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Westminster Hall

Tuesday 15 February 2011

[Mr Andrew Turner in the Chair]

Fuel Prices

Motion made, and Question proposed, That the sitting be now adjourned.-(Mr Dunne.)

9.30 am

Miss Anne McIntosh (Thirsk and Malton) (Con): Good morning, Mr Turner, and I offer a warm welcome to what appears to be a very well attended debate. I am delighted to have secured this debate, and I am particularly pleased about its timing, which is before the Budget on 23 March.

This debate is timely, because it examines the impact of fuel duty, particularly in remote rural communities such as those in North Yorkshire. I will just set the scene by outlining the prices as of yesterday, 14 February 2011. People would be hard pressed to buy unleaded petrol in Thirsk, Malton or Filey for less than £1.30 a litre, and they would be hard pressed to buy a litre of diesel for less than £1.36 a litre.

I want to spend some time outlining the impact of these prices on rural communities, and I also want to set out why I fear that the diesel duty differential is affecting rural communities so harshly. Finally, I want to discuss the options to address this issue.

It is no secret that oil prices have reached a record high-barrel prices have reached $100. The fuel duty and VAT element of petrol prices both impact on drivers and as many people regard those elements as a form of double taxation, their effect on petrol prices is highly inflationary. It is generally thought that 20% of the running costs of a truck are accounted for by the cost of fuel duty at this time.

There is a high dependence on cars in rural areas, where we have limited public transport and where the car is a necessity for many people, particularly the elderly, those on fixed incomes and those with young families. In the words of the AA, in rural areas those on lower incomes are already being priced out of the market.

Harriett Baldwin (West Worcestershire) (Con): I congratulate my hon. Friend on securing this extremely important debate. I represent a rural area myself. Does she agree that there are so few petrol stations in rural areas that the existing rural petrol stations can charge much higher prices than petrol stations in towns?

Miss McIntosh: The problem is that the sale of fuel in rural areas tends to be less per vehicle. I have learned that people tend to "tank up" for two or three weeks at a time. That has an impact, as rural petrol stations do not face the competition for customers that exists in urban areas.

A particular concern for North Yorkshire is that we have had extremely adverse weather this winter, particularly in November and December, and in addition we have a particular reliance on 4x4 vehicles. I want to declare an
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interest, in that I run a partial 4x4 vehicle to ensure that I can access parts of my constituency that I would otherwise be unable to reach. We know that 4x4 vehicles are more fuel-efficient than they were in the past. However, for the reasons that I have given, diesel prices at the petrol pump are higher than they were in the past.

In preparing for this debate, I was surprised by diesel prices in the UK. I had understood that they were the second highest in Europe. In fact, the helpful note provided by the Library for this debate shows that the UK has the highest diesel prices in the EU, despite a pre-tax price that is among the lowest in the EU. The differences in diesel duty rates in EU countries are incredibly stark compared with those for petrol. In some member states, where there are lower diesel duty rates, the diesel discount is nearly 50%. By contrast, the diesel duty rate in the UK is 18p a litre, or 47%, higher than in any other EU country and more than 25p, or 80%, above the simple average for the other 26 member states. It is shocking that the higher cost is passed on to those of us who live in rural areas.

David Simpson (Upper Bann) (DUP): This is a very important subject, which is shown by the number of hon. Members attending this debate. In Northern Ireland, the rise in duty on fuel is obviously a major concern, given that we have a land border. The rise in duty causes major difficulty for all our constituents. However, I am sure that she will have seen reports in the press today that the EU may try to stop the duty and the VAT on fuel from being reduced. I am sure that that is a major concern for her constituents, as it is for mine.

Miss McIntosh: When the Minister responds to the debate, he may want to touch on that issue. Also, when I come to put my case for a rural rebate, I will acknowledge that there might be problems with regard to the EU directive in this sector.

Anne Marie Morris (Newton Abbot) (Con): I wonder whether my hon. Friend has examined the impact of rising fuel prices on micro-businesses. In our rural communities, micro-businesses are key, and the Federation of Small Businesses has estimated that rising prices will cost each one of these businesses, which are already sorely pressed, an extra £2,000 every six months.

Miss McIntosh: Some 6,000 small businesses in Thirsk, Malton and Filey will be affected, and I congratulate the FSB on its excellent campaign.

The impact on farmers-across north Yorkshire, farming is often the main business, and it certainly is in my constituency-of rising fuel prices has been catastrophic. That issue has pushed up the cost of producing livestock and the cost of taking livestock to market. Moreover, for those who train racehorses across North Yorkshire, many of whom are based in Thirsk and Malton, rising fuel prices have pushed up the cost of feeding the horses and the cost of transporting horses and jockeys to races.

Jim Shannon (Strangford) (DUP): As the hon. Lady has said, rural communities in particular are suffering, and the area that I represent, which is very much a rural community, is one of those that has suffered most. Does she agree that concerns have been expressed during
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the past few months, particularly since Christmas, that some retailers were taking advantage of the situation in relation to the price increase? And does she also agree that there is perhaps a role for Government in relation to monitoring, controlling and regulating that situation?

Miss McIntosh: I am mindful of the point made by the hon. Member for Upper Bann (David Simpson) about the land border between Northern Ireland and southern Ireland. In the European Union, the dream place to live as far as fuel duty is concerned is Luxembourg. I am reminded of the queues that I saw on a road in Luxembourg, which existed because the fuel duty is less in that country. So I am very mindful of what the hon. Member for Upper Bann has said and, as I said earlier, I hope that that is an issue that the Minister will respond to, because rural communities seem to be bearing the brunt.

RAC analysis of the survey "Family Spending 2010" shows that spending on transport for the average household was £58.40 out of a total weekly expenditure of £455. Transport is the biggest single item of expenditure, bigger even than food, rent, mortgage or entertainment. Obviously, ancillary services will suffer if transport costs continue to rise incrementally.

There are four options to discuss today. The first is not very realistic-it is the option to do nothing and maintain the status quo. Personally I do not believe that that is a sustainable or realistic option. Obviously, my preferred option is for the Government to pause on 1 April and not to impose the 1p rise in duty. Of course, that increase will be the eighth duty increase to have been proposed by the previous Labour Government since November 2008. I am mindful of the fact that if it is imposed, it would add at least 4p more to petrol and diesel pump prices, on top of the 1p increase in duty in January and the VAT increase as well.

The perhaps more controversial proposal to introduce a fuel duty stabiliser was first put forward by the present Chancellor when in opposition. As shadow Chancellor, he launched a fairly full consultation in July 2008 on a fair fuel stabiliser, a mechanism to ensure that when fuel prices go up fuel duty falls:

I take some comfort from the fact that the Chancellor, in his June Budget, said:

Roger Williams (Brecon and Radnorshire) (LD): The hon. Lady has set out the virtues of a fuel tax stabiliser, but does she agree that that still does not address the differential between prices in rural and urban areas, which makes it so difficult for the small businesses that I represent?

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Miss McIntosh: I entirely take that point, and it is why one proposal that I will come on to is the rural rebate discount. I have no doubt in my mind that the fault for where we are lies very firmly at the door of the outgoing Government, and in particular of their Chancellor. In his 2009 Budget, he announced tax increases on roads, fuel, alcohol and tobacco, and set out fuel duty to increase by 2p per litre in September of that year, and then by 1p per litre above indexation each April for the next four years. The decision to increase duty rates in real terms was projected to raise £3.6 billion over the next three years from 2009-10 to 2011-12.

Mr David Hanson (Delyn) (Lab): Will the hon. Lady tell us whether she voted for the recent VAT rise?

Miss McIntosh: I will come on to that in a moment, but it would be nice to hear from the shadow Minister whether he feels any pain or anguish, or any need to apologise for where we are, particular as many hon. Members from all parts of the House have today said that we are where we are. We need an all-party approach to get out of this, and since we know for a fact, from reading Lord Mandelson's book, that the Labour party, had it remained in government, would have been committed to increasing VAT, we will not take lectures from Labour Members today.

Motoring organisations and some road hauliers have set out their difficulties with a fuel duty stabiliser, and perhaps the Minister in her response will tell us what stage we are at concerning the assessment reached by the Office for Budget Responsibility about how the stabiliser will work in practice. Were a stabiliser to be introduced, is she convinced that the reduction would be passed on to the motorist? If the reduction remained with the oil companies, there would be no advantage in introducing a stabiliser.

Turning to the rebate for remote rural areas, I realise the difficulties in persuading the European Union of such a necessity, but having practised the art, both as a European Community lawyer-now a European Union lawyer-and during 10 years in the European Parliament, I am more well-versed than most in how to persuade the European Union and our fellow member states, many of whose citizens live in equally remote areas. People in rural areas should be entitled to a discount on the rate of duty.

With fuel duties, the principle would obviously have distribution effects, given the greater reliance in rural areas on both private and public transport. We can have a debate and an argument about how the reduction in duty can best be administered, and I realise that a differential duty would require special dispensation, but the UK, in looking to apply a derogation for a lower rate of duty for petrol sold in one area-Scotland, for example-fails to recognise areas such as Northern Ireland, where there is a land border with an area selling fuel at a lower rate of duty. Also, remote areas that are particularly rural and do not have large centres of population, where people do not have schools closer than 13 or 15 miles and have to travel some distance to do a weekly shop, will be particularly penalised.

Andrew Bingham (High Peak) (Con): My constituency is very rural and contains a huge amount of quarrying. The quarries are remote, and most of the stone is carted
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out by road, with hauliers paying high fuel prices. Stone is a building block for much of the economy, so does my hon. Friend agree that if there were a rural consideration, the benefits would descend to people in non-rural areas?

Miss McIntosh: My hon. Friend has provided an appropriate example of a business that depends heavily on road haulage to get its product to market, and I am sure that it would be a particular beneficiary if the fuel duty stabiliser or a rural rebate were introduced.

Domestic fuel is subject that appears in my mountains of correspondence. One or two people have expressed concern about the possible operation of a cartel, particularly in the north of England-Yorkshire, the Humber and the north-east-in domestic heating oil prices. I welcome the fact that the Government have grasped that issue and are looking into it through, I understand, Ofgem, but I hope that one of the purposes of this debate is to push at what might be an open door, to press the Government to, at the very least, examine both where we are and how we got into this difficulty. My constituents have expressed their concerns in fairly strong terms. One stated:

Another wrote:

Andrew George (St Ives) (LD): I congratulate my hon. Friend on securing this important debate. I have written to the Economic Secretary about the pilots that were announced last October for the proposed rural area rebate. EU Finance Ministers' approval will be required before we can even get the small pilots going on the Isles of Scilly and in Scotland, which will take some time. Does she agree that it is really important that the scheme is rolled out as quickly as possibly, and that the Government need to go a stage further and indicate which rural areas they intend to cover?

Miss McIntosh: I am taken by my hon. Friend's arguments, but we learned a lot from the smash-and-crash approach of the Labour Government, who announced that they were introducing a 1p increase due to the state of the economy and the fact that the price of oil was $149 a barrel. The Prime Minister's response to my question showed a responsible attitude. We need a responsible, well-thought-out approach in the Budget. Then we can have pilot schemes in North Yorkshire, Cornwall, Scotland and Northern Ireland.

Julian Smith (Skipton and Ripon) (Con): I support my hon. Friend's argument. Although the Financial Secretary has said that far-flung areas of Scotland might qualify for rural pilots, North Yorkshire is the most rural county in England and must surely qualify for a pilot if the Government decide to run some.

Miss McIntosh: I am delighted that my hon. Friend and neighbour has put the case so eloquently. Rural communities, such as those in North Yorkshire, are suffering, and they deserve special attention.

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Jake Berry (Rossendale and Darwen) (Con): On perceived price fixing between local retailers, I wrote to several major supermarkets in my area before the general election. Fuel is 7p a litre more expensive in Rossendale than in the immediately adjoining town of Bury. The supermarkets wrote back to say that there is a small geographical area in which they fix their prices. Is that not a case of major retailers charging people what they can bear rather than what is necessarily fair?

Miss McIntosh: Several hon. Friends have made comments that I hope the Government will take up, not least of which is the fact that some small independent retailers who try to offer fuel in rural areas are being priced out of the market because suppliers 20 miles away undercut them substantially. All those issues are worthy of further investigation.

Andrew George: Will my hon. Friend give way?

Miss McIntosh: I am drawing my remarks to a conclusion.

I believe that we are pushing at an open door, and I take this opportunity to press the Government to change. Doing nothing is not a realistic option. The price of fuel is one of the most pressing issues facing those in rural communities. The small businesses that drive our economy, including the 6,000 small businesses in my constituency alone, are suffering particularly. Fuel forms a large part of individual household income, and it is extremely inflationary in pushing up the price of everyday items. UK hauliers already pay as much as £12,000 a year more than some EU competitors. As I have said, we now have the highest duty on diesel, yet our diesel is the most cheaply produced.

I make a plea to the Minister to stop the 1p increase on 1 April, consider seriously a fuel stabiliser and a remote rural rebate or discount, which would have a favourable impact on many rural constituencies represented in this Chamber, and address the discrimination against rural dwellers endemic in current pump prices. The differential between diesel and petrol is now unacceptable and must be addressed. I urge the Minister to respond in the most favourable terms possible for the good of families, farmers, the elderly, those with young children, small businesses and all of us in rural areas who depend on cars.

9.54 am

Mr Alan Reid (Argyll and Bute) (LD): It is a pleasure to serve under your chairmanship, Mr Turner. I congratulate my hon. Friend the Member for Thirsk and Malton (Miss McIntosh) on securing this debate. The issue is important for those of us who represent rural communities, as the large turnout of hon. Members from the two coalition parties and Northern Ireland indicates. However, the right hon. Member for Delyn (Mr Hanson) casts a lonely figure on the Labour Benches. I also note that no Scottish National party Members have turned up, which is a scandal considering all the things the SNP is saying in the Scottish press. It shows that the SNP's priorities are completely wrong.

Representing a sparsely populated rural constituency as I do, I am only too aware of the impact of high fuel prices on people and businesses. I represent many islands of the Inner Hebrides. To give some examples, the price
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of fuel on larger islands such as Mull and Islay is typically 15p a litre higher than at a city centre supermarket, and on the smaller islands such as Coll and Colonsay, the price is usually about 30p a litre higher. That obviously has a great impact on people's living standards and on anyone on the islands who is trying to run a business.

I was therefore delighted when the Government announced their intention of pursuing a pilot scheme under which a 5p per litre fuel duty discount would be introduced on many islands, including the Inner Hebrides. I know that the Government need EU permission to go ahead with the scheme, that it takes time to get such projects through the EU and that it is important that the Government get their proposals right, but I urge them to take the proposals through the EU as quickly as humanly possible. I hope that there will be no objections in the EU. Several other countries-Greece, Portugal and France-have similar discount schemes on their islands, so I hope there would be no obstacle to our island pilot scheme. However, as other hon. Members have said, it is not just on the islands that the price of fuel is high. It is the same in many rural parts of the country.

Andrew George: I am grateful to my hon. Friend, who is making an excellent case. My constituency, like his, would benefit from the proposed rural rebate, especially the Isles of Scilly, which have just 2,000 people. He is absolutely right that it should be a fait accompli at the EU level, because the principle is already established. The difference in price on the Isles of Scilly is much the same as in his constituency. Does he not agree that we must press Ministers not only to get the proposals through the EU as quickly as possible but to indicate where the pilot will be rolled out beyond the small areas that will benefit in the first phase?

Mr Reid: I agree. Some 6,000 of my 60,000-odd constituents will benefit from the pilot scheme, but I hope that it can be rolled out later to other rural parts of the country. However, the most important thing is to establish the principle. My hon. Friend will share my frustration that throughout the last Parliament, we proposed such a scheme every year in the Finance Bill and, although we often heard noises of sympathy from Labour Ministers, no action whatever was taken. It is important to establish the principle, which is why the pilot scheme is so important. Once the principle is established and is shown to work-Labour Ministers always said that it could not, in practice-we can prove it will work. It is important to establish the pilot and prove that it works. Then we can roll it out to other rural parts of the country.

On the coming Budget, the previous Government introduced the fuel duty escalator, which increased fuel duty by 1p over and above the rate of inflation. According to my calculations, that means that the tax on fuel would have increased by 4p in the coming Budget if Labour were still in power. Thankfully, they are not. I think we have established that any argument that fuel duty must increase for environmental reasons no longer stacks up. Market forces have already driven the price of fuel very high, which deters people from using their cars. Any further fuel duty increase would not help the environment; it would simply harm the rural economy.

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Dr William McCrea (South Antrim) (DUP): It is easy for the coalition to knock the previous Government, and I have no objection to that at all. However, the coalition Government will be judged by what they do rather than what they say about the past.

I draw to the hon. Gentleman's attention the fact that many rural dwellers do not use cars as a luxury. They use them because there is no alternative. Many of my constituents have no good local bus service and no train. We should bear in mind that they use their cars not out of luxury but from necessity. The Government say that transport sits at the centre of the rural economy; let them prove that they mean that.

Mr Reid: I agree. In my own constituency, particularly on the islands, there are no trains, buses are few and far between, and it would not make sense for the local council to subsidise a bus service for only one person. That would be less beneficial to the environment than people using their cars.

I agree that it is easy to knock the previous Labour Government and that this Government must be judged on their record. It must also be pointed out that we face an enormous budget deficit and that the budget has to be balanced. I recognise that fuel duty brings in a lot of money for the Treasury, but I urge the Chancellor to find another way of raising revenue. Fuel duty discriminates against rural areas in a way that no other tax does, and almost any other tax increase to substitute for the fuel duty escalator would be an improvement. I will doubtless be considered a heretic at the Treasury for saying this, but why not put up the basic rate of income tax? The pillars of the Treasury may collapse at the idea that such heretical thoughts are still around. Every Chancellor for the past 30 years seems to have viewed bringing down the basic rate of income tax as a totemic symbol, but it is a much fairer tax than fuel duty because its impact is equally felt throughout the country, whereas fuel duty impacts far more heavily on rural areas. I therefore urge the Chancellor to abandon the fuel duty escalator policy that he inherited from the previous Government, and raise any other tax in order to balance the budget.

In conclusion, let us get the islands' fuel duty pilot up and running as soon as possible, and abandon Labour's fuel duty escalator in the Budget.

10.1 am

Ian Paisley (North Antrim) (DUP): I, too, congratulate the hon. Member for Thirsk and Malton (Miss McIntosh) on securing this important debate. I am delighted that we have the opportunity to talk about the issue and that the Minister is present to listen to the concerns being raised, to which I hope she will be able to respond positively-if not today, then at least in the Budget.

In The Daily Telegraph in January, Boris Johnson wrote the immortal words that

I say a profound "Hear, hear!" to that-there certainly is something seriously wrong when it costs less to fly to Rome than to drive to Cullybackey in my constituency. Although that is a humorous point, it is-like all such humorous points-a telling one. The pips are now squeaking throughout this country, and none more
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loudly than in rural parts. Many hon. Members have already indicated that the car is not a luxury for people who live in rural areas. The hon. Lady made clear the necessity for four-wheel drive vehicles in rural parts of these islands. They are absolutely essential. That has to be driven home to the Government, who live mainly in cities. They have to recognise the needs of the rural community.

I say a huge "Hear, hear!" to the words of the hon. Member for Argyll and Bute (Mr Reid), who spoke about an island pilot scheme. I am glad that I live on an island-it is called Ulster-and I hope that such a pilot scheme will apply there as well. I flew today from the mainland of Ulster to this island to participate in this debate, so I hope that there is recognition for a fuel stabiliser from my island as well as the hon. Gentleman's island. It is critical. Parts of England, Wales and Scotland have remote rurality, but if ever such remoteness was multiplied-there are a channel and seas between us-we are on the periphery of the periphery. On that basis alone, we deserve some sort of recognition for our rural areas and recognition that help will be given.

I was delighted to see in the agreement that formed the new Government recognition that something was going to be done to address inflated fuel prices. I am sure that, if we cast our minds back to the election, we would all recall that fuel prices were exceedingly high and that our potential and actual voters said on the doorsteps, "You have to do something about fuel prices." That lost momentum-it is almost as if the car is no longer filled with fuel and has stalled. Now that prices are back up, as the hon. Lady has said, to 136p-15p higher in parts of Scotland, and 10p in parts of Northern Ireland-surely the momentum must be put back into the issue and the Government must grasp the nettle.

Jim Shannon: Since the coalition came into power last year, fuel has risen by £2.35 per tank. Does my hon. Friend think that the onus is on the coalition Government to address that issue?

Ian Paisley: The hon. Lady has rightly indicated that there are four options. As a member of an Opposition party, I am prepared to leave it to the Government and say that it is up to them to come up with a solution. Let us hope that we can get something with cross-party and cross-House support, and that we can drive it forward so that it makes a difference for the people who send us here. I think that we can all agree on that.

David Simpson: While we are having a go at the coalition, I might as well join in. Does my hon. Friend agree that the coalition needs to realise that, where Northern Ireland is concerned, millions upon millions of pounds of revenue are being lost to the British Exchequer every single year the longer this goes on?

Ian Paisley: Yes, that is an excellent point, and I want to comment on the issue of smuggling later. I emphasise the points made by other hon. Members that the Budget gives this Government the opportunity-I hope that they will take it and listen to the concerns-to come up with a solution that we can get behind and support.

Gavin Williamson (South Staffordshire) (Con): The hon. Gentleman speaks eloquently about the importance of dealing with the issue. If the Government are able to
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deal with it, will the Democratic Unionist party and others march through the Government Lobbies in support of the Budget?

David Simpson: We are well used to marching.

Ian Paisley: At home, if I march, I need to fill in an 11-bar-one form. The hon. Member for South Staffordshire (Gavin Williamson) may not be familiar with that form, but here I have the luxury of parading anywhere I want. If I support the Government's proposal, I will happily lead the charge through the Lobbies and he will follow in my wake.

On average, petrol at home is about £1.30 or £1.35 per litre, depending on where it is bought. Of that maximum £1.35, 80p is a combination of taxes. People have talked about holding back the 1p increase in April, which will make a difference of about 2p or 3p at the pump, but we need something that will make about 25p difference at the pump if we are going to get not only the rural community, but hauliers and local industry moving again, and people with get up and go to recognise that the economy is starting to breath and move again. The Government have a serious duty to address that.

My hon. Friend the Member for Upper Bann (David Simpson) has touched on the issue of smuggling. High prices encourage smuggling, and on my island it is incredibly easy to smuggle, because we have a land border with another nation state which has a different fuel price. If ever there was an open invitation or open goal to the smuggler, that is it. The Minister will know that in Northern Ireland alone-these figures are staggering-£200 million is lost each year to Her Majesty's Revenue and Customs because of smuggling. In the Republic of Ireland, a further €140 million is lost to their Exchequer because of fuel smuggling. On top of that, environmental waste and damage are caused as a result of removing the various tracers and markers from fuels. That causes untold environmental pollution and harm.

If we have a fuel stabiliser, or the fuel price differential is altered and brought in to recognise those differences, the opportunity to smuggle and to cause crime and waste will no longer exist. We are only encouraging crime if we do not address the matter. That is another solid reason why the Government must get behind dealing with the issue of having fair fuel prices. They could, of course, do so through a taxation cut.

Dr McCrea: Does my hon. Friend agree that people are looking for clarity about how we arrive at the price of our fuel in the first place? Soaring prices at the petrol pumps are causing anger, particularly bearing in mind that many of the companies concerned recently announced massive increases in profits.

Ian Paisley: Clarity is important. Yesterday, I took the opportunity to check how the price differential is made up. Some 58.9p on every litre is duty, and a further 22.3p is VAT. The price of the actual commodity-whether it is diesel or petrol-is currently around 46p. Then, of course, the person who is pumping the fuel has to make a small profit, which is usually a matter of pence-about 5p. There is something seriously wrong when 80p of that is all tax. As I have said, it is getting to the point when people in remote rural communities can
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no longer get around. The closure of petrol stations in my constituency means that it is 16 miles between some villages and the local petrol station. If someone runs out of fuel, they are stuffed. People have to start thinking ahead, buying fuel and bulk storing it. That is not safe; it is hazardous. We must recognise that we are putting immense pressures on our rural communities. Such a situation must be addressed.

I leave hon. Members with those thoughts. As I have said, like many hon. Members, I am prepared to leave it to the Government to come up with a solution that we can get behind. I am glad that the Minister is here-I can see that she is taking notes-and I hope that she is able to give us some encouragement at the end of the debate. I look forward to the Budget, which will be the opportunity for the Minister to respond.

10.12 am

Simon Hart (Carmarthen West and South Pembrokeshire) (Con): I congratulate my hon. Friend the Member for Thirsk and Malton (Miss McIntosh) on securing this important debate. I apologise to her, the Minister and yourself, Mr Turner, for possibly having to leave before the Minister has completed her wind-ups.

I shall try to bring together some of the comments made this morning by mentioning two examples from my constituency that illustrate the problem we have. The first issue is something we have not referred to this morning: the cost of domestic fuel for purposes other than simply driving. I thank my constituent Colin Keen for raising that matter. I shall give a quick example. Between Christmas eve and about the middle of January, people who were tied into domestic fuel contracts with a company called Flogas had a 46% increase in their fuel prices. That is an unsustainable and unjustifiable increase, which has a considerable indirect and direct effect on the rural community and the rural business network. It would be helpful for the Minister to address the problem experienced-at least in my part of the world-by a number of householders who are on large estates. They are tied into lengthy fuel contracts that they cannot reasonably or, in some cases, legally get out of. Their domestic fuel prices are apparently being adjusted without any reference being made to them and without them being able to do anything about it at all.

The second example I shall refer to is that of another constituent, Mr Barry Jones. He has studied local supermarkets and has pointed out that we are not necessarily getting a fair crack of the whip from them. He highlighted that Tesco in the rural town of Carmarthen is charging different prices from Tesco in the more urban setting of Llanelli down the road. There is up to 4p a litre difference. Tesco in Carmarthen argues that it is setting its prices in line with local suppliers. That is fundamentally untrue; it is not. It is setting its price at a rather different rate. I cannot help but think that such a situation is slightly ironic when I see a Tesco tanker with a slogan on it that reads: "Why pay more?" The answer is: because we have no choice. Perhaps we can address the grip that the five big supermarkets seem to have over every aspect of our lives, particularly in rural communities.

My hon. Friend the Member for Thirsk and Malton made a further point in her introductory comments about the overall inflationary effect of the issue on rural
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communities. What we are seeing-and what was being reported on the BBC this morning-is that there has been a much more profound increase in the price of things we need over and above the price of things we want. Fuel hikes have a very different downstream impact on the things we need compared with the things we occasionally want.

That brings me neatly to a further comment about the definition of rurality, which has been touched on in different ways by a number of hon. Members this morning. Several years ago, I tried to get a proper definition of rurality and, perhaps rashly, I asked the pollsters Ipsos MORI for one. It did not have a definition of rural and the people I asked simply said to me, "Well, it's anything that isn't urban." If I may respectfully say so, that is a particularly unhelpful suggestion. Rurality comes in very different forms: isolated, very isolated, fairly isolated and, simply, rural. We need a clearer indication from the Minister and perhaps other interested bodies of what rurality and isolation really mean. I can foresee that some difficult choices and decisions will have to be taken and that they will be based on a line on a map that might mean everything to a bureaucrat, but that will mean absolutely nothing to those of us who live and breathe rurality every day. We might have constituents who fall the wrong side of a line and are prejudiced against-I accept that that might be unintentionally-as a consequence. That definition is important.

We have been told that up to 600 filling stations are closing every year, which means that people have to travel that much further to get their essential fuel. We are told that local authorities in certain parts of the country are cutting back on their rural bus services because of the increase in fuel prices and the downstream effect of that. However, we cannot lose sight of the direct and indirect effects of the issues discussed in this morning's debate. The matter is affecting directly and indirectly pensioners, care workers, volunteers and hauliers. I can think of two hauliers in my constituency that are based in isolated rural areas so that they can be close to the ports of Pembroke dock and Fishguard. They are in an ideal location, but they can pretty well do nothing about fuel prices. They cannot even go over to Ireland-the Republic-and get a better price. Such price increases are playing havoc with their cash flow.

Roger Williams: The hon. Gentleman's hauliers, like my hauliers, suffer competition from people who come over the channel with a full tank of fuel and carry out transport business. That is a great disadvantage to our hauliers, who have to pay the full amount applicable in this country.

Simon Hart: That is a good point. I think I recently read a coalition announcement that a surcharge might be applied to those foreign hauliers. It is worth remembering that hauliers cannot function without three things: vehicles, drivers and fuel. We cannot simply turn around and say that they have to address their overheads in the way we might do so with other businesses. They cannot function without those three vital ingredients.

I shall finish by touching on the big society-I think I have read about that in the news in the past 24 hours-and the social mobility that will come as a result of that. Every hon. Member who has spoken this morning has
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mentioned the effect of fuel prices, whether domestic or for vehicles, on their daily lives and on how they conduct their businesses. Every one of those observations could have been a direct reference to the big society. We cannot deliver the big society in rural Wales or rural Britain under the current conditions. There are people out there for whom the big society has been a part of their daily life for years, but it is becoming increasingly difficult to be champions of the big society because of fuel duty.

I am not high enough up the political food chain-nor, indeed, are other hon. Members here-to make these decisions, but they need to be made and, as an hon. Member said, they need to be made urgently. Whether it is a rebate, whether it is a stabiliser, whether it is a freeze on duty, or whether it is a combination of those things, the most pressing need for rural Britain if it is to be able to remain in business and deliver the big society is clarity and urgency. I hope that the Minister can address them both this morning.

10.20 am

Sheryll Murray (South East Cornwall) (Con): I congratulate my hon. Friend the Member for Thirsk and Malton (Miss McIntosh) on securing this debate. It is essential that we discuss this matter, because of its severe effect on constituencies, such as mine in south-east Cornwall. There is no doubt that high fuel prices affect everybody, but in our rural constituencies they have a disproportionate effect.

South East Cornwall has a large number self-employed people, small businesses and people who have to commute, and we have a very poor public transport infrastructure. The railway timetables are such that often the train cannot be taken and bus companies find it increasingly difficult to provide the service that is needed, so people rely on their cars. My constituents write to me time and time again about the cost of petrol. I stood at the general election on a manifesto that contained the fair fuel stabiliser. I hope that the Chancellor of the Exchequer will include provisions for that in the Budget so that my constituents, including businesses and the self-employed, are at least able to budget for a 12-month period, rather than have their profits decline continuously because of the high rise in fuel prices.

I echo what all hon. Members have said in the debate, but there is one issue that has not been addressed, which is the effect of current fuel prices on our shipping industry. I declare a special interest because my husband is a commercial fisherman. People do not seem to understand that, while our fishermen are able to reclaim the duty they pay, it has a detrimental effect-in fact, a disastrous effect-on their cash flow. There are fishermen in my constituency who go to sea in dreadful weather conditions, but do not secure any return from their catch because it all goes on fuel.

Jim Shannon: Part of the point expressed by the hon. Lady relates to fuel, but also to the price of the commodity being less than it was three years ago and to restrictions from Europe on days at sea. Those reasons, along with the fuel increase, are why the fishing industry is in dire straits today.

Sheryll Murray: I could not agree more, but I want to stick to the issue of the price of fuel, which is having an effect on our farmers, our hauliers, our fishing industry
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and on small businesses in my constituency. In South East Cornwall, most businesses are tiny and cannot stand the impact of increasing fuel prices on their cash flow for much longer-it cannot continue.

To sum up, Cornwall has a large number of residents who have no access to the mains gas supply, or other, cheaper alternative supplies of heating. The increase in fuel duty affects the ability of a lot of my constituents to provide heating in their homes.

Dr McCrea: Does the hon. Lady acknowledge that there is frustration in the community that, when a barrel of oil on the international market goes up, the price rises immediately, yet whenever there is a decrease, there seems to be a long period of time before the price deflates again? Is that not another issue that needs to be tackled by the Government?

Sheryll Murray: The hon. Gentleman sets out a very good case for the introduction of a fair fuel duty stabiliser, which would cushion that effect.

Finally, I would like to mention the rural rebate and make the case for the whole of Cornwall to become a pilot for the rural rebate. We already have convergence funding, so there is already recognition that Cornwall is a special economic area. I ask the Chancellor to ensure that Cornwall is considered as a recipient of a rural rebate.

10.26 am

Glyn Davies (Montgomeryshire) (Con): Thank you, Mr Turner, for calling me to speak in this debate, which is of huge importance. I, too, congratulate my hon. Friend the Member for Thirsk and Malton (Miss McIntosh) on securing this debate. This issue is probably more important and relevant to the problems facing my constituency at present than any other that I can think of, and it dominates a lot of conversations.

I intend to make a fairly short speech because hon. Members have raised most of the points I wanted to raise; I do not want just to repeat them. However, fuel duty is particularly important where I live for two main reasons. One is the absolute cost. As with a lot of rural areas, fuel is essential to us. We cannot just pick up a newspaper in a local shop; we have to drive to the shop. We cannot access any services without having to drive to them. That point is more relevant in a sparsely populated area than anywhere else.

The second issue is competitiveness, about which my constituency neighbour, my hon. Friend the Member for Brecon and Radnorshire (Roger Williams), made-twice, I think-an important point. Competitiveness is important because it affects not just transport hauliers from overseas but those in Britain. The position of small businesses and individuals where we live is incredibly difficult because of competition. The price of fuel is acting as an anti-regional policy that is persuading people to move out, simply because of cost. This is not about individual, large purchasing decisions; it is the accumulation of all the little things that everyone has to buy that makes living so much more expensive.

I do not live on an island, but Montgomeryshire, and Brecon and Radnorshire, are very sparsely populated. Most of the sparsely populated parts of Britain are probably represented here by hon. Members who have
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made interventions. We want something to be done, but I know perfectly well that that is much easier said than done. There are two issues that must be dealt with: we have to face up to the world market that has caused fuel prices to rise, and which we do not have any great control over; and there is the state of our public finances, which the Treasury has to deal with. We are in huge debt and massive interest payments must be repaid-that cannot be denied. To ask the Chancellor of the Exchequer to reduce taxation anywhere in the Budget is a difficult request, and a balance must be struck. However, we also know from what he has said previously that he is sympathetic on this issue. He has spoken about a fair fuel stabiliser in the past, and that is certainly one way to address it. I can see the question of the use of a fair fuel stabiliser giving rise to great difficulties, and I am certain that the advisers working for the Chancellor are looking at how those difficulties could be ironed out. I can see that there are problems.

The second issue, which interests me more because it is getting a lot of coverage, is one that many Members have spoken about today and which I would favour: giving some form of concession to the parts of the country that are deemed to be sparsely populated or rural, where the impact of the price of fuel is greatest. It is said that we are talking about a figure of only 5p per litre, and that the concession would apply only to the remotest parts of Britain. In that regard, I, like others who are present today, want to make a pitch for where I live. Rural Wales is sparsely populated, and if we are to start this initiative in the remotest parts of Britain-that is what is being discussed-and if the Chancellor has to negotiate with the European Union on how a pilot scheme might be introduced, I hope there will be an early roll-out to constituencies such as mine, where it might make a difference.

Roger Williams: My hon. Friend does not need my help-he speaks with great experience and passion on this matter-but some people consider Cumbria the most sparsely populated area in England, although, as he and I know, Powys is four times more sparsely populated. That may add some strength to his bid.

Glyn Davies: I am hugely grateful to my honourable neighbour, if that is a proper parliamentary term to use. No, I did not know that it was four times more sparsely populated. As he started to speak, I was intending to go straight to Google to find out the relative levels, but I accept the figure he gives. We know that Powys is sparsely populated. In the past, there would have been Government initiatives to address the problem, but I cannot think of any current great initiative. We need one, and we need to be added to the list of places where fuel price alleviation might be provided.

I wanted to make this contribution, first, because the issue is hugely important to my constituents, and, secondly, to encourage the Chancellor to recognise in his Budget that it is one of the greatest problems facing the remotest parts of rural Britain. The insidious impact is, as I described earlier, an anti-regional policy that makes it far more difficult to bring development to the remotest parts of our country.

Mr Andrew Turner (in the Chair): I call Andrew Bingham. You have until 20 minutes to 11.

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10.32 am

Andrew Bingham (High Peak) (Con): Thank you, Mr Turner. I, too, congratulate my hon. Friend the Member for Thirsk and Malton (Miss McIntosh) on securing this debate. Much of what needs to be said has already been said, but I would like to make some quick points on rurality.

There are certain goods that can come only from rural areas. I have alluded to stone from quarries, and there is also milk from our farms. Such goods have to go into urban centres, so the people who transport them are based in rural areas. Big haulage contractors are based in High Peak because that is where the product is. The impact on small businesses based in rural constituencies has already been mentioned, and, if we are not careful, the price of fuel will drive such businesses away from rural areas into urban areas, thereby accelerating the demise of rural towns.

The Ferodo brake linings factory is in my village of Chapel-en-le-Frith. Shops in and around the village exist on the back of that factory and the people who work in it. If we drive such companies into urban areas, our small towns will suffer.

The Countryside Alliance has produced statistics showing that people who live in rural areas spend a higher percentage of their income on fuel because of the lack of public transport. Since I was elected to this place, I have been impressed by the transport in London. There are buses and the tube-there are various ways of getting about that are not available to people in rural areas. The bus I use to come here runs every six minutes, but buses in rural areas run every half hour or less, which makes getting around more difficult. Consequently, people spend more of their income on private transport. I believe that the average rural resident travels about 8,700 miles on private transport, whereas it is about 5,000 miles for an urban resident. That equates to an extra £200 in tax in a year.

Ian Paisley: One bus in my constituency comes once a day, and another bus-a charity bus-comes once a week.

Andrew Bingham: I am sure that that is right, and I am sure it is the same in other areas. That brings me to considering the solution. I know that the Chancellor is looking at the issue-he said so in the House-and I understand that he is in a very difficult position because of the financial implications. We have spoken about concessions for rural areas. My concern with that is defining what is rural and what is not. I have various small towns and villages in my constituency, such as Glossop, which shares a boundary with Greater Manchester. It may not be considered rural, but one can go a few miles up the road to a little village called Sparrowpit which is very rural. Like my hon. Friend the Member for Carmarthen West and South Pembrokeshire (Simon Hart), I worry that a line will be drawn and people will fall on the wrong side of it.

The answer is the fair fuel stabiliser. I know it is a difficult issue, and I have great sympathy with the Chancellor and the Treasury team who have to determine how a stabiliser would be introduced. Perhaps we need to hold off on the duty rise that is due while we try to get it working. Many of us here are standing up for
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rural areas. I do not think that people in urban areas really understand how big an issue this is to those in rural areas who fill their car up perhaps two or three times a week if they have to drive here, there and everywhere, and how much that impacts on the household budget.

I thank you for giving me an opportunity to speak, Mr Turner, even though I had not notified you earlier.

10.36 am

Mr David Hanson (Delyn) (Lab): I congratulate the hon. Member for Thirsk and Malton (Miss McIntosh) on securing this debate, which has drawn a great deal of interest. The fact that some 20 Members from all parts of the United Kingdom-Northern Ireland, Wales, Scotland and England-contributed to it shows how important the issue is across the whole of the UK. I confess that for a moment I felt like the 24th Regiment of Foot at Rorke's Drift-I felt that I was surrounded by thousands of Government Members-but I was pleased that at some point the focus of the debate shifted to the Minister rather than the Opposition.

Miss McIntosh: I am delighted to see that the hon. Gentleman has been joined by a reinforcement on his side. Does he think there is any reason for this issue registering so little in the interests of members of his party that no one else has turned up to participate in the debate?

Mr Hanson: I have hon. Friends who represent rural areas. I myself represent a rural constituency. In 2000, the well-known fuel dispute commenced in my constituency because of concerns over fuel prices-we have an interest in the matter.

My first point in response to what the hon. Lady said is that the previous Labour Government did try to address the issue. She will know that striking the right balance between taxation, the environment and affordability of car transport is critical, and that is why Labour, when in government, postponed fuel duty rises when the cost of petrol was high. In October 2008, we postponed the 2p per litre rise to help alleviate the pressures that we recognised were there.

When the fuel dispute took place in my constituency, petrol was around 1.6p to 1.7p per litre. In my constituency, it is now around 1.28p per litre-slightly less than has been mentioned today but a big difference-and, as Members have said, that impacts on businesses, schools, commuters and a range of issues generally. My first thought was, if that is the case, what have the coalition Government, who have had the opportunity to tackle the issue, done since last May? In an intervention, I explained to the hon. Lady that she voted for VAT increases which, according to the House of Commons Library, have added around 2.6p per litre to the price of petrol. Those are important issues. I do not want to focus on the negative, but we cannot get away from the fact that the price of petrol is higher now than it was when Labour left office, and it is higher because of the VAT increases for which she voted.

Miss McIntosh: Is the right hon. Gentleman denying that it was his Government's policy, had they continued in government after the election, to introduce VAT increases which would have had a negative impact?

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Mr Hanson: There is a range of issues. We would have had to see what we would have done. We had a range of plans to tackle the deficit, but, in my view, VAT is a regressive tax.

Miss McIntosh: That is a yes.

Mr Hanson: The hon. Lady might want to, but she cannot hide from the fact that her vote-and the votes of all hon. Members who have spoken today from the Government Benches-has added to the increase in the price of fuel since May last year. That is an uncomfortable fact for them, but that is what they have done. Again, I do not want to focus on the negative, because we have had some positive discussions. However, when attacked, I tend to fight back. Unfortunately, that point was made, so I have to reply on the record.

We have had a number of suggestions, all worthy of consideration. I will look at each in turn. The hon. Lady discussed the issue of the fuel duty stabiliser. The issue was raised during the election, and the hon. Members for South East Cornwall (Sheryll Murray) and for High Peak (Andrew Bingham) also touched upon it today. The fuel duty stabiliser involves some problems, so an explanation from the Minister as to where the Government are on their election pledge from last May would be worthwhile. The Government's own Office for Budget Responsibility said recently that the idea of a fuel duty stabiliser is unworkable. I share that view, on behalf of the official Opposition.

In principle, the concept is simple: as oil prices go up, fuel duty will go down; and as oil prices drop, fuel duty goes up. The motorist, therefore, pays more or less the same for fuel and the Exchequer gets more or less the same in revenue. However, in reality, the suggestion is far from simple. On 14 September, the Office for Budget Responsibility published an assessment of the effect of oil price fluctuations on public finances, with the aim of informing the debate. The report found that a temporary rise in oil prices would have a negligible effect on UK public finances, while a permanent rise would create a loss. The Government would find introducing a fair fuel duty stabiliser difficult because, as the head of the OBR, Robert Chote, suggested a couple of weeks ago,

A 1% reduction in petrol duty would cost the Exchequer around £130 million. The fuel duty stabiliser, depending how it was operated, could cost between £3 billion and £5 billion of public expenditure. The stabiliser was a manifesto commitment, which the Conservative Government wish to carry out, but they need to explain how they will do so and how they will compensate for the loss to the public purse of such a sum. My rural constituents, as well as my urban constituents, will have to find that money from somewhere else, whether in public service cuts or extra taxation. The then Liberal Democrat spokesman, now the Secretary of State for Business, Innovation and Skills, said in opposition that he believed a fuel duty stabiliser would be "unbelievably complicated and unpredictable", which the OBR has confirmed. We need an explanation of where we are. Is the fuel duty stabiliser still a live option? Do the Government intend to keep their manifesto commitments? What would the cost to the public purse be of the potential
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loss of income from the stabiliser? Since the election, all we have seen is a rise in VAT to 20%, which has increased petrol prices, not decreased them.

The hon. Members for High Peak, for South East Cornwall, for Montgomeryshire (Glyn Davies), for Carmarthen West and South Pembrokeshire (Simon Hart) and for North Antrim (Ian Paisley) suggested that we look at the idea of a rural derogation, which the Liberal Democrats proposed in their manifesto. The idea seems to have been adopted by the coalition. However, the pilot at the moment is simply for the Northern Isles and for the Isles of Scilly. We have also had representations today for the "island of Ulster", as the hon. Member for North Antrim called it, as well as from Cornwall and mid-Wales-a very rural area, I know, as pointed out by the hon. Members for Brecon and Radnorshire (Roger Williams) and for Montgomeryshire-and from the hon. Members for High Peak, for Thirsk and Malton and for Skipton and Ripon (Julian Smith). Such areas should be included in such an issue.

How would the Government define a rural area, given the issues raised? Half of my constituency is extremely rural and half extremely urban. Throughout the Chamber, we have had discussion about where the border falls. The difficulties are real. First, why have the areas chosen for the pilot been selected? I could make a strong case for parts of Northern Ireland, where I served as a Minister, parts of mid-Wales, which I know very well, or parts of North Yorkshire.

Andrew Bingham: The right hon. Gentleman called for the rural derogation, which I am not against. However, that worries me, because I sort of agree with him. My constituency is rural, but includes two fairly sizeable towns, so where the lines are drawn would concern me. We could have that same problem of people shipping petrol across the lines.

Mr Hanson: The issues are real. Again, in response, can the Minister tell me why the pilot areas were chosen? What is the assessment of rolling out a rural derogation throughout the United Kingdom? What are the cost assessments for the pilot areas and, indeed, for the other areas bidding today? How do we change the current scheme of taxing oil when it leaves the refinery, rather than at point of sale?

Roger Williams: On people travelling to get cheaper fuel, the idea of a derogation is to equalise the price between areas, not that it is cheaper in rural areas than in urban areas.

Mr Hanson: As the hon. Gentleman knows, that still involves a cost. We have already seen great bids from a number of parts of the United Kingdom for the derogation to be applied.

Currently, tax on oil is levied on leaving the refinery, rather than at point of sale. The complex issues of a derogation involve not just fairness but also applicability and how to achieve the aims wanted on the ground. The Government must reconsider the real issues.

Finally, one of the big issues in the Chamber that has not been explored was touched on briefly by the hon. Member for Montgomeryshire: the role of the oil companies in the price of petrol. Shell will have made £1.6 million
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in profit during the hour and 10 minutes of today's debate. Even after the cost of the Mexican gulf oil spill-£7.7 billion-British Petroleum made £1.8 billion in profit in the third quarter of 2010.

The Government have their responsibility for the price of petrol, but I am also interested to know what steps they are taking internationally about oil company profits-made, quite rightly, in part, from the cost of petrol. Are steps being taken to look at such levels of profit and at whether we can take action among Governments to make a difference? The issue has no easy solutions. We took action as a Government to reduce the price of fuel when it was under pressure. In the Budget, the Government have the opportunity to do the same with the proposed rise. I am interested in what the Minister has to say. The solutions proposed today are not all simple, applicable or desirable. We need to have cross-party consensus, and I appreciate that the Minister has a difficult job. She must now know what we knew in government: none of the issues are easy, without real pain to communities at large. I welcome hearing what she has to say.

10.47 am

The Economic Secretary to the Treasury (Justine Greening): It is a pleasure to serve under your chairmanship, Mr. Turner. I also thank my hon. Friend the Member for Thirsk and Malton (Miss McIntosh) for securing today's debate. We debated the subject on the Floor of the House recently, but I very much welcome another debate today, because she has clearly raised an important issue.

The cost of fuel is a difficult issue for many families and businesses throughout the country. As I said, the House had an extensive debate last week and, again, we have had helpful contributions from Members throughout the Chamber today. I share the disappointment of my hon. Friend that no Labour MPs other than the shadow Minister participated on an issue that clearly affects all our communities.

In fairness, when we face such difficult times, the impact of fuel duty and fuel prices become even more critical for families and businesses. The Conservative party had recognised that in opposition. We have always acknowledged the impact of oil prices-how they feed through into fuel prices at the pump-to be a real challenge. The Opposition, as we heard again from the shadow Minister, still do not recognise the problem to be in need of solution. We do.

As discussed today, we talked about a fair fuel stabiliser, which I reassure the Chamber we are looking at actively. We take it seriously, and we are looking at how we can develop that policy, among others.

Miss McIntosh: I know that the Minister will be pressed to go further, but she will probably not be able to today. One of the coalition Government's best selling points in the run-up to the election was that we always referred to factors such as rurality and sparsity of population. That was in all areas of life, whether delivering the big society or speaking about the everyday roles of individuals and businesses in rural areas. Will the Minister confirm whether we will go back to that? Do we need a fuel duty regulator? Many of the concerns raised during the debate were about how the reduction in cost would
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transfer to the motorist if a stabiliser was brought in. I hope the Minister will address the huge and significant differential between the prices of diesel and petrol at the pump.

Justine Greening: My hon. Friend raises an interesting point, and this debate has been an excellent opportunity for hon. Members to set out the challenge that fuel prices pose for their communities and businesses. It is difficult-and it would not be right-for me to pre-empt the coming Budget, but my hon. Friend sets out some of the broader issues. This debate is not just about how the oil price feeds through to the price at the pump, but about recognising that rural areas face a particular challenge. I say to my hon. Friend the Member for High Peak (Andrew Bingham) that people in urban areas do understand the impact of fuel prices-they face them too-but we recognise that there are additional challenges for rural areas.

As we have heard, public money is short and the deficit we inherited is unprecedented in modern times. The previous Government had no answers or real ideas-we have heard no ideas today-to tackle the mess that they created. There was something ironic about the note from the outgoing Chief Secretary to the Treasury that said, "There's no money left." In many respects, it was even worse than that; we were left with a deficit and debts.

It is worth running through the many rises in fuel duty that we have seen. There was a rise of 2p per litre on 1 December 2008; a rise of 1.8p per litre on 1 April 2009; and a rise of 2p per litre on 1 September 2009. A rise of 1p above RPI was announced in the 2009 Budget. That was phased in from April last year, with a second rise of 1p per litre in October. A range of future increases was announced in the 2009 Budget, one of which has particularly concerned hon. Members in this debate. In spite of all those rises, we picked up an enormous deficit and, according to the outgoing Government, there was no money left. That shows what an absolute mess they handed over which, as has been pointed out, places constraints on what we are able to do. However, we know that we must tackle that mess, and tackle it we will.

We have had to take difficult decisions. Nevertheless, in the midst of that we have taken steps to increase the personal allowance, which will rise by £1,000 from April this year. That will help families on the lowest incomes, and 880,000 taxpayers will be taken out of paying income tax altogether. Parents will be able to take advantage of increases in child tax credits, and pensioners will receive above-indexation increases in the state pension. We have managed to do something that the previous Government did not do in 13 years-re-establish the link between the state pension and earnings. Corporation tax for businesses is being cut from 28% to 24% over the next four years.

Dr McCrea: The Minister must acknowledge that those measures apply across the board and to those in urban areas as well as rural areas. Rural areas are being penalised because of the price of petrol, and we need something to deal with that issue.

Justine Greening: That is why I am about to talk about the fair fuel stabiliser and the rural fuel rebate pilot. We have tried our best to tackle the deficit, but the
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way to do that is to encourage growth, help business get back on its feet and take away tax rises and the jobs tax-it would have been catastrophic if employment had cost companies more. We managed to get rid of the worst effects of that, but there is a particular issue with fuel.

In Opposition, we talked about a fair fuel stabiliser because we recognised the problem posed by oil prices in feeding through to the price at the pump. When we came into power, one of the first things we did was to ask the Office for Budget Responsibility to look specifically at how the price of oil affects our economy. It said that although there may be some tax receipt growth, higher energy and fuel prices do not help the economy-a point reiterated by many hon. Members. It pointed out that a rise in the oil price has a range of other effects on the economy and does not feed through into extra tax receipts in a straightforward way. People spend less money, goods become more expensive, and certain benefits increase as a result of a rise in oil price. Therefore, it is a difficult issue.

I reassure hon. Members that we are looking at a fair fuel stabiliser and at other measures to tackle the problem of fuel prices. There are a range of options, but we must ensure that whatever we do is fair and affordable. Tax is a matter for my right hon. Friend the Chancellor, and I would not be so presumptuous as to pre-empt him. He will update the House during the Budget, which is only a few weeks away.

The rural fuel duty rebate was mentioned. It is clear that changes to the fuel price have a particular effect on those who live in rural areas and, as we have heard, have a greater reliance on petrol and diesel and face significantly higher prices. That problem is exacerbated by the lack of alternative transport, and realistically for many people the car is the main way of getting around.

My hon. Friend the Member for Carmarthen West and South Pembrokeshire (Simon Hart) spoke about why the definition of rurality is so important. Interestingly, the EU does not have exact criteria to define rurality, but it will look at the rebate in terms of state aid, and take into account a range of factors such as the cost of transporting fuel, average fuel prices, public transport and access to petrol stations. It is able to look at the issue in a flexible way, which is helpful.

When we came into government, we announced our intention to introduce a rural fuel duty pilot. The pilot will deliver a duty discount of up to 5p per litre on all petrol and diesel, which will save some drivers in rural areas more than £500 a year. We are still looking at the exact scope of the scheme; today's debate has shown that many hon. Members have particular concerns for their communities and the rurality faced by those communities. It is not as easy as one might hope to define what is rural and where a rural fuel duty might apply, but the pilot aims to get on with that process and work through those challenges. We want the scheme to go ahead in the Inner and Outer Hebrides, the Northern Isles and the Isles of Scilly, but we have not yet finished the exact definition of the scheme. Before it goes ahead, the scheme must get clearance from the European Union. Those discussions are ongoing and are currently at an informal level as that is the best way to proceed to ensure that the pilot scheme is approved. We will update the House further at the time of the Budget.

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To conclude, the dramatic increase in world oil prices and the previous Government's increases in fuel duty have pushed up prices at the pump. We understand the concerns of families and businesses across the country, and we are taking every action possible to help those most in need. At the same time, we must act responsibly and ensure that we tackle our record national debt. That is not easy; it is a difficult balance to strike and we are considering all options in the run-up to this year's Budget.

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Housing (London)

11 am

Jeremy Corbyn (Islington North) (Lab): I am very pleased that we have secured this debate on housing needs in London. There is a feeling of déjà vu about it, although the cast is smaller than usual for debates on housing in London. We have had many such debates and discussions and I suspect there will be many more, because the biggest single issue facing constituents of London MPs is housing problems, which affect just about everyone in every sector. I remain acutely disappointed by the Government's policies in this respect and the response they have offered so far to the deepening crisis that people in London face.

Homelessness has returned to the streets of London and is increasing fast, as anyone walking around London late at night will quickly observe. I am talking about the numbers of desperate and destitute people sleeping in shop doorways, hanging round outside tube stations and sleeping over central heating exhaust vents. Indeed, the Evening Standard reported that a number of people had been found sleeping in rubbish chutes in west London. That is not a good advertisement for what is a very large, multicultural and diverse city in the 21st century-a city that sees itself as a world-class leader.

Other issues, which I shall go through in my remarks, include the costs of housing for people living in the private rented sector, the enormous shortage of council housing, and what I believe is something of a democratic deficit in the administration and development of housing associations.

Later today, a housing lobby will take place outside the House and probably also in Committee Rooms here. Many people who are council tenants and others will be making the very strong point that the desperate housing shortage in London and the rest of the country must be dealt with, that the market alone cannot solve the problem and, indeed, that the Government strategies, far from solving the problem, are making it considerably worse.

I shall say more about this later, but within the mix of housing in London, the difference with the rest of the country is that the national average for home ownership is about 70% and declining, whereas in London it is declining much faster and, in constituencies such as mine, the proportion of people living in and owning their own home hovers at about the 30% mark and falling. For my constituency and for most of central London, as my hon. Friend the Member for Hammersmith (Mr Slaughter) will testify-similar figures will apply in his constituency-the difference is the very large numbers of people living in private rented accommodation.

Let me first deal with the issues relating to home ownership in London. For the majority of people on anything approaching an average income, the idea of owning one's own property in London is a pipe dream. They may have a chance of purchasing on a part-rent, part-buy basis-a shared-ownership scheme. However, in central London constituencies such as mine, people would need to have an income well above the national average-indeed, we are talking about an income of £40,000 or more-to get anywhere near meeting the mortgage requirements, if they can get a mortgage and if they can raise the deposit required. For the majority of people in London, unless they have a degree of
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inherited wealth from their parents or someone else, or access to the very large deposits required by banks and building societies, home ownership is an impossible dream.

Many people have opted to buy into leaseholds or shared ownership with housing associations, and there are deep concerns about the service charges imposed by housing associations and other holders of freeholds who sell on leases in their properties. There is a need for even greater transparency on capital works undertaken to improve those properties. Those of us who represent constituencies where there are a considerable number of leaseholders who have bought in on the right to buy, or bought from people who bought their flat under the right to buy from the local authority, know that there are constant disputes about the costs of capital works and the repayments required. Indeed, they leave some people in a penurious state.

I suspect that many people, when they buy into leasehold properties, are completely unaware of the implications of lease ownership in relation to capital works and vastly and rapidly increasing service charges. I look to the Government to be prepared to be much more transparent and much tougher on regulation in this respect. It is an area of inquiry that the Select Committee on Communities and Local Government ought to be looking into.

The Government's normal refrain in any debate on anything is that everything that is a problem in our society is the fault of the previous Government. I want to place on the record a couple of points about the previous Government's record. First, I strongly praise them for the work they did on the decent homes standard, and for the huge and very necessary investment that was made to deal with the repair backlog in council and housing association accommodation. It is a joy to see estates that have been transformed with new kitchens, new bathrooms, new roofs, new windows, new entrance areas and common parts, improvements in the community facilities and improvements in community centres. That creates a sense of pride and well-being in a community that it is hard for anyone to appreciate who has not been through the misery of living on badly run council estates with run-down common areas and high levels of vandalism. I am talking about the sense of pride that comes from the improvements and the reductions in vandalism and antisocial behaviour that result from them. By and large, the decent homes standard work that has been done has been a very good experience. I regret the way in which the so-called choice was put to tenants-that they had to go either to an arm's length management organisation or for a stock transfer in order to receive central Government money for that. Fortunately, those policies were eventually changed so that all tenants, irrespective of the quality of management or otherwise of their local authority, could receive the central Government money that is so necessary and valuable.

However, as the Minister will know from a recent debate on this subject, a number of local authorities in London did not do very well or did not get any decent homes standard money. They and their tenants desperately need those improvements. I am thinking particularly of Camden and Lewisham, but I suspect they are not the only examples of authorities that need that special attention to achieve improvements in their properties.

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The other great step forward that the previous Government made was on homelessness and the rough sleepers initiative, increasing the number of hostel places and encouraging the various charities that run hostels, or local authorities, to provide, as a priority, transfers from those into long-term, permanent, affordable accommodation. That was an important step forward, as was giving priority to people who have come out of prison-long-term offenders who need to be rehabilitated into society. Forcing them into homelessness and poverty is not a way of rehabilitating them and is no good for society as a whole. I am constantly and increasingly shocked by the number of homeless people one meets who are either ex-service people-usually ex-servicemen-or ex-prisoners and convicts. It does not do our society any good to ignore those people and force them into homelessness.

I realise that the Government's general strategy on housing allocation policies is to leave the issue to local government and to walk away from it entirely, but I ask Ministers and local authorities to think carefully about those policies. We have rightly emphasised the needs of families with children, the vulnerable, those who suffer illnesses, including mental illness, and vulnerable elderly people. Obviously, they are all a priority, but we seem completely to ignore the needs of youngish single people when it comes to providing reasonable, publicly accessible local authority or housing association properties.

It is depressing to have such young people come to see me in my advice bureau, and I am sure other colleagues have had the same experience. The person in front of us will usually be a young man, who will often be in a reasonable job. They will be earning £18,000 or £20,000 a year, but they simply cannot get anywhere to live, because they cannot afford the deposit on a private rented place. In any event, the rent would be very high-possibly £250 or more a week. These people cannot access local authority housing because they are not deemed to be in priority need. One therefore comes across people-I am sure colleagues can bear this out-who hold reasonable jobs but who have no permanent home. They are sofa-surfing or, in some cases, even sleeping in cars, which is tragic. When we look at housing allocation, we need to address the needs of not only families and others, but single people.

Zac Goldsmith (Richmond Park) (Con): I accept that the onus cannot be entirely on local authorities, and that point is well made. However, there is a lot that the local authority can do to place empty homes back on the market. My constituency covers Richmond and Kingston, and there are up to 2,000 empty homes in each of those boroughs. By that, I do not mean homes that have been waiting to be refurbished or homes that cannot be sold, but empty homes by any standard. If, for starters, we multiply the 4,000 homes in those two boroughs by the number of boroughs across London, we have an enormous number of empty homes that could be brought back on to the market and used. Does the hon. Gentleman think that the Government could do more to empower local authorities to get such homes back on the market?

Jeremy Corbyn: The hon. Gentleman makes a fair point. Local authorities have powers in this respect, if they care to use them, and some authorities do. Indeed,
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the local authority in my area is extremely proactive in pursuing empty properties and trying to bring them into rented use or have them taken over by a housing association or somebody else. Typically, these are places such as flats above shops. The hon. Gentleman is absolutely right: there is something criminally wrong about large numbers of good-quality homes being deliberately kept empty across London. Some owners see them as long-term, reserve places that they might live in at some distant point in the future. Some see them as an investment and will wait for property prices to go up. In a society where there is so much homelessness and housing stress, it is simply immoral for places to be kept deliberately empty. I would therefore support effective measures to bring those homes back into use by people who are in desperate housing need.

Where the previous Government did act rather belatedly was on the construction of housing association and council properties. There was an increase in housing association build, most of which came about under section 106 of the Town and Country Planning Act 1990 and planning agreements on particular local sites. However, there was not enough intervention, and the previous Government were not proactive enough. Only rather belatedly did we start building council housing. I am pleased to say that my local authority is now building council housing again. That started during the latter period of the previous Government, when the then Liberal-controlled council brought the programme into being. That programme has continued and is being expanded under the current Labour-run administration in Islington. However, the authority lacks the capital that it requires from the Homes and Communities Agency. When the Minister replies, therefore, I hope he will understand that housing and building costs are high in London, that housing need is desperate and that the only long-term, efficient way out of the housing crisis is to construct council housing at fixed rents and with permanent tenure, which gives people a sense of security, a decent home and an environment in which to grow up.

Before I come to housing benefit, let me say one thing. If we go to any primary school, secondary school, police station or social worker in London and ask what the biggest problem is that we face, we will be told that it is related to housing in one way or another. Young people are growing up in small, overcrowded flats, with two or three siblings sharing a bedroom. That is no way to grow up. Young people in those circumstances cannot bring friends home and they cannot do their homework. There are fights over the television, there are fights over when the lights should be switched on and off-there are fights the whole time simply about space. Anyone who goes into a flat where three teenagers are sharing a room will see the arguments that go on and the stress that is caused to the whole family. What happens as a result? The teenagers do not stay home of an evening; they go out. They do not have a lot of money, so they get into bad company when they go out, and problems result from that. These teenagers underachieve in school. Illness runs rife throughout the whole family. The family breaks up. There is a huge cost to us all in terms of wasted lives, underachieving children, broken families, divorce and everything else. We must recognise that unless we provide all our young people with decent,
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secure, clean, dry and properly repaired accommodation, it is very unlikely that they will achieve their full potential in school, college or university. We are wasting a whole generation as a result of our failure to address the housing crisis in London.

Local authorities have great difficulty fulfilling their statutory housing obligations to house homeless families or those in desperate need. They do not have enough council or housing association allocations to do that. Incidentally, there is a whole science around allocation, with people looking at the choice of bidding or desperately looking on internet sites and reading newspapers to find out how many points they need to get which flat, how many steps are involved and all the other details, which are so important. However, most of those people, most of the time, will be desperately disappointed because they will fail even to be selected to look at a place, never mind to be shortlisted for possible allocation. For thousands and thousands of people, it is like losing a lottery every week, but the consequences are desperate. We therefore need to address the issue.

Local authorities often place families in private rented accommodation. I do not blame them for that; they have no choice. A whole industry has therefore grown up around the housing shortage, with letting agencies and private landlords charging as much as they can get away with. The housing benefit system will usually pay the rent. Although it varies slightly from borough to borough, the rent for a typical two-bedroom local authority flat in central London is of the order £100 a week. A two-bedroom flat in poor condition in the private sector costs at least £250 a week, and £300 is quite common. For a house, we are looking at £500 or £600 a week. The difference is paid through housing benefit, so we are all paying the exorbitant profits made by letting agencies and private landlords; they are the people who are living off the housing benefit system.

When the Government say, as the previous Government did, that they have to address the problem of the cost of housing benefit, particularly in London, I absolutely agree, because pouring money into the private sector in this way simply is not a good use of public funds.

Mr Andy Slaughter (Hammersmith) (Lab): A two-bedroom flat in the private sector in my constituency would actually be about £350 a week, so it is even more perplexing that the Government insist that the rent in new social lettings will be 80% of market rent. That means that the rent payable by new tenants will be three to three and a half times what it would be in existing social tenancies. That, of course, will have to be covered by housing benefit in many cases.

Jeremy Corbyn: My hon. Friend makes a good point and is extremely experienced in dealing with those issues, both as an MP and as the former leader of Hammersmith and Fulham council, where he did a great deal to try to improve the quality and quantity of the housing stock.

We all do advice surgeries and hear sad and difficult cases. I was talking last week to a lady in my constituency who has discovered that her private sector rent has gone up from £315 a week to £475 a week. I do not blame the local authority, because the housing benefit that she is paid is fixed by the Government through the local housing allowance. My constituent is not in work and
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receives benefits, and she has been told that she must contribute £145 a week to make up the shortfall between what the local housing allowance will pay and the rent that is expected or demanded from the landlord. She is expected to pay more than the rent that she would pay if she lived in equivalent council accommodation. It is clearly impossible for her to find £145 a week, which is more than her benefits. She would have nothing to eat and nothing for the children, so the only solution is to move away.

What effect will moving away from the area have on my constituent, her family and all the rest of us? She will lose her place and will have to try to find, if she can, a two or three-bedroom flat, probably in the far suburbs of London or outside London. She will lose her family network; her children's education will be disrupted; she will not have access to the doctors, hospital or community network and support that she is used to; her whole life will be completely uprooted. Wherever she goes, she will have no security of tenure. She will have six months, or perhaps a year if she is lucky, before the landlord decides to allow her to stay or increases the rent because it is possible to get more in the private sector, in which case she will have to up sticks and move on again. Imagine how that feels for the children-the insecurity, changing schools, mum and dad moving the whole time and nowhere permanent to stay or build up a network of friends. It is that sense of insecurity that is so bad for the children of many families living in London.

The Government have decided to address excessive housing benefit costs, and I agree with them. There are two ways of doing it. One is to let the market sort things out, and the other is to bring in some form of regulation, so that there is permanency of tenure and greater security, and so that we spend less money. Unsurprisingly the Government have decided to go for the market option, so they have set local housing allowance limits. I have some figures from James Murray, who is the executive member for housing in Islington and does an extremely good job in difficult circumstances. Bizarrely, Islington falls into four broad rental market areas-inner-east London, central London, outer-north London and inner-north London. The figures for a two-bedroom flat vary. In inner-east London, the figure is £300 a week; in central London, it is £500 a week; in outer-north London, it is £230 a week; and in inner-north London, it is £329 a week.

James Murray also makes the point that in the past 10 years

My observation is that it continues to rise very quickly.

Simon Hughes (Bermondsey and Old Southwark) (LD): I apologise that, for several reasons, I cannot be here for the whole debate. The hon. Gentleman knows that I always want to be involved in these issues.

When I asked the Secretary of State to consider re-examining the broad market rental area boundaries, I received a positive and encouraging response in the House. I hope that the hon. Gentleman will join me and London Conservative Members in trying to win that argument, so that when people are considered for alternative accommodation in the private sector-if they have to go there-it should be within the local authority boundaries where they start, unless they choose otherwise. Their
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links-their schools and usually their families-are in those places, and it seems that that would be a sensible and good social policy. I hope that we all agree that that would be progress, if we can bring it about.

Jeremy Corbyn: Absolutely, because the less distance people must move, the better. That change would ameliorate the policies, and I, and I am sure other colleagues, would be more than happy to support it. We want to minimise disruption.

I do not want to say too much more, because other hon. Members want to speak. I want to conclude with some points about overcrowding in Islington, which is a small borough in comparison with many others. There are 3,096 families living in overcrowded homes, and of those 355 are in severe overcrowding, which means that they lack two or more bedrooms relative to their need. Clearly, there is a need to build council properties. The council is a major provider of housing in Islington, and in its budget, which is due to be debated this Thursday, 17 February, it has managed to present a significant increase in money to go into council house building:

planned under the previous council administration-

I applaud what Islington is trying to do, which is to meet housing needs. Where is central Government's contribution to meeting those needs? The Government tell local authorities that the only way in which they can build new council properties is by raising council rents to 80% of market rents. That means that for many people it will be impossible, in work, to pay a council rent. We are presented with a vista where people will not be able to accept a council nomination, because they will not be able to afford the rent, which will be too expensive. They will have to go somewhere else and try to find somewhere small and overcrowded, where they can at least afford to stay. That is a monstrous way to fund new building-to say that those in great housing need must pay for people in even greater housing need to be provided with somewhere to live. Why can we not have what we have always had, namely central Government allocation of money through the Public Works Loan Board or any other appropriate arrangement, so that we build our way out of the crisis? I hope that the Minister at least understands that point.

I want to add some brief thoughts. We have experienced the sadness of homelessness and witnessed the health problems and disasters that come from it. London is a strong, thriving and vibrant city in many ways, but if it is left to the free market to deal with the issues that it faces, it will begin to take on some of the worst aspects of cities in the United States: the poor will be driven out, because of the housing benefit system, and the private rented market will take over entirely, bringing all the insecurities that go with that. Young people who move to London, who are in work and who manage to get into the private sector pay a vast proportion of their income on housing costs-probably the highest level across Europe. I have talked to people, some of whom work in this building and are on reasonable salaries for their age, who pay 50% to 60% of their take-home pay in private rent for a shared flat or house, which is a huge
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burden. There is no possibility that they will ever save enough money to buy a place. We must recognise that without public intervention and investment, the housing crisis in London will get worse and worse.

I have four brief points to make to the Government. First, they should look at the way the benefit changes are operating, and in particular at their perverse effects on families living in inner London. Secondly, they should bring about some degree of security and regulation in the private sector, to avoid the continual merry-go-round of people having to leave private rented flats after six months or a year, and to create some long-term security and certainty. Thirdly, they should build council housing, providing local authorities with the wherewithal to do so. The virtuous circle of taking building workers out of unemployment and putting them into work to provide housing for those who need it is a major and a beneficial form of income regeneration. Finally, the Government should speak to the banks about the difficulty that so many people have in getting mortgages because of the large deposits that are required.

If the Government and local authorities were to consider such intervention, we would all benefit. The benefits would be better health, fewer family break-ups, better educational achievement and a happier and more cohesive society. I hope that the Government understand that many building companies fear that they will go under because of cuts in house building. In its latest residential crane survey, Drivers Jonas Deloitte said that of the 28,150 homes under construction at 169 sites in London, 44% are allocated for affordable housing. Under current policies, that number will go down, and those companies and those jobs will be in trouble. Meet the social needs and solve the economic problems-the two things go together.

11.31 am

Mr Andy Slaughter (Hammersmith) (Lab): It is difficult, at a time when attacks are being made on the national health service and on state education at every level-from Sure Start to tuition fees-and when we are having to deal with the big society cuts to the voluntary and advice sectors, for housing to be given sufficient attention for us to see exactly what is happening as a result of Government policy; but what is happening in housing is as disastrous in its own way as it is in those other areas. I am therefore grateful to my hon. Friend the Member for Islington North (Jeremy Corbyn) for securing this morning's debate, as it gives us an opportunity to talk at greater length than usual in Westminster Hall about the Government's housing policy and its effect on London.

I shall not repeat what my hon. Friend said; he has many more years' experience as a constituency MP and in dealing with housing problems in London than I do, but I adopt entirely the arguments he put forward, in particular regarding the pernicious effects he spoke of-the bad, insecure, inadequate and overcrowded housing that all London MPs must see every week in their surgeries. Those effects go far beyond housing conditions; they cover health, education and quality of life. It is a national scandal that they have been allowed to develop over far too many years.

I shall deal briefly with four aspects of housing. The first is the private rented sector; the second is the effect of housing benefit changes; the third is the Government's
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policy on social rented housing; and the last is planning policy. One of the early decisions taken by the coalition Government was to abandon the previous Government's proposals that resulted from the Rugg review-a national register of landlords, regulation of letting and management agents, and compulsory written tenancy agreements. When the Government made that announcement, the Association of Residential Letting Agents said that it was extremely disappointed. It said:

That is the view of the industry. My view, as a constituency MP, is that we are seeing a return to Rachmanism in parts of London, with appalling conditions of social rented housing. Perhaps the difference this time is that local authorities are colluding with bad private landlords, with things such as direct letting schemes and, now, the ability to discharge their obligation to the private sector permanently rather than temporarily.

I hear what was said by the right hon. Member for Bermondsey and Old Southwark (Simon Hughes). He is no longer in his place; he tends to pop in and out of these debates. I hope that Members on both sides will try to mitigate the effects of the housing benefit changes that his Government are introducing. It would be better if the Government were to withdraw and review those changes than to give a sop to those who, in their thousands, will be forced to move out of their homes from April onwards. I do not know how we are going to find adequate replacement housing for those hundreds of families in areas with property prices at the levels of Islington and Hammersmith-unless it is in more overcrowded, less salubrious streets and flats. There are few of those, however, because gentrification in inner London has meant that there really are no places where cheap property is available to rent.

It is social engineering. It is gerrymandering. It will force out poorer families who have made their homes in wealthier areas, perhaps over generations; gentrification has crept up on them, and they are now being told that they are not welcome in those areas but must move further out. I hear what the right hon. Gentleman had to say, but they are crocodile tears and warm words from the Liberal Democrats.

Tom Brake (Carshalton and Wallington) (LD): On the subject of crocodile tears, does the hon. Gentleman acknowledge that it was his party's policy to consider the level of housing benefit? I presume that that review was intended not to increase housing benefit but to decrease it.

Mr Slaughter: I have heard the hon. Gentleman many times try to cling to the Labour party as a way of excluding his lamentable failure in supporting a Government who are systemically attacking poorer constituents.

Tom Brake: Is it true?

Mr Slaughter: The hon. Gentleman must have some poorer constituents, even in Carshalton and Wallington, but perhaps not as many as I do. It would be better if he keep quiet in these debates rather than making rather such inane points.

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The Parliamentary Under-Secretary of State for Communities and Local Government (Robert Neill): Will the hon. Gentleman answer my hon. Friend's question?

Mr Slaughter: I see the coalition in action.

Tom Brake: He's not going to answer.

Mr Andrew Turner (in the Chair): Order.

Mr Slaughter: I can tell the hon. Gentleman that, of course, budgets and housing benefit would have been reviewed, but he is wrong to think that a Labour Government would have been party to the mass eviction of hundreds of families from areas in which their children attend school and they have low-paid jobs. We are talking not about indolent people but those doing low-paid essential jobs in inner London. Before the hon. Gentleman gets on his high horse, he should think about the consequences of his Government's policy.

Far more fundamental in the long term will be the review of social housing policy. I almost admire the speed at which the Government have moved to ring the death knell of social housing. There has been consensus on that policy certainly since the second world war, and in the charitable sector since the beginning of the last century. That, however, is not good enough for this Tory-led Government.

There are four principal changes. The first is the introduction that I alluded to earlier of near-market rents for new lettings. In London, they will effectively be unaffordable, even to those on average incomes. Rent for two and three-bedroom flats in Hammersmith will rise by three or three and a half times. The second is the two-year tenancy. The speed of their introduction is amazing. I printed a leaflet to warn tenants that the Government might be introducing five-year tenancies, but before I was able to deliver it they had introduced two-year tenancies. The third element is the almost complete collapse of capital funding for the social sector.

As I mentioned earlier, there is the end of the requirement to provide permanent housing in the long term, with the private sector being used to discharge housing need obligations. If, God forbid, the Government were elected for another term, within 10 years there would not be a recognisable social rented sector left in this country. The proud tradition of providing affordable good-quality homes for people on low and average incomes will be gone, and a fundamental part of the welfare state and the post-war settlement will be gone with it.

Finally, let me turn to planning policy, which is a slightly trickier area to consider. I accept what Government Members say about the previous Government's record in this regard. Over the past 40 years, our record on building sufficient numbers of high-quality affordable homes in this country has not been good. It is almost as if we lost the will to build such homes in the 1970s. In my constituency, we have good examples of the estates and properties that were built in the 20th century: the "homes for heroes" in the 1920s, the "garden" estates in the 1930s and the good quality brick-built council estates of the 1940s and 1950s. We even have some 1960s properties, which, although they have gained a bad reputation, are generally solidly built to Parker Morris
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standards. They are popular with people who live in them, even if they have not been maintained properly over the years.

The consensus on the will to build good quality council and housing association properties in sufficient quantities has gone. Individual local authorities-including, I hope, my own when it was under Labour control-did their bit and had to be resourceful in doing so. For example, there were the infill developments. We saw building on existing estates, public land being given to people who were prepared to build affordable housing, and building on top of supermarkets. We managed to build about 3,000 good, affordable units over a period of years, but it was a struggle. I do not pretend that it is easy to build social rented houses in areas of high land prices. Nevertheless, as my hon. Friend the Member for Islington North said, for many people-even those on average and above average income-social rented housing is the only type of affordable housing. The definitions of affordability in London have been stretched to ridiculous lengths. The Mayor and some councils say that an income of £70,000 to £80,000 qualifies under the affordable definition, because the types of discounts available on properties for sale or for rent in new developments demand such an income. I am sorry, but I do not accept that people who earn £80,000 a year are in housing need-even in London-which is the perverse definition of my own council.

The problem of planning development is slightly more complicated. At the moment-and the debate is opportune for this reason-London councils are going through their process of approving local development frameworks, which replace the unitary development plans. In preparing for this debate, I looked at my own borough's LDF, which may or may not be typical, and it appears to give good news. It seems to say that it will build 13,000 houses over the next 20 years, with a maximum of 20,000 allowable. However, when I examined those figures I found that what is actually planned goes well beyond them.

Perhaps the biggest new development under planning consultation in London is the Earl's Court and West Kensington Opportunity Area, which the LDF says could provide about 2,000 new homes, at least in Hammersmith, over the next 20 years. The developer says it will provide 8,000 homes over the next five to 10 years. The Hammersmith town centre development, which is somewhat misnamed because it includes areas way outside the town centre, including the historic riverside-the hon. Member for Richmond Park (Zac Goldsmith) may be interested in this because he has written about it-is not one development but a string of developments along the riverside. The traditional low-rise buildings of this historic area are being converted into hideous tower blocks of luxury one and two-bedroom apartments. We have seen such developments springing up along many parts of the river on the south side of the Thames. The apartments are built principally for people coming from abroad or for those who wish to have a London pied-à-terre in addition to accommodation elsewhere. We are talking about buildings that are not just at the top of the market, but above it. The LDF for Hammersmith says that over 20 years, up to 1,000 new homes will be built in this area. Some 1,300 homes are currently being built or are under planning consideration for this area, so that target appears to have been exceeded already.

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What we are seeing in planning terms, certainly in central London and in my part of London, is a development grab. Those parts of land that might be available for affordable and sustainable development in the future are being cannibalised for luxury high-rise blocks. Some of the blocks on the riverside are up to 15 storeys, and some in the west Kensington area are up to 30 storeys or more. That is a massive increase in residential units, but they are exactly the wrong type of residential units for the local population and will not meet housing need in London. That is a scandal and a misuse of planning powers. Of my local authority, the developer of the Hammersmith riverside says:

You bet they have. Helical Bar, the developer of the Hammersmith riverside development, has a dispensation to have no affordable housing in it whatever; in fact, there will be a net loss of affordable housing because trust properties for visually impaired people will be demolished to make way for the skyscrapers.

Mr Slade, the founder of Helical Bar, gave £20,000 to the Mayor in the run-up to his election campaign. He made this very prescient comment:

Helical Bar wants to build high-rise flats in outer London. It now has that consent on the way despite the opposition not just of the hon. Member for Richmond Park, but of almost all my constituents, who do not want to see the destruction of their living environment and of the things they hold dear. They want to see not luxury high-rise flats, but affordable homes for themselves and their children.

Zac Goldsmith: I absolutely share the hon. Gentleman's concerns about the nature of this development. As he knows, I have spoken on the record about it and submitted a number of objections. However, is it not true that the decision comes from the local authority and is not one over which the Mayor has any influence at all?

Mr Slaughter: The developments I am talking about are of sufficient size and scale to require the Mayor's approval, or the Greater London authority's dispensation regarding factors such as their height and their not containing affordable housing. In addition to the town hall development to which the hon. Gentleman refers, there are other developments along the river. St George has just decided it wants to build 750 similar properties with no affordable housing in them just south of Hammersmith Broadway, and has its eye on redeveloping a council estate, which the council may wish to demolish, for luxury housing. We are not talking about not enough being done to promote affordable housing in London, or about neglect or negligence. We are talking about a concerted policy to socially engineer areas by demolition, and the removal of social housing units in London and their replacement with luxury, small high-rise developments. The ability to build in London for London's population will not exist again for another generation. That is the real damage being done by this Tory-led Government and their creatures in town halls around London. I am afraid that that is the depressing message.

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I entirely endorse what my hon. Friend the Member for Islington North said. I fear that the news, when one looks at the situation on the ground, is actually worse than inaction: it is the deliberate destruction of the consensus on housing policy that has sustained this country for many decades.

11.50 am

Tom Brake (Carshalton and Wallington) (LD): Thank you for calling me to speak in this debate, Mr Turner. I apologise for missing the opening remarks of the hon. Member for Islington North (Jeremy Corbyn).

Jeremy Corbyn: You have heard them before.

Tom Brake: Indeed, my right hon. Friend the Member for Bermondsey and Old Southwark (Simon Hughes) said that I had perhaps heard some of the hon. Gentleman's comments before. I was in a meeting with the Peabody Trust and some of its residents to discuss housing, which is why I was late for the debate. I know that the hon. Gentleman has been a passionate and consistent defender of housing under successive Governments, whatever their political colour. Therefore, he is right to say that I have heard him make those comments before in the 13 years since my election to this House. Nevertheless, the fact that I have heard them many times before does not mean that they do not have great merit, and I suspect that I would not differ much from his analysis of the problem in London, albeit that we might have some differences of opinion about possible solutions.

I take a different view about the comments made by the hon. Member for Hammersmith (Mr Slaughter), whose proposals seem to exist in a vacuum. His proposals neither take into account the financial environment in which we are operating and nor acknowledge that his own Government planned to examine the level of housing benefit being paid to people in London and other parts of the country. I asked him a question about that issue, but he carefully evaded answering it. He failed to acknowledge that issue, when it would have been the decent thing for him to have done.

That brings me to decent homes. The Minister will know that Sutton Housing Partnership, the arm's length management organisation in my area, has submitted a new bid for decent homes funding. It is a scaled-back bid compared with the bid that was originally proposed. The partnership had secured a limited amount of funding in the first year of the programme from the previous Government, and I hope that, under the new bidding arrangements, it will succeed in securing substantial funding during the lifetime of the programme that it needs to implement to ensure that social housing in the London borough of Sutton benefits from that funding, as it should do. In many respects, social housing in Sutton has not benefited from the substantial programmes that local authorities in other areas have implemented to repair windows, bathrooms, kitchens and the like.

Many parts of my constituency would have benefited from those repair programmes. For example, the St Helier estate was built in the 1930s. It stretches into Mitcham and Morden and into Sutton and Cheam. It requires investment: it would be unfair to say that many of the properties on the estate have not been touched since
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the 1930s, but many improvements need to be made. I hope that the Minister will be able to say a little about the progress of the programme to improve that estate.

My second point is about the meeting that I have just had with the Peabody Trust and some of its residents on the St Helier estate. What those residents are trying to achieve is very much in keeping with what the Government are trying to do in relation to the big society. In other words, those residents want to take responsibility for the management of their estate. However, the difficulty arises because that estate has a mixture of tenants, shared ownership, residents and leaseholders. Therefore the structure of tenure is very complex, and I acknowledge that.

[Mr Philip Hollobone in the Chair]

I am pleased that we have someone from the Department for Communities and Local Government attached to that programme, who is working with the residents of the estate, because Sutton is one of the vanguard boroughs when it comes to the big society. That person will try to find ways to work through those problems with the support of the Peabody Trust, which is also keen to address them. The residents feel that they will be able greatly to reduce the costs associated with the maintenance of that development-the Beddington Zero Energy Development or BedZED, which many hon. Members will be familiar with-if they are able to achieve some type of voluntary arrangement to manage those properties. As I understand it, a voluntary arrangement is required to work within the complicated tenure structure that exists on the estate.

Another issue that I hope the Minister will respond to is that, as I understand it, housing associations in the UK abide by European regulations when they advertise for contracts in a way that housing associations in other European countries do not. That means that housing associations in the UK face an additional financial burden as a result of following the appropriate EU process for advertising, which housing associations in other EU countries do not have to follow. If it were possible to remove that burden from housing associations in the UK, it would clearly reduce the costs involved from the point of view of tenants, the Government, shared owners and leaseholders. I hope that the Minister is examining that issue.

I know that the Minister cannot take any action on the final issue that I want to discuss, but he might want to comment on it. It is the issue of planning applications, and specifically the speed with which they are processed. From both a job creation point of view and the point of view of providing housing, particularly if that involves converting or extending properties, the quicker that planning applications are processed, the sooner the builders can get on with the work. I have had representations about that issue myself. I had one on Saturday from a local builder, who is waiting for the completion of four planning applications. He said that, apart from holding him and his staff back from doing their jobs, it is having an impact on the people who will occupy those properties or conversions, once they are completed. Those are the specific issues that I want the Minister to respond to.

I conclude by saying that although I did not hear-regrettably-the comments of the hon. Member for Islington North when he opened the debate, I am sure that he made some salient and pertinent points about the importance of trying to address the substantial
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housing deficit in London and about the potential consequences of the changes to housing benefit, of which I know that hon. Members from all parts of the House are aware. I hope that the Minister can reassure us on those points this morning.

11.57 am

Chris Williamson (Derby North) (Lab): It is a pleasure to serve under your chairmanship, Mr Hollobone, as it was to serve under Mr Turner's chairmanship before he left Westminster Hall.

I start by congratulating my hon. Friend the Member for Islington North (Jeremy Corbyn) on securing this debate and on making an extremely powerful and cogent speech. He made a number of pertinent points. In the first part of his speech, he referred to the record of the previous Labour Government, including the decent homes investment, which made a big difference to many households in the capital, and the rough sleepers initiative, which did so much to address the problem of homelessness in London. He also mentioned the new build programme. Towards the end of the previous Labour Government, that programme had also started to make an impact on the housing crisis in London. It is regrettable that the policies that are now being pursued by the Conservative-led Government are going in the opposite direction to those Labour policies.

Pertinently, my hon. Friend identified the fact that homelessness is now increasing again in the capital. The scourge of homelessness is an issue that should unite parties across the House, so that we can take the necessary measures to reduce the growing number of people who are forced to live on the streets, which is a stain on our national character. If homelessness in London has increased at the end of this Government's tenure in office, that will be a very poor statement about their record on tackling this issue.

As my hon. Friend mentioned, it is also clear that the number of people who are forced to sleep on a friend's sofa-I think that it is known colloquially as "sofa surfing"-is growing. That is because it is simply impossible for those people to access accommodation, as there is such an inadequate supply of housing in the city and the housing that is available in the private sector is beyond their means.

There is also a big problem with the housing benefit system. The system is wasteful, and I agree with my hon. Friend that there is a great need for much more regulation. He called for four areas to be addressed, one of which is changes to the housing benefit system. I agree with that, because there is perversity, but I do not agree with the changes that the Government are pursuing. Regulation needs to be introduced. We need to build more council houses, and I concur with my hon. Friend's comments about the banks being forced to provide mortgages for people who would like to, and have the income multiples to enable them to, access private sector owner-occupied accommodation.

My hon. Friend the Member for Hammersmith (Mr Slaughter) spoke eloquently about the gentrification of many neighbourhoods in the capital leading to an inadequate number of affordable houses. That contributes to the overall problem in London, and the Government's policies are effectively leading to a clearance, with people on low incomes being forced out of many boroughs.
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That is completely wrong, and the Government need to think again. My hon. Friend also identified the fact that much of the housing being built is inappropriate, and I have seen figures that suggest that about 80% of it is only one or two-bedroom units. Clearly, there is a need for much more emphasis on family housing, for the very reasons that my hon. Friend the Member for Islington North gave. A whole host of problems are related to people being forced to live cheek by jowl in accommodation that is too small for a growing family.

There is a need, particularly in the capital where house prices are much higher, for the Government to deal with the problem of people accessing mortgages, and pressure needs to be brought to bear, possibly with regulation to ensure that banks do not insist on people finding massive deposits. That problem is in desperate need of attention, because it contributes to building up the current housing crisis in London.

The proposed changes to social housing tenancies simply will also make matters worse, with the expectation for people to move on if their earnings exceed a certain level, forcing them into an even more precarious and difficult situation. In addition, the housing investment cuts have hit London hard, and they exacerbate the problem to which my hon. Friends have referred.

The amount of housing currently been built in London is inadequate and much of it is inappropriate for family needs, but another problem is that about 50% of it is located in just three boroughs, and there needs to be some attempt to ensure that there is building right across the city.

Mr Slaughter: Another part of the Riverside development that I have mentioned is being developed by a housing association, which is building £1 million two and three-bedroom luxury flats with river views, so that it can take the profit and build in east London. That is good for the people of east London, but there is already a lot of affordable housing there, and it does not help people in desperate need in west London.

Chris Williamson: My hon. Friend makes a powerful point. It is not really the business of housing associations to build luxury multi-million pound accommodation. Their whole raison d'être should be to provide affordable housing, which is why they came into being in the first place. They have lost sight of their original purpose when they start engaging in market-led developments, such as the one that my hon. Friend has mentioned.

I referred earlier to the difficulties that people have in raising deposits, and I have seen figures that suggest that it takes more than 14 years on average for someone to save for a deposit, assuming that they can keep pace with house price inflation. It is completely wrong that people are forced to rely on relatives to get a foot on the housing ladder, because it disfranchises tens of thousands of people in London whose families do not have the wherewithal to provide them with the deposits needed to purchase the houses that they aspire to own.

The hon. Member for Carshalton and Wallington (Tom Brake) said, I think, that the economic background was one of the reasons why the Government had made some of their decisions on housing and cutbacks. I assume that he was referring to the finance that has
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been made available for housing and the cuts being made in housing benefit. I disagree with him, because it is really important that the Government seek to invest in the housing market and in providing houses, because that is a way of addressing the very problems that the hon. Gentleman mentioned. Using the construction industry is an excellent way of assisting a private sector-led economic recovery. Most of what is procured for the construction industry is sourced from the UK, which provides a huge number of jobs in areas where housing construction and other building is taking place. It is mistaken to suggest that the economic circumstances that the country faces in some way justify the cutbacks in housing.

The hon. Gentleman also referred to delays in planning, and I agree that more needs to be done in that regard. I am concerned, however, that proposals in the Localism Bill might add delays, or will certainly make it more difficult in many circumstances to provide the houses that people desperately require.

It seems to me that the biggest reason for this housing crisis in the capital is an obsession that can be traced back to the early 1980s and the introduction of the right to buy, with its emphasis on a personal subsidy rather than a subsidy on bricks and mortar. That was almost inevitably going to end in tears, which is where we are today. As my hon. Friend the Member for Islington North pointed out, many landlords-I accept that it is not all of them-have sought to exploit the housing benefit system and to maximise rents. That has led to rents in the private rented sector going up and up to a point at which the Government-the same Government who introduced the obsession with personal subsidies in the first place-are now reining in those subsidies and forcing the poorest people and those on middle incomes in the city to bear the burden for their policy mistake, which can be traced back 30 years.

Jeremy Corbyn: Is my hon. Friend also aware that those who live in private rented accommodation not only pay high rents and often a large deposit, but often pay much higher heating costs, because the energy efficiency of the housing is so low? In addition, repairs are often so poor and incompetent that tenants end up paying for repairs themselves out of sheer desperation, in order to live somewhere reasonable. We need a much tougher regulatory regime for private rented accommodation.

Chris Williamson: I could not agree more, because my hon. Friend is absolutely right. Again, research has demonstrated that the private rented sector is far and away the worst in terms of providing adequately insulated accommodation. That adds to the burden of people living in such accommodation, obviously, but it also has significant environmental implications for our cross-party commitment to reduce carbon emissions and address climate change. The private rented sector clearly has a big part to play. My hon. Friend has made a forceful point and has provided another reason why more must be done to regulate the private rented sector.

In conclusion, I return to the importance of investing in housing and of a bricks and mortar subsidy rather than a personal subsidy. We should be seeking to turn the juggernaut around and emphasising building new houses and providing subsidy for affordable housing in
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London in order to supply the homes that people desperately require. That would provide a huge economic stimulus and create many jobs for local people as well as, most importantly, homes.

Good quality homes would also have huge implications for educational outcomes for the many people living in overcrowded circumstances who would be able to move into more appropriate accommodation. Again, my hon. Friend the Member for Islington North made that point. We could also address the health of people in inadequate housing by investing more in providing more and better affordable housing. Crime and antisocial behaviour would be reduced, because people would be living in better circumstances rather than being forced out on to the streets in the evening, where young people get into mischief. It would certainly make a big difference to the quality of personal and family life, which would have a massive, beneficial knock-on effect on the wider community.

Tom Brake: Is the hon. Gentleman about to be more specific about what financial commitment his party would make and how many additional properties they would build? Also, would he exclude the sort of option that is occurring in my constituency, for instance, where a housing association's regeneration of Durand close depends on the sale of private properties as part of the development? Admittedly, those properties are in the same place, not in a different location. Is he excluding the proposed option to give housing associations additional funding to build more properties?

Chris Williamson: There is a desperate need for public investment in social housing. On the previous Labour Government's record, although we certainly could and should have done more in terms of new build during the first part of our Administration, our record on bringing existing housing stock up to a decent standard shows that it was a worthwhile policy initiative and that, in large measure, we achieved it. I know that some areas in London-maybe the hon. Gentleman's constituency is among them-still have not benefited from the decent homes initiative, but 90% of affordable, social and council housing throughout the country and in the capital has benefited.

We must get away from examples such as the one that the hon. Gentleman mentioned, in which housing associations develop market properties, sell them at a profit and use the money elsewhere. In my view, we ought to exclude that, because it is not the way forward. That is not where housing associations ought to be. The main thrust of what I am saying is that expenditure on housing benefit in this country is massive. We must find a way to shift from personal subsidy in the form of housing benefit to a subsidy of bricks and mortar, so we can build more affordable housing for the sake of all the economic and social benefits that would flow from that. That is what the Government should be considering. I will be interested to hear the Minister's comments.

12.15 pm

The Parliamentary Under-Secretary of State for Communities and Local Government (Robert Neill): It is a pleasure to see you in the Chair, Mr Hollobone, as it was to see Mr Turner earlier. I congratulate the hon. Member for Islington North (Jeremy Corbyn) on securing
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another debate about housing in London. We do not always agree on the solutions, but I pay tribute to the assiduousness and seriousness with which he regularly addresses the issue. Like other hon. Members, he has raised important points with which I will endeavour to deal. This has been a wide-ranging debate, and I will do my best to pick up the detailed points made.

I accept that housing matters to everybody. It is important politically and socially. Having a home that meets one's needs is fundamental to achieving one's aspirations for oneself, one's family and one's community. I hope that that is common ground for all parties in the House, and I want to make it clear that the Government regard it as a key objective to help people to achieve those aspirations. I will deal with general issues as well as points about London specifically.

We as a Government are committed to increasing the number of houses available both to rent and to buy. That includes affordable housing, but we must be imaginative in choosing models to use. We need to consider greater flexibility in social housing to ensure best use of stock and help people stand on their own two feet. We must also consider how to protect the vulnerable and disadvantaged and address homelessness, which the hon. Gentleman fairly and properly mentioned. We want to support people to stay in their own homes.

Jeremy Corbyn: The Minister will be aware that homeless charities in London-particularly Shelter, but also the Mary Ward Centre and others-have serious financial problems at present. Their grant funding has been cut, although they are trying to retrieve it from London local authorities. The cut in housing advice provided to homeless people by those organisations is devastating and can lead to only greater homelessness. Is the Minister prepared to look into the matter, receive a delegation and consider whether extra help can be given to ensure that those vital agencies remain open?

Robert Neill: I am sure that my right hon. Friend the Minister for Housing and Local Government will happily get in touch with the hon. Gentleman. It is worth putting it on record that we are working with the National Homelessness Advice Service to ensure that front-line advice workers have the support that they need. We have established a cross-Government ministerial working group to examine the underlying causes of homelessness and we continue to invest in the Places of Change hostel improvement programme. We are attempting to address the problem, but I appreciate the seriousness with which the hon. Gentleman raises the issue, and I will ensure that the appropriate Minister is in touch with him. I will return to the broader issues of homelessness in due course.

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