Labour left the NHS with record levels of public satisfaction, record low waiting lists and world class hospitals such as those at St Helens and Whiston. It is becoming increasingly clear that the NHS is moving backwards because of this Government’s cuts and broken
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promises. I have no doubt that that will inform the choice that people will make tomorrow at the ballot box.
Mr Alan Meale (in the Chair): I call the Minister to reply. As an ex-Whip, you will be aware that you have extra time—11 minutes will be added to our debate because of the Division.
3.33 pm
The Minister of State, Department of Health (Mr Simon Burns): Thank you for that, Mr Meale. It is a pleasure to serve under your chairmanship.
I congratulate the hon. Member for St Helens North (Mr Watts) on securing this important debate. I take the opportunity to pay tribute to the many who work so hard to deliver high-quality NHS services and health care for the benefit of his constituents and the constituents of the right hon. Member for Knowsley (Mr Howarth) and the hon. Member for Blackley and Broughton (Graham Stringer). I pay particular tribute to the St Helens and Knowsley Teaching Hospitals NHS Trust’s approximately 4,500 staff and its many trainee specialty doctors, who bring a consistently high level of care to patients throughout Merseyside and Cheshire.
The trust has a track record of first-rate clinical performance. As we heard, it achieved three stars and consecutive double excellent ratings from the Care Quality Commission, a feat that was maintained in 2010. It also achieved the highest score nationally for cleanliness in the recent national in-patient survey. The people of St Helens and Knowlsey can be very proud of what has been achieved. The hospital’s staff do a tremendous job, and the Government will support and empower them and all front-line staff in continuing to improve services free from the interference of meddling politicians in Westminster—and free at the point of use for all who are entitled to use the national health service.
The fact has been underlined that in 2010-11 we increased PCT allocations for the area to just under £600 million, a cash increase of £17.2 million or 3%. I know that the House will share with me the pleasure of knowing that, in the last two years for which figures are available, there was an increase in the number of nurses, consultants and doctors who serve the local community.
The hon. Member for St Helens North raised the important issue of PFI contracts. I shall deal with this topic in two parts. First, I shall outline the coalition Government’s approach to the private finance initiative generally. Secondly, I shall examine the situation at St Helens and Knowlsey.
The Government confirmed at the end of last year that we remain committed to public-private partnerships, including those delivered via PFI, if they can be clearly shown to represent good value for money. Such arrangements will continue to play an important role in delivering NHS infrastructure. However, we believe not only that too many PFI schemes have been undertaken but that some were too ambitious in their scope, a point made in an intervention by the hon. Member for Blackley and Broughton.
Mr Watts:
Will the Minister say which PFI schemes should not have gone ahead? Frankly, we had a legacy of neglect under the previous Conservative Government,
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and most people believe that we should increase the hospital building programme, not decrease it. Will the Minister itemise those schemes?
Mr Burns: I do not share the hon. Gentleman’s blinkered view of what went on in the health service prior to May 1997. I am probably of a more generous spirit, in that I am prepared to pay tribute to the achievements of the last Labour Government, although it would be more difficult to discover those of the Wilson-Callaghan Government and before that the Wilson Government because of the chronic economic situation.
Unfortunately, the hon. Gentleman is not as generous of spirit; he seems to think that everything changed in May 1979 and did not improve again until May 1997, despite the fact that for every year between those dates we saw a real-terms increase in health spending. Indeed, health spending went up from just under £9 billion a year in 1979 to more than £39 billion in 1996-97, which at the time was an incredibly large sum, although due to inflation and other factors, it now seems far more modest. However, I am prepared to be more open-spirited and to acknowledge achievement when justified, but also to criticise when justified.
Derek Twigg: No one suggested that everything was renewed and changed under the previous Labour Government, but there was record investment and an unprecedented hospital building programme. How many hospitals did the Thatcher and Major Governments build?
Mr Burns: This is the point. Perhaps the hon. Gentleman is taking a punt on something with which he is not very familiar, but if he had been in the House in the mid-1990s, he would know beyond doubt that there were record levels of investment in the NHS. Even he said, looking at the report in front of him, that the Major Government used PFI, and there was considerable investment in infrastructure. He would probably argue—with some justification because one can always argue this—that there should have been more investment, but there was more. I shall give one example, but—
Mr Burns: I will. There are so many examples of old and dilapidated buildings or buildings that were past their sell-by dates that the Thatcher and the Major Governments knocked down and replaced through new investment. One example was the moving of the European-renowned burns and plastic surgery facility on a Billericay site in Essex, which wanted to expand to maintain its position at the forefront of providing highly specialist services and was moved to Broomfield. I remember a particularly happy day in February 1997 when, as a junior Health Minister, I accompanied the then Prime Minister to open it.
May I now get back to the point I was making to the hon. Member for St Helens North? However reasonable the hon. Member for Halton is trying to be, his hon. Friend was not quite so generous, suggesting that everything was appalling prior to 1997 and everything was magnificent after it. The hon. Member for Blackley and Broughton rather unfortunately brought the speech of the hon. Member for Halton to a bit of a halt by highlighting
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some of the perceived criticisms of the PFI system under the Blair and Brown Governments, but the hon. Member for Halton very neatly sidestepped the issue. He did not want his story of good news on investment in hospital buildings to be punctured, and neatly avoided it.
Mr Watts: Will the Minister give way?
Mr Burns: I will, but then I am going to make progress.
Mr Watts: The Minister must understand that St Helens was served by three Victorian workhouses. After the Labour Government were elected in 1997, three brand-new, state-of-the-art hospitals were built and we had a walk-in centre, new GP services and more doctors and nurses. He should understand that my experience is that after 1997 there was massive investment, and before 1997 there was very little.
Mr Burns: To pick up the point made by the hon. Member for Blackley and Broughton, until October last year, I, too, for the 13 years of the previous Labour Government had a hospital in my constituency that was an old, Victorian workhouse, with ancillary wards that were improved Nissen huts. We could go round the country and find many buildings that needed improvement.
I am sure that Labour Members will accept that even the NHS is restricted in that it cannot have unlimited funding, there will be priorities for improvements and reinvestment, and not everything will be done all the time. The process is ongoing. To answer another point before I focus on St Helens, the hon. Member for Halton asked about what is happening to the capital spending settlement and programme. As I am sure he is aware, as an outcome of the spending review, the Government have a capital spending settlement up to 2014-15, and capital will continue to be used to provide investment for NHS development, as well as PFI.
Derek Twigg: How many hospitals?
Mr Burns: The hon. Gentleman wants me to list some more new hospitals. There is the Chelsea and Westminster hospital on Fulham road, which was a flagship hospital for the centre of London initiated by Baroness Bottomley, I believe. I could continue round the country, but I will not because my time is limited. I think that the hon. Member for St Helens North would prefer it if I spent more time discussing his local PFI project, because there is a lot to be said to clear his mind and reassure him, if only he has the open ears to listen; an open mind would help as well.
As the Government confirmed at the end of last year, where they can be clearly shown to represent good value for money, we remain committed to public-private partnerships, including those delivered via PFI. Such arrangements will continue to play an important role in delivering future NHS infrastructure. However, the Government also believe that not only have too many PFI schemes been undertaken, but some were too ambitious in their scope. The Treasury has now reviewed the value for money guidance for new schemes and looked at how operational schemes can be run more efficiently. We are clear that the focus should now be on releasing efficiencies at the many existing PFI schemes.
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In January, the Treasury published new draft guidance, “Making Savings in Operational PFI Contracts”, which will help Departments and local authorities to identify opportunities to reduce the cost of operational PFI contracts. As part of that initiative, my noble Friend Lord Sassoon, the commercial secretary, launched four pilot projects to test the ideas raised in the Treasury’s draft guidance. The focus of the pilots is to find efficiency gains and savings within the PFI contract itself, allowing the quality of care for patients to remain the priority. The pilots should end by the end of this month. The lessons learned will be used to finalise the Treasury guidance and to improve other relevant PFI contracts, including the one at Whiston hospital. One essential element is that all NHS trusts will retain any savings made to reinvest in improving patient care.
The other important aspect of operational PFI schemes and their cost to local health economies is their effect on NHS trusts seeking NHS foundation trust status. The coalition Government have set a clear commitment for all remaining NHS trusts to achieve foundation trust status by April 2014. That policy will finally realise the ambition of the previous Labour Government. It is about ensuring high quality and sustainable NHS services by giving trusts the freedom to serve their patients to the very best of their ability, unhindered by top-down bureaucratic control.
An issue facing some NHS trusts in their move towards attaining FT status is the affordability of their PFI schemes, as hon. Members are aware from examples in their constituencies. We are tendering for an independent review to establish where PFI schemes may, in some organisations, be the root cause of problems that prevent them from becoming foundation trusts. St Helen’s and Knowsley NHS Trust is one such organisation, and will be considered as part of the scheme. In addition to the independent assessment, the Department and the NHS are developing solutions in a systematic and comprehensive way to manage the PFI schemes in the very small number of trusts where a local or regional solution cannot be found.
When the current management of St Helens and Knowsley NHS Trust signed their PFI agreement in 2006, with the agreement of the then Secretary of State for Health, Patricia Hewitt, and other Ministers, local PCTs agreed to make up the shortfall between the revenue generated by the hospital through the national tariff and other means and the cost of the unitary payment—the annual PFI charge, which was some £20.3 million. Unfortunately, that decision built a deep lack of sustainability into the trust’s finances—a lack of sustainability that the trust, the strategic health authority and the Department are now working extremely hard to rectify. To that end, the trust’s board and the strategic health authority, NHS North West, are developing a tripartite formal agreement, or TFA, to be agreed with the Department of Health, which will support the work to achieve foundation trust status.
Every trust is required to produce a TFA, setting out how it plans to progress to FT status by 2014, the challenges that it faces and how it plans to overcome them. In the case of the St Helens and Knowsley trust, the TFA is still in draft form and is very much a work in progress. Beyond what was leaked to the Liverpool Echo and to the hon. Member for St Helens North, I have not
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seen the draft and while discussions are ongoing it would be inappropriate for me to do so and I will not see it. Therefore, it would also be inappropriate at this stage to publish the documents.
Mr Watts: Minister, the local community and the local MPs will believe that that is a totally unacceptable stance to take. It is clear that there are grave doubts about the future financial viability of the trust—the St Helens and Knowsley Teaching Hospitals NHS Trust, including the Whiston hospital—and that a number of options are being considered in the current discussions about the trust. For the Minister to hide behind the fact that he does not want to see that report removes the accountability that we would expect him to have. Will he reconsider that decision and will he look at that document? Also, will he rule out some of the options, including the private provider option? If he does not do those things, people will continue to suspect that his Department is being driven by the fact that it wants to privatise our hospitals, but he and other people in the Department do not want to see the documents that are being discussed now. I can see no reason why he should not see that draft document and why we should not see it.
Mr Burns: First, of course, the hon. Gentleman has seen the first draft document—it was leaked to him and I think that he held it up during his remarks this afternoon—so it is slightly stretching the point to say that local MPs have not seen it. I have no doubt that he has shown it to his hon. Friend the shadow Minister for Health, the hon. Member for Halton, and I would be rather surprised if the right hon. Member for Knowsley has not seen it too.
Mr Brian H. Donohoe (Central Ayrshire) (Lab): I have not seen it.
Mr Burns: Of course the hon. Gentleman, who has just come into Westminster Hall, has not seen it. He is a Scottish MP, and it may have escaped his notice but the English Department of Health has no responsibility for the day-to-day running of the Scottish health service.
Mr Watts: The Minister has seen it.
Mr Burns: No. I have not seen it. I took a deliberate decision not to see the draft—
Mr Burns: Because it was a first draft document, drawn up between officials in the Department of Health, the SHA and the trust, and I do not think that at that stage it was appropriate for me to see it. Also, I suppose that if one is being totally candid, which often gets me into trouble when the hon. Member for Halton or particularly the hon. Member for Leicester West (Liz Kendall) are around, it does make it slightly easier for me because I can say, “In all honesty, I have not seen it.”
I will now make some progress, because I think that what I am about to say may answer some of the questions put by the hon. Member for St Helens North and it may well help the right hon. Member for Knowsley, too. If it does not and I have time to do so, I will give way then.
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The TFA process should be completed soon, with the final approved version hopefully being published some time in June or July. I can confirm—if the hon. Member for St Helens North would like to listen to me, because I think that he will find what I am about to say particularly interesting, as he has expressed a degree of confusion about the issue—is that one of the options under review is not, I repeat not, to somehow “privatise” the NHS. As I said to the hon. Gentleman during Health questions last week, this Government will never privatise the NHS and we have no intention of doing so at the St Helens and Knowsley trust.
Perhaps it would be a help if I took a moment to explain the process through which the trust, like all trusts in a similar position, is progressing towards becoming an FT. First, the trust, along with local health authorities, will attempt to find a local solution to whatever financial issues there may be. If a simple local solution cannot be found from within its own resources, then a more radical solution may be necessary, such as merging with another trust and examining whether services need to be reconfigured. On that point, it may be of some consolation to Opposition Members that the benefits of a merger with another trust are that it reduces the percentage of the unitary payment of the PFI in relation to income, which helps with the financial situation, and for other FTs in a merger it increases the income base and economies of scale become possible, which again potentially helps with the finances of a trust.
If the problems cannot be resolved in that way, we would work to a national solution, which is being developed by the Department and which will be agreed with the Treasury. If there is no foreseeable solution, a final option would be to consider tendering the management of the trust. Under that option, management teams from within the NHS, from a social enterprise or from the private sector would put forward their ideas on how to find a way forward for the trust.
Derek Twigg: Will the Minister give way?
Mr Burns: May I just continue, because this is rather important?
While that option is a very long way down the line of potential solutions, it is only what is currently being done at Hinchingbrooke hospital in Huntingdon, in the constituency of the Under-Secretary of State for Justice, my hon. Friend the Member for Huntingdon (Mr Djanogly). The decision on that hospital was taken by the previous Labour Government, when the right hon. Member for Leigh (Andy Burnham) was the Secretary of State for Health. So it is not a new option dreamt up by the present Government since coming into office. We are simply taking an option that is already on the table and that was there when we came into power, which the previous Secretary of State for Health—a Labour Secretary of State for Health—was prepared to accept.
Derek Twigg: Will the Minister give way?
Mr Burns:
Just one minute. I must say that at the time, during the discussions about what should happen to Hinchingbrooke hospital and about the use of the option that the right hon. Member for Leigh agreed to, nobody said that that was privatising the hospital, because it was not. If—and it is a big if—that solution
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were to be considered the right way to solve the problems at the St Helens and Knowsley trust, that would not be privatisation either.
Derek Twigg: With respect to the right hon. Gentleman, we are not comparing like with like.
Derek Twigg: We have a double-excellent hospital at St Helens and Knowsley; it has excellent financial management and excellent services. It meets all the standards. I put the question back to the Minister. On that basis, why is the Department—whether we call it the SHA or not, it is part of the Department and it has responsibility to the Secretary of State—
Mr Burns: It is not part of the Department.
Derek Twigg: Well, I understand the SHA discussed this as an option with the hospital. I want the Minister to ask my question. Did the hospital voluntarily reject the third option of a private sector provider coming in to manage or run the hospital? Did it refuse that option and also say that it would not accept the cuts being asked of it by the SHA as that would put patient safety at risk? Is that correct or not? If he does not know, will he find out?
Mr Burns: I can advise the hon. Gentleman that it is not correct. That is the advice—
Derek Twigg indicated dissent.
Mr Burns: The hon. Gentleman could at least have the decency to listen to what I am saying first. The advice that I have been given is that that is not correct.
Derek Twigg: What is not correct?
Mr Burns: That the trust rejected consideration, or the possible consideration, of that option, because—[ Interruption. ] What I want to do is to put it in context. As I said in my comments earlier, that is very much a last possible solution if the other solutions are not able to be worked out.
Mr Watts: Will the Minister give way on that point?
Mr Burns: Let me just finish. If I have been given the wrong information, and I do not believe that I have been, the hon. Member for Halton will be the first person to find out, because I would hate to mislead him.
Derek Twigg: Will the Minister give way?
Mr Burns: No. I have answered the hon. Gentleman. He said, “Did the trust reject the proposal because they found it unacceptable and they thought it wasn’t in the best interests of patients and patient safety?” That is what I—
Derek Twigg: Will the Minister give way?
Mr Burns: All right, I will give way for the last time.
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Derek Twigg: I understand that the SHA, not the hospital trust, suggested as a third option having the private provider, on the basis that the hospital—I understand that it was approved by the board—would not accept what was on offer because of the cuts that it would have to make and it was concerned about patient safety. It therefore would not accept voluntarily an option to have a private sector provider come in. The question is whether that option was proposed by the SHA and whether the trust, because of concerns about patient safety, rejected it on that basis, on a voluntary basis. I make that point very clearly.
Mr Burns: Right. I repeat the answer that I gave to the hon. Gentleman before. My understanding is no, that is not correct.
Mr Watts: Will the Minister give way?
Mr Burns: No. There is no further point to this.
Mr Burns: If—I will pursue the matter after the debate—there is anything in that that is incorrect, I will come back to the hon. Gentleman as quickly as possible, but my firm understanding and the advice that I have been given is that the answer is no.
May I reassert what I said earlier about the processes of the options, because it seems to be getting lost in the telling? I have said that it is important to find a local solution to whatever financial issues there may be. That is what the trust and the local health authorities are working to try to secure. If a simple local solution cannot be found from within the trust’s own resources, a more radical solution may be necessary, such as merging with another trust and considering whether services need to be reconfigured.
I think that it was the hon. Member for Halton but it may have been the hon. Member for St Helens North who said, “But nobody has ever said what other trust there might be.” I may be able to help the hon. Gentleman who asked that question. One of the options is the North Cheshire trust.
Mr Watts: Will the Minister give way on that point?
Mr Burns: Right, I will give way and then that is it—finally.
Mr Watts: I am extremely grateful to the Minister for giving way, because this goes to the heart of the matter. The lack of accountability comes from the fact that he has not seen the documents and therefore does not know what is in them. If he published the reports, he would see that there is a first draft and a second draft, and that the idea of the privatisation of the management comes from his Department. I do not want to see the Minister embarrassed. The best way for him to resolve the problem is to publish the two documents, and everyone will then be able to see that the third option was not wanted by the trust but is being driven by the Minister’s Department.
Mr Burns:
May I return to the intervention made by the hon. Member for Halton? I said that as soon as I heard anything I would get back to him. He asked whether it was the trust that said it would not accept the option, and about the patient safety and quality of care recommendation. My answer should have been “I do
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not know,” not “No.” The advice I have been given is that I do not know, and we do not know.
As time is running out, may I reiterate the process? I do not want any confusion. I have said that if a simple solution cannot be found from within the trust’s own resources, more will be done to find a radical solution, perhaps involving a merger with another trust and examining whether services should be reconfigured. Although that option is a very long way down the line of potential solutions, it is similar to the one at Hinchingbrooke hospital that was embraced by the previous Labour Government and accepted, in principle, by the former Labour Secretary of State for Health, the right hon. Member for Leigh, as the way forward in a particular hospital with a particular problem. However, even if that were, in any circumstance, to become an outcome for a hospital, to suggest that it somehow equates to hospital privatisation is nonsense, for a number of reasons.
First, the hospital will remain a wholly owned NHS hospital, with NHS assets and NHS staff remaining entirely within the public sector. Secondly, I remind the hon. Gentlemen that the hospital has achieved its record of sustained excellence in part due to the significant involvement of private sector companies, a policy that was actively encouraged under the previous Labour Government. All the Labour Members present for this debate were proud members of that Government at some point during the Administration’s 13 years. Examples of that policy in operation in the hospital are that radiology imaging equipment has been supplied through a managed equipment service provided by GE Medical Systems since 2006, when Patricia Hewitt was Labour Secretary of State for Health. Facilities management services, which the hon. Member for Halton rightly praised and which have been vital to delivering high levels of cleanliness throughout the trust, have been provided by two companies—Vinci FM and Medirest—also since 2006. The use of the private sector does not mean privatisation, nor does it lead to a poorer quality of patient service, and I hope that hon. Members will acknowledge that the hospital trust’s excellent clinical reputation is evidence of that.
This Government want all NHS trusts to become foundation trusts because they will provide better patient care. Foundation trusts will be free to respond to the needs and wishes of local people and will be far stronger, both clinically and financially. To become a foundation trust hospital, an NHS trust must prove that it has passed strict tests on clinical care—the care that patients deserve. It also must prove that it is financially sustainable in its own right, which is what all taxpayers deserve.
Hospitals that are built on sand will sink, and this Government will not stand idly by and allow that to happen—the people of St Helens North deserve no less. I am sure that in due course, when the proper procedures have been adopted and the strategic health authority, the primary care trust, the hospital trust and the Department of Health have reached conclusions, documents will be published and decisions will flow.
This is not a conspiracy; it is a sensible and coherent way to move forward and discover a viable, practical and proper decision to help what is, in many ways—as all speeches in the debate have shown—a very good hospital that has a problem because of its PFI scheme. I gently remind Members that the PFI was approved by
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the trust and the Department of Health under the Labour Government, not the coalition Government. That is what has caused the problem, and it is why a viable solution is important. I wish everyone well in seeking a solution that is relevant and meaningful to the future success of the trust.
For a variety of reasons, it is always nice to have a conspiracy theory tucked in one’s back pocket to cause concern, but this is not a conspiracy. Just as I said earlier, Americans did land on the moon in 1969, John F. Kennedy was sadly shot in 1963 and, contrary to some people’s views, Barack Obama was not born in a manger.
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Equitable Life
4.9 pm
Mr Brian H. Donohoe (Central Ayrshire) (Lab): It is good to see you in your place, Mr Meale. I thank Mr Speaker for allowing me to participate in this very short debate on a subject about which the Minister has corresponded with all Members, and which has been a problem since 1992, the very beginning of my time in this place. It has been a problem all those years, and no Government have addressed it as my constituents deserve, a fact on which I will concentrate in my speech.
Guidance has been given to Members. The Government first gave it to us in a round robin letter from the Minister on 15 November, and an update was given on 26 January this year indicating that things were moving apace and that solutions and a process had been found. I am after an update from him and the Treasury on where we are at and when the first payment will be made to those who seek and deserve compensation.
There is absolutely no doubt that there was foot-dragging during the 13 years when we were in government. I participated in debates on the other side of this Chamber and was critical of the Government of the day. I also remember occasions when the Minister was on this side of the Chamber, making all sorts of promises to the public that were most effective at the time. That is what I will concentrate on.
The place to look in order to understand a party’s position on any given subject is its manifesto. The Liberal Democrat manifesto referred to
“Meeting the Government’s obligations towards Equitable Life policyholders who have suffered loss. We will set up a swift, simple, transparent and fair payment scheme.”
The Conservative manifesto said:
“We must not let the mis-selling of financial products put people off saving. We will implement the Ombudsman’s recommendation to make fair and transparent payments to Equitable Life policy holders, through an independent payment scheme, for their relative loss as a consequence of regulatory failure.”
That was in the Conservative party manifesto for last year’s general election. Having read those, I would have thought that measures would be in place by now. We are a year into the coalition Government, and I understand that not a single payment has been made. Perhaps the Minister will update us on when it can be expected.
The Conservative manifesto says “mis-selling”. It is a somewhat unfortunate choice of phrase, as many pensioners feel that they were mis-sold an election promise by the Conservatives. That is a fairly serious accusation. I get letters in my mailbag almost weekly—34 of my constituents write to me regularly on the subject—and I am sure that that is repeated across the land and that every Member of Parliament is being written to by those most affected by the mis-selling of that fund.
More recently, the hon. Member for Southend West (Mr Amess) said in the Chamber:
“I know that the Treasury team are working extremely hard to try to balance the books, given the terrible legacy that we were left, but I must tell the Deputy Leader of the House that I am worried about the promises that were made before the general election. Some of my elderly constituents feel that we have not honoured them.”—[Official Report, 5 April 2011; Vol. 526, c. 987.]
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That is a Conservative speaking. There is concern across the House about what this Government are doing, and it must be considered.
What are the problems, and how are the Government and the Treasury addressing them? Although they made that promise, they almost immediately excluded some 10,000 elderly people from the compensation scheme because they took out policies before the September 1992 cut-off date, which seems unfair. Those trapped policyholders arguably suffered the same maladministration as the others. We were told that they would be paid 100% compensation, but they will not receive anything. That should, indeed must, be addressed.
I must concede one thing—I have already done so publicly in this place, during the last debate on the subject. Investing in anything involves taking a gamble. People must understand that even a pension scheme, which could be described as a gold-type investment, can never be expected always to go one way. It is always possible to lose money. I have seen that at first hand. At the same time, we are talking about investments made when the Government of the day—and particularly one Minister, Eric Forth—said that they did not want any form of regulation whatsoever governing the finance sector. If we trace back the history, that is where the problem was first created. There should have been regulation. The whole fund was tied up in a system that had no regulatory body to examine what was going on.
It is simply wrong for the Treasury to have revised the amount of money that will be available from the public purse for the payment scheme. It promised total payment—that is what was said and understood. That is what was in the correspondence I received. I was challenged at the hustings during the run-up to the last election, and that was what was read to me as the policy of this Government. They made that clear to those constituents of mine who were concerned about the question.
Even to suggest that the money is not being paid as intended due to this country’s financial situation is absolute nonsense. Anyone could see that the global financial crisis would affect Government thinking and that the Opposition of the day were being foolhardy in making the promises they made. It almost indicated—to some of my constituents, at any rate—that there was no chance that the Tories would form an Administration. That is part of the reason why they were in a position to make such promises, which still have yet to be met.
The Minister said in a written answer:
“The Government have accepted all the parliamentary ombudsman’s recommendations in full. The Government’s ambition is to start making payments in the middle of this year.”—[Official Report, 31 March 2011; Vol. 526, c. 472W.]
Can the Minister indicate or commit to a date when that will start to happen? Who will first receive the moneys outstanding?
There is no doubt whatever that, just as with previous Governments, there has been delay after delay. It is immensely frustrating, particularly for those very elderly people who have been deprived of the pension they expected from the company. The matter has been addressed by ombudsmen and all sorts of courts, yet even today no money has been paid. I am looking for an update from the Minister, and I expect to hear something this afternoon.
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4.18 pm
Neil Parish (Tiverton and Honiton) (Con): I do not know that I necessarily thank the hon. Member for Central Ayrshire (Mr Donohoe) for how he has introduced this debate. For 13 years, the Labour Government prevaricated about doing anything about Equitable Life. To be blunt, many policyholders believed that it was the Labour Government’s policy to wait long enough that they would not have to pay out to so many people. He has stood up and criticised what we as a Government are trying to do to put that right, yet his party lived through probably the most profligate times that any Government ever lived through and did absolutely nothing about the problems with Equitable Life.
I sat on a European inquiry on this issue, because Equitable Life sold policies not only in this country but in the Republic of Ireland and Germany. The problem was that it was mis-selling—it mis-sold the product by saying that these were with profits insurance policies when, of course, the profits it predicted were never going to be met. Every time we inquire into the matter, we find that all the people who used to manage Equitable Life have mysteriously disappeared and that the new bunch of people running it had no knowledge of what was happening before. We never seem to be able to pin down exactly who was to blame among all the people who were valuing those policies.
The whole issue now rests on the question whether the policies were mis-sold and whether the company acted outside the legislation. I say to the hon. Gentleman that the previous Government had plenty of time to look for and find a way of compensating those who had lost money. Why did they refuse to accept the ombudsman’s report? Why did they go to virtually every court they could find to avoid paying any compensation?
Mr Donohoe: I should like the hon. Gentleman to address one issue. What was in his party’s manifesto and why does he think that this Government have acted under the auspices of that particular entry in the manifesto?
Neil Parish: The manifesto referred to compensating people who had policies with Equitable Life and lost money, and what we are now introducing is a package of measures to compensate them. Whether we can compensate them 100% or not is a difficult question, especially in the financial circumstances that we inherited from the previous Government. I made the point at the beginning of my speech that the hon. Gentleman’s party had the opportunity, when tax receipts were flowing into the Treasury and when there was plenty more money sloshing around in the economy, to make those payments. That was a much less painful time than now, when we have to take into account the financial situation in which we find ourselves. The Minister will explain exactly what we are doing.
I agree with the hon. Gentleman that people want to know exactly when they will receive compensation. I hope that we will hear about that from the Minister. Many of us would like to see as much compensation as possible. In fact, we would like to see greater compensation, but we have to realise that the funds are competing against everything else for which the Government have to find money, at a time when we have inherited such incredible debts. I am sorry to say it, but I find it almost unbelievable that the hon. Gentleman can stand up and
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accuse this Government of not honouring their pledges when, as I have said, the previous Government had plenty of time to do something about the issue. What we have done is to put together a package of measures that will find ways of compensating people.
This is about when and on what date the policies were sold. Some of those issues are sensitive and I imagine that people who bought policies before 1992 are concerned, because they were also mis-sold policies. The issue has been painful for many of my constituents and many others throughout the country because of the money they have lost, but the one thing we have failed to talk about in this debate is that we have to be absolutely certain that this will never happen again. Lessons must be learnt, because this has caused so much suffering for people who were putting money away for their retirement. Do not forget that all Governments—Conservative Governments in particular—always want people to save for their retirement in order to look after themselves. In this case, people lost money, which is to be regretted.
I am happy to have spoken in the debate and will be interested to hear what the Minister has to say. The coalition Government have introduced a package of measures that will give people compensation after 13 years of a Labour Government who failed.
Mr Alan Meale (in the Chair): Before I call the Minister, I apologise to you, Mr Donohoe, because I presumed you had given permission to the last speaker to speak. I tell the hon. Member for Tiverton and Honiton (Neil Parish) that it was wrong of me to bring you in. Having said that, at least in the latter part of your speech, you joined Mr Donohoe in hoping that we will get clarity on this issue.
Neil Parish: I apologise. I did not realise that I had to do that. I did not do it on purpose.
4.25 pm
The Financial Secretary to the Treasury (Mr Mark Hoban): I congratulate the hon. Member for Central Ayrshire (Mr Donohoe) on securing this debate. It is the first time for some time that we have had the opportunity to discuss Equitable Life, and I am grateful for the opportunity to update Members on the progress that we have made on resolving the issue.
The hon. Gentleman was right to highlight that some time has elapsed since these problems first arose. A number of reports that established that maladministration had taken place had been published, but the previous Government failed to act on them. When the ombudsman published her report in July 2008, we immediately accepted her recommendations and her findings of maladministration. We were clear that compensation should be paid for relative loss, but we also accepted the second leg of that recommendation, which was that it had to be subject to the constraints of the public purse. We have been clear throughout. If the hon. Gentleman looks at the speeches that I have made in this Chamber and in the main Chamber on Opposition day motions, he will see that we have been explicit about the two legs of the ombudsman’s recommendations. As my hon. Friend the Member for Tiverton and Honiton (Neil Parish) has said, if the issue had been resolved earlier, perhaps policyholders would have been in a better position than they are now.
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I remind the hon. Member for Central Ayrshire that, while we accepted the ombudsman’s findings on the day on which they were published, Labour Ministers waited until the January of the following year before accepting only some of her recommendations, and they were challenged on that in court.
The hon. Gentleman asked when we are going to make payments and claimed that there had been a series of delays. However, I made it clear in the House last July, when I made an oral statement on the day on which we published Sir John Chadwick’s work, that we would start to make payments before the end of the middle of this year—that is, before the end of next month—and it remains our intention to do so. I am not sure where these mythical delays have emerged from, because over the course of the past nine months it has been clear when we expected to start to make payments.
Mr Donohoe: Will the Minister be specific and say what the payments will be and when they will start to be made?
Mr Hoban: As I have said, we will start to make payments before the end of next month. I will address the structure of the payments and the next formal step in the process later in my speech.
We have been clear from the date on which the coalition was formed that we want to end the plight of policyholders. Indeed, one of our first pledges—it is in our coalition agreement—was to implement the ombudsman’s recommendation to make fair and transparent payments to Equitable Life policyholders for their relative loss as a consequence of regulatory failure. We have kept that promise. In the year since we came into government, we have made significant progress towards achieving that ambition. Last July, we introduced the Equitable Life (Payments) Act 2010, which gave the Treasury the authority to incur expenditure when making the payments. I am grateful to both Government and Opposition Members for supporting the 2010 Act and for allowing it to receive Royal Assent to an accelerated timetable. That has enabled us to press forward with our preparations for making payments as soon as possible.
We published Sir John Chadwick’s advice on the financial losses sustained by policyholders, as well as the calculations of the actuaries, Towers Watson, of the relative loss figure. At that time, I invited all interested parties to make representations to the Treasury so that they could be considered as part of the preparations for the spending review. We considered the full range of those representations, including those from individual policyholders and lobby groups, such as the Equitable Members Action Group and Equitable Life Trapped Annuitants, and from Equitable Life itself. After final refinements of the calculations by Towers Watson, we quantified the relative loss at £4.1 billion. That is based on the Government’s full acceptance of the ombudsman’s findings of maladministration. That is more than 10 times the figure arrived at through Sir John Chadwick’s methodology, which was based on the previous Government’s limited acceptance of the ombudsman’s findings. In last October’s spending review, we announced that approximately £1.5 billion would be made available for payments to policyholders through the scheme. That is perhaps not as much as we would have liked but, as
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the ombudsman herself has acknowledged, the impact of the scheme on the public purse has to be taken into account.
It is also important to note that, even in the midst of last year’s understandably constrained spending review, we still found a way to cover the losses of the with-profits or trapped annuitants in full. That was achieved by paying their losses through annual payments that reflected the structure of their policy. Those policyholders were particularly vulnerable to their losses because they were unable to move their funds elsewhere or mitigate the impact of their losses through employment. They were also generally the oldest policyholders.
The hon. Member for Central Ayrshire raised his concerns about the exclusion of those with-profits annuitants who purchased their policy before September 1992 from the scheme. He is not the first to do so, but this is an important opportunity to restate what I have said in correspondence to a number of hon. Members and what I said in the Committee that considered the 2010 Act. In her report, the ombudsman recommended that the aim of the scheme should be
“to put those people who suffered a relative loss back into the position that they would have been in had maladministration not occurred”.
With-profits annuitants who bought their policies before September 1992 did so before maladministration could have affected their investment decision. The first returns that the ombudsman found were affected by maladministration were those of 1991, which would not have influenced policyholders’ decisions until September 1992. Once a with-profits annuitant had purchased their policy, they did not have the option to move it elsewhere. Therefore, the correct question is not what these policyholders would have received if they had invested in a different company or had transferred their policies at some date after September 1992, but how their Equitable Life policy would have performed if maladministration had not occurred. Calculations by Towers Watson show that, if there had been no maladministration, those policies would not have performed better than they actually did, so no loss has been suffered.
For pre-September 1992 with-profits annuitants, the reduction in the levels of annuity payments is largely due to a combination of circumstances, such as poor investment market performance and the fact that early annuity payments were artificially high due to the structure of the product and over-bonusing. I understand that this is a complex issue, and I have happily engaged in correspondence and discussions with hon. Members on it. However, I hope that my explanation about the situation facing with-profits annuitants clarifies our position.
I want to move on to the principles that have guided our decisions on Equitable Life. At all times we have sought to ensure that our choices have been both fair and transparent. In that vein, we set up an independent commission to advise on the distribution of funds to people with policies other than with-profits annuities. The commission reported in January and we accepted the principles it recommended: that we should introduce a pro rata allocation of funding in proportion to the size of relative losses suffered; that we will take a single
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policyholder view wherever that is fair and practicable to offset relative gains against relative losses for individuals with more than one policy; and that we should announce a minimum amount in the region of £10 beneath which payments should not be made. The reason behind that decision is that administering payments below that amount would be disproportionate to the administrative costs of making them in the first place. Subject to practical constraints, payments to the very oldest policyholders and the estates of deceased policyholders should be made an absolute priority. I want to make that clear to hon. Members today.
We are working on translating those principles into a quick and efficient payment scheme. That work is nearly complete and, as promised during the debates on the 2010 Act, I will be placing a scheme design document before Parliament imminently. In that document, hon. Members will find details on how the new payment scheme will work, including information on who will receive payments, how those payments will be calculated and how they will be made.
We have appointed National Savings and Investments as the scheme delivery partner to oversee that process. I am confident that its experience in processing large numbers of payments makes it the best choice for this important and complicated role. To reduce the complexity of the scheme, we announced in the spending review that payments will be both tax-free and should not affect eligibility for tax credits. That is both fair and sensible, and I know that hon. Members here today will welcome it. A statutory instrument introduced under the 2010 Act to put that into effect is currently before Parliament, and it will be debated shortly.
I want to make one final point to set policyholders’ minds at rest. Policyholders do not need to do anything to claim their payments. Those operating the scheme will contact them in the first instance. A website and call centre will be up and running for the duration of the scheme to guide policyholders and address any queries they may have.
Mr Donohoe: Will the Minister tell me for how long the scheme will be up and running and whether payments will be made over a three-year cycle?
Mr Hoban: The hon. Gentleman has raised an important point. We need to distinguish between two groups. The first is the eligible with-profits annuitants. Payments will be made to them over the lifetime of their policy. That has enabled us to extend the cost of this beyond the spending review and therefore to spend more on resolving the problem than would otherwise have been the case. Other policyholders who have suffered losses and are eligible for compensation will receive a single payment at some point over the next three years, with priority being given to the oldest policyholders and the estates of deceased policyholders. That is to ensure the cost of the scheme is manageable and that the scheme is deliverable in the period.
We have spent a lot of time making sure that the administration and delivery of the scheme works as effectively and as quickly as possible. However, I do not want to give any false promises to people. We said that we would start to make payments before the end of next month. It is a three-year scheme for people, apart from for those who are with-profits annuitants. For with-profits
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annuitants, payments will be made over their lifetimes, which is the right way to maximise the amount of money available to policyholders given the economic situation that we inherited.
I look forward to hon. Members’ comments on the scheme design document, which aims to be as simple and clear as possible both for policyholders and for those who take a more detailed interest in the technical details of the scheme design. The scheme holds out a prospect that policyholders will receive compensation, and it brings to an end a long-running saga that has not reflected well on how such issues are handled. Of course, as my hon. Friend the Member for Tiverton and Honiton has rightly said, we need to ensure that people have confidence to save for the future. That is why, as part of our reform of financial regulation, which focuses principally on the lessons to be learned from the financial crisis, we are introducing a dedicated financial conduct regulator—the Financial Conduct Authority—which will be responsible for all aspects of the regulation of financial conduct. That will help to strengthen consumer confidence in this area, and we hope will ensure that a problem on the scale of Equitable Life does not happen again.
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Small and Medium-sized Businesses (Witham)
4.38 pm
Priti Patel (Witham) (Con): I am grateful for the opportunity to draw attention to small and medium-sized businesses across the Witham constituency. I welcome the Minister responsible for business and enterprise, my hon. Friend the Member for Hertford and Stortford (Mr Prisk), to the debate. Like me, he is a strong champion of business enterprise and economic growth, and he has a great deal of experience in the business sector. I know that he understands from first-hand experience many of the challenges facing businesses across the country. I also have absolute faith that he will want to hear some of the concerns and issues that I have, and that he will want to do what he can to help and support business growth in my constituency. As such, I would like to extend to him an open invitation to come to Witham and meet local business men. After today’s debate, when he has got a feel for some of the businesses we have, I hope he will grasp with open arms that compelling invitation.
By way of background, the Witham constituency has a variety of businesses across a number of sectors. That reflects its diversity and the wider strength of Essex, which I call a county of entrepreneurs. We have some great businesses and some passionate advocates of enterprise. In Witham town itself there are many shops, industrial estates, manufacturing industries and services. In the villages alongside the town, in the more rural part of the constituency, we have farms, village shops, market areas and some impressive post offices that do all sorts of creative things. They managed to survive the previous post office closure programme and I pay tribute to the work of the sub-postmasters and sub-postmistresses. Those businesses across the constituency would benefit enormously—I touched on this point in the House—if Essex was made a designated enterprise zone. That would give added zeal to the spirit of enterprise that we have in the county. May I urge the Minister to consider that, as part of the wider proposition, with Treasury colleagues? We would love to be a prime candidate for that status.
Businesses in my constituency vary in size, from one-man operations and family businesses—we have many family businesses—to companies employing hundreds, which have multi-million pound turnovers. They provide everything from glass, plastics and clothing to food. Over the years, some businesses have grown to become world-renowned household names. The village of Tiptree is synonymous with Wilkin & Sons jam. It produces the finest preserves and conserves in the world—Tiptree jam, as it is known. Last year, Crittall Windows employed more than 200 local constituents. It is a pioneer in window making and has a tremendous local history in the Witham constituency. Silver End is the garden village founded by the Crittall family. Last year, it won the Queen’s award for enterprise.
We have a dynamic company called Servowatch, which is based in Tollesbury. Witham is a coastal constituency, and Servowatch provides alarm and monitoring systems and software programmes for yachts and boats. It is very creative and highly innovative—a small, family business doing incredible things. Hayman Distillers is
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another family business in Witham. There are historic homes that are open to the public. They are creative, and house many small businesses. We have Braxted park. Layer Marney Tower is the largest Tudor gatehouse in England, and hosts the “Antiques Roadshow” programme next week. All sorts of small businesses and enterprises are based there.
As important and essential to the local community are the small business men and women who day in, day out open shops at the crack of dawn, struggle to make ends meet, and provide essential goods and services and, importantly, local jobs. I pay tribute to the local chamber of commerce and the Federation of Small Businesses in Essex for the support network they provide to many of those small and medium-sized businesses. They have been a great avenue for networking and, as I discovered not long after being elected, are a good sounding board for many of the challenges that small businesses face. More than 80% of jobs in my constituency have been created by small and medium-sized businesses. Compared with a national average of approximately two thirds, that is very high. Those businesses showed tremendous tenacity coming through the downturn with very little help from the previous Government, and keeping many thousands of local people in work. I pay tribute to them, because they have struggled and are on the front line. Their priority is to keep their heads above water while at the same time securing local jobs through this difficult period.
Many businesses did not make it through the recession. I put that down to the underlying failure of the previous Government to support private enterprise. Too many local high streets have been left struggling and dying. In Witham town we are, like many, scarred with empty premises and shop fronts.
The Minister knows that the nature of what constitutes a small business has changed over the years and decades. I am the daughter of a small shopkeeper—my parents started a business in the 1970s. The term “small business” has changed beyond all recognition compared with 30 or 40 years ago. The Minister will therefore be aware that Government policies need to adapt to the changing needs of SMEs in order to keep pace with job opportunities and the changing labour market, and to provide opportunities for the private sector to grow and avoid past mistakes. I am a champion of our high streets and independent retailers. Speaking personally, whatever the Government can do—I look forward to the Minister’s remarks—to support them is vital. I emphasise that in the past 10 years our high streets have been neglected. There are three areas where action is needed, and I would like to raise those directly with the Minister: tax, regulation, and access to credit for small businesses.
There is a lot to talk about with regard to tax. I welcome the cut in the small profits rate introduced by the Chancellor, and the cut in the main rate of corporation tax, which was subject to some debate last night during consideration of the Finance Bill. Those measures sent a clear signal that business should not face excessive demands to repay the debt legacy left by the previous Government. In contrast, the previous Government had plans to increase the small profits rate, which would have stifled our entrepreneurs and put investment and job growth at risk. However, I urge the Minister, in his
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discussions with his colleagues in the Treasury, to keep making the case for those important tax cuts for small businesses. We need to give them the freedom to succeed, and take away the shackles of bureaucratic taxes that eat away at enterprises and stifle their creativity. Businesses have felt far too squeezed for a long time, particularly given the rising costs of doing business—costs in materials, fuel and energy. Of course, tax just eats into that.
I would like to touch on the role of Her Majesty’s Revenue and Customs. It is a constant burden for business—full stop. In particular, I emphasise the attitude of HMRC towards business. I have raised with the Exchequer Secretary in previous debates a number of cases which were drawn to my attention through my casework. Given the way it conducts itself, I doubt whether anyone working in HMRC has any experience of running a business. Bureaucratic language is used. There is unfairness, a failure to get the facts right regarding individual self-assessment, and many issues arising from late-payment charges levied by HMRC. There are some desperate situations. I might write to the Minister following this debate to highlight some areas where we could work with the Treasury to introduce reforms. HMRC is over-zealous in the way it conducts itself with small businesses. We need a degree of common sense, better understanding and better dialogue. HMRC is far too faceless and bureaucratic in dealing with small businesses. We need to stop persecuting the people whom I call the nation’s wealth creators. Let them get on and do what they do best, and treat them in the right way on issues of taxation. There are some key areas of improvement for the HMRC.
On regulation, the Minister and the Government deserve a great deal of praise for the actions they have taken in the past 11 months, and for the commitment they have given to slashing the costs arising from red tape. The announcements in the Budget—long overdue—and the moratorium exempting the smallest of businesses, employing fewer than 10 people, from additional red tape for a three-year period are particularly welcome.
Businesses in Essex would welcome more support to take on apprentices, a cut in the red tape that hampers exports and more opportunities for our goods and services, in particular in the public sector. I have come across many small businesses that have struggled in that area, and more can be done. I will welcome the Minister’s thoughts. We would like to see more action taken.
The Minister must already be aware of an issue I raised with his colleague, the Under-Secretary of State for Business, Innovation and Skills, the hon. Member for Kingston and Surbiton (Mr Davey), regarding the Agency Workers Regulations 2010. They are having a significant impact and have been a constant worry for many small businesses. From talking to the businesses I have been dealing with locally, it seems the regulations will have a disproportionate impact on SMEs. Small businesses will struggle to absorb such additional costs and burdens.
I thoroughly appreciate the complexity of the issue, which was dealt with by the previous Government, the CBI and the trade unions. However, SMEs felt excluded from the process under the previous Government. SMEs tell me constantly that more could have been done on direct engagement and listening to them and their concerns. The Under-Secretary has been most helpful in taking concerns on board, but it is too little, too late, because a
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lot of the regulations were sewn up under the previous Government. I would welcome an update from the Minister on the regulations, as well as some more detail about the progress on the one in, one out rule. Businesses in my constituency definitely do not want to see more regulations and new burdens coming their way.
Clarification is also needed on the future of EU regulations. We welcomed with open arms the announcement that gold-plating would end; it was shameful that the previous Government disadvantaged British business to the extent they did. However, SMEs in Witham are eager to know how the current Government plan to protect them from further regulation by Brussels. Given my constituency’s manufacturing businesses, that is a big concern. The Minister is aware of the 2020 strategy developed in Brussels and its implications: we want assurances that it will not go unchecked. I ask for vigilance.
I also press the Minister to look at how to reduce regulation for the beer and pub sector. We have a lot of rural pubs in the constituency, and they create many jobs and have a good impact on the local economy.
Access to credit is a significant challenge for businesses in the constituency. Last autumn, I held a business advice surgery for all small businesses—with the Federation of Small Businesses and the banks, which were very good, actually—to facilitate dialogue and listen to businesses’ concerns. Obviously, without the credit lines, businesses cannot survive. My local businesses are struggling, and little progress has been made on access to credit. We welcome Project Merlin, but for me and my businesses locally it is about the money cascading down and going to the front line.
I would like to highlight an example—my constituent Amelia Rope, who runs an amazing chocolate business. She is an inspirational entrepreneur, as far as I am concerned. Her order books are growing—her clients range from Harvey Nichols to Selfridges—and she is desperate for funding. In fact, the Secretary of State saw her about a month ago. Despite even his interaction, no progress has been made with bank lending. That is simply extraordinary. Interestingly, her business seems to fall outside the scope of initiatives such as the enterprise finance guarantee, which should be available, and the banks are not helping her. I would welcome some thoughts on practical measures.
I have one further of example of where we would like to see credit going down to small businesses. A local convenience store in Witham wants to respond to local customer demand by opening a post office counter facility, and it is working with the Post Office to make what would be a good thing happen. Adapting the shop needs some investment, the cost of which is about £10,000. We have made lots of inquiries and have been told that for such a business to get any money, it would have to be making an investment of more than £1 million —that is the level of investment required under the terms of the available schemes, in particular the regional growth fund. That does not help small businesses of that nature, and certainly not that small shop, which I want to see survive, thrive, grow, expand and provide great postal services. I would welcome the Minister’s views on that as well.
To sum up, business is doing well in Essex and we want it to grow. We have the right Government with the right policies and initiatives to take away the shackles of
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regulation and other burdens. I would welcome the Minister’s thoughts, and his accepting the invitation to come to Witham at some stage to meet our local businesses.
4.55 pm
The Minister of State, Department for Business, Innovation and Skills (Mr Mark Prisk): I congratulate my hon. Friend the Member for Witham (Priti Patel) on securing the debate.
As we have heard, my hon. Friend is an outstanding advocate for small businesses in her constituency—the wealth creators, as she has rightly described them. Although I am a Member of Parliament for a Hertfordshire constituency, I recognise that just across the border in Essex there are some fantastic wealth creators. She spelled out the passion of people who start and run a business, and who take that risk to create not only wealth for them and their family but jobs for their community. We often forget that role of small and medium-sized businesses. She has mentioned a remarkable variety of SMEs, including larger businesses, the self-employed sole traders, family firms and a household name. Tiptree, for those of us who enjoy a little jam on the side, is a fantastic household name, and it is seen around the world.
I note—I will go no further than that—my hon. Friend’s bid for the enterprise zone. I add that my hon. Friend is absolutely right to spell out the role of the business representative organisations. With 80% of SMEs in her constituency in that group, the networking opportunity is crucial. In many ways, that is the foundation for our thinking, as a new Government, on mentoring and business support, which have an important part to play. Government have a role in helping small businesses. That is not to tinker and meddle in every aspect of business, as perhaps we saw under the previous Government, but to create the stable, long-term framework sought by businesses so that they have the confidence to start, to build and to invest in their ventures.
My hon. Friend has mentioned three areas in particular. I am mindful of time, so I want to respond to her points, if I can. First, with tax, we are taking a comprehensive approach, starting by simplifying a system that has become hideously complex and has for far too long soaked up too much productive time, effort and resource. Simplifying the tax system would give businesses greater clarity and certainty, allowing people who are investing and trying to build a business to have some confidence about not only the current financial year but the next. Part of the process has been cutting the main rate of corporation tax from 28% to 23% and, as she has rightly pointed out, down to 20% for smaller businesses, which is one of the best rates in the G7. However, I am sure that the Chancellor is as open as I am to her suggestion that, in the right time and when the finances allow us, we keep that direction of flow with the tax burden, by reducing the rates further in due course.
My hon. Friend has also rightly raised the issue of high streets. The charges that matter, alongside business taxes, are business rates and national insurance contributions. We have sought to double the threshold of the small business rate relief and extended the duration of the scheme by a year. At the same time, we have reversed the previous Government’s bizarre attempt to increase the cost of employing people, through national
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insurance contributions, with the express intention of keeping jobs affordable. She rightly pointed out that many of the job creators are SMEs. If payroll taxes increased, as planned, how would businesses have been able to take on new people?
Equally important in such a context is capital gains tax. I am proud to be the member of a Government who in less than 12 months took capital gains tax entrepreneurs’ relief from £2 million to £10 million. That might seem somewhat technical, but we are saying to the business owner that we want to reward hard work and endeavour, which is an important part of the change.
I was concerned about the attitude described by my hon. Friend with regard to Her Majesty’s Revenue and Customs. It has a business payments support service which, on the whole, works well, in particular with the time-to-pay initiative allowing people to defer VAT and other business taxes. However, I am not unaware of complaints about some offices and some officers, and if she writes to me I would be happy to discuss that with my hon. Friend the Economic Secretary to the Treasury, because we want to ensure that a service that exists to help people with cash flow is operating effectively and consistently.
Let me turn to regulation, which is a perennial problem for all SMEs. During the past 12 months, we have sought to change a culture rather than just a few regulations. As Sir Humphrey might say, it is a courageous step for Ministers, because it is easier to find a few elements, and to say that we have got rid of them, without dealing with the system. The one-in, one-out system is intended to deal with the core of the problem, which is to get Ministers to understand, as SME owners do, that it is not the single measure of regulation that lies heavily on the shoulders of a business, but the cumulative burden. That is why we are forcing Ministers to show, before they introduce additional costs on businesses from regulation, where they can make a corresponding cut. That is the balancing act that we are seeking to achieve.
I can update the hon. Lady. Our first statement, for the first six months of this year from January to June, shows that proposals for 157 measures have been reduced to 46. That is a 70% reduction in the volume of regulatory measures. What is encouraging about that is that just 11 have a net cost on business. Most importantly, it allows us to deliver real savings. For example, the previous Government introduced the right for employees to request time to train, and were going to extend it suddenly to every small business. That would have cost £150 million, but we are scrapping it, not because we are against training, but because many SMEs are doing it anyway. The regulation would have subjected SMEs to paperwork and processes to prove what they were already doing. That was a needless cost, and we have got rid of it.
The net result overall in the first six months will be a reduction of £3.2 billion in the cost of prospective regulatory burdens on SMEs, which is mirrored in other areas. We are scrapping 16 of the regulatory bodies that exist at the moment. We are putting sunset clauses into new domestic regulations and, as my hon. Friend has rightly pointed out, we introduced from last month a moratorium for the smallest firms on the burden of regulation for the next three years.
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My hon. Friend has mentioned EU regulations, and I shall touch on that matter, because I know that they cause great concern to her and many of her constituency businesses. We are taking three steps in this regard, first to ensure that Ministers engage far earlier in the process with Brussels so that we do not find ourselves behind the track, and that France, Italy, Germany and others have decided what the principles of the change will be. Secondly, we are ending gold-plating, whereby we have often tied the hands of UK businesses too tightly. Thirdly, on the 2020 strategy, the Prime Minister is leading the way in pressing the Commission to help small businesses, particularly with an exemption for SMEs in EU regulation. We have already taken that step in the UK, and we are looking to roll it out across the other half of the regulatory burden.
My hon. Friend has mentioned the agency workers directive and, as she has said, my hon. Friend the Employment Relations Minister is dealing with that specifically. The deal that was struck in May 2008 included a 12-week qualifying period before an agency worker is entitled to equal treatment. We recognise that some businesses will have real problems with the way that the directive will work from the autumn. If we seek to change the arrangement but do not secure the agreement of the CBI and the TUC as part of that, the danger is that we could find ourselves in a worse position. The dilemma is difficult, which is why we are consulting carefully, and I am pleased that, as my hon. Friend has said, the Employment Relations Minister is looking carefully at the matter to ensure that large and small businesses are engaged in the process.
Access to credit is also a difficult issue for many small firms. I understand the issue of Amelia Rope—what a super business it is. It can be frustrating, and I certainly find it difficult when the Government cannot intervene successfully in an individual case, but the Secretary of State is leading the way in challenging the banks to make sure that they are not only lending, but behaving reasonably.
Neil Parish (Tiverton and Honiton) (Con): Will the Minister give way?
Mr Prisk: If my hon. Friend does not mind, I want to answer the questions asked by my hon. Friend the Member for Witham.
We are taking various steps to help SMEs. First, we have secured an effective lending code and an appeal process, so that, for the first time for a dozen years or more, businesses can tackle the unreasonable behaviour that they sometimes encounter. I have encouraged hon. Members—I suspect that I do not need to encourage my hon. Friend—to back up their businesses, because that is the sort of direct action that has an impact on the chief executive of a major bank.
Secondly, we are extending the enterprise finance guarantee—it is not directly relevant to Amelia Rope’s business—so that a further £2 billion of lending can be unlocked. For example, in Essex we have seen 397 businesses secure EFG funding to the value of around £34.5 million. I recognise that that is not the only answer, and my hon. Friend rightly has raised the issue of capital. Debt funding is important, but for many SMEs the capital side—the equity side—is also crucial. That is why we have sought to provide an additional
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£200 million through enterprise capital funds, which have been designed deliberately to unlock a total of £300 million—£200 million plus £100 million—in equity funding for capital investment for businesses.
Alongside that—this is specifically relevant to the regional growth fund—we recognise the value of business angels. I am a great believer that business angels sitting alongside a business often bring not only funding, but a little grey hair—I declare an interest in that aspect—in terms of experience. We must ensure that small businesses have someone to bring experience of funding. That is why the regional growth fund has been able to extend the way in which we invest through a business angel co-investment fund. The Government should be careful not to invest public money in the wild belief that we have great wisdom in what to invest in, but if we invest alongside those who are experienced, and have a little skin in the game, we can make a sensible investment and grow that market.
That leads me to a broader point about access to credit. I strongly believe that although we need to take short-term measures with banks, we must deal with the long-term issue of competition in the banking system. If we get more entrants—I believe that we will—we will have a golden opportunity to enable people to choose. Every market works when there is a choice of providers.
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The problem with our banking system at the moment is that most SMEs have a choice between three or four players who have similar terms.
My hon. Friend has raised some excellent points about tax, regulation and credit, as well as about how the agency workers directive will work. She has rightly pointed out that we must enable not only the CBI and larger businesses to have the ear of the Government, but also smaller businesses, which sometimes struggle. In the first 12 months, the Government have started to take effective action by cutting red tape, simplifying the tax system, ensuring that the tax system rewards endeavour through the capital gains tax changes, making it easier to start, fund and grow a business and, in particular, by ensuring that we send a message that the Government include people who have run businesses and who understand them and, just as importantly, that we are on the side of small businesses in Witham and throughout the country.
Mr Alan Meale (in the Chair): That concludes the debate. I place on record my thanks to the Commons staff, who have worked vigorously throughout the day.