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Duncan Hames (Chippenham) (LD): In the light of the concerns raised by this issue, what action does the Home Secretary expect of police authorities outside London to root out inappropriate practices and to restore public confidence in the independence of their forces?

Mrs May: I would hope that police authorities will have been considering the issues that have been raised, and that they will give full and proper support to the review that the inspectorate of constabulary will do on this issue in police forces across the country.

Chris Leslie (Nottingham East) (Lab/Co-op): The Home Secretary says that she did not know about the appointment of Mr Neil Wallis to the Metropolitan police. Did Andy Coulson know, and did the Prime Minister know?

Mrs May: I might remind the hon. Gentleman and the House that in fact, the appointment of Neil Wallis—or, to be correct, of Chamy Media—was undertaken not under this Government, but in September 2009, under the previous one.

Graham Evans (Weaver Vale) (Con): The whole House will remember when Damian McBride planned to smear the wives and families of Opposition Members. Does my right hon. Friend the Home Secretary agree that those who live in glass houses should be more careful about throwing stones?

Mrs May: I entirely agree with my hon. Friend, and as I pointed out to the shadow Home Secretary, the communications director advising the Leader of the Opposition is a former News International employee, Tom Baldwin.

Mike Gapes (Ilford South) (Lab/Co-op): In view of the remarks of the Mayor of London—he said that the phone hacking allegations were “politically motivated” and “codswallop”—does the Home Secretary believe that he is a fit and proper person to be involved in the appointment of the commissioner of the Metropolitan police?

Mrs May: Yes.

Dr Thérèse Coffey (Suffolk Coastal) (Con): Given that Sir Paul and Mr Yates resigned from the Metropolitan police, will my right hon. Friend the Home Secretary clarify whether they can take up any other policing position, including with ACPO or any other policing agencies?

Mrs May: Normally, officers who serve in ACPO are serving officers rather than people who have retired. Therefore, I think Sir Paul Stephenson and Assistant Commissioner Yates will not be taking up any such places.

Malcolm Wicks (Croydon North) (Lab): May I first echo the words of my neighbour, the hon. Member for Croydon Central (Gavin Barwell)? Obviously, our thoughts are with our police officer from Croydon and his family at this difficult time.

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May I put it to the Home Secretary that many Londoners are confused about the respective roles of the Home Secretary, the Mayor and the Metropolitan Police Authority? Who in our democracy is ultimately responsible and accountable for the conduct and integrity of the Metropolitan police?

Mrs May: I say to the right hon. Gentleman that the legislation under which Londoners are confused was introduced by the Government in which he was a Minister. This Government are now clarifying the position under the Police Reform and Social Responsibility Bill. We will streamline the arrangements that exist in relation to appointments and the position of the police and crime commissioner in London. However, the appointment of the commissioner and deputy commissioners will remain, as it is today, a final decision of the Home Secretary.

Bob Stewart (Beckenham) (Con): As I understand it, Lord Justice Leveson’s terms of reference are restricted to phone hacking. I wonder whether it is possible for the inquiry to look also at hacking into e-mails and the illegal acquisition of information such as medical documents.

Mrs May: My hon. Friend is not the first to raise the issue of the remit of the Leveson inquiry. It will cover the culture, practices and ethics of the press, as well as the relationship of the press to the police and issues of regulation. So I would expect that it would indeed be able to look wider than just the issue of phone hacking.

Mr Chuka Umunna (Streatham) (Lab): I note that the Home Secretary did not answer the question from my hon. Friend the Member for Nottingham East (Chris Leslie) about whether the Prime Minister knew that Neil Wallis was working for the Met and/or whether Andy Coulson knew the same. Could she perhaps respond and let us know that answer to that question?

Mrs May: I must say to the hon. Gentleman that so far as I am aware, no, they did not know.

Jason McCartney (Colne Valley) (Con): An experienced columnist from The Guardian said on the BBC yesterday that to the best of her knowledge she believed that the passage of information between journalists and the police was common and widespread. Does the Home Secretary agree that the police investigation should go wherever it leads and follow through all leads on that matter?

Mrs May: My hon. Friend is absolutely right. It is important that, whatever the evidence shows, the police investigation is able to follow the leads to the rightful conclusion without fear or favour, and that they ensure that wherever it leads proper action is taken and people who have committed criminal offences are properly brought to justice.

Hywel Williams (Arfon) (PC): The Mayor of London said this morning that Sir Paul had taken a very brave individual decision. Is the Home Secretary confident that that is the most accurate, appropriate and apposite description of the events leading up to that resignation?

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Mrs May: I have made my position on Sir Paul Stephenson’s resignation absolutely clear. In his time in office at the Metropolitan police he has strengthened the force operationally, and under his leadership it has been effective and done excellent work in cutting crime and protecting the public.

Nia Griffith (Llanelli) (Lab): Given that the Mayor of London actively discouraged the reopening of the police inquiry by referring to the phone-hacking allegations as “codswallop” and a Labour plot, what inquiries will the Home Secretary make into what advice the Mayor took before making those views known and using his influence in that way?

Mrs May: The advice that the Mayor takes is a matter for him.

John Mann (Bassetlaw) (Lab): When did Mr Ed Llewellyn pass on the Guardian dossier to the Home Office?

Mrs May: I am not aware that there was a Guardian dossier. There was information that was generally available to the public, as I understand it. There is an issue here about the role of the Home Office that Opposition Members sometimes fail to grasp. It is not the job of politicians to tell the police who to investigate or arrest. It would be a very sorry day for our police and our democracy if we ever went down that road.

John Woodcock (Barrow and Furness) (Lab/Co-op): Did the Home Secretary raise any concerns to anyone about bringing Andy Coulson into the heart of Government and, if not, does she now regret that failure to speak up?

Mrs May: I have made clear the difference between the Metropolitan police and the Government. The Prime Minister has answered the point about Andy Coulson. He did that last week and he made it absolutely clear that he gave Andy Coulson a second chance. That did not work out and Andy Coulson resigned again.

Toby Perkins (Chesterfield) (Lab): The Home Secretary finally made us aware that she was not told if the Prime Minister knew about Neil Wallis’s employment. Can she confirm whether Andy Coulson knew about the employment of his former deputy by the Metropolitan police?

Mrs May: I have been asked that question and I have answered it.

Mr Denis MacShane (Rotherham) (Lab): Before Wednesday’s debate, would the Home Secretary have the kindness to place in the Library details of all communications, in writing or by phone or e-mail, between Andy Coulson and her private office since she took up the post of Home Secretary?

Mrs May: The right hon. Gentleman, like a number of his colleagues, is seeming to focus purely on Andy Coulson. I say to him and Members of the House that we have a serious job to do—to ensure that we restore confidence in the Metropolitan police and the police generally and to deal with allegations over the operations of the police. We owe it to the public and to the honourable police officers in the Met and other forces

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in the country to do that seriously, to consider all the allegations and to ensure that they are followed through and dealt with.

Kevin Brennan (Cardiff West) (Lab): Were there any meetings between Neil Wallis and Andy Coulson while the latter was working for the Prime Minister at No. 10 Downing street? If the Home Secretary cannot give us that information now, will she undertake to give it to us later?

Mrs May: No, I cannot give the hon. Gentleman that information. It is not the sort of information that is available to me. I would point out to him that for the first part—considerable part—of the period when Neil Wallis was in his advisory capacity to the Metropolitan police, the Labour party was in government.

Mr Michael McCann (East Kilbride, Strathaven and Lesmahagow) (Lab): May I make a statement of the obvious? The Home Secretary has been chasing this issue from day one. She got it wrong on phone hacking, she got it wrong on a judge-led inquiry and it has taken two high-profile resignations to place just a semblance of respectability on an affair that every dog on the street knows stinks. Is it right that Sir Paul Stephenson resigns for Neil Wallis, but the Prime Minister gets off scot-free for hiring not the monkey but the organ grinder, Andy Coulson?

Mrs May: I am not sure that there was actually a question in all that. I remind the hon. Gentleman that, as I said earlier, in 2002, the Culture, Media and Sport Committee reported that the press were making illegal payments to police officers and called on the then Home Secretary to review and, if necessary, overhaul the guidance and measures aimed at preventing such behaviour by the police and media. The Labour Government did absolutely nothing.

Chris Bryant (Rhondda) (Lab): I am afraid that I welcome the two resignations today because I think that Assistant Commissioner Yates, by his own admission, misled Parliament; because the relationship between the News of the World and the Metropolitan police became so close as frankly to be collusive; and because we had this ludicrous situation in which Andy Hayman was leaving the employment of the Metropolitan police to work for News International and Neil Wallis was leaving News International to work for the Metropolitan police. That cannot be good for the Metropolitan police in the end. I know that the Home Secretary cannot tell anybody what investigations to undertake, but will she ensure that there is a proper investigation into the Surrey police and what happened between the police officers in charge of the investigation following Milly Dowler’s disappearance and death and News of the World and other journalists at the time? I do not think that the collusion was only in the Metropolitan police.

Mrs May: A number of concerns have been raised about issues in other forces relating to contractual arrangements, employment arrangements and other matters. That is why I am asking HMIC to look at these issues more closely across policing, including at issues of abuse of power.

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Tom Greatrex (Rutherglen and Hamilton West) (Lab/Co-op): The Home Secretary rightly said in her statement that confidence in the police—for both the public and serving police officers—must be of paramount concern in getting to the bottom of these allegations. She has just shared with the House information about other police forces, but has she had any contact with the Scottish Justice Minister, Kenny MacAskill, about how these types of inquiry can range across Scottish police forces as well as those for which she is directly responsible?

Mrs May: I have not had such interaction with the Scottish Justice Minister, but I am happy to alert him to the steps that we are taking in relation to forces in England and Wales so that he may look at that in relation to Scottish forces.

Mr Wayne David (Caerphilly) (Lab): Looking ahead to Wednesday, may I urge the Home Secretary to have a word with the Prime Minister to ensure that as well as making a statement he will also lead the debate?

Mrs May: Hon. Members have asked that the Prime Minister comes to the House on Wednesday. He will be doing that.

Barry Gardiner (Brent North) (Lab): The right hon. Lady has sought to distinguish the probity of the appointments made by Sir Paul Stephenson and those made by the Prime Minister on the grounds that there is a proper distance between those being investigated and those doing the investigation. Does she agree that there should also be a proper distance between the law-makers in this country and those suspected of lawbreaking?

Mrs May: I say what I said earlier about the difference between the Government and the Metropolitan police. The Metropolitan police were in the process of investigating —or had been investigating—the News of the World for alleged wrongdoing. It is right, therefore, that we should look at drawing a line between the investigators and the investigated.

Helen Goodman (Bishop Auckland) (Lab): There seems to have been an exchange of staff between the Metropolitan police and News International. Last week, I asked the Minister of State, Cabinet Office whether former police officers were subject to the rules of the Advisory Committee on Business Appointments. He has written to me saying that he does not know. Can the Home Secretary say what the current rules are and whether Mr Hayman followed them?

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Mrs May: Perhaps the hon. Lady should have raised that with the last Cabinet Office Minister, under the last Government, because that was when those issues arose.

Bill Esterson (Sefton Central) (Lab): If Sir Paul Stephenson was right when he said that he made an error of judgment in his appointment of Neil Wallis at a time when he had not been implicated in phone hacking, what does that say about the Prime Minister’s judgment in appointing Andy Coulson at a time when he had already resigned once over the very same issue?

Mrs May: I suggest that the hon. Gentleman could have listened to the answer that I have already given—on a number of occasions now—about the difference between the Government and the Metropolitan police. Of course, the point is that the Metropolitan police are responsible for investigating allegations of potential wrongdoing at the News of the World.

Mrs Madeleine Moon (Bridgend) (Lab): The stench that arises from the rotting drains underneath this Chamber seems to be an apt background to a lot of the debate that we have had today. Over the weekend, we had the arrest of Rebekah Brooks, ahead of her giving evidence to the Culture, Media and Sport Committee on Tuesday. I appreciate that the Home Secretary says that it is not up to her to say who is arrested or when, but is it not time that we clarified the role of police investigations and investigations conducted by Select Committees for those investigations being conducted in both places?

Mrs May: I think the hon. Lady will find that Select Committees are very clear about the role and the powers that they have. What is important is that police investigations that could lead to criminal charges and prosecution are not prejudiced in any way by other investigations that take place. That is why we are being very careful in relation to the inquiry that is being led by Lord Justice Leveson. The hon. Lady also refers to needing to clear out the drains. Obviously the drains have not been cleared out for a number of years, but this Government are doing it.

Ian Lucas (Wrexham) (Lab): Which individual police officer made the decision to employ Neil Wallis’s company?

Mrs May: As I understand it, the decision was made by the director of public affairs, not an individual police officer in the Metropolitan police.

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Defence Transformation

4.48 pm

The Secretary of State for Defence (Dr Liam Fox): I wish to express my condolences to the family and friends of Lance Corporal Paul Watkins of 9th/12th Royal Lancers, who was killed in Afghanistan on Saturday. My thoughts and prayers—and, I am sure, those of the whole House—are with them at this very sad and difficult time for them.

I wish to make a statement on the next steps in implementing the strategic defence and security review. This Government inherited both a national economic disaster that represented a strategic threat and a defence programme undermined by a £38 billion black hole. Without a fundamental review for 12 years, our armed forces were still largely configured for the 20th century, despite a decade of sustained operations in Afghanistan and Iraq. The failure to set out a coherent long-term strategy for defence or to match commitments effectively to resources is one of Labour’s worst legacies. However, it is not enough to deal with the mess that we inherited; we also need to build something better for the future.

Right from the start, this Government have been determined not to repeat the mistakes of the past, and to make the difficult decisions that were ducked by the previous Government. We are determined to be bold and ambitious and to build formidable, well-managed armed forces structured for the rigours of future conflict and supported by an affordable defence programme. The SDSR has mapped out our long-term goal for Future Force 2020. The report of the defence reform unit that I announced to the House on 27 June was part of that process. Today, I want to set out the next phase of defence transformation, which involves bringing the Army back from Germany, creating a better future for our reserve forces, and delivering on our commitment to agree a 10-year defence equipment budget.

I have written to Members of both Houses and the devolved Administrations whose constituencies and interests are affected by the decisions that we have taken. Commitments must match resources in order to achieve a balanced budget. As part of the preparation for this year’s planning round, we have identified a number of adjustments to the defence programme. This includes rationalising vehicle acquisition to make the best use of those that we have already procured to support operations in Afghanistan, and continuing to bear down on non-front-line costs, where we will aim to deliver further substantial efficiencies in support, estate spending and IT provision.

Against this background, and as part of our overall approach to balancing the programme, I have agreed with the Treasury that the Ministry of Defence can now plan on the defence equipment and equipment support budget increasing by 1% a year in real terms between 2015-16 and 2020-21. I am grateful to colleagues, and particularly to the Prime Minister, for their support in this process. Such a long-term planning horizon will give greater stability and predictability, and stop the old practice of simply pushing programmes into future years. These and other changes will enable us to proceed with a range of the high-priority programmes set out in the SDSR.

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I can therefore now give the go-ahead for the procurement of 14 additional Chinook helicopters, the upgrade of the Army’s Warrior vehicles, spending on the joint strike fighter, the procurement of the Rivet joint intelligence and surveillance aircraft, the cats and traps for the Queen Elizabeth class carriers, and the development of the global combat ship. This equipment can now be bought with confidence, ending a decade of uncertainty for our armed forces and for industry. However, similar discipline will be applied in future: we will order only what we can afford to buy.

Today I am placing in the Library the report of the review into the reserve forces, “Future Reserves 2020”. I would like to thank General Sir Nick Houghton, Lieutenant-General Graeme Lamb and my hon. Friend the Member for Canterbury (Mr Brazier) for their excellent report. The report makes it clear, and I fully agree, that our reserve forces make an outstanding contribution to operations but have been shamefully neglected in recent years. For example, by some estimates, the Territorial Army has a trained and active strength as low as 14,000.

I am therefore pleased to announce that the Government will proceed with a £1.5 billion investment package over the next 10 years to enhance the capability of the reserves and consequently increase their trained strength, £400 million of which will be spent during this Parliament. The Government will work with employers and legislate if necessary to ensure that the reserves are more readily useable on operations. This significant investment will also build up the capacity of the reserves to contribute to homeland security consistent with the adaptive posture set out in the SDSR.

As the capability of the Territorial Army improves, this will allow a progressive adjustment of the regular-reserve balance of the Army while maintaining the land forces capability set out in the SDSR. This will include the delivery of the multi-role brigade structure of Future Force 2020. By 2020, if the Territorial Army develops in the way we intend, we envisage a total force of around 120,000, with a regular to reserve ratio of around 70:30. This will be more in line with comparable countries such as the United States, Canada and Australia.

Let me turn to basing. The decisions that we have taken in the SDSR to reduce aircraft types, bring the Army back from Germany and form the Army into five multi-role brigades will enable us to rationalise the defence estate and dispose of high-value sites that are no longer needed. The security of the nation and the requirements of defence were paramount in our analysis, but we have also considered the impact of changes on local communities, the impact on service personnel and their families, and the current pattern of the armed forces in Britain.

Army brigades currently stationed around Catterick and Salisbury will make up three of the five multi-role brigades. The other two MRBs will be based in the east of England, centred on Cottesmore, and in Scotland, centred on Kirknewton, south-west of Edinburgh. The MRB centred in Scotland will require a new training area, and positive discussions are being taken forward with the Scottish Government. Two major units and a formation headquarters will be based at Leuchars, increasing the number of posts there from 1,200 to more than 1,300. Consequently, the Typhoon force due to be built up there will instead be built up at RAF Lossiemouth. Other MRB units will be moved into Glencorse, Caledonia,

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Albemarle barracks and eventually Arbroath, as we intend over time to bring the bulk of the Royal Marines together in the south-west. We are also planning to place Army units in Kinloss in around 2014-15, continuing its long-term relationship with defence.

Taken together, this represents a significant increase in the defence footprint in Scotland of well over 2,000 posts. This is in line with the Scottish tradition of supporting our armed forces and is a recognition that these are United Kingdom forces under the Crown, protecting the citizens and interests of this United Kingdom. With the move to five multi-role brigades, we have concluded that 19 Light Brigade in Northern Ireland will be disbanded. Other units returning from Germany will move into the vacated bases and we remain committed to maintaining a permanent military garrison in Northern Ireland; 160 Wales Brigade will remain in Brecon.

We will retain St Athan at its current size for now, but intend to increase its usage to take full advantage of the excellent facilities there. RAF Marham will remain as a base for Tornado GR4. The defence technical training programme will move to Lyneham, guaranteeing its future. More details of these and other estate-related decisions are in the written statement I have laid today. The planning work, including the investment required to adapt sites, will now get under way, based on this strategic direction. It will involve consultations with local communities as appropriate and other statutory obligations that we will need to fulfil.

I am very conscious of the uncertainties that these changes will cause for service personnel and their families. Let me reassure them that the majority of the moves I have announced today will take place after 2015. In both basing and reserves, we have sought wherever possible to strengthen the strong and natural links between local communities and the armed forces. I do not underestimate the importance of these ties in underpinning the military covenant.

The overall package I have announced today is good news for our armed forces and means that they can look forward to the future with renewed confidence because the defence programme I have announced is underpinned with real resources. This investment in people and equipment is not the wish list of the past, but certainty for the future. I commend these decisions to the House.

Mr Jim Murphy (East Renfrewshire) (Lab): I join the Secretary of State in offering condolences to the family and friends of Lance Corporal Paul Watkins, who was tragically killed in Afghanistan over the weekend.

Last week, I offered wide and warm welcome to the Secretary of State for his thoughtful announcements on the Mull of Kintyre. Today, I am afraid, the right hon. Gentleman has chosen to take a different approach. The Government have been grappling with four big policy areas over the past few months: the RAF basing review, reserve forces, the financial settlement and proposed cuts to the Army. Each of those issues is of national importance and each is deserving of a statement in its own right, yet the Secretary of State comes here in what he thought was to be the last full day of Parliament to cram them into one 10-minute speech. This is a shabby way to treat our forces, and a shabby way to treat this Parliament.

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The Government have chosen today, at the high point of one of the biggest political crises in decades, to bury this bad news of 10,000 cuts to the Army—a decision that will not take effect for many years to come. Why are the Government again blaming others? These announcements today are their cuts and their choices. The Secretary of State has announced cuts to the Army of 17,000—just under a sixth of the entire force in just 10 short months.

When in opposition, the Secretary of State said:

“In the real world the only logical conclusion you can come to is that the army is already too small”—

and he went on to demand

“A bigger Army for a safer Britain”.

Today, however, he has announced a smaller Army for a country that we can assume he sees as having only smaller ambitions—from a party that promised thousands of extra troops. It is hard to conclude other than this is strategic shrinkage by stealth. Today’s cut in the Army is bigger than the entire current deployment of all UK forces in Afghanistan. Will the Secretary of State explain why he believes it is in Britain’s strategic national security interest to have an Army so dramatically reduced in size? Will he also say whether this announcement is a result of planning round 11 having been completed?

We welcome any additional investment in our armed forces, and the £1.5 billion from the Treasury is good news, as is the announcement about St Athan. Many of the new capabilities were frozen in the Government’s defence review. We will look at the small print with renewed care, which we have learnt to do in recent months. Notwithstanding last week’s trumpeted announcement on the extension of the operational allowance to Operation Ellamy, hundreds of our forces in Libyan operations will not receive a single penny.

Reservists are great patriots, and provide a bridge to our communities at a time when many people have little understanding of or connection with a large number of our armed forces. They serve with enormous bravery, and we should pay permanent tribute to those who have fallen in Iraq and Afghanistan. There would, of course, be concern if bespoke standing units of reservists became the norm, as that could increase the commitment required from civilians. What assessment has the Secretary of State made of the impact of today’s announcement on retention and recruitment, and how does he address the fear that his approach will undermine the “one Army” concept?

Reform of the defence estate is important to ensuring that our armed forces are properly provided for, but there will be fury in Fife. The RAF has been based in Leuchars for more than 70 years, and it is a matter of deep regret that the Government have chosen to break an historic link that has served the nation so well in peace and in war. It is clear that they have not done their homework. They are closing an RAF base to make savings that they have not identified, and are redeploying the Army at costs that they have not quantified. Will the Secretary of State say how much it will cost to convert the RAF base into an Army garrison—because there will be substantial upfront expenditure—and will he guarantee that there will no period without a military presence at Leuchars, which would have a huge impact on the local communities? Will he also commit his

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Department to detailed research on the defence estates and the industrial footprint of United Kingdom defence in Scotland?

Following the defence review, it is clear that the country is engaged in events that Ministers did not foresee and reliant on equipment that Ministers planned to scrap. We now have a defence policy based on assumptions that are completely out of date. It seems that the Government are starting to face up to the inadequacy of their own defence review. Surely now is the moment for them to think again, and properly to reopen that flawed and rushed review.

Dr Fox: That was one of the poorest attacks on a Government that I have ever heard. It is pretty rich for the Opposition, after calling for the statement for so long, to complain when we make it. They also seem to be utterly incapable of understanding, even now, the appalling financial state in which they left not only defence but the United Kingdom in general. Does the right hon. Gentleman really think that had we been given a choice—had we not faced a national economic emergency—we would be making spending reductions across the board? We are having to do that because of the mess that the Opposition left behind.

When it comes to numbers, yet again the Opposition seem not to have learned any lessons. They talk about total numbers all the time, but they do not talk about deployability. Yet again they have failed to learn the lessons of the mistakes that they made during their time in office. I want to see British forces that can be deployed better, and I want to see them better trained and properly equipped. When they talk about how much they value the TA, the Opposition would do well to remember that it was they who were cutting the reserves during their last months in office. It was they who were cutting reservists’ training and allowances to save small amounts of money. We do not need any lessons from them in that regard.

We are trying to augment the “one Army” concept by ensuring better interoperability between our reserves and our regular forces. We want our reserves, like those in other countries, to be properly used in a way that gives good value for the investment made in them, and gives them a greater say and more respect within the military family.

Investment had already been made in Leuchars, and I fully accept that some of that investment will be lost. However, we felt that—in the broader scheme of things, and if we were to achieve a better rationalisation of the estate—Lossiemouth was the better choice, given that we had an alternative for Leuchars in the form of investment in the Army in the south of Scotland.

The right hon. Gentleman asked about the footprint in Scotland. I should be happy to look at our footprint across the United Kingdom. What we have done is return to Scotland a footprint that is much more akin to what was there when we left office than to what was there when we returned to it.

Nicholas Soames (Mid Sussex) (Con): I warmly congratulate my right hon. Friend the Secretary of State on his important and impressive announcement. Contrary to what the right hon. Member for East Renfrewshire (Mr Murphy) said, the Army will discover that the RAF bases into which it moves are very much

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better found than it is used to. Does the Secretary of State agree that the transformation and whole reform of the defence structure needs to proceed at a great pace, otherwise the rats at the Ministry of Defence will get at it?

Dr Fox: I would like to say that I am rat-proof, but that would probably be tempting fate. We have set out a path that we will clearly follow, from the defence reform set out by Lord Levene, through the basing review, which we have set out today, and through the reserves review and the extra investment that goes with that. It is correct that some of that will have to proceed quickly, but it is also correct that some of it can occur only if other steps are met. For example, the assumptions we make about Future Force 2020 and the size of the regular reserve ratio will depend on two things: that we ensure that the training and equipping of the reserves goes to the plan I have set out, and that we withdraw from Afghanistan in the time scale the Prime Minister has set out.

Mr Bob Ainsworth (Coventry North East) (Lab): Will the Secretary of State not even acknowledge—these words have not crossed his lips—that his announcement today effectively brings the cuts in the regular Army to in excess of 17,000? That comes on top of the cuts he has announced to the RAF and the Navy, and on top of the cuts he has announced to the Royal Marines, because no Minister has been prepared to acknowledge that not only has 19 Light Brigade been disbanded, but so too has 3 Commando Brigade. The Secretary of State is telling the House that we cannot afford—[Interruption.] Well, if Ministers are going to tell us that 3 Commando Brigade still exists, I want the Secretary of State to stand up and say that, because it does not—and if the Minister for the Armed Forces does not even know that, he should not be in his job. Members on both sides of the House worry that it is not the strength that we cannot afford, but it is the weakness that we potentially cannot afford, and we have not had any debate about this massive demise in our military capability. The strategic defence and security review did not provide such a debate, but we surely need it now.

Dr Fox: It defies belief that senior former Ministers of the previous Government can still come to this House and demand that we spend money that is not there. The right hon. Gentleman complains about cuts, but I have to point out to him that we have had to introduce cuts right across public spending because the previous Government left us with a £158 billion annual deficit, and what he calls the equipment programme was no more than a wish list at the MOD; there was no money in the pipeline for it. The programmes I have announced today—the 14 Chinooks, for example—I have been able to announce because there is real money there; they were never able to make such announcements because of their incompetent management of both the Department and the economy.

Sir Menzies Campbell (North East Fife) (LD): Elements of air defence have been present at Leuchars in my constituency for the best part of 100 years, as part of the continuing obligation of all Governments to preserve the safety of their citizens. Because I believe in that obligation on the part of Government to defend their

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citizens, I cannot support the decision not to retain Leuchars as a Royal Air Force base. I believe that decision to be fundamentally wrong, strategically inept and likely to increase risk to our citizens. Will my right hon. Friend confirm that his decision to discontinue Royal Air Force use of Leuchars was taken against the advice of the most senior commanders of the Royal Air Force? Finally, the proposals for alternative use of Leuchars by Army units lack dates, details and substance. What cast-iron guarantees can my right hon. Friend give that these promises will be kept and that the money for them will be found?

Dr Fox: First, may I say to my right hon. and learned Friend that, in what has been a passionate debate about basing, few have defended their constituency interests as passionately as he has, and that I know he is bitterly disappointed with the decision that has been taken? Across the services—it was not just a decision of one service—we looked to see what we thought was the best decision for defence as a whole. Because we wanted to bring the Army back from Germany, because we thought this was a suitable place in the south of Scotland to have one of the multi-role brigades and because we thought that this was good for the footprint of our defence forces in the United Kingdom, it made sense to coalesce our air force at Lossiemouth. I understand that some people, including my right hon. and learned Friend, will be disappointed, but the feeling across the services was that, on balance, this was the right decision.

Angus Robertson (Moray) (SNP): RAF Lossiemouth is to remain an air station and Kinloss will become an Army base, and the whole Moray community and its supporters are to be congratulated on the amazing and successful campaign to retain both facilities. I also thank those who have sensibly, if belatedly, decided to retain the Moray bases.

The victory in Moray is tinged with the sadness that RAF Leuchars will not remain an air base. There has been cross-party support in Scotland for the retention of both Leuchars and “Lossie” as air bases. Sadly, the UK Government have rejected that and have instead made massive and disproportionate cuts to the RAF in Scotland. In addition, the Royal Marines are being largely cut and the welcome return of Army units from Germany is uncertain in its time scale. Will the Government confirm today that RAF personnel numbers in Scotland are being cut by more than 50% and that the Royal Marines are being almost entirely cut in Scotland? Will the Secretary of State confirm that, in addition, Scotland will lose military facilities, including Fort George, Craigiehall, Redford barracks, Dreghorn barracks and the air rescue co-ordination centre at Kinloss? What support will there be for communities that have been suffering and will continue to suffer economic shocks? Lastly, will he confirm what the configuration will be at RAF Lossiemouth in terms of the Typhoon squadrons, the Tornado squadrons, the RAF regiment, the simulators and total personnel numbers?

Dr Fox: This may be the last touch of naivety I have, but I would have thought that on a day when the Government were announcing a substantial uplift of the defence footprint in Scotland, with an extra 2,500 posts

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in Scotland, the hon. Gentleman might have welcomed something that the Government were doing. This Government have brought stability back to the defence footprint in Scotland and have potentially brought extra investment to parts of Scotland for which he has been clamouring in this House for economic assistance to be given. I thought that, just for once, “Thank you, on behalf of my constituents” might have been words that passed his lips.

Mr James Arbuthnot (North East Hampshire) (Con): We shall have to examine with great care the consequences of the details of what my right hon. Friend has announced today. Some of it will be welcome, not least the certainty it brings, and some of it will be less so. What assurances can he give that, in rebalancing the Army between the regulars and the reservists, we will begin by building up the reservists and only later will we reduce the Army?

Dr Fox: As I have just said, I have been explicit about the fact that in order to get to the regular to reserve ratio we want we will first have to build up the reserves to create that deployability and we will also have to see the draw-down from Afghanistan. I very much hope that the amount we are spending—£400 million in this Parliament; £1.5 billion on the reserves overall—will be capable of being absorbed in that time, but we will be able to take a look at that during the strategic defence and security review in 2015 to check that the progress that my right hon. Friend rightly says will be necessary has been achieved.

Paul Flynn (Newport West) (Lab): Does not the disproportionately large size of our Army mean that we take part in an excessive number of wars, with the result that 179 British died in Iraq and 376 died in Afghanistan? Is not the price of punching above our weight that our soldiers die beyond their responsibilities?

Dr Fox: I think the reaction of the House says it all: the hon. Gentleman is in a tiny minority, possibly of one, in holding some of the views he does—[ Interruption. ] It is to the tremendous credit of our—

Mr Ian Davidson (Glasgow South West) (Lab/Co-op): It wusnae me!

Dr Fox: I think the hon. Gentleman doth protest too much on that one.

We should be honouring those who have been willing to make sacrifices in Afghanistan and elsewhere. They do not do so out of a sense of bravado or some bizarre sense of imperialism, as the hon. Member for Newport West (Paul Flynn) would have it, imposed by the UK Government, but because we take our international obligations for global security seriously. We are in Afghanistan because we believe that that is where some of the threats to the United Kingdom came from and we should be thanking our armed forces for the sacrifices that they have been willing to make for our national security.

Several hon. Members rose

Mr Speaker: Order. This is an extremely important statement on which a great many Members want to catch my eye, but I am far from sure that I will be able to

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accommodate the majority. I would like to try, but I will need help in the form of single, short supplementary questions.

Bob Stewart (Beckenham) (Con): Will the Secretary of State do his very best to restrict the cuts in the Army to those who do not fight and make sure that the people who do the fighting are maintained as much as possible?

Dr Fox: Yes, where possible the Army will look to see where non-front-line personnel can be part of the reduction that has been set out.

Mr Jeffrey M. Donaldson (Lagan Valley) (DUP): This is about implementing a strategic defence and security review and today’s statement represents a significant reduction in the military footprint in Northern Ireland, the one region of the United Kingdom that faces the greatest security threat at this moment. The Secretary of State will therefore understand my concerns and those of other Opposition Members about that reduction. Will the Secretary of State assure me that he will reconsider the reconfiguration of the military footprint in relation to Northern Ireland as regards strengthening both the permanent garrison and the reserve footprint?

Mr Speaker: I shall treat that question as a full sentence with a series of subordinate clauses, but it should not be emulated by colleagues. It is not a competition.

Dr Fox: I fear you might be disappointed, Mr Speaker. We have said very clearly that we will maintain a constant footprint in Northern Ireland and that we are committed to that and to using the bases in Northern Ireland for some of those returning from Germany. The House should remember, however, that the purpose of having the Army in Northern Ireland was not primarily security inside Northern Ireland itself.

Mr James Gray (North Wiltshire) (Con): Unlike others, the people of North Wiltshire, particularly those in Lyneham and Wootton Bassett who said goodbye only last week to the Hercules fleet, will warmly welcome the Secretary of State’s announcement that the defence technical training establishment is to move to Lyneham. That is very good news for the area. Will he confirm first that that will mean 1,500 to 2,000 people moving in; secondly, that it will happen reasonably swiftly; and, thirdly, that it is possible that Lyneham will become a hub for defence training in the future?

Dr Fox: I am delighted that my hon. Friend is so happy at the announcement about Lyneham. I am also particularly pleased that the phenomenal service not only of those who have served in and around Lyneham but of those who live in the vicinity is being fully rewarded. I confirm that there will be around 1,500 posts initially, although that number may rise over time, and that the initial move will be in 2013-14.

Lindsay Roy (Glenrothes) (Lab): Will the Secretary of State detail in full his strategic reasons for closing Leuchars as an air base?

Dr Fox: As I said, as a whole following the SDSR we needed to reduce from four to three the fast-jet hubs in the United Kingdom. Clearly Marham and Coningsby

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were not really alternatives in that regard and we therefore decided it was going to be either Leuchars or Lossiemouth for the fast-jet basing in Scotland. The view was taken not just inside the RAF, as I have said, but across all the services that there was an opportunity to move an Army presence into Scotland if we had sufficient bases to do so and, in the south, Leuchars was key to that. That enables us not only to have an RAF presence in the periphery of Scotland but an Army footprint—a military footprint—right in the centre. That offers us potential when we are looking for ways of giving business to small and medium-sized enterprises, for example; having that base in south central Scotland is going to be advantageous.

Patrick Mercer (Newark) (Con): May I congratulate the Secretary of State on his emphasis on greater deployability? I have been privy today to a discussion in the Ministry of Defence about which regular infantry regiments might face the axe in the near future. Will he assure the House that that is just speculation and that our bayonet power will not be affected?

Dr Fox: Exactly how the Army develops its plans as we go towards 2020 will increasingly be an issue for the Army, not least with the greater devolution that we have inside the armed forces as a result of the announcements I made in June. I know, having had discussions today and recently with the Chief of the General Staff, that that is certainly one of the issues the Army will be looking at extremely closely.

Meg Munn (Sheffield, Heeley) (Lab/Co-op): The Territorial Army regiment based in my constituency tells me that it struggles to recruit people, particularly those who are unemployed, because of the impact that the time spent with the TA as well as the wages have on benefits. Will the Secretary of State look at this issue with the Department for Work and Pensions to ensure that those who are unemployed and who want to serve can do so?

Dr Fox: The hon. Lady makes a very interesting point and I certainly will undertake to do that because I want to diminish any barriers to serving in the Territorials, including those to people in employment, which I mentioned in my statement, and those to people who are out of work. I am grateful to her for that interesting idea and I will take this forward.

Kris Hopkins (Keighley) (Con): May I thank the Secretary of State for his clear reality check, given the financial circumstances he took over in May last year? In Keighley there is a long-established detachment of the Duke of Wellington’s Regiment—now the Yorkshire Regiment. Can the Secretary of State outline the impact that his statement will have on Territorial units such as the Duke of Wellington’s Regiment unit?

Dr Fox: I cannot make a specific case regarding any one Territorial unit, but I can say that the money we are announcing today, which is unprecedented in terms of the reserves and which reverses a decline of recent years, will be welcomed in all parts of the TA. We will of course be looking at the best way of spending that

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money, and I guess from my hon. Friend’s intervention that he will be making one of the early bids in that process.

Dan Jarvis (Barnsley Central) (Lab): The statement referred to what was described as a “progressive adjustment of the regular-reserve balance” of the Army. By my maths, that equates to a reduction in the regular Army of 17,000. This is very surprising to me because just two weeks ago I asked the Secretary of State what plans he had to reduce the size of the Army post-2015, to which he replied:

“Nothing has changed in our assumptions since the strategic defence and security review.”—[Official Report, 4 July 2011; Vol. 530, c. 1222.]

Can he therefore tell the House when exactly the assumptions changed and why?

Dr Fox: Again, the hon. Gentleman misses the point. What we are talking about is the deployability of the Army. I want to see the reserves increased so that they can be more deployable. We have such a low level of deployability at present—about 14,000—and I want the numbers to be built up so that the deployable level of the Army is maintained. Perhaps he should look at the experiences of other countries and ask why they are able to have a regular-reserve balance that is quite different from the United Kingdom’s and yet maintain their deployability.

Dr Andrew Murrison (South West Wiltshire) (Con): The 2009 TA funding debacle, the ill-effects of which are still being felt, was a result of Labour accepting the easy expedient of cutting reserve forces when cash is tight. Given that our armed forces in the future will have an even greater proportion of reservists, which I welcome, clearly the dangers are enhanced. What will my right hon. Friend do to guard against the TA being cut, as it is relatively easy to cut it, rather than regulars, when funds are tight?

Dr Fox: I have set out that funding today— £400 million in this Parliament and £1.5 billion by 2020. One of the ways in which we can do it is to challenge the Opposition to say whether they would match that funding in the unfortunate event for the country that they ever came back to power.

Hugh Bayley (York Central) (Lab): Will the headquarters of the Yorkshire-based brigade remain in York? What implication will today’s announcement have for the number of regular soldiers in the Yorkshire Regiment, and what is the future of RAF Linton-on-Ouse?

Dr Fox: I am pleased, and no doubt the hon. Gentleman will be pleased, at the decision that 15 (North East) Brigade will remain in York. That is a decision that we have taken.

Miss Anne McIntosh (Thirsk and Malton) (Con): It is always delightful when neighbouring colleagues take such an interest in one’s own base. Mindful that north Yorkshire and military establishments there have always played a key role in the defence and security of the

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realm, can my right hon. Friend give me an assurance on the future of Alanbrooke barracks and RAF Linton-on-Ouse?

Dr Fox: I thought my hon. Friend might raise that issue and can tell her that there will be no change in the current usage.

Mr David Crausby (Bolton North East) (Lab): How can we be certain that the right hon. Gentleman’s Government, propped up by the Liberals, will deliver and maintain the necessary training and support that our Territorials and reserves require, or is this just another way to cut the Army?

Dr Fox: The big difference between the Opposition and the Government is that we not only say that we believe in the Territorials; we are funding the Territorials, whereas they cut the Territorials. Moreover, we believe that having a stronger reserve is one of the ways of increasing the links between the armed forces and the communities of this country. That community linkage should not be underestimated, and it is not easy to put a monetary value on it.

Mr Mike Hancock (Portsmouth South) (LD): As the Secretary of State did not say too much about the Royal Navy, can we take it that the bases in Portsmouth, Plymouth and Rosyth are safe from any cuts? Can he give an assurance that the Navy basing, based on the plan announced earlier this year, will be maintained?

Dr Fox: The reason I did not mention any specific bases is that there are no changes planned in the usage of any of the bases that my hon. Friend mentions.

Mr Julian Brazier (Canterbury) (Con): I welcome my right hon. Friend’s determination to tap a wider pool of talent and skills in the nation alongside our splendid professional forces. May I suggest that the most important single recommendation in the commission’s report is that we restore proper governance to the reserves, including giving back to the reserve forces and cadets associations their role as a watchdog with an annual report to the House?

Dr Fox: I thank my hon. Friend for his welcome to my welcome to his report. It gives me an opportunity to say a heartfelt thank you to my hon. Friend, who not only has had tremendous input into the report, but has championed the cause of reserves for as long as I can remember in my time in Parliament and deserves great gratitude. He is absolutely correct that the ideas he has just reiterated, which are contained in his report, will form a central part of the Government’s course for the time ahead.

Mr Tom Clarke (Coatbridge, Chryston and Bellshill) (Lab): The Secretary of State referred a few moments ago to what he described as the potential for independence in Scotland. Will he explain what he meant by that?

Dr Fox: I mean that the Labour party was unbelievably beaten by the Scottish Nationalists in the Scottish parliamentary elections on a manifesto from the Scottish Nationalists that they would hold a referendum on

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independence. That is what I meant, and there are serious implications for the Union in terms of defence, were that ever to occur.

Dr Julian Lewis (New Forest East) (Con): Heavy weapons are deployed to theatres from only one military port, that at Marchwood in my constituency. Will the Secretary of State confirm that Marchwood will continue to perform its functions and will not be sold off for a very small amount of money, about a £40 million one-off return?

Dr Fox: I can confirm for my hon. Friend that we do not envisage a change to the usage at present.

John Woodcock (Barrow and Furness) (Lab/Co-op): Can the Secretary of State guarantee that personnel currently serving in Afghanistan and Libya will keep their jobs through these changes?

Dr Fox: Looking almost 10 years ahead, it is impossible to predict what changes might take place. That will be a matter for the Army, of course in consultation with the Government. I can say that no one will be made compulsorily redundant within a year of returning from any combat operations.

Mrs Anne Main (St Albans) (Con): While saddened by the cuts, I completely understand why the Secretary of State has had to do some of these dreadful things. I urge him to take on board the fact that we need proper procurement so that we do not have the disaster of helicopters languishing, as they did under the previous Government, because of sloppy procurement. I also welcome the 14 new helicopters.

Dr Fox: My hon. Friend makes an important point. There is no point in any Government wishing that they had more equipment or telling Parliament that they will buy things when they have no idea where the money will come from. That is why the things I have announced today, including the 14 Chinooks, now have a proper budget attached to them, which they never had when part of a wish list under Labour.

Sandra Osborne (Ayr, Carrick and Cumnock) (Lab): These dreadful things feel a bit like rearranging the deckchairs on the Titanic, given the scale of the cuts that the armed forces are facing. How many personnel currently serving in Germany will in future be based in Scotland?

Dr Fox: It is impossible to give an exact number, but I would imagine that between 6,500 and 7,000, or something of that order, of the 20,000 personnel we currently have in Germany will be coming back to the multi-role brigades in Scotland. The precise number and lay-down will be subject to the plans that the Army will bring forward in the months and years ahead, assuming of course that we have the agreement of the local authorities and the Scottish Government.

Mark Lancaster (Milton Keynes North) (Con): I remind the House of my interest as a member of the reserve forces. I am confident that the reserve forces will step up and meet the challenge they have been set today.

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Indeed, the investment will be most welcome, in stark contrast to the measly £24 million that the previous Government attempted to save in 2009 when they wanted to cut all TA training for six months. Will the Secretary of State reassure me that the practice of late mobilisation, which prevents some members of the TA receiving full deployment training with their attached unit, will cease?

Dr Fox: I will certainly look at the specific point raised by my hon. Friend, who has considerable experience of these matters. He is right that we face a challenge with the reserves and correctly points to the fact that it will be a major feat for them to reach the time scales and budgetary spend that we have put forward. Like him, I am confident that they will meet that challenge.

Mr Ian Davidson (Glasgow South West) (Lab/Co-op): Will the Secretary of State confirm the exact details of the announcement he made in his statement when he said, “I can therefore now give the go-ahead for the procurement of” a list of things, including the “cat and traps for the Queen Elizabeth class carriers”—plural? Does that mean that both carriers will receive cat and traps?

Dr Fox: That is our plan, and I have agreed to my officials now getting involved in contract negotiations. They were not previously able to do so because we were not guaranteed that we would have the budget. When we make decisions of this nature we must ensure that we have the wherewithal to pay for them. Otherwise, as I have said, they are simply a wish list.

Mr John Redwood (Wokingham) (Con): As the Secretary of State is proposing to close the large Royal Electrical and Mechanical Engineers garrison at Arborfield in my constituency, will he ensure that the officials working on the disposal, who aim to make a substantial capital gain for new housing, will understand that some of the money will be needed for transport and educational facilities for the large new settlement they have in mind?

Dr Fox: I am grateful to my right hon. Friend for his support and understanding on this issue and know that he will be disappointed that the units are being moved out of Arborfield. We intend to achieve that in a measured way by 2014-15. I am sure that discussions will be ongoing with the local authority on the financial implications he has pointed out.

Jeremy Corbyn (Islington North) (Lab): Can I assure the Secretary of State that the views of my hon. Friend the Member for Newport West (Paul Flynn) are not necessarily those of a tiny minority or completely isolated? Does the Secretary of State not accept that it is time that this country took a reality check on the levels of global reach that the armed forces are expected to be able to undertake and the massive cost that we are bequeathing to future generations? Is it not time for a serious defence and foreign policy review on these matters?

Dr Fox: Only the hon. Gentleman and the hon. Member for Newport West (Paul Flynn) could describe two out of 600-odd as not being a small minority. As a country, we have had a good debate about the defence

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review, and we think that we should be implementing its practicalities. The understandings and the strategic aim, as set out in the national security strategy, were broadly welcomed on both sides of the House. It is perfectly correct that we have a debate on the ways in which we carry it out, but there is not a huge debate in this country about the strategic direction that we and our allies are taking.

Penny Mordaunt (Portsmouth North) (Con): Parliamentary questions I have tabled show that there is little understanding in other Government Departments of the contribution that defence, particularly the Royal Navy, makes to fuel security, communications and trade. As my right hon. Friend works to put the defence budget and our defence capabilities on a sustainable footing, will he also make the case that our economic recovery is dependent on increased defence spending?

Dr Fox: Our economic well-being, as an island where 94% of our exports go by sea, is also dependent on the security of the international sea lanes and the Royal Navy’s contribution to that. Some would say that that is not a necessary function because it is outside the United Kingdom, but it is about the protection of UK interests, and I am afraid that in a truly globalised economy it will continue to be that way.

Mrs Madeleine Moon (Bridgend) (Lab): In his recent address to NATO, Robert Gates expressed grave concern about NATO’s increasing inability to defend itself and about our unwillingness to pay the true cost of our own defence, relying on America to fund up to 80% of NATO. Does the Secretary of State appreciate that today’s announcement of 17,000 cuts across our armed forces and an increased reliance on a reserve force that is yet to have the capacity to fill a 30% gap will cause great consternation not only in relation to the defence of the UK but across NATO?

Dr Fox: I have of course had discussions with my American counterpart about some of our ideas. For the United States, the idea that we should have such a ratio between regulars and reserves is nothing unusual. When Bob Gates was criticising some of the countries that the hon. Lady mentioned—and when he looked at the United Kingdom, still spending above 2% of GDP on defence, with the fourth biggest defence budget in the world, and investing in the carrier and the joint strike fighter—I do not really think it was us he had in mind.

Mark Pritchard (The Wrekin) (Con): My right hon. Friend knows more than most that the first duty of any Government is to defend the United Kingdom and the United Kingdom’s interests. Does he accept that if the Treasury subsequently tries to erode the statement that he has made today, and indeed what has been said about planning round 11, that will make it very difficult for this Government to fulfil that very solemn obligation and duty?

Dr Fox: It would be extremely unfortunate were there to be any going back on the uplift that we have had as part of our approach to the next decade. I do not see

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any chance of that happening given the Treasury’s willingness to engage with the MOD once the MOD was able to show that it could manage its budget better and assess its costs better, and given that the National Audit Office will in future be making a very strict audit of what we do regarding our finances.

Diana Johnson (Kingston upon Hull North) (Lab): At Hull’s freedom parade on Saturday for 150 (Yorkshire) Transport Regiment, several of the Army vehicles that were going by were plastered with recruitment posters. As my hon. Friend the Member for Barnsley Central (Dan Jarvis) said, the Secretary of State said in the House two weeks ago that there would be no further cuts. When exactly did he decide that he wanted to have an Army that would fill Wembley stadium with probably several thousand seats left over?

Dr Fox: What I want to achieve—I go back to this point again—is a complete Army of reserves and regulars that is genuinely deployable. We have to increase the deployable number because that is what gives us our military effect. There is no point in having bigger armed forces when the budget does not allow us to fully train and equip them, because it is the military effect that we need to preserve. The real betrayal was the Labour party under-equipping our armed forces, as it did so often when it was in government, not the proposals I have put forward today.

Bob Russell (Colchester) (LD): If the previous Government had made this statement, I do not think the right hon. Gentleman would have welcomed seeing the British Army reduced to the size that it was when Colonel Robert Baden-Powell was involved in the siege of Mafeking in the Boer war. The Secretary of State says that the Army will be formed into five multi-role brigades. Will he clarify where 16 Air Assault Brigade and the Colchester garrison fit into that?

Dr Fox: The five multi-role brigades are the core of what the Army will do, but one air assault brigade and one commando brigade will of course remain separate from that shape, so there will be no real difference to the lay-down that my hon. Friend describes. As for the Labour party having introduced such a programme in government, it would never have done so because it had no idea how bad the economic circumstances were that it was creating.

Mr Mike Weir (Angus) (SNP): Although the announcement that 45 Commando will move from RM Condor is not unexpected, it will none the less cause sadness in the local community. The Secretary of State said in his statement that other troops would come to Condor over time. Can he give an indication of the time scale and give an assurance that there will be no gap between 45 Commando leaving and alternative troops taking up residence?

Dr Fox: We looked at this as one of the proposals that we could have announced today with dates attached. The costs, however, were prohibitive in making the moves that I wanted to see. This matter will almost certainly have to be looked at in the SDSR in 2015. Therefore, I would not imagine that there would be any change before 2015-16.

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Jack Lopresti (Filton and Bradley Stoke) (Con): Will my right hon. Friend ensure that the welcome additional funding he has announced for the reserve forces will be used specifically for the reserve forces and not by the regular forces for other things?

Dr Fox: That money is earmarked for the reserves, but it is also earmarked for our deployable force. I have said that if we are unable to get the increase in deployability through the reserves alone with the money that I have put in place, there may be a mechanism for an adjustment between the two. We will certainly try to achieve the ratio and the time scale that I have set out today.

Thomas Docherty (Dunfermline and West Fife) (Lab): I clearly welcome the news that HMS Caledonia will host elements of the Army. I hope the Secretary of State will confirm that a ministerial meeting is possible to discuss the details. Will he confirm which Department will be responsible for funding the transition of those communities from RAF to Army?

Dr Fox: I confirm that we intend to utilise HMS Caledonia as a unit for the MRB. We aim for the moving in to start in 2015-16. Of course, this will be a cross-departmental subject when it comes to looking at the wider costs.

John Glen (Salisbury) (Con): Will my right hon. Friend confirm that the additional funding announced for defence equipment budgets will not be a sufficient uplift post-2014 to achieve the full aspirations of the Future Force 2020?

Dr Fox: We have to look at the defence budget as a whole, not simply the equipment budget, and see where there is leeway. I set out the equipment programmes that we are willing to start spending money on today. I am simply not willing to start to spend on other projects where I can see no budgetary line in the future. After all the pain we have gone through to rebalance the Ministry of Defence budget, we are not going to go back to the bad old habits and recreate the black hole that we inherited.

Mr Denis MacShane (Rotherham) (Lab): The withdrawal from continental Europe is historic and could be very expensive. Why, then, did the Government turn down the offer of the Polish Government to provide accommodation, training terrain and facilities, all at pretty much zero cost, which would have allowed a permanent alliance there with probably our closest military partner in Europe?

Dr Fox: Although it may appear superficially attractive, I am afraid that none of those things is free. The cost of allowances and of keeping our personnel in Germany amounts to about a quarter of a billion pounds a year to the British taxpayers, and they are pumping about a hundred million pounds a year into the German economy when I would like to see that money pumped into the British economy.

There may well be not only a chance to have joint training with our Polish colleagues but room for continued training in Germany itself, following discussions that I had with the German Defence Minister last week.

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Mrs Eleanor Laing (Epping Forest) (Con): Will the Secretary of State tell the House what would happen to the 2,500 extra jobs that he is creating, and the significant investment that UK forces are about to make in Scotland, if Scotland decided to separate from the rest of the United Kingdom?

Dr Fox: The arrangements that we have set out today, with the Crown forces underpinning the security of the United Kingdom, will continue as long as the United Kingdom itself exists.

Jim Shannon (Strangford) (DUP): TA soldiers from Northern Ireland constitute some 20% of total TA personnel in the UK, both deployed and operational. Will the Minister commit to increasing TA soldier numbers in Northern Ireland?

Dr Fox: If that is how the Army thinks it can best utilise the increased resources it has, it can make that decision. If, however, it decides that it should increase the quality of its training, the bases from which it operates or its equipment, those will be alternative choices for it. I will certainly make the hon. Gentleman’s point to the chiefs.

Several hon. Members rose

Mr Speaker: Order. I can accommodate very few more questions, I am afraid. Time is extremely pressing, and brevity is essential.

Elizabeth Truss (South West Norfolk) (Con): I am delighted that RAF Marham is to be retained, and I thank the Secretary of State for listening to the strategic and economic arguments put by the “Make it Marham” campaign, which includes 37,000 people of Norfolk and nine local Members of Parliament. Under the plan for the Tornado squadrons, how many will be based at RAF Marham?

Dr Fox: There are no changes whatever to the plans that we have previously announced for RAF Marham. I have to say, it would have been very hard to miss my hon. Friend’s voice on the subject in recent months, when there can hardly have been a single occasion when she did not raise it with me vociferously in the Lobby. I congratulate her.

Dan Byles (North Warwickshire) (Con): Does the Secretary of State agree that this rebalancing will work only if we can finally stop viewing the reservists and regulars, and the three single services, as separate organisations and start viewing them all as a combined means to an end?

Dr Fox: I could not have put it better myself.

Caroline Dinenage (Gosport) (Con): My constituents will welcome the news about the 14 Chinook helicopters and the global combat ship, not least because they equate to jobs in my constituency. Will the Secretary of State outline in a bit more detail the delivery times for giving out the contracts and delivering the procurement?

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Dr Fox: I hope to be able to do that in the very near future. I hope my hon. Friend will understand that we are now entering a very sensitive period in the negotiations with the company involved, and I would not want to do or say anything that might diminish the MOD’s negotiating hand. However, I will make that information available to her and the House as soon as possible.

Duncan Hames (Chippenham) (LD): I thank the Secretary of State for his decision on Lyneham, which will be welcomed in Chippenham and right across the north of Wiltshire. Does he still envisage any land disposals from the base there as part of its transition to the new role?

Dr Fox: No, I do not at the moment.

Mr Philip Hollobone (Kettering) (Con): The welcome step change in TA numbers will require a parallel step change in employer commitment. Given that we have Queen’s awards for business, exports and technology, can we have a Queen’s award for supporting the reserve forces?

Dr Fox: It is very unusual to get two good and constructive ideas for the Government to take away from a session such as this in the House, but I will certainly take my hon. Friend’s idea away. We want to work with employers to make it easier for reservists to be in employment. We want to do that on a voluntary basis, but if necessary we will come to the House with legislation to ensure that it happens.

Mr Laurence Robertson (Tewkesbury) (Con): Can the Secretary of State give me some assurance about the future of the Defence Storage and Distribution Agency camp at Ashchurch in my constituency?

Dr Fox: On current plans, no changes are envisaged.

Several hon. Members rose

Mr Speaker: Order. I am afraid that we must move on. We have had contributions from 47 Members. I would like to accommodate everybody, as I usually do, but time is pressing. I am grateful to the Secretary of State for Defence and colleagues.

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Local Government Finance

5.50 pm

The Secretary of State for Communities and Local Government (Mr Eric Pickles): With permission, Mr Speaker, I should like to update the House on the Government’s review of local government finance.

The past year has seen the beginning of a long-awaited and much needed shift in power—from national to local, and from Whitehall to the town hall—but if localism is to reach its potential, new legal freedoms must be matched by freedom over finance. That, of course, is not a new idea. Reviews, from Layfield in the 1970s and onwards, have emphasised that increasing local financial control is the key to strengthening local democracy.

Strangely, the previous Government did nothing to reform the system, despite a local government finance Green Paper, a local government White Paper, the balance of funding report, and, of course, the Lyons inquiry. Amazingly, they did not even bother to issue a formal response to Lyons’s 400-page report.

By contrast, the coalition Government are delivering radical change. Over the past year, we have begun the phasing out of ring-fencing, freed up £2.1 billion from restrictions and simplified more than 90 separate funding streams to fewer than 10. That is real progress, but today we are committed to going further still: to restoring councils’ financial autonomy while ensuring a fair deal for all communities, whether in the north or in the south.

In the first phase of our review of local government resources, we have focused on local retention of business rates. As the House will know, the Government have already taken action on business rates. We have introduced a more generous small business rate relief scheme, we are making it easier to get that relief without filling in paperwork, and we have scrapped the unfair and regressive ports tax.

We are now looking at what business rates mean to local councils. Councils in England collect some £19 billion in business rates each year. No sooner does the cash come in than it is gathered up by the Treasury and then redistributed to councils according to a complex formula. That approach has major shortcomings: it denies councils control over locally raised resources; it deprives them of the certainty they need to plan their finances for the longer term; and it creates a disconnection between the success of local businesses and the state of a council’s finances.

Surely it is common sense for the system to encourage councils to boost local jobs and growth. Radical change is needed, and councils themselves agree. In a major step for transparency, my Department is today publishing every representation made in the recent local government financial settlement. There is a common theme. Councils believe that the current system is complex and opaque. They must talk down their successes and talk up their difficulties in order to secure the best possible deal from Whitehall.

To address that, mere tinkering—adjusting the formula here, amending the area cost adjustment there—will not be enough. This Government are determined to repatriate the business rates. Today, I am publishing a consultation outlining our proposals. No more will proud cities or historic counties be forced to come to the national

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Government with a begging bowl. Councils will have a greater control over cash, helping them to plan for the longer term. Tax increment financing will let them borrow against anticipated increases in rates, giving them a new way to invest in infrastructure, from transport projects to regenerating town centres. Councils should see a direct link between the success of local businesses and their own cash flow. That will create the right incentives for them to work closely with local businesses.

I am determined that the transition to a new scheme will be both responsible and fair. The Government’s overriding priority continues to be deficit reduction. In the spending review, we set out the level of resources available for local government for the next four years. In the interests of financial stability, for the first two years of the retention scheme, we will continue to stick to those spending plans, but we will allow local authorities to benefit from any growth in business rates above forecast levels. Beyond this spending review period, we will look to align more closely local authority functions and total business rate income.

It is also of paramount importance to ensure that our proposals on local government finance are balanced, fair and equitable, creating the right incentives for all areas to grow while protecting the most vulnerable. We propose a number of measures to safeguard them and to achieve that. First, poorer places will share the increase in growth with more prosperous areas. Those places with the greatest dependency should, and will, continue to receive support, while being allowed to keep the products of enterprise, and those places that raise the greatest sums through business rates should expect to make a contribution. A new system of tariffs and top-ups will ensure that we start from a fair base. As my right hon. Friend the Deputy Prime Minister told the Local Government Association last month, we will ensure that no one will be worse off when the new system is introduced than they would have been under the old system.

Secondly, as the House will well know, some areas have strong natural economic advantages, such as high-value industries or concentrations of skilled workers. There will be no cap on the amount of business growth from which such councils can benefit. A council will be better off as a result of growth, but if an area benefits disproportionately from a growth in business rates, we propose to introduce a special local levy to capture a share of that benefit. The money raised should be used in the first instance to fund a safety net, which would protect authorities that experience exceptional shocks to their business rate take.

Thirdly, our proposals include the option of resetting the whole system. If councils no longer had enough resources to meet local needs, the Government could recalculate the level of tariffs and top-ups across the whole system.

Fourthly, support for mandatory and discretionary rate relief will continue. Rate relief to the needy will be unaffected. National discounts and rate relief will continue to be supported, meaning no adverse change for such groups as charities, amateur sports clubs, voluntary groups, those in hardship and those who are eligible for rural or small firms relief.

Finally, we have reflected carefully on what our new system means to business. Businesses—the creators of local jobs and wealth—need stability in this process. They need certainty to plan for the long term, so let me

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spell this out in no uncertain terms: local firms will see no difference in the way in which they pay tax, or the way in which the tax is set, as a result of these changes.

I am placing in the Library a plain English guide so that hon. Members’ constituents can understand what our proposals will mean for them. We intend that business rates should be repatriated in 2013. We will bring forward a local government finance Bill to give our proposals legal effect. The publication of this consultation begins a debate that I hope will be wide-ranging and constructive. I want to work with all local authorities, representative groups and political parties to build a consensus for lasting change. That consensus will be built on putting power back in the hands of local councils and communities; supporting local jobs and local firms; and creating the conditions for renewed, sustainable economic growth. I commend the statement to the House.

Caroline Flint (Don Valley) (Lab): I thank the Secretary of State for advance sight of the statement. Obviously, we will look closely at the detail of the Government’s announcement today, because on many policy areas under this Government the devil is in the detail.

Let me make it clear at the outset that we would back a funding system for local authorities that supports jobs and growth and encourages enterprise. In government, we introduced measures such as the small business rate relief to support small businesses and, in consideration of the Localism Bill, we are pushing the Government to go further in devolving powers to cities and councils to enable them to drive economic development. Our amendment is due to be debated in the other place on Wednesday, and I hope that the Secretary of State will confirm today that he will tell his colleagues to support our proposals.

We have been clear that any funding system for local government must be fair. It has to ensure that every authority has the resources it needs to meet the needs of its communities, but today I am afraid that—plain English or not—the Government have failed to spell that out. How does the Secretary of State plan to localise business rates without taking funding from the pockets of our poorest communities? The Secretary of State may just want to talk about year one, but we want to talk about year two and year three, and all the years after that. What will the funding system look like then? And will the Secretary of State be able to guarantee today that no council will be worse off in five years’ time as a result of the reforms that he has announced this afternoon?

It is telling that whenever the Government have been challenged on the long-term effects of their reforms to business rates, they have said that it is up to local councils. What that really means is that, after the first year, the Government are washing their hands of the problem—cutting funding and leaving councils to fend for themselves. We all know how incredibly important this is to local communities up and down the country because, as the Secretary of State knows, business rates make up 76% of the formula grant. Vague, empty assurances just will not cut it. No sleight of hand, temporary transition grants or safety nets can hide the consequences of these reforms. If the wealthiest councils are not giving up the rate they collect locally for redistribution, where will funding for those who rely on redistribution to survive come from?

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The Secretary of State referred, very briefly, to the fact that areas that raise the greatest sums through business rates will still, at least in year one, make some sort of contribution to less well-off areas, but a report in this morning’s Times said that councils with large yields would only be required to contribute to a safety net in the form of a regional pot. Will the Secretary of State confirm whether the redistribution that takes place in year one—or beyond—will be on a national or regional basis? If it is on a regional basis, and given the size of the business rates yield in Westminster and the City of London alone, many areas outside London and the south-east will be considerably worse off.

Until the Secretary of State clarifies those points, we will continue to press him on what these reforms might mean. We have heard his assurances before. He assured us that the finance settlement was fair. Then we found out that while places such as Richmond and Surrey Heath were losing less than £10 a head, areas such as Hackney and Liverpool, serving some of the most deprived communities in our country, were losing nearly twenty times as much. He assured us that the cuts to local government funding did not have to mean cuts to services, but even his own councillors do not believe that one. The cuts that we are seeing now, right across the country—to home helps, care services, street cleaning and, yes, to bin collections too—are the consequences of his cuts.

Today, the Secretary of State still seems to expect us to be satisfied by his assurances—to believe that no council will be worse off. If we do not believe what he says, the Deputy Prime Minister told the same Local Government Association conference:

“The new system will start on a level playing field. How far you progress from there is entirely up to you.”

That was backed up by comments by the Under-Secretary of State for Communities and Local Government, the hon. Member for Hazel Grove (Andrew Stunell) in response to an Adjournment debate last week. I paraphrase slightly, but he basically said, in answer to a concerned question about what would happen after year one, “You’ll be okay for the first year, but I really couldn’t specify beyond that.” Are those the sort of assurances to give us hope that there will be fair redistribution in the future for those communities in the greatest need?

This proposal just does not add up. The amount of funding going to local authorities over the next four years has already been laid out in the comprehensive spending review. Unless the Secretary of State wants to announce today that he is planning to revisit the level of grant he intends to provide to local authorities, will he confirm that, with a fixed pot of money for any council to gain, other councils must lose? If not, will the Secretary of State tell us where the additional revenue will come from? We know which areas will lose out as a result of these changes. It will be the poorest areas, with the most deprived communities and smallest business base, who will be hit with a triple whammy. First, they saw their area-based grants cut and then they had to deal with the finance settlement, which singled them out for the heaviest cuts; and now, to add insult to injury, the Government want to cut their funding to boost the coffers of the better-off councils by localising business rates in a way that is unfair and that will benefit the best-off at the expense of the most deprived.

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However, it will not just be our poorest communities that lose out. Many rural areas and seaside towns—from Southend-on-Sea to Blackpool; in Devon, Somerset and Northumberland—and even Harrow and Enfield in Greater London and Redditch in the midlands will see a loss from these changes.

In government, we were examining the case for tax increment financing, and we will look closely at the details of the Government’s announcement, but however much the Government spin it, it will not be lost on local authorities that the introduction of tax increment financing comes after this Government have already cut local authority capital funding by 45%, and when they have raised the interest rate at which local authorities can borrow. The Government may couch these reforms in the language of localism, but today’s announcement betrays their real intent. Cutting funding to areas with the highest need does not free councils from central control or empower them: it stops them from doing the things their communities need of them.

Yes, we want a funding system that supports jobs and encourages enterprise, but not every area has the same ability to attract investment and new businesses. Not everywhere can be Westminster or the City of London. We will look to support incentives to boost enterprise and put councils and communities in control, but fairness must be at the heart of the system.

Several hon. Members rose

Mr Deputy Speaker (Mr Nigel Evans): Order. Please could Members resume their seats? There is a lot of interest in this statement, so I ask Members to make their questions brief and ask only one question. I also ask Members to rise only if they were in the Chamber for the entirety of the statement. I call Mr Heald—

Oliver Heald (North East Hertfordshire) (Con): My right hon. Friend the Secretary of State may wish to respond—

Mr Deputy Speaker: I apologise. I call Mr Pickles.

Mr Pickles: You can be forgiven for that mistake, Mr Deputy Speaker, as I do not recall a single question in the tirade from the right hon. Member for Don Valley (Caroline Flint).

I am grateful for the right hon. Lady’s welcome, but it seems that it was a pointless gesture to supply her with the statement so far in advance—well in advance compared to what Labour used to do—if she just reads out something that had clearly been typed long before she received it. She should not rely on The Times. She needs to understand what will happen after the first year. The tariff and a levy will continue.

Perhaps we can look at the issue in these terms. If the system is designed to punish our enemies and reward our friends, what will it mean for Doncaster, which includes the constituency of the Leader of the Opposition, the Opposition Chief Whip and the right hon. Lady? Under this system, Doncaster will do particularly well. It will do better under this system than it has for the last five years. Instead of the right hon. Member for Don Valley trying to invent reasons why things will go wrong, she should recognise that this is a way for her to stand up for the people of Doncaster and explain that it is a

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wonderful place to invest, with a great market and a wonderful rail link. She should get on the side of the people of Doncaster and stop opposing a system that will benefit them.

Oliver Heald rose—

Mr Deputy Speaker (Mr Nigel Evans): As we were: I now call Mr Oliver Heald.

Oliver Heald: I welcome the message that councils should roll up their sleeves and help their local businesses to create jobs and growth, but can the Secretary of State assure me that the guide and scout hut—I am a guiding ambassador for my area—and all the voluntary bodies that currently get rate relief will continue to do so?

Mr Pickles: I can absolutely give that assurance. My hon. Friend can continue his good work with the guides and scouts safe in the knowledge that the rate relief will remain.

Mr Bob Ainsworth (Coventry North East) (Lab): I share the concerns of my right hon. Friend the Member for Don Valley (Caroline Flint) that this system will be used to redistribute wealth from the least affluent areas to the more affluent areas—not necessarily in year one but in subsequent years. I listened for an answer to her question but we did not get one.

Mr Pickles: The answer is that roughly £2.5 billion will be transferred from the south to the north of England, and I do not anticipate a significant change to that amount. I was not just picking out Doncaster; places such as Liverpool and Sheffield also do well out of this system—because we are looking at relative growth. The poorer areas will continue to benefit from the levy. Under the present system, any growth or enterprise is immediately siphoned away from the centre. The new system will give places such as Coventry, Liverpool and Doncaster a real incentive by allowing them to keep the extra growth that they generate.

Mr Philip Hollobone (Kettering) (Con): I declare an interest as a serving member of Kettering borough council. In two-tier authority areas, will it be the borough council that sets the repatriated business rate, and will it be required to give a percentage to the upper tier authority?

Mr Pickles: The rating authority—the district authority —will continue to collect, but the county council and district councils will receive a sum of money equivalent to the existing formula grant and will continue to share in the growth. That means that counties and districts will be able to work in partnership with business, and determine between them a proper relationship. There will be no problem with their ability to determine where the money falls.

Mr Clive Betts (Sheffield South East) (Lab): I do not think that even the Secretary of State could describe this as a simplification. I am a long-term supporter of the localisation of business rates, but is not the problem that the cut in Government funding to local authorities will mean that by 2013 the totality of that funding will just about equal the business rates, and that if each local

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authority keeps its own business rate there will be nothing left for redistribution to the authorities with the greatest need, and the least ability to raise money? Is not the fundamental problem the fact that he cannot deliver localisation and fairness in the same agenda?

Mr Pickles: The hon. Gentleman, who is distinguished in these matters—I am rather hoping that the Communities and Local Government Committee, which he chairs, might consider holding a special hearing on it—is entirely wrong. The levy system is there to pick up various authorities that will enjoy extra growth. [Interruption.] If the hon. Member for Worsley and Eccles South (Barbara Keeley) will contain herself, I shall explain. Different parts of the country will enjoy economic growth at different rates. We will ensure that if areas of the country see disproportionate growth—Kensington and Chelsea, the City of London or the authorities next to Lakeside or Bluewater, for example—the money will be distributed. If we did not do that everybody would go and live there, because the pavements would be covered in gold. It is a natural process. Rather than people being on their bended knees, we will ensure that poorer parts of the country not only enjoy the benefits of economic growth through what they themselves achieve, but benefit from prosperity in the wider community.

Mr John Redwood (Wokingham) (Con): Will the Secretary of State confirm that the increase in the business rate will still be set nationally, in order to reassure business people?

Mr Pickles: My right hon. Friend raises an important point. In order to ensure that the system works, business needs to have certainty and predictability, and because we want growth to be generated, we cannot allow businesses to be used as some kind of favourite cash machine for councils. The rate will continue to be set by formula and from the centre. However, local authorities can work closely with business to bring in new businesses.

Mr David Blunkett (Sheffield, Brightside and Hillsborough) (Lab): If this is good news, it is certainly a bad day to bury it. There is no doubt that the Secretary of State failed to answer the question asked by my hon. Friend the Member for Sheffield South East (Mr Betts). He has already confirmed that the national business rate will be set by the Government, that growth will be held by the authorities that have encouraged it, and that, somehow, it will also be distributed to authorities that do not get growth. Given that last week the Department answered a question from me saying that it did not know what the spend would be as a comparator between Westminster and Sheffield, how does he think that he can answer this question this afternoon?

Mr Pickles: It would be horrible if businesses had to take the roofs off their factories in order to escape local authorities—as I believe the right hon. Gentleman will recall from his time in office. Sheffield does remarkably well out of this process. Over the past five years it has had above-average growth in its rate base, and I see no reason why it should not benefit from this. Basically, this is about ensuring that local authorities can benefit from growth in their business rates and can be encouraged to work with business. Frankly, it is no good being in favour of repatriating business rates unless we are also

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prepared to put in place something that is fair and equitable and will look after the vulnerable. I am very sorry that the two hon. Members from Sheffield do not seem to realise that.

Annette Brooke (Mid Dorset and North Poole) (LD): I welcome the principles behind this proposal—equalisation and incentivisation—but I am concerned about year two. The percentages for how the levy operates and how it is redistributed will be critical. What forms of consultation will the Secretary of State engage in, and what scrutiny of the proposals does he envisage?

Mr Pickles: My hon. Friend raises an important point. She will find waiting for her in the Vote Office a consultation document dealing exactly and precisely with the questions that she raises. It is important to understand that there will be no cliff edge in year two. We need to get away from the idea of dependency and the continuous search for the bottom—whereby local authorities try to outdo each other in saying how bad things are. We should be able to celebrate the places we live in, show things off with pride and give local communities the benefits of growth.

Roberta Blackman-Woods (City of Durham) (Lab): The Secretary of State will know that the current system of business rates ensures fairness by redistributing income, taking into account levels of need and the differing abilities of local authorities to raise council tax. Will he assure the House this afternoon that authorities such as County Durham that have high levels of need will not lose out under this proposals, beyond year one, to the tune of about £100 million?

Mr Pickles: I am delighted to report to the hon. Lady that County Durham and the north-east have enjoyed rates of growth in business rates above the English average. From what she said, one might think that somehow councils were in general agreement, but if she looks at some of the submissions that we have received she will see—I will take two as examples—that the Association of North East Councils argues that the north-east received a worse deal than the south-east and that deprivation had risen more in the north-east than in London, whereas Brighton and Hove city council disagrees with the area-cost adjustment for Cumbria, Wolverhampton, Wigan, Liverpool and Oldham, but not for its own area. We cannot have a situation where one part of the country is saying, “Give me more money, and take it from them.” What we need is a system of equality that rewards entrepreneurialism and gets local authorities off their knees.

Mr Tobias Ellwood (Bournemouth East) (Con): I welcome this statement, not least because it dispels many of the myths that have been pedalled by the Opposition. The Secretary of State mentioned in his statement that we would bring in a local government finance Bill. Can he say when it is likely to come to the House?

Mr Pickles: That, of course, is a matter for the Leader of the House and the usual channels. However, my hon. Friend is a perceptive Member, and he will

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have noticed that we are hoping to introduce the system by 2013, so we are not talking about the long term.

Steve Rotheram (Liverpool, Walton) (Lab): The American novelist John Updike once said:

“Government is either organised benevolence or organised madness; its peculiar magnitude permits no shading.”

Given that the Government show no benevolence towards Liverpool—perhaps people can fill the in blanks for themselves—can the Secretary of State specifically guarantee that Liverpool will not see a real-terms cut in its funding after the first two years?

Mr Pickles: It is a wonderful thing to be quoting John Updike—but listening to the hon. Gentleman, I sometimes think that he might consider himself to be Master of the Universe, from another novel, “The Bonfire of the Vanities”. Let us be clear: which authority would have benefited the most from this scheme? It is Liverpool, which would have done exceptionally well. If the hon. Gentleman had been paying the slightest attention to what I have been saying, rather than working up some smart quotation, he would have realised that Liverpool does well out of this system, because it—

Steve Rotheram: Yes or no?

Mr Pickles: Yes, it is going to do better out of this system, and I hope that the hon. Gentleman will get those on his Front Bench behind the process, because the system is designed to ensure that proud cities such as Liverpool no longer have to rattle the begging bowl. They can bring more money and resources in, and the people of Liverpool are the ones who will benefit.

Bob Blackman (Harrow East) (Con): Today’s announcement has been long awaited. I commend my right hon. Friend on the steps that he is taking, but will he answer one question? If councils or local authorities want to encourage start-up businesses, will they be able to develop their own schemes to allow payment holidays on business rates, to enable them to encourage growth and enterprise in their areas?

Mr Pickles: The answer is yes—[ Interruption ]—although, as the Under-Secretary of State for Communities and Local Government, my hon. Friend the Member for Hazel Grove (Andrew Stunell) says from a sedentary position, they will have to pay for it. My hon. Friend and I have long talked about how to regenerate local authorities, moving them forward and giving them some pride. This is a day to celebrate, and the Localism Bill enables such reform to take place. Indeed, such reform is the clearest example of the other side of the Localism Bill: giving people independence through finance. That is something that we should celebrate.

Heidi Alexander (Lewisham East) (Lab): The Secretary of State has made great play of linking the fortunes of local businesses to the revenue of local councils. The previous Labour Government had a scheme—the local authority business growth initiative—which did exactly that. Why was one of his first actions in government to get rid of it?

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Mr Pickles: The hon. Lady needs to try to remember what LABGI was actually like: it was an absolute disaster. Even the Lyons commission said that it was complex, unpredictable and not transparent. Let us remember that under Labour LABGI was chopped and changed. It was a three-year scheme that was stopped after one year, with the second year payments cancelled, and then it ran for two more years, following two consultations. LABGI totally failed to provide for business growth. The hon. Lady should therefore be rejoicing at the scheme that I have announced, because it does all the things that LABGI promised, without being complex, overbearing and, ultimately, a failure.

Mark Pawsey (Rugby) (Con): Businesses in Rugby will welcome the news that their payments to the local authority will be used directly to develop local services and attract new businesses. However, will the Minister confirm that provisions will be in place to ensure that other councils do not raise rates too high and drive firms away or out of business?

Mr Pickles: I am pleased to be able to give my hon. Friend that assurance, because for precisely the reasons that he suggested, we are retaining the existing formula, to ensure that councils benefit with real economic growth not increased taxation.

Andrew Gwynne (Denton and Reddish) (Lab): On 20 June I raised with the Secretary of State the potential impact of localising business rates on Tameside, which could see a drop in its funding of 35.7% a year. He tried to assure me that that would not happen—at least not in year one—but can he explain how the system of tariffs and top-ups will work, at no cost to central Government, if prosperous areas are to keep the proceeds but poorer areas are to be fully reimbursed? The maths just does not add up.

Mr Pickles: I suspect that the hon. Gentleman might not have given my initial statement the attention that he perhaps should have, because we made it absolutely clear that no council would lose out in year one—that funding continues—and local councils such as his will be able to enjoy the benefits of growth. Under the current system his local council might get a “Thank you” from the Secretary of State for showing initiative and bringing in new business, but the Government then immediately take the money back. We think that that money should stay with his local authority.

I remember the hon. Gentleman’s previous question, and I said then that I thought he should defect to us. I still think that he should defect to us, but when he has an opportunity to read the submission document, I suspect that we might be able to arrive at a consensus, because what we are doing is not intended to punish his authority; rather, it is intended to unshackle his authority, for all the potential that it has. If you do not mind my saying so, Mr Deputy Speaker, I really do not think that the counsels of despair from the other side of the Chamber are reflective of the dynamism and entrepreneurialism that exist in local authorities.

Sir Alan Beith (Berwick-upon-Tweed) (LD): I welcome the fact that the Secretary of State has included a significant redistributive element in his proposals. However, may I remind him that it remains the case that those

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authorities that have to do most to secure more business investment in the way of infrastructure development still have the least money with which to do it? The local government system really needs to take better account of that fact.

Mr Pickles: The local government system ensures considerable redistribution from more prosperous areas to less prosperous areas. One thing that will very much warm the cockles of the Deputy Prime Minister’s heart is TIF—tax increment financing—which will give predictable incomes from business rates, ensuring that local authorities will be able sensibly and prudently to borrow against that.

Mr Iain Wright (Hartlepool) (Lab): I am concerned that my constituency will lose out by something in the region of £20 million each year, which obviously comes on top of the £5 million following the end of the working neighbourhoods fund, the slashing of council budgets by a quarter and the abrupt cancellation of the housing market renewal initiative. Will the Secretary of State guarantee that funds will flow back into Hartlepool after year two, and that the Government will invest for the long term in my town, rather than embedding poverty and deprivation?

Mr Pickles: The hon. Gentleman should speak up for Hartlepool. [Hon. Members: “He is!”] That is, he should speak up in a way that he did not—or his predecessor did not—when the Labour Government took away area-based grants. When they did that, there was not a whimper from the Labour Benches. It is because of the good services of the coalition that we are able to introduce some kind of transition. The short answer to the hon. Gentleman’s question is yes.

Andrew Percy (Brigg and Goole) (Con): My right hon. Friend referred in his statement to port rates. The Valuation Office Agency is now going round rating certain berths in Goole as sole-use berths, which means that businesses in my area are going to be significantly affected vis-à-vis other ports on the Humber. Is he going to review the role of the VOA as we move forward on local government finance?

Mr Pickles: Fortunately for the fate of the VOA, it is not accountable to me. It is a constant source of amazement and entertainment, but I hope that it will see reason so far as my hon. Friend’s constituency is concerned.

Clive Efford (Eltham) (Lab): Can the Secretary of State tell us what local authorities will be doing to generate growth under the new scheme that they are not doing now?

Mr Pickles: God help us if the hon. Gentleman does not understand that. Local authorities work hard to bring new things into their areas and to ensure that there is a balance. The difference between this system and the existing system is that, at the moment, despite everything that the local authorities do, we take the money away from them and it goes back into a central pool. In future, they will keep that money, which will give them an incentive—[ Interruption. ] The hon. Gentleman clearly does not seem terribly familiar with the entrepreneurial system that exists. His counsel of

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despair is that we cannot do anything and should not do anything but continue to stand here with our hands out. That is not really a policy; it is a surrender.

Henry Smith (Crawley) (Con): I very much welcome my right hon. Friend’s statement. Will he confirm that, contrary to the call from the Labour party, business rates will not be raised for small firms in my constituency or elsewhere in the country?

Mr Pickles: My hon. Friend makes a reasonable point. He will recall that we have introduced a simplified system for small businesses, to ensure that in the long term they will not have to fill in forms continuously in order to get the necessary rebate. Another important difference is that, unlike what was promised in the Labour manifesto, we are committed to keeping the formula. We are not going to increase the level of taxation, because to do so would have a disastrous effect for firms across the country and for the small firms in my hon. Friend’s constituency.

Mrs Mary Glindon (North Tyneside) (Lab): Business rates from retail and commercial developments are at least five times higher than those from manufacturing in the north-east, but manufacturing is worth £7.5 billion to our economy. Is there a danger that manufacturing could lose out as retail and commercial developments are favoured as a better business rate bet?

Mr Pickles: I have obtained the briefing from the Association of North East Councils that the hon. Lady has just cited. It takes no account whatever of the fact that there is a tariff and a top-up. Opposition Members seem to think that we are dealing with some kind of Monopoly board on which local authorities can decide between retail and other developments. The truth is that the market will decide these things. Where the local authorities fit in is by not getting in the way of the market but working with it and deciding to go for growth. Opposition Members cannot honestly believe that local authorities can just sit there and say, “We’ll have a supermarket on every corner.” They cannot seriously believe that that is what the real world is like. Our proposals will remove a lot of the obstacles to growth.

Jackie Doyle-Price (Thurrock) (Con): My borough of Thurrock currently collects £92 million a year in business rates, but keeps only £52 million. Much of that contribution is generated by two areas, West Thurrock and Tilbury, which also happen to be the least affluent parts of my constituency. Does my right hon. Friend agree that it is much fairer if those communities benefit from the business rates that are generated in their area?

Mr Pickles: My hon. Friend makes a reasonable point. It has been said many times at this Dispatch Box that the problem with the existing system is that it does not take into consideration the difference between poverty and sparsity. There are whole sections of Essex and the Thames corridor where poverty exists but is simply not recognised by the formula. Our system will react very quickly, because the business rate value can show, in

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year, where things are going right and where they are going wrong. Many elements of the existing formula are rather outdated and very unreliable.

Dr Alan Whitehead (Southampton, Test) (Lab): I am reminded of Garrison Keillor, the American humorist, who describes Lake Woebegone as a place where

“all the children are above average.”

Does the Secretary of State intend to have a year zero in order to achieve the outcome he has described, perhaps in 2013, whereby the present arrangements for business rates would be frozen and the change would start thereafter? Or is he proposing a change before that date? If he is proposing a change after that date, what does he mean by an area that “benefits disproportionately” from growth? Will he define “disproportionate” for us?

Mr Pickles: Of course I would be happy to do that. I am sorry that the hon. Gentleman’s joke fell rather flat, but it was funny in retrospect. We will be adjusting the figures in 2013, assuming that we have leave to bring in the Bill, and we will provide an update on the latest figures because there are certain problems, particularly with regard to population. Members should understand that the figures will be based on the fact that relative need was increased to 83% so this is a very progressive settlement in terms of proportion, particularly for areas of relatively low income. Once the figures have been arrived at, we will continue with the new system.

Martin Vickers (Cleethorpes) (Con): I welcome the Secretary of State’s announcements; anything that can be done to incentivise local authorities will obviously be beneficial. May I just query the section of his statement in which he talked about “a special local levy to capture a share of that benefit”? Local levies can of course sometimes be set at such a level as to create a disincentive. Will he elaborate on the level that he is considering?

Mr Pickles: I shall continue to answer the previous question as well, as I forgot to answer the point about disproportion. We need to understand that business rates grow in different parts of the country at different rates. If we did not have a levy, places such as Westminster, and Hammersmith and Fulham, would grow very quickly, and the amount of money coming in would be in the teens and twenties, although we would normally expect growth to be in single figures. We would therefore need to ensure that a levy was taken off, and we would use a sliding scale to achieve that. I always want to be in a position to ensure that, no matter how fast the growth—and even if it was only a tiny few pence in the pound—local authorities would continue to benefit. The more they grow, the more levy they will contribute to other parts of the country.

Helen Goodman (Bishop Auckland) (Lab): Taken to their logical conclusion, the Secretary of State’s proposals will mean that County Durham will lose £130 million while the City of London and Westminster will gain £1.5 billion at the end of the process. Does not that demonstrate not only that the system is unfair but that the Secretary of State is further rewarding financial services while kicking manufacturing in the teeth?

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Mr Pickles: I want to be absolutely clear: that is simply not going to happen. There will be no movement of millions of pounds from one part of the country to another, except in this sense: the north of England will continue to see money moved from the south—not out of charity—to ensure that, as part of England, it enjoys the growth in national wealth. The idea put about by Opposition Members that this means that County Durham is going to lose £x million is risible. Labour Members need to get themselves a policy, because that kind of opposition is simply pathetic.

Dan Byles (North Warwickshire) (Con): I warmly welcome this proposal, particularly the plain English guide attached to it—would that more Secretaries of State did the same! Is my right hon. Friend aware that the Labour-run Nuneaton and Bedworth borough council in my constituency owns many empty shops in the town of Bedworth? That drags down the town, but the council appears to make no effort to try to fill these shops, get them off the books and get them generating income. Will my right hon. Friend confirm that the measure he has announced today will give the council the incentive to do that and get those shops filled?

Mr Pickles: They will now. The folks of Nuneaton are about to see a lot more shops being filled. This is not unusual for any council anywhere in the world—except for England. Only in England do we have an incentive for our areas to get worse. If we were to look at councils in France, Germany and America, we would see the councillors sit down at the beginning of the year and then at regular intervals to say, “We’ve got empty shops; what can we do to fill them? How can we attract national names to come to Nuneaton to make the difference?” I guarantee my hon. Friend that that is exactly what will happen with his local council very soon.

Diana Johnson (Kingston upon Hull North) (Lab): I have listened very carefully to what the Secretary of State has said this afternoon, most of which I found to be gobbledegook. The thrust seems to be that everyone is a winner in this process. Let me tell the right hon. Gentleman that, barring an economic miracle in Hull, we will lose about £45 million by 2014-15. That is based on the figures produced in today’s proposal. How is that going to help economic regeneration and lift people in my constituency out of poverty?

Mr Pickles: The hon. Lady should know better. Frankly, there is no point in just hurling vulgar abuse across the Chamber. She knows, and we know, that under this system a proud city like Hull has a better chance of being able to enjoy the fruits of its labour in bringing in investment. The hon. Lady should start speaking up for the city of Hull rather than decrying it. It is a fine city in the mouth of the Humber; it is time that she spoke up for Humber.

Heather Wheeler (South Derbyshire) (Con): I welcome my right hon. Friend’s announcement. The people of South Derbyshire, with their go-ahead South Derbyshire district council, will be at the forefront of bringing this forward. For four years, we have been saying that we are open for business. This is absolutely excellent; this is what we need in the midlands today.

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Mr Pickles: I am grateful for my hon. Friend’s comments. This system was designed for the go-getter that she undoubtedly is, and it will do a lot of good for her council. We will ensure that this system releases local authorities from the shackles of failure.

Mr Andrew Love (Edmonton) (Lab/Co-op): Every time the right hon. Gentleman utters the words “fair” and “equitable”, we become much more sceptical on this side of the House as we realise what is happening under this scheme. While Westminster will roar ahead over the next few years, councils like mine in Enfield in the outer boroughs of London will do very badly, yet many of the people who live in Enfield work in Westminster, and many of the businesses in Westminster are run by people from Enfield so there is an interdependence. What recognition will there be in the system that although many people contribute to the so-called growth in local authority areas, not all of them live there?

Mr Pickles: The hon. Gentleman raises a very important point. Already the London councils are working on a pooling system for the receipts of the business rate, and are fairly well advanced in their planning. The advantage of having pooling across London is that any growth in Westminster—the hon. Gentleman is right to say that it will indeed be great—will be shared with the people of Enfield. I urge him to look at the part of the consultation paper that deals with pooling. He makes a very reasonable point and something clearly has to be done about it. I would expect other parts of the country also to pool so that rich authorities and poor authorities can both enjoy the benefits of growth.

Brandon Lewis (Great Yarmouth) (Con): Does the Secretary of State agree that one of the most exciting parts of his statement is the opportunity opened up for local authorities through their freedom so that areas like Great Yarmouth, working with the county council and local businesses, might finally be able to invest in infrastructure and see the development of projects like the third river crossing, which were never possible under the previous Government?

Mr Pickles: That is certainly true, given the ability to have tax increment financing schemes in the projected Bill. That would certainly help my hon. Friend’s constituency, which has not done particularly well out of the current grant system. I think that, with the help of the distribution, this has the potential to provide the good people of Great Yarmouth with an opportunity to develop the front and to look to that additional crossing.

Stephen Mosley (City of Chester) (Con): One of the advantages of enterprise zones is that businesses based on them will gain from business rates. Will my right hon. Friend confirm that local authorities with enterprise zones in them will not lose out as a result of this proposal?

Mr Pickles: My hon. Friend makes a very reasonable point. It is important for maintaining the advantages brought by enterprise zones that we do not count that money at all so that they get that sum absolutely free of any changes to top-up or tariff.

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Gavin Barwell (Croydon Central) (Con): Can my right hon. Friend clear up some of the confusion of Opposition Members by confirming that the authorities that will benefit relatively from what he has announced today are not those with a large business rate base or those in particularly affluent areas, but those that will enjoy relatively high economic growth in future? At a time when our country is crying out for economic recovery, surely this is a strong and sensible piece of public policy.

Mr Pickles: My hon. Friend absolutely sums up the case for this change. It will ensure that local authorities enjoy the benefits of growth and that they will be in a position to generate more income directly by their actions.

Neil Carmichael (Stroud) (Con): Does the Secretary of State agree that linking increased yield of business rates to the activities and performance of councils really will help economic growth, particularly when localism too is thrown into the mix?

Mr Pickles: My hon. Friend makes an interesting point. By itself, this change to the way in which the business rate is collected and distributed would not bring about the necessary change. It is only when it is combined with the full effect of the Localism Bill, particularly the power of general competence, that its full importance can be felt.

Mr Marcus Jones (Nuneaton) (Con): Under my right hon. Friend’s proposals, will councils be given the autonomy to encourage growth within our town centres—for example, by being able to offer incentives on non-domestic rates to fill our empty shops?

Mr Pickles: My hon. Friend raises an important point. The Localism Bill enables local authorities to be able to offer those kind of discounts, clearly demonstrating how the Bill and the reform of local government finance combine. I repeat that, despite the hot air and anger, it is our intention as far as possible to move forward on the basis of consensus. I hope that, when Members reflect and look at the consultation document, our proposals will receive enthusiastic support on both sides of the House.

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National Policy Statements (Energy)

[Relevant documents: The Third Report of the Energy and Climate Change Committee, Session 2010-12, on The revised draft National Policy Statements on energy, HC 648, and the Government response of June 2011. ]

Madam Deputy Speaker (Dawn Primarolo): I suggest that, for the convenience of the House, motions 1 to 6 should be debated together, and should be voted on at the end of the proceedings.

6.50 pm

The Minister of State, Department of Energy and Climate Change (Charles Hendry): I beg to move motion 1,

That this House takes note of and approves the Overarching National Policy Statement for Energy (EN-1), which was laid before this House on 23 June.

Madam Deputy Speaker: With this we shall consider the following:

Amendment (e) to motion 1, leave out from ‘of’ to end and add

‘the Overarching National Policy Statement for Energy (EN-1), which was laid before this House on 23 June, but declines to approve it until it is amended to insert in section 5.14.7 a direction to the Infrastructure Planning Commission to consider the impact on the waste hierarchy of energy-from-waste generating stations of over 50MW.’.

Motion 2—National Policy Statements (Fossil Fuel Electricity Generating Infrastructure)—

That this House takes note of and approves the National Policy Statement for Fossil Fuel Electricity Generating Infrastructure (EN-2), which was laid before this House on 23 June.

Amendment (b) to motion 2, leave out from ‘of’ to end and add