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Westminster Hall

Tuesday 12 July 2011

[Mr Roger Gale in the Chair]

Train-building Industry

Mot ion made, and Question proposed, That the sitting be now adjourned.— (Mrs Villiers.)

9.30 am

Mr Roger Gale (in the Chair): We commence with a one and a half hour debate on the future of the UK train-building industry. Six hon. Members in addition to the securer of the debate have indicated that they wish to speak, and I propose to call the Front Benchers at half-past 10 o’clock. Hon. Members may wish to do the maths and work out that if they allow themselves not more than six minutes each, we should accommodate everybody who wishes to participate.

9.31 am

Nigel Mills (Amber Valley) (Con): It is a pleasure to serve under your chairmanship, Mr Gale. I shall try to be relatively brief on this important topic. I am grateful that we have the chance to debate and question the Minister on the future of the UK train-building industry, especially with reference to the recent award of preferred-bidder status for the Thameslink contract to the Siemens consortium, rather than the Bombardier one. It is of great interest to people in the whole Derby area, not least in my constituency of Amber Valley, that we get to the bottom of how the contract came to be awarded to a German rather than a UK-based manufacturer.

Anna Soubry (Broxtowe) (Con): I congratulate my hon. Friend on securing the debate in what has been a very difficult time for Derby and Derbyshire. Does he agree that the decision also has an impact on constituencies such as mine, which are as far from Derby as I think Amber Valley is? It has had a profound effect and caused a lot of anger among my constituents, as well as, no doubt, my hon. Friend’s.

Nigel Mills: I am grateful for that intervention. I suspect that part of my constituency is a bit nearer to Derby than my hon. Friend’s, but I accept that we are all in the same area and that we have people who commute to work at the Bombardier plant and work in the many support industries in the area and who are threatened by the decision.

It is worth starting by saying that the area has a proud history with the railway industry, ranging back to the beginning of the industry in the early 19th century—I believe that production began in Derby in about 1839. The Midland Railway Centre is in my constituency. It is a tremendous attraction and I urge everyone to come to visit it, but the last thing we want is for our whole railway industry to become a museum. We want a thriving and growing train-building industry. We have had a thriving and growing train-building industry. Passenger numbers have been up year on year for ages and we expect that growth to continue. There is no reason why we cannot have a viable industry in the UK if the Government support it.

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I want to cover two areas in my speech. The way to help to preserve and enhance the train-building industry would have been to give Bombardier the Thameslink contract in the first place. I want to talk about whether there is any way that the Government can still reconsider that decision. We are only at the preferred-bidder status stage and have not signed on the dotted line for the whole contract, so I think there is still scope for that to happen. I also want to look at how we can go forward in a better way to procure such contracts more sensibly, so that there is a level playing field and our only UK train-building company has a fair chance of winning contracts. That may not be how we see the current process.

The award of preferred-bidder status on the Thameslink contracts to the Siemens consortium rather than the Bombardier one has led many of my constituents to think that the Government have taken leave of their senses. We have rightly spent the past year talking about the need to focus on the manufacturing sector to provide the skilled jobs we need and to rebalance the economy away from London and the south-east. My constituents have told me that they thought that that meant the midlands and the north, not Germany.

The industry is very skilled, with a huge number of skilled jobs of exactly the kind that we want to attract. The award of this huge £1.4 billion contract to Siemens rather than Bombardier means that we are talking the talk, but not walking the walk. Frankly, my constituents cannot understand why we do not spend taxpayers’ money in a way that produces the overall best benefit to the economy of the UK as a whole and the Derby area. We now risk losing not only the 1,000-plus jobs at Bombardier, but the jobs in the supply chain, which are much harder to quantify at this stage.

My first question for the Minister is this: can the Government reconsider the decision? If not, would she help us to understand exactly why not? We know from Government answers and statements that their view in simple terms is that all they could do was open the submitted bids, compare them to the tender specifications drawn up by the previous Government, work out which one was the most economically advantageous and award the contract. The Secretary of State for Business, Innovation and Skills has commented that the specifications were very narrowly defined and there was almost no doubt who would win.

We understand now that weighting for overall socio-economic considerations was not included in the specifications. Had that been included, it may have allowed the Government to take into account the overall impact of the job losses, the loss of tax revenues, the benefits they will need to pay out and the overall knock-on effect on the economy. We would all much rather that those things were included in the specifications. Can the Minister confirm that that weighting was not included in the contract?

Having realised that, did the Government consider restarting the whole process and saying, “We got the specifications wrong, and if we are to spend £1.4 billion of taxpayer and passenger money, let’s get it right and spend the money properly”? Did they look at doing that? Could they have done it? If not, why not? There is a lot of concern that we are going ahead with so significant a contract, with such significant implications, when the Government do not even seem to think that

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the procurement process has been handled properly or included all the conditions that ought to have been included.

One reason why Bombardier has concerns is its record with Department for Transport procurement processes. It can win contracts worldwide. It can even win contracts to build trains in Germany. It can win contracts with everybody else in the UK. Out of the 14 bids it made for contracts from operating or rolling stock companies, it has won 11, but out of five bids where the DFT was running the process, it has won none. Is that just bad luck or does it suggest that there is something wrong with how the DFT procures the contracts? Do the Government think that huge DFT contracts are the right way to go about train procurement or should we look at letting the operating or rolling stock companies, which have great experience running such things, be in charge of the process? There is a suggestion that the very structure of the tender process made it hard for Bombardier to win. The phrase used was “bundled design, build, maintenance and finance” commercial structure—I find it difficult to get my head around that mouthful.

It was not a case of looking for someone to build trains and sell them, but a case of awarding a contract for someone to build, provide and maintain trains and keep them on the tracks for the best part of 30 years. It is a hugely complex financing exercise. I am not sure whether we were looking for a train-builder or a bank. One suspects that it is much easier for a huge multinational, diversified conglomerate with a brilliant credit rating to produce the cheapest bid, rather than the group that can build the best trains. I do not know about other hon. Members, but I am not sure that I can predict where I will be in 2045. I will be 70 years old, and I hope I will be getting a state pension by then, but I am not totally convinced of that. It is scary to think that these train carriages will be retired after me, but that is how long we are talking about.

The contract is to maintain the trains and keep them on the rails until 2045 or thereafter, which is a hugely difficult thing to do. How many of us can predict what the currency of many EU nations will be even in a year’s time? How many of us can predict how many major banks will still be solvent in a year’s time? And yet, we are asking the train-builders to come up with a finance package that in effect runs for that long period. How can they do that cost-effectively? The process started in 2008 and the state of the banks was even worse then than it is now.

Many hon. Members are concerned that the private finance initiative resulted in taxpayers paying people to borrow far more expensively than the Government could, and we ended up having to pay for that for 30-odd years. Is there not a risk that that is what we are doing with this? We are in effect locking people into a hugely expensive way of financing something, but if we did it better there might be a cheaper way.

I looked at some of the original tender documents from 2008, and there was an interesting presentation to interested parties in the “Commercial and Financial Overview”. On the financing side, it states:

“Consistent with HMT best practice, the Department will reserve the right to hold a funding competition”.

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Have the Government considered that? If the financing costs made it hard for Bombardier to compete in the award of preferred-bidder status, did the Government think, “Actually, financing is a very risky thing for anybody to try and do for this long period. Should we take that out of the process and tender it separately?”? That might have been worth considering.

The same presentation outlines that the accreditation process structure had a weighting of 40% for business excellence and approach, and 60% for technical capability and experience. I do not know whether those weightings were used in the final process, but if they were, it would be interesting to understand how. We would all like to understand exactly how close these bids were. Where was Siemens stronger and where was Bombardier stronger? I fear that the answer to that probably involves hugely sensitive commercial data that the Minister cannot release today. We want people to understand why we are spending taxpayers’ and passengers’ money in this way, but it is hard to explain the process when we cannot access the full details.

One matter that has been raised—it would be helpful to have some clarification on this—is the lightweight bogie that will be used in the contract. For a contract that Siemens won in Germany, it had to use Bombardier’s bogie, and there is a joint contract in place for that. I understand—I cannot find any evidence for this on the internet—that Siemens has not managed to produce, test or bring into operation anywhere a lightweight bogie. The German train industry was not desperately keen to have its trains experimented on and tested, and therefore Siemens has used the Bombardier-made bogie to ensure that it gets the reliability from scratch. Frankly, such a situation seems a little perverse. The Germans give a contract to a German train company but they are not willing to have their trains experimented on, and we end up awarding a contract to a German train company for our trains to be experimented on rather than awarding it to the UK company that could have used its bogie, which it knows works.

Anecdotally, one of the attractions for Siemens was mentioned by the UK chief executive of Siemens rail industry operations, Steve Scrimshaw, in an interview with Rail Professional in March this year:

A lot of the DfT’s scoring is around deliverability and our trains work straight out of the box.”

Interestingly, that same article goes on to talk about the problems that Siemens has had delivering trains into Scotland, where they have not worked straight from the box and their entry into service was delayed by ScotRail until it could resolve some of the technical issues. It is not the case that Siemens delivers and works perfectly every time, and that Bombardier does not. The fact that Bombardier can win contracts in the UK and around the world shows that it probably has a similar quality of delivery to Siemens.

In light of those issues, the key question for the Government is this: can they and will they reconsider this decision before the contract goes to final status? Some of the concerns about the procurement process that I have set out have led my hon. Friends the Members for Mid Derbyshire (Pauline Latham), for South Derbyshire (Heather Wheeler) and for Erewash (Jessica Lee)—she sadly cannot be here today—and I to ask the National

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Audit Office to review this procurement process and examine whether we are getting the most economically advantageous position for taxpayers and passengers.

There are doubts whether the DFT is very good at handling these processes based on its experiences with the intercity express programme contract and this one. Let us be honest: this project was originally called Thameslink 2000, but these carriages might hit the tracks in 2015. That is not a tremendous procurement record. Is it right for the DFT to be handling these contracts? My hon. Friends and I have fundamental concerns about whether the right requirements were in the tender specification and whether we can come to the right decision. Therefore, there seems to be a strong prima facie case to have another look at the matter and ensure that we are spending £1.4 billion of taxpayers’ money in the right way.

We can talk about the history of the process and this contract for as long as we like but, whatever happens on that, we need to get these things right in future. The fact that the past two major contracts have not gone to a UK manufacturer is bad enough but, if we are to sort this process out and keep the train-building industry in the UK, we need to start getting such things right and ensuring that there is a level playing field. Let us be clear that no one is suggesting that we want Bombardier in the UK to be a new British Leyland. Bombardier does not want that and absolutely no taxpayer would want that. We have a company that can build high-quality trains for the right price, and it should get the chance to do that. We want a process that creates a level playing field, and for a UK manufacturer to have a fair opportunity to win contracts to build UK trains in the same way that German manufacturers can build trains in Germany and French ones can build trains in France.

What kind of message are we giving to the people we want to invest and manufacture in the UK? It seems that if someone wants to win a contract to build trains for the German rail industry, they must build them in Germany, and that if someone wants to win a contract in France to build trains for the French rail industry, they must build them in France. However, if someone wants to win a contract to build trains for the UK rail industry, they can build them where they like. If an investor is short of money and considering which countries to invest in, what will their conclusion be? They cannot close the French or German plants because they know that they will not win contracts in those huge markets, but they could close the UK one.

Duncan Hames (Chippenham) (LD): I congratulate the hon. Gentleman on securing the debate. I hope he recognises that the issue goes beyond just rolling stock and that it relates to the whole of the rail supply chain. Does he agree that the key question is this: why does the German industry not have more penetration in the French market, and indeed, why does the French industry not have more penetration in the German market, if both those countries are interpreting EU procurement law in the same way as us?

Nigel Mills: I am sure that all our constituents are asking that question. If Germany and France do not open their markets, why do we open our markets so much? We all want a level playing field. If Germany and France are going to reward their industries, we may

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have little choice but to go the same way. The issue is not new, because the previous Government considered it in 2003. They commissioned a report on how the EU procurement processes were working to see whether there was unfairness or any inappropriate activity. As usual, the conclusion was that there was no clear illegality, but there appears to have been a slight distortion in the results. Interestingly, that report was written by the then UK chief executive of Siemens, Alan Wood. It is amazing how things come back round to bite.

Lorely Burt (Solihull) (LD): I congratulate the hon. Gentleman on securing this important debate. On the parochial protectionism of other countries, is it not the case that the UK is exceptionally successful in winning EU bidding contracts elsewhere? In fact, we come after only Germany in terms of the number and value of contracts that we win throughout the EU, so it works both ways.

Nigel Mills: I think that Germany wins 26% of the time when it bids, and we win about 14%. However, I am not sure that those statistics work when we are talking about major infrastructure projects that are of huge overall significance, rather than about some of the smaller ones. Frankly, across the EU as a whole, we are a hugely advanced economy, with all the high skills and the value added. Therefore, we expect the UK to be able to do things that other economies cannot yet do, and to be winning contracts. The key point is that thousands and thousands of jobs are at stake. We are risking those jobs by playing by the rules, but it seems that the Germans, French and others are not.

Let us consider the Eurotunnel procurement. That contract was awarded not to Alstom of France, but to Siemens of Germany, which must be doing something right. The French went mad and had a judicial review to try to challenge that contract, because they were so surprised that it had not been awarded to one of their domestic companies. We have to send out the message that we want to encourage our UK train-building industry, which is of huge value to us, and we want the Government to support it.

Perhaps we need to consider again how we go about procuring these train-building contracts. For many years, Bombardier has questioned how sensible it is to have a feast of contracts and then a famine. How does that enable it to be a sustainable, viable business? How does having to recruit and skill up to fulfil one contract and then lay people off and start again make a company cost-effective and ensure that we are getting the best price for our trains? How can Bombardier continually develop in the UK and improve its processes if it does not know from year to year whether it will have a viable manufacturing business in the UK?

Let us not set any hares running. We all hope that Bombardier will retain a strong manufacturing presence in the UK and that this will not be a fundamental threat. However, it is a significant contract, especially on the back of its not winning the intercity express programme contract. It would be helpful if the Government set out what other contracts they expect to award in the rest of this Parliament, and how significant their value may be. We know that Crossrail should be one contract. Many have raised the question whether the Government

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can now bring forward that Crossrail procurement in the hope that Bombardier can win it and try to protect jobs in the Derby area.

Some have suggested that the Crossrail contract is very closely linked to the Thameslink contract. The amount of cross-savings between the two might make it very hard for a company that does not have the Thameslink contract to deliver Crossrail competitively. Will the Minister confirm that that is not the case, and that it is open to the Government to award the Crossrail contract to a different provider?

Andrew Griffiths (Burton) (Con): I congratulate my hon. Friend on securing the debate. Bombardier is a major employer in my constituency, too. He has discussed the success of Bombardier and its ability to win contracts. Is he aware of the statistics that show that of 14 contracts that Bombardier bid for that were not related to the Department for Transport, it won 11, yet of all of the contracts it has bid for with the Department for Transport, it has won not a single one?

Nigel Mills: I am grateful for my hon. Friend’s intervention. Had he been here from the start, he would have heard me quote those very same statistics. His point is valid, however, and he reiterates the question whether the Department for Transport is handling those procurements in the most effective manner.

I conclude by asking the Minister some questions about future procurement processes. Do the Government think that there is a need for improvement? Should the Department for Transport be handling them? Will the Department guarantee that the socio-economic benefits will be given some weighting in that process? Can the contracts be structured so that UK manufacturing industry has a chance of a sustainable, viable future? Can we look to structure those contracts in a way that gets trains built, and not look for the biggest bank we can find to underwrite 30 years’ worth of financing?

No one should doubt that the train-building industry is of great importance to the Derby area and the UK economy as a whole. We have a proud heritage of train building. We can and should have an exciting future of train building. I urge the Government to do their bit to ensure that that is what we get.

9.52 am

Margaret Beckett (Derby South) (Lab): I congratulate the hon. Member for Amber Valley (Nigel Mills) not only on securing the debate, but on his excellent speech. In fact, my only criticism would be that he has left the rest of us with not very much to say. He has, effectively and well, used all the ammunition. Significantly, I think I am right in saying that—perhaps not so unusually in this Chamber, but unusually in this place in general—almost every hon. Member present is not here to attack or disagree. We are all here for the same purpose: to raise the concerns so ably set out a moment ago by the hon. Gentleman. If the Minister’s Department and her ministerial colleagues were nurturing the illusion that this is a decision that would go away, that might be an error.

Cross-party interest in this issue has been clear this morning. All the Derby Members here—perhaps almost every hon. Member, as the hon. Member for Broxtowe

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(Anna Soubry) indicated—have constituents with considerable expertise in the rail industry. The plant in Derby is in my constituency, but we all know from our own constituents, wherever they may live, of the very real astonishment among rail industry aficionados. The people who know and understand, who have experience and expertise, are at a loss to understand and explain the decision, and the hon. Gentleman is entirely right to ask for an explanation.

The hon. Gentleman talked about the weight given to the different elements in the procurement process. Like him, I have seen the references that have been made—I believe that the Secretary of State for Business, Innovation and Skills made one of them. There was a story in the Daily Express over the weekend suggesting that this was a decision based on finance, rather than on the kind of trains in which, as the hon. Gentleman rightly identified, our constituents will be travelling for many a year to come. He identified the fact that in the original procurement process in 2008, the Department reserved the right to hold a funding competition. My understanding is that there were two further opportunities—in March 2010 and January 2011, when further steps were taken in the bidding process—when the Department could have triggered the right, which it had reserved, to look again and separately at the issue of funding, but it chose not to do so. That is a concern to all of us.

The hon. Gentleman asked whether we are looking for a train builder or a bank. As I understand it, Siemens has actually become a bank, which indicates the strength of its balance sheet, but is that what we are looking for? Certainly not, if we are talking about whether there is a future for the train-building industry in this country.

Heather Wheeler (South Derbyshire) (Con): I congratulate my hon. Friend the Member for Amber Valley (Nigel Mills) on securing the debate. We are talking about the future of train building in this country. The decision to make Siemens the preferred bidder is incredibly disappointing for all our constituents who work at Bombardier, but surely the most important thing is the way forward. The chairman of Bombardier is going out to South Africa with the Government to look at securing contracts out there. It is asking the Government to bring forward tube contracts by a couple of years, so that there is a future for train building in this country, and the college is opening up in Derby for rail contracts. We have great expertise in the area, and in the north-west too. That is where we need to go with this conversation. I am sure that, having heard my hon. Friend’s conversation with the Minister, answers will be given, but we want to talk about the future, and the future will be train building in this country.

Margaret Beckett: I agree in part with the hon. Lady. I take her point entirely that we are really interested in the future, but let us not overlook the fact that we have barely started. The procurement process has not concluded. All that has happened is that a preferred bidder has been identified and negotiations have been opened. The hon. Member for Amber Valley referred to the intercity express programme contract. In the hands of the Department for Transport, that went to Hitachi, but the contract for that has not yet been signed. Indeed, just before the election the previous Government ordered

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a review of that contract, and this Government have substantially renegotiated it. We are very far from the conclusion of this bidding process, so although I share the hon. Lady’s view entirely that we should look to the future—I will come to that issue in a second—to secure that future we must not abandon the prospect of changing the present circumstances and the award of this contract.

One concern about the attitude that the company is likely to take relates precisely to the issue of opportunities for the future. If this procurement goes ahead, we may lose the opportunity of an offer made by Bombardier. As I understand it, it has decided at the highest level to establish a worldwide centre of excellence for the design and manufacture of new cars for high-speed trains, for future procurement—of exactly the kind referred to in the debate. Bombardier was prepared to site that worldwide centre of excellence in Derby. That offer was, in effect, thrown back in its face. That concerns me greatly. We would be talking about more jobs—jobs with even higher skills levels than we see now, and with the potential for new technologies. Although I and many in my party applaud what the Cabinet and the Prime Minister said in my Derby constituency about manufacturing, skills and the need to rebalance our economy, the skills base in our city is not just Bombardier; it is also Rolls-Royce. We are a strong manufacturing base, but that base depends on the interaction between those two companies, among others, on the supply chain, and on their ability to work together to establish and maintain that skills base.

The Minister of State, Department for Transport (Mrs Theresa Villiers): Does the right hon. Lady acknowledge that the Government of which she was a member set the criteria for the procurement, and that there is no way for this Government simply to ignore the Siemens bid and give the contract to Bombardier? We are bound by the criteria and by European Union rules and we cannot simply rip up the process. Is she advocating that we stop the procurement altogether and start afresh? That would delay considerably the Thameslink programme—which we inherited from the previous Government already running 16 years late—and we would still have no guarantee of Bombardier being the winner at the end of the new procurement process.

Margaret Beckett: I am sorry that the Minister decided that this was a good time to make that party political point, when all of us are present to get her and her Department to change their minds and look afresh at all the implications. We all know from our constituents that there are very real questions about whether the right decision has been made and whether proper account has been taken. We have talked about the financing so far, but we have also touched on whether the vehicle is fit for purpose and whether Siemens—although it is a fine company with a great engineering tradition—has the capacity to supply the trains needed.

I am genuinely quite sad that the Minister made that point. As the storm has arisen, not only in the Derby area but in the north-west and elsewhere, we have been inundated with requests from people throughout the country, with other Members and members of the public asking, “What can we do to help? This is a mad decision and none of us agrees with it.” However, for some days I have had the feeling that, to get the Government off the hook on which they so far seem determined to

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impale themselves, some have been saying, in effect—I am prepared to exempt the Minister—“If we can palm off the blame for this on to the previous Government, then we don’t need to look again at the decision.” I am sorry, but that will not wash this time, because of genuine concern about how the financing was handled, about the train, about the lost opportunity for new manufacturing in the UK and about the knock-on effect on Rolls-Royce. This is not a done deal.

The hon. Member for South Derbyshire (Heather Wheeler) referred to the chair of Bombardier in the UK going to South Africa with the Prime Minister to promote British exports. I would not blame him for viewing the journey with some irony. In South Africa, they will be travelling on new trains, made by Bombardier for South African Railways, which felt able to award that contract. We can all ask why Bombardier could win that contract, but not one in this country.

We are very much at the opening stage in the process of negotiating the contract. The Government have only recently taken delivery of the McNulty report, which also considers the supply chain; we have hardly touched on that yet this morning, but the implications throughout the country are enormous. Genuinely, I say to the Government that this decision is a mistake. I do not accept the simple case that they have put because, as I pointed out, there were opportunities for the Department to look at the financing, but let me take a step back from that. They can blame it on us if they like, but they must change the decision—that is what matters.

10.3 am

Pauline Latham (Mid Derbyshire) (Con): It is a great pleasure to serve under your chairmanship, Mr Gale.

I echo everything that my hon. Friend the Member for Amber Valley (Nigel Mills) said, and much of what the right hon. Member for Derby South (Margaret Beckett) said, because this issue is not party political but about the welfare of people in all our constituencies. Everyone present today, especially from Derbyshire, is touched. However, there are particular worries over the border in Staffordshire, as well as in Nottinghamshire. Although Bombardier is in the right hon. Lady’s Derby South constituency, the situation affects every single one of us. There is a huge knock-on effect on not only the supply chain, but where people spend their money. If people are redundant and therefore do not have money, all the knock-on industries will have to make reductions, and that will have a big impact on our area’s towns and cities. I know that Derby is not doing as well as we come out of the recession as it could have done had the contract been won. People have a huge lack of confidence about their future and how much money, if any, they will be able to spend.

Over the months during which we have been waiting for the decision, I personally lobbied the Secretary of State for Transport on several occasions. Unfortunately, he told me every single time that I was not to worry because Bombardier was fine and was not going to pull out of this country—I mentioned that that was a possibility—as the company had lots of orders and would have no problem going forward. That is clearly not the case, so he misread the situation. I hope that he feels somewhat apologetic about the decision because he was clearly not looking at the wider situation in Derby and the surrounding areas.

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When Hitachi of Japan and not Bombardier won a train order, did the Government review the procurement process and look at why we did not get it? If that did not happen, why not? Clearly, if we could not win that contract, other questions would be raised. As we heard earlier, Bombardier has not won five out of five of the important contracts going forward, so what can the Government do now?

I am as disappointed as every other Member in the Chamber today. We all get campaigning e-mails on things such as forests and the NHS. However, of the issues that affect real people in my constituency, I have had more e-mails and letters about this one than on all the rest put together since I was elected in 2010. That says something about people’s depth of feeling—not necessarily of those who work for Bombardier, but of those concerned about their neighbours, friends or relatives. Some people have three or four relatives working with Bombardier who are all being made redundant. That will have a devastating impact on people in my area. The situation is perhaps the worst we have faced since the crash of Rolls-Royce in 1971—I clearly remember how devastating that was for Derby. It took us a long time to come out of that recession, although Rolls-Royce is now a successful business.

I commend the city council for talking to Bombardier and trying to make it understand the devastating impact on the area. Unfortunately, the company had already made redundancy decisions, which I understand that the Secretary of State received a letter about as far back as March or April. Bombardier was going to make those redundancies anyway, but however much we say that, it does not help the people with the redundancy notices in their hands. Whether they were made redundant three months ago or now, they are still redundant and have an uncertain future.

My hon. Friend the Member for Amber Valley mentioned that we have been talking a lot about coming out of the recession on the back of manufacturing. Well, it does not look like that from where I am sitting in Mid Derbyshire. If we do not do so with firms such as Bombardier, we will never do it, and we will not come out of recession anywhere near as quickly as we might have done had we got this contract in Derby.

I agree with my hon. Friend about the Department for Transport: is it the right organisation to handle such procurement? It does not seem to be able to get it right. Obviously, I agree that there must be competition and, as the right hon. Member for Derby South said, we do not want one contract and nothing else. We do not want a monopoly, but competition must be fair, and it does not seem to my constituents that there has been any fairness whatever.

It is ironic that, not many months ago, the Secretary of State for Business, Innovation and Skills came up to Rolls-Royce to open a new apprenticeship school. Some 50% of those apprenticeships are with Bombardier. He congratulated Rolls-Royce on the facility and congratulated Bombardier on sharing it, but that sounds hollow now. What is the future for those apprentices? They do not seem to have one. Will half that facility now not operate? That would probably mean redundancies.

The implications for the supply chain reverberate not just around Derby, but much further afield. What will happen to companies in the supply chain? Will they be

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able to take up opportunities to supply Siemens, or will Siemens procure everything from Germany or somewhere closer to it, instead of our excellent businesses? The Secretary of State and the Minister need to answer many questions about what swung the decision for Siemens and why Bombardier did not get the contract. Bombardier is an excellent production company. We have seen that it can win orders from other people, but not Government contracts, and that seems to be nonsense.

We must look to the future to see what the Government can do to bring forward procurement. There is Crossrail. We also need more tube trains and other rolling stock needs to be replaced. Will the Government consider urgently bringing that forward—not just by a year or two, but as far forward as possible—to give Bombardier the opportunity to win some contracts and save jobs in the Derbyshire area? The position is devastating and we need some answers, but I am sure that the Minister will be able to give them today.

We are asking the Office of Fair Trading to examine the procurement process and we are seeking a meeting with the Prime Minister. We must go to the very top and exhaust all possibilities. Can the contract be looked at again? Can we seriously change the decision? I believe that the decision was wrong, but we must bring forward opportunities for Bombardier to get back on its feet and to save jobs in Mid Derbyshire, Derby city and the rest of the area. I urge the Minister to do all that she can to bring forward such opportunities for the future of Bombardier and this country’s train industry. If it goes, we will not have a train industry and it will never ever return. The country will then be left without a train industry of which we can be proud.

Several hon. Members rose

Mr Roger Gale (in the Chair): Order. Five or six Members wish to speak. Some 15 minutes remain for Back-Bench contributions, so I urge hon. Members to keep their speeches brief.

10.13 am

Chris Williamson (Derby North) (Lab): I will try to be brief, Mr Gale, and it is a great pleasure to serve under your chairmanship.

I congratulate the hon. Member for Amber Valley (Nigel Mills) on an excellent speech. I agreed with almost everything that he said, although I shall come on to a point with which I took slight issue. I agreed with what the Prime Minister and the Chancellor of the Exchequer said when they came to Derby just three months ago. The Prime Minister said:

“The point of the Cabinet today is to ask one fundamental question: what is it that we can do in government to help the economy to rebalance, to grow and for businesses to start up, to invest and employ people?”

The Chancellor said:

“Derby’s a great example of what Britain’s economy should be in the future. And a strong endorsement of the importance of manufacturing industry.”

I could not agree more.

The train-building and railway industry has been a cornerstone of British manufacturing since the 19th century. It is a vital industry in the Derby area, and it would be a sad irony, would it not, if 2011 turned out to be the last

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year when a British train rolled off a British production line? However, that is where we might be if the Government are unwilling to reverse their decision. Derby gave the world the railways, and I want Derby to continue to have a future in the railway industry long into the 21st century.

The hon. Member for Mid Derbyshire (Pauline Latham) referred to the Rolls-Royce crash of 1971. Derby has not faced a crisis of such proportions since then. Not for 40 years have we faced the possibility of losing so many jobs in one go. I remember that, at the time, the then Government were initially unwilling to intervene, but ultimately they did the right thing by Rolls-Royce, the workers, and the families who relied on Rolls-Royce for their livelihood. Since then, Rolls-Royce has gone from strength to strength, and it is now the largest employer in Derby. It is a world-leading company and a top aerospace company in the world.

I come to the matter raised by the hon. Member for Amber Valley with which I slightly took issue. He referred to a future for the train-building industry if the Government are unable to change their decision on the Thameslink rolling stock programme. My fear is that if that decision is not changed, the train-building industry in our country might not have a future. Let us be clear. From the autumn, Bombardier will have work for barely 300 workers to finish off a contract for sub-surface trains for the London underground, which means that 3,000 people who are employed directly by Bombardier, and at least a further 12,000 in the supply chain, could lose their jobs within the next 12 months. That would have huge knock-on implications for the city, and not just for the individuals who lose their jobs, devastating as that would be, but because the wider implications for Derby’s economy would be massive.

I agreed with what the hon. Member for Mid Derbyshire said when she made that point and also referred to the apprenticeships that will be lost at Bombardier. I know that that is an area of priority for the Government—I share that view—so I implore the Minister to consider the training and employment opportunities for countless young people and future generations in the city of Derby. They will be denied such opportunities if the decision is not reversed.

As I said, the train-building industry is a cornerstone of British manufacturing. Surely we cannot allow such a situation to develop on the spurious grounds that awarding a contract to Siemens represents value for money for taxpayers. How can that possibly be true when 15,000 workers might lose their jobs? That would lead to a huge loss of tax revenue to the Exchequer, a loss of VAT because of reduced spending power, and the payment of increased unemployment benefit.

I shall present a petition to the House next week. It already has 27,000 signatures and the number is growing by the day. It demonstrates the strength of feeling not just in Derby, but further afield, as my right hon. Friend the Member for Derby South (Margaret Beckett) pointed out. The issue is national, not just local.

I shall conclude with three specific questions to the Minister. What legal advice did the Department take on changing the terms of the original invitation to tender? What assessment has been made of how Germany and France have managed to stay within EU procurement rules when, in the past 10 years, 98% of train contracts

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in Germany have gone to German companies, and 100% of such contracts in France have gone to French companies? Finally, will the Minister publish the results of the value-for-money assessment applied to Siemens?

I will conclude with a quotation from the Chancellor’s Budget statement:

“Manufacturing is crucial to the rebalancing of our economy.”

He continued:

“We want the words…“Made in Britain”, “Created in Britain”, “Designed in Britain” and “Invented in Britain” to drive our nation forward—a Britain carried aloft by the march of the makers. That is how we will create jobs and support families.”—[Official Report, 23 March 2011; Vol. 525, c. 958-966.]

I could not have put it better myself, so I urge the Minister and the Department to look carefully at the decision and to change it to ensure that British train building has a future.

10.20 am

Lorely Burt (Solihull) (LD): I shall preface my comments by saying that any job loss is a tragedy for the family of the person involved. The hon. Member for Derby North (Chris Williamson) made a point about the supply chain, which is hugely important. Every job lost in British manufacturing has a knock-on effect on three or four jobs in the supply chain.

I want to address three issues. First, did the UK make the best use of EU procurement rules? Secondly, I will speak about open competition because we must not lose sight of the fact that we do well on that in Europe. Thirdly, we must ask what we can do now and what the best way forward is.

Will the Minister tell us, if she can, who interpreted the EU procurement rules? Were the rules interpreted in a way that might inadvertently have favoured Siemens as opposed to Bombardier? Were the rules gold plated and was our interpretation of them too strict? Why did the procurement rules not take account of the socio-economic impact of the decision’s devastating results? I hope that the Business, Innovation and Skills Committee will conduct an inquiry into the matter. We were legally bound by the procurement rules established by the previous Government, and had we acted differently, we would have been open to legal challenge, although I take no pleasure whatsoever in saying that.

On open competition, the UK wins 17% of all EU contracts and comes second in Europe when it comes to winning European tenders. Protectionism is a harmful road down which to go for all countries in Europe.

Duncan Hames: My hon. Friend is right to make that point. Invensys Rail in my constituency produces world-class signalling technology and has worked on seven out of the eight most recent high-speed lines in Spain, and nine out of 12 of the metro lines in Beijing. When we have such exceptional engineering talent in our country that wins contracts abroad, some of us may wonder why we are not more successful at winning contracts at home.

Lorely Burt: My hon. Friend makes an excellent and important point that has also been raised by a several hon. Members. We must be savvier when setting procurement criteria. In Italy, specifications have been known to include the requirement that the same work

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has been done previously in the same area, although how it gets away with that I do not know. A study by Francesco Grillo concluded:

“In Britain, there are lower barriers to entry”

than elsewhere in the EU. We desperately need to look at that.

A balance must be struck, and there are some mitigating factors. Bombardier preannounced its intention to create 1,000 redundancies, regardless of the loss of the Thameslink bid. The growth review initiated by the Government will look at how business can be supported and at how UK manufacturing companies can meet our strategic needs, the importance of which was raised earlier. We must look at whether the UK makes the best use of our procurement strategy. On the bright side, the Business Secretary has announced a taskforce headed by Margaret Gildea OBE that will work with Bombardier to help to sustain a long-term manufacturing base in the UK—we are in this for the long term.

One or two hon. Members alluded to the fact that Bombardier is Canadian-owned rather than British-owned. Siemens will create 2,000 jobs as a result of being awarded the contract. Indeed, Bombardier has just won a £354 million contract to provide signalling for the London underground. It is therefore not all doom and gloom, but we must do everything possible in Derbyshire to help people to revitalise their manufacturing base.

10.25 am

Jack Dromey (Birmingham, Erdington) (Lab): I, too, pay tribute to the hon. Member for Amber Valley (Nigel Mills) for initiating this debate. My father was a train driver for 15 years and he was proud to drive British trains. British trains were at the heart of a thriving manufacturing base that at its peak employed more than 8 million people. Successive Governments have presided over the decline of manufacturing in Britain. On one hand, the previous Conservative Government saw 3 million jobs lost in manufacturing during the 1980s, while on the other hand the Labour Government were slow to learn painful lessons. They eventually arrived at industrial activism, but only after 10 years, after our economy had become unbalanced, with too much emphasis on the financial sector and not enough on the manufacturing sector. There was too much financial engineering, and not enough real engineering.

Throughout that period, I fought many battles for procurement contracts. In 1992, I was involved with British Rail engineering works in York. We successfully won an order for Networker trains for the southern region, which kept that admirable world-class establishment open for three further years. In general—I hope you will excuse the bad pun, Mr Gale—the direction of travel has been depressing, with consequences for our country and especially the midlands. Some 30 years ago, the midlands had one of the two strongest economies in Britain; it now has one of the two weakest.

The country is recovering at a painfully slow pace compared with Germany and France, which had the wisdom to sustain a strong manufacturing base. Bombardier is right when it says that the situation we are now in could not have happened in Germany or France. In

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recent years we have embraced industrial activism, and the Government have said that they wish to rebalance the economy as part of the growth strategy. I welcome that, but profound lessons must be learned from this sorry saga. Why can the Department for Transport not seem to get backing British industry right? Will the Government recognise the immense leverage that exists in more than £100 billion of public procurement funds, and will they use that in an intelligent way to underpin our manufacturing economy as part of the strategy for growth? The Government must use their power to help manufacturing with a determination equal to that of France or Germany.

Will the Government look again at how contracts are procured? The process was fundamentally flawed. As hon. Members from all parties have said, there was no proper concern for the socio-economic consequences of the contract decision, or for the consequences on the supply chain and the long-term impact of such a loss of capacity in Britain. That includes contracts that could be won both in Britain and internationally, since the trains will no longer be manufactured in Britain.

Finally, it is not too late for the Government to think again. I have been impressed by the excellent contributions made by hon. Members from all parties during the debate. We must learn lessons for the future, but for the here and now we need the Government to state that only preferred-bidder status has been allocated and that it is not too late to change. Where there is a will, there is a way. The voice of people in the midlands is clear: they want the Government to back Britain and to back Bombardier.

10.29 am

Mr Edward Timpson (Crewe and Nantwich) (Con): It is a pleasure to serve under your chairmanship, Mr Gale, and I will be as brief as possible. I congratulate my hon. Friend the Member for Amber Valley (Nigel Mills) on securing this important debate and on his well-argued and thoughtful speech. I endorse all that he has said.

I have made no secret of my feelings about the fact that the Government contract to build trains for Thameslink will go to a German company and that the trains will be manufactured in Germany. Although the decision does not directly impact on the Bombardier plant in Crewe, it is none the less a hugely disappointing and deeply frustrating outcome to what has ended up being a long and drawn-out saga. As my hon. Friend has said, we must go back 16 years to the inception of what was then termed the Thameslink 2000 project—I guess it is now the Thameslink 2018 project—to realise how long the decision has been left hanging.

The procurement process has gobbled up more than £13 million in consultancy fees, and the Thameslink project is now £600 million over budget. That does not make the decision any easier to swallow for Bombardier workers and raises a number of questions about procurement. What is clear is that the outcome of Thameslink is a hangover from decisions made some time ago at the inception of the tendering process. It appears that the EU procurement directive was adhered to to the letter. That slavish adherence to European directives needs to be remedied. Some of those directives have value, but others serve only to damage British industry and, more specifically, industry in Crewe and

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Derby. Why should we stick so rigidly to those rules when they are so flexibly interpreted in other European countries? It is no accident that the Italian police drive Fiats.

We cannot afford to make mistakes such as this. Companies such as Bombardier need to survive and thrive in the UK, or we will be reliant on overseas assistance to manage essential national infrastructure. It simply does not make sense to go for the cheapest contracts if that means that hundreds of skilled engineers end up forming part of the dole bill.

10.31 am

Maria Eagle (Garston and Halewood) (Lab): I congratulate the hon. Member for Amber Valley (Nigel Mills) on securing the debate. He will have noticed not only that everyone has congratulated him on that and on the way in which he made his remarks, but the great agreement among all the speakers.

If rail were in decline in the UK, the loss of our rail manufacturing industry would be a tragedy, but it would at least be understandable. We have seen industries decline because of technological or social change, but in the case of rail, there is no excuse for letting the industry wither and die in Britain. In fact, the reverse is true. Rail is thriving in the UK. More people are travelling now than at any point since the 1920s—1.3 billion journeys are now made every year. There has been growth of an additional 1 million journeys in the past five years alone. Every prediction suggests that demand is continuing to increase and that it could double in the next 30 years. Rail is therefore a priority for investment for the foreseeable future.

The Minister and I may have our differences over spending, not least on the speed and scale of cuts, but there is consensus that as a country we will be investing in rail for many years. Whether the investment is in track and signalling, stations or trains, we will be spending billions of pounds in the years to come. That investment should benefit the UK economy. It will lead to faster journey times and additional capacity. Why cannot it also lead to our supporting, improving and growing our manufacturing industry, instead of our watching it leave the country? It could lead to significant increases in the numbers of manufacturing jobs, which it has done in the past decade.

Sadly, Bombardier is the last train manufacturer left in the UK, but under the previous Government it won successive orders, including £3.4 billion-worth of London underground trains, as well as trains for the London Overground network, London Midland, Chiltern Railways and the Stansted Express. Therefore, the decision by the current Secretary of State for Transport to award the £1.4 billion Thameslink contract to the German-based Siemens-led consortium puts at risk 3,000 British jobs at Bombardier and very many more in the supply chain, as right hon. and hon. Members on both sides of the Chamber have said.

Our train manufacturing industry is at a crossroads. We can see it either follow other sectors and become yet another assembly line, or remain a major manufacturer, taking advantage of the significant investment and orders that the success of rail in the UK will guarantee for years to come. We can ensure that we carry on building trains in this country, but by awarding the Thameslink

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contract to a company that will build the trains abroad, the Government have given us their view of the future of rail manufacturing in the UK. Today, they have heard calls from right hon. and hon. Members on both sides of the Chamber, which I echo, for them to think again and be very clear that that is what they want in the future.

Siemens is a major British employer in its own right, with more than half its 16,000-strong UK work force involved in manufacturing and engineering. The contract that we are discussing will lead to jobs. There is a dispute about just how many, but there will be jobs in the supply of train components and in maintenance. Some will be substituted for jobs that Bombardier would have had if it had won the contract, while others will be new. I welcome the commitment of Siemens to a new UK rail training academy, supporting the national skills academy for railway engineering. However, none of that good takes away from the fact that the Thameslink trains will be built by a work force in Germany. The reality is that the jobs that will be created would have had to have been in the UK whatever the result of the procurement.

The decision is undoubtedly a body blow for Bombardier, as right hon. and hon. Members who represent constituencies in the immediate area, such as my right hon. Friend the Member for Derby South (Margaret Beckett) and my hon. Friend the Member for Derby North (Chris Williamson), have said. The fact that 446 permanent and 983 contract staff already face redundancy is a severe blow, not only to the east midlands but to the whole of our manufacturing industry. The Government have tried to suggest that those jobs would have been lost anyway, but that has been strongly denied by the company, which has said that not one permanent position would have been lost had it secured the contract.

The Government’s response so far to the uproar has been to wash their hands of the process and try to blame the previous Government. That might be understandable, but it does not take us very far forward. We have even seen the nonsense of the Transport Secretary writing to the Prime Minister to complain about the decision that he himself has made.

I hope the Minister today will come forward with some rather more constructive ways in which she can tackle the crisis that the decision has created. It is clear that the Department for Transport has not secured the most economically advantageous outcome either for the local community or for the country as a whole, despite it being perfectly permitted to do so. It is also clear that there has been a particular problem in the Department for Transport, which was referred to by right hon. and hon. Members on both sides of the Chamber, including the hon. Members for Amber Valley and for Mid Derbyshire (Pauline Latham). The DFT has awarded not a single contract to Bombardier since it has been in charge of letting them, yet Bombardier won more than 70% of orders for new trains for the UK rail industry when procurement was led by the rolling stock leasing and train operating companies. The company has been incredibly successful around the world—another point made by all who spoke in the debate—yet the DFT has not placed an order with a British-based company since it took over procurement. There is an issue to be addressed by the Minister and there are serious questions to be answered.

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Opposition Members have called for a full independent review of the procurement. We are clear that the review must consider the social impact on the UK’s work force, both for those directly employed by Bombardier and for those in the wider supply chain. It must consider the likely impact on the sector as a whole and the impact on future procurement. Despite what Ministers say, the Government are perfectly entitled to do just that. The Secretary of State’s predecessor, Lord Adonis, commissioned an independent review of the entire intercity express programme after the preferred bidder had been announced, and the new Government carried out a further review following the election. Both reviews led to substantial changes to the project, not least the agreement that Hitachi would commit to Newton Aycliffe as the preferred site for its planned European rolling stock manufacturing and assembly centre, generating at least 500 new jobs in the north-east.

There are things that Ministers can do. As someone who was a Minister for nine years, I confirm that it is never the case that Ministers cannot do anything. Today, I urge the Minister to think again and agree to a review of the decision. Labour Members accept that we need to learn lessons from our own time in government. In view of the cross-party consensus among Back Benchers in today’s debate, I hope that we can reach a cross-party consensus on how rail procurement will be carried out in the future, particularly as these decisions inevitably cross Parliaments.

I shall offer three specific suggestions for a way forward. First, we need to consider how we operate these contracts under the European procurement directive—a point made by a number of right hon. and hon. Members. We must examine why France and Germany manage procurement whereby their home-based companies in almost all cases secure the work. Only in April this year, German national rail operator Deutsche Bahn placed a €5 billion order for 200 high-speed trains with Siemens. A major contract such as that being awarded to anyone but a domestically based company would be greeted with outrage and shock in Germany.

Secondly, we need to look at a longer-term capital investment programmes and not just stop-start, feast-and-famine programmes, as several Members have said. Manufacturers are left unable to plan ahead. Why must Bombardier have so many agency workers? It is nonsense for trains to be built by agency workers, when train building is such a skilled job. Those who build the trains should have training, a proper career path and guaranteed employment extending into the future, and they could have that if we organised our procurement better. The lack of certainty created by stop-start procurement hits investment in skills. Network Rail believes that a fifth of all procurement costs could be eliminated if there were continuity of orders. It is 800 days since the last new rolling stock order was placed. The feast-and-famine approach to rolling stock procurement, which has blighted the sector for almost 20 years, must change, and there is no reason why it cannot, given the investment in this country’s rail industry in the coming years.

Thirdly, we need to reduce the number of train designs to enable longer continuous orders, economies of scale and interoperability. Network Rail has recommended reducing the 64 different rolling stock classes that operate

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on the network to just three. The Competition Commission calculates the average cost per vehicle at more than £1 million, with 8% of procurement costs associated with the development of different bespoke models. Passenger rolling stock costs in Britain are 15% of the industry’s running costs. The three changes that I have outlined would make a significant difference to not only reducing that cost, but enabling British-based manufacturers to plan properly, skill their work forces adequately and secure the large, long-term, ongoing work that is achieved in sectors such as the defence industry.

In the meantime, the Government must not sit back helplessly as yet another UK manufacturing sector is lost. It is not too late to look again at the Thameslink decision. As my right hon. Friend the Member for Derby South, the hon. Member for Amber Valley and others have said, this is not a done deal. Siemens has been named as the preferred bidder, but the contract has not been signed. While that remains the case, there is still a chance to look at the issue again and to take some action.

Interestingly, the Minister for Housing and Local Government said in a written statement to the House on 16 June that Bombardier’s bid

“also presented an attractive proposal and it is our intention to retain them as the reserve bidder.”—[Official Report, 16 June 2011; Vol. 529, c. 86WS.]

If the proposal is attractive and would protect a large number of British jobs, it must surely be right for the Minister for Transport to have another look at whether the right decision has been taken.

I want to ask the Minister a number of questions. Will she confirm on precisely what date DFT Ministers were first informed of the result of the procurement? For what reason did she reject the option of holding a funding competition, which my right hon. Friend the Member for Derby South has mentioned? On a couple of occasions, that option could have been taken forward. Why was it not? Why, as late as the start of this year, were bidders, including Bombardier, asked to supply a range of new information if, as the Government have stated, the decision simply came down to a balance-sheet comparison? If that was the determining factor, it could have been done at an early stage in the procurement.

The Minister will be aware that Deutsche Bahn recently rejected the Siemens bogie design for the new generation of its high-speed trains and that it required the company to use the Bombardier FLEXX Eco instead. What consideration was given to that element of the contract? Will she take this opportunity to accept that it was wrong for her Department to brief the media that Bombardier would have made job losses regardless of the decision on the contract, because the company has firmly denied that claim?

Heather Wheeler: I do not know whether the hon. Lady has seen the letter involved, which was dated 23 May, but I have, and I am surprised that she has said what she has said.

Maria Eagle: The hon. Lady is entitled to her opinion. I am reflecting on what the company said publicly after the Government had made their claim, which it utterly denied.

Finally, will the Minister agree to look at the procurement process for Crossrail trains? That process is at an earlier

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stage than Thameslink was at when she inherited it. Will she look at Crossrail again, review the contract and the procurement process and bring forward a revised proposal that includes the lessons of Thameslink?

In addressing the Chamber at the end of this excellent debate, I hope the Minister answers the questions that have been put to her. Of course, she will not have time to answer them all, because there have been very many, but it would perfectly acceptable for her to write to us with detailed answers to the questions that she does not get around to answering.

10.44 am

The Minister of State, Department for Transport (Mrs Theresa Villiers): It is a pleasure to serve under your chairmanship, Mr Gale. I congratulate my hon. Friend the Member for Amber Valley (Nigel Mills) on securing a debate on this important issue. I welcome the contributions that he and other right hon. and hon. Members have made on this issue, which is important for Derby and the UK. I emphasise that the Government fully understand the concern that is felt. We, too, deeply regret the job losses that are under way in Derby, and we, too, are determined to do what we can to help Derby and Bombardier.

We recognise that Bombardier was hugely disappointed not be made the preferred bidder for Thameslink, but the procurement was set up and designed by the previous Government. Although we were left to open the envelope on preferred-bidder status, they set the criteria against which bids had to be judged. We are legally bound by the criteria set by Labour at the beginning of the process.

We are also legally bound by European law to judge bids on a completely blind basis. Under EU law, domestic and overseas suppliers must be judged impartially and on a wholly equal footing. Against the published criteria we inherited, the Siemens bid clearly represented better value for money.

We cannot make the location for the proposed manufacturing part of the criteria. Contrary to what the shadow Secretary of State, the hon. Member for Garston and Halewood (Maria Eagle), said, it was not a criterion for preferred-bidder status in the IEP contract that Hitachi set up a factory at Newton Aycliffe, although it has chosen to do so.

In response to a number of points made by different hon. Members, I should say that we could not simply rip up the procurement started by our predecessors. That would leave the Government at risk of facing damages in the courts and lengthen the delivery of Thameslink, which, as I have said, and as hon. Members have acknowledged, was already running 16 years late when we inherited it from the previous Government. There was no legal way we could simply ignore the Siemens bid and hand the contract to Bombardier; it simply is not in our legal power to do that.

Maria Eagle: Is the Minister really saying she has no power in this matter? She is the Minister.

Mrs Villiers: I am saying that, as the Minister, I need to abide by the law and by our obligations under the European Communities Act 1972 and the treaty of Rome; I am afraid I have no choice in that. Going

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forward, we of course recognise the need to examine wider issues about whether the UK approaches the application of EU procurement rules in the right way and achieves the right balance of risk. Similarly, I agree with my hon. Friend the Member for Amber Valley that we need to see whether our approach is consistent with those used in other member states. That is why the issue will be considered as part of the Government’s growth review.

Nigel Mills: On that point, I would like to draw my right hon. Friend’s attention to another quote from Mr Scrimshaw, who is the head of Siemens’s train building in the UK. Rail Professional asked whether he would ever look at building in the UK, and he replied:

“I wouldn’t rule it out. Currently, all the tenders from DfT don’t include requirements for UK manufacture. We have a model that works quite well.”

It seems that Siemens did not entirely rule out the possibility that such a requirement might exist. Perhaps the Department could look at that in future.

Mrs Villiers: Even if we had designed the criteria, it remains the case that we could not have made the location of the manufacturing process a condition of successfully achieving the contract; that is simply not permitted by EU law. However, I totally deny the allegation that the Government are sitting back and not taking action. I agree that we need to take action to help Derby and Bombardier. The reality is that Bombardier advised the Department for Transport that it expected to make more than 1,000 redundancies, regardless of the outcome of the Thameslink procurement, because several of its orders are about to reach completion. However, whatever the reason for the redundancies, we want to try to help Derby and the surrounding area at this difficult time.

As a result of the review by Bombardier of its UK rail operations, the Business Secretary has set up an economic response taskforce. It will he headed by Margaret Gildea and its remit will be to mitigate the economic impact of job losses at Bombardier, in its supply chain and in local communities. It will draw on representatives from Derby city council, the county council, Derby college and the Skills Funding Agency. Jobcentre Plus will also deploy its rapid response service, to support workers who will be affected. That is in addition to the work on skills that the Government have been involved with in Derby in partnership with Rolls-Royce and Bombardier, and the support that the Department for Transport is giving to the National Skills Academy for Railway Engineering, which my hon. Friend the Member for South Derbyshire (Heather Wheeler) mentioned. We shall do our best to help Bombardier to get the overseas contracts it is bidding for, such as in South Africa. That is one reason why representatives from Bombardier will accompany the Prime Minister on his visit to South Africa, which is coming up.

Margaret Beckett: I should not be a bit surprised if those representatives make the point that it will not help them to gain confidence overseas if they cannot get contracts at home.

I want to raise a point that has been made in several quarters, about the job losses. I, too, have seen the letter from Bombardier to the Secretary of State. It makes two things clear, one of which is that, indeed, as no one

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has attempted to deny, there were temporary, short-term contract jobs that were due to come to an end, which is a pity. However, it is also clear that more than 400 skilled engineers and designers are being made redundant now because of the loss of the Thameslink contract. Also, I know that the Department has been aware for some time, as I hope Ministers have, that Bombardier has made it crystal clear that if it did not get the Thameslink contract, not only would the new jobs not be coming, but those 400-odd would be the start of the process. It is not right for the Minister to pretend that all those jobs were going to go anyway. That is just not true.

Mrs Villiers: As I have said, whatever the reason for the job losses, it is important that we should work together to help Derby in this difficult time.

Chris Williamson: Will the Minister give way?

Mrs Villiers: No. I am afraid I have only a few more minutes, and a long list of points to get through. I want to try to respond to my hon. Friend the Member for Amber Valley.

My hon. Friend was concerned that in some way the Department for Transport discriminated against Bombardier. Absolutely not. We fully respect the excellence of the engineering facilities at Bombardier. We are determined that it should be judged on an impartial basis, so there is no question of any predisposition against Bombardier, or any discrimination.

Several hon. Members have expressed concern about the combination of long-term funding and maintenance and whether we should take the approach to procurement in the future of judging each procurement on its merits. It was not possible to sever those elements of the bid process from the criteria we inherited from the previous Government. They combined long-term maintenance and funding, and it would not have been possible for us to sever those criteria and start again, for the reasons I have given.

My hon. Friend the Member for Amber Valley thought that there was a case for leaving more procurement decisions to the train operators and the rail industry. I agree on that. He also asked about the margin between Siemens and Bombardier. I am afraid that that is commercially confidential at the moment and I cannot share it with the House. It would not be in the interest of Bombardier, Siemens or the taxpayer for me to do that. Several hon. Members, including my hon. Friend and the shadow Secretary of State, have expressed concern about the Siemens bogie. That has been evaluated. The bogie is based on proven technology used elsewhere. Its development began in 2007 and it is expected to have undergone about 1 million miles of testing before it goes into passenger service. As to concerns about peaks and troughs in rolling stock orders, yes, we need to consider that in future, and we shall do so as part of our consideration of the McNulty review.

My hon. Friend the Member for Mid Derbyshire (Pauline Latham) spoke passionately and movingly about the impact of job losses. She asked about a meeting with the Prime Minister, and he has asked the Business Secretary to meet Councillor Philip Hickson of Derby city council. In answer to the question of the hon.

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Member for Derby North (Chris Williamson) about assessment of the position in Germany and France, we looked carefully at their approaches, and will also do so as part of our growth review. As to whether we will publish the results of the value for money assessment of the Siemens bid, it is not possible at this point, as I have said, to publish such commercial details, because they are commercially sensitive. The hon. Gentleman asked what legal advice the Department obtained on changing the invitation to tender. As I have made clear, we are legally bound by the criteria we inherited from the previous Government, and those were thoroughly assessed by our legal advisers.

Chris Williamson: Will the Minister give way?

Mrs Villiers: No, I am sorry. I have a lot of points to make, and I propose to make them.

My hon. Friend the Member for Solihull (Lorely Burt) rightly emphasised the benefits of open markets and highlighted the dangers that going down a protectionist route might have. The hon. Member for Birmingham, Erdington (Jack Dromey) talked about how the Government could use their £100 billion public procurement programme to underpin economic recovery. Of course we will consider that as part of our growth review. My hon. Friend the Member for Crewe and Nantwich (Mr Timpson) was concerned about the amount spent on consultancy. The bulk of that happened under the previous Government, but I agree that we need a more efficient approach to spending on consultancy in relation to procurement in the future. Since the general election the consultancy spend has been considerably reduced.

It is important to recognise that Bombardier, alongside other train manufacturers and train and component supply chain businesses in the UK, will have the opportunity to bid for a range of contracts in the future. We are reforming the franchise system to incentivise train operators to invest in new rolling stock. We have given the go-ahead for the tube upgrades. We have secured funding for Crossrail. We are going ahead with a consultation on high-speed rail. Bombardier is a highly successful global company, with a proven record of winning big contracts for its Derby works and elsewhere. It has done so in the past; we see no reason why it should not be well placed to do so again in the future. In recent years it secured orders for nearly 1,400 carriages for London Underground’s sub-surface line, 376 for the Victoria line and 232 for London Overground. It has been shortlisted for the Crossrail order. Its striking success rate on tube-related contracts must put it in a strong position for when London Underground next needs to procure new carriages, which, thanks to the securing of funding for the tube upgrade, will happen in due course. Only a few weeks ago, Bombardier won a £354 million signalling contract for London Underground.

For all those contracts we are determined to ensure that domestic suppliers are treated entirely impartially and given a fair chance of getting them. The fact that the coalition Government have secured funding for such a major programme of capacity enhancement will result in major opportunities, not just for Bombardier but for other train component and supply chain manufacturing businesses in this country. Following its nomination, for example, as the preferred bidder for the intercity express programme contract, Hitachi has

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announced that it is locating its train manufacturing services for Europe at Newton Aycliffe in County Durham. That will provide significant opportunities for UK component manufacturing. As has been said, if the Siemens Thameslink bid proceeds to conclusion, it will involve the creation of 2,000 jobs in the UK. It has indicated that it intends to use elements of the UK supply chain to supply its bid.

This has been a difficult debate, and it is a difficult time for Derby. We are determined to help.

Chris Williamson: Will the Minister at least give an undertaking to take legal advice on the possibility of calling in the decision and reviewing it, with the possibility of reversing it, as has happened with previous contracts?

Mrs Villiers: We have looked extensively at the contract and have done the numbers very carefully. As I have said, it is not legally possible for us to rip it up. We need to ensure that in future, Bombardier and all our domestic suppliers will be well placed to compete effectively for bids and competitions that will be made possible by the coalition’s commitment to investing in our railways.

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Housing Market Renewal

11 am

Luciana Berger (Liverpool, Wavertree) (Lab/Co-op): I am delighted to have secured this debate on behalf of all hon. Members who share my concern about the cancellation of the housing market renewal initiative, and the terrible impact that that will have on those affected by it. I shall give an overview of the problems faced by all pathfinder areas and highlight how the cancellation of HMRI will affect some areas of Liverpool.

The Government’s plans for house building over the course of this Parliament can at best be described as conservative. Between 2005 and 2010, Labour delivered 256,000 affordable homes in England, including 142,000 additional homes for social rent. Over the five years of this Parliament, however, the Government are planning to deliver only 150,000 affordable homes—100,000 fewer than Labour achieved in the previous Parliament. HMRI was originally envisaged as a 10 to 15-year programme, but it was abruptly ended eight years in, when many of the schemes were reaching fruition.

In March, an Audit Commission report estimated that the HMRI had generated about £5.8 billion of economic activity across the UK, which created 19,000 jobs in the construction and related industries, and sustained more than 2,600 jobs in the construction industry each year. Thousands of homes have been built and more than 108,000 have been refurbished.

At the neighbourhood level, HMRI has helped to stabilise market conditions and provided a strong sign of change. Private sector resources have been leveraged in to the projects, and more than 15,000 new homes have been built in areas where no properties had been built for a long time.

In Merseyside the pathfinder scheme known as NewHeartlands delivered 2,297 new builds, refurbished 18,263 homes and made 65% of its planned acquisitions. Shelter, the housing and homelessness charity, said:

“The Housing Market Renewal pathfinders have brought much needed investment to parts of the North and Midlands experiencing low demand for housing and long term economic decline.”

The decision to cut £120 million of funding and to end HMRI has been tough on Liverpool. There are thousands of people on the housing waiting list across the city. Many families live in overcrowded or unsuitable homes. The decision puts an end to the good work being done to alleviate these problems and makes future work difficult, and it is clear from the mixed messages coming from the Minister for Housing and Local Government—I am sorry that he is not here today—that there is no clear exit strategy.

Rather than putting in place a phased withdrawal that would allow local authorities to manage the axing of funds, the Government have stopped the scheme dead, which has created confusion, uncertainty and bitter disappointment. The lack of strategy is evident, given the situation that the Government have left behind.

Robert Flello (Stoke-on-Trent South) (Lab): I congratulate my hon. Friend on securing this most important debate. Will she join me in raising the fact that other areas must have suffered, including areas such as Stoke-on-Trent? The Renew North Staffordshire pathfinder scheme cleared many properties in that area and demolished great

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swathes of the city, often taking a long time to piece together the ownership of the various lots of land. It was ready to start the next phase when, all of a sudden, it found itself with derelict land and nothing to build.

Luciana Berger: We have had similar experiences in Liverpool. It is devastating for the cities and towns concerned, as there are literally acres of flattened land with nothing on them. Near Smithdown road in Picton, there is nothing but green-grey grass, but people know that houses once stood there.

In Kensington and Picton, which are two wards in my constituency, some dilapidated housing stock sits mostly empty and boarded up. Some people live in what have become ghost towns. Eight out of nine houses are unoccupied. The people still living in those areas feel desperate and let down. They put up with living in decaying conditions because they were promised that they would be rehoused. People across Liverpool knew that if they lived in an area in a certain phase—one of phases 1 to 8—at some point they would be moved out their housing and the area would be regenerated. They now face the disappointment of having to stay.

If progress is not made on demolition, the shell of these properties will rapidly deteriorate, and that will increase the risk of collapse, which could endanger residents. Worse still, the land next to the residents lies idle. As I said, new homes were meant to be built there, but that will not happen because the funding has been withdrawn. The majority of people remaining in the clearance areas are vulnerable, elderly or have health problems. Residents would like to stay in the local area, but they do not have that choice because there are no new or alternative houses.

This is happening not only in Liverpool, as I am sure we will hear from other hon. Members, because it is a familiar story in the other pathfinder areas. The Audit Commission report into HMRI states:

“At this stage there are too many isolated and vulnerable residents still living in poor housing”.

Mike Gahagan, the former chair of the Transform South Yorkshire pathfinder, has said that

“the sudden termination in HMR funding has left many families in distressed surroundings”.

Stuart Whyte, the former chair of Gateway Hull and East Riding of Yorkshire pathfinder highlighted the fact that the areas have increasingly become a magnet for crime and antisocial behaviour.

These residents are already vulnerable and living in these areas for an extended period is likely to have a major impact on their health and well-being. Empty homes attract the theft of valuable metals and lead. The other weekend, I visited Ben Kwonko, a constituent who lives in an area where eight out of nine homes are tinned-up and unoccupied. His home is damp and lead has been stolen from his roof numerous times. He and his family are desperate to move out of that property, but he has no choice. There is also an increased likelihood of arson attacks in these areas.

The Minister might have realised the damage that ending HMRI has done to these areas, as he announced in May that a £30 million transition fund would be made available to the five most deprived HMRI areas—

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Merseyside, east Lancashire, north Staffordshire, Hull and Teesside. I welcome that announcement as a first step. Liverpool has been comparatively lucky by being able to access some of that money, but the reality is that such figures are a drop in the ocean when compared with the scale of the challenge. The money will not deal with all the outstanding housing renewal problems in some the neighbourhoods in Liverpool.

I refer to an example in Anfield, which is in the constituency of my hon. Friend the Member for Liverpool, Walton (Steve Rotheram), who I am sure will reinforce the point. In his constituency, areas in phases 6 and 7 do not meet the transition fund criteria for occupancy, and there is a requirement that the fund should not open up new phases of redevelopment. However, people are stuck in those areas. The funding decision also leaves four pathfinder areas with no extra funding and no clear idea of why that is.

Will the Under-Secretary of State for Communities and Local Government, the hon. Member for Hazel Grove (Andrew Stunell), share with us how the figure of £30 million was arrived at? How was the decision reached over which pathfinder areas are to receive money from the transition fund? What were the criteria and who set them? What support, if any, does he plan for those pathfinder areas not eligible for the transition fund? The transition fund does not address the fact that a large amount has already been spent on pathfinder schemes—thus far for nothing. We have seen £2.2 billion of taxpayers’ money invested in housing market renewal since 2002. What assurances can the Under-Secretary give that these areas will not regress, and that money already spent will not be wasted?

It is not only taxpayers’ money that is in danger of being wasted. Ros Groves is chair of the Anfield and Breckfield housing and physical regeneration group in Liverpool. The Minister for Housing and Local Government—I keep referring to him because I was expecting him to answer the debate—was in Liverpool when he announced the transition fund in May. Ros Groves said that he

“went on about how we need to get private sector involvement and I said: ‘We’ve got that. We’ve had £207 million spent here by businesses. What do you do with that? Just throw it in the bin?’ And he didn't have an answer because there is no answer.”

I hope that the Under-Secretary will be able to answer that today.

As well as a clear lack of a strategy on how to deal with residents living in pathfinder areas, there has been complete confusion over what funds will be available to finish the planned development in these areas. In October 2010, the Housing Minister said:

“We will complete all the committed HMR schemes, and we will then roll the funding up into the regional development fund to continue the good work.”—[Official Report, 21 October 2010; Vol. 516, c. 1114.]

That gave hope to pathfinder areas that they would be able to maintain funding for these projects—albeit on a reduced scale, but still at a reasonable level. However, the Minister’s commitment was left in tatters just over two weeks ago when Lord Heseltine, the chair of the independent advisory panel for the regional growth fund, told the Communities and Local Government Committee:

“The regional growth fund is not in any way a replacement for the housing market renewal funding...There is no way in which we are doing housing renewal.”

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That is a complete rejection of what the Minister said to the House in October and of what he told my hon. Friend the Member for Liverpool, Walton and me in a meeting in Liverpool. He gave false hope to those in Liverpool and other pathfinder areas that a solution may be found.

We are left with a lot of unanswered questions, so I hope that the Under-Secretary will answer some of them today. What discussions has he or his colleague had with Lord Heseltine regarding using the regional growth fund to develop the HMRI pathfinder areas? When was the decision made not to allow regional growth fund money to be used for housing? Who made it and when did the Housing Minister find out? Did the Under-Secretary or the Housing Minister know in advance of Lord Heseltine’s Select Committee appearance that he was going to veto the use of regional growth fund money for housing market renewal? When the Housing Minister gave his commitment to the House in October, had an agreement been reached to provide funding from the regional growth fund, which has subsequently been breached, or was he hoping that the funding could be used, but had not yet received concrete assurances that it would?

In addition to explaining how the Government made the decisions that have got us into this mess, I hope that the Under-Secretary will finally give us some clarity and provide an indication of how we can move forward and complete the housing projects, which is ultimately what we all want to see. I believe that the Housing Minister is interested in finding a solution.

Annette Brooke (Mid Dorset and North Poole) (LD): I am here simply out of interest. Will the hon. Lady give us some indication of how much money is needed to complete the projects in the way in which she is talking about?

Luciana Berger: The transition fund that was announced was £30 million. If the projects had continued in Liverpool alone, £120 million more would have been needed over the next seven years. However, there are another eight pathfinder areas. We expected some scaling back, but there are areas in my constituency and others across the pathfinder areas in which people are living in dilapidated housing. Those people were supposed to be decanted in a few years’ time. Their properties were expected to be regenerated and rebuilt, thus bringing much needed jobs to local areas and improving people’s surroundings, as they all deserve.

Robert Flello: On that point, let me just say that while £120 million might sound like a large amount—indeed it is a very large amount for just Liverpool alone—does my hon. Friend accept that if the cuts were not being made so deep or so fast, it would not be such an issue? Does she also accept that the economic benefit to not just Liverpool but the country would be huge and would far outweigh the investment required?

Luciana Berger: I thank my hon. Friend for his helpful intervention. Of course, if the cuts had not been so deep or fast, we could have had that money. As I said, it was another seven years before the HMRI was due to be completed. I do not have the figures in front of me, but I have seen some astounding numbers detailing

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the economic benefits and multiplier effects of having those houses built in all the areas. The knock-on effects would benefit the NHS, and people would find work and also live in better areas. As I said, there would be many more local construction jobs. On an annual basis, there would be nearly 3,000 sustainable jobs in the construction industry, and such jobs are much needed up and down the country. Although it is clear that the HMRI has ended, there is still a window of opportunity—albeit one that is rapidly closing—to build on the work done under the initiative and to utilise the expertise and partnerships that were built up during the course of the scheme.

In Merseyside, all the NewHeartlands authorities are trying to maintain momentum. Other sources of funding to finish regenerating these neighbourhoods are being thoroughly investigated. I have spent several hours meeting the housing market renewal teams at the council, and they are dedicated to doing everything they possibly can to leverage in that funding.

Liverpool is actively market testing refurbishment-based solutions for three of its neighbourhoods—Arnside road, Granby Four Streets and Webster Triangle. Initial indications are that there may be interest from partners to deliver in some of those areas. Meanwhile, in the renewal areas, new homes are being delivered by lead developers and are popular. I live on a former housing market renewal site. Examples of other such sites include the Parks in Anfield and the former Easby estate, both of which are in north Liverpool, where historically there has been little or no private sector house building.

Will the Under-Secretary commit to working with councils such as Liverpool and local communities to develop plans and identify funding for developing the pathfinder areas? So far, little support has been extended by the Government to make up for the complete cut in HMRI funding. The reality is that while councils are doing their best to find innovative solutions to this problem, their efforts are a drop in the ocean compared with the level of funding previously committed under HMRI, so they need more support from the Government.

As Elaine Stewart, the head of housing renewal services at Liverpool council, has said:

“We have to forge more relationships with the private sector although, in housing market failure areas, private sector rules don’t apply and we have to be realistic about the amount of private sector funding coming in. Without some public sector funding, it won’t work.”

At the final oral evidence session of the Communities and Local Government Committee inquiry into regeneration, the Minister for Housing and Local Government hinted that the Government may bring forward new funding. He said:

“This is not a policy launch, but I have an idea in mind where communities will be able to access further sums of money through a local process which will enable them to regenerate in ways that suit them locally.”

I would love to hear about those proposals. It is a shame that the Housing Minister is not here to tell us more about what he meant. However, until the Minister comes forward with something other than an idea—he did refer to it only as an idea—we will not be any closer to a solution.

On behalf of all my affected constituents and all those across Liverpool and the other pathfinder areas who live in intolerable conditions, I urge the Under-Secretary

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to go back to his Department and revisit the decision to end HMRI. Some £790 million has already been committed in Merseyside. We want a solution that will mean an end to thousands of people being forced to live in out-of-date, decaying and dangerous housing.

I thank you, Mr Gale, for your stewardship this morning. I hope that the Under-Secretary will address the issues that I have raised, and I am sure that my hon. Friends will raise other concerns during the rest of the debate.

Several hon. Members rose

Mr Roger Gale (in the Chair): Order. I imagine that Mrs Riordan will wish to call the Opposition Front-Bench spokesman at 12 o’clock. A significant number of Members wish to take part in this debate so, once again, brevity is the order of the day.

11.18 am

Joan Walley (Stoke-on-Trent North) (Lab): It is a pleasure to serve under your chairmanship, Mr Gale. I am sure that you will give us all an opportunity to contribute to this important debate, which I congratulate my hon. Friend the Member for Liverpool, Wavertree (Luciana Berger) on securing. The point that I want to get across to the Minister, who has a strong belief in local government, is that the housing market renewal programme, of which north Staffordshire was one recipient, was an important means by which capital funding came to areas where there was economic failure. The whole programme was intended to restore the balance between the south-east and other places where there is no economic failure and areas such as ours, which, for well-documented reasons, need to deal with issues such as absentee landlords. There are whole blocks of homes the purpose for which has now gone.

It has been well documented that in the early stages of the housing market renewal programme many MPs had real concerns; indeed, many MPs in Stoke-on-Trent had concerns. My hon. Friend the Member for Stoke-on-Trent South (Robert Flello), Mark Fisher, the former MP for Stoke-on-Trent Central, and I challenged the officials who were introducing that programme in the city, because it did not seem to us that they were working with or alongside local communities, or that there was a master plan to consider the kind of bottom-up regeneration that we wanted for our communities. In the early days, the officials’ proposals were all about the large-scale demolition of a large number of houses, which had no place in our local regeneration strategies.

Through careful, long-term lobbying, we did our best to change that approach. Across Stoke-on-Trent, there was a sea change where the housing pathfinder programme took place. In some places, the change was too little, too late, but in other places there was a major change. The programme was late in getting off the ground in north Staffordshire—it was about three years late in getting together all the different proposals—so we were behind where we should have been. Once the programme got off the ground, however, it started to make an impact.

The problem that we now face is the sudden and unprecedented withdrawal of funding by the Government in the comprehensive spending review, with no clear

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detail being given about what will be put in its place. My hon. Friend the Member for Liverpool, Wavertree has outlined the concerns about the regional growth fund. There was an assumption that that fund would provide some of the capital investment that we needed, but that did not happen.

We are now left, once again, with the huge disparity between the parts of the UK where there is no economic failure whatsoever and those parts where there is economic failure and where we are trying to remedy that failure. What we desperately need is a cocktail of measures, whereby everything works alongside everything else to get economic investment, restructuring and strategic planning in line with what local communities want, which means the homes where people live. We need homes side by side with jobs.

I know that the Minister cares passionately about the issue, but it is wrong that the funding was removed just like that with no time for people to prepare for its removal, and it is also wrong that the transitional funding of about £30 million, which would allow only for the further demolition of properties, should have been put in place without addressing the real capital needs for investment in our areas. It might seem to the Minister that the demolition of the remaining acquired sites is the best use of that transition fund of £30 million. However, if we consider the ongoing costs of vacant sites, which have no maintenance budgets whatsoever, it is not the right way forward to restrict the criteria on how that transition funding can be spent in the five most distressed areas to paying for demolition. Will he work with those five areas, which are represented here today, and officials in those areas? More importantly, will he look in a cross-cutting way at other Government policies? When he replies to the debate, I hope that he will indicate to hon. Members who are present today how the Government’s post-comprehensive spending review policies on housing market renewal relate to the Government’s economic policies on local enterprise zones and to the work that is coming out of the Treasury.

In Stoke-on-Trent, we hope that the Minister’s Department will support our application to establish a local enterprise zone. If that local enterprise zone goes ahead, it will border one of the areas for which we are seeking these transitional payments for housing market renewal, which is the Middleport area of my constituency. The same point applies to other areas on the periphery of what we hope will be the local enterprise zone. Will he look at how the investment that we need in housing in those areas can be provided—perhaps through a ring-fenced amount of money—to help us to deal with the absolute void that has been left by the Government pulling the plug on finances for housing market renewal?

I want to discuss the regional growth fund. It is extraordinary that the Government have indicated that what has been taken away with one hand will be provided with the other through applications that meet the criteria for the regional growth fund. Those of us who have attended meetings with Lord Heseltine know that the regional growth fund is already stretched and that it will not be ring-fenced in any way for housing investment, but without the homes to go alongside the jobs that we hope will come from the regional growth fund, people in our areas will not be able to get back on their feet in the way that was envisaged when the housing market renewal programme was first introduced.

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There is another cross-cutting issue, which is the local government finance relocalisation of business rates. It is a huge issue. If the Minister thinks that what the Treasury does about relocalisation of business rates and the consultation about those plans that will take place throughout the summer recess—perhaps away from media attention—will have no bearing on areas where we are fighting to get back economic prosperity after economic failure caused by structural reasons that we know only too well, I urge him to think again. Can he tell us how the proposal for the equalisation of business rates, and the giving of powers and funding to local authorities to meet the genuine needs of their areas, will have any chance of success when it appears that, as a result of the coalition agreement, areas such as the City of London will carry on receiving huge amounts of money? Such areas do not have economic failure—if their money goes into the pot, they get to keep it for themselves—but what about areas such as Stoke-on-Trent, which stand to lose money? Stoke-on-Trent stands to lose £26 million, which is on top of the £36 million in local government funding that has already been taken away from our area by the CSR.

I have already been in touch with the Department for Communities and Local Government about this issue, but will the Minister ensure that his officials work with those of us who are on the ground and who are in touch with the local enterprise partnership, local authorities and local communities to find, by some means or other, a way in which legitimate funding for legitimate regeneration and investment, which meets the needs of local communities that have been left stranded high and dry by the sudden decision to remove the money for housing market renewal and to allow transition funding only to be used for demolition, can be provided?

In Middleport, the Prince’s Regeneration Trust has now purchased the Middleport pottery; we have a Burslem master plan; and local people have a huge desire for housing renewal. I ask the Minister to work with the hon. Members here today, who care so much about their areas, to find a way forward.

11.27 am

Mr Iain Wright (Hartlepool) (Lab): It is a pleasure to serve under your chairmanship, Mr Gale. I remember with fond affection that you had to endure my ramblings in Committee during the passage of the Housing and Regeneration Act 2008, alongside your co-Chairman at that time, my hon. Friend the Member for Bootle (Mr Benton), whose constituency, like mine, is a recipient of housing market renewal funding. I feel like we are all back together for a nice reunion.

I congratulate my hon. Friend the Member for Liverpool, Wavertree (Luciana Berger) on securing this important debate on an issue that affects many thousands of decent residents in the north and in the midlands. I have a pathfinder project in my constituency. It extends throughout the Teesside area and incorporates sites not only in Hartlepool, but in Gresham, Middlesbrough and South Bank, which is in the borough of Redcar and Cleveland.

Between 2007 and 2009, I was the Minister in the Department for Communities and Local Government responsible for housing market renewal. I travelled across all the HMR areas when I was a Minister. I met

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residents in Stoke-on-Trent, Liverpool, Birmingham and Sandwell, and I was struck by their enormous enthusiasm and ambition. They were determined to see a reversal of the slow and painful decline in their neighbourhoods.

Robert Flello: My hon. Friend will no doubt recall walking down the high street of what was Coalville and is now Weston Heights in Stoke-on-Trent and seeing the phenomenal transformation that was taking place to turn what was a very run-down estate into one where people are still flocking to buy and rent properties. What a transformation that was, especially when combined with the other transformations in Stoke-on-Trent, such as the brand new hospital and the fantastic regeneration of our schools, and what a damn shame that it has ended.

Mr Wright: I agree with my hon. Friend. Alongside our hon. Friend the Member for Stoke-on-Trent North (Joan Walley), we are pushing on behalf of north Staffordshire. I remember seeing the huge ambition in that area, among others.

It is worth going back to the basics of what HMR was trying to achieve. It was trying to stem and reverse long-standing decline in areas characterised by acute housing market failure. In many respects, that was due to an imbalance of one particular type of property in an area. For example, about 37% of all the housing stock in the entire borough of Hartlepool—14,500 properties—is terraced housing. On any measure, that is too much of one particular type of stock, so there is a need to rebalance the stock the town provides to residents—both now and in the future. That was true of other HMR areas.

What struck me most when I had responsibility for this matter—more fundamentally than acute housing market failure—was the disconnect between those areas and economic activity. The areas were blighted by low skills and, often, virtually no employment. To succeed, I felt that housing market renewal had to be linked explicitly to economic success, and that was why, when I was able to announce in 2008-09 an extra £1 billion of funding for housing market renewal, I wanted to link it explicitly with the possibility of securing extra funding and with injecting skills and employment into those areas, with a particular emphasis on apprenticeships for young people.

It is also important to recognise that this was deliberately a long-term programme. Those areas in the north and the midlands were built in the Victorian era to house workers in heavy manufacturing industries. When those industries declined in the post-war era, their economic raison d’être was often lost, and areas have struggled to adapt. Those big social and economic changes cannot be solved overnight, so HMR was deliberately a 15-year programme to put those areas back on a sustainable footing. The abrupt cancellation of the programme, without any other suitable replacement, undoes all the good work that has been done, and sets those neighbourhoods back decades, as my hon. Friend the Member for Liverpool, Wavertree so eloquently said. More taxpayers’ money than was originally planned for HMR will be needed to sort out the social and economic problems caused by the cancellation of the programme.

Since 2006, for every pound of HMR funding in Teesside, we have levered in an additional £1.06 of other public sector investment and 61p of private sector

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investment. For Hartlepool in particular, the figures are actually much better. Hartlepool has received about £4.5 million of HMR funding between 2006 and 2011, but that has been complemented by £13.7 million of other public funding and an astonishing £20 million of funding from the private sector, so that is more money coming in from private companies as a result of public sector investment. As many as 2,500 private sector jobs in the construction industry have been created or safeguarded as a result of that initiative. If private companies see the Government losing faith in those areas and failing to maintain investment, it is difficult to envisage how private sector money will stay and grow there.

That is frustrating, because Hartlepool has shown how good progress can be made. We have seen the complete redevelopment of Trinity square by a good Hartlepool house builder, Yuill Homes, and it is now a thriving and welcoming area in the centre of town. At the Headway site close to Chester road, 280 terraced properties have been demolished and work on 170 high-quality, mixed-tenure homes has begun. A second of four planned phases is now progressing. The development agreement for the Headway site made provision for raising employment, skills levels and training opportunities, including the provision of apprenticeship places.

Last month, alongside Bob Farrow, a long-standing tenant of the Belle Vue area, I opened the first modern homes in the area, which replace 50 pre-fab and terraced properties. Bob has lived his entire life in the Belle Vue area, having been born in Borrowdale street. With other residents, he has been closely involved in the planning of the new development. It is a myth—if the Minister is going to suggest this—that the programme has had a top-down approach. It has been bottom-up, with residents actively involved in planning the future of the areas. At the opening of the new homes, Bob said:

“I knew when I first saw Housing Hartlepool’s plans for the new Belle Vue estate that it was going to be wonderful, but these fantastic homes have exceeded expectations. Hartlepool residents have been closely following the progress of the new homes and it is great to see them become a reality.”

In the Perth, Hurworth and Grainger streets part of Dyke House, a compulsory purchase order is in process, meaning that several hundred residents, who have been living with uncertainty, are now seeing some progress. Credit for that must be given to Damien Wilson, Hartlepool borough council’s assistant director of regeneration, who alongside me, the three ward councillors—Mary Fleet, Stephen Thomas and Linda Shields—and officers, Amy Waller from the council and Helen Rooney from Housing Hartlepool, have been going to the Hartlepool Rovers quoit club every Friday at 5 o’clock to keep residents up to date with developments.

However, I am concerned that this progress of breathing new life into disadvantaged areas is incomplete, and that people will be left in limbo for years. As the Audit Commission stated in its review of HMR in Teesside:

“This is a particular risk…where so many schemes are at a relatively early stage. There are a number of areas where a large number of properties have been acquired that are awaiting demolition. This has the potential to leave communities living in a very poor quality environment…The slowing down or stopping of interventions will undermine commitments made to communities and damage community confidence in neighbourhoods.”

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Through all their policies, the Government are damaging the communities in my constituency and the wider north-east. Economic policy, social and welfare initiatives, and public sector cuts all disproportionately affect my area and focus on neighbourhoods that least have the tools to battle those challenges. Areas such as Hartlepool, Middlesbrough and Redcar and Cleveland are less likely than anywhere in the country to be able to withstand economic recession and public sector cuts. HMR was starting to turn round decades of neglect, economic inactivity and housing failure to provide neighbourhoods with the housing and hope that they deserve. The Government have taken that away without putting anything in its place. For the first time in many years in this country, we have no dedicated urban regeneration funding programme. I hope that the Minister will reflect on what his Department has done, and do something for my constituents and other decent residents across the midlands and the north of England.

11.36 am

Graham Jones (Hyndburn) (Lab): It is a pleasure to serve under your chairmanship, Mr Gale, and I congratulate my hon. Friend the Member for Liverpool, Wavertree (Luciana Berger) on securing a debate on an important issue to my constituents, the axing of HMR.

HMR was overall a successful scheme, although I admit there were some problems, which I will address later. I want to address how the ending of the scheme affects my constituency and low-demand areas; some of the misleading statements put out by the Government; and the Government’s £30 million transitional fund.

Let us be clear where we are now: facing human misery. People were given assurances that the HMR red line around their neighbourhood would be a 15-year programme. It was not to be one that would first encourage disinvestment and degeneration and then, at the bottom of that regeneration trough, have the funding pulled to leave streets abandoned, in the worst cases looking like ghettos.

The regeneration did have cross-party support. The Minister himself was once a fan and, from reading Hansard, I note that he was a supporter. The Prime Minister made unequivocal promises back in 2006, when he took the then shadow Cabinet on a visit to Liverpool. While walking along some of the terraced streets, he observed,

“Run-down areas become a magnet for dumping and littering.”

He laid out this Government’s political ambitions, saying of regeneration,

“It’s a huge task. I want the Conservative party to be the party of urban regeneration. The aim is to make our cities better places for people to live in.”

People rightly feel badly let down; that the Government and the Prime Minister have broken their promises. That can be best summed up by Peter Latchford, the former chair of Birmingham and Sandwell pathfinder:

“I am particularly concerned at the message sent to people living in complex and deprived areas when a programme like this is terminated so abruptly. In Birmingham and Sandwell, we showed that the best results come from involving local people; from investing in long-term relationships of trust; from holding ourselves properly to account locally. There is no better way to disillusion such people, who have seen a succession of ‘interventions’ come and go, than to pull the plug halfway through the promised period.”

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HMR was successful; it made good progress in some of the most deprived areas. That is according to the Audit Commission, Shelter and the chairs of the former pathfinder areas that oversaw the regeneration. The Audit Commission report published this March showed that the decision to abolish the housing market renewal programme was ill-advised. My hon. Friends the Members for Liverpool, Wavertree and for Hartlepool (Mr Wright) mentioned the benefits identified by the Audit Commission, including £2.2 billion invested in the HMR programme since 2002, £5.8 billion in economic activity and 30,000 new property sites cleared. The HMR kept 19,000 jobs in the construction industry. In Newcastle Gateshead, £60 million in HMR funds, along with contributions from the council and the Homes and Communities Agency, secured £400 million in private investment and delivered more than 4,000 new homes. The Housing Minister is keen to say that we need new homes, so he should be aware of those facts.

I want to put on record the Audit Commission’s summary, as it is important:

“The HMR programme is making a difference to the communities it serves, with fewer empty houses, reduced crime, and more jobs and training opportunities, especially in those neighbourhoods that are more advanced in their programmes.”

It goes on to discuss the Government’s current proposals for a £30 million transitional fund, essentially to fund the evacuation of residents in what, in my opinion, is an attempt to remove the personal misery involved from the broadcast and news media in order to assist the Government politically. The Audit Commission’s summary says that

“the emphasis must be on completing current key interventions; not least to ensure that promises made to communities are met and to reduce the risk of previous investments being undermined by leaving a legacy of uncompleted projects. At this stage there is…a significant risk that neighbourhood regeneration projects stall, leaving communities living in a poor quality environment indefinitely.”

There seems to be no exit strategy and a lot of waste. The sudden withdrawal of funding has left local authorities unable to complete projects that were already under way. The Government should have considered a phased withdrawal from the programme, and the scheme’s management should not have been based on the five reasons the Housing Minister trots out so frequently, all of which I will dismiss.

The first reason is deficit reduction. The Government are ignoring the plight of the areas involved, the promises made and the investment so far. As my hon. Friend the Member for Stoke-on-Trent North (Joan Walley) said, we had the opportunity not to introduce such a great deficit reduction programme. We are going too far too fast, and it is hurting our communities. The second reason is future funding, to which I will come, and the £30 million in relief, particularly the regional growth fund, which my hon. Friend the Member for Liverpool, Wavertree discussed, and the new homes bonus, to which the Housing Minister keeps returning. The third is waste, the fourth is top-down targets and the fifth is a conflation of over-supply and under-supply in housing markets.

There has been waste in HMR areas, but I remind the Minister responding to the debate that of the five areas for which he is providing funding, Hull, Liverpool and Stoke were Liberal Democrat-controlled, East Lancashire was Conservative and Liberal Democrat-controlled, and

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Tees Valley had no overall control. It is not a Labour issue. In East Lancashire, Hyndburn’s Conservative council was handing out full market value payments plus relocation grants plus a cash handout of £30,000, and undertaking group repairs at £55,000 a property, which was more than the full value. Significantly, the council never engaged with estate agents or architects on added value or the redesign of properties, nor did it seek the best investment value. I am told that in Liberal Democrat Pendle, £1 million, not including acquisition, was spent converting eight houses into four. Another issue is the lack of Government intervention in Liberal Democrat and Tory-controlled councils.

My hon. Friend the Member for Hartlepool mentioned top-down targets, another issue to which the Housing Minister keeps referring. A pathfinder, as the name implies, is a housing programme in which local authorities were told to find a path. There were no top-down targets that anyone is aware of except the Housing Minister, who said in a reply to my right hon. Friend the Member for Birkenhead (Mr Field):

“Some pathfinder schemes were successful; however, others attracted controversy due to an over-reliance on demolition, in part encouraged by top-down government targets.”—[Official Report, 20 January 2011; Vol. 521, c. 901W.]

The Housing Minister has made that assertion repeatedly. Can the Minister here today name a single top-down target imposed under the HMR programme? I cannot and nor can anyone else—including the Housing Minister, who has failed to provide a single meaningful example so far.

Turning to my constituency, Hyndburn has unfunded areas like those mentioned by my hon. Friends. The future of Woodnook and Peel in Accrington is now unfunded, and I will assert to the Minister the sheer scale of the problem. Residents in the area were consulted in 2005 by the Conservative council. Plans were drawn up and presented that included details such as houses to be demolished and trees to be planted. The Conservative council scrapped those plans and then went into “spend, spend, spend” overdrive in West Accrington. In 2010, the council repeated the process, covering some 70 terraced blocks with 15 houses a block, a considerable number of properties. The hon. Member for Rossendale and Darwen (Jake Berry) was courteous enough to visit last month and recognised the true scale of the problem, but the Housing Minister has yet to come through on his promise to visit Hyndburn and see the HMR-related problems in Accrington.

Residents of 70 blocks in red-line areas believed that their area would be regenerated, but since the cuts in the comprehensive spending review and the axing of HMR, the council has scaled back its plans to include just five blocks. In many blocks outside the area where transitional money will be spent, occupancy rates are between 30% and 80%. A press release from the Department for Communities and Local Government on 9 March this year stated:

“This coalition Government is committed to helping vulnerable people and will not stand by when residents are stranded in derelict neighbourhoods through no fault of their own.”

Five out of 75 blocks are being done and 70 blocks are being neglected, some of which meet tier 1 and tier 2 criteria for the £30 million and have less than 50% occupancy.

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As my colleagues have said, £30 million is grossly insufficient. Four blocks that I have looked around make me think of the misery on those streets. Surely the Minister must recognise that that cannot carry on. In effect, even with the £30 million, we are abandoning people in HMR areas. Worse, although some blocks qualify for match funding under the Government scheme, it is ridiculous to think that a local district council could afford to match Government funding to deal with such areas, even though they meet the criteria. We will be abandoning and neglecting people who meet the criteria, despite two previous plans. Such is the desperation of the district council to do something that it is prepared to say whatever it takes to the Government in order to get any crumbs that might help people. The council knows that it is abandoning residents because it has been shorn of Government funding, and the private sector does not want to know. We risk facing blight compensation notices.

The Housing Minister conflates over-supply and under-supply, trotting it out as a reason for the shortage of housing in the UK. He said on 17 January:

“The housing market renewal programme was responsible for demolishing a large number of homes—so many that there are fewer affordable homes after the 13 years of the previous Government than there were when they got into power in 1997.”—[Official Report, 17 January 2011; Vol. 521, c. 535.]

A conflation of the south-east and the north-west is imaginary and unhelpful, as it belittles the truth. There are more houses than people in significant parts of the north. Is the Minister not aware that Liverpool’s population used to be 1 million but is now nearer 450,000? East Lancashire’s population has fallen. There are more houses than people; demand is low.

Is the Housing Minister so lost from his brief as to be unaware that there are 750,000 empty properties, most of them in the north? People do not want those homes, the private sector does not want them and hard-pressed councils have no money to deal with them. Is he really suggesting that the cure for low demand is for people from the south-east to move to the north? If so, is that official Government policy, and what is he doing about it? That is what he seems to be suggesting. How else will we fill those houses? If not, he should refrain from suggesting that there are more people than houses, for that embarrasses his own position.

My hon. Friend the Member for Liverpool, Wavertree touched on the regional growth fund. The Housing Minister told the House of Commons one thing that seems to be totally untrue, and he needs to address the fact that he has misled the House. As my hon. Friend said, the chair of the regional growth fund said that it will not accept funding bids, so for a long time those communities were led to believe that there would be a future, but there is none. I am sure the Housing Minister will be haunted by his words:

“We will complete all the committed HMR schemes, and we will then roll the funding up into the regional development fund to continue the good work”—[Official Report, 27 October 2010; Vol. 517, c. 1114.]

I want to address a second point that the Housing Minister touched on—the new homes bonus—because it is not only on the regional growth fund that he has misled the public. He has repeatedly confirmed that the

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new homes bonus will supplant HMR, yet figures distributed by the House of Commons Library show that my constituency received just £62,000. Is the Minister aware that the average price for acquisition is £77,000 in West Accrington and £45,000 in East Accrington? The difference is that one has had intervention and the other has not. That £62,000 will barely buy one house. When we find out that the new homes bonus will buy so few bricks, stones and slates, is the Housing Minister not embarrassed by his comment that the new homes bonus will assist HMR areas?

It is not only a Hyndburn issue. East Lancashire has some of the worst housing in the country, yet its five HMR local authorities are recipients of the lowest new homes bonus payments in the UK. All five feature in the bottom 27 out of 350 authorities and receive less than 90p per head in new homes bonus payments. Hyndburn receives 78p per head, while leafy Uttlesford receives £9.30 and conservative Tewkesbury £6.47. How is that fair? How is that consistent with the Housing Minister’s extravagant funding claims?

Given that there are more properties than people, it is no good the Minister saying that we will be rewarded for filling empty homes and that there is an empty homes budget. How? How will we get people into those houses? Empty properties are a revolving door. The Housing Minister is making ridiculous arguments. I presume he is suggesting that people leave delightful Tewkesbury and Uttlesford, where they want to live and where there is high demand, and move to Woodnook, Peel or Accrington, where there is little or no demand. When he makes those generic comments, I would like him to explain how he will square that circle.

Crime hot spots and human misery are key issues. Families remain trapped in deserted streets where projects have been abandoned. Those areas attract crime, with several experiencing arson attacks, which makes it very dangerous for those living there. Stuart Whyte, the chair of Gateway Hull and East Riding of Yorkshire pathfinder, said:

“The areas have increasingly become a magnet for crime and anti-social behaviour. Beyond this human misery the sudden withdrawal of funding has a major impact on the willingness of the private sector to invest in the areas.”

Mike Gahagan, former chair of Transform South Yorkshire pathfinder, said that

“the sudden termination in HMR funding has left many families in distressed surroundings”.

The Government have an obligation, and forcing local councils to accept liability will not make the problem go away, particularly in lower-tier district councils, which cannot raise the finance. The Liberal Democrat leader of Burnley council, Charlie Briggs, said:

“£30 million remains insufficient to meet the area’s needs. We need a policy and funding that gives us a bridge to Mr Shapps’ new world. We are in touching distance of a revitalised housing market. It will be disgraceful if the government now pulls the rug on us and, more importantly, our communities.”

That is a Liberal Democrat leader—it does not even come from the Opposition.

The Government are nowhere on regeneration. Their own document, “Regeneration to enable growth”, is an embarrassing three pages long, followed by some cut-and-pasted tables. Is that their position on regeneration—three pages? When the Prime Minister visited Liverpool, he put Lord Heseltine in charge of regeneration, stating:

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“I am delighted to be here and announce the setting up of a Cities Task Force which Heseltine has agreed to chair. He has a great record in helping with urban regeneration and is a great friend of Liverpool’s.”

Questioned at last week’s Select Committee on Communities and Local Government, Lord Heseltine had this to say on regeneration: there is a paper out on regeneration; it

“is called ‘Going for Growth’ or something.”

It is actually called, “Regeneration to enable growth”. It is clear that the Government have abandoned regeneration and HMR. Those the Prime Minister has made responsible for it know so little and the Government do not care enough to do something about it. Perhaps the Minister has recognised that the Government have conveyed confusion and misinformation, and will eventually come back to the nub of the issue. The problem will not go away.

In closing, I note that last Tuesday the Housing Minister announced that he would look at a new fund. My hon. Friend the Member for Hartlepool has put the questions—where is that new fund and what will it do? Will it include the existing HMR areas? Will it be part of a strategic plan including public and private finance? Crucially, in my constituency, will it be more than the embarrassing £62,000 the Government provided in the new homes bonus fiasco? I close my comments there, Mr Gale. Thank you.

Mr Roger Gale (in the Chair): In the light of that lengthy contribution, the Front Benchers have indicated that they are willing to curtail their speeches slightly. Mr Rotheram, you have about seven minutes.

11.55 am

Steve Rotheram (Liverpool, Walton) (Lab): It is a pleasure to serve under your chairmanship for the first time, Mr Gale. I congratulate my hon. Friend the Member for Liverpool, Wavertree (Luciana Berger) on securing the debate and my hon. Friend the Member for Hyndburn (Graham Jones) on tenaciously pursuing the issue of housing market renewal.

Hon. Members will, I hope, be aware of early-day motion 1970 on housing market renewal, which I sponsored not only because it affects huge swathes of my constituency, but because we need to secure a fair deal for all the former HMR areas. The Chancellor once told us that we are all this together, and perhaps that is partly true in this case—at least, “we” on Labour Benches representing ordinary, working-class constituencies might be in this together, but certainly not “we”, as in the royal “we”, representing leafy suburban areas such as Tatton, Witney and South West Surrey.