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Westminster Hall

Tuesday 2 September 2014

[Mr Dai Havard in the Chair]

Social Economy

Motion made, and Question proposed, That the sitting be now adjourned.—(Harriett Baldwin.)

9.30 am

Hazel Blears (Salford and Eccles) (Lab): It is a pleasure to serve under your chairmanship, Mr Havard, in slightly altered circumstances than would normally be the case in Westminster Hall. I hope that this debate will be a cross-party event with a lot of different perspectives offered on the subject and, although it will not be entirely consensual, I am sure that many points will unite us when speaking about the social economy. I hope that the fairly adversarial nature of the seating will not condition our behaviour and that the debate will be consensual.

First, I welcome the Minister to his post. This is my first opportunity, and the first opportunity for a number of colleagues, to debate with him. I am sure that he is already finding that the areas of his responsibility are surrounded by people of great good will, innovation and creativity. It is an exciting, dynamic area of policy and I know that he will enjoy it and that he will guide and shape it.

Secondly, but equally importantly, I pay tribute to the former Minister for Civil Society at the Cabinet Office, the hon. Member for—

Mr Nick Hurd (Ruislip, Northwood and Pinner) (Con): Ruislip, Northwood and Pinner.

Mr Dai Havard (in the Chair): Whatever he just said.

Hazel Blears: Absolutely. My knowledge of the geography of the south is not as good as my knowledge of the north.

I pay serious tribute to the former Minister, because for the past two years we have been working quite closely together on a range of areas, including social enterprise, social value and social investment. He has brought great vision, clarity, leadership and energy to this area of policy and without his drive and personal commitment I do not think that such progress would have been made over the past few years. I place on the record my thanks and appreciation for the work that he has done.

I also thank my Front-Bench spokesperson, my hon. Friend the Member for Newcastle upon Tyne Central (Chi Onwurah), the hon. Member for Warwick and Leamington (Chris White) and my hon. Friend the Member for Huddersfield (Mr Sheerman). Perhaps other hon. Members will join us. Each hon. Member present has a distinctive, important contribution to make; perhaps I will mention that later.

Mr Dai Havard (in the Chair): They are all on my list of speakers.

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Hazel Blears: Very good.

At one point I would not have thought that we would be having a debate on the social economy, because it is a fairly new idea that has emerged from some quite longstanding ideas. The idea of the social economy is beginning to develop as a way of bringing together sections of the existing economy—it is an exciting development—and about working out what a new economy might look like. One of the main drivers for me has been the financial crisis—the crash—and the resulting lack of trust in a range of organisations, including, unfortunately, some in our financial sector and some big businesses, which has led to the emergence of ideas about what a more responsible capitalism would look like. Although a lot of speeches have been made, there has been too little detail mentioned, and too little thought and analysis, about real, practical measures we could take to make capitalism more responsible and to have more of a social mission, and for us to feel that—as well as making money and creating jobs, which are really important in our economy—businesses can embrace a social dimension that allows them not just to do good in the community, but to be more successful.

One of the exciting things about a responsible capitalism is that it is not simply about altruism or philanthropy, but about saying that a business that recognises, at its heart and in its mission, the impact it can make in communities is likely to be a much more longstanding, successful and competitive business in the marketplace. Bringing those two things together is an exciting concept.

I came to this issue originally 20 or 30 years ago, supporting social enterprise, so it is not new in those terms. When I was a Minister I did the first cross-Government social enterprise strategy, to see how the whole of Government could help make social enterprise flourish, become more mainstream and move out of its niche position and into providing mainstream services. We have seen a step change, partly because of the financial crash and the move to responsible capitalism, and partly because of a recognition in the social sector that it needs to have confidence and big ideas—to move, perhaps, from the margins to the centre of our economy. I am seeing in many social enterprises now a new-found dynamism and confidence, which is moving them to the centre.

All the players on the board were at one time playing separately and individually, in their own small area, but I now see the private, public and voluntary sectors, including co-ops, mutuals and social enterprises, in a massive burgeoning of many different organisations playing a part in the mainstream economy in Europe and indeed globally. If that is not an exciting idea, I do not know what is, so I am pleased that we have secured this debate.

I want to talk about social enterprise, social value and social investment, which I see as the three building blocks of a social economy. I will start with social enterprise, because it has been around for a long time. As I said, many of us have supported the growth of social enterprise for 20, 30 or 40 years. I am delighted that there are now some 75,000 social enterprises in this country that employ more than 1 million people. They make a huge contribution to our GDP and include some of the most innovative, creative and far-sighted individuals and organisations that I have ever had the pleasure of meeting. That is partly because they sit

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slightly outside the mainstream, so they have the space and flexibility to come up with solutions to some of the most pressing social problems that we face.

Social enterprise increasingly offers a range of solutions to some of our most pressing social problems. Certainly, the Government have begun to explore some of these areas, such as the rehabilitation of offenders, getting long-term unemployed people back to work and health and social care issues. There are programmes to tackle the most troubled families in our communities, including a programme that started seven or eight years ago, when I was in the Home Office, that this Government have taken forward. Increasingly, social enterprises rather than conventional organisations are able to provide innovative solutions to some of our most pressing problems because they have the freedom to think differently and the ability to do so.

It is interesting that the recruitment organisation of choice for many teachers now is Teach First, which has a fabulous reputation and is not a conventional organisation. It takes the brightest and the best to work in some of our most difficult and challenged schools, to give our youngsters the chance of a decent education.

Place2Be is a social enterprise that works in Salford in my constituency and nationally. It works with children whose families are some of the most troubled—with drug and alcohol or mental health problems—and operates six primary schools in Salford. Against all the odds, with the support of Place2Be and through counselling and support in their schools, children of the most troubled parents are progressing at the same rate as children who are progressing at the average rate in the rest of the school. That, for me, is almost a miracle. That social enterprise, which is now being funded by social investment as well, is making a massive difference on the ground. I know that all colleagues will have examples of similar organisations operating in their own areas.

Bounce Back is a social enterprise that trains people who are ex-offenders. It costs some £95,000 to keep someone in prison, but about £3,000 to go through the Bounce Back programme, get ready for work and take up an opportunity in the future. Bounce Back and Blue Sky, which are similar organisations, say, “The only qualification you need to come and work with us is that you must have been to jail.” It would be quite interesting to see that in a job advert; I do not see many such adverts.

Mr Barry Sheerman (Huddersfield) (Lab/Co-op): Is this in the financial services sector?

Hazel Blears: Not yet. They tend to do grounds maintenance or logistics, but who knows?

That work is refreshing. In conventional job recruitment, it is difficult if someone has been to prison and has a criminal record. It can be so hard for them to get a job, but all the evidence is that the one thing that can keep someone out of jail is if they have a job, a home and some relationships with their family.

Emerging organisations, such as Bounce Back and Blue Sky, are doing an absolutely fabulous job. We also have SMaRT garages, which operate in four or five

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different places across the country, including in my constituency. They provide help to people with serious mental health problems, but they do not do it through social workers and psychiatrists; they do it by getting people hands on, servicing cars, doing MOTs and doing practical work. The only way someone is judged in that organisation is on whether they turn up, whether they do a good job and whether they are polite. They are learning social skills, as well as practical skills, which will stand them in good stead. I went to the SMaRT garage in Salford, and they let me—I am not sure I did the whole thing—help service a Volvo. I did worry about the man or woman who would drive it afterwards, but they kept a close eye on me.

Mr Sheerman: May I say what a relief it is to some of us who have a long-term interest in transport safety, and road safety in particular, to hear my right hon. Friend talk about a safe vehicle, rather than the motorbikes she is usually associated with?

Hazel Blears: Everyone has to have a bit of fun now and again. I am sure they kept a close eye on me when I helped to service the Volvo. I did not realise until afterwards that the young man who helped me had very serious mental health problems. He had been detained at Broadmoor for a significant period of time, yet that organisation, because it was prepared to take risks and believe in people, was able to do something that virtually no other organisation could. Ronnie Wilson, who runs that organisation, does a fabulous job.

Having said all that—those organisations are brilliant—there is much more that the Government can do to bring social enterprises to the mainstream. On each of my three issues, I will go through a couple of specific points, for the Minister and for my Front Bench team, with whom I have had the opportunity to discuss some of this. At the next election, the manifestos of all political parties need to have some specific and concrete offers to social enterprise, social value and social investment, if we are to build the social economy we want to see.

On social enterprises, I want to see the social sector established with a clear corporate identity. I want it to have respect and to be seen as the place to go to for creative, innovative solutions. That is the first point. The Government say, “There are lots of problems that we cannot solve. We need you to come into this space and begin to help us do that.” That is starting to happen, and it needs to happen more clearly.

David Simpson (Upper Bann) (DUP): On a point of clarification on social enterprises in the right hon. Lady’s constituency, are there any links between further education colleges or educational institutions and young people who have difficulties?

Hazel Blears: The hon. Gentleman raises an extremely good point. We have some links. We certainly have some enterprise models in some of our schools, academies and FE colleges. In the past, that would have simply been a small business option, but a social enterprise option is increasingly coming through. I find—I am sure we all see this—that more and more young people want values. They want to go home at the end of the day and be proud of what they have done and who they work for. That is why one in three start-ups across

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Europe is a social business. Young people with the best talent want to work in those organisations. That brings me back to my first point, which is that there is a business case for social enterprise. If a business wants the best talent, it has to have a social mission at its heart, so that young people are proud of what they have done at work.

First, we need a real recognition that social enterprise is a corporate form that can solve problems. Secondly, we need to look at financial incentives that can help to grow social enterprises—such as tax reliefs or looking at business rates again—so that we can incubate and grow the kind of organisations that can help us. Thirdly, we need to work with the European Union and look at state aid issues. An exemption for social enterprises and charities would make a huge difference and lift the burden of reporting requirements from this sector, which often cannot cope with some of the bureaucracy that bigger businesses can cope with. I will come to Europe in a minute, because Europe is doing great things in this arena, but the exemption is one more thing that we could do.

Moving on to social value—I am conscious of time—I pay tribute to the hon. Member for Warwick and Leamington. He has done an absolutely superb job in taking through the social value legislation in the House. The legislation will be game-changing. It will last and be hugely influential. We will look back in 10 years’ time and say, “Why did we not do it 30 years’ ago?” It is a market leader for many other countries across Europe and the world, which are now talking about doing similar things. I went to the Isle of Man to talk to some people about social value. Their Parliament does not half work quickly. I went to a Saturday conference and a Saturday night dinner, where I made a speech. On Monday morning, one of the Members of the Tynwald came up to me with a draft four-clause Bill. He said, “Would you like to come with me to Parliament, and we will present it?” It was amazing. I hope the Isle of Man will get a social value Act as well.

I was pleased to be associated with the legislation, which is incredibly important, but there is more we can do. I held a round table this year with people from the private sector, local authorities, social enterprises and the voluntary sector. We presented the then Minister for Civil Society, the hon. Member for Ruislip, Northwood and Pinner, with a lengthy report on the issues that had been highlighted. I am more than happy to talk to the new Minister for Civil Society, the hon. Member for Braintree (Mr Newmark) about that round table and some of the practical things we can do. I am delighted that more and more local authorities are putting social value clauses in their contracts and their procurement. That always used to be completely forbidden under European Union law. The EU has done a 360° turn and is now saying that not only can these social clauses be put in, but that they should be put in. That is amazing. I went to a procurement conference in Brussels with 1,000 procurement officials from across the European Union—it shows my dedication to duty that I went to a Brussels procurement conference—and to see those officials enthused by the possibility of being able to do good in how they use procurement was heart-warming and amazing.

In the European Union, Commissioner Andor has been hugely instrumental, as has President Barroso, and the whole agenda has been embraced. Commissioner

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Andor is coming to Salford on 22 September, where we are organising a round table for him to look at what more can be done in Europe to take forward the social value provisions on procurement and the social investment agenda. We are running with the grain, but there is more that we can do on social value.

One of the big issues is measurement and data, because everyone is doing the social economy now, but there are 57 varieties in how it might be measured. While there is inconsistency and uncertainty, it is difficult for people to get on a level playing field. I am not in favour of rigidity or one-size-fits-all. Part of the beauty of the agenda is that things develop and grow, but we need some core agreement on consistent principles for measuring social impact and social value, so that those who are tendering know exactly what they have to put in and so that those who reply to those tenders and provide services know how they can shape those services to have the best chance of winning a tender. This is a plea to the Minister: we have to have consistent principles and grounds for the measurement of value.

Guy Battle, who used to work for Deloitte and now has the Sustainable Business Partnership, has done some great work in setting up a social value portal, looking at measurement, metrics and developing the whole agenda. I think that he is someone who the Minister would want to meet and consult. The manifesto asks for social value including trying to ensure that we have some consistent principles and standardised measurement. Secondly, can we look at ensuring that social value clauses are included and given equal consideration to other criteria, or at least some clear weighting? People are saying to me, “We do not know whether the weighting is five points, 10 points or 15 points. We are very unsure about how to design our contracts.” The third ask—this is perhaps slightly more radical, but I believe it is essential—is to extend the Public Services (Social Value) Act 2012 from services to goods and infrastructure. The big spend in the next 15 to 20 years will not be on revenue, because we all know that money is tight; the big spend will be on big infrastructure projects, such as High Speed 2 and a new airport, wherever that might be, whether it is in the estuary or not. It is about the big rail developments and all those big infrastructure projects. If we can include social value clauses about local labour, using local supply chains and having a social impact in all those big infrastructure projects, imagine the prize that awaits. Now that Europe says that we can do it, we should extend social value legislation to include infrastructure and goods.

My final points are on social investment and I draw attention to my unpaid interest that is in the Register of Members’ Financial Interests with regard to Big Society Capital. Social investment is an exciting area of development. We had a G8 forum this year on social investment and Britain is clearly a global leader. We have more social investment than anywhere else with 15 in operation and 50 in development. The US and Australia have five each only. It is fantastic to be a global leader and to be better than America for once, much of which is down to the former Minister.

Social investment is exciting because it is new, but I recognise that money will be tight for whoever is in government after the next election. There will not be much public money around, so if we are to continue to

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reform, transform and improve public services, as well as the private sector, we will have to find new sources of finance to facilitate some of that transformation. I want to give one quick example. I do a lot of work on dementia and I have an idea that we could get social investment into dementia care to support community-based interventions to keep more people at home, so that they do not end up in the acute sector, which is the worst possible place for them. Dementia sufferers stay twice as long in the acute sector as people without dementia, they get readmitted twice as often and they die more often, all of which costs the NHS a fortune. If we can get social investment in and keep people well in the community, their lives will be better, their families’ and carers’ lives will be better and the acute sector will save money. The reason why that does not happen is because the money of clinical commissioning groups is all tied up in the acute sector. If we can get social investment, which would allow some headroom for double-running, community interventions, such as gardening, singing, befriending and buddying, can be scaled up. There is an emerging evidence base that such activities are effective and can lead to a virtuous circle.

I am meeting the Minister of State, Department of Health, the right hon. Member for North Norfolk (Norman Lamb) next Tuesday with Big Society Capital and the Social Investment Business and I hope that we can do something here. It will require courage and determination from the whole system, but the prize is worth having. We had a G8 forum on social investment and we had a G8 forum on dementia, which is the biggest global health challenge. It would be amazing if we could use this new global finance to tackle that challenge. We must cross our fingers and watch this space and see how far we get with that. It is exciting and is an illustration of what we could do.

I have some more manifesto asks. I have discussed them with my Front-Bench team and I am more than happy to send the Minister some detailed analysis. On social investment, we could look at charitable trustees’ investment decisions and give them the confidence that they can perfectly properly take social considerations into account when investing money. It is ludicrous that charities are not allowed to consider social impacts. We could make it clear that pension funds can also consider social reasons for investment rather than always having to get the best price and the most money. If we start to motivate charitable foundations and pension funds, the amounts of money could be massive, but we are not utilising them to their fullest extent. We could have a social investor exemption from the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, so that retail people can learn about social investment. When we get a social investment ISA, we will have broken through all the bureaucracy and it will be an everyday thing. I want such an ISA because I want my investment to do good as well. That is where we need to be. On tax incentives, we have the social investment tax relief, which is a great step from the Government, but let us ensure that it is broad enough to enable collaborative funding and new structures, such as social investment bonds and funds. We could also simplify the community investment tax relief to ensure that intermediaries can quickly get money and get it out to those who need it.

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The previous Labour Government started a plan, which has been carried on by the coalition, to use money in dormant bank accounts. There are other funds to which we could extend that idea, such as insurance, long-term investments and unclaimed gambling winnings. There is a lot more money out there that we could bring in. Instead of lying dormant and being wasted, it could be used to tackle some of our biggest social problems, so I ask the Minister and my Front-Bench team to consider that.

Finally on social investment, I want to discuss local impact funds. The Social Investment Business has been developing local funds to enable relatively small amounts of money to go to local organisations. The money that comes from social investment can sometimes involve big numbers, but there are many small organisations that need small grants. The first local impact fund was launched in Liverpool some two months ago, and of the 39 local enterprise partnerships, 11 have already said that they want local impact funds. This is a fabulous opportunity. The next round of European Union structural funds is coming with the proviso that 20% must be spent on social impact. Wow! What an opportunity to use EU funds to do good. That would rehabilitate the European Union in many people’s minds and even some of our not-very-pro-EU colleagues may think it a fabulous thing to do.

I am conscious that I have spoken for a long time, but I say to the Minister that I am delighted that he is in his role. He has a fabulous job. I have no doubt that he is raring to go and I am willing to give whatever help I can and the whole sector is willing to do the same. There are excellent companies out there in the marketplace. This is no fluffy public sector agenda; Fujitsu is examining its whole supply chain in terms of social impact and Interserve has recently invested in a social investment bond to fund a social innovation centre, which is amazing. Chief executives and chairmen really get this. The synergy of public, private, voluntary and mutual social enterprise is a powerful and irresistible idea. I ask the Minister to go with the grain and make his name—his mark—on this agenda.

Several hon. Members rose

Mr Dai Havard (in the Chair): Order. I will call the Front-Bench spokespeople at 10.40 am, so I ask the three other Members who want to speak to share the remaining time respectfully between themselves.

9.57 am

Mr Nick Hurd (Ruislip, Northwood and Pinner) (Con): As I speak, phones will be ringing in garages across Salford with anxious Volvo drivers seeking reassurance that their cars were not serviced by the right hon. Member for Salford and Eccles (Hazel Blears). I do not know how good a mechanic she is, but she is a brilliant politician. I congratulate her on securing a debate on a subject about which we are both passionate, on her track record of supporting social enterprise for many years, on keeping my feet to the fire when I was a Minister and on sending a strong signal to the builders of the social economy that there was strong cross-party support and interest in sustaining the work.

For me, the debate is about two important things. First, how do we find better solutions to the social challenges that undermine this country and carry

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unacceptable costs—both financial and, more importantly, human? Secondly, as the right hon. Lady herself asked, how do we help British business to sharpen its competitive edge in the modern world, to build trust—a crucial but fragile ingredient of value creation—and to generate social value? Those two opportunities come together within the social economy.

I want to make three brief points to complement what the right hon. Lady said. First, there is a substantial global movement here. We must seize the moment. We spend a lot of time in this place observing the waves on the surface of the ocean, which means that we sometimes miss or are slow to pick up on some of the substantial shifts in the current beneath the surface. What we are discussing today is such a shift in terms of how we think about the economy and its future. I see stars realigning across the three pillars of our society in a way that I have not seen in my lifetime, which suggests that people are now prepared to think and work in different ways—above all, critically, in government.

Government has to change. Across the world, Governments in developed nations face the same challenges of economic recovery—not only getting economies going, but ensuring the fairness of the recovery and its sustainability. There are also the issues of how we shape the competitive future of our countries and, as the right hon. Lady mentioned, how on earth we meet the public’s demand for better public services when we have substantially less public money. We are only halfway through the cuts, whoever wins the next election—let us be clear about that.

As John Micklethwait and Adrian Wooldridge said in their excellent latest book “The Fourth Revolution”, countries in the developed world face the same challenges in the global race to redesign government. The greatest political challenge over the next decade is fixing government. In this country, government has to work in different ways; gradually, that penny is beginning to drop, at the central Government level and at the local authority level, but it is hard, because we operate in a risk-averse environment. Doors and minds are open to doing things in different ways, however, and that has simply not been the case for the previous 25 years.

Furthermore, as the right hon. Lady said so powerfully, social attitudes to business are changing at the same time. In a transparently connected world, values matter much more to business. How businesses behave matters much more, and that will arguably be a source of competitive advantage in future. More and more of us are choosy as consumers about who we do business with; more and more of us, as savers and investors, are choosy about whom we invest in.

To correct the right hon. Lady, I should say that there are social ISAs at the moment, in response to that trend, and the socially responsible investment market is worth trillions of dollars now that savers are becoming more discerning. Employees in a tight labour market are clearly much more discerning, too, and want to feel prouder of where they work. We hope that commissioners, people spending public money, will also be sending strong signals to the market about the competitive advantage potential of being able to demonstrate social value.

No more powerful sign of social change is evident than in the surveys of young people and the generation coming through at the moment. Survey after survey

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tells us the same thing: coming through now is one of the most socially responsible, entrepreneurial generations that this country has ever seen, with different attitudes to the workplace, to businesses and to what their place in society is. The young generation will underpin the social economy.

The right hon. Lady talked about one in three start-ups in Europe being social; in this country, 15% of SMEs are social enterprises—15% and growing. There is not only change in government and in social attitudes to businesses, to which business is responding, but the social sector is having to change its attitudes as it is buffeted by change on all sides, which carries both risk and opportunity. Now, minds are much more open to working in partnership with different types of organisation and to seeking different funding models, such as social investment.

I see the stars realigning in a way that gives a fantastic engine to the move towards a more social economy and more collaborative models, which must be part of the future.

Mr Sheerman: The hon. Gentleman is making an excellent speech and I am absolutely rapt. As he was speaking, it came back to me that we are sometimes a little precious—not him personally, but those in the social economy. A lot of entrepreneurs have come to life through social enterprise. They may stay with social enterprise, but they get their training and become successful private entrepreneurs. There is a big move between the two.

Mr Hurd: The hon. Gentleman anticipates exactly my next point. What is so exciting is the signal that we can send about supporting social entrepreneurship across the sectors. He mentioned the private sector, but one of the things that excited me most in office was the evidence of the entrepreneurship within the public sector, unlocked by the opportunity to spin out and run mutuals inside the public sector. There are fantastic examples in the constituency of the right hon. Member for Salford and Eccles. It is amazing what happens when we give people the freedom to pursue their dreams as what I define as social entrepreneurs—people who run their own businesses spun out of the public sector. Those values and instincts and that creativity exist across all the sectors of society and need to be nourished.

This is a big idea whose time has come, with the opportunity for collaboration to unlock the spirit of innovation and social entrepreneurship in the country. This country is built on our success in innovating in the process of wealth creation and in the building of our cultural heritage. That is less evident in the area of social innovation, but this is the time to unlock that potential.

Secondly, to reinforce the point made by the right hon. Lady, we lead the world in this area. One of the things that struck me most in office was how many visits I got from representatives from a bizarre range of countries, from Canada to the country that I still call Burma, who said, “We notice what you are doing. We are interested in social enterprise and social investment, and for us the place to come and learn is Britain.” We must not surrender that lead, because if we are right about the movement, it will be a source of competitive advantage for this country as we think about how we shape the future.

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My third and final point is to reinforce the right hon. Lady’s message to our Front Benchers—both individuals have earned a great deal of respect and admiration. Let us seize the moment and not lose momentum. I am conscious that for the two gentlemen who aspire to be the next Prime Minister of this country the agenda is full and cluttered, which is daunting, but let those of us who believe in this continue to make noise, saying, “This matters. We have something very valuable and important growing in this country. We must nourish it.”

The right hon. Lady is quite right. We had to compromise to take the Public Services (Social Value) Act 2012 through Parliament. Respectable voices inside Government were saying, “Be careful here, because we are trying to make the procurement process leaner and more efficient, so what are we doing cluttering it up?”, so we compromised. No voices in the procurement business now say that the Act gets in the way.

Now is the time to look seriously at whether we extend the scope. Such a review needs to happen, but in parallel with a fundamental approach to raise the quality of commissioning throughout the public sector and a modest investment in the kind of learning networks that bring people together and make them ask, “How can we make best use of this?” That is how the system can be helpful. Things such as the Commissioning Academy, which is low cost and high value, are very important.

I also support the right hon. Lady’s comments about the pursuit of other dormant assets. So much time was spent in setting up Big Society Capital and making the system work with the reclaim fund, that we did not have the time to start conversations about pursuing other assets, in particular in the insurance industry. However, they are there, so let us go for them. Let us start those conversations now, because that is money sitting on the table.

I make a plea for cross-party support for the important public sector mutual movement. We must continue to send signals and say, “It is okay, we will support you in this process.”

On social impact bonds, let us be clear that we are at the bottom of the S-curve of the development of that instrument, which is so important because it creates space for social innovation in a system that is risk-averse. They are clunky, take too long and are too expensive to set up, and we have to change all that, but let us be clear that we have only just started and are at the bottom of the S-curve. We now need to find a different gear of ambition to make many more of those things in the marketplace, so that we can test whether the instrument is as valuable an influence as we think it is.

My appeal is fundamental: let us keep the level of ambition, because through that agenda we have the potential to improve so many more lives and to find better solutions to problems that impose unacceptable cost—both financial and human—on this country.

10.8 am

Mr Barry Sheerman (Huddersfield) (Lab/Co-op): It is a pleasure to serve under your chairmanship, Mr Havard.

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The debate has reminded me that I became a social entrepreneur a long time ago in Wales, where I set up the first co-operative development agency when I was a young academic at Swansea university. That was a long time ago. If I confess all, Mrs Thatcher made me a social entrepreneur. I spent 18 years in opposition, with 11 years as a shadow Minister, always disagreeing with what the Government were doing. There had to be more to life, so I developed something that I was passionately interested in. I started setting up co-operatives —working ones, rather than retail ones—and I have been at it ever since. I am told that I am on about my 48th social enterprise, which is quite a number. Most of them have survived. Some fulfilled their goal and then we wound them up nicely or merged them with somebody else’s enterprise.

As I said in an intervention, social enterprise is enterprise—it is entrepreneurial. People have to be good at it. Social enterprises need to have people in their trusts and on their boards who know about numbers and finances because they have to pay wages, watch their cash flow and do all the things that any other enterprise does. They also need people with vision, who can say, “This is the trend. This is what is happening.”

I agree with everything my right hon. Friend the Member for Salford and Eccles (Hazel Blears) said. I do not want to stroke her feathers too much today because we learnt yesterday that she is the Prime Minister’s favourite parliamentarian. I cannot add to that, but the fact is that she is a great champion of the social economy. We come from slightly different sides, only in the sense that I have got much more in to a particular way of raising money than her. I learn from her all the time and I think she learns a little from me, as we have different kinds of specialism.

I agree with the hon. Member for Ruislip, Northwood and Pinner (Mr Hurd) that we are at an interesting point, with real lift-off. I was looking at some figures this morning. This year, 250,000 new businesses have been set up using crowdfunding. I am an unashamed champion of crowdfunding. I found that it became really difficult to use the conventional ways of raising money for social enterprise after the financial collapse of 2008. I am told that I am a very good fundraiser, and I raised a lot of money for different things, including around £2.5 million to £3 million for the John Clare Trust, when things were rather better, but most of the sources for social enterprises suddenly dried up. Let us be honest: a lot of good social enterprises have gone to the wall. Certainly a large number in the environmental sector did so simply because there were no longer sources of funding. That is a cause for concern and it would be worth conducting an analysis of what happened in the environmental sector.

The fact is, however, that a new opportunity came around. I started reading e-mails and tweets about crowdfunding. I said to the wonderful Library here, “Could you brief me on crowdfunding?” and, for the first time, the response came back, “We do not know what that is about, Mr Sheerman, so we cannot brief you.” I confess that I tweeted to ask who could teach me about crowdfunding, and suddenly my room in Portcullis House was full of really exciting, interesting people saying, “We are doing crowdfunding. We think it is important and it is the future. We want a forum for it.”

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A group of us therefore formed the Westminster forum on crowdfunding, which now has more than 150 regular participants.

It is impressive that there are so many bright young people in this area. They are not all in social enterprises: as we know, crowdfunding runs across a number of areas, one of which is simply starting a business. We had a long conversation with the former Business, Innovation and Skills Minister, the right hon. Member for Sevenoaks (Michael Fallon), who has just changed job, in which he said, “I go up and down the country and people tell me that the big banks do not lend to start-up businesses. When I come back to London and interview the big banks, they say they do, but I believe the people who tell me that the banks are not lending.”

There is a real problem with start-up finance in all sectors, but the social enterprise sector rewards crowdfunding—there are rewards for investment. People do not get the investment back but they see a good project take off and succeed. Some of the organisations mentioned by my right hon. Friend the Member for Salford and Eccles started in that way. There is also straight crowdfunding: justgiving.com has raised nearly £3 billion and has just started a new organisation. I am jealous, because it has been called Yimby—yes in my back yard. There is also CrowdPatch, as well as other grass-roots social enterprises that are starting little businesses, opening a local shop or clearing up the local pond. Those enterprises then get bigger, more exciting and more adventurous. Some are very big players indeed.

In a few months—certainly in the past 18 months—Britain has become the crowdfunding centre of the world, and London is now the crowdfunding hub of the world. That has tremendously exciting potential for the social economy. In the past, when people wanted to start something they struggled to find the seed finance, but I have to give some credit to the Government, including the former Minister, the hon. Member for Ruislip, Northwood and Pinner, and the current Minister—I get along well with him and am sure he will do a very good job. The Prime Minister was nice to my right hon. Friend the Member for Salford and Eccles yesterday and I am going to be nice about the Chancellor of the Exchequer. We have had a good conversation with the Treasury and with the Secretary of State for Business, Innovation and Skills, and they have been positive about crowdfunding and the social sector.

I would never have believed that in my lifetime I would see the seed enterprise investment scheme and the social investment tax relief scheme. That is amazing. I hear that there are rumbles of discontent—[Interruption.] The Minister is right to claim some kudos for this. We now have a system that I understand has caused real discontent in silicon valley and places around the world where people set up enterprises because we have an almost unfair advantage, as our tax system is so good for start-up businesses. No doubt that is true.

In the previous Budget, that advantage was expanded to the social sector, which is very good news. Quite honestly, if someone is going to invest in something, and somebody comes along and says, “You are going to get a 30% tax break and will probably get your money back if you invest wisely”—wow! To extend that to the social investment sector—wow, wow, wow! We will not be content, of course—we are Members of Parliament—and will be talking to the Treasury about expanding the

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scheme a little more. As the Minister knows, the tax relief for social investment is not quite as big as that for the private sector, so we will want to get it slightly closer. I am not going to ask today for a full step towards parity, but getting a little nearer would be very good indeed.

There are three aspects to this cultural change. Strangely, it is also an historical change—we are going back. Two hundred years ago, in my constituency of Huddersfield, people created a social economy. They created their own little co-ops, burial societies and holiday clubs; and they invented housing associations to buy decent homes. They created a whole world supporting ordinary working people in doing what they had to do. They did all of that, creating a culture and a real alternative social structure.

Funnily enough, social media will enable us to rebuild that, through the crowd element and being able to talk to a crowd of people with a similar view. That may be local and quite parochial, or regional, but it could be worldwide. I am involved in a crowdfunding enterprise that is planning something that will involve every supporter of rugby league in the world. Perhaps that will not appeal to you, Mr Havard, as a rugby union man, but just imagine 7 million crazy—I say that in the nicest sense, meaning, “crazily passionate”—rugby league fans all contributing to something wonderful for the game of rugby league.

Crowdfunding can be global or local. I am more interested in what it can do in this country, both for social enterprise and to change the culture of our economy. Although not everything about it is good, there are some wonderful companies. We have the social impact investment taskforce, across the G8, chaired by Sir Ronnie Cohen. That is the way for the future. The intersection between social impact investment, social enterprise and crowdfunding is the future. It is exciting and we can change the whole landscape of what happens in our communities and our society. We have the tools: let’s go for it.

10.19 am

Chris White (Warwick and Leamington) (Con): Having listened to the past three speakers, I think this is probably more of an annual general meeting than a debate. I pay tribute to the right hon. Member for Salford and Eccles (Hazel Blears), not least because she will leave the House, come what may, next May. It sticks a bit to say it will be disappointing to lose a Labour Member, but it will be disappointing to lose her expertise. The support she gave me with the Public Services (Social Value) Act 2012 was singular in making it progress through the House and ensuring it had the cross-party support necessary for any Bill to achieve success.

I will break with convention slightly and say how disappointed I am to see so few Members in the Chamber. I can only assume that they got lost on their way here. Those who understand what social value and the social economy are about will realise that these are some very radical, new and revolutionary ideas, but, as the right hon. Lady mentioned, some long-standing ideas have also newly re-emerged. As the author of the Act, I recognise that this is not day one: a lot of knowledge and work has been put into this field already. However, as Members have discussed, we have found a new period of momentum to do some great work.

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To comment on what the former Minister, my hon. Friend the Member for Ruislip, Northwood and Pinner (Mr Hurd), said, when the Act started on the Floor of the House, there was a certain nervousness as to what its repercussions would be and what burdens it would place on businesses. I think this initial anxiety has been replaced by a level of confidence. Local authorities have become better and more successful at ensuring there is consideration of the wider benefits that their services can provide. The right hon. Lady mentioned Liverpool as one of the great examples. It was one of the first places I visited in my former role as the social value ambassador. I still hold a great memory of the Furniture Resource Centre. Rehabilitation, as the right hon. Lady mentioned, is an area where we can make the biggest difference through such work.

I am pleased with the role the Government have played. Obviously all Members who have got a private Member’s Bill through will know it is not possible to do so without the support of all Departments. Departments have made great strides in service commissioning and procurement. However, as the right hon. Lady said, there is potentially time for review. I think that 18 months is a long time—we dream of the Isle of Man—but it is still long enough that we can look at what has been achieved and whether these initiatives can be extended. Not only are the nation, its local authorities and Government Departments, adopting the initiative, but the world sees us a leader in the concept.

I have long believed that the closer to the community a service is, the better it is. Localism is key to this. It is a broad principle, based on the belief that we should devolve power to the lowest possible level. How we deliver everything, from our services to our local plans, should be considered by speaking to our constituents. We should ask our communities what they want, but what they really want perhaps is to be able to take on more authority. That is one of our greatest challenges. There are few Members present, but as people who believe in this concept, our task is to ensure our communities better understand what the social economy, social investment and social value are all about. These are simple ideas that we have managed to make quite complex.

Hazel Blears: The hon. Gentleman is making an extremely good speech. He has really hit a nerve on that point. We talk glibly about social enterprise and the social economy, but these words mean very little to ordinary people. The work he has done to make this come alive has been really impressive. Would he agree that one of the things the Social Economy Alliance—a whole range of organisations, ably led by Peter Holbrook of Social Enterprise UK—can do, working with hon. Members, is try to make those terms come alive to ordinary people? It is about getting people back to work, keeping them out of jail and those kinds of things. That is one of the biggest hurdles we need to get over.

Chris White: I thank the right hon. Lady for her intervention. Peter Holbrook, amazingly enough, has the one signed copy of my Act. What he has done with it goodness only knows. I agree that there are many players in this area, because of the alliance, Social Enterprise UK, and all the charitable bodies and their

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umbrellas. Our local political representatives are key players and do fantastic work on the ground supporting their constituents. I believe we should make these things more accessible to them. I would not denigrate anything they do, and certainly not as a former councillor myself, but we are coming towards local elections. Whatever party people support, they should be able to put in their manifestos what they are doing to help local community organisations.

Mr Hurd: I support that point on accessibility. The right hon. Member for Salford and Eccles (Hazel Blears) is right: if I stopped people in Ruislip high street and asked what they knew about local social enterprises, I would get even more blank expressions than usual. Would my hon. Friend join me in supporting quite simple initiatives, such as the Buy Social Directory and the imminent Social Saturday initiative? They are designed to give people more information about the social enterprises on their doorstep. Giving them access to what is going on in their area seems to be a simple step we can take and support.

Chris White: I thank my hon. Friend for his intervention. Days such as Social Saturday will create great momentum. It is something we should consider having yearly. I still maintain that we have work to do. As suggested, one piece of work is to put these issues strongly and firmly in our manifestos, so that these organisations can feel confident that they will continue to have the support and investment they need, whoever forms the next Government.

Mr Sheerman: We must of course ensure all the major parties get this in their manifestos. However, there is one small danger with accessibility: we create our own language in the social economy. It can sometimes be a bit cosy. People outside do not understand things and have to fight to get in. The reason I like the word “crowd” is that it is a new way of expressing an old idea: that the crowd is empowered. I ask the hon. Gentleman to use “crowd” with “social” when he talks about accessibility.

Chris White: The hon. Gentleman always talks great sense.

I am grateful to my hon. Friend the Member for Ruislip, Northwood and Pinner, the former Minister, for his support with respect to the direction of travel that social value has taken. I look forward to the comments of the new Minister, who has picked up his responsibility with alacrity. I look forward to a commitment from him to growth in the area we are considering; an increase in its momentum and an extension of its scope; and attention to reviews, which would be helpful and appreciated.

Mr Dai Havard (in the Chair): Order. You have all been so disciplined that the two Front-Bench Members have half an hour to share; so no doubt we will have comprehensive answers and comment. As the Minister prepares, I call Chi Onwurah.

10.30 am

Chi Onwurah (Newcastle upon Tyne Central) (Lab): It is a pleasure to serve under your chairmanship, Mr Havard—particularly in this debate. I congratulate and thank my right hon. Friend the Member for Salford

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and Eccles (Hazel Blears) who secured this important debate and has worked hard to push the agenda forward so constructively.

The debate has indeed been constructive so far, and there have been passionate speeches on both sides, from the former Minister, the hon. Member for Ruislip, Northwood and Pinner (Mr Hurd), the hon. Member for Warwick and Leamington (Chris White), my hon. Friend the Member for Huddersfield (Mr Sheerman) and my right hon. Friend the Member for Salford and Eccles. I shall try to maintain that constructive manner, but I do not guarantee that I shall succeed as well as my right hon. Friend did.

We recently witnessed one of the biggest crises of capitalism that the world has seen. Many ordinary people are still coping with its consequences, particularly for the cost of living. Yet with any crisis comes an opportunity, and in this case it is the opportunity to rebuild the economy into one that is more focused on long-termism and value creation, with social enterprise and social value at its heart. Some in the Government may be keen to get back to a business-as-usual approach to the economy, but the Labour party wants social enterprise and a social economy to be at the heart of things. Social enterprises help to build and sustain communities, and their hearts beat to the same pulse as that of the Labour movement’s founders—namely voluntarism and collective action, as my hon. Friend the Member for Huddersfield eloquently described.

We in the Labour party believe that genuine social enterprises can offer examples and incentives to both the private and public sectors. They can offer improvements in the delivery of some public services. Unlike some large contractors such as Serco and G4S, social enterprises are embedded in the heart of their communities, and as small organisations they can pilot and test small-scale incremental innovations in service delivery while developing new skills in the communities where they are based. By being strongly rooted in communities, enterprising and properly regulated, social enterprises can identify new and more socially effective ways of delivering public services, thus providing an example to Government. Indeed, they can be the innovative front line of the public sector.

The leader of the Labour party, my right hon. Friend the Member for Doncaster North (Edward Miliband), was, in government, the Third Sector Minister. He championed the transformative potential of social enterprises and began putting in place the infrastructure to enable them to thrive. That included the legislation for the foundation of Big Society Capital. I am pleased that the present Government have carried some of that work forward, although not surprisingly they are not doing so with the same scope and ambition that I would hope for.

Building and supporting the social economy is not something we can do overnight. It takes hard work. I thank all the organisations that have been involved in generating ideas and pushing them forward to Parliament and the public. We all know how much work that takes, including talking to different people and groups—the social economy is a broad church—to develop positive and constructive ideas. Indeed, we are going through that process now, and I welcome the input being given.

Despite the time at my disposal, I cannot respond in detail to every point made by my right hon. Friend the Member for Salford and Eccles; many ideas are currently

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being considered as part of our policy review. However, I shall touch on as many as I can. My right hon. Friend spoke of establishing a social sector with a clear corporate identity. I share that aim. One of the things that has surprised me about the sector is the way it has been able to defy definition for so long. If we want to promote the role of social enterprises—and that will be a key aim of the next Labour Government—we need to understand what they are, and ensure that they have the skills to take up their role in a new economy, which they champion.

For example, we must not allow what I would call para-third sector organisations to brand themselves as social enterprises to win more contracts or qualify for incentives. It is unfortunate that the Government have so far been seen to load the procurement playing field very much against genuine social enterprises in favour of private sector companies that often parade as social enterprises.

We have heard about social value in procurement, reporting and standards, and the Public Services (Social Value) Act 2012. I echo the tribute paid by my right hon. Friend the Member for Salford and Eccles to the hon. Member for Warwick and Leamington for his work on that important measure. The 2012 Act builds on many achievements of the previous Government and, in fairness, earlier Administrations. It is a real and symbolic step forward, and an important one, despite the fact that many worthy provisions were removed from it. We would have gone further with it; we tabled amendments to improve it. Both the former Minister, the hon. Member for Ruislip, Northwood and Pinner, and the hon. Member for Warwick and Leamington have spoken about the compromises necessary to get a private Member’s Bill passed. We would look to build on and extend the Act.

At £86.8 billion a year, the public sector’s overall procurement spending power rivals its legislative power. The Labour party recognises the power of Government spending and procurement in creating and sustaining social value. We have already announced that we will require suppliers to offer apprenticeship opportunities on all public contracts of more than £1 million. We have also said that private companies that win public sector contracts will have to be more transparent.

Hazel Blears: I am hanging on my hon. Friend’s every word; no doubt many social organisations want to know where we will be going with our manifestos, as that is the period we are in. She has talked about extending the 2012 Act, and that is welcome. I want to ask about extending it to infrastructure and goods. There are now many housing organisations—such as City West in Salford—that are renewing their whole housing stock and want to put social clauses into their infrastructure expenditure. City West has created social enterprises such as Gardening Guerrillas and Pirate Painters and a handyman service, and it is running sweat equity programmes. It is incredibly innovative, and housing associations throughout the country are doing similar things. Is my hon. Friend saying that we will extend the Act to goods and infrastructure as well as services?

Chi Onwurah: I thank my right hon. Friend for that intervention and the examples of the many ways in which social enterprises can contribute to their communities.

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I will have to disappoint her as I am not in a position to give manifesto commitments in this debate, but we are looking closely at the measures taken out of the Public Services (Social Value) Act 2012, as it made its way through Parliament, for ways to ensure that social enterprises can contribute to local communities more extensively than is currently allowed. I am afraid that she will have to be content with that limited answer.

Across central and local government, contracts are often offered on a scale that squeezes out social enterprises and charity providers, which means that, effectively, only established, vested interests can bid. That may drive down costs in the short term, but, in the long term, the number of providers dwindles, as value is extracted from communities and new burdens on the taxpayer are created elsewhere.

Government needs to be working as a whole towards delivering social good through public services and not simply shifting burdens around by cost-cutting in one area while creating new needs in another. Successive Governments have sought to support social enterprise in public service delivery, yet public procurement remains a significant and growing concern. At the round tables and meetings I have held throughout the country on social enterprise, access to public procurement has remained the No. 1 concern.

Many public service sectors are now dominated by what I would call private sector oligopolies: often large multinational corporations that are well versed in winning public sector contracts. They have become so large and complex that, like the big banks before them, the Government cannot afford to let them fail. In my city of Newcastle, the council is supporting local businesses and small and medium-sized enterprises by awarding contracts tendered below a certain threshold to local businesses. In nearby Sunderland—our arch-rivals in some respects, but here we are working to the same aim—the council has a similar system and, as a result, north-east businesses account for 68% of such third party spend overall.

We want to draw on the benefits and innovation of social enterprises in public services, which is why last month I announced that a Labour Government in 2015 will enable Departments and local authorities to offer some contracts exclusively to social enterprises and organisations with a public service mission. The social enterprises will have to demonstrate how they can add value and display the management skills in innovation that we expect from the private sector, so, to that end, we will explore the establishment of a centre of excellence to support social enterprises as contractors. The infrastructure necessary to support social enterprises is probably the second biggest issue I come across in my conversations with social enterprises: skills, governance, back-office, computing and IT all need further support.

I turn briefly to social investment. My hon. Friend the Member for Huddersfield set out eloquently the potential for crowd sourcing as well as the importance of the social investment sector and how the UK leads the world in social innovation. We are looking at ways in which we can further support social investment. We want to see a comprehensive change in the social enterprise landscape, with services being less transactional, more

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focused on individuals and delivered at the most local level possible. We are looking to social enterprises to support that aim.

Social enterprise has the potential to be the innovative front line of both market competition and public service delivery, delivering social value and adapting to a world in which there is more emphasis on social value creation and retention. We look forward to working with social enterprises to enable that and, as part of that, I look forward to the first Social Saturday.

10.45 am

The Minister for Civil Society (Mr Brooks Newmark): I am pleased to have the opportunity to serve under your chairmanship, Mr Havard. I congratulate the right hon. Member for Salford and Eccles (Hazel Blears) on securing this important debate, which is my first of the new parliamentary term and only my second as the Minister for Civil Society. I also pay tribute to my predecessor, my hon. Friend the Member for Ruislip, Northwood and Pinner (Mr Hurd), for his brilliant leadership when he was in this role. I have large shoes to fill, but I will do my best.

I cannot think of a more exciting subject with which to begin, because Britain’s social economy is indeed thriving. We have got to this point through the hard work and commitment to support the sector provided by successive Governments, including that of the right hon. Member for Salford and Eccles. She continues to be a champion of charities and social enterprises as a member of the all-party group on social enterprise and shows commitment to ensuring that the Public Services (Social Value) Act 2012 achieves its full potential.

I take on board the right hon. Lady’s point about the importance of having measurables and consistency. Thinking about how to extend the social economy to infrastructure is a great idea. The hon. Member for Newcastle upon Tyne Central (Chi Onwurah) was absolutely right to say that, with £86 billion of public procurement, there is much scope for social enterprises to take advantage of what is out there. As the new Minister, I hope that I can try to facilitate that.

Chi Onwurah: I omitted to welcome the Minister to his position, but I would like to do so now. If he is going to carry on saying that I am absolutely right, long may he remain in his position.

Mr Newmark: The hon. Lady represents Newcastle, which is the home of my football team, so she can do little wrong in terms of representing that exciting city—it is second only to Braintree, of course.

I also pay tribute to the right hon. Member for Salford and Eccles for her support of Big Society Capital through her role on its advisory board and her regular public appearances, as well as for her support for mutuals. Such contributions have been invaluable to a growing economy that includes organisations, entrepreneurs, innovators and investors who are committed to supporting positive social change.

I am grateful for the bipartisan approach to this issue and to the right hon. Lady for regularly reminding us how this work transcends party differences. It is about supporting those charities and enterprises who work tirelessly to improve people’s lives and communities.

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Members of all parties have the same agenda: we want to improve people’s lives, and the voluntary and charitable sector leads on that objective.

I think the right hon. Lady said that medium-sized social enterprises employ more than 1 million people; in fact, they employ 2 million people and contribute more than £55 billion to the UK economy each year—an enormous amount. The UK already has one of the most developed social investment sectors in the world and it is growing all the time. A few weeks ago, I visited the Repair Academy in Wiltshire, which transforms unwanted household goods into marketable, new products: upcycling as well us recycling. It is not only doing that to make a quick buck; it is equipping the young people who work for it with the skills they need for the world of work and working to change public attitudes to waste and recycling.

So yes, there is a business mentality, but it is also about public and social good. Too often, we think of those things as being mutually exclusive; allied together, they can be a truly powerful force, strengthening communities and changing lives, developing new solutions to seemingly intractable social problems and transforming the way we deliver public services to this country.

The right hon. Lady also mentioned three other great examples, including Place2Be and—was it Born Back?

Hazel Blears: Bounce Back.

Mr Newmark: Bounce Back, which I thought was a great idea. The qualification is that someone goes to prison, but there are people there who want to change their lives and help them transform back into the community. Bounce Back seems a great example of that.

For all those reasons, the Government have made it our mission to help strengthen Britain’s social economy. Just like any other business, social businesses need access to long-term capital. For years, charities and social enterprises had been telling successive Governments how hard it was to find affordable and sustainable finance. We listened to them and helped establish Big Society Capital, the world’s first full-blown social investment institution. Much credit is due to my ministerial predecessor, my hon. Friend the Member for Ruislip, Northwood and Pinner. People had talked about a social investment bank for the best part of two decades, and his leadership in Government made it a reality in less than two years. He made an excellent point in mentioning the discussions on having a collaborative approach between business and government, in terms of developing the social economy to unlock social innovation.

Hazel Blears: A lot has been said about collaboration, and I agree entirely with the previous Minister, the hon. Member for Ruislip, Northwood and Pinner (Mr Hurd), that government needs to change. I suggested interdependent budgets for Cabinet Ministers when I was in the Cabinet and I believe that there is some interest in that issue now.

However, I should say to this Minister that I am seeing the Health Minister, the right hon. Member for North Norfolk (Norman Lamb) with my social enterprise, Social adVentures, on the issue of dementia care. Collaboration between Ministers is essential. Perhaps this Minister could add his weight to some of our proposals with his colleagues across Government.

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Mr Newmark: I think I am seeing the same Minister myself. I have a meeting with him, so hopefully we will be singing off the same hymn sheet.

I also pay tribute to the contribution that the right hon. Member for Salford and Eccles has made to Big Society Capital’s advisory board. Since 2012, Big Society Capital has made more than £150 million of investment commitments into the third sector, creating specialist intermediaries actively providing finance and support to front-line organisations. The beauty of that model is that it is self-sustaining. Big Society Capital is independent of Government, and because the money is provided on a repayment basis, it will constantly be reinvested in new projects, and in turn, will generate more cash.

In April, the world’s first social investment tax relief, which is important and which the right hon. Member for Salford and Eccles alluded to, came into force. We estimate that it could unlock an additional £500 million of new finance into the social economy over the next five years. Taken together, these measures mark a move away from reliance on hand-to-mouth grants towards long-term affordable finance.

I like the idea that the hon. Member for Huddersfield (Mr Sheerman) had about other ways of finding finance. Crowdfunding and the seed enterprise investment scheme, which in my previous life I was pushing very hard for, are excellent ideas. Creating a more level playing field when it comes to taxation is also an important point, which I have taken on board.

Of course, many smaller or fledgling charities and social enterprises could make use of the funding, but sometimes they need support to do so, so alongside Big Society Capital, we have introduced the investment readiness programme. That provides start-ups with the intensive support necessary to get off the ground. It also helps established social enterprises improve and expand their operations in a sustainable way, making them ready for investment or ready to bid for a public sector contract.

However, capital itself is not enough. We have also been working to make it easier for charities and social enterprises to provide services in both the public and private sectors. Over many years—and different Governments—traditional private sector organisations have dominated the outsourced public services market, a point made by many colleagues today. We have worked hard to change that, enabling staff to take control of their own services by spinning out into public service mutuals.

Freed from the bureaucracy of the public sector but instilled with the public service ethos and run by committed public servants, mutuals are improving outcomes for users, communities and commissioners across the country. There are already 100 live and trading, up from just nine in 2010, with even more in development. The right hon. Member for Salford and Eccles said that in her constituency a new one has now been launched—for adult services, I think—and I welcome that.

It is not only mutuals that are getting in on the act. Other forms of social enterprises and charities have an enormous amount to offer. Civil society can also do things that Government cannot do. It is often much closer to the people we want to help, so we are pioneering some really exciting models to allow it to play a more direct role in delivering front-line services.

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Social impact bonds, for instance, enable private investors and philanthropists to invest in a project to address complex, entrenched social problems. The taxpayer only pays for what works, and because private investors are able to take on the risk, it means social organisations can get involved. There are now 17 social impact bonds across the UK, four of which were supported by the Cabinet Office’s social outcomes fund. From rough sleepers in London to NEETs—those not in education, employment or training—in Perthshire and Kinross, to children at risk of going into care in Essex, around the country we are going to see social impact bonds opening up serious resources to tackle long-term problems in new ways.

I welcome the work of the previous Administration on the first of these and the continued cross-party support that helps to ensure that such interventions have a transformative effect. The right hon. Member for Salford and Eccles has championed these as part of her impressive efforts to improve the life chances of disadvantaged children and young people. We are starting to see how social impact bonds can focus capital towards those services that provide strong, effective support for those young individuals.

Because we want to weave innovation into the fibre of national and local government, the Public Services (Social Value) Act 2012 places a legal requirement on commissioners to consider the economic, environmental and social benefits of how they commission and buy services. I know that my hon. Friend the Member for Warwick and Leamington (Chris White) has been absolutely resilient on pushing that point through, with the great support of the right hon. Lady. That will help shape the design of services from the outset, so that due consideration is given to innovative social delivery, which gets full social value from the taxpayers’ pound.

I am confident that we will see more and more public sector commissioners bringing communities, businesses and charities together to change people’s lives. Already, many private sector organisations are interested in how

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they can include social value in their supply chains, which is why, with Social Enterprise UK, we have created the Buy Social Directory, which lists over 10,000 social enterprise suppliers—a point made by my hon. Friend the Member for Ruislip, Northwood and Pinner.

I know it is still early days. We have made a start, but there is so much more to come. We want to encourage more investment in the sector and open up new markets. The Buy Social campaign, beginning in September—and we have Social Saturday coming up—will encourage businesses and consumers to buy from and invest in the social economy, so the great British public can invest in the causes that they believe in. We want to make social investment as easy as possible. We are also exploring how pension and insurance funds can participate in the social investment market, but we are also looking further afield, helping the sector export overseas as well as attracting inward foreign investment.

The UK is experiencing a rising wave of dynamic social entrepreneurship that seeks to improve people’s lives. Britain can be proud to be recognised as the world leader. Even in the few short weeks that I have been a Minister, I have seen first hand some of the fantastic opportunities that the social economy presents, for jobs and economic growth, for innovation and new ideas and for better public services.

I again thank the right hon. Member for Salford and Eccles for her commitment. The social economy has much to contribute to her constituency and to the UK as a whole. I welcome her input and that of the hon. Members for Huddersfield and my hon. Friends the Members for Ruislip, Northwood and Pinner and for Warwick and Leamington.

We are a nation of philanthropists and campaigners, time-givers and fundraisers, poppy wearers and marathon runners. We have a fantastic heritage of social innovation, from the great Victorian social reformers to modern-day social entrepreneurs, so the Government will continue to support the growth of Britain’s social economy. I am optimistic that by working together, we can build on the progress we have made to create the bigger, stronger society that we all want to be part of.

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Obstructive Sleep Apnoea

11 am

Julie Hilling (Bolton West) (Lab): I am very pleased to have secured this debate and to be—[Interruption.]

Mr Dai Havard (in the Chair): Order. Could we have quiet, please, including in the Public Gallery?

Julie Hilling: Thank you, Mr Havard. I am very pleased to be serving under your chairmanship. You will not be surprised to learn that I first got interested in this subject from a road safety perspective. When a member of the Select Committee on Transport, I received an e-mail from the parents of a young woman who was killed by a lorry driver who fell asleep at the wheel, so I raised the issue on a number of occasions when we were doing different inquiries on things such as freight transportation and road safety. However, as soon as I started to talk about sleep apnoea, I discovered that it was far more common than I had thought—with a number of friends and acquaintances declaring that they had it—and that, in Bolton West, predicted rates of the condition are higher than the national average. I asked for the debate today to coincide with the launch of the British Lung Foundation’s obstructive sleep apnoea health economics report, because an estimated 1.5 million people have the condition in the UK, yet only 330,000 people are currently diagnosed and treated.

OSA affects people of all ages, including up to 4% of middle-aged men, 2% of middle-aged women and 20% of those aged over 70. Although not everyone with OSA is overweight, many are, and with an increasingly overweight and ageing population, it is anticipated that the rates of OSA will increase in the coming years.

What is obstructive sleep apnoea? It is a condition whereby the muscles in the throat relax, causing an obstruction in the airway during sleep, meaning that a person stops breathing. Some people stop breathing hundreds of times a night, and others have periods during which their breathing is restricted. Untreated OSA can have a profound impact on the quality of life of those affected and it has been proven to cause high blood pressure, as well as being associated with a host of other health conditions such as heart disease, heart failure, stroke and diabetes. The life of someone whose OSA is not treated can be dramatically shortened. Correct treatment has been shown to increase the probability of survival of OSA patients by 25%.

There is a strong link between OSA and an increased risk of road traffic accidents, with individuals who have uncontrolled OSA three to seven times more likely than the general driving population to have an accident on the road.

Jim Shannon (Strangford) (DUP): I thank the hon. Lady for bringing this issue to the House for hon. Members’ consideration. Many people will look on OSA as something that perhaps is not all that worrying, but from what the hon. Lady has said, it very much is. Does she feel that probably what we, the Minister and the devolved Administrations now need to do is to raise awareness of the condition through GP surgeries, leaflet drops and education?

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Julie Hilling: I thank the hon. Gentleman for that intervention. I absolutely agree that we need to do more and I will go on to talk about what the Government should be doing.

Rosie Cooper (West Lancashire) (Lab): Before my hon. Friend gets to that, I congratulate her on securing the debate. Does she agree that with 80% of OSA cases not being diagnosed and the economic and social aspects of that being so dramatic—it costs so much to deal with strokes and heart attacks—we must do more to ensure that the National Institute for Health and Care Excellence regulations are implemented? The Government and the Department of Health cannot walk away from the health and social costs and the costs to the patient.

Julie Hilling: I thank my hon. Friend for that intervention. It feels as though she has looked at my speech, because I am going to cover in detail a number of the aspects that she has raised.

OSA can reduce a person’s ability to work and impair the quality of life of the person and their family. The story of Steve, one of my constituents in Bolton West, shows only too well what can happen when OSA is not diagnosed. When Steve was 36, he started to get lots of daytime sleepiness; indeed, he was sleeping all the time. He became very aggressive and went to his doctor, who treated him for depression. The first medication did nothing, and the second medication made him even more aggressive. He managed to maintain his job, but with great difficulty, often having to slope off for a sleep, and he was being threatened with dismissal. He did not have a relationship with his young daughter; between the ages of four and six years old, she had no relationship with her dad at all. He could not play with her or interact with her, except to snarl at her. Indeed, he did not have a relationship with his wife or anyone else at that time. The family went on holiday, but his wife said that she would never go away with him again because he slept the whole time. Eventually, he had to take sick leave from work, and for five months he never left his bed. He was so bad that his wife had to change the bedclothes around him. He had a constant headache and felt worthless as he was not contributing anything to society or his family. He could not eat properly and just could not function. He attempted suicide twice.

Steve was referred to a mental health consultant at Royal Bolton infirmary who immediately asked whether he had been tested for sleep apnoea and he was referred to Wythenshawe sleep clinic. There are three stages of sleep: a top layer, a lower layer and deep sleep. The sleep clinic discovered that every minute and 43 seconds, Steve went back to the top of the sleep cycle and was never getting into a deep sleep. He was given a continuous positive airway pressure—CPAP—machine. He went home, slept for 11 hours and was back at work the next day. Eight years later, he still uses the machine every night and has never looked back. It does have its downsides. He will not go abroad because he has a great fear of electricity cuts and he cannot sleep in the same room as his wife because of the noise of the machine, but he believes that that is a small price to pay for getting his life back. Steve feels like he suffered two years of torture. Let us not forget that sleep deprivation is listed as a proscribed method of torture. However, with a very low cost treatment, he can now function and live life to the full.

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My friend’s sister, 52-year-old Jean, also had difficulty in getting her GP to take her issue seriously. She went to him because she was very tired all the time and kept falling asleep in work and on the bus home. She would go to bed and sleep all night, but wake up feeling just as drained and tired. After three visits, her GP started to take her problem seriously and, after running a number of tests with no result, referred her to Wigan infirmary. She got an appointment within three weeks, had her sleep monitored and then got a CPAP machine. It has not solved her problem completely, but it has much reduced the number of times she wakes up and she is able to enjoy life again.

Yasmin Qureshi (Bolton South East) (Lab): I congratulate my hon. Friend on securing this Adjournment debate. On the point that she raises about how long it takes for people to be diagnosed, is it not correct that about 1.5 million people in this country probably suffer from this condition, but only about 330,000 people are ever diagnosed? Presumably, therefore, one thing that we need to do is to make medical practitioners aware that this condition is perhaps a lot more prevalent than we think it is.

Julie Hilling: I thank my hon. Friend for that intervention. She is right. We need to make both the public and medical practitioners aware. Also, we need to ensure that the services are in the right place. I will talk more about that in a moment, but first let me tell hon. Members about one more person. My office manager, Noelene, also surprised me by saying that she suffers from OSA; I never had any inkling that she did. She has an underactive thyroid and was extremely tired and forgetful. She would have no recollection of doing something or no memory of how she had got somewhere. She just blamed her thyroid, but her endocrinologist told her that her thyroid levels were fine and that she could not keep blaming everything on her thyroid. He referred her to his friend the sleep specialist. She collected a monitor that afternoon and less than four weeks later was given a CPAP machine. As the specialist said, if the mask works, it is OSA, and if not, it is something else and they will have to continue to investigate. She had problems with the mask initially and found it very uncomfortable but persevered. She could not get on with the full mask, because, as she said, a full mask and hot flushes are not a great combination, so she tried two other masks and now has a nose mask. Occasionally she does not use it, but immediately feels bad. She is now four years on from diagnosis and treatment.

I guess I am not surprised that I did not know that people had the condition, because snoring and falling asleep all over the place are still treated as a great joke, and the first reaction of most of us when we are told that we snore is immediately to deny it. The cost of undiagnosed sleep apnoea is enormous, however. Up to 80% of cases of OSA remain undiagnosed. Awareness of the condition is poor, and the risks associated with it are underestimated even by doctors. The British Lung Foundation led a three-year project to raise awareness of the condition and to campaign for the setting of quality standards for the treatment and care that OSA patients can expect. The OSA patients’ charter, published in 2012, was designed to do that, and it calls on the

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Government to prioritise OSA by increasing awareness, ensuring adequate data are collected for good service planning and investing more research into the condition.

Progress has been slow, however. The British Lung Foundation commissioned a report on the health economics of OSA, which will be published later this week, to demonstrate the economic and social arguments for greater focus on, and treatment of, the condition. The report finds that treating OSA can generate direct health benefits to OSA patients, and reduce costs incurred by the NHS, in comparison with not treating the condition. Currently, only 22% of OSA patients are treated across the UK, but increasing diagnosis and treatment rates to just 45% could yield an annual saving of £28 million to the NHS, as well as 20,000 quality-adjusted life years. That includes savings that result from reductions in road traffic accidents, heart attacks and strokes, as well as the positive impact on patients’ quality of life and improved survival rates over time. Other sources suggest that NHS expenditure on undiagnosed patients is estimated to be approximately twice that of people of the same age and the same gender. It is estimated that if everyone in the UK with moderate to severe OSA was treated, approximately 40,000 road traffic accidents could be prevented—accidents that not only affect sufferers of OSA, but cause injury and death to so many others.

The main treatment for OSA, continuous positive airway pressure, is very cost-effective. NICE usually values a treatment as cost-effective if it costs £20,000 to £30,000 per quality-adjusted life year gained, but the main treatment used for OSA costs the NHS only £5,000 per quality-adjusted life year gained. Because OSA is associated with other conditions such as heart disease, stroke and diabetes, some savings may also be made in the reduction of medication for those conditions. A Canadian study found that 38% of patients being treated for OSA reported a reduction in their intake of medicines to manage their other conditions.

What do we need to do? In July 2012, the Department of Health set up a working group on OSA to look at areas for improvement in care and services for the condition. However, the group was disbanded early in 2013 during the NHS restructure, and no one is responsible for taking forward the recommendations from the group’s work. The Department of Health should appoint a body to take forward those recommendations. In 2012, NICE was asked to produce a quality standard on sleep-disordered breathing. That has not been developed, and it should be taken forward as an immediate priority so that those with OSA know what to expect from their care.

Everyone who has symptoms of OSA should be diagnosed quickly and accurately, and they should receive the highest standard of care. That will help to reduce NHS costs and improve patients’ quality of life, and it could reduce the number of road traffic accidents that are caused by sleepy drivers. The level of risk of OSA varies across the UK depending on the prevalence of risk factors, and there is a mismatch between the geographical distribution of need and the regional distribution of services. Local commissioners must ensure sufficient availability of services in areas such as Bolton West that have a high estimated OSA prevalence. OSA screening and specialist referral should be introduced into the quality outcomes framework. Doing so would allow for more accurate data on the number of referrals

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being made from primary care and provide an immediate financial incentive for early intervention that would reduce costs and improve outcomes in the long term.

Finally, let me return to where I started on my journey of interest in OSA. Those who drive for a living, frequently on monotonous roads and motorways, are at risk of falling asleep at the wheel. Their lifestyle also puts them at increased risk of developing sleep apnoea. Those who fear that they have the disorder are often worried about seeking treatment, because they are concerned about losing their livelihood. I hope that the Minister will support the call of the sleep apnoea partnership group to expedite the treatment of vocational drivers so that they can be driving again within four weeks of referral.

Rosie Cooper: Before she reaches the end of her speech, will my hon. Friend emphasise that it makes absolutely no sense not to raise awareness of the condition, diagnose sufferers and provide treatment to improve the health of individuals, save the NHS money and reduce the number of sleep accidents? That is a no-brainer.

Julie Hilling: My hon. Friend has kindly done so for me. Clearly, OSA is a major issue, and one that is as serious in Bolton West as it is throughout the UK. The Minister assured me in February 2013 that a model care pathway and service specification to reduce variation in diagnosis and treatment would be developed, but we are still waiting. The time for talking is over. Research has been done and professional groups have informed the Government, so it is now time to take action. I will listen with great interest to the Minister’s response.

11.15 am

Meg Munn (Sheffield, Heeley) (Lab/Co-op): I congratulate my hon. Friend the Member for Bolton West (Julie Hilling) on securing the debate and thank her for allowing me to make a very short contribution. The link between OSA and road traffic accidents is well established, and I was alerted to that fact when the nephew of one of my constituents was killed by a lorry driver with undiagnosed sleep apnoea. According to medical experts, 10% to 20% of lorry drivers—that could be as many as 40,000 drivers—may suffer from sleep apnoea. The Royal Society for the Prevention of Accidents estimates that one third of road accidents are caused by somebody at work. In 2012, the number of people killed in road accidents was 1,754, so we are talking about approximately 600 deaths involving people who drive for work. [Interruption.]

Mr Dai Havard (in the Chair): Order. I am going to have to stop you, because we have a procedure issue here. The Minister did not understand that you were going to make a contribution.

The Minister of State, Department of Health (Norman Lamb): I am happy for the hon. Lady to make a contribution, but it needs to be brief.

Meg Munn: I am coming to the end, Mr Havard. In fact, I would have finished—

Mr Dai Havard (in the Chair): If I had not intervened.

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Meg Munn: The point that I want to make is that the Health and Safety Executive does not investigate such deaths. Will the Minister press his colleagues in the Department for Work and Pensions to get the Health and Safety Executive to look at road deaths and not to ignore a major concern about driving at work, in which OSA plays a significant part?

11.17 am

The Minister of State, Department of Health (Norman Lamb): It is a pleasure to serve under your chairmanship, Mr Havard. I congratulate the hon. Member for Bolton West (Julie Hilling) on securing the debate. One of the great benefits of Adjournment debates is that they force Ministers to focus on one condition among the array of things that we have to deal with, and this debate puts an important spotlight on OSA. I will take up with Professor Mike Morgan, the national clinical director for respiratory disease, the issues that the hon. Lady has raised. In accordance with the request from the hon. Member for Sheffield somewhere or other—

Meg Munn: Heeley.

Norman Lamb: In accordance with the request of the hon. Member for Sheffield, Heeley (Meg Munn), I will write to the Health and Safety Executive. She made a good point, and I am happy to raise it directly with the HSE. Those are serious issues, and they deserve to be taken seriously.

The case studies provided by the hon. Member for Bolton West clearly demonstrated the benefit of accessing treatment, and the impact that treatment can have on someone’s life. I agree with the hon. Member for somewhere near Liverpool—

Rosie Cooper: West Lancashire.

Norman Lamb: I apologise; I agree with the hon. Member for West Lancashire (Rosie Cooper) that that is a no-brainer. As other hon. Members have said, we must raise awareness and understanding not only among the general public but among clinicians and general practitioners, because a problem with diagnosis may arise because a GP does not recognise the need for a referral. As the hon. Member for Strangford (Jim Shannon)—I think I have got his constituency right, at least—has said, we must work with the devolved Administrations and ensure that we raise awareness of the condition across the United Kingdom.

As the case studies demonstrate, OSA can have a huge impact on the quality of life of those who suffer from the condition and their families, which the example of Steve demonstrates so graphically. OSA can contribute to other long-term health conditions, such as high blood pressure, stroke, diabetes and, critically, mental health issues. The hon. Member for Bolton West made a point about Steve contemplating suicide, and we often forget about the close connection between many long-term conditions and the mental health issues that can go with them. People suffer depression because of an inability to escape their condition.

As we have heard, OSA can also lead to serious, even fatal, accidents. The statistic that there may be 40,000 preventable road traffic accidents is extraordinary. The issue is driver fatigue. Sleep apnoea sufferers are thought to be seven times more likely to cause crashes than

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drivers without the condition. The challenges posed by OSA should not be underestimated. In the UK it is thought that some 4% of middle-aged men and 2% of middle-aged women suffer from OSA, which in many cases requires lifetime treatment of the sort described by the hon. Lady. A further complication is that, as she describes, OSA is often left undiagnosed because people with the condition usually have no memory of some of the key symptoms, such as interrupted breathing during sleep, so they may be completely unaware that they have a problem unless a partner happens to raise it with them.

The NHS outcomes framework for 2014-15 sets out the Department’s priority areas for the NHS and includes reducing deaths from respiratory disease as a key indicator. Additionally, the mandate sets out the requirement for NHS England to improve outcomes in a range of areas, including preventing premature deaths from the biggest killers, which include respiratory illnesses, and supporting people with long-term physical conditions such as sleep apnoea. Incidentally, it will be interesting to see the economic impacts that the report will set out. I am happy to take that up with the national clinical director, too.

Our “Living Well for Longer” report, which was launched in April 2014, sets out what the health and care system will do to achieve the Government’s objective to be among the best in Europe at reducing levels of premature mortality. The report brings together in one place the national actions taken by the Department and the wider Government, NHS England and Public Health England on prevention, early diagnosis and treatment, focusing on the five big killers, including lung diseases, and showing how they will support local leadership and interventions.

Local clinical commissioning groups are responsible for assessing the needs of their local populations and for commissioning services to meet those needs. For patients with OSA, NHS England expects CCGs to take the NICE guidelines into account when deciding what services should be made available. NICE has recommended continuous positive airway pressure as a treatment option for adults with moderate or severe symptomatic OSA or hypopnoea syndrome, where certain clinical criteria are met. NHS commissioners are legally required by regulations to fund that treatment, where clinicians wish to use it.

Continuous positive airway pressure is currently the only technology recommended for OSA in NICE technology appraisal guidance. The hon. Lady mentioned a referral to NICE for a quality standard, and I am happy to write to NICE. She will understand that NICE is independent, and it is important to respect that independence, but I am happy to ask NICE where that issue is in the work stream of quality standards that are waiting to be addressed. That work will be completed by 2017, which is the long-stop date. I will check, and I am happy to write to her to confirm the position.

Although it is not always possible to prevent OSA, making certain lifestyle changes may reduce a person’s risk of developing it. Those changes include losing weight, limiting alcohol consumption and stopping smoking. The Government are acutely aware of the damage being done to the population’s health through smoking and harmful drinking, which is why we have set out clear ambitions for driving down the prevalence

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of smoking and reducing the incidence of alcohol-related disease in our tobacco control plan and our alcohol strategy respectively.

We have ensured that NHS health check, a key programme to address systematically the top seven causes of preventable mortality, includes identifying and helping people to take action to quit smoking, maintain a healthy body weight and reduce alcohol consumption. All those issues, of course, have an impact on a range of conditions, including vascular dementia and heart disease, but they are also relevant to sleep apnoea, and we ought to be doing more to address the issues that could prevent the condition.

Through the responsibility deal, we are actively working with business to take voluntary action on calorie reduction and food labelling to help people make healthier eating choices. That is already delivering change and making a real difference. The Change4life social marketing campaign is encouraging individuals to make simple changes, such as reducing their calorie consumption and being more active. One of the key challenges in tackling OSA, as several hon. Members have said, is raising awareness of the condition. It can be difficult for sufferers to detect OSA themselves, and it often goes undiagnosed as a result. In fact, it is estimated that in this country up to 3% of adults across all age groups have undiagnosed OSA, which is an extraordinary number. There are then the associated accidents.

Surveys carried out by the British Lung Foundation in 2011 and 2014 to measure awareness of OSA show that awareness of the condition has risen significantly, which we should applaud. Awareness has especially risen among men, who are most at risk, and in areas with a high risk of OSA. I pay tribute to the British Lung Foundation, which has worked collaboratively with the hon. Member for Bolton West, and the important work of its obstructive sleep apnoea project that aims to improve diagnosis and raise awareness of the condition. The project’s successes include the largest survey of OSA sufferers ever undertaken, a UK-wide mapping tool of sleep services and prevalence of known OSA risk factors and a media campaign that reached at least 48 million people.

It was a privilege for me to attend the recent opening of the Breathe Easy North Norfolk group. Breathe Easy groups have the potential to be incredibly powerful, and they are run by their members with help and support from the British Lung Foundation. Breathe Easy groups provide support and information to people living with a lung condition, as well as those who look after them.

Those are all examples of highly valuable initiatives led by the British Lung Foundation that have a huge impact on the lives of a great number of OSA sufferers in the UK. The effects of sleep apnoea are potentially devastating, and the condition affects thousands of people in this country, many of whom are not aware of the problem even when they are feeling its effects. It is vital that the NHS continues to work hard not only to reduce the number of premature deaths from all respiratory illnesses, including OSA, but to support people with long-term conditions better, regardless of where they live. I assure the hon. Lady that the Government will continue to work hard to improve outcomes for all those in society who have, or are at risk of, a long-term condition such as sleep apnoea.

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I reiterate the point made by other hon. Members that the analysis of the economic case demonstrates that much better preventive work ultimately saves money, as well as having a massive impact on individual lives. I strongly feel that we need a shift of emphasis to focus much more on prevention.

Meg Munn: As there is a bit of time remaining, may I press the Minister on the Health and Safety Executive? We do not currently know how many accidents involve sleep apnoea, and we might need to consider not only more action on the health side but more action to ensure that employers are screening drivers who are particularly at risk.

Norman Lamb: I indicated earlier that I am happy to write to the Health and Safety Executive, and I will ensure that the Hansard report of this debate is referred to it so that the hon. Lady’s point can be taken up. I will also write to the national clinical director and NICE. I hope those actions will contribute to the objective, which we all share, of raising awareness and getting the system to be much better at intervening earlier to help people with conditions. Such intervention can have a massive impact on people’s lives and, with a bit of support and access to treatment, can completely transform the lives of those individuals.

11.29 am

Sitting suspended.

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Aerospace Industry

[Mr Philip Hollobone in the Chair]

Mr Philip Hollobone (in the Chair): Order. The sitting is resumed, and I see we have a galaxy of parliamentary talent before us to hear Sir Peter Luff open his debate on the future of the UK aerospace industry.

2.30 pm

Sir Peter Luff (Mid Worcestershire) (Con): I apologise to the House for my voice; I am suffering from the after-effects of a long and difficult summer cold. I will croak my way through my 30 minutes or so and hope that I can be heard throughout my speech.

It is a great pleasure to welcome the Under-Secretary of State for Business, Innovation and Skills, my hon. Friend the Member for Mid Norfolk (George Freeman) to his second Adjournment Debate on a subject that he and I have discussed in the past. I am confident that he will lend a sympathetic ear. In keeping with the prevailing wisdom about the meaning of the word “aerospace”, I will discuss primarily the civil airframe market and its supply chain rather than space or defence, although I will make some remarks about both.

My interest in aviation goes back to the 1960s in Windsor. I grew up directly under the flight path of the rapidly expanding Heathrow airport, where I went plane-spotting regularly. I remember the Viscounts, the Comets, the VC10s and of course the magnificent Concorde. Those wonderful British and Franco-British aircraft inspired many British children, and they and the outstanding military aircraft that we have built have handed to this generation an extraordinary legacy of excellence in aviation that we must honour by continuing that success.

The debate is also an opportunity for me to return to the 2010 report of the Select Committee on Business, Innovation and Skills, which I chaired. The report was entitled “Full speed ahead: maintaining UK excellence in motorsport and aerospace”, and the inquiry convinced me of the extreme urgency of addressing the engineering skills shortage in our country. More than four years later, we are making some progress, but there is still a lot more to do. I will return to some of the report’s recommendations later in my remarks, but its conclusion states:

“The Government’s role in support of the aerospace sector is to enable the industry to compete on an equal footing with its international competitors. Other countries actively support and promote their aerospace industry through the provision of financial support, access to trade credit and funding for R&D work. The UK Government must ensure that the level of support it provides industry does not place the British aerospace sector at a disadvantage.”

There has been much to welcome in Government policy since that report. Government and industry now work together successfully through the Aerospace Growth Partnership in a concerted effort to secure the UK’s position as a leading aerospace nation, the second largest in the world, to invest in innovation and to take advantage of the future growth opportunities within the civil aerospace industry.

I hope that all participants in the debate—I am glad to see that the number is growing—offer unqualified support for the Aerospace Growth Partnership approach, but that does not remove the need for Ministers to be

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accountable to Parliament for the progress made. The debate is an opportunity to challenge aspects of the AGP approach constructively and test its progress. It is also an opportunity to demonstrate cross-party support for the broad approach being adopted.

In that spirit, I will be asking whether the strategy is sufficient to rise to the international competitive challenge. Are the various mechanisms being established sufficiently integrated and comprehensive? Are the views of the major US players in defence and civil aerospace who value our supply chains so highly properly understood? Is support for aerospace exports sufficiently strong? Is it understood that the sector and its supply chains comprise many medium-sized businesses, not just large original equipment manufacturers and small firms? Is the British supply chain sufficiently robust? Is it right to limit the scope of the work to the civil aerospace market? Should not links with the defence aerospace and space sectors be more explicit? Is the approach to skills adequate? Can the momentum being generated in the AGP be sustained?

Isaac Newton said:

“If I have seen further, it is by standing on the shoulders of giants.”

The modern British aerospace industry indeed stands on the shoulders of giants. British scientists and engineers have an outstanding track record of technical and commercial success since the earliest days of manned flight. We are heirs to a roll-call of famous names of companies and individuals. Aerospace is a significant manufacturing success story for the UK, and is one of our most important high-technology industries. As the BIS Committee 2010 report said:

“Britain is one of the few nations involved in the design, manufacture, marketing, maintenance and support of the full range of aircraft products—from complex composite aero-structures, including wings, aero-engines, rotorcraft, aircraft systems and avionics, through to maintenance, repair and overhaul services.”

Ours is the largest aerospace sector in Europe and, as I said before, the second largest globally, after the USA. A Boeing 787 Dreamliner flying with Rolls-Royce engines is 25% British by value. An Airbus A380 with Rolls-Royce engines has about 40% British content, broadly the same as other Airbus variants fitted with Rolls-Royce engines. Indeed, the new A350 XWB and the A330neo are supplied only with Rolls-Royce engines.

Gordon Birtwistle (Burnley) (LD): I congratulate my hon. Friend on securing this debate. He mentioned the Airbus and Boeing aeroplanes using Rolls-Royce engines. Is he concerned, as I am, that Rolls-Royce has stopped making smaller engines for A320s, A319s and the smaller Boeing aeroplanes and is concentrating solely on big engines? Would it not be advantageous if Rolls-Royce could get back into making smaller engines, either with a partner or on its own? Smaller aeroplanes are becoming very popular at the moment.

Sir Peter Luff: I do not think it is right to double-guess companies’ commercial strategies, but my hon. Friend makes an important point and I am sure that the company has heard what he said. I hope it responds to both of us to explain its industrial rationale for taking that particular decision.

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Airbus’s UK contribution includes civil wing design at Filton and build at Broughton; fuel system and landing gear design and testing at Filton; and A400M wing design and manufacture at Filton. UK suppliers providing other significant components and services to Airbus include landing gear manufacture in Gloucestershire; window manufacture on the Isle of Wight; maintenance service panel manufacture in Greenford; design houses around the country; and even a standby compass. We are also strong in the military market. Eurofighter, the Saab Gripen and the F35 all have significant British content.

These are exciting times for the UK aerospace industry, and there are significant opportunities for further growth. The latest monthly commercial aircraft order and delivery data, published last week by the trade association ADS, reveal a further increase in the backlog of more than 12,000 aircraft and 21,000 commercial aircraft engines. That equates to about nine years’ work in hand for the industry and could be worth about £155 billion to the UK economy.

Obviously, the UK civil aerospace sector makes a huge contribution to UK jobs, skills, exports and long-term growth. In 2013, UK aerospace was worth £27.8 billion to the UK economy, with 91% of final demand coming from exports. Aerospace exports grew by 12% in 2013, and the industry employs 109,000 people in well-paid, highly skilled jobs, and supports another 120,000 in the supply chain. The average wage is about £41,000, more than 50% higher than the UK average, and the sector has grown 10 times faster than the rest of the UK over the past three years.

After the record number of orders and commitments made at the recent Farnborough international air show, the longer term looks strong and opportunity-laden too. It is estimated that by 2032, more than 29,000 new large civil airliners, 24,000 business jets, 5,800 regional aircraft and 40,000 helicopters will be required. As the UK specialises in developing and manufacturing some of the most complicated and high-tech parts of modern aircraft, the industry estimates that that requirement means a potential market share of about $600 billion for the UK.

Against that background, we must ask ourselves whether the Government and the industry are doing enough to ensure that the UK retains and improves on its current position. To be honest, I was concerned by the breezily optimistic picture painted in “Flying High”, this year’s update on the Aerospace Growth Partnership. It reads more like a sales brochure for Government policy than an honest assessment of the challenges facing British aerospace companies. Only on the very last page do we read:

“However, the challenges of intensifying international competition, the rapid pace of innovation in the sector and a need to broaden our customer base remain.”

Those words encompass my reasons for seeking this debate.

There were starker warnings in the strategy “Lifting Off”, published last year, which says that

“recent trends have shown that UK content on new aircraft is in decline and that, without action, this will accelerate as new generations of aircraft are introduced.”

My confident hope is that the new Minister’s response will reveal a depth of thinking about the competitive

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challenges and a strong commitment to do all that it takes to maintain the UK’s position internationally.




I am encouraged by his affirmation of my hopes and aspirations. I also hope—again, confidently—to hear recognition from the official Opposition spokesman that the AGP’s success is built on the firm foundation laid by previous Governments, and therefore an expression of strong support for this Government’s approach to working with the industry. This should be an opportunity to examine in a bipartisan spirit how we can ensure that the success story of British aerospace is maintained.

The industry, through its trade association, identifies four principal challenges: overseas competition and innovation, environmental demands, access to finance, and skills. Advances in technology are driven by environmental needs to cut emissions, reduce fuel-burn and increase aircraft efficiency. The UK must continue to be at the forefront of research into improvements in those areas in order to stay competitive, drawing on its capability in propulsion, and advanced structures in particular. Small and medium-sized enterprises throughout the supply chain will face increasing pressure from larger companies to cut costs and innovate. Many companies face problems accessing the necessary finance to grow, respond to new demand, collaborate and conduct R and D. Banks and financial institutions can be less willing to offer the finance needed for innovation due to the inherent risk and the long time scales involved.

UK industry requires not only a greater number of aerospace engineers and technicians to replace the current generation, but candidates with the right skills and knowledge to understand the use of new materials and structures in aerospace manufacturing. I will return to that at the end of my remarks.

However, my first specific question to the Minister flows from the first of those four industry concerns—overseas competition and innovation. Innovation underpins growth. If we do not invest in innovation now, the UK will not be competitive in the years to come. That is especially true in high-tech industries such as those in the UK aerospace sector, which face increasing global competition. We know that public investment increases private investment in innovation, but as the Business, Innovation and Skills Secretary has observed, the UK has both lower public funding and lower total investment in R and D than most of our competitor nations. More must be done to boost UK aerospace R and D, and to create a more level playing field with Europe and the rest of the world. For every £1 invested in the UK, France spends €10 and Germany €15.

However, the AGP looks set to improve that position. Later this year, the Government are due to publish their science and innovation strategy, which also offers an excellent opportunity for the UK to make a serious commitment to innovation policy, complementing all existing industrial strategies. However, countries such as South Korea, Japan and Brazil are throwing their immense firepower at building their share of global markets—for example, we can look at the strong position of Japanese suppliers on the new Boeing 787. Other nations such as France and Germany have been doing more, and often for longer, to stimulate technology and R and D. The growth in opportunities in civil aerospace means that the UK faces increasing competition from both mature and emerging markets. Therefore, we must

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foster innovation throughout the supply chain to bring new technology, products and expertise in order to stay ahead in a competitive market.

I worry about whether the various mechanisms being established are sufficiently integrated and comprehensive. The response that has developed and that is spelled out in the AGP’s strategy is built around a variety of mechanisms. It rightly identifies areas of UK competitive advantage—wings, engines, aerostructures and advanced systems—and emphasises the importance of reinforcing that success. It seeks to address a major shortcoming in the UK business environment for aerospace. As “Lifting Off” says:

“Long-term predictability and stability of Government funding for R&D is a key factor in determining where it”—

the industry—

“chooses to invest and...the UK needs to do better in this research.”

At the pinnacle of the AGP is the Aerospace Technology Institute, an industry and Government co-funded £2 billion investment over seven years. That is precisely what the BIS Committee 2010 report called for and I am delighted to see our recommendation being so enthusiastically embraced. The ATI’s small team will lead on the development of the strategy and will identify the specific technological activity required to address capability needs in the UK. It aims to align early research and cross-sectoral R and D innovation delivered through the Technology Strategy Board, which will soon be known as Innovation UK. It already has more than £300 million of collaborative R and D projects under way, spanning the four UK priority areas: wings, engines, aerostructures and advanced systems.

The ATI works alongside the recently established UK Aerodynamics Centre and the various component parts of the High-Value Manufacturing Catapult, but a manufacturing accelerator programme is also being proposed. I am not currently clear about what that programme would add to the complex landscape of organisations. Indeed, I confess to being just a bit concerned about the complexity of the environment, with the ATI, the UKADC, the MAP, the TSB, the HVMC and its seven component parts, including the excellent Advanced Manufacturing Research Centre near Sheffield, the inspirational Manufacturing Technology Centre at Coventry, the important National Competence Centre near Bristol, and, possibly finally, the National Aerospace Technology Exploitation Programme that is aimed at smaller companies, never mind the host of academic organisations and those many organisations involved in defence aerospace.

I am a strong supporter of the AMRC and the MTC. I have been to both—I went to the MTC last week. They are fantastic centres of excellence, designed to encourage improvements in manufacturing across Britain and not just in aerospace, and they have a vital part to play in the aerospace sector and across all sectors. However, I worry whether that is a complex environment. How are the Government and the AGP assessing the strength of the international competitive challenges, and what lessons are they drawing about the adequacy and, crucially, the coherence of the UK’s response? We must always remember that the aviation industry works to very long time frames—they are often several decades per programme—and therefore consistent and long-term support from the Government is vital to provide a stable policy environment in which to operate.

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Sir Gerald Howarth (Aldershot) (Con): I reinforce the point that my hon. Friend made about the lead time for developing new aircraft today in comparison with even a generation ago. This morning, we had a briefing from the Royal Navy project director on the joint strike fighter programme. That programme has taken 14 years of development to get to where it is today, and we are a long way from getting any aeroplanes into service, which really illustrates my hon. Friend’s point.

Sir Peter Luff: That is true in the civil and defence markets—long lead times are a characteristic of new aircraft development. That is why the AGP is intended to span 15 years, and why it is vital that it receives cross-party support, to ensure support continues throughout future Administrations. Therefore, I have a central and, I hope, easy question for the Opposition. Do Her Majesty’s loyal Opposition hold true to the principles to which Labour worked in the last Parliament, and do they still endorse the broad approach being followed by the Government in this Parliament, subject to the kind of detailed questions that we are asking today?

I cannot avoid the sensitive issue of the understandable rivalry between Airbus and Boeing. I bow to no one in my respect and admiration for Airbus UK and its management team. I bitterly regret that the British share in the ownership of this fine business was lost when BAE Systems unwisely divested its shareholding. As a result of that decision, we have to work all the harder to ensure that we keep, and if possible increase, the UK’s share of each Airbus aircraft that is built. Airbus employs around 10,000 people directly in the UK: 6,000 at its site in Broughton, north Wales; and 4,000 at Filton, in Bristol. Broughton manufactures the wings for all Airbus civil aircraft; Filton designs the wings, as well as designing and testing the fuel systems and landing gear. Filton is also the manufacturing site for the wings of the A400M military transport aircraft, which will soon go into RAF service as Atlas. The Airbus supply chain involves another 1,000 UK companies; Airbus is one of the UK’s biggest inward investors in R and D, with 2013 investment at around £480 million; and there is the new North factory in Broughton.

Mark Tami (Alyn and Deeside) (Lab): I join other Members in saying that I am very pleased the hon. Gentleman has managed to secure the debate. I will make a point before he moves off the issue of BAE Systems. He clearly said that he regrets the sale by BAE Systems of its share in Airbus. In hindsight, BAE Systems may have taken a different road, but one of the problems that was harming Airbus in this country was that BAE Systems cried wolf so many times, threatening to sell its share—it said it was not selling the share, then threatened to sell it. Does he accept that that, too, was not a sustainable position?

Sir Peter Luff: The hon. Gentleman makes an important point. We are talking about the long-term commitment to this sector; long-term commitment to ownership also matters very much. I strongly endorse what he said.

Of course, the new North factory in Broughton was opened by the Prime Minister three years ago. That factory shows the continued commitment of Airbus to the future of UK manufacturing and R and D. The company deserves the kind of high-level endorsement

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demonstrated by the Prime Minister. However, we need to give that endorsement practical substance by attacking non-compliant World Trade Organisation subsidies of Boeing and by robustly supporting export campaigns for Airbus aircraft.

Let us move briefly to Washington DC and, in a sense, to Washington state. At the end of July, it was astonishing to hear a senior Boeing executive tell a congressional hearing about

“the economic and employment benefits Europe has achieved with aerospace using massive state support over the past four decades”.

The old biblical phrase about the mote and beam comes to mind. The land of the free does not always extend its commitment to freedom to free trade.

Sadly, an ongoing dispute before the WTO regarding US and EU support for large civil aircraft manufacturers remains a real threat to the competitive position of Airbus. In essence, the WTO has found that European repayable launch investment loans to Airbus are legal and WTO-compliant but that many US grants, contracts and tax concessions to Boeing between 1989 and 2006 were WTO-inconsistent. Against this background, it is bewildering that, in blatant disregard of the 2012 WTO findings, Boeing has been awarded the single largest targeted tax break in US history, amounting to nearly $9 billion, in order to underwrite development and production of the new 777X aircraft in Washington state. The 777X is a serious competitor to Airbus’s wide-body A350 XWB and A380 families. This latest tax break for Boeing essentially allows it to develop the new aircraft for free, which places Airbus and its suppliers at a huge competitive disadvantage. It means that fair competition is not possible for products such as the A380. The “massive state support” happens not in Europe but in the USA. Will the Minister assure me that the UK Government will use their strong influence with bodies such as the European Commission and the WTO, and work with other Governments, to ensure that there is a level playing field in which UK companies can operate, with a fair global legislative environment?

Having said all that, Boeing builds excellent planes and it will remain a force to be reckoned with for the foreseeable future. We may think that the US Government’s use of subsidies is outrageous, but we still respect the technical skill of Boeing and the success of its aircraft. As the Defence Minister with responsibility for equipment, I was determined that all the major defence suppliers—including Boeing, Lockheed Martin and Northrup Grumman—should be made to feel entirely welcome in the UK and were encouraged to invest here, so as to work ever more closely with our supply chain.

In that spirit, we should recognise the way in which Boeing has thrown itself into the UK, supporting the AMRC at Sheffield and, for example, the Royal Aeronautical Society’s excellent “Build a Plane” challenge. The views of the major US players in aerospace—defence and civil—who value our supply chains so highly must be properly understood if we are to ensure that British suppliers can play a significant part in their future products. Yet the very name “Boeing” seems virtually to have been exorcised from AGP documentation, with only the briefest and most cursory of mentions. We want British technology to be so compelling that Boeing has no choice but to increase UK content on its planes,

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but we will get to that point only if we properly understand its needs, too. What are we doing to ensure we have that understanding?

I turn to exports. Industry insiders tell me that official support for sales campaigns is absolutely vital for the aerospace industry. From my time at the Ministry of Defence—I look to my hon. Friend the Member for Aldershot (Sir Gerald Howarth) in this regard as well—I have supported, in India, Turkey, South Korea, and elsewhere, the excellent work of the UK Trade & Investment Defence & Security Organisation. Sadly, UKTI is seen as being

“a long way from being optimal on the civil side.”

Specifically, the industry needs more advanced information on when Ministers are travelling on trade missions and not just to have what one chief executive described to me, in a description I recognise all too clearly, as

“a complete obsession from a media/comms perspective for ‘announcables’.”

Aerospace contracts take a long time to negotiate and cannot just be pulled out of a hat because a Minister happens to be visiting a particular country. As that same chief executive said to me,

“The UK diplomatic service is one of the best in the world; my colleagues from overseas regularly say that to me, the PM has a high regard on the global stage—we should use it more. He has said to us on several occasions that he is happy to be the number one Airbus salesman—it’s just that sometimes the back-up from UKTI is lacking.”

Another company has emphasised to me that advance warning of ministerial visits abroad and of trade delegations here to help support sales campaigns is just not being given, although that happens regularly—routinely—in other European countries such as France. On exports it seems we could do much more. Will the Minister pledge to look at that issue?

When politicians speak of SMEs, they often mean the very smallest firms, employing perhaps 10 or 20 people —members of the Federation of Small Businesses, say. Much of the debate about the aerospace industry appears to the outsider to revolve around the original equipment manufacturers on the one hand, and SMEs on the other. Discussion of the former usually focuses on the pursuit of new programme investment, in the case of purely indigenous companies, or on the methods by which non-indigenous companies can be persuaded to invest in the UK, embody original intellectual property in the minds of UK employees and deal with the constraints of the US international traffic in arms regulations regime.

Discussion of SMEs quite properly tends to concentrate on increasing their market access. However, in such a debate the industry layer below that of the OEMs but above that of the SMEs tends to be ignored. This layer, made up of companies that we could call the large sub-prime suppliers, includes companies such as Marshall Aerospace and Defence Group, Cobham, Meggitt, Ultra Electronics and Martin-Baker, most of which are completely British; the value they generate flows directly into the British economy and the Exchequer.

I acknowledge that many of these companies have particularly strong positions in defence aerospace, but I will be asking shortly whether we are right to think of the defence and civil markets in such distinct compartments. Any serious analysis of the future of the UK aerospace industry should take account of the large sub-prime

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suppliers and their contribution to the UK economy, national security and prosperity as well as to innovation, skills and training. Are we focusing sufficiently on the large sub-prime businesses in the AGP strategy?

We must also ask whether the British supply chain is sufficiently robust. Monday’s Financial Times reported that there were concerns about the ability of the UK supply chain to cope with the rapid upturn in orders. Industry chief executives have expressed concern to me about the lack of ambition of some of their suppliers, which are content to remain static but are risking stagnation or worse through an absence of plans for growth. Others have expressed concerns about the stability of small suppliers and said that they are forced to use two different suppliers for the same component to ensure stability of deliveries—and that second supplier is generally not a British one. There may be a need to provide not just finance to the smaller SMEs, as the AGP promises, but management consultancy on growth strategies and possible consolidation with other suppliers. I suspect more active intervention in the supply chain will be needed. Will the Minister consider that?

Is it right to limit the scope of the AGP’s work to the civil aerospace market? I ask because I am sure the linkages with defence aerospace, and space in particular, should be more explicit. Indeed, the Office for National Statistics classifies activity in this area as

“manufacture of air and spacecraft and related machinery”.

The Library briefing note reminds us that support for the sector from successive Governments owes much to the need to sustain the defence aerospace sector.

The AGP could learn directly from the Defence Growth Partnership, too. As noted in “Delivering Growth”, recently published by the DGP, the UK’s defence value chain comprises all suppliers of equipment, support and technology for defence, including defence aerospace, and includes the enabling functions of Government, ranging from test facilities to regulators, and the UK’s strong academic and science base in universities, research bodies and technical institutes. This is a profoundly capable resource, but a diverse one.

The DGP intends to harness the power of the value chain in a more co-ordinated way, to enhance responsiveness, agility and competitiveness in meeting customer needs. In addition to leveraging the existing value chain, it aims to maximise the synergies with other sectors and attract new companies into defence—particularly SMEs that can bring fresh thinking into the sector, but might otherwise struggle with market access. This is the kind of approach that we see in all industrial strategies, but I do not see it in the AGP.

In the 2010 Select Committee report, we looked at defence research and expressed concern about the sharp reductions being planned by the last Government, concluding that

“If we are looking at developing UK national capabilities for future defence requirements, it is self evident that if there is less being spent on research and technology now, we will have less UK capability in future.”

We also stated:

“While defence research is primarily the responsibility of the Ministry of Defence it is important that the Government acknowledges the fact that defence research has an impact on other areas of R&D, especially other high-tech industries. The Department for Business, Innovation and Skills should be involved in any discussions

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about funding for defence research to ensure that the impact of any reductions on advanced manufacturing industries is minimised.”

As Minister with responsibility for defence equipment, I was proud to put a floor under the Department’s spending on science and technology and prevent any further cuts, but our spending on defence S and T remains far too low.

In defence aerospace, much of the activity will have a direct read-across to the civil sector, particularly, for example, when it comes to sustaining relevant skills and fostering innovation. The rigid policy separation between defence and civil markets owes much to departmental boundaries, but also to a disappointing sense that promoting defence is not quite as acceptable as promoting civil aerospace. No such concerns cloud the minds of US policy makers and Boeing is again the beneficiary. It is time we grew up and joined up the parts of aerospace more convincingly.

That leads me to my final comments on the importance of sustaining the engineering skills of the aerospace sector. This was one of the most compelling sections of the 2010 BIS report and, more than four years on, there is not a word I would alter. “Lifting Off” gives a graphic account of the skills shortages and the demographic problems facing the sector. However, what I find profoundly disappointing is the apparent lack of acknowledgment that these are the problems of the wider engineering sector, too. Yes, the strategy outlines actions of Government and industry to address the issue—I welcome unreservedly the 500 masters-level postgraduate places announced in the scheme and the development of high quality, employer-led apprenticeships—but as EngineeringUK says, the UK, at all levels of education, does not have either the current capacity or the rate of growth needed to meet the forecast demand for skilled engineers by 2020.

The Royal Academy of Engineering and EngineeringUK estimate that by 2020 in the UK there will be demand for between 1.28 million and 1.86 million engineers and technicians. Approximately 640,000 graduate engineers will be required by 2020 across all sectors of the economy. Seven out of 10 jobs will be to replace the ageing work force. UK higher education institutions currently produce only 21,000 engineering graduates and UK industry creates only 66,000 engineering apprenticeships each year.

Against that background, it is profoundly worrying that each of the published industrial strategies, including the AGP, seem to regard skills in their sectors in isolation. The progress report on the AGP this year speaks of