East) (Lab): It is always interesting to listen to such Back-Bench debates because there is a high degree of consensus, but we also sometimes hear some of the things that people really think. My colleagues and I were berated from those on the Government Front Bench for our apparent failure to do more to tackle inequality, but we then heard an interesting speech suggesting that the only reason we raised taxes was to redistribute income. Government Members perhaps have to decide what line they want to propagate.

What I really want to do, however, is to tell a story about a city. In the 1980s, it was a bit of a backwater. It was notorious for its holes in the ground in very prominent areas. It was run by a council that called itself progressive; its members were Conservatives, but they called themselves progressives-we have had that again more recently. They took a hands-off view of how to run a city and saw themselves purely as some sort of administrators.

After that, the council changed political hands and was controlled by a Labour majority administration for the first time in its history. A great deal of effort was put into building up the economy. Those holes in the ground were filled. Infrastructure was put into a whole development on the west side of the city. That allowed the financial services industry in the city of Edinburgh to flourish, and the city became an important financial centre. However, it was the council-the public sector-that put the land deals together and made it possible for places to expand and to create the private sector jobs that have been so important to our city.

The holes in the ground were filled. We built a conference centre. There was some criticism of that at the time, and people asked, "Why is the council doing that?" but the criticism since has been that we were not ambitious enough-that the conference centre was not big enough to put on the kinds of exhibitions that go with conferences nowadays.

I regret to say that in the past few years, even in advance of the change of national Government, there has been some real contraction. The arm's length company that we set up that got financial services off the ground
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in Edinburgh has been almost wound up. There is a reluctance to fund a transport project in Edinburgh that would make a big difference to our economy-the trams, which I was challenged to mention by my hon. Friend the Member for Edinburgh South (Ian Murray). The hon. Member for Battersea (Jane Ellison) spoke of her hope that the Government would fund a tube extension to Battersea. That is an acknowledgment that such transport spending is hugely important as an economic generator.

Contraction has already begun. School building has almost ceased, and construction workers have consequently been put out of work. It is important to recognise the role that the public sector plays in growth.

5.36 pm

Chris Williamson (Derby North) (Lab): I will be brief. I want to talk about the importance of construction to the growth agenda in this country.

I have been very disappointed by the staggering economic amnesia displayed by the Government in the past six months. Labour had a proud record in the previous 13 years. The previous Government left a good economic legacy. Record levels of employment were achieved under Labour, inflation was kept low, and we ensured that interest rates were at record lows for a considerable period of our time in government. We also prevented the recession from turning into a depression. We have Labour policies to thank for those things.

My fear is that the policies pursued by this Government are likely to result, at best, in a very low level of economic recovery and, potentially, in a double-dip recession. The Government talk of a private sector-led recovery in this country, but construction is key to that. Some 92p in every £1 spent on construction is retained; 300,000 private sector companies work in the industry, employing 3 million workers, or 8% of our work force; and every £1 spent in public sector investment achieves a return of 56p to the Exchequer and results in £2.84p worth of economic activity.

I am concerned that the Government's talk of a private sector-led recovery is just rhetoric, because their measures are undermining the construction industry in this country. My hon. Friend the Member for Pontypridd (Owen Smith) made the point that the construction industry is struggling. I spoke recently with representatives from the UK Contractors Group, who said that talk of growth in the building and construction sector was unbelievable. Their members are saying that they have poor order books and that at best there is likely to be a flat level of activity. Many will shed workers and go into decline.

One of the biggest factors, of course, is the election of this Government and their decision to scrap Building Schools for the Future. BSF was not only a fantastic educational investment, but a massive investment in construction. The construction sector has been undermined by that-the rug has been pulled from under it. That massive building programme would have sustained many construction companies.

Housing targets and the abolition of the regional spatial strategy by the Government will mean that far fewer houses will be built. Not only will people not be housed adequately, but there will be another negative
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impact on our construction industry. I therefore urge the Government to think again about their strategy for construction in the UK.

5.40 pm

Chris Leslie (Nottingham East) (Lab/Co-op): There have been some excellent and increasingly succinct contributions to this welcome debate on growth. It is a fantastic initiative and a tribute to the reforms led by the Backbench Business Committee. Important aspects of economic policy have been covered. My hon. Friends the Members for Glasgow North East (Mr Bain) and for Edinburgh East (Sheila Gilmore) talked about the Scottish economy and the importance of investment in their cities. My hon. Friend the Member for Stoke-on-Trent North (Joan Walley), and the hon. Members for Redcar (Ian Swales) and for Brighton, Pavilion (Caroline Lucas), talked about environmental jobs and new eco-technologies. The hon. Member for Hove (Mike Weatherley) talked about the music industry, the hon. Member for Warrington South (David Mowat) talked about energy pricing and the hon. Member for Watford (Richard Harrington) talked about the film industry. The hon. Member for Warwick and Leamington (Chris White) talked about the role of the voluntary sector in the economy and the hon. Member for Battersea (Jane Ellison) talked about tax increment financing in an important contribution.

As my hon. Friends the Members for Wirral South (Alison McGovern) and for Derby North (Chris Williamson) both pointed out, Labour did a great deal to support our economy and, until the general election, we had seen growth return and borrowing begin to fall and we were emerging from one of the gravest worldwide economic crises in generations. Clearly action is needed now more than ever to boost growth and jobs.

The Bank of England's inflation report yesterday pointed out that nobody could predict the course of the economic environment in the years ahead, and some dangerous clouds are gathering. Yesterday's report from the National Institute of Economic and Social Research calculated that growth was slowing further in the three months to October and claimed that it was 0.5% weaker than the official third quarter figure. Today's G20 gathering in Seoul has to grip the serious imbalances facing the world economy, but, as my right hon. Friend the Member for Wolverhampton South East (Mr McFadden) said in a very powerful speech, the Prime Minister and the Chancellor seem yet again on the margins of the debate rather than in a leadership position. We should be wary, of course, of a return to protectionism, but also of a slowdown in the eurozone, and we should therefore be doing more to encourage exports, jobs and growth here at home.

The doctrinaire approach by the Chancellor threatens the return to strong economic growth. He is ignoring those who say that the Government should proceed with caution and is instead rushing full speed ahead, risking the fragile recovery with his ideological zeal for cuts in public investment, as my hon. Friend the Member for Copeland (Mr Reed) said. Even Ministers have to accept that public sector spending cuts will undermine the return to growth. My hon. Friends the Members for Barnsley East (Michael Dugher) and for Pontypridd (Owen Smith) pointed out that we know from the analysis by the Office for Budget Responsibility that the Government's budget and spending review shows that
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the choices they are making will cut our growth prospects rather than enhance them. Growth is essential to rebuilding our fiscal position and if we are to fund vital improvements in public services-as my hon. Friend the Member for Ealing, Southall (Mr Sharma) pointed out, with particular reference to infrastructure, and as did my hon. Friend the Member for Bolton South East (Yasmin Qureshi)-with no strategy for growth, the Chancellor has no viable strategy for investment in schools, hospitals or our future prosperity as a nation.

The spending review will hit the economy hard just at the wrong time, and the Government admit, as my hon. Friend the Member for Luton North (Kelvin Hopkins) pointed out, that they intend to slash half a million jobs in the public sector. We know that PricewaterhouseCoopers has predicted that the same number of jobs will also be lost in the private sector. The hon. Member for North West Leicestershire (Andrew Bridgen) talked about the mood music playing, and we can see that consumer spending is already shaken and confidence is being battered by the tune played by the Chancellor. My hon. Friend the Member for Edinburgh South (Ian Murray) mentioned that other factors will affect that confidence, including the impact of the VAT rise on businesses and consumers.

We have to boost employment, not pull the rug from beneath our own economic prospects. As my hon. Friend the Member for Walthamstow (Stella Creasy) pointed out, the abandonment of the future jobs fund was a major mistake. As my hon. Friend the Member for Rutherglen and Hamilton West (Tom Greatrex) said, every 100,000 people out of work costs the taxpayer £0.5 billion in benefit payments alone.

We heard today from the Department for Work and Pensions that it is winding down all its current welfare-to-work projects ahead of its new scheme, which will not be ready until next summer at the earliest, yet new referrals to the current programme are to be halted from December in half of the country and stopped completely from March. That is complete madness at a time when we need to be working our hardest to get people into employment.

As we have heard time and again from all sorts of hon. Members, business investment is a key driver of growth, but that is at risk, I would contend, from the Government's approach. I have bad news for the hon. Members for East Surrey (Mr Gyimah) and for Northampton South (Mr Binley) when it comes to the net lending targets that should be placed on the banks, as was promised in the coalition agreement. I am talking, of course, about those banks that are state owned and should be encouraged to lend more readily to businesses. Not only was any reference to those net lending targets in last week's Green Paper conspicuous by its absence; the Prime Minister himself said in his speech in Hertfordshire last week that net lending targets are difficult to achieve. The Minister, who has responsibility for small businesses, has also seemed to row back from those net lending target commitments in the coalition agreement. I would be grateful if he could clarify where the Government stand on those targets.

The Government have taken an axe to some of the key foundations that have been supporting business investment in recent years. For example, they have cut back the capital allowances that have supported reinvestment in new plant and technology for industry.
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My hon. Friend the Member for Leeds West (Rachel Reeves) highlighted the cancellation of the loan to Sheffield Forgemasters. We heard this week about the scrapping of the grants for the business investment programme that have helped to create 50,000 jobs since 2004. That decision was criticised this week by Nissan, which saw that help as an essential and crucial factor in its decision to invest and in the rebalancing of the UK economy to help manufacturing.

As my hon. Friends the Members for Gateshead (Ian Mearns) and for Wigan (Lisa Nandy) said, the abolition of the regional development agencies, and more importantly the budgets they had to invest in the regional industrial economy, is a tragedy. This is compounded by any number of small changes that the Government are making that are not necessarily being noticed by our constituents, although gradually they will be. One such change that will be noticed now is the 80% cut in the undergraduate teaching budgets, which sends a clear signal that Ministers are failing to invest in the long term. The pace of private sector expansion will need to be record breaking, as my hon. Friend the Member for West Bromwich West (Mr Bailey) said, if they are genuinely going to take up the slack left by the Government's austerity. Yet there are already signs, as in today's Financial Times, that the business investment to GDP ratio is starting to fall short of the trend, compared with previous recoveries.

My hon. Friend the Member for Great Grimsby (Austin Mitchell) and the hon. Member for Stafford (Jeremy Lefroy) mentioned exports, which are essential to this picture. Unfortunately, they look like they will weaken because of the economic climate, and the Governor of the Bank of England said yesterday that with more than 60% of UK exports going to the eurozone-for example, 7% to Ireland alone-there are big risks to growth if our trading partners contract. The Treasury states clearly that it needs growth in exports at a rate only last achieved in 1974. Achieving that rate is a tall order.

As we see it, Ministers have very little strategy for growth, and are relying too much on monetary policy coming to the rescue. That is a dangerous approach. We say that jobs and growth need to come first, and the Government need to wake up and end their recklessness.

5.48 pm

The Minister of State, Department for Business, Innovation and Skills (Mr Mark Prisk): May I congratulate my right hon. Friend the Member for Wokingham (Mr Redwood) not only on securing the debate, but on being generous enough to be concise in his remarks? I can see that I will have to join the fan club for those who enjoy his website. I shall try to have a look at it later this evening. We have heard from more than 30 speakers today, and despite the absence of our friends in the media, it has shown that the House is alive and well, and very keen to ensure that there is a cross-party debate on this crucial subject. Indeed, not only did we get the views of 30 Members, but I also appear to have got the detailed views of a barber in Bedford. I suspect I will not be going there for the weekend for that particular support and advice.

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I shall now move to the centre of the debate. Hon. Members will appreciate that in order to allow my right hon. Friend to deliver the last few words, I will be unable to address all the issues raised by my 30 colleagues.

Returning the UK economy to balanced and sustainable growth is the overriding ambition of the coalition Government, but to achieve this we need a different model of economic growth-one that leaves behind the old reliance on spiralling Government spending, a handful of economic sectors and debt-fuelled consumption. In its place, we must ensure that we build an economy that is rooted in higher levels of business investment, more exports and a strong manufacturing base. As a number of hon. Members have said-including my hon. Friends the Members for Watford (Richard Harrington), for Battersea (Jane Ellison) and for Stafford (Jeremy Lefroy)-economic growth will be led by the private sector and entrepreneurs, not by the Government. However, the way in which the Government tax, spend and regulate has an impact on businesses and their ability to compete at home and abroad. We therefore have a responsibility to ensure that we create the best possible environment in which they can grow and flourish.

When this Government took office, the most urgent task that we faced was to restore macro-economic stability to the UK economy. A decade-long credit binge had left us with a record public sector deficit, leaving households and businesses perilously exposed, so that when the credit crunch came, Britain was especially vulnerable. The previous Government let people think that there were no consequences to unsustainable borrowing. Their attitude to the deficit led the way, so that by the end of the last financial year, £1 in every £4 that the Government spent was borrowed money. Thus, if we had done nothing about the problem and followed the advice of the previous Government, by the end of this Parliament we would be paying £70 billion in debt interest. That is more than we spend on either schools or defence. Without stability, the economy simply cannot function properly, let alone grow.

Let me turn to some of the issues that hon. Members have raised in this debate, and in particular those concerning small and medium-sized businesses, the tax system and the pressures and problems of regulation. The first point, which was raised by a number of Members, including my hon. Friend the Member for North West Leicestershire (Andrew Bridgen), was the fact that the tax regime is strangling innovation. The UK tax regime has become increasingly complex and burdensome. After 13 years of a Labour Government, we now have the world's longest tax code. That is why we have put reforming the tax system, making it simpler and more predictable, at the forefront of our plans.

The issue of improving access to finance has been raised by many Members in this debate, including my hon. Friends the Members for Northampton South (Mr Binley) and for East Surrey (Mr Gyimah), and the hon. Member for Copeland (Mr Reed). We recognise that some viable businesses-especially small businesses-are struggling to finance investment and expansion. Unblocking the flow of credit and increasing the availability of debt and equity finance, as mentioned by a number of hon. Members, is a priority. Let me make it clear that the industry's recent commitments to finance the economic recovery-commitments made through the British Bankers Association-are welcome. The proposals include a
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new and revised lending code for small businesses, and a new appeals process when finance is declined. Both are welcome. The BBA has also proposed creating a £1.5 billion business growth fund to provide flexible equity finance for established businesses with good growth prospects.

However, let me say this to hon. Members-and, therefore, to the businesses in their constituencies and the banks that should be working for them. Where unreasonable behaviour is shown we will challenge those banks, and we will do so vigorously. It is extremely important to ensure that we do that. However, a key part of the solution lies also in finding more diverse sources of finance, and greater competition. My hon. Friend the Member for Stourbridge (Margot James) rightly pointed out that if we ensure a wider range of choices for small businesses, that will be important in the medium and longer term. The Independent Commission on Banking is looking at those issues, and it will report next spring.

In the meantime, the Government are taking action. We are extending the enterprise finance guarantee scheme until 2015, unlocking up to £2 billion of additional lending over the next four years. I note the remarks of my hon. Friend the Member for Hove (Mike Weatherley), and I ask him to keep me closely informed if there is any evidence that a sector is being deliberately discriminated against.

We are also increasing the enterprise capital funds by £200 million over the next four years, potentially enabling more than £300 million of venture capital investment. That will help to fill the existing gap in equity provision for fledgling SMEs with strong growth potential-a gap that many Members have referred to. As my hon. Friend the Member for Stafford pointed out, business angels are a crucial part of the equation. We are keen to see an expansion in business angels, so we are looking into how to create a more investment-friendly climate for them. That may include reforming the rules governing the enterprise investment scheme.

In the few minutes remaining to me, I want to turn to the big matter that many hon. Members, including my right hon. Friend the Member for Wokingham, and my hon. Friends the Members for Stourbridge and for Skipton and Ripon (Julian Smith) raised-red tape. In recent years there has been an increasing rush to regulate. Under the previous Administration, we saw that peak at the equivalent of 14 new regulations every working day.

As a new Government, we are trying not just to tinker with and change a few regulations, but to deal with Whitehall's prevailing culture. It is time for a different approach, so we have adopted a one-in, one-out system of control for new regulations. That means that before a Minister can introduce a new regulation, they must first examine the cost to business and identify a corresponding cut in existing regulations, so we will be able first to cap and then to cut the burden of regulation. I hope that that answers hon. Members' questions about whether the system would merely retain the problem, or improve it.

We want to do a lot more. We have inherited a significant number of regulations that cause real problems for existing businesses. That is why the Department for Communities and Local Government is already examining building regulations to improve, simplify and overhaul them for the construction industry. It is also why the Government have already adopted the proposals in
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Lord Young's excellent report on reforming and improving health and safety legislation. It is why the Prime Minister asked Lord Young to go further, and to review the whole burden of regulations throughout Whitehall, and how they impinge on the bottom line of small and medium-sized enterprises.

Together, those measures will begin the process of changing not just a few regulations-not just 20, 30 or 40 regulations-but the culture of Whitehall. I am not naive enough to believe that the task will be completed in a year, or a couple of years. It will be difficult, but let me tell the House in no uncertain terms that we are determined to ensure that we get it right, because that is crucial for our economic competitiveness.

I shall conclude by saying that the Government believe that private sector enterprise, innovation and investment are the keys to future growth. We believe that the Government's job is not to tinker and meddle, but instead to create a stable macro-economic framework within which businesses have the confidence to invest. That means not picking winners, but ensuring that we have the right business environment in which the best will flourish. It means a simple, more predictable tax system that rewards endeavour. It means better access to both debt and equity finance. It means less red tape and fewer regulators, a skilled work force and more apprenticeships. It means sustainable investment in our infrastructure and support for exports to markets around the globe. In each case the Government have a role to play, and we intend to be an effective partner for business.

5.57 pm

Mr Redwood: I thank all who participated in this debate. It is a sign of the success of the Backbench Business Committee's choice of topic that I do not have enough time to respond in detail to colleagues in the way that I would like, having sat here patiently listening to some good contributions. I hope that the Minister recognises that my hon. Friends and I, as well as Opposition Members, are extremely worried about the position on bank credit. The hon. Member for Leeds West (Rachel Reeves), my hon. Friends the Members for Hove (Mike Weatherley) and for Northampton South (Mr Binley), the right hon. Member for Wolverhampton South East (Mr McFadden), the hon. Member for Edinburgh South (Ian Murray) and I made a number of points.

Although I am grateful for the measures that the Minister sketched for an economy of a few billion pounds, we are talking about a £1.5 trillion economy. A few billions will not make a big difference, and I urge him and his hon. Friends in the Treasury to look again at why the Bank of England is depressing the accelerator-printing money and telling people that the water is lovely-and the banking regulator is depressing the brake and saying that money cannot be lent to industries that need it, or for the big projects that are much needed throughout the country.

A Labour Member became excited when he thought he heard me say that we want a big public works programme paid for by the public sector. I clearly said that we need a big public works programme-paid for wholly or mainly by the private sector. That is what we need to release banking credit for longer-term projects. We need the power stations, the transport links and the broadband. Those are the things that could bring the House together.

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This has been a well-tempered debate, and hon. Members have expressed their fears and worries for their constituencies, but all have come together to say, "Yes, growth is what we need; bring on the growth; all we love is growth, and we must do more to achieve it." The Government must control their deficit, but they must also do rather more on infrastructure, regulation, taxation and a number of issues to get that growth assured faster. They must persevere throughout the whole four years that remain of this Parliament and the Government's budget strategy, so that we get those jobs and the big increases in tax revenue that are much needed to deliver their plans.

A large number of Labour Members-too many to read out in the few seconds remaining-were very concerned that public spending cuts would have a depressing effect on the economy.

6 pm

Motion lapsed (Standing Order No. 9(3)).

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RAF Marham

Motion made, and Question proposed, That this House do now adjourn. -(Mr Dunne.)

6 pm

Elizabeth Truss (South West Norfolk) (Con): I am delighted to have secured this Adjournment debate today on an issue that is critical not only for my constituents but for Norfolk as a whole and, more broadly, for East Anglia. There has been a lot of talk over the past few weeks about the future basing of the Tornado aircraft. These discussions have involved high politics, not least because we are in the run-up to the Scottish elections. I want to talk today about how the decision ought to be based on military and economic criteria, taking into account issues such as employment and deprivation. We cannot allow this debate to be dominated by politics. On this day of all days, as we pay tribute to our brave service personnel, it is important that their needs should be taken into account.

RAF Marham was established in 1916 to defend us against the German zeppelins. Its personnel fought in the first world war, the second world war and, more recently, in Iraq and Afghanistan. There is a great deal of anxiety about their future among the personnel at the base, some of whom have recently returned from Afghanistan.

Andrew Griffiths (Burton) (Con): I had the privilege of visiting RAF Marham recently as part of the all-party parliamentary armed forces scheme, and of meeting members of the Tornado squadron there. That squadron has been in combat for almost six years solid, and it makes a big contribution to our activities in Afghanistan. Does the hon. Lady agree that it is up to us to support it by giving it some stability?

Elizabeth Truss: That is exactly how I feel. The 2 Squadron recently returned to a heroes welcome in Swaffham, and I know how important it is for the local community and for those people who are based at RAF Marham that this decision be taken properly and rationally. We cannot play politics with people's jobs and with our nation's defences.

Among the key features of RAF Marham are the engineering and maintenance facilities based there. There is a high level of expertise, on the industry side and on the military side, which has taken years to develop. Indeed, there were previously eight separate locations for the maintenance and engineering facilities, but they have been consolidated at RAF Marham. I understand that those facilities are one third more efficient than their US counterparts in manpower terms. Over the years, they have saved billions of pounds for the Exchequer. To move those facilities elsewhere would cost at least £50 million, simply because of the levels of hardware and personnel involved.

Mr Richard Bacon (South Norfolk) (Con): My hon. Friend visited RAF Marham with me earlier this year. Will she reflect on what we were told by BAE Systems and Rolls-Royce engineers about the specialist layout for depth maintenance at Marham, which cannot be replicated elsewhere because of the size of the facilities?

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Elizabeth Truss: My hon. Friend has made a good point about the facilities, but I am thinking not only about the facilities but about the staff. I fear that, at a time when we are involved in a conflict in Afghanistan, moving the skills base-as well as the physical presence to which my hon. Friend has referred-would be dangerous and costly, and I do not think that we can afford to do it.

RAF Marham has built up a tremendous skills base locally. Unfortunately, the area suffers from relatively high unemployment and deprivation, and the skills and jobs at RAF Marham are very important to local people. I recently visited Hamond's high school, where many young people told me of their aspirations to join the Royal Air Force and become engineers. It would be disastrous to remove such a source of aspiration for young people from that area at this time. Many young people take up apprenticeships at RAF Marham, and it has built up tremendous support in the community.

I am very pleased that so many of my hon. Friends from Norfolk, East Anglia and elsewhere are in the Chamber. All nine Norfolk Members of Parliament-and let me point out to the Minister that they are all flying the coalition colours-have backed RAF Marham, because they know how important it is to the Norfolk economy. All eight councils in Norfolk, controlled by all three major parties, have also come out in support of RAF Marham as part of our "Make it Marham" campaign. I believe that in due course a petition will be presented to the Secretary of State and at No. 10 Downing street. That is not to mention the town mayors and the local businesses, which will be affected by any change.

There is a huge degree of local support for RAF Marham, and a huge amount of local pride has been invested in it. However, it is not just a question of the support that it commands locally. There is also the military presence that it affords, and the location that it provides for the conflict in which we are engaged in Afghanistan. It is possible to fly from RAF Marham to our forward operating base in Cyprus without the need for in-flight refuelling. That does not apply to other air force bases, and I think it is an important factor. RAF Marham is also well located for our United States allies in Lakenheath and Mildenhall.

RAF Marham has the RAPTOR-Reconnaissance Airborne Pod for Tornado-system, which my hon. Friend the Member for South Norfolk (Mr Bacon) and I saw during our visit, and also a tactical imagery intelligence wing, which produces high-quality images that are used not only by our service personnel but by our key allies. A large amount of important equipment and military intelligence is collected there. During the current conflict, we hear a great deal about the ground forces but slightly less about the role of the Tornado, because it is rather more secret and not open to public view in the same way. As was said earlier by my hon. Friend the Member for Burton (Andrew Griffiths), we ought to support what those people are doing.

Mr Keith Simpson (Broadland) (Con): I congratulate my hon. Friend on her hard work in support of RAF Marham, which affects a number of our hon. Friends. If RAF Marham were to close completely, only one Ministry of Defence base would remain in Norfolk-at Swanton Morley, a former RAF base that is now the base of the Light Dragoons. There is a lot of concern in
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Norfolk. RAF Coltishall, part of which is in my constituency, closed six years ago, but 80% of the base-now owned by the Ministry of Justice-has still not been taken over. The fear has always been that RAF Marham would be left on its own. Perhaps the Minister will tell us whether, if either RAF Lossiemouth or RAF Marham lost the RAF operational element, any of the military units from the United Kingdom support division would go into whichever base was closed.

Elizabeth Truss: I entirely agree with my hon. Friend about the detrimental effect of the closures that we have already seen in Norfolk and East Anglia. I should like the Minister to consider the future of RAF Marham when the Tornado is retired. My understanding of the 2005 report on the joint strike fighter is that RAF Marham was considered a suitable option for the JSF. As the equipment is modified and-I am given to understand-the noise levels would be lower, it might be a potential future location, so we could continue building on our excellent engineering and maintenance facilities.

Mr Bacon: On my hon. Friend's point about the JSF, because Marham has an extra-long runway it could be used by a wide variety of aircraft, not just the JSF. Also, when we were there, we saw an enormous amount of expensive work, paid for with taxpayers' money, being done to refurbish the runway.

Elizabeth Truss: That is right, and my hon. Friend makes a very good point about the amount of taxpayers' money that has already been invested. I agree that that would be wasted if we were to give up on even an alternative Ministry of Defence use for Marham, which is so specialist in the RAF. That is an extremely important point.

We have had a long discussion about the economic and military value of RAF Marham, and I thank my colleagues for their interventions, but I also want to talk about its economic value locally and the key factors for west Norfolk, about which I know my hon. Friend the Member for North West Norfolk (Mr Bellingham), who is present today, is also well aware.

Thomas Docherty (Dunfermline and West Fife) (Lab): I congratulate the hon. Lady on securing the debate on this of all days. I have absolutely no axe to grind as I live some distance from Norfolk and represent a constituency that is a great distance away. I also congratulate the hon. Lady on her delicate approach to this issue, but does she agree that it is crucial in the review that community is not set against community and that the MOD makes decisions on their merits? It is important that all communities behave in as dignified a way as the hon. Lady has this evening.

Elizabeth Truss: I thank the hon. Gentleman for his comments, and I think that is absolutely right. No MP wants to see the source of much local employment and pride in their constituency closed down. I fully appreciate that, and I know that Opposition Members are genuine in the case they might make for the base in their constituency. However, I want to make the case today that RAF Marham is located in an area with particularly high unemployment and deprivation, and I will draw the comparison with Lossiemouth. The unemployment
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rate in the west Norfolk borough is 7.4%, whereas in Moray in Scotland it is 4.8%, so west Norfolk has significantly higher deprivation. We should also look at the skills levels: 15% of the population in west Norfolk do not have any qualifications, compared with 9.6% in Moray.

Thomas Docherty rose -

Elizabeth Truss: I am sorry, but I will not give way again, as I have already taken a number of interventions.

There is also a higher proportion of children on free school meals in west Norfolk. I say that not to denigrate other bases, because I accept that no MP wants bases closing in their area, but to make the point to the Minister that west Norfolk has relatively high unemployment and deprivation, and that ought to be taken into account. I should also point out that more people are employed at RAF Marham than at Lossiemouth and Kinloss combined. More than 5,000 people are employed at RAF Marham, as against 2,300 at Lossiemouth and 1,800 at Kinloss. Those statistics also need to be taken into account when the decision is made.

I understand the hon. Gentleman's point that all areas are suffering from their own difficulties, but it would be wrong for those very high levels of unemployment and deprivation not to be taken into account in the national debate just because some parts of the country shout louder than others. That is a concern to me, because it is very important that this decision is made on proper grounds-military grounds, economic grounds and the grounds of the public purse. This should not be about politics trumping economics; it should be about a secure skills base for communities-in my case, in west Norfolk-and a secure military future for our country, and in this instance not just for the Tornado force, but for the JSF moving into the future.

6.15 pm

The Minister for the Armed Forces (Nick Harvey): I commend my hon. Friend the Member for South West Norfolk (Elizabeth Truss) on initiating this debate on the future of RAF Marham which, as the House will understand, is of great importance to her constituency. I thank her for her words of praise for the men and women of our armed forces and the Ministry of Defence civilians who support them. This is a special day for our armed forces. It is a day when the whole nation joins together to remember their sacrifices, and I paid my respects at the national memorial arboretum this morning. The armed forces memorial is sobering, as engraved upon it are the names of more than 15,000 of those who made the ultimate sacrifice for this country, and more names are being added each year. I cannot pay high enough tribute to our armed forces, to what they have done in the past, to what they are doing in the present and to the remarkable professionalism, courage and resolve that I know they will continue to show in the future.

Given the subject of this debate, I should like to pay particular tribute to all those who work at RAF Marham and to the local community, who have, over the years, given such strong support to the station, the RAF and
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the nation. As my hon. Friend said, RAF Marham has a long and honourable history. During the second world war, it operated as a bomber station and in the post-war period it has also acted as a base for air-to-air refuelling aircraft. Today, it is the RAF's largest fast-jet station and it is home to a significant element of the RAF's offensive air capability, operating four Tornado GR4 squadrons, which carry out attack and reconnaissance roles. Other force elements based at RAF Marham include the Tactical Imagery Intelligence Wing, 3 Force Protection Wing Headquarters and 93 Expeditionary Armament Squadron. RAF Marham is also a centre of engineering excellence, providing engineering support to the Tornado GR4 fleet. All together, RAF Marham is one of the largest employers in Norfolk, with a total of more than 4,000 service personnel, MOD civilians, and contractors working there.

Last month, we published the strategic defence and security review, which was based on two clear priorities: protecting our mission in Afghanistan; and setting the path to a coherent and affordable defence capability in 2020 and beyond. The Government have made clear our determination to address the unprecedented fiscal deficit we inherited. Every Department has had to make its own contribution and the MOD is playing its part. Because of the priority we place on security, the defence budget is making a more modest contribution to deficit reduction relative to many other Departments, but even so, regrettably, this has meant tough decisions. The SDSR process aims to bring defence plans, commitments and resources into balance. It is painful, but we have to make sacrifices to get the economy and the defence programme back on track.

Our fleet of Harrier and Tornado air defence and ground attack aircraft have performed magnificently over the past 30 years, but those aircraft risk becoming outdated as threats continue to become more varied and sophisticated, and maintenance of the fleets will become an increasing challenge. So, RAF plans to make a transition to a fast-jet force comprising just the Typhoon and the joint strike fighter by 2021 make operational and economic sense. The decisions to retire our Harriers and to reduce the number of Tornados involved very difficult choices, which we had to make to focus resources where they are most needed: in support of current operations. The Tornado GR4 force, even at its reduced size, will be significantly larger than the current Harrier force. So retaining the more capable Tornado allows continuous fast-jet support to forces in Afghanistan and the ability to support concurrent operations. That would not be possible if Harrier were retained and Tornado retired.

We know from our work on the SDSR that RAF Kinloss and two other bases will no longer be required by the RAF. I can understand that that will be cause for some concern at Marham, as it is elsewhere in the country with ties to the Air Force. Of course, this is not just about fast jets-nor is it even just about the RAF. The decision on Tornado basing will have to take into account wider RAF and defence requirements. For example, the Prime Minister announced our intention to accelerate the re-basing of the Army from Germany, which also needs to be taken into account.

The Ministry of Defence will need to determine what makes the most sense for the structure of our armed forces, including where they are based, where they need
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to train and operate from and ensuring value for money for the British taxpayer. However, no decisions have been taken on our future basing requirements beyond those that I have just outlined. It will take time to work out which of the bases we retain and the uses to which they are put. In that work, we will also look beyond those bases directly affected by the SDSR decisions.

My hon. Friend has reminded us of the importance of RAF Marham as the Tornado force headquarters and of the wider economic and social position of RAF Marham in the south-west Norfolk community. We have also had similar representations from my right hon. and learned Friend the Member for North East Fife (Sir Menzies Campbell) regarding RAF Leuchars and from the hon. Member for Moray (Angus Robertson) regarding RAF Lossiemouth. The MOD has also received submissions from the Moray taskforce. The thousands of people who marched in Lossiemouth on Sunday reminded us, if we needed reminding, of the strength of feeling these decisions generate in local communities.

So we know that these are important decisions and that we must get them right. I know-and regret-that this means uncertainty for the people and communities concerned. My hon. Friend the Member for South West Norfolk made that point powerfully, and it is understood, but I emphasise to her again that there is no proposal to close RAF Marham. The issue has to be seen in the context that I have just described.

We will not rush to a conclusion without proper analysis. It will take time for us to reach the right decision. As the SDSR states, we will aim to do so in a way that is sensitive to economic and social pressures and the needs of our people and their families. We also want to make sure that any decisions fully consider the implications for Tornado personnel operating in Afghanistan over the coming year as well as their families. It is therefore unlikely that any decisions on Tornado basing will be taken before next spring at the earliest. We will of course listen to any representation from local communities as we work through our decision. As and when it proves necessary, we will work with all the relevant agencies and the local communities to manage the local impact of our decisions.

The SDSR announcement marked the beginning, not the end, of a process that will transform our armed forces to meet the challenges of the future. That includes decisions on all military estates, such as RAF Marham. Further work is now needed to establish how we will deliver the SDSR's findings.

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Thomas Docherty: The hon. Gentleman is a decent Minister. Will he assure all the communities affected that the Ministry will work quickly and that when the decision is made, the communities will be the first to know, so that the media do not-through whatever process-discover before the three or four affected communities?

Nick Harvey: I certainly give the hon. Gentleman a commitment that we will try to make sure that that happens in an orderly fashion, as he describes. I must stress, however, that as this process involves an estate review across defence, more than three or four communities will have an interest. It is a very big piece of work. Of course we will endeavour to do things quickly but, as I have stressed, there will be a detailed and comprehensive study across not only the whole of the RAF but defence as a whole. It will consider the issues I have discussed, including where units that come back from Germany might be based. We will do it as quickly as we can, but I do not want to mislead him into thinking that that means he will get an outcome any time soon.

We need to do further work to establish the detail of how to progress, but I am determined that at the end of the process, the United Kingdom will have the capabilities it needs to keep our people safe, to meet our responsibilities to our allies and friends and to secure our national interests. As they were in the SDSR, our decisions have to be objective, unsentimental and based on the military advice we receive. We need to focus finite resources where they are most needed. We know that the armed forces will be smaller and that, as the RAF reduces its number of fast jets, it will inevitably need fewer flying stations. Although the RAF might become leaner, we can maximise investment in new aircraft, as well as assuring full support to current and contingent operations. The transition to the combined fast-jet fleet of joint strike fighters and Typhoon will certainly provide the RAF with world-class capability for the future. My hon. Friend has called on the Government to base their decisions on military necessity, the realities of the public purse and the socio-economic impact on the areas affected and I assure her that that is precisely what we intend to do.

Question put and agreed to.

6.26 pm

House adjourned.

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