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Another suggestion that I have already raised with the Minister, and which I know would take some work, would be to look at whether we need a separate definition
of a community pub and whether such a definition is possible. We would need a proper study to see whether we could separate community pubs, which clearly have a community function, from a lot of bars and nightclubs, which do not. It would be exciting if that was possible, because it could lead to a different rateable value. As one of my colleagues said, community pubs sometimes, but often do not, get sufficient payback from their community work and the community role that they play.
Justin Tomlinson (North Swindon) (Con): I am delighted to support that point. All too often, the community pubs my hon. Friend is referring to are the last standing community facility in the local area. All too often when I am in an area, I will see the former post office, the former dairy and the former school house. It is right to separate community pubs from the rest of the trade because they have an additional role to play in the market.
Greg Mulholland: I thank my hon. Friend. I hope that he will help me, CAMRA and the Institute for Public Policy Research, which is looking at this issue, to see whether that would be possible. Such a step would make it easier in planning law to do some of the things that we want. I hope the Minister and his team will seriously consider that point and that it will be part of the dialogue we have.
Even without such a change, it is possible, as I said, to require any change of use from A4 or any demolition to involve a moratorium that includes the three things I mentioned: allowing the pub to continue where there is a genuine business and making sure, if not requiring, that the genuine, independent market value be considered; holding community consultation; and carrying out a viability test.
Finally on the suggestions from me and the save the pub group, let me return to pub listings. We still have a few wonderful pub interiors, and I am glad to say that there are a number in London, which it is worth going to see. They are important to tourists, who will walk into a pub such as The Mitre and realise that such things are unique to this country. We should be proud of that.
Nigel Adams: I, too, received a copy of the wonderful book on Yorkshire's heritage pubs, but was my hon. Friend, like me, not a little surprised that there were not more entries from Tadcaster, given that it is the most prominent brewing town in the country, as all Members present will agree? I hope that he will raise that with his friends at CAMRA the next time he sees them.
Greg Mulholland: All I can say is that they have strict criteria. As my hon. Friend well knows, anyone travelling up the A1(M) will come to a sign pointing to Tadcaster one way and Otley the other. One is a famous pub town and the other is a hugely famous Yorkshire brewing and pub town. There are some synergies there, and it is probably appropriate for me to visit Tadcaster to see some of its pubs for myself.
As the Minister will know, councils have the power to compile local lists of historically important buildings. At the moment, however, that power is toothless because it affords no extra protection. Will the Minister find a
way to ensure that buildings that are put on these local lists by the good councils that recognise the importance of pubs such as The Whitelocks in Leeds can be protected in the planning process? It is great to have them listed, but listing seems to achieve nothing in the planning process.
Those are the main recommendations that the save the pub group is making for now as part of the conversation we are having. We will have a lively debate about the right way forward, but there is one thing the Minister and the Government must not fall into the trap of doing. I sit on the coalition Government Benches and I support what the Government are trying to do. Like the Minister, I do not want more regulation, and I certainly do not want more regulation on pubs in the licensing system-in fact, I want to see less. However, it is quite wrong to suggest that giving communities the right to have a say over their local pubs and the important local services they provide is regulation, because it is not; it is simply about ensuring that there is a proper process to enable communities to have a say. That will not prevent pubs from being converted to alternative and positive uses when their days as a pub are numbered because of the area they are in or the local population.
I agree with the Minister that we want competition and a free market. As everyone in the pub trade and associated trades knows, however, there is no free market, because of the huge distorting impact of the fact that half the pubs in the country are owned by the largest pub companies, which tightly control prices and dictate rents. That is a separate issue, and the Government are looking at it. However, entrepreneurs-the up-and-coming small brewers and small pub companies-are delivering great pubs, but they are not getting access to the market because of the planning system. If the Minister wants genuine competition, as I do, he needs to make it much easier for not only communities but entrepreneurs to get their hands on pubs. At the moment the Government are not saying that.
Of course, the Minister will hear from the pub companies, developers and supermarkets, who want carte blanche to do what they want with the community's pubs. They will tell him, "You must not do this; it is not in the spirit of the free market. It is anti-competitive. It is regulation." It is not. The Government have a clear ideological choice. Do they really want to empower communities to have a say over local pubs, or do they want to back the developers, the giant pub companies and the supermarkets, to let them do whatever they like with their pubs? It is as stark as that. I know what I believe in as a localist, a decentraliser and a real fan of pubs, and I hope the Government will choose the right way.
The matter is linked, of course, to that of the big society, which is a huge issue. There has been a lot of coverage of the big society this week. People say it is a concept no one can disagree with: we want more power for communities, and local people doing things for themselves. The issue has been about the costs and whether it is affordable. However, much of the big society can happen without the Government spending a penny, and what I am talking about presents one opportunity for that. If the Government make the right, bold decisions they can stop the closure of profitable pubs happening against the wishes of communities. That surely is the big society at a local level.
Andrew Griffiths: I thank the hon. Gentleman for bringing this important debate to Westminster Hall, and for recognising the importance of Burton. As he says it is the home of beer and Britain's No. 1 brewing town. He talks with some force-and I agree with what he says-about the need to protect our community pubs. Does he also recognise that many brewers and pub companies are trying to reverse the decline of pubs by opening new pubs every day of the week? Marstons in my constituency has just opened The Dapple Grey in Uttoxeter, which is thriving. I was in there a few days ago and it was heaving with people. We need to allow pubs to grow and flourish, and the hon. Gentleman's viability test is the most important element of that.
Greg Mulholland: I thank the hon. Gentleman. We work closely together, because the all-party save the pub group works closely with the all-party beer group, of which he is the vice-chairman, and we look forward to continuing with that. He is right to say that viability is a key issue. He is right to say that some pubs are opening; but sometimes that is used as an excuse to close other pubs that owners or pub companies want to dispose of because of their huge indebtedness, some of which they need to claw back to please their shareholders and foreign creditors.
The issue that the hon. Gentleman raised is important, but there was a case in Otley where a brand new pub opened-a wonderful little free house called the Old Cock-because it was not possible for Lee and Linda, who run it, to get one of the pubs owned by the pub company. They had to set a pub up in what used to be a café, and now offer a wonderful range of independent beers that they could not afford to buy through the pub company. That is why I say to the Minister that there is no free market or way to do that. The tragedy is that The Woolpack, which I have already mentioned, is a mere 50 yards from the Old Cock. If the system worked, Lee and Linda would have bought it, and would be operating that free house from its wonderful historic building. Instead, it has closed and is being converted. The Old Cock is a brand new pub. All I am saying is that we need to assess viability and first ask communities whether pubs are still wanted. That would answer all the problems that we agree exist.
As to my questions to the Minister, I want to nail him down-not today-on whether he agrees with, and whether he and the Government will commit to, the principle that no profitable and wanted pub should be permanently closed against the wish of the community, without that community having any chance of a say on its future. To me, that is the overriding fundamental principle that we must get to as a localist and decentralising Government-and, hopefully, a pro-pub Government. I also ask the Minister to provide an assurance today, if he can, that the Government are committed to extending planning control to cover the demolition of pubs, as he
has suggested he is minded to do. Will he also seriously consider doing the obvious thing and making an A4 use class order subject to planning permission for any change of use? That would make a big difference and stop conversions to Tescos, betting shops, restaurants and cafés with no community right to consult.
Will the Minister consider that the forthcoming national policy framework should include not only the idea that retaining pubs is important-it must do that, and I am sure he will ensure that it does-but the idea of a six-month moratorium? That could say, as guidance rather than diktat, that there should be a six-month period to allow other people to buy the pub and allow for the viability test and the independent community consultation. Will he seriously consider strengthening the right to buy, at the very least to prevent an owner unreasonably refusing a bid from a community? Indeed, in my opinion that should also cover a bid from a small brewery such as Wharfebank brewery in my constituency, which has just taken on its first pub. Perhaps the Minister will consider that and work with us to try to strengthen it and make it meaningful, so that communities feel it is worth putting bids together.
Justin Tomlinson: When new schools are built, local authorities must put competition arrangements in place to allow different organisations to bid. Those that bid are given huge amounts of advice and support, to turn enthusiasm into a practical and credible bid. I should be interested to see what support could be offered to those in the community who want to defend the community pub, to turn their enthusiasm towards finding the considerable amounts of money and huge commitment that can be needed to make that a realistic dream.
Mrs Anne Main (in the Chair): Order. Before I ask Mr Mulholland to respond to that intervention, I remind the House that we should begin the winding-up speeches at about 3.30. Perhaps I may ask that the hon. Gentleman draw his remarks to a close. If no other hon. Member wants to speak-and no one has indicated a wish to do so-I want to call the shadow Minister at 3.30.
My hon. Friend the Member for North Swindon (Justin Tomlinson) must be a mind-reader, because my very last question to the Minister was to be on exactly the point he raised. Does the Minister accept that the Government's asset transfer unit needs to examine, and considerably expand, the support it offers to communities on the possibility of community buy-outs? That is essential, and if the Localism Bill is to bring about decentralisation, localism and the big society, it must happen. It would not cost a huge amount of money-which we cannot provide-but it can empower communities.
I appreciate your indulgence, Mrs Main, and that of the House. The subject is complicated and it needs to be considered as a whole. As I hope I have explained, there is often scant real protection-and there are many loopholes in it-for the great British pub that we all, including the Minister, purport to support and value. That must be changed. We must stop the scandal of
profitable, wanted pubs being closed willy-nilly every week. I am delighted that the Minister, and the Prime Minister, have said that they want the Government to be pro-pub. I shall judge the Government on several issues: the reform of the beer tie, dealing with irresponsible pricing in supermarkets, licensing, regulation and a host of other things. Above all, if the Government are to be pro-pub and save pubs throughout the country, they must put the rhetoric into practice and say, "Yes; not only are pubs important but the planning system will say they are and will reflect that." They must make sure that finally, communities will get a say when someone says that they want to close the local pub.
Chris Williamson (Derby North) (Lab): It is a great pleasure to serve under your chairmanship, Mrs Main. I congratulate the hon. Member for Leeds North West (Greg Mulholland) on securing this debate on an issue that is important and unites the House. I will start with a confession that I hope hon. Members will not hold against me: I am a teetotaller and rarely frequent local pubs. However, I recognise their importance and the central place that they occupy in many communities around our country. It is a matter of great concern that we have lost so many pubs in recent times and continue to lose them at an alarming rate. Between 25 and 40 pubs around the country close every week, which is a source of great concern.
The hon. Gentleman discussed the need for an ongoing conversation about the issue. It is clearly important to return to that as the new Government develop their policy on this and a range of other matters. I thank him for his work on the issue. Hopefully, his questions to the Minister and the ongoing campaign with which he is involved will have some impact on the Government and enable them to make policies that address the concerns that he outlined.
I share the hon. Gentleman's concerns and was appalled by the scandalous examples that he gave of the sharp practice in which certain unscrupulous, well-heeled business people indulge, leading to the closure of all too many of our community pubs. He is right to say that a local pub is a small business that generates employment opportunities, particularly in the more remote communities in our country. Pubs are a valuable source of local employment.
I hope that hon. Members will forgive me for making a political point. I am concerned about the implications of the massive cuts that the coalition Government have agreed to implement. In particular, the cuts of up to 30% that local authorities face over the next four years, and cuts in other public services, will lead to the loss of almost 500,000 jobs in the public sector. According to research by PricewaterhouseCoopers, at least a further 500,000 in the private sector will lose their jobs as well.
Hon. Members are looking at me; they may be wondering what on earth that has to do with this debate. [Hon. Members: "Hear, hear!"] I will enlighten them: it has absolutely everything to do with it. If people do not have money in their pockets, the hospitality trade will inevitably suffer as a direct consequence. Not only the hospitality trade but the leisure trade and many other service industries will be detrimentally affected by the cuts supported by Government Members in the Chamber during debates on the comprehensive spending review and other spending matters.
Karen Bradley (Staffordshire Moorlands) (Con): I apologise for missing the beginning of this debate; unfortunately, I was in a Bill Committee, but I came as soon as I could. The hon. Gentleman is making a point about people not having money in their pockets. Is it not therefore even more important that we deal with below-cost selling of alcohol in supermarkets-
Mrs Anne Main (in the Chair): Order. That is not the subject of this debate. We are on winding-up speeches now. I request the shadow Minister to continue with his remarks, which I hope will also address the topic of the debate.
Chris Williamson: Thank you, Mrs Main. They will and they are. It is central to the future viability of pubs around the country that we recognise the implications of other decisions taken by the Government and the Members who vote for them.
Hon. Members have referred to the community right to buy. On the face of it, I have no difficulty with it-indeed, I think that it is probably a good thing and will be beneficial in certain circumstances-but when we scratch the surface, it is a little bit of a pig in a poke, is it not? No funding is attached to it. How will a deprived community where many are unemployed, have modest incomes from low-paid employment or are losing their jobs as a result of the cuts to which I referred be able to exercise the community right to buy if the people there do not have the wherewithal to do so?
Before the election, the Conservative party gave a commitment on the community right to buy that the community would be given the right of first refusal. As I understand it, that commitment has now been withdrawn. I would be interested to hear the Minister's comments on that point.
The hon. Member for Staffordshire Moorlands (Karen Bradley) made a point about supermarkets. I take the Chair's guidance that it was not directly related to the topic, but it is important to acknowledge that competition from supermarkets is having a detrimental impact on the viability of community pubs. Again, the Government have failed to take decisive action to tackle the minimum price. They should have gone somewhat further to address it.
The hon. Gentleman discussed the need to strengthen planning legislation. I agree absolutely, but he slightly contradicted himself in the latter part of his speech. In his conclusion, he said that more regulation was not required; I think he said, "We don't want more regulation." He will correct me if I am wrong, but he said that stronger planning powers are needed. I agree with him, but what is that if not greater regulation? I accept that regulation can be a force for good in certain circumstances, but over-regulation of the sector can be problematic and a barrier, as can set-up costs, and those issues need to be addressed. I support his aims, but there is perhaps a weakness in his argument. He might consider that, because I know that he feels strongly about the issue and has done a lot of good work to lead the charge on it.
I am also interested to hear the Minister's comments about the regrettable decision to scrap the Labour Government's proposed community-owned pubs support programme, which would have provided resources to enable communities to save community pubs from closure.
Chris Williamson: I was merely referring to the hon. Member for Leeds North West, who discussed the need to strengthen planning laws to give local authorities greater powers over the closure of community pubs. I support him on that. The point that I was making is that strengthening planning powers for local authorities amounts to greater regulation, so in certain circumstances, stronger regulation can be a force for good. It can be beneficial in helping promote the campaign that he is pursuing.
The community-owned pubs programme has been scrapped. The Government had set aside £3.3 million-not a huge sum, but significant-which would have gone a long way towards assisting many community pubs to remain open. The chief executive of the Plunkett Foundation, which was charged with administering the fund, said about the decision to scrap the programme:
"This is devastating news for each community that had hoped to save their local as a co-operative. The government has turned its back on communities that were looking to take more responsibility over their everyday lives."
It seems that the Government propose to replace a meaningful Government initiative, which would have provided resources for practical action to save a considerable number of community pubs, with a mere information leaflet, which will be distributed to local communities. That is no substitute for a properly funded initiative that would have gone a long way in saving community pubs. That was a mistake, and I would be interested to hear the Minister's comments on it. He is quoted as saying:
""Pubs don't want state handouts. The new government is to give local communities new powers to save local pubs."
However, as I have already pointed out, the Government's proposed power will be meaningful only in those communities that are relatively well heeled and that therefore have the wherewithal to provide the resources necessary to exercise a community right to buy.
Nigel Adams: Is it not the case that the previous Government had 13 years to do something positive about protecting pubs? People had money in their pockets then, but the previous Administration failed to do anything.
Chris Williamson: I do not understand the hon. Gentleman's intervention. I have already made the point that the previous Labour Government set up the community-owned pubs support programme, which his Government have scrapped. We did take positive action. I accept that too many pubs closed and that perhaps more could have been done. We can always do more, but we took appropriate steps and ensured that people in the public sector were in employment and that we kept unemployment lower than it would otherwise have been. As I have already said, unless people have unnecessary money in their pockets, the hospitality trade and community pubs will suffer as a direct consequence.
Chris Williamson: Thank you, Mrs Main. The reality is that we took action. On another point, we took the necessary steps to stop the economy going into a complete tailspin. I repeat the point that I have already made and make no apologies for doing so: people need income in their pockets from employment, and the measures that we took to keep unemployment lower than it would otherwise have been helped ensure that more pubs did not close. I regret to say that this Government's measures have taken away the direct support by scrapping the community-owned pubs support programme. They are also introducing new powers that only relatively affluent communities will be able to utilise, and are taking economic decisions that will have a much bigger impact on the future viability of community pubs, because unemployment will certainly increase and many more pubs will close as a direct consequence.
Jason McCartney: I would be interested if the hon. Gentleman could name a single pub in Yorkshire that was saved by that scheme. Dozens of pubs closed in my constituency during his Government's last five years.
Chris Williamson: I hope that the hon. Gentleman will forgive me for not knowing the names of pubs in Yorkshire. I am a Derby MP and, as I said at the outset of my contribution, I am teetotal and very rarely frequent pubs. Pub names are not one of my strong points. I could not even name too many pubs in Derby, but I recognise the central role that they play in the local community.
I will finish by addressing the comments made about the big society. The notion that, somehow, the nebulous concept of the big society will be the saviour of community pubs and that Ministers on the white charger of the big society will ride to the rescue is, in reality, a fantasy. In my view, the big society is nothing more than a 21st-century version of the Poor Law. If hon. Members view that as the way to protect community pubs, I am sorry but they will be sadly disappointed.
The Parliamentary Under-Secretary of State for Communities and Local Government (Robert Neill):
It is an absolute delight and pleasure to serve under you, Mrs Main. I also warmly welcome this debate and congratulate my hon. Friend the Member for Leeds North West (Greg Mulholland) on securing it, on the constructive way in which he made the case for assisting
community pubs, and on the excellent work that he rightly does as part of the all-party save the pub group. I also pay tribute to my hon. Friend the Member for Burton (Andrew Griffiths) and the all-party beer group. All such groups and bodies are important players in the conversation that, as my hon. Friend the Member for Leeds North West has said, we are having, and I promise him that we will continue to have it. It is an important issue. I appreciated the seriousness with which a number of my hon. Friends intervened to raise examples to reinforce a number of my hon. Friend's legitimate points.
I will say this as gently as I can, but the shadow Minister, the hon. Member for Derby North (Chris Williamson), may not have quite caught the mood of the debate to a nicety. It was not a partisan debate. If people want to play it along partisan lines, I can point out that, in 13 years of the previous Government, the situation developed, got worse and not much was done-an initiative 12 weeks before the general election was scant and shoddy recompense.
The hon. Gentleman did, however, remind me of a story about John Costello, the former Irish Prime Minister. He had lost a general election and was driving with his Attorney-General to the presidential palace to hand in his resignation. Their car had to stop at a crossroad, on to which a fight spilled out from a public house. Costello turned to his Attorney-General and said, "Do you know, I've never been in a pub in my life," to which the Attorney-General replied, "Well, if you had, we might not be going to hand in our resignations now."
I do not have to confess-I think it is well known-that I occasionally use a public house. I have certainly assisted my hon. Friend the Member for Burton in adding to the heaving numbers in a public house in Uttoxeter. I am conscious, from my own constituency as well as from my visits around the country since my appointment, that public houses are a key part of the community. We have vibrant pubs in villages, in suburban areas such as mine, and in inner-city areas, some of which I see when wearing my hat as the Minister with responsibility for the Thames Gateway.
Of course, as my hon. Friend the Member for Leeds North West has rightly said, changing circumstances mean that, because pubs are businesses as well as community assets, they will sometimes come under pressure and some will not be sustainable. I have mentioned the east end of London. I visited some old friends in Poplar, where demand for pubs has declined due to the change in the demographic of its population, so not all its pubs are likely to survive. It is important to recognise-I am grateful that my hon. Friend did-that we have to bring that balance into the equation. Equally, I think we have all come across the sort of cynical behaviour whereby viable public houses are sold, sometimes over the heads of the tenants, the landlords or the community. My hon. Friend has quoted a number of examples and, during a Localism Bill Committee sitting, I referred to one in my own constituency. The absentee landlord of The Broomwood pub, in Sevenoaks Way in Orpington, has deliberately run it down so that its value as an asset is diminished, in order then to seek planning permission to turn it into a McDonald's. I am no more likely to frequent a McDonald's than the shadow Minister is to frequent a pub. It would certainly not have been a good result for that community, and I think there is common ground between us on that point.
Justin Tomlinson: That can also be the case before a pub has even been built. In new developments-a lot of my constituency is new development-space is allocated in the master plan for a community pub. The developers deliberately do not sell it-as is the case with our local brewery, Arkell's-and they then try to come back and say that the only demand is for additional housing.
The Government are seeking to approach the matter against the background of recognising that there must be a sensible balance and that, of course, it is sometimes legitimate to regulate to protect community interests. However, we are also dealing with businesses that need to be kept viable and remain attractive for investment, so as my hon. Friend the Member for Leeds North West said, it is important that we deal with the matter in reasonable and proportionate way that does not build in inflexibilities that might discourage people from investing in the public house trades. We must get the balance right and I am grateful to my hon. Friend for his contribution to helping us do that. I would rather deal with the matter in a considered way than engage in grandstanding, because there are opportunities that will come to us.
Let me consider some of the points that were raised. It is worth saying that the current national policy-planning policy statement 4-is perhaps not used as fully as it could be. I accept that point, and outside this Chamber I will happily take up with my hon. Friend ways in which we can ensure that local authorities are made aware of their existing scope. For example, PPS4-planning for sustainable economic growth-asks local authorities proactively to plan and promote competitive town centre environments to support shop services and other things that have small-scale economic uses. That can be taken to include public houses. My hon. Friend indicated that some local authorities are doing that, and I applaud them for doing so. Some of the public houses we have referred to might be in conservation areas or might have a particular merit, such as listing and so on. There are other forms of protection.
When determining applications affecting premises such as pubs, current policy also enables local planning authorities to take into account the importance of the facility to the local community or the economic base in the area. However, I acknowledge that that is not doing enough to slow down the attrition rate of pubs. Therefore, we are determined to simplify the system. My hon. Friend is right: the national planning policy framework is the appropriate vehicle for doing that. Since the Town and Country Planning Act 1947, most planning policy has been dictated by guidance rather than through primary legislation, which has tended to be enabling. That is the route we intend to adopt.
We are committed to taking the existing protections that it is appropriate to continue with, simplifying them, amplifying them where appropriate and publishing a comprehensive, single, streamlined national planning policy framework. We are aiming to do that by April 2012. We will start to consult on that later this year, and I very much hope that my hon. Friends and the organisations in their constituencies concerned about the issue of planning and public houses will contribute
to the consultation. That will also include planning for community and other leisure facilities. The linkage about encouraging live music, for example, that my hon. Friend the Member for Hove (Mike Weatherley) referred to, is absolutely right. That is why, separately, the Government are proposing to reform the licensing law to make it easier for live entertainment to take place without some of the bureaucratic licensing requirements, particularly in smaller venues. I hope that that will add to viability, which is an important consideration here.
Two matters are important in relation to the Localism Bill. First, we are introducing neighbourhood planning, which will give neighbourhood communities a greater chance to shape their area in planning terms. Communities will be able to set policies for the development of their area, subject to the constraint that what they say must be in general conformity with the overall strategic policies of the local authority's development plan, and that it will be subject to the national policy set out in the NPPF I referred to. Within those constraints, communities will be able to say what sort of developments-within reason-are acceptable or not acceptable and where. That is an important tool, and I hope it will enable people to have greater protection.
Such an approach will also give communities greater flexibility in expanding. Sometimes that is right because, for example, there might be a demand for additional housing in a village area. Incremental growth is not easy to achieve under the current planning system, so there is a greater pressure to convert the use of a public house to housing. Our proposals will make it easier for a neighbourhood to expand organically and therefore, I hope, to still keep the public house in existence.
Mrs Anne Main (in the Chair): I was just about to say that the Minister is winding up. This is an hour-and-a-half debate and the right hon. Gentleman has not been here for the entire debate. However, the Minister has given way.
Mr Lammy: The Minister is aware that I have been concerned about these issues for some time. Will he say a little bit more about the legal status of the neighbourhood plan? He will be aware that The Oakdale Arms on Hermitage road, Tottenham is facing decimation in March, and there is real concern that the local community has not been involved.
We have already set out the proposals we are intending to make, and there should be a referendum-an independent check-to make sure that the neighbourhood plan, once it is in place, is in conformity with other policies and that there is support from the community. The details are available in a guide to neighbourhood planning, which is on the Department's
website. When the right hon. Gentleman has looked at that, perhaps other hon. Members who are interested in the matter will have the chance to look at it.
As well as neighbourhood planning, there is the community right to buy. That gives a fair chance for communities to bid to take over assets and facilities that are important to them. Community right to buy is triggered by assets being listed, so it is an important power for community groups to take the initiative to list them. I do not pooh-pooh the community right to buy, as the hon. Member for Derby North did. Potentially, it is a powerful tool, and there are good examples where it has already been taken on. We have published a consultation document setting out details of how that scheme works. It will be underpinned by regulations to deal with the process. That consultation ends on 3 May and as I said, I hope that hon. Members and interested groups will contribute to it. Some of the details that my hon. Friend the Member for Leeds North West fleshed out are exactly the sort of issues I promise him we want to take on board during the consultation.
I understand my hon. Friend's point about the moratorium, and I would like to consider the matter in that context. The only query is whether too rigid a moratorium could itself create injustice in certain circumstances-for example, where the legitimate collapse of a business through commercial misfortune, as sometimes happens, triggers the need to realise assets quickly. It is about getting the balance right. I would not want to discourage people from investing in pubs, which might happen if they thought they could not always get their assets out again. However, there is more work that we can and will do on that.
On change of use, as was said, when used properly, there is already an ability to import viability into the test. Local authorities can remove committed development rights under the existing use classes order through what is called an article 4 direction. However, as part of our reform of planning policy, we intend to consult more generally on reform of the use classes order. Again, there is an opportunity for that conversation to continue. Similarly, as my hon. Friend says, we have announced a review into the use of covenants, which can be used to prevent a fair playing field for communities when public houses are sold on.
On the question of demolition, I pay tribute to my hon. Friend the Member for Selby and Ainsty (Nigel Adams) for his private Member's Bill. In the past, demolition has been excluded, but we are prepared to look carefully with my hon. Friend and other hon. Members at whether there is some means by which we can, perhaps in the context of the community right to buy, extend planning control to the demolition of community assets. That might be a means by which we can achieve a proportionate solution. I hope the door is open to my hon. Friend in that regard.
I am sorry that there is no time for me to say more. However, I hope I have shown that we take the comments of my hon. Friend the Member for Leeds North West in the spirit in which they were intended. I congratulate him on what he has done. We will continue to have a conversation on those specific points.
I would like to begin by thanking the Minister, who has already provided a huge amount of support to the Humber MPs in our campaign to make the Humber a renewable energy centre. He is already aware of much of what I will say today and we are grateful for the support that he has given. There are a couple of issues on which we would like to pin the Minister down, in the best sense of the phrase, as we try to move our campaign forward.
The campaign has support across the Humber and I assure you, Mrs Main, that the absence of other Humber MPs is not due to lack of interest. My neighbour, the hon. Member for Scunthorpe (Nic Dakin), is at a Select Committee hearing outside of Westminster today. My hon. Friend the Member for Beverley and Holderness (Mr Stuart) is away on parliamentary business, as is, I believe, the hon. Member for Great Grimsby (Austin Mitchell). However, this is a campaign that enjoys strong support across the banks of the Humber in north Lincolnshire and east Yorkshire. We are concerned primarily with doing what we can, as local MPs, with the support of our local councils and businesses, to ensure that we become a centre for offshore wind, and potentially a centre for wave and tidal power and other renewable energy opportunities, such as bioethanol. With your permission, Mrs Main-I have had contact with the Minister on this-my hon. Friend the Member for Cleethorpes (Martin Vickers) will speak for five minutes of my time.
I think that we all agree, across the House, that we want to ensure that the UK plays its part in the renewable energy sector and that we are not left behind as we have been in the past, particularly with onshore wind. Our campaign on renewable energy, as broad as it is, does not extend quite as far as onshore wind. The Minister is aware of our particular issues with onshore wind locally, but I just place them on the record again. As a country, however, we have missed the boat on manufacturing for onshore wind and we do not want to fall behind with the new technologies.
Why the Humber? Well, apart from the fact that everybody knows it is the best area in the UK in which to invest, has the best people and is potentially represented by some of the best people-I exclude myself from that; I talk of course of my neighbours-in the past 10 years the area has not made the progress it should have done, and as other parts of the country have. We lost private sector jobs in the past 10 years at a time when the economy was growing, and we remain one of the poorest parts of the UK. We have, however, a great deal going for us too: deep sea ports, plenty of land for development, an excellent motorway infrastructure that is not congested in the way that it is in other parts of the country, and a long history of manufacturing and manufacturing skills
on which to build. As I mentioned, we also have strong support for this campaign from across the local area, including from some of our key stakeholders, MPs and councillors, but also from local newspapers. The Scunthorpe Telegraph, the Grimsby Telegraph and the Hull Daily Mail have been running their own campaign to support bringing more renewable energy projects to our area.
Jason McCartney (Colne Valley) (Con): I congratulate my hon. Friend on securing the debate. On the matter of support, he also has plenty of support from Yorkshire MPs, myself included. Offshore wind is important for my inland constituency, so that we do not have to have onshore wind farms dotted all over the beautiful countryside of the Colne and Holme valleys. It is also important because David Brown Engineering in Lockwood, Huddersfield, has a major contract to make the gears for offshore wind turbines. Hopefully the Humber will also play an important part in cutting our carbon footprint, as part of the array of carbon capture and storage that may go into the North sea, and bring jobs. My hon. Friend has plenty of support not just in the Humber region, but across the whole of Yorkshire and the north of the country. Thank you for this debate.
Andrew Percy: I thank my hon. Friend for that glowing pledge of support for the Humber, and that demonstrates a point I will go on to talk about. The supply chain for this industry will not be limited to the Humber-it will benefit UK plc. There will be jobs through the development of the renewable sector across the whole of the UK in manufacturing. I know that he will be at the forefront of campaigning for those jobs to go to his constituency of Colne Valley.
What we seek from the Minister is continued support in selling the Humber-I know he has responsibilities for the whole of England-and England, internationally. We would also welcome support from the Government in terms of the pressure they can apply to ensure that once agreements have been made, as they have been with Siemens, there are no glitches in the system. I also seek clarity about the framework in which we are operating. I will turn to that point first, in relation to wave and tidal technologies.
In terms of R and D, the UK is at the forefront of these technologies and there are huge opportunities, not only because we are an island, but because of the skills we have. There are massive opportunities along the Humber, which is served by several other tidal rivers including the river Aire, which I live next to, the Ouse, the Trent, and what we call the Dutch river, but which is the Don to everybody else. It is estimated that marine power has the potential to bring approximately 10,000 jobs to the UK by 2020.
There is a project on the Humber at the moment, the Pulse Tidal project, which is one of those great British entrepreneurial technologies. It started in someone's garage. After 10 years of working in someone's garage, that has now developed into a machine that is operating on the Humber, just off Immingham dock. It was funded 50% by the Government and 50% by private funds, and has been operating successfully since 2009. It cost £2 million to build, but the beauty of the project is that it used Corus steel and is maintained by another local company, Humber Work Boats. The next step of the development is a commercial scale machine, rated at
1.2 MW, which will be installed by 2013. There the good news tails off a little. It is likely that the commercial scale machine will go to Scotland, because the renewable obligation certificate scheme is more generous there. In fact, Bob Smith the CEO of Pulse Tidal, tells me:
"The single biggest funding issue for us today is the market pull-at present there is nothing to incentivise investors to support a tidal power project in favour of a wind power project-they both receive 2 ROCs. Given that tidal is early in its development, comparable to wind about 15yr ago, it is more expensive than wind, and higher risk. Hence no investor would put money into tidal projects. With 5 ROCs in place for tidal, there is sufficient incentive to bring investors to the sector."
I know that there is a review of that scheme, but will it consider the current disparity between England and Scotland? The scheme is currently in favour of Scotland and we are at a disadvantage, so will the review recognise that?
I hope the Minister will consider the need for extra support for these emerging technologies, so that we remain at the forefront. We have had all that R and D. We have successful projects up and running, but we risk losing them overseas and missing out, just as we did with onshore wind technology.
What are the Department's plans for the longer-term capital support for this sector? The marine development fund is being phased out. Will that be replaced and what will be put in its place? There is a need for capital and revenue support to ensure that we do not miss out. I am sure that we will get that, because I know the Government are certainly committed, but we seek a clear commitment from the Government on the future of wave and tide.
Mike Weatherley (Hove) (Con): On the point about losing industries overseas, does my hon. Friend agree that, given our heritage of petrochemical skills and a highly efficient agricultural base, it makes sense to have a bioethanol base here in the UK?
Andrew Percy: I will be coming on to talk about that exact point. As with the wave and tidal technologies, where we have the skills base and the R and D, the same applies to bioethanol. I seek those commitments in relation to wave and tidal. My hon. Friend's intervention moves me beautifully on to bioethanol.
The question, of course, is why bioethanol and why the Humber? My hon. Friend made the comments that I would have made about the petrochemical skills heritage in this country, so I shall not repeat them. We also have mandated targets for biofuels, so whatever people's individual views about biofuels are, the reality is that if we do not produce them locally in the UK, and specifically in the Humber, they will be produced elsewhere, and the jobs will be elsewhere.
As with wind-and, potentially, wave and tide, if we are not careful-the UK has been lagging behind. In 2008, France had 15 operational plants, Germany had nine and the UK had one large and one small plant. There is huge potential: as with wave and tidal technologies, the predictions for the industry are impressive. It could be worth as much as £3.25 billion to the UK by 2020, and could employ some 14,500 people. There is huge potential, in the Humber in particular, for the reasons that I have outlined in respect of infrastructure.
Two plants are coming to the Humber: Vireol will be running an industrial-scale wheat-based production plant in Grimsby from 2013, which should produce about 44 million gallons of bioethanol a year. I am told that that is the equivalent-my science was never very good-
Julian Sturdy (York Outer) (Con): I congratulate my hon. Friend on securing this important debate. I add my support to his campaign for the Humber, especially as I am a big supporter of wave and tidal. He makes a key point about bioethanol: it will be a huge economic driver for our region if we get it right. However, I add a note of caution, and would like to know what he thinks about it. Commodity prices are growing rapidly at present-
Andrew Percy: It is an important point, and I will come to it. It is one of the criticisms-a misunderstanding, in my view-of what is actually happening. I shall first finish with the plants that are coming to the Humber. The effects of Vireol's production of bioethanol will be the equivalent of taking 60,000 cars off the road, and Vivergo will produce at a plant in Saltend.
My hon. Friend knows that we have not only in the Humber region but across North Yorkshire-on his patch-some of the most productive agricultural land in the country, so there is huge potential locally to benefit from bioethanol production. The concern he raises is one that many people raise, which is that we are taking land that could be used to produce food to feed our cars instead. However, the process that will be used at the Vireol plant will produce as a by-product a high-quality animal feed, and there is a difference between biodiesel and bioethanol.
The global annual production of the big four oil seeds that are used for biodiesel is about 120 million tonnes. To meet our 2020 target, 24 million tonnes would have to be used for biodiesel. For bioethanol, it is 1.7 billion tonnes of the big three grains, of which only 60 million are needed to produce bioethanol. There is a prediction that the UK could increase its production volumes up to about 20 million tonnes. That could be done while ensuring food security, and, as I said, the wheat-based process that will be coming to the Humber produces a high-quality animal feed by-product, so it is a win-win situation. We already export wheat for animal feed or bioethanol production overseas.
I have two quick questions for the Minister on bioethanol-I am conscious of the time. What in particular will he do to continue to support this important sector, which has the potential to bring many jobs to our region? And when, specifically, will the Government renew the 2020 targets, which are for 10% of our fuel production, so that the bioethanol industry can continue to secure investment?
Martin Vickers (Cleethorpes) (Con): I congratulate my hon. Friend the Member for Brigg and Goole (Andrew Percy) on securing this timely debate. It has come at a time when north Lincolnshire, in particular, stands ready to take full advantage of the opportunities for jobs and growth. Many local companies, some of which were previously involved in similar activities such as supporting our offshore oil rigs, are well positioned to take full advantage of the development of offshore turbines. New training opportunities are being developed by local colleges, training providers and businesses, and there is massive public support following a particularly successful focus on the industry, which my hon. Friend mentioned, by local newspapers the Grimsby Telegraph and the Scunthorpe Telegraph.
My hon. Friend the Member for Brigg and Goole has articulated the future impact of tidal, wave and biofuel energy, but I want to highlight the region's potential for placing the Humber at the centre of the offshore wind sector, not only in the UK, but in Europe and globally.
The area is ideally located. The Immingham and Grimsby dock complex is the largest in the UK, measured by tonnage. Since the decline of the fishing industry, Grimsby dock has been seeking a new role, and offshore wind could be the vital opportunity. Only a few miles away, Scunthorpe has steel production, and everything possible must be done to ensure that the various contracts filter down to small businesses, many of which have been struggling in recent months.
The region has several examples of where short-term investment could result in long-term growth and regeneration. For example, the regional growth fund is currently reviewing proposals, made in association with North East Lincolnshire council, to modernise, improve and update port infrastructure, which would provide for the construction of tailor-made facilities for the offshore wind sector. Such improvements, requiring investment of £1.8 million, would lead to real improvements within a planned 12-month time frame and to several potentially major contracts being finalised, possibly resulting in the creation of hundreds of long-term, sustainable jobs. Such contracts would directly affect investment and job creation, arising from the emphasis and support given to the Humber region.
One of the most exciting developments is proposed by Able UK on a 300 hectares site close to East Halton and North Killingholme. It could make northern Lincolnshire the capital of the offshore wind industry
and provide the potential for thousands of jobs over the next decade or so. Many of those jobs will come fairly soon with construction projects, and when linked to this country's commitments to increase dramatically our environmentally friendly energy supplies, green technology has the potential to create many new opportunities.
The production of renewable electricity in the UK has been growing by 11% per year since 2000, and the offshore renewables industry has been gearing up for growth. The Crown Estate has announced the successful bidders for each of the nine round 3 offshore wind zones within UK waters, and that will occupy the industry for at least the next 10 years. It has been brought to my attention that there may be some delay to round 3, but I hope the Minister will allay those concerns in his reply. Opportunities for growth opened up to the area with the supply chain for the Humber gateway site-the Able UK development-and also with the massive round 3 Hornsea site that is within 12 miles of Hull. When finished, it could generate up to 14% of the UK's total energy needs.
I urge the Minister to give a cast-iron guarantee that northern Lincolnshire and the Humber will receive Government support equal to that for other areas. Private enterprise stands ready to invest, but it cannot do it alone. We welcome the opportunities offered by port development grants, but the earlier we receive confirmation that the A160 into Immingham docks will be upgraded, the better. I appreciate that that is not within the Minister's brief, but it is yet another opportunity for me to mention the issue.
There is also the seemingly never-ending debate about Humber bridge tolls. The Treasury review into the tolls is a major step forward, and we look forward to its conclusion later this year. If the labour market is to function freely in the renewables industry-and other industries-and allow local workers to take all opportunities available, we must consign the debate on tolls to history.
Potential investors and current stakeholders remain concerned about long-term financial commitments and the speed at which planning applications are implemented. In a report on the potential of the UK's renewables sector, the offshore valuation group stated the requirement for new financing structures that complement the fundamental features of renewable energy infrastructure and are able to support the scale and speed of industrial growth. That is necessary to secure the UK as a centre for the global renewables industry.
So far, the Government have done a lot, which is greatly appreciated by local councils and other representatives from the industry. Nevertheless, we cannot do it alone. There is the possibility to create a great number of job opportunities in an area that has been in recession for too many years, and I urge the Minister to do everything in his power to help the area.
The Minister of State, Department of Energy and Climate Change (Charles Hendry):
It is a privilege to serve under your chairmanship, Mrs Main, particularly on a subject that I know is dear to your heart. I congratulate my hon. Friend the Member for Brigg and Goole (Andrew Percy) on securing this debate and on returning to a theme that he has become accomplished in discussing in this House. He and my hon. Friend the
Member for Cleethorpes (Martin Vickers) make a powerful duo, and they are eloquent and dedicated advocates for the interests of their constituencies. They have worked hard to create a broad coalition on both sides of the House and of the Humber, and to bring together the interests of the local authority, the business community and the political representation in the Greater Humber area. That will ensure that we take maximum advantage of the benefits that undoubtedly exist. Contributions from other hon. Friends concerning how such opportunities can benefit their constituencies have also been encouraging, and we have heard from my hon. Friend the Member for Colne Valley (Jason McCartney), and about the interest in bioethanol from my hon. Friends the Members for Hove (Mike Weatherley) and for York Outer (Julian Sturdy).
This is a timely debate because we are looking at the potential for a huge regeneration in parts of the country that have been badly affected by economic decline over many years. One of the most exciting aspects of the renewable sector is the potential that it brings for economic prosperity in areas that have suffered badly. We must put this debate in the national context. The Government are committed to a major roll-out of renewables, because we believe that it will help to secure our long-term energy interests, help tackle climate change and meet our renewable energy targets for 2020 and beyond. It will also deliver many green jobs across the United Kingdom, revitalising our manufacturing sector.
The 15% target for renewable energy by 2020 is challenging, but we are sure it is achievable. We are on track for the first interim target of 4% renewable energy by 2011-12, and we have 25 GW in the renewable electricity pipeline. We should look at the resources around us-we have heard about how such resources play out for the Humber. Around these islands we have 40% of Europe's wind and some of the highest tidal reaches in the world. We are already global leaders in the offshore wind sector, with 1.3 GW of installed capacity.
This debate takes place against the background of the Government's commitment to localism, and we expect communities that accept renewable energy developments to receive distinct and specific benefits. We have mentioned the localisation of business rates, and we are looking at other ways in which communities can benefit from hosting facilities on behalf of the wider national interest.
My hon. Friend the Member for Cleethorpes discussed offshore wind. The Carbon Trust has estimated that the offshore wind sector could create 70,000 jobs by 2020. Last week, I was delighted to announce the grant of consent for the Humber gateway offshore wind farm, which will generate enough clean electricity for 150,000 homes. We put in place the offshore wind developers forum specifically to identify barriers. We are determined to drive that process forward as fast as possible, identify potential barriers to investment and do what we can to ensure that they are dealt with and do not become insuperable. We still need an acceleration in deployment and technical advances to realise the potential of offshore wind.
UK manufacturing activity will be key to realising the economic potential offered by offshore wind across the whole supply chain, and I am confident that the offshore wind sector will grow substantially in the coming
years. We are determined to avoid mistakes that we have seen in the past, where although our waters contain some of the largest offshore wind farms in the world, the jobs and contracts go to mainland Europe or the far east. In taking forward the next stage of offshore wind development, we must ensure that those jobs come to the United Kingdom.
We are the world's leading market, and any company that is keen to invest in the offshore wind manufacturing chain should be looking at Britain. The contribution made by Siemens, and its determination to build in the UK, and the interest we are seeing from Gamesa, GE, Mitsubishi and other companies shows the extent to which Britain will be a global leader in this technology.
We are looking at making larger turbines than have been developed before. They need to be more reliable than those used for onshore wind, and to have deep foundations and undersea cabling. That means that they will be harder to transport than some of the turbines used for onshore wind, and there is a strong case for that manufacturing to be done locally to market.
I support the work that has been done on both sides of the Humber and, indeed, in other parts of the country to showcase the benefits of this technology for potential investors. It is also interesting to see the work that well-established local companies are doing to give themselves a new direction. For example, Cosalt, which was originally known as the Great Grimsby Coal, Salt and Tanning Company when it was founded back in 1873, now provides engineering, safety and inspection services to the wind energy sector. That typifies the economic development thinking in the area. There is no doubt that such activity should provide a major boost to the British economy, and there is every reason for us to hope that the ports along the Humber will be able to develop from that.
Of course, this issue is not just about wind power. One of the most exciting aspects is how the renewables sector brings together in specific locations a raft of different technologies and the contributions that they can make. Biomass is part of that. In 2009, biomass electricity provided 87% of total renewable generation in the Yorkshire and the Humber region. There is no doubt about the significance of the contribution that it can make.
My hon. Friends spoke about the importance of bioethanol and the leadership that Britain ought to be looking to establish in this sector. Bioethanol offers one of the few options in the short term for tackling greenhouse gas emissions and for meeting our renewable energy targets in the transport sector. We are considering the opportunities that can be provided through eligibility to benefit from the renewable transport fuel obligation and the renewables obligation. As my hon. Friend the
Member for Brigg and Goole set out in opening the debate, we are looking at the renewables obligation, and this issue can be part of that process, although as he will understand, it is my colleagues in the Department for Transport who lead on those issues.
We are also committed to harnessing the benefits that a successful marine renewables sector can bring to the UK generally and, within that, to the Humber area. The schemes to which my hon. Friend referred show some of the thinking that is going on. This is a fast-moving sector. As he has said, the struggle is in getting things to a commercial scale. What we have seen in looking at the schemes that were in place already-the marine development fund and particularly the deployment fund-is that the bar was set too high to be relevant to the stage that the industry is currently at.
We have examined how we take the technology further and faster. Its development is an explicit written element in the coalition agreement, which is at the core of what we are trying to do in the Department of Energy and Climate Change. The benefits go well beyond providing us with secure, clean electricity, because there is an opportunity to build a new manufacturing sector in the UK, which will create new jobs and grow economic opportunities both at home and globally.
That will happen only if we ensure that we capitalise on the hard work that the sector is doing already and ensure that the right foundation is in place on which to build success. We have established a marine energy programme, and we now want to ensure that small, dynamic companies have every reason to stay in Britain by putting in place a network of marine energy parks around the UK. That will enable us to take forward the technology and ensure that those emerging companies want to develop in the UK, rather than, as we have seen too often in the past, taking their technologies elsewhere in the world.
We have brought forward the banding review for renewables obligation certificates by a full year, so that we can provide much greater certainty to investors. The difference between different parts of Britain-the difference between ROCs support in England and in Scotland-will feature in that, although of course the level at which support is set in Scotland is a matter for the Scottish Government and the same applies in Northern Ireland.
We can offer a real opportunity to take forward these technologies in this country. Our objective must be to remove barriers, to encourage investment and to ensure that we identify where the challenges are, so that the potential throughout this country can be achieved. This has been a short but important debate. The Humber has a very important contribution to make to the renewable energy future of this country, and I again pay tribute to the Members of Parliament who are representing the area for the determination and assiduity that they have brought to its cause.
Mr Gareth Thomas (Harrow West) (Lab/Co-op): I am grateful to Mr Speaker for offering me the opportunity to have this debate. At the outset, I need to declare that I have a mortgage with Northern Rock. I am privileged to be chair of the Co-operative party and one of the party's 28 Labour/Co-op MPs. It is in that spirit and with their support, but from the Back Benches, that I have sought the debate.
Yesterday, as the Minister will recognise, was business as usual for banking. Barclays bank was carrying on as if Ministers had never been worried about its bonuses or its profits. This is also the week for yet another re-launch of the big society. It is a concept in crisis, unloved by many of the Minister's colleagues and viewed with profound scepticism by many people in the charity world. What better time, then, for the Minister to offer up a vision-and, crucially, the action to back it up-of the big society that is not an excuse for an attack on public bodies and hard-working public servants, but that instead leads to real change in an area of the corporate world, financial services, where the whole country has wanted a change in culture and behaviour?
Despite a coalition commitment to help mutuals, thus far in financial services there has been little of note. Mutuals and financial mutuals in particular are proof that there is another way-that, important as the public and shareholder-led private sectors both are, there is a way to combine the best of both traditions, to drive enterprise, to foster ambition and to cherish community throughout our country. Financial mutuals, building societies, friendly societies and credit unions were not responsible for the global financial crisis. They do not have a culture of large dividends or excessive bonuses, and they have much more, surely, to offer, but astute Government regulation will be required to foster and encourage the sector.
Both my parties-the Co-operative party and our sister party, the Labour party-were right to call for the remutualisation of Northern Rock at the last election, and I urge the Minister now to set out clearly the Government's position on that issue. The Banking (Special Provisions) Act 2008 allows state-owned banks to be converted into mutuals. That could be by sale, merger with an existing mutual or the creation of a new entity.
The long-term ownership solution for Northern Rock should take into account some key principles. Taxpayers should not be out of pocket as a result of the change. Hard-working families and small businesses should be protected. The institution that emerges should be secure and responsible and add to the financial stability of the UK economy. The new organisation should act in the long-term interests of its customers.
Jonathan Evans (Cardiff North) (Con): The hon. Gentleman knows that I share his interest in the promotion of mutuality. I am therefore a little disappointed by this being couched in Labour terms. Does he not think it would be helpful if the proposition put to the Minister were that there should be a proper review and examination of the opportunity of mutuality in relation to Northern Rock, rather than it being asserted to him that that is the only option? We should be examining it as fully as we examine any other option.
Mr Thomas: I end up at the same point as the hon. Gentleman, although I took a different journey to get to that point. I will come back, if I may, to the excellent work he has been doing in chairing the all-party inquiry into financial mutuals.
An expert think-tank based in the university of Oxford set out in September 2009 how and why Northern Rock could and should be remutualised, ensuring that its debt to the taxpayer was paid down, creating a stable financial services provider and constraining it from making the previous mistakes, while helping to secure a more competitive retail financial services market.
The next step, which the hon. Member for Cardiff North (Jonathan Evans) hinted at, would be a full feasibility study examining in detail the financial, governance and leadership issues in respect of a remutualisation. Will the Minister encourage such a feasibility study to be undertaken, either as a Green Paper examining the issues in all their complexity or, if the Treasury wants to maintain some distance, requiring UK Financial Instruments to do that instead? In short, will he now actively investigate the feasibility of the case for remutualisation?
In 2003, PA Consulting Group-not a body that one would naturally think of as being on the left-published an interesting analysis of the relationship between the profits of commercial banks and the market share of mutuals. In short, as mutuals gain market share-in other words, as competition between the various private banks and their mutual competitors increases-bank profits from the retail banking market come down. Potentially, that gives the Minister a significant opportunity to deal with the criticism that, under a Tory-led Treasury, it is business as usual for the banks; he can promote greater competition through the growing mutual sector.
The biggest advantage that mutuals can offer is their long-term view. They are not faced with the short-term need to secure profits. Indeed, Nationwide estimates that the mutual pricing benefit that it enjoyed between 1997 and 2007 because it did not have to put shareholders ahead of members totalled some £3.7 billion. New research, using the published accounts of six shareholder-owned insurers, shows that more than £2.2 billion was paid to shareholders in dividends. That is the dividend drag-the loss incurred by all who seek insurance as a result of buying from a business owned by shareholders. That helps to explain why mutuals, which do not suffer that drag, typically pay higher investment returns, provide better standards of service and pay more claims.
Treasury and Financial Services Authority orthodoxy appears to be that corporate form does not matter, but that what counts is what those various corporate bodies do for their consumers. Such a view is simplistic and not sufficiently considered to warrant the hands-off approach to corporate diversity that often appears to characterise the approach of the FSA and the Treasury. Let me be clear: I do not advocate a mutual-only way, but robust diversity is important in ensuring real competition and giving consumers a real series of options in the market.
New capital rules being introduced in the wake of the global financial crisis may give rise to insufficient care being given to protecting and increasing the remaining strength of the building society movement. The FSA's new interpretation of the rules on capital may, over a number of years, bring about the end of friendly societies. Both sets of draft capital requirements could profoundly
damage the competitiveness of financial mutuals, and they do not reflect the fundamental difference between financial mutuals that are run for members, and the basic banks or private insurers, which are run for shareholder gain.
The European capital requirements directive is designed to enable financial services businesses better to absorb losses following the introduction of the new Basel standards. I accept that that is an important part of the response to the global financial crisis; it focuses on improving the quantity and quality of capital, particularly what is called core tier 1 capital. Over the last 20 years, building societies' capital reserves have been supplemented by permanent interest-bearing shares. However, they will not meet more demanding definitions for core tier 1 capital.
I recognise that building societies need to have access to new ways of securing capital that are permanent and that fully absorb losses. At the moment, the rules are being framed with only one type of corporate form in mind-the private bank. They do not recognise the fact that mutuals are structured and function differently, providing value to their customers over the medium and longer term. If building societies are forced to adopt plc-like capital, they will have to adopt plc-like behaviour. Building societies are trusted, safe and responsible precisely because they are not part of what "St Vince" calls the casino economy. Surely it would be a mistake to force upon them a new type of equity capital that would import excessive risk-taking.
I realise that there has been movement in the discussions between building societies and the Government on this matter, but I ask the Minister what progress has been made-and, just as important, what has he done personally to move things forward with his European counterparts?
There has been less progress in discussions with friendly societies. The FSA, revisiting its own rule book, seems hellbent on clinging to a piece of legal advice that has not been shared with the industry and which is at odds with every legal opinion that the industry has received. It seems to be based on a ministerial view from the mid-1990s that the then Minister publicly acknowledged was not intended for mutuals. Why cannot the FSA share its legal advice with the industry? If its motivation is that it does not want to damage friendly societies, why cannot a joint solution be found? If a solution cannot be found, mutual insurers would have to pay out a significant proportion of the capital held in their organisations; the consequence of that could be that they had little or no working capital and would have to shut up shop or demutualise.
I am grateful that Hector Sants attended the inquiry of the all-party group on building societies and financial mutuals, but frankly I doubt whether he has yet grasped the seriousness of the situation that friendly societies face as a result of his organisation's proposal. Even now, I hope he will agree to an urgent review of the FSA's legal advice and step up efforts to find a solution. If he does not, and if the Minister does not intervene, consumers will have less choice, plcs will take greater profits and customers will face higher charges. I would welcome the Minister's response.
The Minister is responsible for ushering in changes to financial services regulations. They offer the opportunity
to lock in a new requirement to champion corporate diversity and, crucially, new structures to ensure that we have people of sufficient calibre and status in the regulatory landscape to deal with building societies and friendly societies. Will the Minister support a requirement to promote corporate diversity in financial services when bringing forward the Bills to set out new arrangements for the City? What action is he taking to ensure that mutuals will be the responsibility of those high enough in the pecking order to make a difference when needed?
I turn to credit unions. The Minister will recognise that there is widespread concern about high interest rates for consumer credit and the activities of illegal loan sharks. I hope he realises the opportunity that properly managed credit unions can provide in meeting the needs of those wanting relatively small sums of money at affordable rates. Access to credit unions in the UK has been growing. For example, I understand that Wales has a credit union in every part of the country. That is not the case in England, although things have been slowly improving in recent years.
Tom Greatrex (Rutherglen and Hamilton West) (Lab/Co-op): My hon. Friend may be aware that access to credit unions in Scotland has improved of late. I hope he will join me in paying tribute to Hamilton credit union, which is developing financial services for children and young people to help get them into the culture of saving, so that in future they will be more financially responsible.
Mr Thomas: I welcome the progress that has been made in Scotland, and particularly the work of the Hamilton credit union outlined by my hon. Friend. What action will the Minister take to champion the further growth of credit unions across the UK?
Mutuals make a vital difference by generating more competition in financial services, and they help to create more value for the consumer, as opposed to the shareholder. I look forward to the Minister's response to my questions.
I congratulate the hon. Member for Harrow West (Mr Thomas) on securing this debate. He roots his support for financial mutuals in the co-operative movement, which he represents in the House. Many on the Government Benches would see financial mutuals as a coming together of communities to meet the needs of their members, which may be an early articulation of the big society.
We should not forget the role that mutuals play in providing financial services. They hold about 20% of UK retail deposits, and provide financing for 17% of outstanding UK mortgages-including mine. They employ 70,000 people and half of the UK's population are members of mutuals. The one member, one vote ownership model sets mutuals apart from their plc peers, as it enables them to focus solely on the needs of their members. It is unsurprising that mutuals frequently rank highly in surveys of customer satisfaction. As we know, many mutuals operate in areas of economic and social deprivation throughout the UK. They provide services that would be seen as sub-scale for big banks,
including as the small loans offered by credit unions whose customers might otherwise turn to doorstep lenders.
The hon. Gentleman made an important point about access to credit unions. When I read the transcript of a recent debate on high-cost credit, I was struck by the fact that one of the challenges is to increase access to credit unions as an alternative to doorstep lenders. In a moment, I shall discuss some of the measures that we will take. It is the importance of mutuals and the choice and diversity that they provide that drives our commitment to see them thrive and prosper.
The causes of the financial crisis have been stated many times, and I do not intend to rehearse them here. None the less, it is important that we learn from the crisis and take steps to ensure that the same mistakes are not repeated in the future. The Government want to create a financial services sector that works differently and is driven by different values, which is why we are committed to implementing measures that will foster diversity in financial services, promote mutuals and create a more competitive banking industry.
The Government have established an Independent Commission on Banking to make recommendations on both structural and non-structural measures to change the banking system and promote stability and competition for the benefit of both consumers and businesses. A strong sustainable mutual sector, which has the ethos of working in the interests of members, can support that.
We must be realistic and recognise that the financial crisis and the subsequent economic climate have posed many challenges for mutuals. Those challenges include greater competition for retail deposits, more intensive supervision and tougher capital requirements. I do not apologise for the tougher regulatory environment that we are now in. Adapting to this new world has been, and remains, a key challenge for financial mutuals as well as for the whole financial services sector. The Government are keen to ensure that the legislative framework is in place to enable mutuals to fulfil their role.
There are number of changes to which we are committed to help create a more equal playing field in financial services. Let me turn now to the point about capital that the hon. Gentleman rightly raised. We are committed to achieving high capital standards across the financial sector, including for mutuals. At the same time, it is right that we have capital requirements that are appropriate for mutuals. The Government seek to address that issue in negotiations on the capital requirements directive. This is a matter that the Treasury and I take very seriously, and we are leading the debate on this in Europe to ensure that the specific nature of mutuals is taken into account while, at the same time, not compromising the quality of capital in the banking system. We expect a proposal from the Commission on that later in the year.
I say to the hon. Gentleman that one of the driving forces behind our reforms on capital is that we want to ensure that financial institutions never again turn cap in hand to the taxpayer for financial support in a financial crisis. That is why it is important that all deposit-taking institutions, regardless of their form of ownership, have access to loss-absorbing capital.
Capital is a key issue for mutual insurers, too, which is why the FSA is considering the use of with-profits funds. It will be publishing a consultation paper on that shortly. I do not want to pre-empt the proposals that have been made today, but having extolled the virtues of the mutual model, it is reasonable to expect that mutual with-profits policyholders should expect at least as favourable an outcome, if not a better outcome, than proprietary with-profits policyholders. It is important that mutual insurers ensure that they treat their with-profits policyholders fairly, too.
Jonathan Evans (Cardiff North) (Con): The hon. Member for Harrow West (Mr Thomas) alluded to the previous ministerial statement. He knows that it was a statement that I made, but it related to the position of stock-owned companies. It deliberately excluded the position of mutuals, because it was an assessment of what policyholders' reasonable expectations were and it was based on previous experience. Those factors have been erased from the way in which the FSA has taken the matter forward, so will my hon. Friend agree to revisit that area?
Mr Hoban: My hon. Friend makes an important point and it is one that he and I discussed before this debate. His argument, which he has expressed publicly, is that his statement was not intended to be applied to all forms of with-profits funds. The FSA is aware of that view. None the less, it is important that this issue is treated very carefully. I am well aware that for many mutual insurers, their capital comes from with-profits funds. Without that with-profits fund, they would not be able to function in the way in which they do now. It is also fair to say that for a proprietary-owned business, the with-profits fund belongs to its policyholders. We have seen a number of firms go through a reattribution process in recognition of the fact that those funds belong to the members of that fund. There is a challenge there that we need to address and we need to be very careful about the impact of decisions on the ecology of the mutual insurer sector.
Mr Thomas: As I suggested in my remarks, the FSA's position appears to be based on a particular legal opinion that it has secured. Will the Minister ask the FSA to revisit that legal opinion, bearing in mind that all the other legal opinions that the industry has received are at odds with that opinion? Will he also specifically ask the FSA to share that legal advice with the industry, as part of the process of trying to facilitate a solution?
Mr Hoban: The best route for resolving this is through the response to the consultation paper, which the FSA will publish later this year. It is for the FSA to decide whether or not it should disclose legal opinions, because it is an independent regulator. The consultation paper is an important way in which to resolve these issues.
I was talking about the need to create a modernised legislative framework for mutuals, and capital is part of that. The Government are also implementing legislation to allow mutuals to modernise the way in which they communicate with their members and to enable them to prosper. The Legislative Reform (Industrial and Provident Societies and Credit Unions) Order 2010 has been a long time coming. It will be re-laid before Parliament
next month and will introduce many quite basic, yet far-reaching reforms that will enable credit unions to modernise and grow.
Mr Hoban: I know that my hon. Friend, as chairman of the all-party parliamentary group on credit unions, will have a great deal to say on this matter, but may I just finish my point? I may even be able to answer his intervention before he makes it.
One of the biggest changes will be to allow credit unions to admit corporate bodies to their membership. Those new members will be able to deposit in and borrow from their local credit union, which provides opportunities for investment and growth in communities. Alongside that, various deregulatory measures relax the rules on age limits for memberships, year-end dates and the ability to offer interest on deposits. These proposals should increase the appeal of local credit unions to the local community and increase their steadily expanding membership still further.
Damian Hinds: Many of us are waiting with excited anticipation for the legislative reform order. What expanded role does the Minister see credit unions potentially playing as a result of the changes in the legislative reform order both in a big society context and in encouraging enterprise because of being able to work with corporate bodies as well as individuals?
Mr Hoban: It would be a way for credit unions to make the greatest opportunity of this. We are trying to open up more possibilities for the financial and mutual sector through a number of our measures. I go back to the debate about capital. One of the challenges that I put to the building society sector and others is that if it had the opportunity to raise more capital, what would it do with it. How would it benefit more people as a consequence of having that flexibility? I say to my hon. Friend that corporate members could include charities and voluntary groups, and their deposits could help credit unions to expand their base, so that they can lend more to local communities. There is an opportunity there for the voluntary service to help expand that base. That will also help to create a much more viable credit union sector. Like me, my hon. Friend will have had conversations with Mark Lyonette, who wants to make sure that we move the credit union sector on to a much more stable and viable footing, enabling it to take deposits from others and pay interest on them.
Mr Hoban: That point about access to credit unions in Wales was made before the hon. Gentleman came into Westminster Hall for the debate. We need to learn the lessons. The Treasury is very open to new ideas and any thoughts that he has about why Wales has that degree of access to credit unions would be much appreciated.
We will also implement the Co-operative and Community Benefit Societies and Credit Unions Act 2010 once the legislative reform order comes into force. That will modernise the industrial and provident society name and the powers available to update the legislation in the future. Other reforms include a consultation on the use of electronic communications in the mutual sector. That consultation closed at the end of January, and we will lay an order shortly to enable mutual societies to have the option of using electronic communications to engage with their members, which would reduce their costs.
Before I go on to talk about the regulatory framework, let me address the issue of Northern Rock. That issue was raised in the Treasury Committee, and I am aware of the work that has been done on it by Kellogg college. There is a degree of elegant circularity about remutualising Northern Rock, given its antecedence. But of course the responsibility for managing the Government's investment in Northern Rock rests with United Kingdom Financial Investments Ltd. UKFI gave evidence to the Select Committee, and if the hon. Member for Harrow West reads the transcript of that sitting, he will see that it is open to ideas about the remutualisation of Northern Rock. The principal objective of UKFI is to promote and create value for taxpayers from its management of our stakes in banks, but it also has to pay due regard to financial stability and act in a way that promotes competition. Clearly a remutualised Northern Rock might help it to do those things.
Mr Hoban: Before I give way to the hon. Gentleman, I will just say that the taxpayer has a £1.4 billion stake in Northern Rock, so any solution in terms of remutualisation would need to identify a clear way in which the taxpayer would receive a return on that investment. Furthermore, it is not clear how a large Government shareholding in a mutual would affect mutual status.
Mr Thomas: As I said in my opening remarks, I absolutely acknowledge the point about the taxpayers' interest in Northern Rock. However, rather than just allowing the people at UKFI to sit there waiting for ideas, will he write to them and specifically ask them to conduct a feasibility study into the remutualisation of Northern Rock, addressing the taxpayer issue that he quite rightly mentioned as well as other wider issues? Will he take proactive action on this issue?
Mr Hoban: If the hon. Gentleman reads the transcript of the evidence given by UKFI to the Treasury Committee, he will know that remutualisation is very much on its agenda. In conjunction with Northern Rock, it is about to appoint advisers to advise it on the disposal process. I know that UKFI is looking at remutualisation. However, I have yet to see a proposal that demonstrates why remutualisation is in the interests of taxpayers. Nevertheless, we are open-minded on this issue, and we will wait to see a viable proposal emerge.
Regarding the regulatory framework for mutuals, we will bring Northern Ireland credit unions within the regulatory structure that is in place in the rest of Great Britain. That will enhance consumer protection and
ensure that those credit unions become part of the Financial Services Compensation Scheme, which will enable their members to appeal to the Financial Ombudsman Service. It will also enable those credit unions to seek approval to enter new markets and therefore help them to grow. In addition, we are looking at the registration and regulation of industrial and provident societies as part of our review of the regulatory architecture. I know that that is a concern of the co-operative movement and we will seek views on it shortly.
The hon. Member for Harrow West raised the issue of an objective on diversity for the new regulatory structure. Again, that point has been raised with me before. My concern is to ensure that the new regulators, learning from the mistakes of the past, focus on what matters-confidence in financial services, and the stability
and soundness of institutions. That should be their driving force and I do not think that an objective on diversity would fit within the new framework.
We want to see mutuals grow and thrive. We are introducing measures on legislative reform and new capital levels, and we are offering greater support to the mutual sector. Mutuals have a big role to play in the future development of financial services, and this Government are keen to do all we can to ensure that they continue to provide an important service to communities across the UK.