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House of Commons

Monday 19 December 2011

The House met at half-past Two o’clock


[Mr Speaker in the Chair]

Oral Answers to Questions


The Secretary of State was asked—

Submarines (Female Personnel)

2. Caroline Dinenage (Gosport) (Con): What expertise women can provide and which roles they can fill on board Royal Navy submarines. [86894]

6. Harriett Baldwin (West Worcestershire) (Con): If he will take steps to encourage women in the Royal Navy to apply to serve on Vanguard and Astute class submarines. [86898]

The Secretary of State for Defence (Mr Philip Hammond): I announced to the House on 8 December that women will be recruited into the Royal Navy submarine service. All submariner roles will be open to women, and this new opportunity to serve will enlarge the talent pool from which the submarine service will recruit. All male and female applicants will be assessed against the same criteria. All applicants will receive the same training. I am confident that there will be sufficient interest from female personnel to serve on board Royal Navy submarines.

Caroline Dinenage: I welcome that news from the Secretary of State and the confirmation of what many of us know: that women can do everything that men can do. [Hon. Members: “Hear, hear!”] But better. Can the Secretary of State please expand on when it is most likely that women will first be put into training and service on submarines?

Mr Hammond: Let me say, Mr Speaker, that if my wife is to be believed, not only can women do everything that men can do, but they can do two things at a time, while men can do only one thing at a time. I hope that this will contribute to the efficiency gains that we need to make in the Royal Navy and elsewhere. I can tell my hon. Friend that female officers will serve on Vanguard class submarines from late 2013, followed by ratings in 2015, and that women will be able to serve on Astute class submarines as both officers and ratings from about 2016.

Harriett Baldwin: I pay tribute to all those who have the fortitude to serve on submarines underwater for many months at a time, particularly at this time of year. Can the Secretary of State say whether there will be any cost to the public purse from adapting submarines to accommodate both sexes?

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Mr Hammond: Yes, there will be an estimated cost of about £3 million in total, to provide appropriate accommodation and emergency air supplies, so that should any female submariner be found to be pregnant while on board, she will be able to breathe from a discrete air supply until she can be medically evacuated.

Nicholas Soames (Mid Sussex) (Con): Have any trials been conducted for this project? I generally welcome the principle entirely, particularly given the great success of women on board all other ships, but does my right hon. Friend not think that it might be worth while conducting a lengthy trial in simulated conditions before the plan goes ahead?

Mr Hammond: I would say two things to my right hon. Friend. First, the only reason why women were not eligible for the submarine service was that until recently the best medical evidence suggested that there could be a risk to foetal health. It is now clear that that risk does not exist. I would also say that the United States navy has made the change already, and has found the arrangements to be perfectly satisfactory.

Christmas (Service Personnel)

3. Amber Rudd (Hastings and Rye) (Con): What food and entertainment his Department plans to provide to service personnel on operations during the Christmas period. [86895]

The Minister for the Armed Forces (Nick Harvey): Where the security situation allows, troops and support staff in Afghanistan will be served an English breakfast, a traditional turkey lunch with trimmings and a buffet supper. The Scots band will tour UK bases and there will be a carol concert in Camp Bastion. A variety of arrangements are similarly in place for those deployed elsewhere. Christmas decorations have been delivered to Camp Bastion already, and boxes of welfare and morale-boosting goods have arrived from UK4U, in addition to what is provided by the MOD.

Amber Rudd: Last weekend I spoke to my constituent Valerie Hindson, whose son, Lance Corporal Joel Hindson, is serving with 1st Battalion The Princess of Wales’s Royal Regiment in Afghanistan. She is concerned about Christmas provision for him, because he is not at Camp Bastion, but out at a patrol base. Can my hon. Friend reassure me, and the friends and family of many brave men and women, that extra effort will be made to reach those out at patrol bases, as well as those at Camp Bastion?

Nick Harvey: Yes, I can certainly give my hon. Friend that assurance. Special Christmas packages are going out to all forward operating bases and patrol bases. In most cases there is a chef on site and proper catering facilities to ensure a Christmas lunch. That will not be possible for a small number of people in very remote locations, but even in those cases, special Christmas provision is being made.

Steve McCabe (Birmingham, Selly Oak) (Lab): For purposes of comparison, will the Minister tell the House how much will be spent on food and entertainment for Ministry of Defence Ministers and officials over the same period?

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Nick Harvey: To the best of my knowledge, no such funds are being spent at all.

Bob Stewart (Beckenham) (Con): As the patron of the Forces Children’s Trust, which looks after service orphans and widows, may I gently remind the Minister that it would be nice if the Ministry of Defence were to encourage all units, when they are having their Christmas celebrations, to look after the people who have lost loved ones within the unit? I am sure that that is happening, but a gentle reminder would not go amiss.

Nick Harvey: My hon. Friend makes a good point. I share his confidence that commanding officers and those responsible for the welfare of troops will have this in mind, but when there are opportunities to offer such reminders, we will certainly do so.

Redundancy and Resettlement

4. Nic Dakin (Scunthorpe) (Lab): What steps he is taking to mitigate the effects of redundancy on those leaving the armed forces. [86896] 7. Susan Elan Jones (Clwyd South) (Lab): What steps he is taking to support service personnel through the process of resettlement. [86899]

13. Toby Perkins (Chesterfield) (Lab): What steps he is taking to support service personnel through the process of resettlement. [86905]

The Parliamentary Under-Secretary of State for Defence (Mr Andrew Robathan): In addition to the tax-exempt compensation and, for many, an immediate pension, the welfare of those leaving the services is very important to the Ministry of Defence. We have in place a robust and effective resettlement system that helps our service personnel on a number of levels, and allows them to serve knowing that they will receive professional and tailored assistance on leaving. The MOD fully understands that making the transition from the armed forces into civilian life can be daunting, and we remain committed to supporting service leavers in taking this important step.

Nic Dakin: I thank the Minister for his reply. Given the increased challenges for those going through the resettlement process, will he commit to including an update on the success of the process in the Secretary of State’s annual report on the military covenant?

Mr Robathan: That is an extremely good point. The hon. Gentleman may be aware that we estimate that 96% of ex-forces personnel find employment within 12 months, and that 93% of the total do so within the first six months. He has made a good point, however, and we will see whether it is possible to do as he asks.

Susan Elan Jones: May I ask the Minister whether the new Cabinet Committee will allocate new funds to tackle the important issue of homelessness among veterans?

Mr Robathan: We are very concerned about anyone being homeless, and the Ministry of Defence is especially concerned about homeless veterans. One should, however, make absolutely certain that one deals in facts. While

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any individual being homeless is a concern, we reckon that approximately 3% of those who are found homeless on the streets in the United Kingdom are ex-service personnel. Indeed, I commend to the hon. Lady the organisation Veterans Aid, based in Victoria, which I visited recently. It does fantastic work with ex-service personnel who are homeless.

Toby Perkins: The country is already facing a significant housing shortage, massive increases in unemployment and real difficulties relating to primary school intake numbers. Is this not absolutely the worst time for 17,000 of our service people to be entering that housing and jobs crisis? Is that not a pretty shabby way to treat people who have served our country so well?

Mr Robathan: May I gently say to the hon. Gentleman that we are not happy to be making people redundant from the armed forces? Unfortunately, however, we have a serious financial situation in this country, as I think he and everyone on the Opposition Benches will recognise, and we have to address that. Regarding housing, he will know that my right hon. Friend the Minister for Housing and Local Government has announced that he is in discussion with local authorities to ensure that ex-service personnel get to the front of the queue, because they might have local connections. He is consulting on that issue at the moment. Regarding employment, I have just said that ex-service personnel are eminently employable and that they are valued by the employment market, and I think that those leaving the services will, God willing, not find it too difficult to find a job.

Mr James Arbuthnot (North East Hampshire) (Con): Over Christmas, will my right hon. Friend find time to think about the difference between those in the armed forces who are made redundant and those in the Ministry of Defence civil service who are made redundant? Members of the armed forces are frequently made redundant compulsorily, but that has not happened to a single civil servant so far.

Mr Robathan: My right hon. Friend will know that there have been a large number of applications from civil servants for the voluntary early release scheme. That is why very few people are likely to be compulsorily made redundant at the moment. Those in the armed forces have been less forthcoming with applications for voluntary redundancy, but only 40% of those taking redundancy are doing so compulsorily, the rest having applied for it.

Dr Andrew Murrison (South West Wiltshire) (Con): My right hon. Friend will know that it tends to be early service leavers rather than those who have served their full commissions who feature disproportionately in criminal justice and homelessness figures and mental health statistics, yet the resettlement facilities—such as they are—are focused very much on those who have served the armed forces for a long time. What can we do to redress the balance?

Mr Robathan: My hon. Friend speaks from his own personal experience, and he is absolutely right that early service leavers are often those who have the greatest difficulty. I would like to thank him again for his “Fighting Fit” report on the mental health needs of

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ex-servicemen, and indeed for his recent work on prosthetics. In fact, everyone—even someone who has served for a very brief period—gets some resettlement advice. Inevitably, those who have served for a brief period have less need to adjust, if I may put it that way, because their service has been so short.

Mr John Redwood (Wokingham) (Con): Will the Minister look again at ideas put forward by me and others in the past to allow service personnel to buy a property while still serving in the armed forces, or to build housing equity before they leave, in order to avoid the problem of homelessness?

Mr Robathan: My right hon. Friend raises an excellent point. There are schemes that we are taking forward to ensure that people can get priority in some ways. For instance, my right hon. Friend may not know that until recently—in fact, this is still the case—a BFPO address may not count as a proper address for creditworthiness; we are taking steps to change that.

Gemma Doyle (West Dunbartonshire) (Lab/Co-op): The Daily Telegraphreported over the weekend that a further 150 trainee pilots may be sacked and have to go through the resettlement process. Will the Minister confirm that that is not correct?

Mr Robathan: I understand that the story to which the hon. Lady refers is, in fact, a rehash of a previous story. We very much regret making trainee RAF pilots redundant—but by reducing the number of aircraft we have reduced the number of pilots that we need. We have no plans for further redundancies from the RAF’s flying training pipeline.

Mr Edward Leigh (Gainsborough) (Con): There are widespread reports in today’s press that the Government are planning a large cull of senior officers. I know it is a bit of a joke that there are now more admirals in the Royal Navy than major warships—but can the Government not solve this problem by increasing the number of warships instead of cutting the number of admirals?

Mr Robathan: I am grateful to my hon. Friend for his pre-Christmas question. Unfortunately, we have a slight problem with paying for the number of warships. I am sure we will bear it mind, but I have to say that the reduction in the number of senior officers has been spoken about at great length, including in the recent report by Lord Levene.


5. Jeremy Corbyn (Islington North) (Lab): What expenditure on the Trident replacement he expects to have incurred by 2016. [86897]

The Parliamentary Under-Secretary of State for Defence (Peter Luff): We expect to spend £3.9 billion on the successor submarine programme by the maingate decision-point in 2016. We have deferred the decision on the future warhead until the next Parliament. We are spending around £900 million a year at AWE—the Atomic Weapons Establishment—on capital investment and running costs to ensure that we can sustain the capabilities to maintain the current stockpile. As a consequence of this sustainment, we will also have the capability to design and produce a new warhead, should that be required. We expect to spend around £8 million over the next three years to

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examine the condition of the physical infrastructure at the naval bases and current communications systems for the successor submarines.

Jeremy Corbyn: By the Minister’s own figures, the Government are proposing to spend £5 billion on the submarine replacement and the preparations for a new missile system from AWE Aldermaston, which means that after the next election the new Parliament will be confronted with the decision whether to renew the Trident system, having already spent £5 billion on it. Does the Minister not think that we are walking—indeed, sleepwalking—into a massive expenditure, after that, of £25 billion on a replacement, plus the running costs? Is it not time we brought this vanity project to an end and cancelled the Trident system?

Peter Luff: No, I do not think that at all. In fact, not spending that money would prevent us from preserving the option for the next Parliament to take the decision. The hon. Gentleman is fond of pointing out the problems in respect of the capability for the nuclear deterrent, but let me assure him that the work we are undertaking will have benefits for other classes of nuclear submarines in future— particularly in respect of the primary propulsion systems, for example with the PWR3. There are real benefits from doing this work—not just for the security of the nation in the short term, but for the long term as well.

Dr Julian Lewis (New Forest East) (Con): Given that both the Polaris and Trident submarines came in on budget and on time, is that not a good precedent for the successor system? Will the Minister take the opportunity to repeat in resounding terms the assurance that the Prime Minister gave to Conservative MPs when the coalition was formed—that Trident will be renewed, whether the Liberal Democrats like it or not?

Peter Luff: I believe that, notwithstanding the views of the hon. Member for Islington North (Jeremy Corbyn), no programme is subject to greater scrutiny in the House than the nuclear deterrent. That is one of the reasons for the accuracy of our costings. Let me assure my hon. Friend that the primary responsibility for our nation is the security of the country, that the nuclear deterrent is the ultimate guarantee of the country’s security, and that we stand firmly behind it.

John Woodcock (Barrow and Furness) (Lab/Co-op): Will the Minister tell us how many Government staff are working on his review of alternatives to the Trident system, when he now expects the review to end, and whether he has reached a final conclusion on whether its findings will be published?

Peter Luff: I cannot tell the hon. Gentleman off the top of my head exactly how many Government colleagues are involved in the review, but I will write to him about it. What I can tell him is that its findings will be available towards the end of next year for the Prime Minister and the Deputy Prime Minister to consider, and that, given that it will constitute a full and frank exploration of the alternative systems at a highly classified level, there are no plans to publish either the report or the information on which it draws. However, we are a long way from the end of the review, and it is therefore premature to speculate on how the final assessment might be used once it has been completed.

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Tessa Munt (Wells) (LD): What is the point of having a review if no one, except a select few, has an opportunity to look at its findings? Should not the Liberal Democrats, in particular, be allowed some access to that information? [Interruption.]

Peter Luff: As my hon. Friend the Minister for the Armed Forces says, I was of the view that the Deputy Prime Minister was a Liberal Democrat—and he will see the report.


8. Eric Ollerenshaw (Lancaster and Fleetwood) (Con): What arrangements were included in the recent memorandum of understanding with Turkey. [86900]

The Parliamentary Under-Secretary of State for Defence (Mr Gerald Howarth): I signed a defence industrial co-operation memorandum of understanding with the Turkish Ministry of National Defence during the state visit of President Gül. The memorandum provides for a committee to be formed, to meet at least annually, and to be staffed by the Ministry of Defence, the UK Trade and Industry Defence and Security Organisation, and the Turkish Ministry of National Defence. It also establishes a framework for the potential acquisition of common defence equipment, for scientific and technical co-operation to meet the needs of both our armed forces, and for the development of joint projects.

Eric Ollerenshaw: Is that memorandum simply part of a wider recognition by the Government of the increasingly pivotal role that Turkey is gaining for itself in world affairs?

Mr Howarth: Turkey is indeed an important ally of the United Kingdom. Like us, it is an important member of NATO, and given that its economy is growing at five times the average rate of the eurozone, it is also an important economic player. In the context of defence, there is a great deal that we can exchange with Turkey, and I am delighted that a number of British companies, including BAE Systems, are investing in joint ventures there.

Mr Denis MacShane (Rotherham) (Lab): Does the Minister agree that Turkey and Israel are the only two functioning democracies in the region—and will he therefore increase contact and co-operation with the military in both those countries, particularly with a view to containing, or indeed confronting, an Iranian nuclear bomb threat?

Mr Howarth: I can tell the right hon. Gentleman, who has considerable experience of foreign affairs, that we already co-operate closely with both Turkey and Israel. In this instance, however, I think that Turkey is the important country, and I am delighted that the treaty, which was also signed by my right hon. Friend the Secretary of State at the time of President Gül’s visit, will give United Kingdom forces access to training facilities in Turkey.

Mr Julian Brazier (Canterbury) (Con): Will my hon. Friend join me in commending the very restrained and at the same time statesmanlike way in which the Turks have been handling the hideous problem on their borders that has been created by the barbaric behaviour of the Syrian Government?

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Mr Howarth: Indeed. My hon. Friend has drawn our attention to a serious matter of concern to all of us in the House, and indeed to the wider community—what is taking place in Syria. The Turks are clearly important and concerned players because they share a border with Syria, and we are watching developments there with close interest.

Armed Forces Pay

9. Jonathan Ashworth (Leicester South) (Lab): What recent discussions he has had on armed forces pay; and if he will make a statement. [86901]

The Secretary of State for Defence (Mr Philip Hammond): I provided oral evidence to the Armed Forces Pay Review Body on 13 December. The discussion covered various aspects of the current remuneration package for members of the armed forces, as well as the broader economic context.

Jonathan Ashworth: I thank the Secretary of State for his answer. He will, of course, be aware that the pay freeze and changes to pensions are causing some concern, perhaps even anger in some quarters, not least among non-commissioned officers. Does he have any concerns in that regard, and does he have any contingencies in place should the changes to pensions and the pay freeze lead to an exodus of experienced personnel?

Mr Hammond: The Government recognise the unique and important role played by the armed forces, which is why we doubled the operational allowance to £5,280 tax free, why the incremental pay system will continue during and after the pay freeze, and why we have exempted the armed forces from the average 3% increase in pension contributions that public sector workers will pay. I recognise the concern that the hon. Gentleman expresses, and I have discussed it with the Armed Forces Pay Review Body. The proposals that the Chancellor announced in the autumn statement for continued pay restraint after the freeze include flexibility for the Ministry of Defence to address specific problem areas if we find we are losing, or failing to recruit, specialist staff.

Mr David Nuttall (Bury North) (Con): What does my right hon. Friend think will be the effect on the morale of our armed forces personnel of their pay being frozen this year, while many people on benefits are being given a 5.2% increase?

Mr Hammond: My hon. Friend will recognise that by doubling the operational allowance for the armed forces, exempting them from the pension contributions increase and continuing the incremental pay system, we have sent a very important signal to them about the importance that we attach to them. I think that most members of the armed forces understand that we are facing some very tough decisions in order to get the MOD budget back on track and ensure a sustainable future for our armed forces, and that the restraint was necessary to achieve that.

Mr Kevan Jones (North Durham) (Lab): Frozen pay, reduction in the pension and compulsory redundancies: can the Secretary of State explain how that squares with the Prime Minister’s statement in The Sun this morning that he intends to uphold the military covenant and support our servicemen and women?

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Mr Hammond: I think that the hon. Gentleman was a member of the last Government, so he will be very clear about the scale of the financial problem that the MOD and the wider public sector face. The armed forces are playing their role in helping to correct the deficit and get this country back on track.

Mr Philip Hollobone (Kettering) (Con): What discussions has my right hon. Friend had with the Department for Education about financial incentives to encourage retiring service personnel to take up teaching as a career, in order to get some self-respect and discipline taught to our young people in schools?

Mr Hammond: My hon. Friend will know that the Secretary of State for Education has announced the “troops to teachers” scheme. Work is ongoing to put the flesh on the bones of that proposal, and an announcement will be made in due course.

Aircraft Carriers

10. Mr Jim Cunningham (Coventry South) (Lab): What assessment he has made of the likely effects on the defence sector of the aircraft carrier programme. [86902]

The Parliamentary Under-Secretary of State for Defence (Peter Luff): Having visited Govan and Rosyth to see the Queen Elizabeth class carriers under construction, I know that the project is good news for the UK defence industry. It is anticipated that 7,000 to 8,000 jobs will be created or sustained at the tier 1 shipyards, with a further 2,000 to 3,000 jobs in the wider supply chain. Apprenticeship schemes have also been reinvigorated, with nearly 800 apprentices now involved in the project. Some £1.35 billion-worth of equipment subcontracts have been placed, the majority of which have been awarded to more than 75 different UK companies spanning the length and breadth of the UK. With an expected 50-year service life, there will be continued opportunities for UK companies to benefit from this project.

Mr Cunningham: I am sure that companies such as Rolls-Royce will welcome the Minister’s statement, but does he agree with the First Sea Lord that if a British aircraft carrier had been available during the Libyan mission, it would have been most cost-effective and efficient to use it?

Peter Luff: Actually, I do not fully agree with that. A carrier might well have been deployed, but the aircraft that were necessary to deploy the missiles we needed were the Tornados and Typhoons, and they did a first-rate job. That proved that the Government made the right judgment in the strategic defence and security review by deciding on a gap in respect of that particular capability.

Sir Menzies Campbell (North East Fife) (LD): Does the Minister recall that an important factor in the decision to continue with the construction of the two aircraft carriers was the availability of the F-35, the joint strike fighter? Is he aware of reports that there is a delay in its development programme? What will be the impact on the effectiveness of the carrier force if there are no aircraft to fly off them?

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Peter Luff: The world is full of rumours about the future of the F-35 programme; I hear a new one almost every day. It is true that a lot of questions are being asked, and those aircraft are very important to carrier strike capability, but I shall wait to see what actually happens, rather than joining in the speculation.

Alison Seabeck (Plymouth, Moor View) (Lab): In a written answer to me, the Minister put the estimated cost of converting one of the carriers to the catapult and arrestor system at about £1 billion. Can he therefore tell us whether the Chancellor’s announcement in the autumn statement of real-terms cuts in respect of procurement issues of almost £30 billion, extending into the first two years of the next Parliament, is apt, or whether the Prime Minister’s promise of a real-terms increase in defence spending of 1% will apply to this and other major projects?

Peter Luff: I can confirm that nothing has happened to our commitment to increase the equipment budget by 1% in real terms from 2015. I have to say that our job would be a great deal easier if the previous Government had not taken the decision to delay the carriers, thus adding an extra £1.3 billion of costs to the programme with no capability gain whatsoever.


11. John Mann (Bassetlaw) (Lab): When he expects UK troops to be withdrawn from Afghanistan. [86903]

The Secretary of State for Defence (Mr Philip Hammond): My right hon. Friend the Prime Minister told the House that UK force levels in Afghanistan will reduce from 9,500 to 9,000 by the end of 2012. By the end of 2014, the security transition will be complete and British troops will no longer be in a combat role. The UK and the international community are committed to Afghanistan for the long term, and a number of UK troops will remain after 2014, including in training roles at the UK-led Afghan national army officer academy.

John Mann: Does the Minister pay more attention to the German Foreign Minister, who wants us in Afghanistan for another 15 years, or to the people of Bassetlaw, who say that now is the time to bring our lads back home?

Mr Hammond: We have a clear plan for the completion of the mission in Afghanistan, which involves transitioning lead security responsibility to the ever more competent Afghan national security forces. That will be done over the next three years, resulting in the withdrawal of the overwhelming majority of our forces by the end of 2014 and the ending of our combat role. That is the position that most people in this country would want to see: a measured and properly controlled winding down of our involvement that protects the legacy that we have won with so much blood and treasure.

Jack Lopresti (Filton and Bradley Stoke) (Con): Will my right hon. Friend assure the House that any reduction in UK force strength in Afghanistan will be based on the improving situation on the ground, not on any political expediency?

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Mr Hammond: The trajectory of the force draw-down to the end of 2014 will be determined by the evolution of events on the ground. No prior decision has been taken about the pattern of that draw-down other than that 500 troops will come out next year, as my right hon. Friend the Prime Minister has announced.

Mr Bob Ainsworth (Coventry North East) (Lab): It was widely reported in the press that the Secretary of State had proposed to the National Security Council a draw-down that was accelerated beyond that originally envisaged. Will he tell us what the time scale for decision making is in Afghanistan? I agree with him that this is a very complex theatre of operations, and we have an absolute duty to make things as right as we can as we exit from our combat mission in Afghanistan.

Mr Hammond: As the right hon. Gentleman will know, the National Security Council discussed strategy on Afghanistan last week and a number of different scenarios were considered. It is clear that we must have regard to the decisions that the United States has yet to make about the pattern of its force draw-down. We will want to look again at this issue once it is clear how and when the United States will draw down its forces, but we have made no fixed commitments, other than to reduce the force level by 500 next year and to be out of the combat role by the end of 2014.

Bob Russell (Colchester) (LD): This time last year, 16 Air Assault Brigade was deployed to Helmand province. Many of those young soldiers were also there in 2008 and, based on the time line that the Secretary of State has given, I suspect that some of them be deployed yet again. However, none of those who joined the Army since February 2007 will be entitled to the Jubilee medal. Why not?

Mr Hammond: The simple answer is that the conditions of service requirement attached to that medal is five years’ continuous service. The hon. Gentleman is absolutely right that some members of 16 Air Assault Brigade might be deployed for one more Herrick tour before our operations in Afghanistan are complete, but the jubilee service medal is a separate issue and the conditions set for it are very clear.

Mr Jim Murphy (East Renfrewshire) (Lab): In this week before Christmas, our thoughts are with our forces who are separated from their families and in particular those families who continue to feel the loss of a loved one in Afghanistan.

The Bonn conference on Afghanistan cannot be considered to have been a strategic success. I am not blaming the Government for that failure—it was an international responsibility—and the Opposition remain committed to the Afghanistan mission, but for the Government, bipartisanship in Afghanistan cannot mean just getting agreement between the two parties in the coalition Government; it is also about persuading the public and Parliament. What else can the Secretary of State say about his early assessment of the levels of non-combat troop involvement from the UK that will be needed in 2015 in Afghanistan?

Mr Hammond: I am pleased to hear the right hon. Gentleman reiterate the Opposition’s support for the Afghanistan strategy, as it is vital that we go forward

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with a broad measure of consensus. On the post-2014 troop levels, no decisions have yet been made about the level of UK troops in a training, support and advisory role. We will want to take that decision nearer to the time, when we have seen what other international security assistance force nations propose to do and when the level of international funding for the Afghan national security force has been determined and committed to, so that the scale and competence level of ANSF forces can be seen clearly.

Aerospace Sector

12. Andrew Stephenson (Pendle) (Con): What steps he is taking to support research and development of military capability in the aerospace sector. [86904]

The Parliamentary Under-Secretary of State for Defence (Peter Luff): I am committed to providing sustained support for science and technology across all aspects of defence. The Ministry of Defence has and will continue to invest in the aerospace sector, developing capability and undertaking research into new ideas. As part of that ongoing investment, I am pleased to announce today that we have placed a £40 million four-year research contract with BAE Systems to explore critical technologies and key systems integration for the UK’s next generation of highly capable air systems. The future combat air system research contract is expected to include significant benefits for the wider UK supply base.

Andrew Stephenson: I thank the Minister for that answer and, in particular, for the good news about BAE Systems. However, many companies based in Pendle and Lancashire are small and medium-sized enterprises. Will the Minister say a little more about what he is doing specifically to support SMEs in the aerospace sector?

Peter Luff: We have plans to do more to help SMEs and I had hoped to announce them in the White Paper that I was due to publish this month, but the pressure of Christmas business has delayed that until the new year. I can assure my hon. Friend that there will be good news in that for the SME sector and I also reiterate what I said in my original answer: the future combat air system contract will bring real benefits to small and medium-sized enterprises in the UK, including, I am sure, in my hon. Friend’s constituency.

Mr Barry Sheerman (Huddersfield) (Lab/Co-op): Does the Minister acknowledge that the British aerospace industry and sector are vital to British manufacturing and that the Department for Business, Innovation and Skills is at this moment conducting a rationalisation of procurement methods? Will he have an intelligent conversation with BIS about how procurement can be longer reaching and longer term in the defence industry?

Peter Luff: All my conversations with BIS are intelligent.

Armed Forces Pay

14. Diana Johnson (Kingston upon Hull North) (Lab): What assessment he has made of the advice from the Armed Forces Pay Review Body; and if he will make a statement. [86906]

Mr Speaker: Now for an intelligent answer, from whichever Minister.

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The Secretary of State for Defence (Mr Philip Hammond): Apologies for the delay, Mr Speaker. The Armed Forces Pay Review Body reports annually to my right hon. Friend the Prime Minister and to me. Its next report is expected in early 2012.

Diana Johnson: In the 2010 election, the Liberal Democrats promised to raise the pay of our lowest paid soldiers by as much as £6,000. The coalition is now ignoring the Armed Forces Pay Review Body, which will mean a real-terms cut, and the operational allowance, as I understand it, will benefit only a third of our armed forces personnel. Should not promises made to our armed forces be worth more than another abandoned Deputy Prime Minister election pledge?

Mr Hammond: I have already said in answer to an earlier question that we have doubled the operational allowance. That is critical to troops on operations and is hugely appreciated. We have increased the pay of the lowest paid members of the armed forces, even during the pay freeze, by a fixed £250, which is a more significant percentage for those on the lowest pay levels. The hon. Lady can pontificate all she likes from the Labour Benches, but the problem that we are dealing with and that we have to deal with to give our armed forces the stability and confidence they want for the future is based on the legacy of debt from and undeliverable promises made by the previous Administration.


15. Simon Hughes (Bermondsey and Old Southwark) (LD): What support is available at higher and further education level for young people who want to join the armed forces; and if he will make a statement. [86907]

The Parliamentary Under-Secretary of State for Defence (Mr Andrew Robathan): Further education support is provided to people who join the services, generally through apprenticeships which include nationally recognised vocational and academic qualifications. For those young people who wish to join the armed forces and have aspirations to continue in higher education, opportunities include the defence sixth-form college at Welbeck; bursaries and scholarships in secondary and further educational establishments; the defence technical officer and engineer undergraduate scheme; and cadetships for students reading degrees in specific professions, such as medicine or the law.

Simon Hughes: That is very welcome, but it is not as well known as it ought to be. Given that next month is the first cut-off date for people applying to go to university next year, will the Minister see if he can make sure that all those who have shown an interest in joining the armed services are told about the support opportunities open to them if they go into the services but also want to carry on in formal education?

Mr Robathan: I take the right hon. Gentleman’s point entirely and I agree with him, but those opportunities are quite well known. Some 41 years ago I took up a university cadetship at university, which was very welcome. People who wish to join the armed forces now know that they can get assistance at university and at other educational establishments.

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Jim Shannon (Strangford) (DUP): I, too, thank the Minister for his response. I am a member of the armed forces parliamentary scheme who has had the opportunity to attend many Army camps at locations across the United Kingdom. We were told that the MOD had a bursary scheme for those aged 16 to 18, and none of us was aware of that. Can the Minister assure us that it is his intention to raise awareness of the scheme across the whole of the United Kingdom, including Northern Ireland?

Mr Robathan: Certainly. We are not contemplating broadening the scheme to the armed forces parliamentary scheme, but bursaries do exist. I take the hon. Gentleman’s point on board, as I did the previous point. We should give the bursary scheme good publicity. However, I think he will find that there is considerable over-subscription to the bursary scheme, not under-subscription, because young people know about it and are a bit quicker than I am.

Mental Health (Veterans)

16. Stephen Phillips (Sleaford and North Hykeham) (Con): What support his Department provides to armed forces veterans with mental health disorders. [86908]

The Parliamentary Under-Secretary of State for Defence (Mr Andrew Robathan): Further—wrong one.

Mr Speaker: No. 16.

Mr Robathan: Yes. We will continue to work closely with the Department of Health on the mental health care of our former service personnel. That includes implementation of all the recommendations in the “Fighting Fit” report produced by my hon. Friend the Member for South West Wiltshire (Dr Murrison).

Mr Speaker: I am glad the right hon. Gentleman’s sense of humour has not deserted him.

Stephen Phillips: I am grateful to the Minister for that answer. Martin Pratt, about whom I wrote to my right hon. Friend in November, was a constituent of mine before his untimely death. He served his country in the SAS and his experiences were sufficiently traumatic that, long after he had left the Army, he suffered from severe post-traumatic stress disorder which ultimately led to alcoholism and the death of a much loved husband, father and grandfather. It seems clear that there is little understanding in the civilian medical community of such cases of later-life PTSD in military personnel, and very little joined-up thinking between agencies responsible for the care of veterans. I hope that my right hon. Friend can assure Martin’s family and the whole House that he will look into this case in detail with his colleagues in the Department of Health so that the lessons that plainly need to be learned are learned.

Mr Robathan: My hon. and learned Friend makes a good point. He will understand that it would be invidious of me to comment on an individual case, but he will understand that I have a particular regimental interest in Mr Pratt. This is a joint venture between the MOD and the Department of Health, and my hon. and learned

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Friend should have received—or he will receive it shortly; I have a copy here—a letter from the Minister of State, Department of Health, my right hon. Friend the Member for Chelmsford (Mr Burns), explaining what should have been available and what may not have taken place in this particular case. My hon. and learned Friend must see that letter himself. We are very concerned about this. We are pursuing the “Fighting Fit” report from my hon. Friend the Member for South West Wiltshire and we are putting in place many measures that will assist people who have PTSD and other mental health problems.

Mr Russell Brown (Dumfries and Galloway) (Lab): At the end of last year, the strategic defence and security review announced 35 mental health nurses. Experience shows us that many of the cases that have been diagnosed as either PTSD or veterans with mental health problems date back to the first Gulf war. How confident is the Minister that we will have enough appropriately qualified nurses, and is it the intention to be able to cover all parts of the country?

Mr Robathan: It certainly is the intention to cover all parts of the country. I think that the hon. Gentleman shares my concern that people with mental health problems who have been in the services and who have been affected by their service are given particular care by the Department of Health, assisted by the MOD, and we are determined that that should happen. The extra mental health nurses are being rolled out and I think that most are already in place. That is a Department of Health responsibility, but most, if not all, are already in place, and we certainly take this very seriously. I do not know whether the hon. Gentleman has visited the King’s centre for military health research, but I recommend that he does so and that he talks to Professor Wesseley—the right hon. Member for East Renfrewshire (Mr Murphy)will know him—who does an excellent job there on our behalf dealing with mental health.

Christmas (Family Support)

17. Oliver Colvile (Plymouth, Sutton and Devonport) (Con): What support his Department is providing to the families of service personnel during the Christmas period. [86909]

The Minister for the Armed Forces (Nick Harvey): We aim to provide the highest level of welfare support to the families of deployed service personnel throughout the year. In addition, local commanders are able to use the family welfare grant to support families with funding for gatherings, children's Christmas events, day trips, pantomimes and coffee mornings. For example, 20th Armoured Brigade has set aside some £16,000 for that purpose. Unit welfare staff will remain on hand to provide help and support throughout the Christmas period.

Oliver Colvile: Earlier today, the military wives choir, which is based in my constituency, released its “Wherever you are” single, which I for one very much hope will be the Christmas No. 1. Will my right hon. Friend be willing to join me in urging the Treasury to give the VAT proceeds to its nominated charities, the British Legion and the Soldiers, Sailors, Airmen and Families Association?

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Nick Harvey: I very much endorse the enthusiastic welcome that my hon. Friend has given the military wives choir, which comprises constituents both from his Plymouth constituency and my North Devon constituency. We wish it well with its “Wherever you are” single released today and hope that it will be the Christmas No. 1. Matters of VAT must be addressed to the Chancellor.

Mr Speaker: I am relieved that the Minister of State did not burst into song, but that may happen later in the day—who knows?

Topical Questions

T1. [86917] John Glen (Salisbury) (Con): If he will make a statement on his departmental responsibilities.

The Secretary of State for Defence (Mr Philip Hammond): My departmental responsibilities are to ensure that our country is properly defended, now and in the future, through the delivery of the military tasks for which the MOD is mandated; that our service personnel have the right equipment and training to allow them to succeed in the military tasks; and that we honour our armed forces covenant. In order to discharge those duties, I have a clear responsibility to ensure that the Department has a properly balanced budget and a force generation strategy and a defence equipment programme that are affordable and sustainable in the medium to long term.

I am deeply aware that our people are the greatest assets of the armed forces, and I am sure that all Members of the House will want to join me in wishing all of them, especially those who are away from home over the festive period, a happy and a safe Christmas.

John Glen: I thank my right hon. Friend for his answer. Will he update the House on the status of the service chiefs' review of force generation and sustainability, which among other things was looking at harmony guidelines? I am sure that my right hon. Friend will be aware that if he adopted the Navy’s harmony guidelines, he would secure a significant saving across the MOD.

Mr Hammond: The single service chiefs are reviewing force generation issues in the light of the proposed change structure of the armed forces. The issues around harmony are different in the three services, and it is right that the individual services develop harmony guidelines that are right for their conditions and allow them to operate within their single service budgets.

Mr Jim Murphy (East Renfrewshire) (Lab): The Minister with responsibility for veterans has confirmed the proposals to cut MOD police by 50%, which has been described by the Defence Police Federation as “irresponsible and ill thought out”. There will be real worries about the impact on the protection of munitions stores and barracks. Will he guarantee that there will be no cut in MOD police numbers at the most sensitive of bases, particularly Faslane and Coulport?

The Parliamentary Under-Secretary of State for Defence (Mr Andrew Robathan): Security, particularly of our nuclear installations, is absolutely at the top of our list of priorities, but that does not mean that we cannot organise things better, which is what we are looking at. May I just say to the right hon. Gentleman that we struggle with the huge black hole in the money that he left us?

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T2. [86918] Mr Peter Bone (Wellingborough) (Con): If there was a terrorist attack on this country and the Prime Minister was killed, what would be the Secretary of State’s role in co-ordinating a military response and who would be in charge of the country? Would it be the Deputy Prime Minister?

Mr Hammond: As you would expect, Mr Speaker, robust arrangements are in place for dealing with any such contingency, but I will not talk about them in the Chamber today.

Angus Robertson (Moray) (SNP): Last week the Russian aircraft carrier Admiral Kuznetsov and its support group were moored off the north-east coast of Scotland. Will the Secretary of State confirm that not a single fixed-wing UK maritime patrol aircraft was available and no appropriate naval vessels were able to deploy from a Scottish base because there are none in that category?

Mr Hammond: The hon. Gentleman rather narrowed the scope of his question at the end by saying “able to deploy from a Scottish base”. We operate the UK armed forces and our response is on a UK-wide basis. I will check the facts of the incident and write to him.

T3. [86919] Harriett Baldwin (West Worcestershire) (Con): Cyber-security is an integral part of the nation’s defences, so may I invite the new Defence Secretary to visit the wide range of cyber-security firms located in cyber valley in Malvern in my constituency?

The Parliamentary Under-Secretary of State for Defence (Peter Luff): The Secretary of State and I have just carved up our diaries and I, as the Minister responsible for industry, equipment and science, will be prepared to make the long and arduous journey from Mid Worcestershire to West Worcestershire to visit those firms, hopefully at an early date.

Paul Flynn (Newport West) (Lab): What steps is the Secretary of State taking to reduce tension between the west and Iran, as there is a possibility of a war between our two countries, the consequences of which would be unimaginable?

Mr Hammond: The Government’s policy remains one of both applying pressure and maintaining engagement with Iran in the sincere hope that the crisis can be resolved peacefully.

T4. [86920] Margot James (Stourbridge) (Con): May I sing in unison with my hon. Friend the Member for Plymouth, Sutton and Devonport (Oliver Colvile) in congratulating the military wives and crave your indulgence, Mr Speaker, on this festive occasion by presenting an advance copy of the disc, via my hon. Friend the Member for Devizes (Claire Perry) who is sitting in front of me, to the Secretary of State for his enjoyment on one of the long car journeys that I know he enjoys so much?

Mr Hammond: I am grateful to my hon. Friend. I had the great pleasure of meeting members of the military wives choir when they performed at Downing street a couple of weeks ago, and we wish them every success for a Christmas No. 1 next week.

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Dan Jarvis (Barnsley Central) (Lab): Does the Secretary of State believe that the utility of military force as an instrument of UK foreign policy is more relevant or less relevant than it was, say, 30 years ago, and how does he intend to reflect that in future UK defence policy?

Mr Hammond: That is a very deep but helpful question. The Government are clearly committed to integrating defence diplomacy with our wider diplomatic effort to ensure that the UK’s Government-wide objectives are best delivered through the use of all the assets available, including our defence assets, and my right hon. Friend the Foreign Secretary and I will publish our strategy for defence engagement in the new year.

T5. [86921] Simon Hughes (Bermondsey and Old Southwark) (LD): I warmly welcome the Prime Minister’s announcement today that he is setting up a Cabinet Committee to deal with all matters relating to the armed services and veterans. I ask that the Committee prioritises housing issues, which are referred to often, and that there is an indication of how colleagues in this House and members of the armed services and their families outside can give evidence to the Committee.

Mr Robathan: I thank the right hon. Gentleman for his question, because I think that the announcement shows that we are prioritising the needs of our service, particularly ex-service personnel. I am absolutely certain that housing will be at the top of the list of matters that are discussed. It is a Cabinet Committee and so will not be taking evidence, but I am sure that it will receive representations and submissions, which will be very welcome.

Alex Cunningham (Stockton North) (Lab): I am pleased that companies including Darchem Engineering in Stillington in my constituency still have contracts related to the new aircraft carriers, but with which of our partner nations’ carriers will the new carrier-variant aircraft be interoperable?

Peter Luff: One major gain of moving to the carrier-variant joint strike fighter is enhanced interoperability with our United States allies, in particular, but there will also be interoperability with the French. The change produces real opportunities for interoperability.

T6. [86922] Mary Macleod (Brentford and Isleworth) (Con): I have recently urged Hounslow council to review its banding criteria for council housing for ex-service personnel. What discussions has my right hon. Friend had with the Department for Communities and Local Government and the Minister for Housing and Local Government to ensure that there is provision for ex-service personnel, who have done so much for this country?

Mr Robathan: I am very pleased to receive that question from my hon. Friend. The Minister for Housing and Local Government, as she will know, has a committee—of which I am a member—that discusses those matters, and as I mentioned earlier he recently announced a consultation on priority for ex-service personnel on social housing lists. The community covenants that we are taking forward are specifically with local authorities,

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so that service personnel leaving the armed forces are given assistance and receive proper recognition in social housing, as elsewhere.

Mike Gapes (Ilford South) (Lab/Co-op): The previous Government established the St Malo agreement with France, and the previous Secretary of State for Defence took it further. Will the current Secretary of State have words with the Prime Minister to ensure that his current attitude to France does not damage our important programme of defence co-operation?

Mr Hammond: I can reassure the hon. Gentleman that the Prime Minister’s attitude is that we have a commonality of interests in securing strong defence in Europe, and that bilateral relationships between Britain and France will be mutually beneficial to both countries. We are advancing our defence co-operation with France and expect to conduct a defence summit in February.

T8. [86924] Andrew Stephenson (Pendle) (Con): I welcome the news that armed forces personnel will be used to aid security at the Olympics games, but will any of those returning from Afghanistan end up having their post-operational leave cancelled and, instead, be posted to Olympic duties?

Mr Hammond: Some of those returning from Afghanistan may at some point be involved in Olympic duties, but no one will lose their post-operational leave. Post-operational leave has to be scheduled anyway, and it will be scheduled around the requirements of the Olympic task.

Caroline Lucas (Brighton, Pavilion) (Green): May I press the Minister for more detailed figures on the capacity being built at Aldermaston for a possible new warhead? When will he announce the specific breakdown of costs associated with that and, in particular, with the Octans and Orchard programmes, and will he do so through a statement to the House, rather than by slipping it out in a written answer?

Peter Luff: I do not know how often one has to say this: no expenditure at the Atomic Weapons Establishment is being incurred to enable a new warhead; it is to sustain the security of the existing stockpile. I do wish the hon. Lady would get this into her head: no money is being spent on new warheads.

T9. [86925] Mr John Baron (Basildon and Billericay) (Con): The Secretary of State will understand the significance of the fact that only 3% of Afghan security forces are from the Pashtun south, particularly when it comes to how successful our handover will be in 2014. What progress is being made to improve the imbalance in ethnicities before our troops withdraw?

Mr Hammond: My hon. Friend is right to draw attention to that continuing issue. The Pashtun percentage in the ANSF is very much higher than 3%, but he is right that Pashtun recruits tend to be northern rather than southern. The ANSF has strategies to address that, and the situation is slowly improving, but it remains one of the important issues that has to be addressed if we are to create a stable and sustainable Afghan Government.

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Derek Twigg (Halton) (Lab): In the past week I have intervened in the case of a constituent who is being made redundant from the Army in a few weeks’ time, to ensure that he is able to get social housing and an educational place for his child. He had little help from the MOD, so will the Minister look again at what help is being given to those who are made redundant? Specifically, I have been told that education legislation does not prioritise those being made redundant, as it does those being given a new posting, and that is completely wrong.

Mr Robathan: I should be grateful if the hon. Gentleman wrote to me with the details of the case, which I will certainly take up. We remain committed to both social housing and educational benefits for those leaving the services, and I am not sure whether the situation to which he refers is correct, but I will pursue it if he takes it up with me.

Stephen Gilbert (St Austell and Newquay) (LD): On Friday evening, I visited 781 squadron of the Air Training Corps, based in Newquay, and I saw the great work done there. What plans does the Minister have to develop and further support our cadet forces?

Mr Robathan: We absolutely believe in the value of our cadet and youth organisations, and not just the armed forces cadet organisations. The Air Training Corps does fantastic work. We are looking to expand, if we can, cadet organisations, particularly the combined cadet forces in all schools. However, the cost is quite large and we are short of money. Nevertheless, we are looking into the matter at the moment—indeed, as I speak.

Tom Greatrex (Rutherglen and Hamilton West) (Lab/Co-op): In his earlier reply, the Minister referred to the touching issue of homelessness. I spent the weekend with soldiers off our streets in my constituency; many homeless veterans are slipping through the net. What work will the Minister be doing, including with the devolved Administrations, to ensure that veterans on the streets are helped to adjust to civilian life again?

Mr Robathan: That is, of course, a matter for the devolved Administrations but we are in close contact with them, particularly over the covenant. The Scottish and Welsh devolved Administrations have accepted the covenant in full—I think the Northern Ireland devolved Administration have as well, although there are slight differences there. We certainly wish to see our ex-service personnel receive proper housing support in Wales, Scotland and Northern Ireland as well as in England. If the hon. Gentleman has a particular case in mind, I would be grateful if he wrote to me.

Mark Lancaster (Milton Keynes North) (Con): I remind the House of my interest. Will the Minister confirm that no distinction will be made between “regular” and “reserve” when it comes to the qualification criteria for the Queen’s diamond jubilee medal?

Mr Robathan: My hon. Friend speaks with some passion, and he has spoken to me about the issue before. I can confirm that reservist personnel will receive the diamond jubilee medal if they qualify. I believe that we have made sure that the anomaly that took place at the Queen’s golden jubilee will not apply next year.

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Mr David Hanson (Delyn) (Lab): On service pay, the Secretary of State for Defence has again prayed in aid the operational allowance. For my benefit, will he confirm how many, in percentage terms, of our service personnel will receive that operational allowance over the next three years?

Mr Hammond: I am doing the maths on my feet; there are about 9,500 people in Afghanistan on a five-cycle rotation, so the answer is about 45,000 or 47,000 of our armed forces personnel.

Mr Dominic Raab (Esher and Walton) (Con): Following the failure of the congressional committee to agree savings as part of the deal to raise the debt ceiling, the US military faces automatic spending cuts of up to $500 billion from 2013. What reassurances have Ministers sought specifically about the impact that that may have on UK-US co-operation in intelligence and counter-terrorism?

Mr Hammond: I assure my hon. Friend that we are having regular discussions with US counterparts; I am going to Washington immediately after the new year holiday. Whatever happens, our strong security and intelligence relationship with the US will continue. It benefits both parties and is at the very heart of our strategy.

Mr Iain Wright (Hartlepool) (Lab): On Friday, I attended a ceremony to commemorate the 97th anniversary of the bombardment of the Hartlepools. It was the first

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direct attack on the mainland for centuries, and 118 people, including 37 children, were killed. Given the national and local significance of the event, what steps will the Government put in place to commemorate the centenary in three years’ time?

Mr Robathan: I pay tribute to those of my grandfather’s generation who did so much in the first world war—what they did is almost beyond our ken. The issue is to do with history, and for that reason the Department for Culture, Media and Sport leads on it. However, as the hon. Gentleman may know, my hon. Friend the Member for South West Wiltshire (Dr Murrison) has been appointed the special representative on the first world war and he will deal with all the commemorations. He will co-ordinate input from the Ministry of Defence, the DCMS and the Imperial War museum for the nation as we approach the centenaries of the 1914 to 1918 period.

Elizabeth Truss (South West Norfolk) (Con): Given the sterling performance of RAF Marham servicemen in Libya and the strategic and economic advantages of the base, when a decision is made in the spring about basing for the joint strike fighter, will RAF Marham not be the ideal candidate?

Mr Hammond: I give my hon. Friend full marks for her persistence on behalf of her constituency interest, but I have to tell her that it is far too early to make a decision about where the joint strike fighter will be based.

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Foreign National Offenders

3.34 pm

Chris Bryant (Rhondda) (Lab) (Urgent Question): To ask the Secretary of State if he will make a statement on the Home Office report on the number of foreign national offenders who have committed crimes on release before being deported.

The Minister for Immigration (Damian Green): This Government believe that foreign criminals should be returned to their home country at the earliest opportunity, and the UK Border Agency always seeks to remove them. Last year we removed more than 5,000 foreign criminals, 43% by the end of their prison sentence. Where there are barriers to early removal, the agency seeks to detain them to protect the public. However, the agency has to operate within the law. It must release foreign offenders when ordered to do so by the courts and release low-risk offenders where there is no realistic prospect of removal within a reasonable period. When this happens, the agency works closely with the police and the National Offender Management Service to reduce the risk of reoffending. Deportation action continues in all cases.

There are 3,940 foreign offenders in the community, 90% of whom were released by the courts. Deportation can be delayed for many reasons, including challenges under human rights legislation, the situation in the offender’s home country, and lack of co-operation by the offender or his home Government in getting essential travel documents. We are doing everything in our power to increase the number and speed of removals. We now start deportation action 18 months before the end of the sentence to speed up the deportation process. We are chartering flights to remove foreign offenders to many more long-haul and challenging destinations. We will change the immigration rules to cut abuse of the Human Rights Act 1998. We will open more foreign national-only prisons, and we will be able to remove more European offenders through the prisoner transfer agreement. The House can therefore see that we have already taken significant action to address this long-standing problem and intend to take further action in the months ahead which I hope Members on both sides of the House will support.

Chris Bryant: Well, quite the opposite, in fact. The trouble is that the rhetoric does not fit with the facts. We learned this weekend that a report has been sitting in the Minister’s hands for weeks and yet he had absolutely no plans to publish it. When was he going to reveal the true figures to this House? Will he publish the report, in full, this afternoon? Will he confirm that according to the report by the independent chief inspector of the UK Border Agency, John Vine, there were 3,775 foreign national offenders awaiting deportation in May this year, and that according to the secret internal Home Office report in his hands, that figure had leapt by September by nearly 500 to 4,238—higher than the number that the Minister just gave us? That equates to seven foreign criminals in every constituency awaiting deportation. Is not that an increase of 12.5% in just four months? Can the Minister tell us where these people are? To be precise, can the Home Office be precise about the whereabouts of every single one of

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these people? If not, then contrary to what the Minister says, he has absolutely no means of deporting any one of them.

Will the Minister confirm that the number of foreign national offenders deported has actually fallen this year—fallen, not risen—by more than 700, an astounding figure? Will he confirm that the number of staff at the UK Border Agency is being cut by 6,500? Will he confirm that foreign criminals who left prison this year and have not yet been deported have been arrested and charged with violent crimes? If so, how many; and does that include murder, kidnapping and violence to the person?

So far on the Minister’s watch, we have seen numbers of staff at the UK Border Agency going down, numbers of foreign national offenders deported going down, and numbers of foreign criminals in our midst going up. Does the Minister not realise that that is the wrong way round? I urge him to get a grip as soon as possible, to publish the figures, to publish his secret report, and to put a real plan in place to ensure that more, not fewer, foreign criminals are deported: fewer words, more action.

Damian Green: The problem for the hon. Gentleman is that he should think carefully before asking urgent questions about newspaper reports that he has not read very carefully. All the figures in the newspaper report that he is relying on start not in May 2010 but in March 2009, so they cover a large period when his Government were in power. He appears to have forgotten that under his Government foreign national prisoners were freed on a routine basis without even being considered for deportation.. Indeed, let me give him some figures to show what has changed for the better.

Between 1999 and 2006, 1,013 foreign national offenders were released from prison without consideration for deportation. In 2009-10 the figure was 64 and in 2010-11 it was 28. Over the past two years, all 92 have been considered for deportation and 10 have already been removed—a stark contrast with the complete failure under the previous Government.

Chris Bryant: Seven hundred fewer.

Damian Green: The hon. Gentleman asked about violent criminals. Again, I tell him in all friendliness that he should check his facts before he comes to the Dispatch Box. The report at the weekend mentioned three cases involving murder. I have checked the facts. One of those people was charged and acquitted, so was not a murderer at all. Of the other two, one was not only released from immigration detention under the previous Government, but committed the murder for which he was convicted under the previous Government. That is not the previous Government’s fault. People who commit murder commit a crime on their own responsibility. However, the hon. Gentleman should not attempt to distort facts and figures to serve a political purpose, particularly when he is on such weak ground.

Of the 90% of people who have been released by the courts, 60% were released under human rights legislation. We will change the immigration laws to stop the abuse of article 8 of the European convention on human rights.

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Chris Bryant: Seven hundred fewer.

Damian Green: Having failed with his question, the hon. Gentleman is now trying again from a sedentary position, non-stop. I invite him to lead his party in supporting our legislation, when it is brought forward, to change the Human Rights Act so that it better reflects the British people’s view of what human rights should be.

May I correct one canard that the hon. Gentleman has repeated a lot, which is that this Government propose to cut the number of staff at the UKBA by 6,500? It has been a matter of a public document for more than a year that in the current spending review period, we will cut the number by 5,200. Again, I gently tell him to stop using the 6,500 figure, because the first 1,300 of those people were planned to be cut by the previous Labour Government.

Mark Field (Cities of London and Westminster) (Con): The general public will find it rather unedifying to watch this blame game, when what they want is to be protected from dangerous foreign criminals who should have been kicked out of the country. Will the Minister tell us why, in his 18-month tenure, there has not already been a move to alter the human rights legislation to which he referred? What impact does he think that legislation has had on the severity of this problem, which clearly has not come about since May 2010 but has been around for some years?

Damian Green: The problem has indeed been around for some years. As I said in my introductory remarks, we have taken a number of measures to make the system more effective, the most important of which was to ensure that every foreign national offender who is in prison starts having their deportation considered 18 months before the end of their sentence. That is the most effective way to ensure that we do not have hundreds of people or, as in some cases, more than a thousand people falling through the cracks.

My hon. Friend is right about human rights legislation. I apologise if we have been too slow for his taste in bringing reforms forward. As he will know, we produced a consultation document some months ago suggesting changes to human rights legislation. Given the tenor of the exchanges so far, I expect our changes to receive support from both sides of the House.

Keith Vaz (Leicester East) (Lab): The Minister will know that the Home Affairs Committee’s last report on the UKBA emphasised that the crucial relationship in respect of foreign national prisoners was that between the Prison Service and the UKBA. Fifty per cent. of such people have been waiting for up to two years for removal. The Minister has used the 18 month figure several times. Could we not start looking at deportation the moment the prisoner enters the prison system?

Damian Green: Obviously, the practical point is that it depends on the length of the sentence. As the right hon. Gentleman knows, if somebody is sentenced to more than a year they are up for deportation at the end of their sentence, so what he suggests effectively happens. I am grateful to him for both the Committee’s thoughtful reports and the tone of his question, which gets to the heart of the matter. There has to be better co-ordination

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between the Prison Service and the UKBA. We have taken significant steps towards achieving that, and I am sure that more steps need to be taken in future.

Tony Baldry (Banbury) (Con): In many cases the trial judge makes an order for deportation as part of the sentence, but a significant number of offenders destroy their passports and paperwork in an attempt to frustrate deportation. Would two things be possible? First, the trial judge could be invited to make a finding of fact at the time of sentencing about the citizenship of the offender. Secondly, to follow on from the question asked by the Chair of the Home Affairs Committee, notice could be served on the offender’s high commission or embassy indicating that on completion of the sentence the individual would be deported to the country concerned, and inviting the full co-operation of that embassy or high commission.

Damian Green: I am grateful to my hon. Friend for those helpful and practical suggestions, some of which the UKBA already attempts to operate. He will be aware that most countries co-operate with the process entirely and are extremely helpful but, sadly, some countries are much less helpful. One measure that we are taking to ensure that the situation improves in the years ahead, as it needs to, is persuading Governments who are less keen than others on helping us with returns to be more helpful and co-operative about accepting their nationals back.

Frank Dobson (Holborn and St Pancras) (Lab): When a prisoner is sentenced to imprisonment and deportation, why do we not just deport them straight away and save the expense of sending them to jail?

Damian Green: Successive Home Secretaries and Immigration Ministers have grappled with that suggestion. One problem is that we would need to know that offenders would be sentenced to some kind of equivalent term in their own country. Otherwise, we would have the terrible situation that somebody could commit a serious crime in this country in the full knowledge that the worst thing that would happen to them if they were caught and convicted would be that they were returned home free to their own country. I cannot believe that the right hon. Gentleman wants that to happen. That is why successive Governments have not taken that path.

Charlie Elphicke (Dover) (Con): I have seen people in the Dover removal centre who have been there for three years, being held in stasis after having served their sentence. May I urge the Minister to take all measures possible to get such people out of the system as quickly as possible? It seems basically unfair that they should be incarcerated when they have served their sentence.

Damian Green: I take my hon. Friend’s point, and he is assiduous in his work on the conditions at the removal centre in his constituency. I can assure him that this Government—like the previous Government, to be fair—will keep people in detention after their prison sentence has finished only if they are thought to pose a danger to the wider community. I am sure he will appreciate that if such people cannot be deported immediately for the reasons that we have been discussing, but they pose a danger to the British public, the best place for them is in immigration detention.

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Mr David Winnick (Walsall North) (Lab): Is it not clear that the reason why the Home Secretary is not here to make the statement herself is that her Department is in such a shambles over matters relating to immigration control? Can the message be sent to her loudly and clearly that it is time she got a grip on her Department?

Damian Green: The hon. Gentleman has been here long enough to know that if the shadow Minister for Immigration asks an urgent question, it is answered by the Minister for Immigration. That is the way things work.

Mr Peter Bone (Wellingborough) (Con): Would not the British Government prefer foreign nationals who come here, commit a crime and are put in prison to be sent home to their country early, rather than be kept in prison and let out again to commit further crimes?

Damian Green: As I explained to the right hon. Member for Holborn and St Pancras (Frank Dobson), it seems slightly perverse for anyone to want to send out a signal that if someone commits a serious crime in Britain, uniquely in the world they will get off with either no sentence or a very short one. We want people to know that if they commit a crime in this country, they will be caught and convicted. If they are convicted, they should serve a proper sentence. Of course it would be preferable if they could serve some of that sentence in their own country, and we have negotiated arrangements to that end with certain countries.

Malcolm Wicks (Croydon North) (Lab): Following the murder of one of my constituents, and following the murderer’s being sent to prison, it was put to me by other constituents that this man—the murderer—might be a foreign national. I did not know whether that was true, so I wrote to ask the Minister. The Minister replied that he could not tell me and that the only way I could find out was to seek the permission of the murderer—no doubt because of human rights. Is not the Minister’s reply, and this situation generally, total nonsense? Sometimes it is the Member of Parliament who can track such individuals, to ensure that the Home Office is doing its duty.

Damian Green: I rather agree with the right hon. Gentleman. The amount of data protection that Ministers are required to observe may well seem absurd, and I can reassure him that I found it absurd as well. Indeed, those sorts of messages go out to Members of Parliament much less frequently than in the past, because I have changed the system.

Andrew Bridgen (North West Leicestershire) (Con): Will the Minister share with the House what specific steps he will take to prevent the misuse of human rights law from stopping the deportation of dangerous foreign criminals?

Damian Green: As my hon. Friend will know, we produced a consultation document a few months ago. He will have to wait for the final verdict on the deliberations, but he will be as aware as I am that the pleading of human rights—in particular family rights, under article 8 of the European convention on human rights—has been distorted beyond all measure, principally by courts

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in this country in this instance, rather than by the European Court. We want to send much clearer guidance to our judges, so that they know where the balance should lie between the rights of the individual and the rights of the community, because that balance has got completely out of kilter.

Cathy Jamieson (Kilmarnock and Loudoun) (Lab/Co-op): Can the Minister say how many prisoners who are due to be deported are currently detained in Scottish prisons? Also, when did he last speak to the Cabinet Secretary for Justice in the Scottish Government to ensure that this matter is dealt with as quickly as possible?

Damian Green: I speak to the Justice Secretary in the Scottish Government on a regular basis about various issues, because of the devolved powers in this area. I am afraid I do not have the exact figure that the hon. Lady asks for to hand, but I will write to her with it.

Mr Philip Hollobone (Kettering) (Con): Will the Minister name and shame the three countries from which most of the foreign nationals in question come and that are being the most awkward in facilitating their return to secure detention in their own countries?

Damian Green: Two were named in the weekend press, but they were not, in fact, the most awkward. Awkwardness is difficult to define. The two countries named were Jamaica and Nigeria, whose nationals account for most such prisoners. However, I should pay tribute to both countries’ Governments, who are considerably more co-operative now than they were. I visited Nigeria recently, where I visited a prison, part of which had been built by the British taxpayer specifically to make it easier for us to return Nigerian national prisoners to Nigeria. That is the kind of practical action we are taking.

Mr John Spellar (Warley) (Lab): Did not the Minister’s reply to my right hon. Friend the Member for Croydon North (Malcolm Wicks) demonstrate exactly how he is failing in this job? He is just the mouthpiece for his civil servants, who are still pumping out the same old line. However, perhaps he can help us on a couple of issues on which he did not reply to the shadow Minister. Does he have a clue where the various prisoners are or how many are in the west midlands, for example?

Damian Green: At this moment it is quite difficult to say where every individual in this country is, or where any sub-set of those individuals is, because they may be travelling around. We put strict reporting arrangements on all who are released—both those released by the courts and the 10% released by the UKBA. We use electronic tagging and monitor them carefully so that we know where they are. That is why, as an example, we are in touch with all 92 individuals who were released without being considered for deportation over the last two years. We are pursuing deportation for all of them, and 10 have already been removed.

Andrew Stephenson (Pendle) (Con): On 7 November, giving an answer in the House, the Minister said that there were 162 successful appeals by foreign criminals against deportation in October to December last year, of which 99 were allowed on article 8 grounds. Does the Minister agree that it is a bit rich of the

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Opposition, who introduced the Human Rights Act and who now oppose its reform, to bring this matter up today?

Damian Green: I am always willing to welcome repentant sinners, so if Labour Members were to support our reform of human rights legislation, I am sure that we would be delighted.

Tony Lloyd (Manchester Central) (Lab): Notwithstanding the Minister’s answers on the reform of the Human Rights Act, Britain has a good reputation historically for not sending people back if there is a reasonable chance that they will face torture or death. Will he guarantee that that will still be the benchmark against which we will be measured?

Damian Green: Of course that will remain the law. The hon. Gentleman takes a close interest in these matters, and I am sure that he will recognise that there is something absurd about a situation in which “human rights” has become a boo phrase, and in which many people in this country regard human rights as something that gets in the way of justice. That is nonsense—

Chris Bryant: That is because of your speeches.

Damian Green: If the hon. Member for Rhondda (Chris Bryant) believes that, he really is completely out of touch with reality.

Mr Dominic Raab (Esher and Walton) (Con): I welcome the Home Office’s review of article 8 and the right to family life. Successful article 8 challenges to deportations are running at about 400 a year, and they include that of the man with no dependants who was convicted of killing my constituent, Bishal Gurung. Will the Minister tell the House when the Home Office review will report, and is he mindful of the evidence from the Lord Chief Justice and the President of the Supreme Court that changes of this nature would require primary legislation?

Damian Green: Obviously, we are mindful of all the representations we have received on the consultation. We will come to a conclusion within the next few months. My hon. Friend’s point is clearly a serious one,

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and we are looking carefully into the fastest and most effective method of achieving what I hope we all want to achieve.

Nic Dakin (Scunthorpe) (Lab): The Home Office’s quarterly figures for the removal of foreign criminals from the UK show that, in the first quarter of 2009, the figures were consistently between 1,300 and 1,400, but that they fell to 936 and 1,056 in the last two quarters. Can the Minister explain that change in the numbers?

Damian Green: Some of the reasons relate to the fact that fewer people are coming into the system. Also, there is an increasing cohort of people who have been here a long time and who are therefore able to have lengthy legal processes. All the points that I have already mentioned are used by individuals to delay the process.

Steve McCabe (Birmingham, Selly Oak) (Lab): Does the Minister know how many released foreign prisoners have had to be rearrested for the commission of sexual offences?

Damian Green: I do not know that figure off the top of my head, but if I find it, I will certainly pass it to the hon. Gentleman and put it in the Library of the House.

Kevin Brennan (Cardiff West) (Lab): The figures seem to show a sudden drop in the last two quarters, down from 1,339 to 936 and then barely above 1,000. There seems to be something going on that is more significant than a long-term trend. Will the Minister look again at why the number of foreign national offenders being removed seems to have dropped off a cliff edge in the past six months?

Damian Green: I do not accept that characterisation. Indeed, as the hon. Gentleman says, the figure went down and it has now gone back up again. As I explained to the hon. Member for Scunthorpe (Nic Dakin), there are a number of reasons for the change, some of which are precisely related to the changes that we have introduced and will introduce to stop people using and abusing the legal system to enable them to stay in this country when they have no right to do so.

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Banking Commission Report

4.58 pm

The Chancellor of the Exchequer (Mr George Osborne): The Government are proposing the most far-reaching reforms of British banking in our modern history. Our objective is to make sure that what happened in Britain never happens again, that taxpayers are protected and that customers get a better service. Last year, the Business Secretary and I set up the Independent Commission on Banking to look at what has been called the British dilemma—that is, how Britain can be home to one of the world’s leading financial centres without exposing British taxpayers to the massive costs of those banks failing.

In the years leading up to the financial crisis, a failure of regulation contributed to the build-up of a debt-fuelled boom. Banks borrowed too much and took on risks they did not understand. When the bubble burst, these banks turned out to be too big to fail, and the last Government had to spend billions of pounds bailing them out. Of course, major financial institutions in other countries were bailed out by their taxpayers, but the British bail-outs were on a different scale. The Royal Bank of Scotland bail-out was the biggest in the world. The recent report of the Financial Services Authority on the failure of RBS attributed that to

“poor decisions made by the RBS management and Board”

against a backdrop of a regulatory regime that failed to stop them. The politicians responsible are named in the report.

This Government are determined to do better at protecting British taxpayers from the cost of failing banks, while at the same time acknowledging the importance of the financial sector to our country. Britain should remain home to one of the world’s leading financial centres and the home of global banks, but the strength of this industry is also a potential weakness to the economy if not properly regulated.

The sector supports nearly 1.4 million jobs—not just in the City of London but across the whole of the UK. The balance-sheet of our banking system is close to 500% of our gross domestic product, compared to 100% in the US and 300% in Germany and France. So while a European and international regulatory response to the crisis is important, we cannot rely on this response alone to make our banking system safe. We in this Parliament have to take action—and under this Government, we are.

We are putting the Bank of England back in charge of prudential regulation; we have created the Financial Policy Committee to look at risks across the financial system; and I welcome today’s report from the Joint Committee on the draft Financial Services Bill. I wanted proper pre-legislative scrutiny. That has happened, and we will respond in the new year so that we improve the legislation. We have also introduced a permanent bank levy on wholesale funding and we have introduced the toughest and most transparent pay regime of any major financial centre in the world. We also need to address the structure of our banks, however. That is why the coalition Government set up the Independent Commission on Banking. I again want to thank Sir John Vickers and

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the other members of the commission—Clare Spottiswoode, Martin Taylor, Bill Winters and Martin Wolf—for their impressive report.

The report made three main recommendations: first, that everyday high-street banking services should be separated from wholesale and investment banking activities, and that this be done via a ring fence; secondly, that banks be required to have bigger cushions to absorb losses without recourse to the taxpayer; and thirdly, that competition in the banking sector be strengthened by increasing the number of banks on the high street and the power of customers to switch accounts. When the final report was published in September, I made it clear that I welcomed these recommendations in principle and would return to the House by the end of the year. Today, I fulfil that commitment. Let me set out in detail how the Government plan to respond, and invite further views before we publish a White Paper next spring.

First, the Government will separate retail and investment banking through a ring fence. It is important to know that this ring fence will not prevent banks from failing, but it does mean that if banks get into trouble, those elements of the banking system that are vital for families, businesses and for the whole economy can continue without resort to the taxpayer, so the following will be in newly ring-fenced banks: the deposits of individuals and their overdrafts, and the deposits and overdrafts of small and medium-sized businesses. They will all be kept separate from riskier wholesale and investment banking, which will have to be outside the ring fence. Larger corporate deposits and lending and private banking can be either in the ring fence or outside. The ring-fenced bank will be legally and operationally independent; it will be able to finance itself independently and have its own board; and there will be limits on the amount it can lend to the rest of the group. The commission’s interim report proposed a de minimis exemption for small banks that were clearly not systemic, and we invite opinion on whether to proceed with that. Our objective is clear. We want to separate high-street banking from investment banking to protect the British economy, protect British taxpayers and make sure that nothing is too big to fail.

Secondly, we will make sure that banks have bigger cushions, so they are better able to withstand losses. The international Basel III requirement, which the UK was instrumental in negotiating, requires banks to hold minimum equity capital of 7%, and there is a top-up for systemically important banks. We will go further. Large ring-fenced retail banks will be required to hold equity capital of at least 10%, and there will also be a minimum requirement for the loss-absorbing capacity of big banks of at least 17%. This requirement will apply to the UK operations of British banks, and will also be applied to the non-UK operations of UK-headquartered banks unless they can demonstrate that they do not pose a threat to the UK taxpayer.

I can also confirm that the Government will introduce the principle of depositor preference: in other words, the principle that unsecured lenders to banks, who are better placed to monitor the risks that banks are taking on, should have to take losses ahead of ordinary depositors. We seek further views on the best way to implement this principle. This comes on top of the guaranteed protection offered by the Financial Services Compensation Scheme, which covers 100% of eligible deposits up to £85, 000.

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Those proposals on loss absorbency will also strengthen the European single market. One of the greatest distortions to the single market in banking is the perceived implicit taxpayer guarantee for all European banks. Through these proposals, the UK is setting out a plan to remove that distortion for UK banks. The European Commission has indicated that it plans to consider what it can do to reconcile it at EU level. I welcome that, and the UK will engage actively in the debate.

This House and other member states have objected to the European Commission's proposals to impose maximum standards for bank capital. These proposals undermine efforts that we and others are making to improve financial stability and the single market, and bodies such as the International Monetary Fund believe that they also water down the international Basel III agreement, giving exemptions to globally active banks in certain European countries. Along with others, we will seek changes to ensure that the EU faithfully implements international agreements.

Thirdly, the Government will take action to increase competition in the banking sector. As a result of the disappearance of banks such as Bradford & Bingley and the last Government’s decision on the merger of Lloyds and HBOS, the banking sector is dominated by a handful of large banks. Last year, just four banks took 70% of the market share. We need new banks to enter the market and provide consumers and businesses with more choice. Last month the Government announced the sale of Northern Rock to Virgin Money, which creates a new competitor in our retail banking sector. In the coalition agreement we made it clear that we wished to foster diversity in financial services, including the promotion of mutuals. We welcome last week's announcement that Lloyds has identified the Co-op as preferred bidder for the divestment of more than 600 branches, which will create a strong challenger in the high street.

We will also make it easier for people to switch their current accounts. This recommendation from the Commission has received less attention from the media, but could be of huge benefit to millions of customers. The idea is that individuals and small businesses can switch to another bank within seven days, and all the direct debits and credits will be switched for them at no cost. The Government have secured the banking industry's agreement that it will implement these proposals by September 2013.

We will support the Treasury Committee's proposal to bring the Payments Council within the scope of regulation, and I can confirm that our financial services legislation next year will specify that one of the objectives of the Financial Conduct Authority is to promote effective competition in the interests of consumers. A new statutory competition remit will provide the FCA with a clear mandate for swifter, more effective action to address competition problems in financial services. Within months of the ICB report, legislation will be introduced to bring the change into force.

That brings me to timing. Some have questioned whether the Government will seek to delay implementation of these reforms—such questions come from people who never even contemplated reform when they were in office. In fact, the reverse is true. On the advice of Sir John Vickers and others, I will introduce separate legislation to implement the ring fence. The Government

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intend implementation to proceed in stages, with the final changes relating to loss absorbency fully completed by the beginning of 2019 in line with the Basel agreement, but I can confirm that primary and secondary legislation relating to the ring fence will be completed by the end of this Parliament in May 2015, and that banks will be expected to comply as soon as practically possible thereafter. The Government will work with the banks to develop a reasonable transition timetable.

Of course, there are both costs and benefits to these reforms. The Government estimate the total costs to UK banks to be between £3.5 billion and £8 billion, broadly in line with the commission’s estimate. Much of this reflects the cost to them of removing the subsidy that comes from any perceived implicit taxpayer guarantee, which is precisely what we intend. The cost to GDP is estimated by the Government at just £0.8 billion to £1.8 billion, slightly lower than the commission’s estimate. These are far outweighed by the benefits of the ICB’s recommendations. Even a relatively modest reduction in the likelihood or impact of future financial crises would yield an incremental economic benefit of £9.5 billion per year, such is the cost of financial crises to the economy. Since the wholesale arms of non-UK banks would be unaffected by these reforms and the principal recommendations relate to UK retail banking, the competitiveness of the City of London as a location for international banking will not be affected.

We are fixing the banking system to protect taxpayers in the future, but we also need to clear up the mistakes of the past. I have already mentioned Northern Rock and Lloyds, but the biggest call on the taxpayer was the bail-out of RBS. The Financial Services Authority’s recent report was a damning indictment of all that went wrong in this crisis, and those responsible are clearly identified in it. We need to deal with the mess they created. Despite promises from the previous Government that taxpayers would profit from the RBS bail-out, the Government’s shareholding is now worth around £27 billion less.

We are already reforming the regulatory structures that allowed these catastrophic failures to occur. Bonuses are a fraction of what they were four years ago. Early this year we placed a limit of £2,000 on cash bonuses for RBS and Lloyds. We have made it very clear that the bonus pool next year must be lower again, and more transparent. We are also clear that, at a time like this, the Financial Policy Committee’s advice should be followed: bank earnings should be used to build capital levels, not pay out large bonuses.

RBS itself has also made significant changes since 2008, including reducing the size of its investment bank by half, but I believe RBS needs to go further, and the management agree. We are the largest shareholders. Let me set out our view. RBS has already announced that it will further shift its business strategy towards its personal and SME customers and its corporate banking business which serves UK and international companies. We believe RBS’s future is as a major UK bank, with the majority of its business in the UK and in personal, SME and corporate banking. Investment banking will continue to support RBS’s corporate lending business, but it will make further significant reductions in the investment bank, scaling back riskier activities that are heavy users of capital or funding. RBS should emerge a stronger,

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safer bank able to maintain lending to businesses and customers, and which in time can be returned to full private sector ownership.

The British people are angry about what happened in our banks, and angry at the politicians who let it happen. This coalition Government see two parties working together to clear up the mess of the past and to create a banking system that protects taxpayers and serves customers better. Today we present the most far-reaching changes to banking in our modern history so that we can build an economy that works for everyone. I commend this statement to the House.

Ed Balls (Morley and Outwood) (Lab/Co-op): Let me start by thanking the Chancellor of the Exchequer for advance notice of his intention to give a statement but, as with the autumn statement, it is deeply disappointing that the statement, and the 75-page document, arrived with us only eight minutes before the Chancellor entered the House of Commons. One has to ask: do the Chancellor and the Business Secretary have something to hide?

I have a number of questions for the Chancellor. We have not had time to read the report so I hope he will make an effort to answer our questions today, but let me thank him for agreeing, at least in part, to our recommendation back in September that he produce an implementation plan for the Vickers commission by the end of the year. It is vital that the Government now implement these important banking reforms without foot-dragging or back-sliding or watering them down.

So will the Chancellor now agree to our second request, also made in September, and ask the Vickers commission to come back in 12 months’ time and publish an independent report on the progress that has been made in implementing its report?

Labour Members are determined to play their part in implementing these proposals in, as far as is possible, a cross-party spirit—taxpayers, customers and businesses, angry at banking recklessness which forced a multi-billion pound bail-out, will expect nothing less. We have apologised for the part that the last Government played in this global regulatory failure. In that same cross-party spirit, perhaps the Chancellor would like to take this opportunity to apologise too: for the role his party played in opposition, and he played as shadow Chancellor, in complaining of “too much regulation”, and for the then Leader of the Opposition calling, as late as spring 2008, for “lower taxes” and “less regulation” for the City. We all made mistakes and perhaps this Chancellor, who opposed financial regulation legislation, who opposed the nationalisation of Northern Rock, RBS and Lloyds, and who opposed Bank of England independence, should show a little more humility as well. If he does, I will, in a cross-party spirit, commend him for that.

I join the Chancellor in commending the excellent work of the pre-legislative scrutiny Committee on the draft Bill and of the Treasury Committee. We will study those reports in detail, and we will approach the Bill and the Chancellor’s reforms to the machinery of financial regulation with an open mind. However, like those Committees, we are concerned that his reforms could make decision making both more complicated and less transparent in future. There is a serious and still unanswered

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question as to whether there is sufficient accountability to match the massive new powers that the Chancellor plans to delegate to the Bank of England. His so-called “simplification” actually increases the number of deputy governors of the Bank of England from two to three.

Our fear is that he is replacing the tripartite system with a de facto quartet system—the Treasury, the MPC, the FPC and the PRA—with the FCA on the outside. Given that complexity—I can explain the acronyms; they are all different autonomous agencies in the Bank of England—can the Chancellor tell the House why he has still not published the promised memorandum of understanding between the Treasury and the different Bank agencies? I hope it is obvious to the Chancellor that the memorandum of understanding must specify that in any crisis the Chancellor must always hear the direct advice of all three deputy governors—alongside that of the Governor—most importantly that of the deputy governor who is also the chief executive of the independent regulator responsible for ensuring the stability of the banking system. In my view, that is essential if this new, more complex quartet system of financial regulation is to work in an effective and transparent way.

In responding to the Vickers commission, Labour set out three tests that will guide our view of banking reform—let me deal with them in turn. First, to protect taxpayers, we, too, support the commission’s radical reforms on ring-fencing and regulatory standards. Rather than delay, could the Chancellor explain why he is not at least making a start with reforms in the current financial regulation Bill, which will come before the House next year? Can he clarify to the House whether it is his intention to implement, in full, the Vickers recommendation on depositor preference? On the requirement on the biggest UK global banks to have the ability to absorb losses equivalent to between 17% and 20% of risk-weighted assets, can he explain why he is deciding to water down the Vickers proposal by not applying this rule to their full global balance sheets? Is he sure that this will not leave the taxpayer exposed?

The Business Secretary told the BBC yesterday that the Vickers report was being implemented in full, but what we have here is not an implementation report; it is a consultation paper before a White Paper in the spring. Already we learn that the Chancellor is not implementing the Vickers recommendations in full. Will he tell the House whether he really intends full implementation, or have the Liberal Democrats been sold a pup yet again?

On the second test of securing international agreement, given the Prime Minister’s decision 10 days ago to walk away from the negotiating table without securing any protections at all for financial services in those discussions, will the Chancellor tell the House whether he is confident that he can do a better job? In particular, is he confident that he will be able to get the necessary EU-wide agreement, which means a qualified majority vote, to implement the Vickers capital requirement proposals?

On the third test of delivering a banking system that supports the wider long-term interests of the economy, may I ask the Chancellor about competition and the supply of credit? On competition, we argued back in September that any delay or backsliding on competition would leave consumers and small businesses to pick up an unfair share of what he has confirmed is a

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multi-billion pound bill for tougher capital and regulatory standards. Developments since September have not been encouraging.

On Northern Rock, will the Chancellor reassure the House that his rather hurried trade sale will deliver over the coming years—in two, three, four and five years—a new challenger bank that will compete in the small business and mortgage markets? Will he assure the House that that will be the outcome? Will he confirm that it is as a result of widespread concern that the taxpayer will not get value from his loss-making sale that the National Audit Office has launched an investigation into that decision?

On the sale of Lloyds branches to support a new challenger bank, will the Chancellor explain to the House—perhaps he could explain it to the Business Secretary, too—why he has decided not to implement in full Vickers’s proposals to increase the size of branch sales from Lloyds on divestiture? Why has he not taken the advice of the Vickers commission on competition? Is it not overwhelmingly clear, as we argued back in September, that rather than waiting until 2015 the Chancellor should now commit to a review in 2013—two years’ time—of the impact on competition of these proposals?

The fact is that none of these long-term reforms can address the two immediate threats to the supply of credit and the stability of our already fragile economy and banking system. First, here in Britain, with rising unemployment and a flatlining economy depressing confidence, thousands of small businesses are now struggling—as Members on both sides of the House know and as I heard for myself in Leigh on Saturday—to access the credit they need to survive and grow, with net bank lending to businesses not rising but falling. Alongside the long-term reforms, will the Chancellor tell the House why, rather than cutting taxes for the banks, he is not acting now to ensure that UK banks start to act now to increase their lending to small businesses?

Secondly, finally and most gravely of all, the failure of all our political leaders across Europe to solve the euro crisis and in particular to get the European Central Bank to start doing its job as lender of last resort is now the biggest threat to banks in Britain, businesses in Britain and jobs in Britain. Ten days ago, the Prime Minister walked away. Will the Chancellor reassure the House that he has not walked away, too? Are he and the British Treasury seriously engaged in trying to solve what is now the gravest threat to prosperity in our country in this generation? Is anyone in the rest of Europe listening to the Chancellor any more?

Mr Osborne: First, I apologise if the right hon. Gentleman did not get the statement far enough in advance for him to read it. I am merely following the procedures that he laid down when he was at the Treasury.

Let me deal specifically with the points he raises in detail. First, on the financial services Bill which we will introduce in Parliament early in the next year, I did not talk about it in the statement because we will have the Second Reading debate, I hope, shortly after we come back in January, but it is an important part of what we are doing. I mentioned it in passing. It is about changing the regulatory system to put the Bank of England in overall charge of monitoring levels of debt and systemic risk in our economy—a responsibility that I believe

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should never have been taken away from the Bank of England back in 1997—and at the same time giving it the powers that it needs to act as a prudential regulator, without which it would not be able to identify those systemic risks.

The reason why I have not produced the memorandum of understanding is that I was waiting for the Joint Committee—the pre-legislative Committee—that has been looking into the Bill. I thought it would be completely inappropriate to produce the MOU before it had reported so, as I explained to the Committee, I was going to wait until I had its report. The report is only being published today and I hope fairly shortly to be able to produce that MOU, having taken into account what both it and the Treasury Committee say.

The right hon. Gentleman says this is all rather complicated. There is a simple principle, which is that the Bank of England is in charge of monitoring risks in our financial system—

Ed Balls: This plan is dangerous.

Mr Osborne: Well, we have tried the right hon. Gentleman’s approach and look what happened: the entire banking system collapsed. So with the greatest respect, his advice on what is a dangerous approach to regulation we will take with a pinch of salt.

I turn to the right hon. Gentleman’s other points. On international agreement, obviously it is extremely important that we are able to do this under European law. There has been an argument about this. We have a great deal of support. Countries such as Spain and Sweden have written to the Commission to urge it to allow countries to have their own national regimes that sit on top of the minimum capital requirements, and we are encouraged by the very recent Commission quote which says that “Vickers can be implemented fully in the UK in a way that is compatible with EU law”, but we will continue to make our argument. It is encouraging that both the European Commission and the European Parliament have expressed their keen interest in the Vickers report and are doing their own work on that. It is good to see us leading the international debate on that.

The right hon. Gentleman mentions competition. On Northern Rock, we welcome the National Audit Office investigation. It would be very surprising if the NAO did not do a report into such a financial transaction. It has done reports into all the previous financial transactions by this Government and the previous Government. I think what it will demonstrate is that this was a loss-making bank and the independent advice that we received was that it would go on losing money. The people who should be to blame for losing taxpayers’ money are sitting directly opposite me.

On Lloyds and the Lloyds branches, we have spoken throughout this process to John Vickers. Obviously, he can speak for himself and give his view, but we have kept him closely informed of what we are proposing. I think it is consistent with the intention in the report to create a strong challenger out of the divestment of the Lloyds branches.

Let me turn to the timetable that the right hon. Gentleman mentions. As I say, we will be implementing some of the competition requirements in the Vickers report—for example, the new competition remit for the

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FCA. That will be part of the financial services Bill that we introduce in January. We considered carefully whether to try and put all the Vickers requirements—the creation of the ring-fenced banks—into the financial services Bill that we are introducing early next year.

We did not think that was sensible. That was also the view of John Vickers, who recommended a separate piece of legislation. That is precisely what we are going to do, but our commitment is clear. We will have all the primary and secondary legislation, which is where quite a lot of the detail will be, through by the end of this Parliament. That is exactly what we want to see.

Finally, the right hon. Gentleman has been going around complaining that we are not doing enough, we are in danger of watering down Vickers, and the like. This is from the people who have opposed structural reform to our banking system. When I was sitting on the Opposition Front Bench as the shadow Chancellor under both the previous Chancellor of the Exchequer, who is in his place, and also under the Chancellor of the Exchequer before, who then became the Prime Minister, they opposed structural reform. They did not want to separate the banks. No doubt they can answer for themselves, but for the former City Minister who was in post when RBS made its bid for ABN AMRO, for the City Minister who was in post when Northern Rock was offering those 125% mortgages, for the City Minister who was in post when HBOS was making all those commercial property loans, for the former City Minister to complain that we are not doing enough is ridiculous. This is the man who advised that Fred Goodwin should get a knighthood and who told his boss to go and open the Lehman Brothers headquarters. That is his record, and his mealy-mouthed apology reminds me of that film “Whoops Apocalypse”—I am sorry, I just brought down the entire British economy; can we all please move on now. That is what he has done. Frankly, he has not made a substantive or interesting contribution to this debate on bank reform. Perhaps in the next few months he will.

Mr Peter Lilley (Hitchin and Harpenden) (Con): I am grateful to my right hon. Friend for his welcome for the Joint Committee report on the financial services Bill. Will he confirm that the legislation implementing recommendations on ring-fencing will be subject to pre-legislative scrutiny, but after that the banks will be required to implement ring-fencing without delay, whereas there is a strong case for allowing time for the requirements for higher capital adequacy to be built up to prevent intensifying the shortage of capital in the short term?

Mr Osborne: I will consider the case for pre-legislative scrutiny, and the House will consider it, closer to the time. Obviously there is a trade-off between getting the legislation through and having the pre-legislative scrutiny, but my right hon. Friend’s Committee has done a very good job. Not everyone here will have had a chance to read its report, but I have read its executive summary and I will read the full report tonight. It is an impressive piece of work and an advert for pre-legislative scrutiny. I repeat our commitment that we want all this legislation, primary and secondary, by the end of the Parliament.

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Mr Alistair Darling (Edinburgh South West) (Lab): I welcome the Vickers report and I am glad to hear that it is being implemented, but will the Chancellor be careful about overselling this? This would not have stopped the failure of Northern Rock or HBOS, and the idea that a future Government might decline to step in and rescue an investment bank if it failed is simply not credible. Look what happened to Lehmans when the Americans tried that. So these problems have not gone away. Will he accept that if his reforms of the Bank of England are to work, he has to look at the governance of the Bank, as the Treasury Committee recommended recently? The Bank made some bad mistakes in the past and we have to face up to that, just as we have faced up to the mistakes of the Financial Services Authority. Will he urgently accept the need for European Governments to shore up their banks, because there is very real risk, if we have a sovereign default in the next few weeks, that their banks will be affected because they are not adequately capitalised? If he is still on speaking terms with his opposite numbers, that is something that he should attend to very quickly.

Mr Osborne: I can assure the former Chancellor that we are still on speaking terms. Indeed, I had an hour and a half conference call just before I came into the Chamber, so I can promise him that a lot of speaking is still going on. The question he rightly asks is: where is the action? The eurozone has taken a number of important steps, but we still need to see a more credible firewall, which will enable it to stand behind its banks even more effectively.

On the right hon. Gentleman’s specific point about the Bank of England and whether this could have prevented what happened when he was Chancellor, of course institutions can get things wrong, and the Bank of England got things wrong in the run-up to the crisis, but it is sensible to try to have one body that is looking at both the prudential risks in individual firms and the overall systemic risks in the economy. The tripartite system clearly failed to do that. I do not think that before he became Chancellor it met in person at a principal level, or perhaps only once. The system did not work and many Committees of this House have pointed that out. For the Bank of England to have clear responsibility for monitoring risks is sensible. As to whether all this could have prevented what happened, I draw attention to two points. First, there are higher capital requirements in Vickers that would have better protected banks such as HBOS, and, secondly—the biggest challenge of all that he had to face—it is precisely the collapse of a large universal bank such as the Royal Bank of Scotland that Vickers is seeking to address. No one pretends that it is easy, but we believe, Vickers believes and many others believe, that the idea of ring-fencing the retail operations focused on the UK will give the Chancellor of the day greater opportunity to protect what really matters to the UK economy without having to resort to bailing out the entire institution.

Mr Andrew Tyrie (Chichester) (Con): The House and the Chancellor will have heard the remarks made across the House about the need to strengthen the accountability of the Bank of England, which the Treasury Committee has already reported on, so I will not dwell on that. On the European angle, does he agree that the UK should be permitted to implement Vickers without awaiting the

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outcome of Commissioner Barnier’s latest announcement that he will review the merits of breaking up banks altogether, an idea explicitly rejected by Vickers, while at the same time not worrying about another of Mr Barnier’s curious and contradictory proposals, which is that a cap, as has just been mentioned, should be placed on the amount of capital UK regulators could demand of banks, which, if implemented, could prevent us from putting Vickers in place at all?

Mr Osborne: As I have said, I will return to the House early in the new year to address the issues that my hon. Friend’s Committee, other Members of the House and the pre-legislative Committee have raised about the accountability of the Bank of England and the accountability and responsibility of the Chancellor in a financial crisis. On his points about Europe, I understand that Commissioner Barnier, or the part of the European Commission that sits under him, is interested in the Vickers report and is looking at it, as is the European Parliament, which we welcome. On maximum harmonisation—in other words, not allowing individual countries with large banking systems to have their own regimes sitting on top of the EU minimum—that is something that other member states are concerned about. It was actually the Swedish Finance Minister who signed the letter that first raised concerns about that and got other Finance Ministers, myself included, to sign it, and the International Monetary Fund has also been very public in raising its concerns. We have not yet reached the point where the directive is about to be passed, but there is certainly a lively debate going on about it.

Several hon. Members rose

Mr Speaker: Order. If I am to accommodate the level of interest in the statement, I will from now on require brevity, the textbook for which can be written by Sir Stuart Bell.

Sir Stuart Bell (Middlesbrough) (Lab): Building on my right hon. Friend the shadow Chancellor’s statement on bank lending to the small and medium-sized enterprise sector, has the Chancellor made any study at all of the impact of what he calls bigger cushions—raising capital requirements from 7% to 9%—on bank lending to that sector? Can he offer the House a guarantee that he will consider that as part of his consultation leading to his White Paper in the spring?

Mr Osborne: It is precisely to avoid a procyclical impact that the backstop for capital requirements is 2019, so there is quite a long timetable, which is consistent with the Basel agreement, but the hon. Gentleman is of course right to point out—indeed, the shadow Chancellor made this point—that the current situation in the eurozone is causing a stress on bank funding around the world. It was good to hear the shadow Chancellor acknowledge at the end of his remarks that the biggest single threat to British businesses, as I think he put it, is the current eurozone crisis, which is an analysis we share.

Several hon. Members rose

Mr Speaker: Order. Still on the subject of brevity, I now turn to the person I would describe as the emeritus professor of that subject, Mr John Redwood.

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Mr John Redwood (Wokingham) (Con): Will the Chancellor take urgent action with RBS to create three new competitor banks from its assets and liabilities so that we can have real competition and more promotion of growth?

Mr Osborne: I have set out our view as the largest shareholder of RBS. We have to be careful of the shadow director rules and the like, but I was very clear in my statement that we expect and hope to see RBS shrink the size of its investment bank and focus on the UK and its UK customers. That is our proposal as an RBS shareholder. Of course, the question of how to dispose of our shares in RBS, which might arise in future, is one that we will address at the time.

Malcolm Wicks (Croydon North) (Lab): Given the interesting speech recently made by the Prime Minister on the importance of Christian values, is there not a danger that the Chancellor and the Treasury as a whole are spending too long talking to the money changers and not enough time talking to more important elements of the British economy, such as manufacturers and small businesses? Does he feel that when Jesus overthrew the money tables he should have waited six years before acting?

Mr Osborne: I would not say that what we are undertaking is of biblical proportions, but we are acting now to deal with those problems. We are changing the system of regulation, which will be in place once the draft financial services Bill is passed next year; we are changing the competition remit, which will be in place by 2013; and we are committed to introducing all that legislation, including the secondary legislation, in this Parliament. We are undertaking those reforms, but in the years in the desert, which were the years under the Labour Government, none of those things was proposed at all.

Stephen Williams (Bristol West) (LD): I congratulate my right hon. Friends the Chancellor and the Business Secretary on working together to provide a secure future for our banking sector and to put behind us the failures of the past. Uppermost in the public’s mind from the past will have been the £45 billion bail-out of the Royal Bank of Scotland, and, given that it is now under state ownership, could not the Chancellor consider its break-up to establish a challenger bank on the high street for lending specifically to small and medium-sized businesses in order to provide the finance for future growth and economic recovery?

Mr Osborne: I have already set out the Government’s view on the Royal Bank of Scotland, and the issue of what to do when we come to dispose of the shares will be one that we can all address at the time.

The document and the process have been a very good advertisement for the coalition Government. The Business Secretary and I have worked incredibly closely on the document, which is a joint one from us both, and people will not have read in the newspapers lots of stories about the “splits between us on the issue”—

Ed Balls: That was last week.