The Prime Minister - Liaison Committee Contents

Examination of Witness (Questions 1-131)


18 NOVEMBER 2010

  Q1  Chair: Welcome, Prime Minister. It is your first appearance before the Liaison Committee, the Chairs of the House's Committees which scrutinise Departments, oversee the effectiveness of Government and manage the House itself. The purpose of these sessions—I reiterate this not for your benefit, as you know very well, but for others—is quite different from Wednesday's Question Time.

  Mr Cameron: That's a relief.

  Q2  Chair: They are not for political jousting between leaders. They are not for quick exchanges on constituency or national grievance points, but they are designed to explore in greater depth and hold to account the role that you play and your office at No. 10 plays in the determination and delivery of Government policy. We are looking at a number of areas where we think your own input has been decisive or significant. We scrutinise our individual Departments in our own Committees and we call Ministers before us, so now it's your turn.

  We will start with a major section on the comprehensive spending review. The Chief Secretary has already been questioned in detail by the Treasury Committee, and other Ministers by other Committees, but what about your role? How often were you involved simply in order to broker agreement or referee arguments between the Treasury and Departments? How often was that the reason for your involvement?

  Mr Cameron: Well, I was involved from the start setting the strategy for the comprehensive spending review. Obviously that went back before the Budget, and involved setting the overall fiscal mandate for the Government: how much we were trying to get debt down and by when. When it came to the comprehensive spending review itself, I was involved both in setting the strategy—which Departments would we try to protect, what areas would we to try to invest in, what was the thinking behind where to make cuts and how to make them—and then I was involved in two other ways. One was through what became known as the Quad. We had a quadrilateral meeting of the Deputy Prime Minister, me, the Chancellor and the Chief Secretary, which I think occurred nine times, and we would use those meetings to go through some of the difficult areas and try to work out what the right policies and approach were. So setting the strategy; running the Quad meetings, which I think were very successful in making it a collective decision; obviously chairing Cabinet, and Cabinet had about nine discussions on the spending review; and then, yes, I was involved in helping to settle some of the individual Departments, particularly some of the tricky, difficult issues. There are some really difficult issues involved. Defence was one, but some other Departments were involved too. It was a mixture of things but, I hope, it was mostly strategic and trying to make sure the process was more collegiate and collective than it has been in the past.

  Q3  Chair: But the cases where there was a dispute were not necessarily the ones in which you had the greatest interest in steering the policy in a particular direction. So how often were you intervening in this process because you had a particularly strong view about what the policy should be?

  Mr Cameron: It wasn't so much that. There were disputes, obviously, between the Treasury and the individual Departments. I didn't get involved in all of those. I would get involved if they weren't being resolved and so there were one or two areas where they weren't being resolved and I got involved in order to help resolve them. Given the scale of the public spending reductions we are trying to achieve, the process worked very well partly, I think, because the Treasury did a good job at meeting early on with Cabinet colleagues. Also in this Quad process, where we went through difficult areas like how we were going to try to protect education and early years, what were we going to do about housing, how were going to make sense of welfare, we had proper, substantial meetings between both Conservative and Liberal Democrat colleagues in the coalition to talk through these issues.

  One other point: I think the reason why it went relatively smoothly is that we took a big decision at the beginning, which I think is inevitable if you are trying to reduce public spending and get a deficit under control, that you've got to look at the very big areas of public spending like pay, pensions and welfare. If you do not do that you are going to make unacceptable cuts in schools, hospitals and policing. We did, I think, make some quite big decisions on welfare—I think £18 billion, if you put the Budget and the spending round together, of reductions. As you know, we have frozen public sector pay for two years. In public sector pensions, there will be increased contributions. So those three big areas and big decisions made the rest of the spending review not easy—it was extremely difficult because of the reductions we were looking for—but it set the framework.

  Q4  Chair: It made it more difficult, didn't it, in some areas?

  Mr Cameron: No, because, as I say, if you don't do things on welfare, pay and pensions, you would have to be cutting, by far more, education and other areas. I thought that that was unacceptable. If you want to get the Budget deficit under control, you have got to look at the big areas of public spending, as I've said, rather than just think you can just have cuts across the board in every Department. That would have been very unstrategic. We took a strategic view that we wanted to protect various Departments: the health service, overseas aid and, effectively, the schools budget. We took a view that we wanted to protect capital spending, because we wanted to invest in the recovery, and we protected capital spending. We wanted to make sure that, while we were making spending reductions, there was a strong element of fairness, and particularly social mobility. So, in the decision, for instance, to increase nursery education for two, three and four-year-olds, to introduce a pupil premium to help young people from low-income backgrounds go to university, I would say that there is a strong strain of social mobility helping to create a more fair society that also goes right through the spending round decisions. We took those decisions early on. So those were the aims, and the spending decisions had to flow from those aims, rather than just trying to make the numbers add up.

  Q5  Chair: Did those issues about early years education and the pupil premium require late intervention from you and the Deputy Prime Minister?

  Mr Cameron: They were decided at the Quad meetings, so the Deputy Prime Minister, myself, the Chancellor and the Chief Secretary, and sometimes other Ministers as well—when we were discussing welfare, Iain Duncan Smith was there. That is where we decided the strategy for, as I say, which Departments to protect, the strain of fairness that we wanted to run through the spending round, and the decision to support the recovery by not seeking further reductions in capital spending. Indeed, we have actually increased capital spending from the plans that we inherited.

  Q6  Mr Tyrie: This spending review is described as comprehensive, but it wasn't really, was it? There were quite a number of areas which had already been hived off as untouchable at the start.

  Mr Cameron: That's right. I mean, in the Conservative manifesto we said we wanted to protect the NHS and we ensured that, in our negotiation with the Liberal Democrats that went into the coalition agreement, the NHS would be protected. I know that is a contentious decision that some people do not agree with. I think it is right on two grounds. One is that the cost pressures in the health service are huge anyway—drugs budget, ageing population, new treatments coming on stream—so I think it is difficult enough to have a NHS budget that is just increasing with inflation. Secondly, and I make no bones about this, if you are trying to get from the biggest budget deficit in the G20 to a position where you are balancing the books, you have got to try and take the country with you. The thing I care about most, and I think most people in this country care about most, is our national health service; that it is there for us if we get sick. So I think it is right, morally, as you are asking the country to come together and go through a difficult time to get to a better future, to protect the one thing that we all care about very deeply.

  Q7  Mr Tyrie: Still, you are agreeing, it wasn't a comprehensive review; it was a semi-comprehensive review at best, and you bought off various pieces of opposition to take, as you put it, the country with you by excluding a number of areas.

  Mr Cameron: I think it was a comprehensive review in that we took decisions right across every single Department. We took a decision about the health service. There will have to be efficiencies in the health service. There is a big programme to reduce bureaucracy in the health service. That was part of a comprehensive set of decisions.

  Q8  Mr Tyrie: You'll understand that Ireland is very high in the news at the moment. I passed warning to your office that I might ask about Ireland. Do you want, now, to quash the widespread reports that, on a contingency basis, plans are afoot for a bilateral bail-out?

  Mr Cameron: First, I don't think it would be right to speculate about the financial health of another country in the European Union, a country that is a close neighbour, a good friend, and a country that we have very close political and economic relations with. Obviously, if you look at the relationship between Britain and Ireland, it is one of our biggest export markets. As I said in the House the other day, we export more to Ireland than we do to Brazil, Russia, India and China combined. Perhaps that's not a great reflection of how well we're doing in the rest of the world, but those, nonetheless, are the facts. Our banks are very connected to the Irish banks. We have an interest not only in the eurozone being a success, but in Ireland being a success, so I certainly don't want to rule things out, but, as I say, I don't think we should be speculating.

  Q9  Mr Tyrie: So there would be special conditions—a special relationship that we have with Ireland—that might lead one to want to do a bilateral bail-out rather than use the purely European mechanism?

  Mr Cameron: Well, let me make one point about the European mechanism, so that everybody understands, because I think it is important. The previous Government, before the new Government came to office, agreed in the European Union this European financial mechanism which is basically there to help countries that get in trouble. It is established under qualified majority voting. It was supported by the previous Government; it was not something that we advised. That is a mechanism that is there and can pay out money to support countries that are in trouble. That exists, and we are part of it whether we like it or not.

  Q10  Mr Tyrie: Perhaps I could just ask one general question with respect to all this. Have you, in your planning—I presume there is planning—taken on board the fact that a bilateral bail-out will come out of the bottom line? It will therefore increase the deficit and also therefore alter the numbers in the CSR, unlike the contingency liabilities created by a European bail-out.

  Mr Cameron: We're not speculating. If I may just give a technical answer, let me say that the point you make is absolutely right. Money lent to other countries via the mechanism is a contingent liability. They just use the headroom between the European budget—what the European Union spends—and what it is able to spend. They use that headroom to make a contingent loan. That is not actually money that you have to go out and raise, whereas a bilateral loan is money that you go out and raise in order to lend. Technically, you are making a—

  Q11  Mr Tyrie: And you have to come to the House for approval on a supplementary estimate.

  Mr Cameron: I think, in any event, if these things were to happen, one would want to have an early discussion in the House of Commons.

  Q12  Mr Tyrie: And one can take it from your answers that you are heavily engaged in these debates and issues.

  Mr Cameron: I think I've tried to answer the question as best I can.

  Chair: Mr Cash has a supplementary about the mechanism.

  Q13  Mr Cash: Yes. Prime Minister, given that article 3 of the mechanism that you have referred to can only be activated, under the European regulation that governs this, by Ireland itself and not by qualified majority vote. Given that Ireland has not activated that, are the Chancellor and the coalition Government joining Germany and the other member states to participate in this mechanism before it is activated? Why are the European Bank and the Commission in Dublin before the regulation is activated? Doesn't it look rather as if we are trying to coerce Ireland against the views, expressed by their Prime Minister, that they can manage for the time being? Why are we taking part in this mechanism and not doing a bilateral arrangement, which will enable us to be able to do it outside the European framework?

  Mr Cameron: First of all, I'd say that we're certainly not trying to coerce Ireland to do anything. That is not any part of our plans. I think the technical position, as you put it, is absolutely right. I don't really want to go into any conversations in Europe that are taking place and all the rest of it. I think that counts as speculation. But I think the position, as you and I understand it, is that this mechanism exists, it is operated by QMV, Britain is a part of it, because of the action of the previous Government, it has funds available, because of the way it was set up, and that is the situation that we inherited.

  Q14  Mr Cash: But the QMV only operates once you've got into the system. It has to be activated by Ireland, and they've said they don't want to get into this at this stage.

  Mr Cameron: I can't answer for the Irish Government, obviously.

  Q15  Chair: At the moment, we take it that both options are still open. Although, of course, neither might be pursued—that is to say, the European mechanism and the bilateral mechanism.

  Mr Cameron: I think you'd be right in saying that, but as I say, I think going any further would be speculating into the fate of another country, and I don't think we should do that.

  Q16  Margaret Hodge: I want to get us back to the breadth of the comprehensive spending review. You have said—I think there is consensus on this throughout Parliament—that we should do all we can to find value-for-money back-office savings to protect front-line service. My Committee undertook a study of the value-for-money savings that were sought in the last comprehensive spending review, and I think that, despite its being a political imperative, the machinery of government—the Departments—failed to deliver. Only 40% of savings were found, and only a third of those were genuine value-for-money savings as opposed to cuts. I wish you the best in your attempt to succeed in this endeavour to find genuine value-for-money savings, but were you to fail, would you then find other cuts or would you lower the £81 billion target?

  Mr Cameron: You put the question very fairly. I think that one of the reasons why, in the past, some of the value-for-money savings haven't been found is that there wasn't quite the same need to find them. Departments were often faced with rising baselines and told, "Go ahead and save some more money if you can, to spend even more," and those savings weren't found. We are in a different situation, because Departments really can see that, in some cases, their baselines are being reduced. So they are going to have to work, with the help of the Cabinet Office and others, to really make sure that they look at back-office costs and central administration first. They are being helped by a Government who are freezing public sector pay, reducing welfare payments and dealing with the issue of public sector pensions—two of which benefit Departments at the same time. We are not planning for failure in finding these savings, but the savings we have set out across the four years need to be achieved and we want to achieve the maximum amount of them through the sorts of efficiencies that you talk about.

  Q17  Margaret Hodge: And if you don't? That was really the question. Gus O'Donnell gave us evidence yesterday, so I can see that there is real endeavour, ironically, to centralise control rather strongly in the Cabinet Office to ensure that the savings are secured. But I have to say that I am sceptical as to whether you will achieve what you have set out to do. What I am interested in is: were that to happen, would you then come back for further cuts, or would you reconsider your £81 billion target?

  Mr Cameron: The baseline of reductions is set out and we want to stick to that.

  Margaret Hodge: So you would have to come back for further cuts?

  Mr Cameron: No, the Departments have to deliver those reductions. They are being helped, as I say, because we are freezing public sector pay, improving procurement and reducing back-office costs. We are doing things to help them, but in the end those Departments have to deliver those reductions.

  Take the example of policing, which we discussed yesterday in the Chamber. HMIC— Her Majesty's inspectorate of constabulary—says that it is quite possible to get 12% reductions in police spending without reducing the number of officers on the beat. How do you make up the gap between that and the reduction in Home Office spending that we are talking about? Well, obviously we are adding a two-year pay freeze—

  Chair: We will come to that later.

  Mr Cameron: I know, but I am just using it as an example. We are making changes to police pay and conditions, and we are changing paperwork, which will go in addition to what HMIC is saying. In the end, the Departments have to deliver this. It is worth rewinding and asking why we are doing this and trying to do so much within a Parliament. The fact is that if we weren't doing this and if we took the plans we inherited, at the end of the Parliament we would still have a structural deficit of 3% and we would still be adding to our debt-GDP ratio. In simple terms, it would still be getting worse. So after all the pain of cuts, the situation would still be getting worse. That would not be a sensible way to go about it. We have to get to a situation where, within this Parliament, we will have effectively dealt with most of the worst part of the programme.

  Q18  Margaret Hodge: I hear that. I am sceptical as to whether the Departments will find it without tackling front-line services, but I hear your intent. May I give you three examples from the work we have done to date of where I think it is either a short-term decision that can have a longer term impact, or an unintended consequence of a decision? HMIC is the first of my three examples. It is facing a cut in staff and has 18 million accounts, going back to between 2004-05 and 2007-08, unreconciled as to whether people have paid too much or too little in tax. HMRC told us last Friday that it is writing off three of those four years in terms of money owed to Government. We are therefore writing off about £650 million. With its lack of staff HMRC is unlikely to be able to tackle '07-'08 properly, and the total amount owed to Government is £1.4 billion. Your unintended consequence there is cutting staff then losing money, which leads to further cuts elsewhere.

  Mr Cameron: I'll ask the Treasury to look specifically at that issue, but in the spending review we actually announced, "Yes, there are some efficiencies that are being driven through HMRC, as there are in other Departments," but we announced a specific extra bit of investment into a part of HMRC—

  Q19  Margaret Hodge: Can I stop you there?

  Mr Cameron: Hang on a second; let me just finish—in order to raise an additional amount of revenue.

  Q20  Margaret Hodge: Apologies for saying this to you, but we have been told by HMRC that that is a separate, additional amount for a separate £7 billion.

    Mr Cameron: That is exactly the point I made. It is separate.

  Q21  Margaret Hodge: And HMRC still has to lose the staff who would be collecting the £1.4 billion owed to us.

  Mr Cameron: We can't exempt Departments from trying to be more efficient. As I have said, there was a separate decision made in HMRC to try and recover £7 billion, I think, of revenue; I can confirm that figure to you if you like.

  Q22  Margaret Hodge: Let me take another example, which is the decision to delay Trident. I can understand the political reasons for delaying it, but the reality is that we will have to spend £1.2 billion to £1.4 billion extra on extending the life of the Vanguard submarines, and we will have to spend an extra £1 billion on an extra order for a hunter-killer submarine to keep the Barrow shipbuilding capacity going. Is that sensible?

  Mr Cameron: I don't agree with you about the second part. The hunter-killer submarine—the seventh Astute submarine—was part of the defence programme. You are shaking your head, but it was, and we think it should be, part of the programme. I would separate that decision, which I think is the right decision and which we took in the strategic defence review, from the decision we have taken over Trident.

  I asked very specifically, "Can we look very closely at the costs of the Trident replacement, and see how much it is necessary to spend both now and in the future? Now that we have all the experience of the current Vanguard submarines operating, can we make a better estimate of how long their life is?" The advice that came back very clearly from officials, which we accepted, was that you could make the decision a little bit later; that you could put off some of the spending from this Parliament; that overall that would not add to the costs; and that it was the right decision to take. I know that we are going to come on to the strategic defence review; that was part of a very thorough piece of work.

  Q23  Margaret Hodge: Well, I have to say to you that we don't yet know what it will mean in terms of additional costs of Trident if we go ahead, and we know the additional cost in extending the life of the Vanguard submarines. From the Committee's point of view of value for money, it looks like a short-term decision with a long-term extra expenditure for Government.

  Mr Cameron: I believe it is a reduction of £750 million over the spending review period and some £3 billion over the next 10 years, but I am sure that a Defence Minister or a Treasury Minister would be happy to come in front of your Committee and go through it in detail.

  As I have said, we were doing a defence review, and I think it was important that we looked at the costs of Trident in that review. We have managed to save more than £700 million in the spending review period. We are still spending significantly on Trident's replacement during this period. I was assured that we could do this having no gap of capability between the existing and new submarines, and I was told it was possible to do so without suspending continuous at-sea deterrence. It seemed to me, therefore, if you could save some money it was a perfectly sensible thing to do.

  Chair: As we have moved into defence, I would like to bring in James Arbuthnot at this point.

  Q24  Mr Arbuthnot: Prime Minister, what role did you play in the strategic defence review?

  Mr Cameron: Again, a chairmanship role, I would say. I chair the National Security Council. That is a new Committee; it is the leading Cabinet Committee that we have established, which I think works extremely well. It has met about 18 times since the Government were formed. Seven of those meetings specifically covered the strategic defence review. I chaired those meetings, in order to first set the strategy that we wanted to follow as a country: "What are the biggest threats and opportunities to us?" and flowing from that strategy, "What is the defence posture that we ought to take?" and then, flowing from that, "What are the decisions we ought to take about submarines, destroyers and frigates and all the rest of it?"

  In addition to that chairmanship role, obviously the service chiefs have a direct line to the Prime Minister and they like to come and make their views known, which they did. We had very good exchanges and conversations. I had a number of bilateral meetings with the Defence Secretary and the Chancellor, and I played quite a role at the end. There was a gap between the Treasury and the Ministry of Defence, which was quite widely reported on, so I don't think I'm breaking any great confidences, and I helped to bring together both parties at the end to get what I think was a good, sensible outcome. It was mostly a strategic, chairman-like role, I hope, but with a bit of interference at the end.

  Q25  Mr Arbuthnot: So, was it the most difficult area of the whole of the comprehensive spending review?

  Mr Cameron: Yes, I think it was, for a couple of reasons. The first is that it was one of the most overspent Departments. It was a bit of a train crash when we took over, in terms of £30 billion of excessive commitments and overspends. Plus, it is fantastically important—

  Q26  Mr Arbuthnot: Is that a change from the £38 billion?

  Mr Cameron: Sorry, it was £38 billion, you're right—£38 billion of overspends. Plus, it is a fantastically important area, which we have to get right. And, defence was part of an overall strategic security and defence review that included other areas as well, which made it particularly complicated. Within it, there were one or two areas, such as the decision over the aircraft carriers, which was a fantastically difficult question to try and get the right answer to. I profoundly believe that we got the right answers, but it took a lot of time and work, and it was tough.

  Q27  Mr Arbuthnot: You said that you particularly got involved right at the end. At that stage, we had the letter from the Secretary of State for Defence to you, which somehow found its way to The Daily Telegraph. What effect did that letter have on the entire process?

  Mr Cameron: I don't think it had a huge impact. You know as well as I do that Ministers stand up for their Departments and make the case for them. Sometimes they do it orally and sometimes it appears in a letter; regrettably, sometimes it appears in the newspapers. There is a problem—that Department does seem to have had a bit of a problem with leaks, which is worrying when it is the Department responsible for security. However, I don't think it made a huge difference.

  The fact is that I think it was a good outcome, in terms of saying, "Here we are as a country with this vast deficit. We have to deal with it." Defence made a modest contribution with an 8% real-terms reduction over a four-year period, and that doesn't touch at all what we are doing in Afghanistan, because that's funded out of the reserve. A set of good and long-term decisions were made over things such as carriers, Army numbers and future requirements for the Air Force, which I think are right. We can come on to that.

  Q28  Mr Arbuthnot: Sticking with that letter just for a moment, it would not have been so influential if it had just been between him and you, would it? If it hadn't been leaked, it would surely not have had nearly so big an effect.

  Mr Cameron: I think the point is that because it was the most difficult area to deal with, there were always going to be more discussions about defence and a trickier process of getting it right than perhaps with other Departments. Leaked letters don't help. I'm not trying to be evasive. They don't help—of course they don't; they add to the public pressures. They mean the meetings that you are having are under huge external scrutiny, and everyone wants to know what happened after this National Security Council or that National Security Council, whereas in a normal week, you can have a meeting and no one is in the slightest bit interested. So of course, it adds to the pressure, but I don't think it materially changed what was a genuinely collective discussion, and I don't want to underestimate that.

  When we talked about the defence needs of the United Kingdom, for the first time in a long time in the National Security Council, there was the Business Department, the Chancellor of the Exchequer, Development, Defence, the Prime Minister and the Foreign Secretary, who were having a proper discussion about what the right defence posture was for the UK, and where we needed to spend our money in order to deliver it. That is very helpful. Throughout this whole spending review process, I've tried to make it more collective and collegiate, and more about the Government coming together and discussing such things as a Government, rather than bilaterally between the Chancellor and a Secretary of State, or between just the Prime Minister and the Chancellor sitting on the sofa. We tried to have more of a collective discussion about those things.

  Q29  Mr Arbuthnot: I'll come on to that precise process in just a moment. There is one question that concerns me—well, there are several questions that concern me—which is that of the uplift for the defence budget from 2015 onwards. You said on the day of the strategic defence and security review, "My own strong view is that this structure will require year-on-year real-terms growth in the defence budget in the years beyond 2015." So that is your own strong view, and it is clearly the Defence Secretary's own strong view, but, rather oddly, it seems not to be Government policy. What do you intend to do to turn your own strong view into Government policy?

  Mr Cameron: I suppose that the short answer to that is: put it in a manifesto and win an election.

  Q30  Mr Arbuthnot: That won't work, will it? If that view is not Government policy, the Ministry of Defence will have to start making really severe cuts with effect from 2012 onwards.

  Mr Cameron: I don't accept that. I think the point is that the Ministry of Defence now has what it hasn't had for a long time. It has its budget numbers out until 2015, and it knows that one party has absolutely committed to real-terms increases—I haven't specified how much—between 2015 and 2020. I think that that is necessary to deliver the sort of force levels and effect that we've talked about for 2020. It is obviously for other parties to make their views clear, but, frankly, I think that that is a greater planning horizon than the MOD has had for a long time. If you think of the MOD, two years ago, three years ago, it was massively overspent—£38 billion in the red—without a clue of what was going to happen next. I think it has a much better position now, with a departmental budget that is basically a flat £34 billion, give or take a bit, through five years. What we have to do is make sure that we have good people in the Ministry of Defence making sure that we get value for money. I am enthusiastic that we've got a new Permanent Secretary, a new Chief of the Defence Staff—we need to get a new Chief of Defence Materiél—and good people in the Department to make sure that it delivers on the very large amount of taxpayers' money that is going into it.

  Q31  Mr Arbuthnot: Okay, but in the defence review you also announced a 10-year rolling budget for the Ministry of Defence. Presumably, you'll be building into a comprehensive spending review before the next election the sort of uplift that you are saying it is your strong view should be in place.

  Mr Cameron: That's a very good question, and there are two answers to that. One is that we think we should have a defence review every four or five years, which will help that process. Secondly, yes, of course there will be a debate within Government about what more we can say on defence spending, which will be discussed and debated every year between now and 2015. We are in a coalition, and I think we've come to a very good outcome on a defence review. We have shown that, actually, two parties that have slightly different track records and different policies on this matter can come together and make sense of a really difficult set of questions, and I am sure we can continue doing that.

  Q32  Mr Jenkin: It is widely understood that the decision to withdraw the Harrier and Ark Royal under the SDSR[1] was a last-minute decision made over the weekend before the review, and, until then, they were to stay. That decision was very roundly attacked by the former First Sea Lord, Admiral Lord West. That provoked a reaction from the chiefs of staff, which was published as a letter in The Times. Did No. 10 have any role in suggesting or promoting the idea of that letter and in encouraging them to try to close down the debate?

  Mr Cameron: I've read both letters, and I am delighted that the chiefs of staff wrote such a powerful letter in defence of the decision we made, but I don't know all of the details of how that letter came into being.

  Q33  Mr Jenkin: Did No. 10 have any role in it?

  Mr Cameron: I simply don't know. I wouldn't be at all surprised, but I don't know.

  Q34  Mr Jenkin: So it might have been a suggestion from No. 10?

  Mr Cameron: I cannot answer the question, because I don't know. I am very happy to write to you.[2] I would much rather deal with the substance of the issue, which I think is genuinely difficult and fascinating. Who wrote what letter is, frankly, less important. The reason the decision was made relatively late was that it was the most difficult question at the heart of the defence review, which we debated and discussed as a National Security Council over and over again.

  I shall explain how my view changed, to give a sense of how deeply the matter was discussed. Coming at it as an amateur, it seemed at first cut that the obvious answer was to keep the existing carriers, and also to keep the Harrier, which could be used as a bridge to the new carriers. That is the simple, amateur, straightforward view: there is no capability gap, so the Tornado is retired instead of the Harrier. However, by the end of the process, I was convinced that although that decision was the easiest to explain in Parliament, and to the media and the public, it was the wrong decision. I profoundly believe that we have now made the right decision, which is to keep the Tornado and retire the Harrier, except in respect of a capability gap between having a carrier now and having one in future. I take that view for the following reasons. First, Tornado is a more capable aircraft than Harrier. The Harrier has a fantastic record. I grew up full of admiration for what that aircraft did in the Falklands, but the fact is that, today, the Tornado is a more effective ground attack aircraft. It is operating now in Afghanistan. Secondly, the big question for us right now is: how can we best support our troops and our effort in Afghanistan? That is by keeping the Tornado.

  Chair: I think that most of us are familiar with that argument.

  Mr Cameron: That is why we came to the more difficult, complicated and nuanced view—but the right view. I wanted to try to explain that to the Committee, in a way to try to prove that this was a discussion and debate process, rather than saying, "Let's do what is easy or politically convenient." It would have been much easier to keep Ark Royal, keep the Harriers, retire the Tornadoes and say, "There we are, what a simple answer to the question." It would have been the wrong answer. That is why I feel so strongly.

  Q35  Mr Tyrie: Many of us will find it unacceptable if it turns out that No. 10 did prompt chiefs of staff to enter political controversy in that way. It is very important that we get to the bottom of that, and we await your reply.

  When Lord Turnbull gave evidence to the Treasury Committee, he said that Liam Fox's letter was written to be leaked. I am sure you did not see it that way, Prime Minister.

  Mr Cameron: No, it was a letter written to put the Secretary of State's view about the importance of not making excessively deep cuts in defence. Over four years, 7.51% real-terms reductions are a lot lower than reductions in other Departments. Let us look at the effect that we are getting for that money, whether in the Royal Navy, the Army or the Air Force. We still have the fourth biggest defence budget in the world. We can overdo the gloom. We are going to have the best hunter-killer submarines anyone has got in the world. We are going to have a brand-new aircraft carrier.

  Chair: Prime Minister, I know there are messages you want to deliver to us, but there are a lot of things we want to ask you about.

  Mr Cameron: Sorry, I do not want to get carried away.

  Q36  Mr Tyrie: On the carrier decision, how thoroughly did you personally explore the scope for renegotiation of that contract.

  Mr Cameron: Fairly thoroughly.

  Q37  Mr Tyrie: This is a monopoly supplier, and a monopoly purchaser. That normally creates some basis for negotiation, does it not?

  Mr Cameron: Absolutely. This was a question I asked repeatedly: "Can we go back to BAE, can we look at the contracts, can we see whether we can change the contracts?" But the answer was pretty clear. This is something that a Select Committee might want to look into. These contracts were pretty tightly drawn, and if we had even cancelled the second of the two carriers it would have cost a huge sum of money.

  Q38  Mr Tyrie: In order to look into the matter, a Select Committee will need the contract. I recognise that some aspects of the contract will be security confidential, but would you agree to provide that contract to my Select Committee with the security aspects redacted to enable us to examine the extent and limits of the scope for negotiation?

  Mr Cameron: I will be happy to provide the maximum that we can under the rules, but it was an important[3]—

  Mr Tyrie: You make the rules, Prime Minister.

  Mr Cameron: I wish it was as simple as that. You find out in this job that you don't make quite as many rules as you would like, but I will certainly look into it and we will do what we can.

  Q39  Mr Bailey: You and your party have said that you are committed to widening participation in higher education. A recent study by the Institute for Fiscal Studies reported that education maintenance allowances have "significantly raised" stay-on rates for post-16 students from lower-income backgrounds and, indeed, the educational success arising actually pays for itself. If the Government were committed to this in the run-up to the general election, why is it now being removed and what steps are being taken to replace it?

  Mr Cameron: We've had to look at every area of spending very closely because of the catastrophic state of the public finances that we inherited: an 11% budget deficit, the biggest in the G20, a situation that put us into the economic danger zone which we had to come out of. We looked at the education maintenance allowance specifically and while there is the piece of research that you quote, there is another piece of quite well-thought-through research that shows that 90% of the money is effectively dead-weight cost, paid to people who would stay on anyway. It seems to me that there are two points to make. First, we are going to be legislating to raise the effective participation age in education to 18 so does it really make sense to pay people to stay on at the same time as doing that? Secondly, as part of a process of trying to drive trust and decision making down to the lowest levels in this country, we will be enhancing the amount of money and resources that college and school heads have to try to target that sort of money on people who need it most. That is, frankly, a better approach than the one that we inherited. But I accept that there will be a spending reduction in this area.

  Q40  Mr Bailey: When do you expect your proposals to come on stream?

  Mr Cameron: We are looking at this at the moment. I think an announcement will be forthcoming. I don't have the exact date for when this will be introduced.

  Q41  Mr Bailey: There is a considerable gap between the implementation of the cuts and the implementation of these proposals which seek to address the issues. What is going to happen in the meantime?

  Mr Cameron: I don't think there should be a gap. There will be a phasing out of EMAs and then the introduction of the discretionary learner fund. That should, we hope, be quite a smooth process because, as I say, we are moving to a situation where we will legislate to raise the participation age to 18. We have to make big decisions about how to focus the money on education. The big decision we have made is to put the money into the schools budget. That's why the spending per pupil is being frozen in cash terms across the Parliament and we are introducing a £2.5 billion pupil premium over and above that so that pupils from the poorest backgrounds have more money following them to whichever school they choose to go to, which is going to hardwire some real progressive thinking into our education system. At the same time we are getting rid of a lot of specific grants, trusting the head teachers with the maximum amount of money we can for them to choose how they best spend it. That is a different approach from that of the last Government, who had a lot of different budgets for education, which made it very complicated, and we think it is right to trust head teachers more.

  Q42  Mr Bailey: Will you have a mechanism for funding FE colleges?

  Mr Cameron: Yes, we will. Again, we are looking for a more decentralised, less bureaucratic mechanism than what we have inherited. I don't know what you have found but always when I have gone round FE colleges, they have complained about the massive duplication of the number of bodies that they have to go to for funding and they would like a simpler system. A bit like a HEFC[4] for universities, they are going to have an FEFC, a further education funding council, which will be much simpler than the myriad bodies we have inherited.

  Q43  Mr Bailey: Can I go on to the implications of the rise in tuition fees because as a result of these proposals, somebody going through university could potentially accumulate up to £40,000 of debt on tuition and accommodation? Given that it is much harder to sell the benefits of a university education to students from low-income and low-aspiration families, it will be a huge challenge to keep the level of applications up. Indeed, the latest statistics show that after a rise up to about 2008, it has been dropping in comparison with the private sector. That puts additional responsibilities on organisations like Aim Higher. Are you going to keep it and if not, what are you going to replace it with? Aim Higher has been very successful in this area.

  Mr Cameron: I can't give you specifics on Aim Higher, but I think the most important thing is that the new system we are introducing is a more progressive system, because students won't pay anything up front and no one will start paying back until they earn £21,000 compared with £15,000 now. I think it will be possible to encourage people from low-income backgrounds to go to university with that sort of system. It comes out of the Browne review, which was an all-party review commissioned by the Labour Government, but with Conservative support, and it gives a boost to the maintenance arrangements. That combination of better maintenance arrangements, nobody paying anything up front and not paying anything back until you earn £21,000 makes it a much more progressive system.

  I totally accept that we still have a challenge to get out to schools in deprived areas and encourage people to apply to university. We will never get more social mobility unless we do that. But looking at the policies we are adopting as a whole—help at nursery school, the pupil premium, and children on free school meals getting some free time at university—all of those things can help us as a Government and as a country to encourage people from low-income backgrounds to apply to university.

  Chair: Much as I would like to explore these issues, I have to bring in Mr Miller.

  Q44  Andrew Miller: I want to move on to the science budget as a whole. I am on record praising the work that David Willetts has done in maintaining flat cash for the research councils' budgets. You said in earlier responses that you tried to have collective discussions. I've been probing an area that I can't get a straight answer on. Perhaps you will give it to me, Prime Minister. There is an interaction between the Browne report, the science settlement, departmental science budgets, the immigration cap and the closure of the RDAs[5] on the effect on our overall capacity for science in the UK. What advice were you given on the interaction of those things?

  Mr Cameron: Crikey, if two-brains Willetts can't answer that question, I don't know what hope there is for me, but let me try. First of all, the flat cash settlement for science gives a good baseline for science in our country. There is an interaction between what's happening at university and, as you say, the immigration rules as well. I would argue that they are all heading in a pro-science direction. On the university changes, HEFCE[6] will focus support on science degrees. I think that this system of graduate contributions is going to focus the mind of the undergraduate much more on, "What is a good course? What is a good university? What will give me a good start in life?" I think all of that is very pro-science.

  On immigration, we are looking at overhauling the system we inherited and, yes, having the tighter control of immigration that this country badly needs—200,000 net immigration each year is too high and needs to come down. Within that, we should have proper regard for people who can come to this country and make a real contribution. Right now, the system doesn't really work like that. As I tried to say in the House yesterday, people are coming in under so-called tier 1 rules and are doing unskilled jobs.

  Chair: Prime Minister, never feel it is necessary to repeat what you said in the House yesterday.

  Mr Cameron: Sorry, you are quite right. Quoting your own speech is the first sign of madness; I will stop it at once.

  Q45  Chair: Perhaps you could tell us, if I might interrupt for a moment, when you expect the criteria to be known.

  Mr Cameron: On the immigration system, we are getting through this very effectively. I would hope that, next week, we might be able to make enough progress to make an announcement.

  Q46  Andrew Miller: All of your answer was predicated on "I think," so I am correct in saying that you didn't receive any advice on the collective impact of all of those issues, one upon another. That might need some thinking about. We haven't got a strategy that engages us on issues like whether we are going to attract people to come in and be our successful Nobel prize winners. How many university departments are going to close as a result of this policy? You don't know the answer to that, do you?

  Mr Cameron: I specifically asked to see the chief scientific adviser when I became Prime Minister and had a proper meeting with him about the big items on his agenda to make sure that this was a pro-science Government. I have appointed as our Science Minister someone whom you said you support—David Willetts is one of the brightest talents in the House of Commons. I think this is a pro-science Government. Of course, lots of different policies will have an impact on science and I think, as I hope to demonstrate, that they will have a good effect. That is why we have a chief scientific adviser.

  Q47  Andrew Miller: Finally, it is therefore a great pity that the chief scientific adviser said to the Lords that he was disappointed at the failure to be consulted on changes in his own Department. The Times Higher Education yesterday had the headline, "'Stupid, ignorant, foolish': peers express dismay at potential loss of scientific expertise in merged BIS post". Now, although David Willetts has assured me today that my concerns and the concerns of the scientific community will be met, isn't it time we had some more transparency, proper engagement, with the scientific community to stop these mistakes being made?

  Mr Cameron: Perhaps I should take away what you say and have a greater think about it. What I'm finding is that the system of having a chief scientific adviser, and indeed scientific advisers in each Department, is a way of helping to make Government policy science-friendly. Have we cracked the problem completely? No, I don't think we have, but I think that is quite a good start.

  Chair: Thanks very much indeed. May I turn to transport and to Louise Ellman?

  Q48  Mrs Ellman: At the beginning of this meeting you told us that you had been involved in taking a strategic look at the cuts and that you had wanted to protect capital spending. You named a number of service areas that you had taken that approach to. I was a little disappointed you didn't mention transport in that. Looking at the actual facts, rather than the rhetoric around the facts, capital spending in transport is actually being cut by 11% and resource spending cut by 20%. Now, that does not suggest that, in reality, you see transport as such an important engine for growth.

  Mr Cameron: I am afraid that I would dispute your figures. We are going to be spending more than £30 billion on transport infrastructure in the next four years. That is actually more than what the previous Government had planned, so those are the facts. Overall, we are spending about £9 billion more on capital projects than the previous Government planned. The reason I didn't have to get too involved in the transport budget is that the negotiations between the Department for Transport and the Treasury went quite well.

  Chair: That is the point that I think you made.

  Mr Cameron: The reason it went well is because—

  Q49  Mrs Ellman: But Prime Minister, the figures I am using are figures from the review and figures from the Treasury review. They are not figures that have come from anywhere else. It might be true that it all could have been worse, but you can't say that you protected capital spending in transport in the way that you are alleging.

  Mr Cameron: I think we can. The point is, the previous Government announced a lot of cuts in capital spending. We inherited that situation. We took that and, in some cases, we added back in money. That is why I am able to say to you that spending more than £30 billion on transport infrastructure in the next four years is more than the previous Government planned. That is a fact, and I think that's important.

  The reason it was a relatively straightforward negotiation between the Treasury and the Department for Transport is because we had decided, strategically, to try to protect capital and where possible to enhance capital, so I didn't get involved in that particular area. I did have conversations with the Mayor of London about the importance of the tube upgrade and the importance of Crossrail, both of which we have managed to protect and are going ahead, so I think it is a good settlement for transport capital. Yes, like every other Department there are reductions in departmental spending, but in terms of capital spending I would say it is a very good outcome.

  Q50  Mrs Ellman: There is clearly a dispute on the figures and the facts, which we will pursue elsewhere.

  At the moment there are very successful regional structures that have permitted local authorities, working with business, to decide strategic priorities for transport. Those are now being dismantled and there is widespread agreement that the proposed local enterprise partnerships will not be able to replace those bodies looking at strategic, rather than very localised transport. What are you going to do to make sure that regional, rather than very localised priorities are determined in an effective way and that areas outside London don't lose out?

  Mr Cameron: That is a very important point. I would come at it from a slightly different angle, because I think that the regional bodies were often quite bureaucratic, quite distant and, in some cases, there were endless studies done but not much actual action. So I don't think it was a perfect system.

  Q51  Mrs Ellman: In this instance I am talking specifically about transport and specifically about how regional allocations for transport were decided. All the evidence from around the country is that the existing structures—local authorities working with business—were very effective in that regard. They are going. There is no clear effective replacement, and we've heard from our Committee in Birmingham, in Hull, and, in the last couple of weeks, from your own Secretary of State, who said that some other structure will have to be put forward for transport. Are you going to take a personal interest in this?

  Mr Cameron: Yes, I will. It is important that we allocate money properly. It should be done on the basis of what has the greatest economic return. When we look at these transport capital projects, we ask very good questions about what is going to have the greatest impact on growth. For instance, we are going ahead with the A11 in Norfolk, the improvements on the M4 and M5 north of Bristol—

  Chair: Again, I don't think today is the day for that valuable catalogue. Otherwise I will start asking you about the A1.

  Mr Cameron: Sadly, I'm afraid that is not on my list.

  Chair: I think Mrs Ellman is trying to get at the issue of how you are going to get decisions of regional implication taken.

  Q52  Mrs Ellman: The danger is that, without an effective regional structure for making decisions on regional, rather than local, schemes, either decisions won't be made effectively or they will become centralised. Your Secretary of State has admitted to the Transport Committee that, if the criteria adopted nationally were applied absolutely, we would have more and more investment in London and the south-east—an overheating of the south-east—and less investment in the other regions. That is why it is very important that there is a regional perspective. Will you take a personal interest in ensuring that, in this change that you have already decided on, regional perspective and regional prioritisation will not be lost in the case of transport?

  Mr Cameron: Yes, absolutely. All I would say is that we can make a success of the local enterprise partnerships, because they will go with the grain of what people want locally and regionally. If you look at the decisions we took in the spending round, there were some major investments into the regions, and there are even more that will be announced. The Government are extremely conscious of that.

  Q53  Chair: Can I make a helpful suggestion that you might like to write to us just to clarify the answer to Mrs Ellman's question?

  Mr Cameron: Delighted to.[7]

  Q54  Sir Alan Haselhurst: If we look back over 60 years, we surely cannot be content about the current state of the rail network—apart from one or two shining examples of major improvement—and passengers are currently bracing themselves for another hike in fares. Doesn't this make it more important that we get the nature of franchising right? Such evidence as there is suggests that longer franchises will encourage the successful bidder to invest more, actually in partnership with Network Rail, to bring about the kinds of improvement that will ease bottlenecks, improve flow and actually then add, in total, to the amount of money that is being spent to improve the network.

  Mr Cameron: I basically agree with that. I think that short-term franchises have meant that there isn't the incentive on the operator to invest in the long-term health of the line and its success. I think where we need to go is longer-term franchises, but with tough penalties if they don't live up to the things that they've promised to do. I think we also have to have a really good look at why costs in the railway industry have got so out of control. Roy McNulty is doing this review for us, and I put a lot of store by that, because—you may have had experiences in your own constituency—when there has been an examination of the case for an extension of a line or for a new line, the cost figures are absolutely astronomical. We have to get to the bottom of why that is the case.

  Q55  Mr Betts: I want to look at the way in which you've helped to try and join up Government thinking in a number of respects, particularly looking at the housing benefit changes. Do you accept that the fundamental problem here is that the level of the housing benefit bill has risen because the cost of housing has risen, which, fundamentally, is because of a shortage of supply? If it is the Government's objective to rectify that and, as the Housing Minister said, to build more houses than were being built before the recession, why, in the CSR, has the money for new affordable housing been cut by more than 50%?

  Mr Cameron: It is an extremely good question. We have got to ask ourselves why we've been chasing ourselves round in a circuit of increased housing benefit and increased costs and, all the while, not building very many houses. It seems to me that we've got to do two things. One is, for the deficit problem, that we've got to look at the explosion of housing benefit—up by 50% over the past five years. We have to look at that, because we have to get on top of the deficit. We also have to ask ourselves whether we can have a system that would encourage more house building, which would ease the constraints of supply. Although I completely accept that we have cut the capital money going into house building, I would argue that that system wasn't working. We had big capital allocations going into housing for the last decade, but it hasn't worked. It has pushed up the price of land; anyone owning a bit of land outside one of the towns we represent has done extremely well, thank you, but we don't seem to have built very many houses.

  What we are doing, as I have said, is getting on top of housing benefit and making some difficult decisions, but we are introducing some real changes to how we support social housing and how we support and encourage house building, which I believe will make a difference. For instance, the new homes bonus will mean that from now on when local authorities build houses in their areas, or allow houses to be built, they will actually benefit. Right now, there isn't much of a benefit to any of our local authorities deciding to support house building. We need to change that fundamental regard in a more decentralised system, which I think will answer your very good point.

  Q56  Mr Betts: I am not sure it does, Prime Minister. On the first point about new ways of funding affordable housing, the new way is actually to make new lettings of existing houses, or of the new houses that are built, at 80% of market rates. Has any calculation been done as to how that will increase the bill for housing benefit?

  Mr Cameron: First of all, how will it affect increased house building? I think the fact is if you go to a rent-based model, it gives house builders the confidence that if they build social housing, they know the sort of rent they will be able to get.

  Q57  Mr Betts: But it will increase the housing benefit bill, won't it?

  Mr Cameron: It will put some pressure on the housing benefit bill, which is another reason why we are trying to make sure that we get on top of the housing benefit situation.

  Q58  Mr Betts: Just in terms of the new homes bonus, can you point to one piece of evidence that shows that if you redistribute the planning grant that is available for this purpose among the number of houses that you need to build to beat the previous Government's progress before the recession came, that would amount to about £1,300 per property? Is that really going to be a sufficient incentive to get you building more than 200,000 homes in this country? Is there any evidence for that?

  Mr Cameron: Yes; ask local authority leaders.

  Q59  Mr Betts: No, is there any evidence?

  Mr Cameron: Yes; if you ask local authority leaders, the ones I have spoken to say, "Right now, although there are a lot of targets, there's not really much in it for us as a local authority if we build houses, because we don't really keep the revenue." Under the new homes bonus, they will keep the additional revenue that they get. It is quite a big move we are trying to make from a very top-down, centralised system to a system where we say to local authorities, "If you attract new business into your area, you keep the business rate. If you get new houses built, you keep the revenue for those extra houses." It is a change in the system, but given that what we have just had didn't produce the houses and produced this rocketing housing benefit bill with record numbers of people on housing waiting lists, I think it's time to try something new.

  Q60  Mr Betts: Given there is quite a lot of evidence that the housing benefit changes—not just in London but outside—and particularly the 30th percentile rule, will actually mean that areas of cities such as Sheffield are no longer affordable for people on housing benefit, including those in work on low incomes, is it still the Government's policy to have mixed communities or is there now a disjunction between the policy of DWP and the policy of CLG?

  Mr Cameron: Of course we want to have mixed communities, but what we are trying to do—something that is quite widely shared across the political spectrum—is to move to a situation where we are not asking working people to pay taxes to support people in housing benefit-funded houses that they couldn't live in themselves.

  Q61  Mr Betts: Many of whom are in work. Many people on housing benefit actually work.

  Mr Cameron: Absolutely. But I think the general principle that I just enunciated—

  Q62  Mr Betts: So that actually goes against the policy of mixed communities, then, does it?

  Mr Cameron: No. As I explained, we support mixed communities, but we have a situation now where you have people claiming £20,000, £30,000, £40,000 or £50,000 per year in housing benefit. You have people in Sheffield paying their taxes so that people can live in houses that they themselves couldn't dream of living in.

  Chair: Order. Anne Begg.

  Q63  Miss Begg: Thank you, Chair.

  Picking up on what you have just said, Prime Minister, a lot of people accept that the housing benefit bill had to be brought under control, and you have given us some examples. There are quite a lot of different aspects to the policy and to the cuts in housing benefit, and I want to home in on one particular one, because I don't understand the rationale for it. I have heard the rationale for all the others, and you have just given some detail about why the caps have been brought in. This one is about those who have been a year on jobseeker's allowance. After they've been on jobseeker's allowance for a year, they are to lose 10% of their housing benefit. I've looked through everything I've received as Chair of the Select Committee and from elsewhere, but I cannot see, and I haven't heard, a Government Minister explaining the rationale behind that particular decision to cut 10% from the housing benefit of those who have been out of work for a year.

  Mr Cameron: I think the rationale is this: everybody knows that, in some cases, the fact that somebody is on jobseeker's allowance and housing benefit means that the incentive to work is less, because there is a danger of losing the jobseeker's allowance and the housing benefit. So the idea behind that 10% reduction is to sharpen the incentives to work. Taking the example of London, in London there are 34,000 people who have been on jobseeker's allowance for longer than a year. They are all people who are supposed to be available for work and seeking a job, and in London there are 30,000 new vacancies in any given month—400,000 new vacancies each year—so that is the reason for that.

  Let me make one more point: 90% of people on JSA do find a job before the end of a year, and we will be introducing the Work Programme to make sure that we try to help everybody find a job as quickly as possible. So I hope that this policy will have as little effect as possible but, none the less, because of the link between JSA, housing benefit and incentives to work, I think that it is worth pursuing.

  Q64  Miss Begg: Let's hope that it has quite a lot of effect, because in the Red Book it is proposed to save £100 million in the first year and £110 million the year after, so these are not small amounts of money. You are looking perhaps to lessen the marginal tax rate for someone going into work, but it shouldn't be the case that someone who has been out of work for a year loses 10% of their housing benefit, regardless of whether in that year they have moved house to find somewhere cheaper. We may have a position where someone has done everything that the Government have asked of them, but will still be affected. They have signed up for work—they are on JSA, yes, but they have gone to all the appointments that Jobcentre Plus has made for them—they have gone to all the interviews, they have applied for hundreds of jobs, and, with the best will in the world, they have not been able to find a job. This will be the first time in the welfare history of this country that sanctions are brought against such a person who has done everything that the Government have asked of them. They will still be sanctioned and they will still lose their housing benefit. That is quite a big change so, again, I come back to my original question: what's the rationale behind that? It's not going to encourage people into work, because that sanction will follow them wherever they try to move. They are going to have less money with which to get into work, because they won't have the money to pay for transport and all the other costs associated with work.

  Mr Cameron: I don't really accept that it won't increase the incentive to work because, as I have said, there is a problem. We all know that there is a problem where people are on jobseeker's allowance and maximum housing benefit, which can be an incentive not to work.

  Q65  Miss Begg: But some of those individuals might already have moved to the cheapest house that they can find, but after a year they will still lose 10% of their housing benefit. If you are on £65 a week JSA, to lose 10% of your housing benefit is quite a large proportion of your income, which is meant to help you get into work. That just won't happen, so what you're saying really doesn't add up.

  Mr Cameron: We're saying that we want to do much more than currently happens to help such people to get work in the first place. The whole point of the Work Programme is that it will give tailored help and support—not just from the state, but from voluntary bodies and private sector organisations—to help those people into work. So, yes, there is a number scored in the Red Book, but, obviously, if we can get people into work faster than that and reduce that number, we will be getting more tax revenue from the people who we get into work.

  I have to bring you back to the problem of housing benefit. Here is that benefit, which is up 50% in the past five years—everyone accepts that it's out of control—so we have to take steps to deal with it. We have tried to take a range of different steps: introducing the housing benefit caps; moving to the 30th percentile; this issue; and a number of other things, including the single room rate extension. None of those steps is easy—I completely accept that none of those things is easy. It's no good saying, "We're all in favour of getting on top of housing benefit," but then saying, "Well, I don't like this change, that change or the other change." We have to try to find a package of changes for housing benefit. It's not going to be radically reduced; all we're going to be able to do is to try and stem the increase and perhaps have a modest reduction.

  Miss Begg: But I think my point is that this particular measure is actually counter to everything else you're trying to do. It's also worth pointing out that people won't go into the Work Programme until they've been on JSA for a year, so they only get the help once they've already been sanctioned.

  Chair: I think we have come to a straight point of disagreement. No doubt you will want to take Miss Begg's thoughts away and reflect on them. Margaret Hodge has a quick supplementary question.

  Q66  Margaret Hodge: This is just from a constituency point of view. Prime Minister, you said that you support mixed communities, but it is undoubtedly the case that the cap and the 30th percentile that you will be introducing in the housing benefit changes will mean that poorer people cannot afford to live in rented accommodation in Notting Hill, where you live, Islington, where I live, or in Westminster, where we all work. They will be forced out to places such as the one I represent—Barking—where you know that pressure and social unrest is already being caused by very rapid changes in population and the lack of affordable housing. I simply ask you whether social unrest is a price worth paying and about the impact that can have with the extreme right.

  Mr Cameron: Margaret, find me a street in your constituency, and let's go down it together and ask the people living there who are earning £20,000, £25,000 or £30,000 whether they are happy to be paying towards the rent bills of £30,000, £40,000 or £50,000 of people living in central London. Frankly, I think that is more likely to lead to social unrest—when people find out how much money they're paying in taxes for people to live in houses they couldn't dream of living in themselves.

  Q67  Margaret Hodge: I don't think you understand the anger in my constituency at the inability to access affordable—

  Chair: Order. This is not Wednesday afternoon.

  Mr Cameron: They're not helped by the fact that we are wasting money.

  Chair: Order. Prime Minister, we do constituency business on Wednesday afternoons.

  Q68  Keith Vaz: I think we'd all like to come down this street in Islington when you and Margaret Hodge go for a visit.

  Yesterday, the deputy leader of the Labour party and you had a robust exchange over police numbers. This morning, I telephoned the chief constable of Greater Manchester, who confirmed that if these cuts are implemented, he will lose a quarter of his work force in four years. As you know, the Police Federation has talked about 20,000 front-line officers going and KPMG, in an independent study, has talked about 18,000. That is definitely going to affect front-line services. Do you agree?

  Mr Cameron: I don't necessarily agree, because it's going to depend on how well we manage our police forces. I didn't use this quote yesterday, so I'm not breaking our rule of the first sign of madness being quoting your own speeches, but Peter Fahy, the chief constable said: "the end result will be more resources put into frontline policing and a more efficient and effective service for the people of Greater Manchester." Sorry; I should have read the first bit of the quote too: "While the situation is obviously unsettling"—and clearly it is unsettling, which is why we are having this debate—"the end result will be more resources put into frontline policing".

  Since yesterday, I have found some more figures. The total number of police officers in Greater Manchester is 8,000, and there is a total police staff of 4,200. Whoever was in government—if Gordon Brown were sitting here—would have to reduce the Home Office budget and make difficult decisions, and we'd be saying to the police, "You are going to have less money over the next four years." As politicians, leaders, and the rest of it, the question is to work out whether we can try and get more for less. I don't want to single out Greater Manchester, but when you look at 4,000 staff as opposed to 8,000 officers, and when you look at 187 people in human resources, we have to do better than that. If he himself seems to be saying that the end result will be more resources put into front-line policing, let's get behind him and try to deliver that.

  Q69  Keith Vaz: Sure. Yesterday you were very clear, and you are clear today, that there are back-office staff, who you kept mentioning yesterday in your reply. I have a list of 86 different kinds of posts that exist in a local police office. The fact is that we are not expecting police officers who we want to see on the beat—visible policing, which is what our constituents want—to do the jobs of, for example, a telephonist, a payroll manager or a caretaker. There has to be a line.

  Mr Cameron: Absolutely. No, if anything, one of the problems was that because the last Government, for understandable reasons, targeted the number of officers, we ended up with officers doing HR, IT and back-office functions. When you set a target like that, people do rather perverse things in order to meet it. What we have to focus on is visible policing on our streets and trying to minimise the back office that is there to support that.

  Now, what are we doing to help this process? Well, we are freezing police pay for two years—it is a difficult decision, but that will help police forces. We are looking at the allowances and trying to rationalise some of them. We are getting rid of the forms I mentioned yesterday—the stop form and others—which will massively reduce the hours spent on police time. But we all need to say to our police forces, and I will have this conversation in the Thames Valley, "What are you doing to procure your vehicles with other forces? What are you doing to share helicopter assets? What are you doing to combine your diver teams?" There is a huge amount. I don't want to see force amalgamations. I think that was a mistake the last Government made—people don't want it—but you can certainly amalgamate a lot of support functions, saving money. I think there is a big agenda there. We have hardly even scratched the surface.

  Q70  Keith Vaz: Prime Minister, you are right that there is a big agenda but your own chief constable, Sara Thornton, said that she would see a noticeable reduction in service. That means not providing something that was provided before. If, as a result of these cuts, crime rises in Thames Valley, for example, and in other parts of the country, would you look again at the police budget in order to make sure that they have the resources they need?

  Mr Cameron: Of course, this Government will have an ongoing process of looking at how well we are doing, how money is being spent, whether we are getting value for money and the rest of it, but I think we should start from the proposition that we have got to try to get more value for less from the police. Sara Thornton, the chief constable, actually came to my constituency surgery to discuss this and she said—I hope I'm not misquoting her—that looking at things like a 15% reduction was manageable. Now if we can make the difference between the 15% that some police forces think is manageable and the figures set out in the Red Book—we can do that through the freeze, through paperwork reductions and through changing allowances—I think this is deliverable without seeing a reduction in visible front-line policing. It is going to be challenging—of course it is—but let's start from the proposition that all of us should be saying to our forces, "What are you doing to try to take costs out of the back office?"

  Q71  Keith Vaz: A final question about the disorders of last week or the week before last. Clearly, mistakes were made and there is going to be an investigation by the Metropolitan Police Commissioner. If it is found that a lack of resources contributed to this problem, would they be provided by the Government in the future?

  Mr Cameron: I spoke to Paul Stephenson, the Metropolitan Police Commissioner. I was in Korea, obviously, for the G20. In our conversation, he did not mention resources at all. I am not surprised. Frankly, this was a failure, as he put it—I'm not criticising him and I think he was very candid, upfront and honest about it—of intelligence and a failure of planning, and it shouldn't happen again. It was an extremely thin blue line in front of that building, and we saw that blue line, frankly, pushed away, swept away almost by that very badly behaved crowd of people, who did appalling things when they got into that building, by the way. That should not happen again, and I know that Paul Stephenson won't let that happen again. There are, I think, plenty of police officers in London to stop that from happening again. I don't think it was a shortage of resources; it was a failure of planning and intelligence, as he himself has said.

  Q72  Mr Robertson: Prime Minister, the background to my question on Northern Ireland is the increasing terrorist threat which was recognised by the Home Secretary back in September, when she increased the assessment level. I know that the decision on the police budget is devolved, but obviously you have responsibility overall for security. Is it your understanding that the police budget in Northern Ireland will remain the same? Or will it be increased or lowered in the coming years?

  Mr Cameron: Obviously, it is a devolved issue; it is a matter for them. I completely agree with you that the security situation is troubling. It is an issue that has been discussed by the National Security Council. We clearly look at all the things that we can do to help and all the contingency plans that we have to make. I think we are standing by the commitments made by the former Prime Minister in terms of the training college for police and other services—the capital expenditure. Obviously, the decision makers in Northern Ireland will need to make their decisions about how to spend their money, but security must be a very great concern with what we have seen.

  Q73  Mr Robertson: As you are aware at Hillsborough just before policing was devolved an agreement was made by the last Government which the Conservative party said it would honour. Again, I understand that the matter is devolved, but will the Northern Ireland Executive have sufficient money to be able to provide the police with the resources they need? There is a growing threat. A third of the police budget, according to the Chief Constable, is spent entirely on security matters; they have all the other issues to deal with, just as police forces do.

  Mr Cameron: We believe they have what they need. We are standing by the commitments made by the former Prime Minister and believe that we are meeting them. Obviously, this is something we have to keep under review and look very closely at the circumstances they are in. There was agreed access to the reserve, as proposed by the former Prime Minister. We stick to that. On devolved policing and justice, it is important that we say to colleagues in Northern Ireland, "You must try to make the best decisions you can with the budget you have, allot your resources accordingly and then come back to us if there is a real problem." Having devolved, we shouldn't try to stand on their shoulders the entire time. It is important that that is the case.

  Q74  Mr Robertson: I understand it is up to them to decide how they allocate the money they are given, but it is your decision how much they are given. The Select Committee was in Ireland just last week, and the Assistant Commissioner of the Garda, in spite of the difficulties they have, gave us an absolute, categorical assurance that there would be no let-up on policing, particularly of the border area with the Republic. Can we give that same guarantee in Northern Ireland?

  Mr Cameron: Yes, I believe that we can. Perhaps I could write to you, because this is a very important area and I don't want to mislead you in any way. I believe that we can. That is the question we asked in the National Security Council and the discussion that we had. I would make the general point to remember that it is important for all the devolved areas. In Northern Ireland, public spending is 25% per head higher than in the UK, and its overall settlement is -6.9%, compared with a situation in many Departments that is a lot tougher than that. Perhaps I will drop you a line about the precise terms and what guarantee I think we can give about the level of border security.[8]

  Q75  Mr Robertson: Finally, the Secretary of State has said that there won't be any more open-ended, very expensive public inquiries into the past, and that that will be the responsibility of the Historical Enquiries Team. Again, given the budget constraints, will that team be able to carry out the work that it needs to carry out—if it is going to be responsible for it—to the satisfaction of people in Northern Ireland, who have been so desperately and badly affected by the troubles?

  Mr Cameron: That's a very good question. I hope it will be able to. I think that, following Saville, we should try to avoid open-ended inquiries in the way that you say. That puts a burden on the Historical Enquiries Team, which has a huge amount of work to do and limited resources. Of course, that is something we can look at. Coming to terms with the past is a very big part of the peace process. I completely understand that and would like us to try to do it, while avoiding big inquiries if we can.

  Chair: The major part of our time has been devoted to the spending review, so I want to turn to some other issues. The first is the Government's claim and aspiration to be the greenest Government ever.

  Q76  Joan Walley: Prime Minister, you said that you want this to be the greenest Government ever and have given a great fanfare to that. Listening to the exchanges so far, it struck me that, on transport policy, you said that money is to be allocated properly on the basis of greatest economic return. Where is sustainable development in all of this? What are you doing to embed sustainable development, so that when decisions are being made, it is not just economic decisions, but environmental, social and right the way in this cross-cutting way?

  The coalition Government have abolished the Sustainable Development Commission, so there is real concern about what will take its place, how sustainable development will be embedded and how it can be monitored. Will there be targets? How will we know that they have been the greenest Government ever?

  Mr Cameron: Okay. You are quite right to pull me up on my answer on transport. All transport projects are looked at in terms of not only their economic benefit, but their environmental impact.

  Q77  Joan Walley: How? That is the question.

  Mr Cameron: By taking into account their impact on the environment, carbon and all those issues. In terms of the Sustainable Development Commission, what we have tried to do, in a difficult spending round, is to put money into things that will make a difference—like the green deal, like carbon capture and storage, and like a green investment bank, which will have real money to spend—rather than have quite so much monitoring and evaluation.

  In terms of how we will know how we're getting on, because of the last Government's Climate Change Bill, which we supported and in many ways proposed, we have the carbon budgets so that we can see how we are making progress. Look, obviously, we made difficult decisions in the spending round, but I think, overall, when you look at what we managed to do on the green front in terms of CCS,[9] feed-in tariffs, renewable heat incentive and the rest of it, I think it got a pretty warm welcome from green groups and I think deservedly so, because we took some difficult decisions to safeguard some important projects.

  Q78  Joan Walley: I want to ask briefly about the proposals for the green investment bank and those measures that you have just described, but just before we leave this subject about embedding sustainable development, surely, it has to be done in a cross-cutting way. Is this something that you are going to give your own personal commitment to? Is there going to be a Cabinet cross-cutting committee? Because it is not just about how green are your Government estate policies; it is how you embed it into every piece of regional policy, transport and defence. I haven't heard that mentioned at all just now.

  Mr Cameron: That's a very good point. What we've done across Government is have, for each Department, quite clear structural reform plans. So instead of setting targets, we've actually just set out what each Department is going to do in terms of the legislation it will pass, the appointments it will make and the regulations it will introduce—explaining what it will do to reach the outcomes we all want. Obviously, that begs a huge question: what about things that cut across Government? With carbon and greenery, we need to have a cross-cutting structural reform plan, which we will put in place. I think that you are completely right about that and perhaps I can write to you with some details about how that will work.[10] There are some issues that cut right across Departments, and this is obviously the most important one.

  Q79  Joan Walley: Just one quick question then: you employed Sir Philip Green to review Government efficiency and to look at the whole issue of procurement. Did his specification from you include what to look at in terms of sustainable procurement?

  Mr Cameron: His commission was really to look at cost saving. It wasn't part of a green agenda; it was really: let's just get someone from the outside to come and look at things such as procurement, IT and some of things that Government do centrally. I think he produced a report—it goes back to Margaret Hodge's question, really—can we have some confidence that we can actually remove some of these back-office costs without cutting the front line? That is more what it was about.

  Q80  Joan Walley: But isn't the danger, before you have a look at your briefing there, that that will set the whole ship of Government in one direction and not look at embedding sustainable development and actual green procurement, which could do huge amounts to improve local economies and, at the same time, reduce emissions right the way across the board?

  Mr Cameron: I don't think it will embed that thinking because we are providing transparent information on environmental performance—and transparency is the best thing you can do on this front—and we are going to be publishing the carbon footprint of our supply chain. Those things are embedded, but the specific purpose of Sir Philip Green was to just look broadly across Government at cost-saving measures and what they could achieve. Certainly, because we have carbon budgets through the Bill, because we have this approach on transparent information and the carbon footprinting of our procurement, I think all those things will be—I'm going to sound like a jargon king—hardwired into our approach. There we are—I'll try not to roll out any more pilot schemes in the next 10 minutes.

  Q81  Joan Walley: Finally, on the green investment bank, which I think everybody agrees is going to be so important, is it really, truly going to be a bank, or is it going to be a fund? Is there likely to be a dispute between the Treasury and the Department for Business, Innovation and Skills, and might you be taking as keen an interest in this at Cabinet level, as you did in the comprehensive spending review that we have just heard about?

  Mr Cameron: Yes, yes, yes and yes to all of those questions.

  Q82  Mr Yeo: Prime Minister, there is no more ardent supporter of your aim to lead the greenest Government ever than myself, though another policy I am equally enthusiastic about is that for fixed-term, five-year Parliaments. Now we know that the next general election is in 2015, can you tell us what criteria you will use to judge the success or failure of your Government as the greenest Government ever?

  Mr Cameron: When we produce the structural reform plan that goes across Government for carbon and greenery, we will be giving you the weapons, as it were, to beat us if we don't fulfil all the things that we said we would do. These structural reform plans are not a thrilling read, I have to accept, but they are very clear. In the one for Chris Huhne's Department, it says: set up a green investment bank, deliver the carbon capture and storage pilot, establish the green deal with all sorts of benchmarks about when it needs to be done, introduce the renewable heat initiative by a certain date. I don't just want to wait for five years to see whether we've been any good at this stuff. I want to give you the tools, so that when I come back here—whenever it is—you can say, "Your structural reform plan said you were going to have done X by now. Why haven't you done it?"

  It is not targets, because what tended to happen in the past is that we set targets for things, missed them and then said, "Well, shucks, that's life." This is actually setting the actual act that you've got to take, and then you can see whether you've taken it or not. I think we've got a good list of things in this area, such as introducing feed-in tariffs. I have mentioned the renewable heat initiative and CCS. There is electricity market reform and the 10% cuts for Government Departments by the end of the first year. There is a pretty good set of things that I think you'll be able to judge us against—all within the carbon budgets that were set out by the previous Government.

  Q83  Mr Yeo: There will be some quantifiable measurements. You may not want to call them targets, but we will know how many million homes have availed themselves of the green deal and how many renewable, low-carbon energy projects, which have got planning consent and have been funded, are in the pipeline. So we'll know what we'll have by 2020. We'll know how much money the green investment bank has lent or invested. Those will actually all be measurable.

  Mr Cameron: Absolutely. The proof, as it were, is that Cabinet Ministers are already complaining that they've had to put things into their structural reform plans that they may not be able to meet, and it'll make life very awkward in front a Committee like this or the House of Commons. That is part of the point in a way, which is to try to have a set of plans that are quite measurable and verifiable and that are not all in far-off target land. They are on actual concrete things that you do on the ground. So I hope that we'll be able to chart the progress as we go along.

  Q84  Mr Yeo: Do you accept the suggestion from the Climate Change Committee that electricity generation should be substantially decarbonised by 2030? Just to put that into context, it would mean an 80% reduction in emissions per unit generated by 2030.

  Mr Cameron: Basically, yes, for the reason that people are only just waking up to, which is that if we are going to move to a world of electric cars and more ground-source heat pumps and, effectively, electricity-backed heating in our homes, we are going to see a potentially massive increase in electricity demand. If we don't decarbonise electricity, we've got no hope of meeting all the targets that we're all committed to. There are intensive discussions in Government right now about how we best reform the electricity market to make that happen—to what extent do we need all the different tools to make this happen and what sort of energy mix is likely to result in terms of nuclear, gas, wind and other renewables? So, yes, I do accept the basic proposition, and a huge amount of work is being done, and I think the DECC is doing it very well.

  Q85  Mr Yeo: You have mentioned carbon capture and storage, and the first competition is funded—it was announced in the CSR at £1 billion. Have you decided how to fund the remaining three competitions to which the Government are committed?

  Mr Cameron: No, we haven't yet. We are committed to them, as you said. It was important to have that £1 billion—it is quite difficult to hold on to £1 billion in a tough spending round—for the first carbon capture and storage project. It will put Britain a long way ahead of other countries, but, obviously, we couldn't do everything we wanted to.

  Q86  Mr Yeo: Do you accept that, if we are going to achieve these goals of decarbonising electricity, which in turn will enable us to achieve the carbon budgets that the Climate Change Committee is setting out—another one is coming next month—the inevitable consequence of that, coupled with our concerns about security of energy supplies, is significantly higher electricity prices?

  Mr Cameron: I think that electricity prices were going to rise anyway—if I can put it that way—because so much of our electricity infrastructure is out of date and because so much of our nuclear industry is about to come to the end of its life. There was an increase in electricity prices built in anyway.

  The debate that we're having at the moment is on what sort of model our electricity market should be going forward. Do we want to go on with this quite market-based model and to just have targets for carbon reduction and allow the market to deliver that carbon reduction? Or do we want to take the slightly more planned view that we want to try and effectively shield the public from excessive further rises in electricity prices by having some quite long-term guaranteed feed-in prices. There is a proper debate going on around the table, as with the other areas of Government, about what sort of model will deliver what I think we all want, which is decarbonised electricity, good security of supply and some certainty about pricing.

  You are quite right, however, that prices are on an upward trajectory. They would have been anyway, but if we go for a slightly more planned approach we may be able to protect people from very big oscillations in prices. Frankly, no one knows what will happen to oil and gas prices, particularly with the discovery of so much shale gas. Is that a real game changer in energy prices? I don't think we know that yet, and I don't think we should take a risk on that basis.

  Q87  Chair: When do you expect a conclusion of this debate? We are just entering winter, when people are going to be worrying about energy prices.

  Mr Cameron: This debate doesn't really affect the current year; it is more about looking ahead at how we will structure the electricity market. With all these subjects on which the coalition hasn't yet completed its work—whether that's immigration, control orders or this issue of energy policy—so far, I would argue, we have gone through difficult subjects such as higher education, the comprehensive spending review and defence and we have come up with good, well-thought-through answers. We will do the same on this, but it will take a little bit of time.

  Q88  Miss McIntosh: Prime Minister, you have described DEFRA as the "fourth emergency service". It is responsible for two of the greatest risks that the country might face; first, as in Cornwall at the moment, the risk of flooding and, secondly, the risk of animal disease outbreak. Why did you impose the second largest budget cut on the green Department?

  Mr Cameron: Describing these cuts as imposed is a slightly pejorative way of putting it. We had to find reductions across Government, and the Departments that were not protected had to find some quite big reductions. What we have done in DEFRA is to preserve the important areas of spending. On flooding, for instance, we will be spending £2.1 billion on flood and coastal defences over the next four years, which is broadly the same as the amount we spent over the past four years. We can actually add to the Pitt review, because it should be possible for local areas to top up grants that are given to them for flood defences.

  In terms of animal health, we are spending £356 million a year on this, and it is only fair that we ask the agricultural industry to share some of this cost. Obviously, it should be able to share some of the decision making about how the money is spent.

  Q89  Miss McIntosh: I'd be interested to know how you think the local areas are going to top up, when we are already topping up through levies to the flood defence committees. In your debate in May 2008 after the flooding in Witney, you were very concerned about the level of funding of the Environment Agency. The rural communities were not benefiting quite so much and there was a severe shortage of flood engineers. We know what is in the comprehensive spending review regarding flood defences, but we are not aware of how the cuts to local authorities will impact on flood defence spending when they take over the role for flood risk management schemes from 1 April.

  Mr Cameron: That is an extremely good point. I would say that the Government have their responsibility to fund flood defences properly, which I think we are doing. I have found in my constituency that, yes, there is a concern that rural areas get left out, because you can never find the same number of houses at risk as you can in large urban areas, but I also find a frustration that, sometimes, just because you don't make the mark for what the EA would fund, you tend to get nothing rather than everything. The idea that Sir Michael Pitt looked at, which we support and will be making some announcements about, is that it should be possible for local areas and communities to say, "Even if we can just get a little bit of funding for that project, we can add to it ourselves." At the moment, there is quite a lot of all or nothing in the way it works.

  Q90  Miss McIntosh: We know that you like trees; are the Government still committed to their tree-planting programme? Can you give an assurance today that in the sell-off of any part of the Forestry Commission estate, elevated projects such as the one in North Yorkshire at the moment—where trees are being planted and peatlands are being created; it has biodiversity and flood defence issues—will not be jeopardised in any way?

  Mr Cameron: I think I can give that assurance. We need to have a good tree-planting programme in this country, but in terms of the Forestry Commission I don't think it is absolutely vital who owns a piece of forest. The question is whether there is good access to it, whether it is well kept, and whether it supports biodiversity. Those are the questions that matter.

  Almost 70% of England's forests are owned by private companies or individuals. There is an idea that a forest is only worth while and benefiting the nation and the public if it is publicly owned. We don't apply that idea to other areas, and I am not sure that we need to apply it to forestry. We want it to be properly regulated, and we want the Forestry Commission to do its job, but I think that people shouldn't be worried about the innovative financing that we are looking at.

  Q91  Miss McIntosh: Finally, are you aware that one of the perverse consequences of the Fixed-Term Parliaments Bill and the fact that there won't be a Queen's Speech until November 2012 is that there will be a delay to the Water Bill, which is meant to be a flagship policy?

  Mr Cameron: I am not aware of that. I don't necessarily see why it should cause a delay, because the reason for this long Session is to get in sync with Queen's Speeches in the spring/summer, when the election would be, which is a logical move. That doesn't stop us introducing legislation before the next Queen's Speech. That might just be an excuse that you're being given. I will go away and see if I can find out.[11] Perhaps they haven't finished drafting it, or something, rather than that.

  Chair: A very quick word from Mr Clifton-Brown.

  Q92  Geoffrey Clifton-Brown: Sorry, Prime Minister, but I want to go back. In terms of decarbonising the electricity sector, do you accept that in the future we will need a substantial nuclear power-generating capacity? If you do, do you accept that urgent decisions are needed, so that we get new nuclear power stations built in time for when the existing ones are decommissioned?

  Mr Cameron: I do think that nuclear is likely to play a good part in the new mix of electricity. I think that it should be done on the basis of no specific nuclear subsidy. I hold to that, and I think that it's right. We shouldn't be giving guarantees to businesses on clean-up costs for which they are not prepared to take responsibility. I am encouraged, and I have had meetings with EDF, which is going ahead with building nuclear power stations in this country. I think that EDF is confident that the decisions that need to be made are being made to give it the certainty to make the investment. It seems to me that we're cracking on with the decisions that are necessary to give that certainty.

  Chair: I hope that Mr Miller has a question that admits of a short answer.

  Q93  Andrew Miller: In your answers to the previous four questioners, you covered issues that have massive science and engineering implications, yet earlier you seemed to accept that there hasn't been such cross-cutting collaboration in the establishment of your science policy. Starting tomorrow, are we going to see such cross-cutting work in all areas of science and engineering?

  Mr Cameron: I think, Andrew, that you are saying that I need to spend more time with my scientific advisers, and I will certainly do that.

  Q94  Mr Jenkin: On the questions of national strategy, forgive me for asking a slightly cheeky question, but did you ever hear of an organisation called ARAG?

  Mr Cameron: No.

  Q95  Mr Jenkin: Well, it was an organisation based at Shrivenham Defence Academy. ARAG forecast that there would be a banking collapse and that it would be the largest risk to the security of the nation. Unfortunately, the then Prime Minister, Gordon Brown, excluded it from his national security strategy—he very deliberately did so—and it was abolished to save £1 million. Do you agree that there is a lack of such strategic thinking capacity in government?

  Mr Cameron: I think that the answer to that is probably yes. In the modern world, Governments inevitably get very focused on the short term, on what has to be delivered, on the next Queen's Speech and on the legislation that is being drawn up. It is important to try to get Governments, or people in government, to stop, to sit back and to look at the big picture, to think strategically and to take time to think. It's extremely difficult to do that, because of all the pressures of political and Government life. I hope that we did that in our strategic defence review. We purposefully separated the security strategy from the subsequent work so we could spend some time looking at the risks and opportunities for Britain. Did we spend long enough? People will always be able to make an argument for spending longer, but I accept the general premise that there is not enough strategic thinking in government as a whole. That is because of all the pressures that are faced.

  Q96  Mr Jenkin: In our report "Who does UK National Strategy?" we very much welcomed the establishment of a National Security Council as a big step towards better strategic thinking, but we also recommended that the Government should recognise that there is a community of strategic thinkers in government who should be treated and trained as such. There used to be a six-month Civil Service College course on strategic thinking; there is now only a one-week module. Will you take forward these recommendations that we should educate strategic thinkers across Government, like we educate statisticians and finance managers, so that Ministers are given better support on all the possibilities, analysis and assessment of the parameters of the decisions that they have to make?

  Mr Cameron: I will certainly look at it. Part of the problem, and it sort of goes to Andrew Miller's question about how we consider science, is that it is all very well training up the strategic thinkers and having Government scientists, you need to make sure that the politicians have got a bit of time to stand back and listen to what the strategists, the scientists and others are telling them. That is the difficult thing because inevitably there are the huge pressures of what has to be done today, tomorrow, this year, next year, rather than trying to think five or 10 years in advance. We have to try to find a way to do that better. It is about how Parliament works. It is about how the national debate works. It probably has something to do with m'learned friends from the press as well. We have to try to do that better as a country. I don't think there is any one single answer. I suspect that having good, well-trained people to help you do it is part of the answer.

  Q97  Mr Jenkin: Part of our report is about understanding what we mean by strategy, which has become a ubiquitous term that we use in place of "plan" or "plan of action". Strategy is about reacting to the short term intelligently, as well as planning for the long term—it is not just about horizon scanning. Could I invite you to consider that Ministers will be able to do their jobs better if they are more often confronted with alternative scenarios and different parameters? If that staff work—if that business of analysis and assessment—is done, much like it is done through the Joint Intelligence Committee and the joint assessment staff for intelligence and security purposes, it needs to be across a broader range of policy.

  Mr Cameron: I agree with that.

  Chair: We didn't think you would say no to it.

  Mr Cameron: I do agree with that. You have to make sure that this is not just motherhood and apple pie and, "Yes, we must all spend more time thinking strategically." You are right that it is sometimes about how you react to short-term things as well as planning for the long term. I have been pleasantly surprised by the way that if you create something like the National Security Council, the machinery in the Cabinet Office underneath it enjoys doing, and does do quite a lot of, strategic thinking about resilience, about threats and about future developments. Things like cyber warfare will be a massive problem today and in the future. I have been quite impressed that people are thinking strategically and advising us strategically about these issues.

  Q98  Mr Jenkin: But the NSC has very few staff and we recommend that it be given a responsibility for national strategy, rather than just threats and contingencies and the negative stuff—about the positive possibilities and opportunities facing our country as well as the risks.

  Mr Cameron: I saw that bit of your report. I think the only difficulty is that if you are not careful, national strategy then becomes what the Cabinet ought to be. If you so broaden it, you might find that the National Security Council loses its very important focus on security and goes off into all sorts of different tracks, and we lose something that is really vital: that we are thinking about our national security in the round.

  Q99  Richard Ottaway: Prime Minister, one of the welcome objectives of the National Security Council is its efforts to improve cross-departmental co-operation. But going against the grain of that, we've got single departmental budgets, which tend to hinder cross-departmental work, and we have abolished public service agreements, which used to set cross-Government goals. Do you think you are doing enough to incentivise cross-departmental co-operation in this field?

  Mr Cameron: That's a very good question. I think so. We looked at this in opposition and again in government—should you do more to pool budgets? It gets fantastically complicated. It seems to me that the right answer is that if the National Security Council is discussing Pakistan, and it comes to a series of conclusions about what our stance and relations should be, every Department should follow those conclusions. So, DFID will be spending more money on mending a fragile state, the FCO should be upgrading its relationship, and so on. Every Department has a consequence from what the National Security Council has decided. I do not think that it matters that the whole budget is not pooled, as long as Ministers are incentivised and judged on whether they are delivering what the National Security Council has decided.

  Q100  Richard Ottaway: Moving on, I had the privilege of being there when you signed the bilateral treaty with France the other day. What priority are you going to give to bilateral agreements over multilateral agreements, such as the NATO agreement? How do you see the two slotting into each other?

  Mr Cameron: I don't think that it's an either/or. NATO is the cornerstone of our security. I am going to the NATO Council this weekend. The reason for the French agreement was that we are just two countries with very similar armed forces which both want to see sovereign capability enhanced, so it makes sense to combine in some areas, because we will get more bang for our buck—or, indeed, our franc. Sorry, not franc; euro. I don't want to contribute any further to euro woes. Where was I?

  I don't think that you have to choose between the two. The question I ask is: what is in our national interest and what maximises our national interest? Does membership of NATO? Yes, of course it does. Does a big aid budget? Yes, it does. Does a deal with France over defence? Yes, it does. It is simple: what is our national security and how do we best deliver it?

  Q101  Richard Ottaway: Can you see us offering bilateral assistance to France in one of its military operations?

  Mr Cameron: If, for instance, the French came to us and said we should work together because there is a problem in Kosovo or an African country, we would decide separately on each occasion. There is no danger of us being corralled into some French adventure, or vice versa. We would have the capability to do things together, as we have done in the Balkans, for instance, and that would all be to the good. Some people wrote that this was the end of the British armed forces being independent. That was completely ridiculous. It is does not affect the independence of the British armed forces at all. It enhances our sovereign capability. It means that we can have more A400Ms, we can have better equipped tanker aircraft, we can have more effective armoured vehicles—that is what we can get out of this—and we can save money on nuclear research, all of which we can put back into defence for more effect. It certainly doesn't mean that we will suddenly be careering off around the world because the Elysée Palace says so—of course not.

  Q102  Richard Ottaway: As you have just said, you are off to Lisbon tomorrow. What do you see coming out of Lisbon at the moment? Will it be a landmark summit? The strategic concept process is rather split between those who want to stick to the old territorial limits and those who want to see an out-of-area expeditionary capability. On which side of that debate do we sit?

  Mr Cameron: I think that the strategic concept—look, in this life that we all lead, you read enough boring official documents that are completely impenetrable—was beautifully clear in how it was written. I told its author the Secretary-General that myself. I think that it is a good vision for NATO which is about both European defence and about being able to act collectively for our wider security, as we do in Afghanistan. I hope that what comes out of the Council is real solidarity over Afghanistan—that we are making progress, that we must do this together, that we must fill the training mission, and that we must go on training up the Afghan army and police. That should be the pre-eminent conclusion of it.

  Chair: We will be turning to that in a moment.

  Q103  Richard Ottaway: The strategic defence review places emphasis on the importance of the World Service. As you know, the responsibility for that is being transferred to the BBC. The Foreign Secretary will have the last word on direction, but the editorial content will be decided by the BBC. How do you think that that will impact on the opening and closing of services of the World Service?

  Mr Cameron: I think, as you say, that the Foreign Secretary has the determination of where, and the BBC has editorial control. It seems to me that that is the right division. I think that this was a good agreement with the BBC. I think that the BBC should not be immune from the difficult spending decisions that Government Departments have had to make. The agreement where it funds part of the World Service and gives licence fee payers a six-year freeze in the licence fee is a reduction of its budget over the spending period that is equivalent to what is happening to the British Library or British Museum—from memory, I think it's about 15%. It seems to me that that is quite a fair agreement for all concerned, and the licence fee payer benefits by having a freeze in the licence fee for six years.

  Q104  Joan Walley: Can I just ask a supplementary on that? In terms of the importance of the BBC World Service, and what was said just now about greening governments, as well as the importance of environmental literacy and there being an understanding around the planet of the importance of the environment and sustainable development with respect to global security, is that something that you intend to pursue and ensure is taken up in the new arrangements applying to the BBC World Service?

  Mr Cameron: Obviously it will have editorial independence but I think it has been quite effective in putting forward good thinking on the environment. I'd also argue that it's a very good role for the British Council. I was in China recently, and the British Council has a fantastic programme in Chinese schools trying to encourage children to think about the environment. Across our soft-power institutions—the BBC and the British Council are great examples of those—that is a really good example of what they can do.   

  Q105  Keith Vaz: Prime Minister, as you know, the creation of the National Security Council was a recommendation of the Home Affairs Committee in the last Parliament because of our concern about the co-ordination of counter-terrorism policy. Can you tell us practically how that works with regard to a country such as Yemen? We all accept that terrorism does not have any boundaries and, as you know, a parcel bomb was found at East Midlands airport that originated in Yemen. Cobra would deal with the emergency situation. The NSC would meet monthly to consider strategy, would it not? Presumably you've started a strategy on Yemen. How would that strategy actually be implemented to diminish the risks relating to Yemen?

  Mr Cameron: The National Security Council meets every week. The way I want it to work—and it has made good progress—is with all the Ministers who have a role in national security there, so Energy, Business, the Treasury, the Foreign Office, DFID and the Prime Minister. In addition, crucially, you have the experts, who include the Chief of the Defence Staff, the heads of the security services and GCHQ, and if we're discussing resilience or whatever, you might have people from DEFRA or the Environment Agency.

  The idea is that it meets every week. It normally has an update on the key priorities—terrorism; Afghanistan—to make sure that the decision makers are getting the latest information from the experts. Then, each week, we try and have a discussion about a particular issue that needs a strategic approach. We have had very good discussions on Pakistan and Yemen, on looking at terrorism in Northern Ireland and on other subjects. So, we try to pick one off each week.

  Yemen is a good example. We have a range of engagement with Yemen. Obviously, we have a big aid budget. We have a bilateral relationship; I have spoken to President Saleh and met him myself. We have a relationship in terms of security, and we're also a leading part of the Friends of Yemen, which we jointly chair with Saudi Arabia. We try to use all those tools to make sure that what is happening in Yemen is moving in the right direction. It's a country with great difficulties, as you know. There is huge poverty, declining oil resources, a very challenged economy, massive population growth, and rebels in the north and in the south. It's very challenged, and it is also a base now for al-Qaeda in the Arabian Peninsula. What we aim to do is bring all the tools we have, with regard to our relationship with Yemen, to try and make sure we're enhancing our national security.

  Sorry, that was a very long answer, but it's a classic example of where you ought to be trying to think across Government, rather than just relying on the Foreign Office to have a good bilateral relationship.

  Q106  Keith Vaz: Would you see the possibility of the head of the NSC—obviously you chair it so you are the head, but your chief civil servant—not being a civil servant, which would be like in America?

  Mr Cameron: Sorry, I missed out the key person on the National Security Council: the national security adviser, Peter Ricketts, who was the Permanent Secretary at the Foreign Office.

  Q107  Keith Vaz: But he is a civil servant. Would you have an American-style national security figure—a Condoleezza Rice-type figure?

    Mr Cameron: I certainly wouldn't rule that out. Peter Ricketts is doing a brilliant job; he's brought the organisation together very well. One of the reasons I think he's done it so well is that, having come from the Foreign Office, he has got the Foreign Office to buy into the whole process, because this is a much more collective way of making foreign policy as well. But no, I certainly wouldn't rule out having a different sort of person in future.

  The key thing—what I'm trying to do with the whole Government, whether it is discussing the spending round or foreign policy—is to try to have a more collective discussion at the centre, which the Prime Minister should try and chair, rather than being the chief executive.

  Q108  Miss McIntosh: Prime Minister, we're very focused on terrorism, but mindful of the fact that we have just had two hostages released who had been taken from their yacht off the coast of Somalia, are we doing enough, both as a country and internationally, to combat the situation in Somalia that leads to piracy?

  Mr Cameron: It's a very good question. We are trying but, as you can see with the level of piracy and the level of hostage and kidnap, the world's efforts in the Horn of Africa and its coastal waters are, at the moment, not as effective as they should be. I think that the basic problem is Somalia. You can have many ships patrolling those waters—and there are quite a few—but while Somalia is a fairly broken and ungovernable country, it is extremely difficult. There is no easy answer, but again it's a combination of factors that we need to bring to bear to try and make some progress.

  Q109  Malcolm Bruce: Prime Minister, you have given us some quite interesting insights into how the National Security Council is working. I just wonder if I could probe you on one or two more points. First, has the composition changed? On 12 May, when it was announced, the Secretary of State for International Development was identified as a full-time member, and you have confirmed that that is the case. It was said that the Secretary of State for Energy and Climate Change would attend from time to time, yet you've implied that he is now a full member. Just for clarification, what is the actual composition?

  Mr Cameron: I haven't got the list in front of me, but certainly for the big discussions, for instance, when we were discussing Harriers, carriers and defence, I remember specifically that Chris Huhne and Vince Cable were both there. Energy is a key national security issue. I don't have the exact membership in front of me. I can let you know, but Andrew Mitchell is certainly a member.[12]

  Q110  Malcolm Bruce: The follow through from that is, who actually determines the agenda? You say it meets every week. Obviously, the interest I have in this particular section is the international development agenda. To what extent is it driven by foreign policy or defence considerations? Who sets the agenda?

  Mr Cameron: It's driven by national security concerns, so the agenda is set by me on the advice of the national security adviser. I think that so far, it has had quite a lot of discussions that really do impinge on the excellent work that DFID does, and DFID plays a very important role in it. We have made some changes to development policy and have focused it more on to areas where there is a national security concern. So we are doing more in terms of broken states and more on conflict prevention. Now, I know that is contentious with some people, but I think that is important and right, actually.

  Q111  Malcolm Bruce: It's not contentious, but there is concern about what people call the securitisation of development. We boosted the budget in Afghanistan and we are doing so in Pakistan as well. I suppose the two questions that follow are: to what extent do you think the increased development budget actually improves national security; and how can you reassure people that it does that in a way that delivers poverty reduction and development, rather than sustaining defence activities or other, more conventional security areas?

  Mr Cameron: I'll put my cards on the table. In order to make the argument for a growing DFID budget at a time of national austerity, I think we need, correctly, to broaden the argument for the budget. There is a moral argument, which is that even in a time of difficulty, there are desperately poor people in other parts of the world who we should be supporting. That is part of the reason for the DFID budget and that is why a lot of the money goes to the poorest people in the poorest countries. But I think we should expand the argument and actually say, quite clearly, that the DFID budget is also about conflict prevention and trying to stop upstream things that will cost us even more money downstream, whether that is mass migration, climate change, or conflict prevention. Preventing a conflict is always cheaper than taking part in it.

  Also, frankly, we should be clear that the development budget gives Britain clout and influence in the world. Six months into the job, I really feel that. When you sit round the table at the G8 or G20 discussing Haiti, Pakistan or Yemen, often the modern equivalent of a battleship is the C17 loaded with aid and the brilliant Oxfam team that is going to go in and help deliver water or whatever. They are real tools of foreign policy and influence and heft in the world. We should be quite frank about that, and not be embarrassed about it.

  Q112  Malcolm Bruce: You don't have to persuade me, Prime Minister, but you may have to persuade the wider public. The other thing that relates to that on climate change is that you have talked about mass migration and the extent to which climate change in poor countries could lead to people being displaced and therefore migrating even to these shores. There is a £2.9 billion international climate finance initiative coming from DFID, DECC and DEFRA. Will that all be classed as development assistance and will it be targeted specifically at poor people in poor countries?

  Mr Cameron: My understanding is that there are very strict rules for what qualifies as ODA spending. We will make sure that we are within those rules. I think there is a limit put on the amount that can be spent on climate change and climate change finance, and we will be within those rules as well. I have just commissioned a bit of work myself to find out what other countries are spending on climate finance, because I want to see that others are following the lead that we have taken. Perhaps I can let you into the secret when I find out the answer.

  Q113  Malcolm Bruce: Thank you for that. Just as a matter of interest, the Permanent Secretary and her team gave evidence to the Committee indicating that, across the Government budget, that would amount to about 7.5% of our overseas development assistance, which is within the range that the previous Government set as a target—they said that 10% should be the upper limit. Your Government have not repeated that particular guarantee, but do you accept that that is the ballpark figure?

  Mr Cameron: My understanding is that we broadly accept what was previously laid down. We are within that and should go on doing it. We have to make sure that, even as we make what I think is a slightly refreshed argument for the development budget, as I have tried to explain, we keep people's confidence that this money is actually helping the poorest in the world. I personally think that conflict and conflict prevention is one of the most important drivers and one of the best ways to prevent poverty, so we shouldn't be embarrassed about the change.

  Q114  Malcolm Bruce: Thank you for that. May I move on to Afghanistan, because that is obviously where a significant increase in the budget has taken place—£700 million over the period, which is a 40% increase? Are you in a position to say how that is going to be spent? Our defence engagement is in Helmand, but one would presume that our development spending is not confined to Helmand. Are you able to say how it will be distributed both within Helmand and across the rest of Afghanistan, and, indeed, whether there are any particular sectoral priorities?

  Mr Cameron: We have been doing a number of things. One is, as you say, the support directly into Helmand, where we have built more than 80 km of roads and are providing clean water. We have also been improving farmers' livelihoods through the wheat seed distribution centre, which I have visited. As well as putting money into other parts of Afghanistan, we are doing some direct Government support to try to build the capacity of that Government to, for instance, raise their own revenue. In the end, we have to try to build an Afghanistan that is not so dependent on foreign aid and support, so we are doing some direct Government-to-Government support where we are going in and helping them build the capacity to run an effective Government, which is challenging. For instance, we are spending £20 million supporting the Afghan revenue department and, since 2004, tax revenues have gone from $200 million to almost $1.28 billion. That is a good example of capacity building at the centre of Government.

  Q115  Malcolm Bruce: There are some quite good success stories in Afghanistan. The poppy growing has reduced a lot and the commitment on health and education delivery has improved. What can you do to try to reassure people that what we are doing in development terms in Afghanistan is actually working? Before you answer that question, there is obvious concern about the level of corruption that exists within the system, and concern that President Karzai's crackdown on corruption is rather lacking in commitment. That undermines people's confidence. Is there anything you feel you can do to reassure people that, first of all, the money is being effective and, secondly, there is genuine recognition that corruption is the worst way to ensure that people will have confidence in future delivery?

  Mr Cameron: It is extremely difficult. I think that our aid programmes are seen across the world as being relatively good at making sure the money gets to the front line, is not diverted and is not supporting corruption. We have to do what we can to reassure people about that.

  I approach the argument in a slightly different way; I think we need to explain that the reason for being in Afghanistan is national security. We are not going to create a perfect country, we just want an Afghanistan that can take care of its own security and deny the space to terrorists. That should be our pre-eminent concern with Afghanistan. The aid and development work we do is to help build up that country's capacity in all the ways that you suggest. I think the tiering of it is that national security is the first part of the answer, and the development picture is subsidiary to that.

  Q116  Malcolm Bruce: A small final supplementary. I think the distribution of the previous budget before it was increased was 20% in Helmand and 80% across Afghanistan. Are you in a position to say whether that proportion has significantly changed in the increased budget?

  Mr Cameron: All that the figures I have here show is that about 50% of DFID's funding is channelled through the Government. I don't have the breakdown of the funding between Helmand and the rest of the country, but I am sure I can get that for you.[13]

  Q117  Richard Ottaway: Prime Minister, the justification for our still being in Afghanistan has been, as I understand it, to prevent the return of al-Qaeda. It is quite important to distinguish between the Taliban, who are the locals, and al-Qaeda, who are international terrorists. Are you still getting advice to the effect that al-Qaeda will return to Afghanistan if we pull the troops out?

  Mr Cameron: That is the advice, yes, because "Taliban" is a term that covers a huge range of different people. At one end you have tribes who have been ignored either by the Government, by private security firms or whatever else, who have taken up arms as insurgents but who aren't really connected to the Taliban movement. It goes all the way from that right up to people who still have a link and a strong association with al-Qaeda, and there are many degrees in between.

  Is it the case that if we literally left now, and Afghanistan was left as a basket-case country with the Taliban controlling part of it, with all the bad people we know are in the tribal areas of Pakistan, al-Qaeda could return to Afghanistan and re-establish a base there? Yes, I think that is the case. The success we are having—I don't want to overstate it—is that we are having more tactical success on the ground in Helmand. Because we have an effective strategy, working with the Pakistanis, of squeezing this problem from both sides, and serious attrition of al-Qaeda in the tribal areas of Pakistan, is why we are having some success. If you pull back on either side, either in Pakistan or in Afghanistan, you create a larger amount of space for al-Qaeda to exist in. Part of that could be in Afghanistan if we weren't there. Sorry, that was a very long answer, but I think it is important to think about it like that.

  Q118  Richard Ottaway: The military tell us that we are achieving success on the ground, and that should not be surprising because we are right at the height of the surge. But you are left with the feeling that when the military start to wind down the Taliban will come back out of the woodwork and reoccupy ground that the military hold, unless we can start talking to them and negotiate a peaceful settlement. That means having talks at a high level. Do you agree that we should start talking to the Taliban sooner rather than later?

  Mr Cameron: I think this is something for the Afghan Government to take the lead on and determine. The way I see it is that most counter-insurgencies the world over and through history have ended through a combination of force of arms and some sort of political settlement. I spoke to President Karzai this morning, and he has said that if people who take a quite fundamentally strong religious view—southern Pashtuns who have become associated with the Taliban—put down their arms; if they sever connections with al-Qaeda; and if they accept the broad outlines of the Afghan constitution, they can become part of the future of Afghanistan. So, some combination of military success and reintegration of low-level Taliban, and some reconciliation as well, is part of the answer, but it should be led by the Afghans.

  Q119  Richard Ottaway: But do you think that the Afghans are strong enough to do that at the moment?

  Mr Cameron: I spent four years as Leader of Opposition going to Afghanistan every year, and what I have observed that has changed and is positive—there are lots of things that are not so positive—is that the relationship between Afghanistan and Pakistan, between President Karzai and President Zardari, is much better than it was. In a way, that is very important to making sure that any form of reconciliation strategy can work.

  Q120  Mr Jenkin: Prime Minister, you hosted a one-day seminar at Chequers soon after the election. Was that useful?

  Mr Cameron: Yes. It goes back to our strategic thinking debate earlier. I was very keen as a new Prime Minister, having taken over an existing Afghan strategy, to try—although I agreed with the main tenets of it—to stand back and have a proper think about what we were doing and how we were doing it, and how we could get to the end point that we all want, which is an Afghanistan running its own affairs and our troops back home as quickly as possible. So, I got people such as Paddy Ashdown, Rory Stewart, and the former taskforce commander in Helmand General Graeme Lamb. A number of people came, and it was a good session to try to think about what we were doing and how best to do it.

  Q121  Mr Jenkin: And that was with a number of people from within Whitehall and the military and from outside Whitehall and the military, people who agreed and people who disagreed with the Government's policy.

  Mr Cameron: Yes.

  Q122  Mr Jenkin: Don't you think that it is that kind of strategic thinking that needs to be permanently available to the National Security Council, and indeed to the Cabinet if the Cabinet is going to effectively lead national strategy?

  Mr Cameron: I do. You don't have a huge amount of time though. We're involved in an Afghan situation in which it is critical that this year and next year we make really good tactical progress on the ground so that people can see we are safeguarding the population, denying the Taliban space and making progress with the other things that I talked about. So there wasn't a lot of time to have a great strategic rethink. I just wanted to have a stop and check to see how we should be touching the tiller slightly to alter the strategy. I would say that since then it's been much more national security focused, more hard-headed in its approach—as I've tried to explain—and a bit more realistic about what's achievable.

  Chair: Order. I must let Richard Ottaway come back in.

  Q123  Richard Ottaway: You were talking about the Afghans being strong enough to deal with this. To what extent do you think that the United States ought to be involved here? You know that it is opposed to the reconciliation process and opening talks. Can you put some influence on it to make it change its mind?

  Mr Cameron: My experience, such as it is, is that this part of the relationship between Britain and America works best if you are talking candidly as friends, as we are, rather than trying to do it too much in a sort of public forum. The idea that there is some great disagreement between different countries in the alliance about the combination of military success and political settlement is not the case, I think.

  Q124  Richard Ottaway: Do you think that Pakistan's got to be involved in any settlement?

  Mr Cameron: Obviously, the short answer is yes, because we have to convince Pakistan that it is in its interests to have a stable Afghanistan as a neighbour, and we have to convince it, as I think we are doing, that terrorism in Pakistan is part of the problem—not part of the solution—and has to be defeated. I think that you can see what the Pakistanis have done in South Waziristan and the Swat valley. They are really putting a lot of pressure—we'd like them to put even more—on the bad guys.

  Q125  Richard Ottaway: By 2013, it will become pretty clear whether the policy's working, and obviously we want it to be seen to be working. If it doesn't work, do we have a plan B?

    Mr Cameron: I am a great believer in giving plan A everything you've got, and I think that General Petraeus's troop surge and plan has worked well. I have said what I've said about the vital importance of training up the Afghan army and police, and the importance of reintegration and reconciliation. I think that if we do all those things there is no reason why we shouldn't succeed.

  Chair: Finally, James Arbuthnot.

  Q126  Mr Arbuthnot: Prime Minister, can I come back to that plan B? Let's suppose that the targets that President Karzai has set himself and the targets that we all want to see achieved are not achieved. Do we nevertheless withdraw combat troops from Afghanistan, come hell or high water?

  Mr Cameron: I am not contemplating us not having a successful strategy, but I will be as clear as I possibly can. I said very clearly that I did not want us to have combat troops or troops in large numbers in Afghanistan by 2015 for a very good reason, which is this. We have been in Afghanistan since 2001. We have been in Helmand since 2006. Britain, by 2015, will have played a huge role, made a massive contribution, made massive sacrifices for a better, safer and stronger Afghanistan, and I think the British public deserve to know that there is an end point to this—there is a point at which we won't be in a combat role or have large numbers of troops.

  That is why I set the deadline of 2015; and yes, it is a deadline. I think deadlines sometimes help to focus minds: help to focus the mind of the Afghan Government that we have to make progress, help to focus the mind of the military planners to know that this cannot go on for ever. In my judgment, that's the right approach for the United Kingdom. We are five years away from that point. We have a huge amount of effort to give, and we will put our shoulders to the wheel. We are the second biggest troop contributor; we are making an extraordinary contribution to that country in all sorts of ways, including aid, as we've discussed. But I think the British public deserve to know that there is an end point to all this, it is 2015 and that's clear.

  Q127  Mr Arbuthnot: Why do you take this view in relation to Afghanistan when you didn't take it in relation to Iraq?

  Mr Cameron: I'm in the position now of taking responsibility for what we are doing in Afghanistan, and in the end you have to make a judgment, as Prime Minister, on what strategy you want to set and whether you want to set a time limit on it, and I've taken the decision that we should.

  They are different situations in Iraq and Afghanistan. I think I've given a pretty clear answer. We've already been in Helmand for four years. By the time we are not in a combat role and with much reduced troop levels, it will be more like nine years. That is a massive contribution to the security of that country, and I think we should use the fact that we have given so much, spent so much and lost so much life to encourage others in NATO and our trusted partners to make sure that, even if they can't be in a combat role, they are in that training mission, they are helping that country.

  Let me just make one more thing clear. Yes, of course we won't be in a combat role; we won't have anything like the troops that we have now. But should Britain go on having a relationship with Afghanistan where we're helping that country, helping train its military, helping support its Treasury, helping build its capacity? Yes. Because I think we learned the lesson in the past of walking away from Afghanistan. I'm not proposing that, but I think the British public deserve to know that our young men will not go on in the situation they are for ever.

  Q128  Mr Arbuthnot: So you said what you said in Canada in order to reassure the British public. Was there some pressure coming upon you from the British public to make such a statement?

  Mr Cameron: No, it's not that— This is what I feel, having looked at the defence arguments and the foreign policy arguments and the national security arguments, and wanting to take the country through what is a difficult time—we have suffered some great losses in Afghanistan—and wanting to make sure that we can take the country in the most united way we can through this situation, for our own national good, of what we're doing in Afghanistan, and to take people with us. I think that is actually important.

  Q129  Mr Arbuthnot: You will see the twinfold risk that we might be encouraging the Taliban to think that they can just wait us out, and that we might therefore be encouraging the local residents of Afghanistan to support the Taliban rather than us. That's the first risk.

  Mr Cameron: Absolutely. Can I answer that?

  Chair: Let's take the two risks together.

  Q130  Mr Arbuthnot: The second risk is that we leave Afghanistan and leave the job of combat troops to our allies, which is not, surely, in the British tradition.

  Mr Cameron: Okay. Let me try to answer those as best I can. First, I think that setting a 2015 deadline rather takes the pressure off what I think other Governments have felt, which is, "I must insist on this many troops out by that month" or "that many troops out by that month." That is actually a more dangerous situation to get yourself into, because this transition we want to see has got to be in respect of conditions based on the ground, and we mustn't rush it; we've got to get it right. So I think it's better to set a later, firmer deadline than to try to set too many individual deadlines before.

  Mr Arbuthnot: I like the notion of "conditions based".

  Mr Cameron: This is five years we are talking, effectively—well, four years. But it's a long period of time.

  Secondly, on leaving Afghanistan, what I would say is this. We have over 10,000 troops in Afghanistan. We have been in the toughest part of the country for the longest period of time. When you look at the price we've paid and the casualties that we've taken, I think we can hold our heads up high in NATO and say that we have played a huge part in trying to get this country to a better place. I think other NATO members respect and understand that and I am extraordinarily proud of what our troops have done. It's been incredibly tough.

  What I have tried to do is first of all make sure that in the mission we are involved in, we have a proper spread of troops to deliver that mission. That is why I was absolutely clear we had to come out of Sangin. We were overstretched. As well as 10,000 UK troops, there were 20,000 US troops. I wanted to make sure we were covering an appropriate amount of ground so we could deliver the job and do it properly. We have served magnificently in Sangin. Incredibly brave people did extraordinary things in that town. I have been there and seen it for myself. But I think it was right to make the decision to say, "Let us focus on Central Helmand, where we have enough troops to do the job properly, to deliver the effect on the ground," and that is now happening. I am confident that was absolutely the right decision that I insisted was taken. That's the first point.

  The second point is, it will be a serious amount of time that we will have been there, and I think we can hold our heads up high and say we have played our role absolutely to the full and we can be proud right now of what we have done, irrespective of what we will continue to do over the next few years.

  Mr Arbuthnot: With that I agree.

  Q131  Chair: Thank you, Prime Minister, for the tribute to our troops and for the fact that you continue to remind us week by week of the names of those who have given their lives in this still very costly conflict.

  Prime Minister, as you know, we want to have these occasions a little more frequently than your predecessors did. I hope we can resume discussions about that. Is there anything you want to add before we conclude these proceedings?

  Mr Cameron: On a happier note, it's a pleasure to be the first Prime Minister to appear in front of a fully elected Committee of Select Committee Chairs. This is democracy in action. Also, I am sure everyone would want to put on record the happy news we announced yesterday in the House of Commons about the royal wedding. We are looking forward to that. There is a debate I think we ought to have—obviously, we do not know the date yet—about whether there ought to be a bank holiday. If it's in the middle of the week, it will be a very good idea to have a bank holiday, and even if it's at the weekend—this is entirely a decision for the royal family—I think there would be a great temptation to have a bank holiday, a day of national celebration, to mark what is happening.

  Chair: That sounds like a decision. Thank you, Prime Minister.

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