Communities are told to become more independent; the rationale that the Government present to us is that they are over-reliant on central Government funding. Communities are seeking to become more independent by promoting their economies. What do the Government think is happening to the economic development function of local authorities around the country? What do the Government think has happened in the absence of the strong role that One North East previously played in promoting economic development in the north-east? That strong economic development role, that drive that local authorities can provide, is no longer there as it once was. I pay tribute to people such as the leader of Newcastle city council, Nick Forbes, for trying to ensure

3 Dec 2013 : Column 229WH

that his city has a bright and economically prosperous future, but the Government are making that task harder, and I hope they recognise that.

The impact of the cuts falls on both statutory and non-statutory services. Too often it is assumed that statutory services will be safe, as it is by the permanent secretary to the Department, who says that because it is written in law that councils have to balance the books, it will happen. Too often it is also assumed—by campaigning organisations and commentators on local authority finance—that statutory services will continue to be provided and will be safe because they are a legal requirement. However, the truth is that councils are already having to look at the eligibility criteria. For example, the duty placed on local authorities in the 1960s to provide for an efficient library service will have to be interpreted in new ways by local authorities in future. Frankly, it will have to be interpreted in ways that do not meet local communities’ real aspirations for those services.

We know that statutory services will not be safe, and we also know that the burden will fall particularly on the more discretionary services. However, the discretionary services, such as cultural services, are no less important. Over the river from my right hon. Friend the Member for Newcastle upon Tyne East, and my hon. Friend the Member for Newcastle upon Tyne Central, in Gateshead, there are iconic cultural attractions, as indeed there are in Newcastle upon Tyne. As a student at Durham university, I enjoyed the cultural offer in Newcastle many times. These things are vital to local economies and to the health and vibrancy of the community. They are part of what a prosperous community in the 21st century should be all about. Local authorities have a vital role in enabling such things and ensuring that they are present in a community, but we know that around the country they will be the first to go.

We must be honest about what would have happened were a Labour Government now in power, as we come out of a period of global recession. Resources were rightly used to help keep young people in work—for example, through the future jobs fund—to keep our vital industries going, and to keep people in their homes to avoid the scandal of home repossessions that we saw in Conservative recessions in previous decades. The Government rightly tried to maintain jobs and the economy. A Labour Government would have come into a period, in this Parliament, in which we would need to look at how to balance the books. Our proposals differ very much from the Government’s. The Government’s proposals have gone far too far and go about things in the wrong way. Front-loading has had a particular impact, resulting in, for example, the perverse problems we have described in our health services.

Above all, however, we know that the effect of the Government’s proposals over three years was to grind the economy to a halt. We are told that there has been a huge increase in private sector employment. Many of those private sector jobs are transfers from the public sector, because of the cuts in recent years. Where they are genuine private sector jobs—indeed, where they are public sector transfers—we often find that people are on zero-hours contracts, employed through agencies in insecure jobs on low wages. The Government have

3 Dec 2013 : Column 230WH

removed any enforcement of the protections afforded to those people. They have less money in their pockets and are less able to contribute to the local community, thereby compounding the problems that local authorities face in their community leadership role around the country. That has been the impact of the Government’s proposals. We simply would not have done things in the same way, and we would not have done things in such a fundamentally unfair way.

It is not just organisations such the Association of North East Councils or SIGOMA, the special interest group of municipal authorities—SIGOMA provided us with a helpful background briefing, for which I am grateful—making this point. The Audit Commission, which provides independent commentary, has highlighted the unfairness, stating that

“councils in the most deprived areas have seen substantially greater reductions in government funding as a share of revenue expenditure than councils in less deprived areas.”

In 2014-15, the 10 most deprived local authorities in England will lose six times more than the 10 least deprived local authorities, as compared to 2010-11. The councils that will suffer the biggest cuts in spending power per head—that is the Government’s own manipulated measure, which is designed to mask the real impact—are Liverpool, Hackney, Newham, Manchester, Knowsley, Blackpool, Tower Hamlets, Middlesbrough, Birmingham and Kingston upon Hull. Those are some of the most deprived communities around the country. I would add Newcastle to that list, as another deprived community; there are particular needs in Oldham as well. Those communities should be properly recognised in a fair funding formula.

My hon. Friend the Member for Newcastle upon Tyne Central points out that her region—although, as she said, the Government do not like that term—has endured the biggest cuts. There are communities with high levels of deprivation and particular needs in London, and some of the most deprived wards in the country are in the heart of Corby in the midlands, but when we look at the map of the impact of these measures across the country, it is clear that money is going from north to south, and from poorer to more affluent areas. The Prime Minister’s local authority, West Oxfordshire, is one of the least deprived in the country, ranking 316th out of 325 in the indices of multiple deprivation. It is getting an increase in spending power of 3.1%; that is extraordinary. We know that this is not an accident, but a deliberate strategy by the Government to shift funding. The problem is compounded by holdbacks, which my hon. Friend the Member for Newcastle upon Tyne Central rightly raised as having a further significant unfair impact on particular local authorities. That is partly, as we know, because of the impact of the new homes bonus.

The cut to local government in the 2015-16 spending settlement appears to be around 5% greater than the amount stated in the spending round of 2013. The Local Government Association’s analysis is that there will be a 15% real reduction for most local authorities, as opposed to the 10% claimed by the Government; the analysis by SIGOMA and others is that the real impact will be higher. Will the Minister at least accept the analysis of the cross-party Local Government Association, which has no particular political axe to grind?

3 Dec 2013 : Column 231WH

The Government’s announcement on funding with regard to holdbacks has caused particular issues because of the scale and pace of the increase in the number of holdbacks announced for 2015-16. The original figure for the new homes bonus was £800 million of holdback; I understand that remains the same. The holdback for the safety net around business rates was originally proposed to be £25 million, but the revised proposal is that it will now be £120 million. I understand that there are additional holdbacks on capitalisation as well. The net effect of the changes is to add £180 million to the holdbacks.

The Select Committee on Communities and Local Government looked at the issue recently, and said that holdbacks were making it impossible for councils to set budgets. As local authorities are having to make incredibly tough decisions, consultation is even more important, but giving short notice of the huge cuts in funding makes it really difficult for local authorities to hold genuine consultations with communities.

The increase in the amount retained for the safety net for business rates from £25 million to £120 million has caused particular concern. At a recent hearing of the Select Committee, the hon. Member for South Derbyshire (Heather Wheeler) described the safety net increase as “a huge jump”, and said that arguments that all the money would ultimately be returned to local government did not make sense, asking:

“How can councils budget when decisions like this are being made?”

Remember, that comes from a Conservative member of the Committee.

I understand that Sir Bob Kerslake, the permanent secretary at the Department, said that the holdbacks represented “relatively small amounts” of the £25 billion total funding for local government. He uses that global figure deliberately to massage the appearance of this issue and make it seem less significant. Some district councils—I know that they are exotic things to some hon. Members, but I have two in my area—will face cuts of £300,000 to £400,000 because of these changes. That is not a modest amount; it is a huge amount from their overall budget.

Similarly, the Select Committee asked why councils were given only three months’ notice of the additional 20% cut. I will quote the hon. Member for South Derbyshire again: she said that it “just does not fly”. Is the Minister going to tell us today that it does fly, or will he agree that the situation is unfair and has compounded the problem that local authorities face?

Does the Minister accept that councils must plan and set their budgets for 2015-16 on the basis of a cut in funding of 15%? The Government say that councils can set their budgets based on taking a risk—although all the risk seems to me to be shifted on to local authorities, given the way the holdbacks are handed out—that the holdback may be 10%. Does the Minister seriously think that that would be a prudent way for a local authority to manage its budget? We know from the work of the National Audit Office that even before the cuts really bite, as they will this year and for the next two years, three in 10 councils have had to take in-year unexpected action to try to balance their books. They have had to reduce service levels, for example, and have had recruitment freezes and emergency renegotiation of contracts with their providers. The NAO’s review was

3 Dec 2013 : Column 232WH

nearly a year ago, so I estimate that the figure will now be higher than three in 10. Given those challenges, does the Minister really think it is prudent to ask local authorities to budget on that basis?

I believe that there is hope. If there is a change of Government in 2015, there will be an opportunity to make a reality of community budgets and Total Place, and to end the silo approach to local authority funding—for example, in relation to care services. We can genuinely integrate services to make the public pound go further. We will back local authorities in taking on new roles—in back-to-work schemes, for example—that could be both financially beneficial to the local authority, if the incentives are right, and beneficial to our communities. There are opportunities for much better dialogue. We need to review the new homes bonus, which is a mechanism to shift resources around the country in an unfair way. I hope that today the Minister will accept the scale of the crisis that his Government have created, and will give us assurances that they will listen to us on holdbacks and accept the real need to review the funding formula across the country, so that when the provisional settlement is announced in just a few weeks’ time, it is fairer.

3.37 pm

The Parliamentary Under-Secretary of State for Communities and Local Government (Brandon Lewis): It is a pleasure to serve under your chairmanship this afternoon, Mr Streeter. I congratulate the hon. Member for Newcastle upon Tyne Central (Chi Onwurah) on securing a debate on a matter that is clearly important for her. It gives us the chance to air some important issues about local government more generally.

Before I turn directly to the subject of the debate, I want to put it in context. The shadow Minister commented on the size of local government, its funding and the changes in funding. He made a comment about going too far and too fast, which we have not heard for some time from the Opposition. That comment seems incredible in the light of the current economic situation, as the Government’s economic policy is clearly working for the benefit of the country.

We also have to remember exactly how we got to where we are. The previous Government left us with an unprecedented deficit, something this Government are having to deal with. Local government accounts for 25% of public expenditure, and so has a big part to play in those efforts. Unfortunately, that is a part of the legacy that we took on from the previous Government. Even today, we are still all wondering about the £52 million—and growing—cuts that Labour has stated that it would make to local government; despite what the shadow Minister said, Labour has not yet outlined where those cuts would come from, and the figure has continued to go up in some of its recent pledges. We have to put the situation in some context.

Mr Nicholas Brown: I do not accept the Minister’s analysis, but for the purposes of debate, I will give him the benefit of the doubt. If what he says is right, why is the burden of expenditure reduction not being shared fairly across England? If special measures to protect anyone should be taken, why are they not being taken to protect the very poorest and most vulnerable—the people whom local authorities have a statutory duty to look after? Why is the burden not being shared fairly?

3 Dec 2013 : Column 233WH

Brandon Lewis: I will come to the issue outlined by the right hon. Gentleman, but I remind him that the independent report, which is in the Library, outlined that this year’s settlement was fair to areas in the north and south, rural and urban. It is important to remember the legacy that we inherited. My area—Great Yarmouth—is in the east and, thanks to the previous Government’s policy decisions, was left with a £3 million black hole, which this Government have had to fix. When we talk about spending power, we must remember that a Labour Government left my local authority with what would have been a 20% cut in spending power in one year— something this Government have had to deal with.

The hon. Member for Corby (Andy Sawford) mentioned councils such as West Somerset. He might like to do a bit more research and homework on what is going on in West Somerset and look at the work it is doing with its neighbours, on which I congratulate it. More and more small district authorities are moving to ensure that money on the front line is not spent on bureaucracy and red-tape administration. Many small district authorities particularly have budgets of under £20 million and should be looking to share management and chief executives to ensure that their taxpayers’ hard-earned money is spent on the services that we all want and not on bureaucracy and red tape. It is logical for authorities to do that. Instead of using childish language such as “takeover”, Labour Members should realise that this is about working in partnership and with efficiency for the benefit of local people.

It is important to understand that there has been a landmark change for local government this year. After years of doffing their caps to Whitehall, all councils now have the ability to control their own destiny. In the midst of the clamour of deficit denial and doom-mongering from some people, that message is in danger of not being heard. The size of the deficit and the debt must be dealt with, and local government is one of the biggest players in the public sector.

I want to make it clear to hon. Members that the current settlement and the one that we will soon propose for 2014-15 are fair to all—the north and the south—as the Library outlined. The hon. Member for Newcastle upon Tyne Central referred to what will happen next year, and I hope that she appreciates that we are only a couple of weeks from next year’s assessment, so she will not have to wait long for the details.

Chi Onwurah: I urge the Minister to focus on the key point of this debate, which is that money is being held back from local authorities and redistributed. He said that local authorities can take their destiny into their own hands and drive forward, but that necessitates imposing no such holdbacks in future. Will he confirm that?

Brandon Lewis: The hon. Lady’s point highlights where we are. The current structure for local government is that councils will benefit and see their income rise as a reward for the good work that they do for their communities. I will touch on that directly.

Manchester, Liverpool and Newcastle all have higher spending power per dwelling than the national average. When talking about what local areas have, it is important to put that in the context of the starting point. The average reduction in spending power is only 1.3% this

3 Dec 2013 : Column 234WH

year and we are protecting individual council tax payers by offering a council tax freeze. We are protecting councils through the rates retention scheme’s safety net, which generates a minimum level for their baseline funding, which Newcastle will benefit from, although it was unable to do so previously.

The settlement is fair because even for councils like mine, which now benefits from the efficiency support grant, we have provided protection for those who were hit worst by the policy decisions of the previous Government, and that brings me to the important point of how the system now works in a council’s favour. Following the Localism Act 2011 and financial reforms to the settlement, 70% of an authority’s income is raised locally and, most importantly, the growth incentive ensures that local government will keep up to 50% of all the growth that it generates. Councils have more power than ever before, but they must understand the implications. They must act in their residents’ best interests and work hard on their behalf. Redesigning council tax benefit to cut fraud, which costs around £2 billion, promoting local enterprise and getting people back into work, or redesigning services to make them more efficient and sustainable, especially as there are still savings to be had across the sector, all make a difference.

Some cutting-edge councils understand that and lead by example in developing good practice for the rest of the country to follow. Getting the ball rolling can be the hardest part of radically overhauling local services. The Government established the transformation challenge award to help councils, particularly small ones, to demonstrate innovation, to protect services and to reduce costs to the taxpayer. Just a few months ago, I was pleased to announce 18 successful schemes, including projects to accelerate the integration of local health and care services, which hon. Members have outlined this afternoon, and to create shared finance and human resources for emergency services.

The £3.8 billion that is coming across from the health service to be part of the local government family to provide adult social care is an indication of the work that follows on from the community budget pilots. That transformation touches on the point that the hon. Member for Corby made and is an important way to bring the public sector together and to drive out duplication and provide better services. We know from the community budget pilots that up to £20 billion of savings can be found across the public sector if we can get the work done correctly throughout the country. More importantly, they have shown better services for residents and more effective service delivery.

Debbie Abrahams: Will the Minister undertake on behalf of his Department to publish information about the impact of the reductions on funding to local authorities and on services?

Brandon Lewis: The whole point of the change in the structure of local government finance is that council finance is partly in councils’ control. That is why 40 authorities have had an increase in their income this year alone. Today, a Labour authority has predicted a £500,000 increase in its income over the next couple of years, thanks to the business rate retention scheme. Hon. Members should focus on their councils’ decisions on what services they provide locally. Some £3.8 billion

3 Dec 2013 : Column 235WH

is going to local councils to ensure that they can deal with adult social care in a joined-up way, without creating further bureaucracy.

Local government has shown great skill in moving forward. The Audit Commission and a recent survey noted that residents believe that services have improved. Our community and neighbourhood budgets show that we are finding ways to rewire the system to provide better services at much lower cost.

Turning to the future, I recognise that councils are facing pressures. That is why the spending review set out a package of measures to support them in 2015-16, including the £3.8 billion pool of funding for integrated health and social care, which will help to ensure that services in the care and support system can be protected and will enable authorities to invest in prevention and early intervention.

We will make available a new fund of £330 million to accelerate the transformation of local services with a £200 million extension of the troubled families programme to support another 400,000 families, £100 million to build on the transformation challenge award to improve public service delivery and a further £30 million to drive change in the fire and rescue service. All that together shows that there is a huge opportunity for councils to save money and to achieve better outcomes by working collaboratively and innovatively for their communities.

Chi Onwurah: The Minister avoided answering the question asked by my hon. Friend the Member for Oldham East and Saddleworth (Debbie Abrahams) about the impact of the funding changes on different councils in the north and south by re-emphasising the power that local authorities and councils have to direct their own funding. Will he specifically say whether he supports the principle of holding back funding, as has been described in several contributions this afternoon? He has listed some increases in some different funds. Are they coming from top-sliced funding or from new money, as we would understand it?

Brandon Lewis: I tell the hon. Lady again that what a local council does with its funding is a matter that she must put to her local authority. Councils must make the decisions about how they spend the money that they have. There is no point continuing to look at silo pots of money. The point of spending power is that it shows exactly what a local council has in total to spend on its local community. In Newcastle, the amount is one of the highest in the country. It is also why it is important that we offer support to people individually as well. We are pleased to be able to offer further support for council tax freezes in 2014-15 and 2015-16. We have been clear that if an authority wants to raise its council tax, it should do so with the assent of the public in a referendum locally. It needs to be able to explain to residents what it wants that money for and to convince residents of its case.

It is worth adding that in many cases, councils have more in reserves than they are losing through cutbacks. Liverpool, Manchester and Leeds all have reserves that are twice that of their spending power reductions. Indeed, this year, Newcastle has had substantial reserves. It is also important to note that local authorities will be spending about £4 billion extra this year across the country—well over the £100 billion of last year. It is

3 Dec 2013 : Column 236WH

also worth noting that local authorities have managed to increase reserves to a record level, going up by almost £3 billion to £19 billion. With that and the £2 billion in fraud and error, and with a further £2 billion in uncollected council tax, there is still a long way for local authorities to go before they can claim that they have done everything to drive out waste and bureaucracy.

We are in a new world for local government. The funding settlement used to be the endgame; now, it is just the starting point, with councils no longer tied to the settlement figures. They can get to earn their keep and retain £11 billion of business rates. That could deliver an extra £10 billion to our wider economy. It is worth noting that areas such as Manchester, Liverpool and Newcastle all saw business rates rise above the national average of 4.8% in recent years. However, thanks to the old begging bowl system, they missed out on the opportunity of making the most of that money—but no longer. From now on, it will be what councils make and not what they take that counts. If they bring in more businesses, more jobs and more homes, they will be rewarded. If they build those new homes through the new homes bonus, they will see a share of that money, which is worth £650 million this year and is growing. If they increase their business rates, they will retain some of the benefit of that increase.

Therefore, the message to councils is clear: if they are ambitious, become self-reliant and work hard on behalf of their local people, they will succeed and see the benefits. We want authorities to go further and faster, so that residents feel those benefits. We want to help and reward those who do the right thing and are innovative. Our funding approaches, as has been outlined independently, are fair for north and south, urban and rural, and rich and poor. I gently say to hon. Members who have outlined what they see as the funding draw from urban areas that even Labour Front Benchers have been arguing on the Floor of the House to move money away from urban areas into rural areas.

Andy Sawford: Will the Minister say which Labour Front Benchers have been making that argument?

Brandon Lewis: The hon. Gentleman’s colleague, the hon. Member for City of Durham (Roberta Blackman-Woods), made that point in a petition in the House just a couple of weeks ago, in pushing to have that gap between urban and rural moved more towards rural areas.

Andy Sawford: I inform the Minister that I also put a petition from local residents in the Speaker’s petition bag, as did many hon. Members of all parties in representing their constituents. However, the Labour Front-Bench team’s position was clearly set out, as the Minister is very well aware, only a few weeks ago in the debate relating to SPARSE—the Sparsity Partnership for Authorities delivering Rural Services. We were clear that we see the current formula as fundamentally unfair.

Brandon Lewis: I gently say to the hon. Gentleman that the hon. Member for City of Durham was in the Chamber on the night giving in her petition, in which the case that was being made was not about having more money, but about ensuring a different distribution between rural and urban areas, but I shall let him take

3 Dec 2013 : Column 237WH

that up with her, rather than me. She was the one who was making the case to move the money to rural away from urban, so I suspect that the Labour party has some work to do with its own Members.

We now ensure that the system rewards innovation and imagination, as we saw this year with the transformation fund. We have given councils more power than they have had before, and we are developing a new ethos for local government, where they are generating more income through the work that they do locally, rather than holding out a begging bowl to central Government. If councils are willing to look to the future, they have a once-in-a-generation chance to step out from Whitehall’s shadow and to use the income from local growth to support, develop and improve the services that they give their residents.

3 Dec 2013 : Column 238WH

Government Contracts

Mr Gary Streeter (in the Chair): We now move on to our next debate. Our participants are here, so anyone wanting a second go on the previous debate will not get it. It is an important debate on managing Government contracts—I shall speak slowly so that the Minister has a chance to get to his position. It is a delight to call Meg Hillier.

3.54 pm

Meg Hillier (Hackney South and Shoreditch) (Lab/Co-op): As ever, it is a pleasure to serve under your chairmanship, Mr Streeter. Before I start, I need to declare an interest: my husband is a non-executive director of a social enterprise that runs some Government contracts. However, the focus of my concern is small and medium-sized enterprises, and I am delighted to have secured this debate on their behalf.

My interest in the issue stems from my work as a member of the Public Accounts Committee and from my many conversations with businesses in my constituency and elsewhere. The Minister will be aware of the Committee’s work and particularly our hearings on 20 and 25 November. I do not intend to cover the same ground in this debate, as he will have the pleasure of reading the Committee’s report shortly.

I want to focus mostly on how Government contracts work for small and medium-sized businesses. As our hearings demonstrated, there are a few large companies that have a grip on the delivery of public sector contracts. Whether they run prisons, maintenance, security or hospital services, relatively few prime contractors are in the market for business that both recent Governments have embraced, worth billions of pounds a year. Government talk the talk about supporting small businesses, but unless they are willing to lead from the front, the promises, frankly, ring hollow.

As the MP for Shoreditch—often called “tech city”—I do not need to be convinced that small and medium-sized enterprises are the engine room of UK plc’s future growth. It is not only me who is saying that; the Chancellor of the Exchequer declared that tech city

“will be the technology centre of Europe”.

There is no shortage of private investors either who are prepared to bet their money on these businesses.

However, those innovative businesses face different hurdles when it comes to Government contracts. The hurdles set by civil servants, most of whom, as I am sure the Minister will acknowledge, have never run a business, big or small—that is not intended as a criticism; it is just a fact—are so cumbersome that most small businesses cannot comply with them. The automatic setting in Government is to be as risk averse as possible, and that sets in train in contracting a vicious and uncompetitive circle that is well-nigh impossible for new businesses to break into. Of course, I share a desire, as I am sure the Government do, to make sure that the taxpayer is not taking on undue risk, but balance is needed.

Some of the innovative tech businesses in Shoreditch, such as the recent arrival, Affinitext, which is offering transformational software for smart document reading, can offer solutions that will save the taxpayer money.

3 Dec 2013 : Column 239WH

Many work in ways that the Government could learn from, but businesses that do not meet the Government’s pre-determined model of contracting are shut out.

There are spin-off benefits, too, for the wider economy that the Government should be aware of. Research shows that every £1 of business with an SME generates 63p to the local economy, whereas with large businesses—those employing more than 250 people—only 40p is generated in the local economy. Both are worth aiming for, but for a Government who say they support business, the question is whether they only support big business.

We need to see a step change in how Government work with smaller businesses. Specifically, we need shorter procurement processes—again, that is the risk aversion coming in to play—and a serious step change in how contracts are drawn up. When a contract includes 150 key performance indicators, as we heard at the PAC the other week, it suggests a serious lack of critical focus. There also needs to be a sensible approach to how Government Departments and businesses can meet outside formal contract negotiations and learn what each has to offer. I think the Minister would have some very exciting meetings in Shoreditch if he were able to visit.

I will highlight one example. Tribesports, which is a Shoreditch-based business—based in the Cremer business centre, just off Kingsland road—provides a social platform for sports enthusiasts. Priya Shah, who is responsible for business development, told me that trying to get through to health providers to suggest alternatives to paper leaflets as a way of spreading health messages, in a world of smart phones, was challenging. She said that it was

“impossible to get through to the right contact at the NHS. This”—

she was referring to providing health advice—

“requires a modern approach, with everyone spending more and more time on computers and phones, not reading leaflets.”

She is only one example.

Overall, contract management has become unnecessarily complicated. The advent of G-Cloud is a help—I was pleased to welcome an official from G-Cloud to Shoreditch not that long ago—although local businesses in Shoreditch tell me that it is still cumbersome. For many—this is about the language sometimes spoken between Government and businesses—the very word “Government” in front of a contract suggests a minefield that is hard to navigate compared with other sectors, and indeed, other countries with which they do business. That is the challenge. Sometimes, it is just a different language that is being spoken, but the Cabinet Office and the Minister are now supposed to be capturing and sharing knowledge and best practice within projects, across projects in a Department and across Departments.

The Minister has a difficult task. Whitehall is strewn with the failed legacies of Cabinet Office Ministers who have promised various versions of joined-up government or Prime Minister enforcer roles—call them what you will—but who have not been there long enough to see off the interests of the large Whitehall spending Departments. I am pleased that the Minister for the Cabinet Office and Paymaster General has been in post for a long time. That is an improvement. However, we know that, in Whitehall and Cabinet, the bigger the budget of the Department, the more clout the Department has. Initiatives such as the commissioning academy and

3 Dec 2013 : Column 240WH

the Major Projects Authority are welcome, but improving contract management and procurement skills just is not enough. Too often we hear of hurdles set by risk-averse civil servants. What about better use of technological solutions to monitor compliance?

Just one example of how the Government could learn from the private sector—another one—is suggested by Affinitext, which I have mentioned. Graham Thomson, managing director of Affinitext, says:

“Electronic, tablet friendly versions of contracts should incorporate an agreed rights and obligations matrix, so as to ensure that each party performs their obligations in accordance with the contract, using ‘Just-in-Time’ task reminders.”

That is pretty simple stuff in their world, but Whitehall does not yet seem ready to embrace it.

The Public Accounts Committee got a thumbs-up from the big private sector companies when we called for more transparency, which is another issue for some of these smaller companies. In Shoreditch, that is the way business is done. It seems that in many respects Whitehall and Ministers are nervous about losing control of “the message” by encouraging that. I speak as a former Minister with some knowledge of the pressure on Ministers. However, as Graham Thomson says,

“‘Commercial sensitivity’ issues, if raised in that regard, are definitely more Civil Servant driven than private sector driven. In any event, they are manageable.”

All the businesses that we have spoken to on the PAC and that I have spoken to in Shoreditch are far less concerned about commercial sensitivity than Government are.

I have some specific questions for the Minister. The first is about the length of procurement processes. Why are Government procurement processes so long compared with those of other countries? One supplier—I would happily talk to the Minister privately about this individual, although I do not think that it is appropriate to name them in this debate—tells me that in the US, Canada, Sweden and New Zealand, procurement of the same product has typically taken seven to 12 weeks compared with two and a half years for a Ministry of Justice contract that is still not concluded. Many other people have highlighted long, drawn-out or delayed contracts as a major risk.

What is being done to improve how contracts are drawn up? Many small businesses, including Fixflo, which has an online platform for housing maintenance, and another company, which won a Government health contract, have highlighted the complexity of contracts and the frequent changes by commissioners as off-putting.

Why are Government still demanding that intellectual property be handed over to Government? Does the Cabinet Office have any guidance for Departments about that? Has it seriously addressed the issue? It can be a deal-breaker for emerging tech businesses, whose capital is often their IP.

What are the Government doing to break down Government contracts into smaller contracts? I know that there are some attempts to do that, but as one company said,

“Instead of tending towards single suppliers of IT services, an integrated solution which incorporates smaller companies would help to support the IT sector and innovation. Encouragement should be achieved through a credit in the tender scoring process.”

I hope that the Minister will consider that suggestion.

3 Dec 2013 : Column 241WH

Mr Iain McKenzie (Inverclyde) (Lab): It is a pleasure to serve under your chairmanship, Mr Streeter. I congratulate my hon. Friend on securing this important debate. She touches on a number of issues. The one that I will ask her to comment on is not contract management, but contract monitoring. Does she believe that frequent contract monitoring is necessary to prove, first and foremost, best value for the Government?

Meg Hillier: My hon. Friend raises an important point. Contract monitoring is often more of a box-ticking exercise. When there are 150 key performance indicators, it is difficult to know whether someone is watching the overall performance of the contract, and sometimes the contracts are drawn up in such a complicated way that it is very difficult to shift meaningfully. In the building world, for example, there are attempts by housing associations and contractors to partner, so that they work together to acknowledge where there might need to be a change for more improvement. I hope that the Minister would acknowledge that there needs to be great improvement. The Major Projects Authority is doing some good work in that area, but it deals with the major projects. Many Government contracts are much smaller than that, which is one of the big challenges. Building a warship is one thing; letting a small IT contract is another.

Crucially, all of this—what my hon. Friend talked about and what I have talked about—cannot just be left to Departments. We know that procurement managers come in various forms. Some are not very expert. I remember as a Minister saying to one official who had led two projects that came in ahead of time and under budget and that delivered very successfully, “What’s your next one?” The reply was, “Well, I have to move in order to get my next promotion.” I know that there have been some attempts to put project managers in place in Departments, but I would be interested to hear whether the Minister has an update on that.

Procurement managers can often prefer the simplicity of a single supplier, as it can be more complicated to manage several contracts. The Cabinet Office recently—yesterday, I think—advertised its event management contract, welcoming multiple small bidders. I hope that that will be better than other Government bids and that the Cabinet Office will live up to its promise. I am quoting from the Minister’s own website, which says:

“We are committed to ensuring that small organisations and businesses can compete fairly with bigger companies for our contracts.”

I see him nodding. I hope that businesses in Shoreditch take that seriously and that he delivers.

When contracts are broken up, smaller IT companies are often required to partner with bigger players to meet the risk threshold. That can be a big issue for a supplier’s IP and it adds complexity. For businesses in Shoreditch and particularly the tech businesses, it is a deal-breaker.

I want to raise one specific issue in relation to local government procurement; I am not sure how this applies to national Government. Now that councils often join forces to procure for longer contracts—perhaps across more than one local authority area—those now count as large contracts, and it is often the case that small businesses do not meet the requirement that the value of the contract be not more than 25% of their annual

3 Dec 2013 : Column 242WH

income. That is an example of a hidden barrier that could be avoided if the threshold were for the annual value of the contract, rather than the whole contract over the longer period. I am not sure whether the Cabinet Office is aware of that. I hope that the Minister is. Does it apply to central Government too, and can the Cabinet Office do anything to tackle it?

It is fair to say that there has been some progress by both recent Governments in paying contractors much faster, but late payment can be a big issue for smaller companies if they are a subcontractor down the line. Has the Minister any plans to make it mandatory for large contractors to pay their subcontractors within 30 days of receipt of payment from Government? If the Government are paying on time, there should be no excuse for that payment not being sent down the line to the smaller contractors on time as well. I hope that the Minister can answer that point.

During the Olympics, there were some very interesting issues going on with contracts from the public sector. There were scams whereby bidders included local businesses in a bid and then stood them down once they had won. I do not know whether the Government are aware of that and what they are planning to do to ensure that it does not happen in future. It had a big impact on local supply chains and, crucially, on small and medium-sized businesses’ confidence. There is such cynicism out there. If the Minister were able to come to Shoreditch, he would hear this. There is a desire to take these contracts on. People realise the prize that they bring, but there is cynicism about whether they will ever have the chance to compete on a level playing field.

That happened during the Olympics. We picked up on it too late, because clearly there was a very tight deadline for delivery of the Olympics, but I believe that contracts need to be better audited after they are awarded. We must ensure that promises of local employment and contracting with certain subcontractors and promises on pay rates, training provision and so on are delivered on. Only a post-audit will deliver that.

I have touched on financial hurdles, but there are others that I have heard about repeatedly from solvent and successful businesses. When smaller businesses join forces to bid for a contract—often in a creative partnership and sometimes delivering very good solutions or potentially doing so—they require three years of audited accounts, which they cannot provide because they have never worked together before. Even when they are able to get around that by providing projected accounts, they need to spend up to £6,000 on accountancy fees to do that. It is right that due diligence takes place, but could that hurdle be introduced later in the bidding, when a consortium knows that it is in the running? The up-front costs can easily put off SMEs, whereas big companies can afford them much more easily.

One company, which had won a health contract, told me:

“Financial guarantees were required which were impossible for SMEs to reach. For one application we were required to put up a bond of £10m which removed small companies immediately from competition, as for a company with a £3m market cap nobody will be willing to put up the risk for such a bond. This means that small companies are effectively denied the chance of competing in the bid, and stops them…making the jump from small to medium sized companies.”

3 Dec 2013 : Column 243WH

Mr McKenzie: I thank my hon. Friend for giving way once more and for making very powerful points on the procurement aspect. Has she, like me, experienced the reluctance of small and medium-sized businesses in relation to eProcurement—their fear of using that tool to submit tenders online?

Meg Hillier: Earlier, I mentioned G-Cloud. That is an important innovation, but there needs to be greater confidence building and greater awareness.

I am not sure whether the Minister has come across this, but there were times when I was a Minister when I would ask whether anyone had spoken to someone and I would gather that there had been a big consultation, but later on, when I met some of the people who had been at that, whether from the business sector or elsewhere—I dealt with procurement in the Home Office for three years—I discovered that being in a meeting was all that happened. Someone sat in a meeting; they did not actually engage. I think there needs to be really good, positive engagement with businesses, which are keen and willing and have a lot to offer.

I extend an invitation to the Minister or his senior officials to come to meet Shoreditch businesses and hear from them directly about the barriers that they face. If he does so, he will also learn about a number of innovative, user-friendly and cost-effective ways for the Government to deliver smarter services. I hope that he will take that opportunity and spend a thrilling morning meeting some of the best brains in the country.

We know that civil servants’ careers are not enhanced by taking risks, so the safe, risk-averse approach is well embedded in Whitehall. The Cabinet Office is charged with changing that landscape and opening up Government to the small business sector. It is certainly talking the talk, but whether the large-spending Departments will deliver is another matter. I look forward very much to the Minister’s response. Shoreditch is listening, and I will be holding him to his words and his Government’s promise of more business for the small business.

4.10 pm

The Minister of State, Cabinet Office (Mr Nick Hurd): It is a great pleasure to serve under your chairmanship, Mr Streeter—I think for the first time—and to respond to an important debate. I congratulate the hon. Member for Hackney South and Shoreditch (Meg Hillier) on securing the debate, and on presenting it in such a clear and compelling way, rooted in her experience as a former Minister responsible for procurement in the Home Office and a member of the Public Accounts Committee. I am reassured by her telling me that my reading of the upcoming report will be a pleasure. That will be a first, and I await it with bated breath.

The issue that the hon. Lady has raised is enormously important, and I want to persuade her that the Government, and the Cabinet Office in particular, are absolutely committed to trying to open up more space for small and medium-sized enterprises to come in and offer the value and the innovation that she has talked about. I do not want to appear at all complacent, because although we think we have made some good progress, we know that we are nowhere near where we want to be, considering the scale of the opportunity.

3 Dec 2013 : Column 244WH

The matter is extremely important, not least given the state of the public finances and the situation that we inherited. It is important to recognise where we started. As I think the hon. Lady recognised, what we might call the outsourced public service market was entirely dominated by large private sector organisations, and small companies had little room to come in and improve the situation. I recognise a lot of her analysis about how off-putting and complex the whole concept of bidding for Government contracts is for those running a small business, which I have done myself. It is hard enough work as it is without having to wander through a swamp of bureaucracy and difficulties.

We inherited that situation, which was compounded by the fact that Government did not know how much they spent with major suppliers. I am glad that the hon. Lady referred to the fact that the Minister for the Cabinet Office and Paymaster General has been in post since the start of the process, because that has made a great deal of difference. We are trying to drive a culture change across the system, and he has been extraordinarily persistent in trying to achieve that. The results of the work of the Efficiency and Reform Group, which we created, have been dramatic. We saved the taxpayer £10 billion last year alone compared with 2010, of which £3.8 billion came from commercial areas and £800 million from better engaging with strategic suppliers. There was no rocket science involved; the Government simply woke up to the fact that we sit on top of a powerful buying machine, which makes it possible to secure much better terms. We can leverage our scale to get better value and resolve performance disputes more quickly.

Mr McKenzie: The Minister speaks of the culture change that he is trying to establish. Will he comment on the McClelland report and how it has been embraced by other parts of the country?

Mr Hurd: We are trying to embrace a culture change. There was a culture of buying big and buying badly in a very risk-averse way, and we are trying to improve that—to touch on a point alluded to by the hon. Member for Hackney South and Shoreditch—not least by instilling much greater commercial capability and confidence in the system. A saving of £10 billion in one year is an important improvement, which is equivalent to about £600 per UK household. That is real money, which has real-world impact. Within that, we have been working hard to improve the procurement processes that the hon. Lady quite rightly criticised. We need to make it easier and cheaper for firms, particularly smaller ones, to bid for work.

In the context of my main responsibilities as Minister for Civil Society, I might add that we are particularly keen that charities and social enterprises feel they have more space and a level playing field on which to compete. The hon. Lady mentioned the length of procurement times, and we have cut the length of the average procurement by 40%, which makes the UK faster, we think, than any of our European neighbours. I am always delighted to hear about specific cases where the procurement process has been too long and too clunky, but we have taken a big step in the right direction.

3 Dec 2013 : Column 245WH

Part of the process is improving our commercial capability and confidence at the heart of the civil service, so 1,800 officials have already been trained in procurement and 150 leaders have been through the Major Projects Leadership Academy in Oxford. We need to go much further, as I have said, and get smarter at managing performance. For the first time, the Government have allowed past performance to be taken into account when bids for new work are evaluated. It is astonishing that that has not happened before. Suppliers can now be rated high risk when there are material performance concerns, and we have introduced a new approach for managing gross misconduct. Our long-term goal remains the creation of a vibrant, competitive marketplace. Where bad practice is uncovered, we will crack down on it robustly. We intend to continue to build on the progress of the past three years, focusing on commercial capability and promoting transparency.

I turn to the meat of the hon. Lady’s contribution on behalf of businesses in her constituency. We are absolutely determined to wrestle with some of the challenges, problems and barriers to which she alluded, to make it easier for small businesses to come in, compete and give those spending taxpayers’ money more choice and more access to the innovation that we desperately need. She talked about procurement time, and, as I have said, we have reduced the average turnaround time from advert to contract award by more than 40% to 100 working days. That is better than France and better than Germany. Within that, small procurements can be much quicker, and we are keen to continue to improve. Some progress has, therefore, been made in that area.

The hon. Lady talked about contract complexity, which I definitely recognise as a problem; the contract with some 150 key performance indicators that she mentioned is simply extraordinary. Our next step to try to simplify the system and introduce more consistency is to release a model contract for services, which sets out best-practice contracting approaches and includes a streamlined performance management regime.

The hon. Lady asked about intellectual property, which is of particular interest to technology companies in her constituency, and whether the Government still demanded that intellectual property be handed over to them. Our approach is to make that decision on a case-by-case basis. In the new model service contract, ownership of previously existing intellectual property rights will stay with the author. If the Government pay for new IPR to be created, however, in some circumstances it will be appropriate to retain ownership.

Meg Hillier: I am heartened by what the Minister has said. It would be helpful if people knew the position at the beginning of the process, because such hurdles are often added during the bid, which sends a very negative message around the small business community.

Mr Hurd: I take that point on board, and I give the hon. Lady an undertaking to feed it into the system as we look at the model contract and the best-practice contracting approaches. She spoke passionately about the need to open up more opportunities for SMEs, and I assure her that we are committed to doing so. She challenged me to get beyond mere words, and those are

3 Dec 2013 : Column 246WH

not just words; we can now talk about numbers. Since 2010, overall spend from Government with SMEs has increased by £1.5 billion, which is serious money. We are not concerned simply about the relentless pursuit of value for money for the taxpayer. Given the recent economic circumstances and the search for growth, it is in the interests of the taxpayer and the country that we support growth where it can be generated. As we all know, SMEs are the engine of growth in the economy, so the agenda is extremely important. As she knows, the Government set out an aspiration that 25% of Government spending should go to SMEs. Although the data are not perfect—I would not claim they were—we think about 19% of Government spending is directly and indirectly with SMEs. That is progress.

The hon. Lady talked about IT in particular. I know she has a specific constituency interest there. We are keen to break down Government contracts in IT into smaller sizes, which is essential if we are to capture the value that the SME community can bring. The massive differences in prices between the old suppliers producing old technology the old way and what can be done now through new technology are absolutely extraordinary. We are determined to break such contracts open. New presumptions are set against information and communications technology contracts worth more than £100 million and we have published an ICT strategy that explicitly supports smaller, more disaggregated approaches. We have also launched CloudStore. Some 58% of the first £54.5 million spent on CloudStore went to SMEs, which benefited from 66% of sales by number. Interestingly, the Foreign Office is a good example of success; rather than have a single ICT provider, it has split a single contract into three. G-Cloud has around 1,000 SMEs on it, which have won 66% of contract awards by number. We have also just announced the digital services framework, where SMEs constitute 84% of suppliers. I hope I can assure her that, in that space, there are not just words, but genuine achievements to point to in creating the frameworks and space for SMEs to come in and supply us with innovation and the potential to add huge amounts of value to the Government ICT spend.

The hon. Lady mentioned bad practice and sham practices in local government. The reach of central Government and the Cabinet Office in limiting local government has limits. We have, however, consulted on Lord Young’s recommendations on how we can extend some of what we have learnt in central Government and make it available for local authorities, so they can improve their procurement practice and, in particular, make it easier for SMEs to participate. We shall relentlessly bear down on the need for pre-qualification questionnaires below a certain threshold of contract. Contracts Finder has been enormously popular. It contains all opportunities worth more than £10,000. More that 19,000 contracts have been published online and 31% of contract awards have gone to SMEs. For the first time, we have published a contracts pipeline, with £169 billion-worth of contract opportunities.

We have set up a mystery shopper scheme to address bad practice and the need to blow a whistle on bad processes or notify us when things are not being done in the right way. The scheme allows suppliers to report poor procurement practice across the public sector.

3 Dec 2013 : Column 247WH

So far, more than 550 cases have been received, of which more than 100 have been successfully resolved in local government.

Payment terms are enormously important, because cash flow is everything when running a small business. The hon. Lady rightly asked about payment terms and whether the Cabinet Office plans to make it mandatory for large contractors to pay their subcontractors within 30 days of receipt for payment. Yes, is the answer. The Government pay all undisputed invoices within five days. We have mandated prime contractors to pay subcontractors within 30 days, through the inclusion of a contract condition in the contracts we write. The new model contract I mentioned will reinforce that, because it is enormously important. We recently consulted on Lord Young’s recommendation that those contract conditions be adopted across the whole of the public sector. There is a tremendous amount of ambition.

The hon. Lady talked about the need for post-contract audits and the need to improve the way we monitor performance. I and the Government acknowledge that. We want to do more post-contract audit, to focus on how the contract is performing, supported by much greater focus on building commercial capability and contract management in Whitehall. Too much of the capability, resource, process and thinking has been directed at the procurement process, and not at the broader commissioning process and the need to monitor and work with the supply chain after the contract is awarded, to ensure that what we bought is being delivered in the right ways.

The hon. Lady mentioned some barriers that her constituents and others face. She said that, where businesses join forces to bid for a contract, they are required to have three years of audited accounts, which they cannot provide. We are keen to remove as many barriers as possible, so that situation is suboptimal. That is why the Cabinet Office advises procurers not to request three years of audited accounts. We would be keen to review specific cases where such behaviour has occurred. The mystery shopper service is an opportunity for people, and small businesses in particular, to tell us the reality on the ground.

With that broad sweep, I hope that I have convinced the hon. Lady that our commitment to improve goes beyond words. She knows from her time in government and from the evidence she received on the Committee that such work is difficult. It is gritty. We are changing culture. We have to bring in new expertise and capability. We have to challenge the system that was frankly not very efficient at managing and spending public money. For reasons she will recognise, we are determined to secure much better value for the taxpayer, and that includes making it easier for SMEs in her constituency and others to come in and help us with the innovation, value for money and fresh approaches we desperately need.

Meg Hillier: I extended an invitation to the Minister, or his officials, to come to Shoreditch. I would be happy to host them on a useful working visit, if he is interested.

Mr Hurd: That is a delightful invitation. I can tell the hon. Lady on behalf of the Cabinet Office that we would be happy to accept.

3 Dec 2013 : Column 248WH


Mr Gary Streeter (in the Chair): We are ready to move on to our next debate. The protagonist has entered the Chamber. There is a lot of interest in this extremely serious health matter. As the Minister takes his place, I am delighted to welcome the hon. Member for North Devon.

4.24 pm

Sir Nick Harvey (North Devon) (LD): It is good, Mr Streeter, to have the opportunity to debate this topic this afternoon. I have been aware of the issue for a long time. Roaccutane raises a lot of understandable passion among those who are directly affected. It is a form of the drug isotretinoin, used to treat severe acne and manufactured by Swiss pharmaceutical giant Roche. It was licensed for use in the UK 30 years ago, in 1983. Since then, in the UK alone, it has been implicated in reports of 878 psychiatric disorders, including 44 suspected suicides.

Next month, in January, it will be 10 years since my constituents’ son, Jon Medland, tragically took his own life while studying for a medical degree in Manchester. Having heard of its “miraculous” effects, Jon began taking Roaccutane to clear a relatively mild case of acne. Just three and a half weeks later, he died, having transformed from a successful, outgoing, happy young man to a withdrawn and depressed individual. Jon had never suffered from depression. Everything in his case points to an adverse reaction to the medicine. As the coroner said:

“For a drug to affect a person of a very solid life foundation...deserves further investigation”.

Despite a number of similar cases and mounting scientific evidence, we seem to have lost sight of the precautionary principle when it comes to Roaccutane. It is impossible for my constituents—Jon’s parents, Pamela and Jonathan, who are here today—and the other families affected, to achieve genuine closure while young lives are still at risk and reports continue to come in.

The purpose of today’s debate is to call for a thorough re-examination of the evidence and an investigation into the use of Roaccutane, for stricter guidelines to medical professionals on prescribing the drug and for the Department of Health and the Medicines and Healthcare products Regulatory Agency to show greater will in warning of the risks.

Richard Drax (South Dorset) (Con): I congratulate my hon. Friend the Member for North Devon (Sir Nick Harvey) on securing this debate on a subject that has affected one of my constituents, Mr Derek Jones. Forgive me if I am jumping the gun by raising this issue. My constituent, Mr Jesse Jones, committed suicide, and someone who wrote to Mr Derek Jones after reading an article in The Mail on Sunday related another case. In both cases, the deceased were referred for psychiatric treatment after stopping the drug, but because suicide occurred after they stopped taking the drug, no warning was given to the right officials.

Sir Nick Harvey: My hon. Friend makes an important point. The point when people are at the greatest risk can be as long as six months after taking

3 Dec 2013 : Column 249WH

the drug. In the case of John Medland, the impact was swift and profound, but in other cases, it has occurred some time later.

Bob Stewart (Beckenham) (Con): Is it possible, therefore, that there is a link? If the drug is a toxic chemotherapy agent, it may well have a permanent effect on the brain. Consequently, after the person stops taking the drug, it can affect their personality. Could that be the reason?

Sir Nick Harvey: My hon. Friend tempts me beyond my limited medical expertise, but the logic of what he is describing sounds convincing. The other point to be made about the delay in some cases is that the numbers on the incidence of suicide and psychotic disorder that I quoted a few minutes ago are highly likely to be gross underestimates. For example, just this morning, I had a telephone call from someone in Cornwall who had heard a morning bulletin on his local BBC radio station referring to this debate. He said that for the first time, the penny dropped with him. He had attempted suicide and been forced out of the Royal Navy, but he had never before put the two things together. With the benefit of many years’ hindsight, he realised that it happened just months after he had used Roaccutane to deal with acne. I therefore think that it is fair to say that we are looking at numbers far greater than we first thought.

Caroline Nokes (Romsey and Southampton North) (Con): I congratulate my hon. Friend on this important debate. Given that he has said that the number of people affected may have been grossly underestimated, does he agree that what is desperately needed is robust scientific investigation and analysis of the numbers and possible causes, especially as many of the studies are not very up to date?

Sir Nick Harvey: I entirely agree that a great deal more research is needed. My point in raising the matter with Government through my hon. Friend the Minister is that I cannot see who other than a public authority could initiate or, indeed, fund such research. It is certainly not in the manufacturer’s interest; Roche clings to the notion that millions of people have been treated with the drug without side effects or mishap. That may be perfectly true, but it does not alter the fact that, for those who have suffered a serious side effect, the impact has been devastating. I ask again: where is the precautionary principle?

Mike Thornton (Eastleigh) (LD): What is Roche’s answer to the fact that the drug is more or less banned in the United States—one must sign a separate declaration—and that it is banned in other countries? If the drug is totally safe, why do other countries not consider it so?

Sir Nick Harvey: What has happened in the United States is interesting. As we know, the United States has a much more litigious culture than we do in the UK, and the manufacturer there has paid out to a patient on quite a large scale. That patient suffered different side effects, but the manufacturer nevertheless had to pay out. That, combined with the fact that generic versions

3 Dec 2013 : Column 250WH

of the drug are now available on the US market, has caused the manufacturer to withdraw altogether from the US market.

While we are discussing the attitude of Roche, it is worth noting that the information in the drug’s packaging includes explicit warnings about the possible psychological side effects, including incidences of suicide. If Roche acknowledges that to the extent of being willing to put it on the information, it seems to be recognising that for all the millions who may have used it successfully, a cohort of the population has nevertheless suffered as a result of using the drug.

The logical continuum of that is the ultimate withdrawal of the drug altogether. Rationally, I do not think that we can ask the Government to move straight to that in one go, much as I would like them to. Were they to attempt to go down that path, in no time at all they would find themselves locked in some sort of litigation with Roche, which would certainly not stand by and watch a major market like the UK ban its product. The court would expect the Government to demonstrate overwhelming scientific evidence, which I do not believe is available as yet. That is why, as a first step, I am calling for such scientific research to take place.

Caroline Nokes: On my hon. Friend’s point about calling for the drug to be withdrawn, does he agree with the dermatologist in my constituency who sent me an e-mail today saying that it would be a sad day for many thousands of acne sufferers if the drug were withdrawn completely? We desperately need this debate and the future to hinge on accurate scientific information.

Sir Nick Harvey: I am not entirely sure that I agree. Other treatments for acne are available. I readily acknowledge that they may not be as effective, but they include antibiotics and a variety of other treatments. Unless and until we have some way to predict which people are most likely to suffer catastrophic side effects, I would prefer on the precautionary principle that no one at all took the drug. If we could predict with some certainty—whether by means of genetics or whatever—who might be predisposed to such side effects, then and only then might it be safe to argue that anyone without such a predisposition could safely use the drug, but we are nowhere near that yet. I suffered from acne and was prescribed antibiotics for 11 years or so to deal with it. It is a miserable business—no one would make any bones about that—but there are other treatments, and the catastrophic consequences for some people of using the drug suggest that we would be better off without it.

Richard Drax: On that point, Robyn Cole, who is not my constituent, wrote a moving letter to Mr Jones saying that the best cure that she had for acne was sunshine, and if only she had been told that initially. On the dysfunctions caused by the drugs, Mr Jones wrote in an e-mail to me:

“Sexual dysfunction is not included in the patient information notes; Roche said that they were not aware of this side effect. But as one sufferer told me, if they put ‘sexual dysfunction’ in the leaflet, no one would take it.”

His son was severely affected, and Robyn Cole also tells me that she is still physically affected some years on, having given up the drug.

3 Dec 2013 : Column 251WH

Sir Nick Harvey: My hon. Friend makes an interesting point, and I am sure that he is absolutely right in his belief that if it were mentioned in the warning notes, the use of the drug would undoubtedly be greatly reduced, as we would want in the interim.

Let us look at the available scientific and anecdotal evidence that establishes a link between the drug and the effects that I have described. Roaccutane is a vitamin A-related compound that has long been known to cause psychiatric side effects. Reports of users experiencing depression have continually surfaced, so much so that in the USA the Food and Drug Administration forced Roche to produce safety warnings about Roaccutane as long ago as 1998. The following year, an Irish study found that users of the drug were 900 times more likely to suffer from depressive symptoms than patients being treated for acne with antibiotics.

Although many studies since that time have provided limited evidence, they have often been too small to be viewed as conclusive. However, I want to mention two that stand out. First, in 2005, Dr Doug Bremner from Atlanta university published a study using brain imaging before and after four months of treatment with Roaccutane. The images clearly showed an impact on brain function, associating the drug with a decrease in function of the frontal lobe—a part of the brain that regulates emotion. Secondly, Dr Sarah Bailey from Bath university undertook studies on young adult mice and rats. When the animals were put through a “forced swim” test, where they were placed in water, those on Roaccutane spent longer being immobile, without attempting to escape, than those on antibiotics—a change in behaviour consistent with depression-related behaviour in the animals. Of course, humans and mice are very different and therefore much more research is necessary. However, at the very least Dr Bailey’s findings should be seen as a caution to doctors prescribing the drug.

These studies simply are not enough. It is evident that not everyone who takes Roaccutane develops depression, but there is clearly a vulnerable population of patients who do. Investigations just have not gone far enough to find out why that group is vulnerable, but such research is vital. Surely, before we lose more young lives to the psychological impact of the drug, there is a clear case for further study on a larger scale.

Roche consistently says that it does not know the mechanism by which the drug actually works. Therefore, one might conclude that it is none the wiser about, or perhaps is not interested in, how these side effects work. However, one cannot ignore the fact that isotretinoin—I cannot pronounce it properly—is the only drug not designed to affect mental state that features in the USA’s top 10 list of drugs associated with depression. In response to the idea of a link between Roaccutane and depression, many people have suggested that the victims were already depressed because of their acne. While acne may indeed reduce self-esteem—many acne sufferers will know what I mean by that—it is an exaggeration to generally describe people who suffer from acne as being in the grip of depression.

Mike Thornton: That description just sounds ridiculous. Surely, if this drug is effective at curing acne, if someone took it and their acne was cured, they would not be depressed by having acne because their acne would have gone. There is no way acne could be described as being the cause of the depression.

3 Dec 2013 : Column 252WH

Sir Nick Harvey: My hon. Friend undoubtedly raises a logical loop, but there is the question of time scales, because even a very brief usage of the drug could have—as other hon. Members have suggested—quite a lasting impact. I simply do not accept that the horribly sudden onset of mood swings, paranoia and episodes of psychosis can be remotely compared with any feelings of lowered self-esteem that might be experienced by people because they suffer from acne.

Jon Medland, my constituent, had no history of depression. Similarly, the heartbreaking suicide note of James Sillcock, who died last year, told how he had “loved” his life, but it also said that Roaccutane had “changed his world completely”. Worryingly, a European Medicines Agency report in 2003 confirmed that discontinuing the drug may not be enough to alleviate adverse reactions. That was certainly true in a number of suicide cases, where young people realised they were “not themselves” and stopped the course of treatment, only to find themselves falling deeper and deeper into depression afterwards, which comes back to the point I was making earlier.

At the very least, this issue highlights the need for a greater awareness at all levels of the patient’s interaction with doctors; direct approaches must be made to monitor the patient’s mental state. Ultimately, we may never know how many people have been affected. Roaccutane was linked to nine suicide cases between September 2010 and September 2011, but with suicide such a sensitive topic, we can imagine that some victims’ families have not come forward. Indeed, others may not have realised the full picture—that the container of insignificant-looking pills, kept in the bathroom, for a few spots could have led someone to take their life in a state of psychosis.

It is also worth mentioning again that Roche has pulled Roaccutane from the US market. The drug first came on to the market for chemotherapy and then was marketed to a wider audience when its acne-curing properties became apparent. A number of doctors have been keen to argue that it is being overprescribed as a first-line treatment; it is only supposed to be used after at least two other medicines have been tried. In 2009, Dr Tony Chu said:

“You know with Roaccutane you can get patients off your books in six months rather than go through the mill and try them on a variety of things until you hit on the thing that will actually work for’s bad medicine.”

If doctors are doling out Roaccutane with little thought about the bigger picture, they are also ignoring the psychiatric risks.

Caroline Nokes: Will my hon. Friend give way?

Sir Nick Harvey: I have an eye on the clock, but I will give way briefly to my hon. Friend.

Caroline Nokes: Does my hon. Friend agree that Roaccutane can only be prescribed by a dermatologist, so the vast majority of patients would have gone through products prescribed by their GP before they ever get to a dermatologist and have the possibility of having Roaccutane prescribed?

Mr Gary Streeter (in the Chair): Order. Before the hon. Gentleman responds, can we make sure the Minister has time to respond to the debate?

3 Dec 2013 : Column 253WH

Sir Nick Harvey: Indeed, Mr Streeter.

What my hon. Friend says should be the case, but there seems to be some evidence from some medics that Roaccutaine is being used rather too quickly.

Young people full of potential and leading happy lives have been crippled by their use of this drug. On the face of it, perhaps the proportion of users of the drug who become victims does not appear to necessitate any action being taken, but if we look at the actual numbers involved and reflect that these cases are real, we must ask what has become of the precautionary principle.

In the absence of a consensus that a link exists, the burden of proof should fall upon the manufacturers and drug agencies to prove that there is no link, given the scale of the anecdotal evidence and the picture that is building up. We need a thorough, well-funded and sizeable study into the link between Roaccutane and the adverse effects that I have described. There is a clear need for stricter guidelines to medical professionals when prescribing the drug. The Department of Health should be clear about the risks and ensure that that advice permeates through every level of the NHS. Young lives are at stake and we can no longer afford inaction.

4.47 pm

The Minister of State, Department of Health (Norman Lamb): I congratulate my hon. Friend the Member for North Devon (Sir Nick Harvey) on securing this debate, and I say right at the start that I take the issue that he raises extremely seriously. I cannot begin to imagine what families have gone through after suffering such tragic losses, but if I was in their shoes, I would be campaigning and fighting, just as they are. I applaud the work that they have done in raising an issue that is obviously of intense concern to them.

Roaccutane is the brand name for the drug substance isotretinoin—my hon. Friend and I have both had some difficulty in pronouncing it. During my speech, I will refer to “Roaccutane”, although it is one brand name of that drug. I am grateful to my hon. Friend for providing this opportunity to update the House on issues relating to the prescribing of this medicine. I will aim to address the serious concerns that have been raised about the safety of Roaccutane, including the adverse psychiatric effects that my hon. Friend and other Members have expressed concern about.

Roaccutane is a derivative of vitamin A that is used for the treatment of severe and resistant acne; it is important to stress that. My hon. Friend the Member for Romsey and Southampton North (Caroline Nokes) made the point that it is used only in those cases.

Acne is a common condition that affects around 80% of adolescents at one time or another; it affects adults more rarely. Although acne is not life-threatening, it can have a significant impact on the lives of sufferers. In its severe forms, acne can be both extremely debilitating and distressing, causing real disfigurement and permanent scarring. It can also have a genuine impact on someone’s mental health. Many forms of acne will respond well to treatment with topical preparations or systemic antibiotics. For severe and resistant acne, however, effective treatment options are more limited.

Roaccutane has been authorised in the UK since 1983. It is available worldwide and has been used by millions of people. Roche, which first licensed Roaccutane,

3 Dec 2013 : Column 254WH

has withdrawn its product for commercial reasons in a number of countries, including the USA. However, other brands of the same drug—so-called generic drugs—are still available in those countries. It is a highly effective oral treatment for severe and resistant acne. However, all effective medicines are associated with a risk of side effects in some people. I appreciate that the side effect, or potential side effect, that we are talking about is of the most serious nature possible.

Unfortunately, it is impossible to predict which individuals will suffer a side effect from a medicine, but a medicine will be issued a licence only if it is considered that the benefits of treatment in the licensed indications outweigh the risks of side effects. The risks and benefits of Roaccutane were carefully considered at the time of licensing and, because of the known safety profile of this drug, it is licensed for use only for severe forms of acne that are resistant to other treatment. Since licensing, the safety of Roaccutane has been closely monitored by the Medicines and Healthcare products Regulatory Agency, with expert advice from the Commission on Human Medicines.

Roaccutane is a medicine that is highly effective at doing what it is designed to do. It is associated with some serious side effects. Roaccutane is harmful to the unborn foetus and therefore must not be taken during pregnancy. When Roaccutane is taken, common side effects include dryness of the skin and the lining of the mouth, nose and eyes. The dryness of skin that is associated with Roaccutane can take the form of cheilitis, which is cracking or inflammation of the lips. This condition can become very severe, chronic and debilitating in some patients. There has also been significant concern about the possibility that Roaccutane may be associated with psychiatric adverse effects, such as depression and suicidal behaviour.

Roaccutane is licensed for use only for severe forms of acne that are resistant to other treatment. This narrow indication for use is not the only restriction on its use in the UK. As my hon. Friend the Member for Romsey and Southampton North said, it can only be given by, or under the supervision of, a consultant dermatologist. The intention behind restricting prescribing in this way is to ensure that the health professionals with the most experience, and who are best placed to give patients advice about the important safety issues related to the drug’s use, make the prescribing decisions.

To underpin the discussions between prescriber and patient, all licensed medicines have a summary of product characteristics, which contains important information for prescribers, and are accompanied by an information leaflet for patients.

Bob Stewart: The nephew of a constituent, Elliot Brandon, was prescribed this drug by the doctor, but neither he nor his mother were given any indication that there might be side effects. That has to be stopped. We have to correct that, as soon as possible.

Norman Lamb: I was going to make that point. It is important that proper advice is given to patients when a drug is prescribed. My hon. Friend raises a serious concern on behalf of his constituent. I accept his point. The patient information leaflet is an essential document if the patient is to be fully aware of the possible risks of treatment and make informed choices about their care.

3 Dec 2013 : Column 255WH

Of course, unless they are directed to it and advised to read it by the clinician, the chances are that they will never read it. That is an important point.

Caroline Nokes: I have sat in on four consultations when Roaccutane has been prescribed. I reassure the Minister that consultant dermatologists tend not to just hand over a leaflet; they stand over a patient while they read it.

Norman Lamb: I am grateful to my hon. Friend for her intervention. I am sure that that is the usual practice. However, the concern expressed by my hon. Friend the Member for Beckenham (Bob Stewart) suggests that that may not uniformly be so, though it certainly ought to be.

Since 1998, there has been increasing awareness that Roaccutane may be associated with psychiatric adverse reactions, particularly depression and suicidal behaviour. The assessment of this issue has been complicated by the fact that young people with acne are already at an increased risk of depression, regardless of treatment. All psychiatric adverse reactions were assessed by the working group on isotretinoin in 2005. This working group of the Committee on Safety of Medicines consisted of independent experts, including psychiatrists and dermatologists, who considered the available data from published literature and case reports. All new information on psychiatric adverse reactions has remained under close and regular review since that time.

The product information for Roaccutane, and the other generic alternatives, states that particular care needs to be taken where patients have a history of depression, and that all patients should be monitored for signs of depression and referred for appropriate treatment if necessary. It also states that stopping taking Roaccutane may not lead—as hon. Members have mentioned—to improvement, and therefore further psychiatric or psychological evaluation may be necessary and appropriate.

As it is associated with rare, serious side effects, Roaccutane can only be prescribed by, or under the supervision of, a consultant dermatologist. The British Association of Dermatologists has published guidelines for its members on when to prescribe Roaccutane and how best to monitor patients for adverse effects during treatment. The guidelines recommend that patients be asked about any previous psychiatric illness, and the patient and their family should be made aware that the medicine may affect their mood. Patients should be asked about psychological symptoms at every clinic visit.

3 Dec 2013 : Column 256WH

I appreciate that, in the case of the constituents of my hon. Friend the Member for North Devon, there appeared to be a rapid deterioration of mental health—certainly, a deterioration that immediately followed the start of taking Roaccutane. Female patients will be asked about such symptoms every four weeks because of the need to rule out pregnancy before a new prescription is issued. The Medicines and Healthcare products Regulatory Agency keeps this issue under close review. Any new information is carefully assessed to see whether there is a need to take action to alert health care professionals and patients.

This debate has provided an important opportunity to update the House on developments relating to the prescribing of Roaccutane, which was last debated about 10 years ago in this place. As with any effective medicine, difficult issues of risk and benefit must be grappled with. Few hon. Members will not have known someone who has suffered, physically or mentally, with the scars of acne—severe and acute acne can be a disabling condition—and few would doubt the serious nature of the potential side effects of this powerful medicine, and their tragic potential consequences. In the short time available, I hope that I have been able to update the House on the measures in place to ensure safe prescribing of Roaccutane.

Sir Nick Harvey: I sense that my hon. Friend is reaching his peroration. He has offered us reassurance that the drug is used only under the auspices of specialist doctors and, apparently, only in severe cases, although my constituent’s was a mild case. Is he minded to take any further action at all, because as yet he has not suggested anything?

Norman Lamb: I am grateful for that intervention. I was going to suggest, at the end of my speech, that I am happy to talk to my hon. Friend and his constituent, if he wants that, because this concern cannot be dismissed in a half-hour debate. I am happy to look further at his concerns, because they could not be more serious. I recognise that other hon. Members are interested as well, and I am happy to meet others, if that would be of some use. I understand the seriousness of the issue that my hon. Friend raises.

Question put and agreed to.

4.59 pm

Sitting adjourned.