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House of Commons

Tuesday 4 November 2014

The House met at half-past Eleven o’clock

Prayers

[Mr Speaker in the Chair]

Oral Answers to Questions

Treasury

The Chancellor of the Exchequer was asked—

Northern Powerhouse

1. Mr David Jones (Clwyd West) (Con): What progress he has made on his policy to create a northern powerhouse for the UK economy. [905838]

6. Graham Evans (Weaver Vale) (Con): What progress he has made on his policy to create a northern powerhouse for the UK economy. [905843]

9. Paul Maynard (Blackpool North and Cleveleys) (Con): What progress he has made on his policy to create a northern powerhouse for the UK economy. [905846]

10. Andrew Stephenson (Pendle) (Con): What progress he has made on his policy to create a northern powerhouse for the UK economy. [905848]

13. John Stevenson (Carlisle) (Con): What progress he has made on his policy to create a northern powerhouse for the UK economy. [905851]

The Chancellor of the Exchequer (Mr George Osborne): In July I set out my plan to build a northern powerhouse to connect the great cities of the north with the counties that surround them—and, of course, north Wales—by investing in transport science, and by devolving powers from Westminster to elected city mayors. We now have plans for High Speed 3 and for major new science investment. Yesterday I signed an historic agreement with the civic leaders of Greater Manchester to create the first directly elected metro-wide mayor outside London, with powers over transport, economic development and policing. I hope that Manchester will be the first of many cities to take advantage of the greater devolution of powers. Today I have opened my door to discussions with any metropolitan authority that wants to adopt a new model of governance. All that is part of our ambition to reduce the decades-old gap between north and south, which is central to our long-term economic plan.

Mr Jones: Does my right hon. Friend agree that key to the northern powerhouse vision is the improvement of transport connectivity throughout the region, and does he agree that north Wales is well placed to benefit from such improvement?

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Mr Osborne: As a Cheshire Member of Parliament, I know that the north Wales economy is closely connected with the economy of the north-west of England. We have already committed ourselves to reopening the Halton curve, re-establishing a regular direct rail link between north Wales and Liverpool for the first time since the 1970s. That is something that my right hon. Friend asked me to do, and campaigned for. Moreover, High Speed 2 gives us the potential of a station at Crewe, which will greatly increase capacity for journeys to north Wales and reduce journey times. We are ready to listen to further ideas for ensuring that prosperity is experienced in north Wales as well.

Graham Evans: For 13 years Labour neglected jobs and growth in the north, including Weaver Vale, thus creating an economy that was dangerously unbalanced. Does my right hon. Friend agree that it is only the Conservative party, with its long-term economic plan, that will deliver job security for the whole United Kingdom, not just the south?

Mr Osborne: My hon. Friend is absolutely right. A record number of people are now employed in the north of England, but the gap between north and south grew under those 13 years of Labour government. If the House wants one example of a project that was waiting to be completed but was entirely neglected by the Labour Government, it is the Mersey Gateway bridge, which this Government are now building and to which they are committed—and, thanks to my hon. Friend’s campaigning, there will be no tolls for local residents.

Paul Maynard: I welcome the Chancellor’s obvious commitment to the northern economy. Does he agree that a commitment to exports will be at the heart of its regeneration, and will he join me in praising Victrex, a company in my constituency, which exports 97% of what it produces? Is that not what will drive a northern renaissance?

Mr Osborne: My hon. Friend, who is a powerful champion of the businesses in his constituency which employ local people, has told me about Victrex and its exporting success. That success is being replicated by other manufacturers in the north of England which are increasing their exports. The energy revolution in the Fylde area and on the Blackpool coast is creating the potential for a national college to develop the engineering and other skills that will be required. My hon. Friend has made a strong bid for that college to be in his constituency, and I am listening very carefully to the case that he is making.

Andrew Stephenson: I welcomed what my right hon. Friend said when he was in Manchester yesterday. However, a northern powerhouse must not just be about our biggest cities. In Pendle we have landmark regeneration projects such as the £30 million redevelopment of Brierfield Mill, which is in need of my right hon. Friend’s support. Will he tell me what benefits the northern powerhouse will bring to my constituents, and how his investments in transport and regeneration will help them?

Mr Osborne: Crucial to the vision of the northern powerhouse is not just supporting the great cities of the north, but ensuring that they are connected with the

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towns and counties surrounding those cities. We are investing hugely to improve transport links in Lancashire. My hon. Friend, who is such a champion of his constituency, has raised with me the Brierfield Mill site, which is now called Northlight. We are taking a close look at what we can do to redevelop the area and bring more jobs to his constituency, and that is due to his campaigning efforts.

John Stevenson: The idea of a northern powerhouse is welcome, as is the introduction of an elected mayor, which I am sure will provide real leadership. However, it is vital for smaller places such as Carlisle to benefit as well, which will mean ensuring that the next generation has the right skills to enable local businesses to succeed and prosper. How will the Chancellor ensure that that happens?

Mr Osborne: Thanks in part to the efforts of my hon. Friend and the support he has given to investment in Carlisle, we have seen a 34% fall in the unemployment claimant count in Carlisle in the last year alone. We are also devolving more responsibility for setting the skills agenda to local businesses, so we can have skills that are specific to the Carlisle area. I am always happy to talk to my hon. Friend and to meet people he would bring to see me, to see what more we can do to make sure that Carlisle is part of the strong economic revival of the north of England.

Ms Gisela Stuart (Birmingham, Edgbaston) (Lab): The Chancellor opened the door for other metropolitan areas to go down the route of the northern powerhouse. Has he given any consideration to what he regards to be an optimum size for those units? In the west midlands, would that be a Greater Birmingham and black country metropolitan area or an entire west midlands metropolitan area?

Mr Osborne: I do not think any one area is the same as any other area. There is a specific model for Greater Manchester, and of course the Greater Manchester councils had worked well together as a combined authority. Clearly Birmingham city council is much larger than Manchester city council alone, so I would like to have a conversation with the hon. Lady, and with Albert Bore and other civic leaders in Birmingham, about whether we can move to a mayoral model, perhaps just in the city. That is a discussion to be had with local people, however.

Mr Barry Sheerman (Huddersfield) (Lab/Co-op): I must congratulate the Chancellor of the Exchequer on his organisational brilliance by peppering us with all these planted questions on this subject, but I tell him, as the co-chair of the Yorkshire group of MPs, that we are a bit canny in Yorkshire; we are a bit worried about this northern powerhouse. We agree with it and support it, but it is a bit close to the general election. Where has he been for four and a half years, and where is the money coming from? We have not seen any resources for it.

Mr Osborne: We have already made investments over the last four years in things such as the northern hub and the electrification of the trans-Pennine railway, which of course will have helped the hon. Gentleman’s constituency. I welcome his support for the northern

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powerhouse. This agreement with Greater Manchester was struck with Labour leaders of Manchester councils as well as the Conservative leader of Trafford and the Liberal Democrat leader of Stockport. I want to work across party divides with local Labour civic leaders and local Labour MPs to see what we can do for Huddersfield and other towns in the north of England so that they are connected to the northern powerhouse.

Chris Ruane (Vale of Clwyd) (Lab): Can we see the colour of the Chancellor of the Exchequer’s money? How much is being allocated for so-called HS3, and has he ring-fenced the amount of funding for north Wales?

Mr Osborne: We will have developed and costed plans for HS3 from—[Interruption.] There was no proposal for HS3 from the Labour party for 13 years in government and then for four years in opposition. Labour Members are now complaining that I came up with a proposal four months ago. We already have detailed support for that proposal from David Higgins and we are going to have a costed plan for it. There was absolutely no attempt to connect the north of England from east to west under the last Labour Government. It is happening under this Conservative-led Government.

Mr Angus Brendan MacNeil (Na h-Eileanan an Iar) (SNP): Is not the best way to have a northern economic powerhouse to have full fiscal autonomy for Scotland? After all, the Prime Minister did say that all options for devolution are there and all are possible. Does the Chancellor agree, or is he afraid of the competition from a more socially just Scottish treasury making better policies for the people of Scotland?

Mr Osborne: We will honour the commitments made during the referendum campaign by all the Unionist parties to devolve further fiscal powers to Scotland. We will honour the commitment we made, and I would ask the Scottish National party to honour the promise it made that this was a referendum which would settle the issue of Scottish independence at least for

“a generation…perhaps for a lifetime”—

I am quoting Alex Salmond. Perhaps the SNP should stop trying to reopen the question that was resolved, and work with us to make sure that Scotland has a great economic future.

Catherine McKinnell (Newcastle upon Tyne North) (Lab): The Chancellor talks about creating a northern powerhouse, but really is he not just struggling to play catch-up, because while he has been shifting funds from northern cities to wealthier parts of the country, the unemployment rate in the north-east is the highest in the country, wages for working people in the north have fallen by even more than the national average and across the north the number of people unemployed for a year or more is up 62% since the last election? Why will he not match Labour’s plan to devolve real power and £30 billion of funding not just to the north, but to all city and county regions?

Mr Osborne: Labour ran one of the most centralised Governments in history. It did not devolve any powers to anyone—

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Chris Leslie (Nottingham East) (Lab/Co-op): We did in Scotland.

Mr Osborne: Not in England. In regard to playing catch-up, I would say to the hon. Lady that we have heard from Labour’s civic leaders in Greater Manchester that they want a directly elected mayor. We have heard from the Conservative Chancellor of the Exchequer. What is the view of those on the Labour Front Bench on this proposal? Last week, the Labour leader was in Manchester saying that the Labour party would never sign up to such a deal, but four days later all his civic leaders did so. What is the policy of the Labour party?

Income Tax Allowances/Thresholds

2. Jackie Doyle-Price (Thurrock) (Con): What plans he has to bring forward legislative proposals to change income tax allowances and thresholds. [905839]

The Chancellor of the Exchequer (Mr George Osborne): By next year, the personal allowance threshold will have reached £10,500. This will mean an £805 cut in income tax for the typical basic-rate taxpayer, and 3 million people being taken out of income tax altogether. Under a Conservative Government in the next Parliament, we would go further.

Jackie Doyle-Price: Enabling people to keep more of what they earn is the best thing any Government can do for ordinary hard-working taxpayers. Can the Chancellor tell me how many of my constituents in Thurrock will be likely to benefit from these proposals?

Mr Osborne: My hon. Friend is a champion for the hard-working people in her constituency. Not only have our personal tax cuts helped many thousands of those people, but if we go ahead with our plans to raise the personal allowance to £12,500, more than 5,500 people in Thurrock would be lifted out of income tax altogether and 58,000 of the people she represents would benefit.

Kate Green (Stretford and Urmston) (Lab): Raising tax thresholds disproportionately benefits men, because many women earn so little that they do not even reach the lowest threshold. On the other hand, consumption taxes have a disproportionate effect on women who are responsible for managing the family budget. Will the Chancellor rule out any increase in VAT, in order to ensure that our tax system can be fair to both genders?

Mr Osborne: We do not need to raise VAT, because our plans are paid for by the Government living within their means. Does the hon. Lady speak for the Labour party, because she seems to be opposing the increase in the personal income tax threshold? That is a policy that has lifted many low-paid women out of income tax altogether, and I find it surprising that once again the Labour party is against the interests of hard-working people.

Mr Andrew Tyrie (Chichester) (Con): By raising the personal allowance, the Chancellor has pulled 3.2 million people out of tax altogether. At the same time, however, he has dragged 1.6 million people into paying the higher rate of 40p. It is the marginal rates that matter, and that is a massive disincentive to wealth creation in this

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country. Does he acknowledge that, as soon as the fiscal room to do so is available, it will be essential to act to take as many people as possible out of higher-rate taxation altogether?

Mr Osborne: As my hon. Friend knows, people earning up to £100,000 who are paying the higher rate have seen the benefit of the increase in the personal allowance. They have seen their income tax bills fall. He is right to say that more people have been pulled into the 40p rate, however, and that is why we are proposing to increase the threshold to £50,000. That will be in our election manifesto, and it is something that we can deliver in the next Parliament so that people on middle incomes, as well as those on lower incomes, can benefit from a tax-cutting Conservative Government.

Chris Leslie (Nottingham East) (Lab/Co-op): The Chancellor did not give us the small print relating to the promises that he has just repeated: terms and conditions apply. Will he acknowledge that there is a price tag attached to those promises, and will he tell us specifically what the cost of those commitments would be?

Mr Osborne: What I would say to the shadow Chief Secretary to the Treasury is—

Ed Balls (Morley and Outwood) (Lab/Co-op): What is the answer?

Mr Osborne: It is around £7 billion when we add it all up. That would be paid for by lower public expenditure. These are tax cuts that are paid for. I note that that is not the approach taken by the Labour party, which would increase tax, increase borrowing and increase spending, sending the economy back into the mess that it left it in.

Chris Leslie: So we have established that this would mean £7 billion of lower public expenditure. What elements of public expenditure would be involved? Would the Chancellor cut the police again? Would he take the money from schools and hospitals? Or are we to judge him on his usual track record, which would mean that after the election he would simply add it on to VAT?

Mr Osborne: What we have seen under this Government is a party that is able to bring our public finances under control; to reduce the welfare bill; and to make sure the egregious waste in Westminster and Whitehall that took place under the previous Government no longer takes place. We will fund that by lower public expenditure, because once we get the public finances under control we are going to keep them under control.

Tax Receipts (Deficit)

3. Ian Murray (Edinburgh South) (Lab): What assessment he has made of the effect of tax receipts on the deficit in the last 12 months. [905840]

The Chief Secretary to the Treasury (Danny Alexander): Progress has been made on reducing the deficit; it is down by more than a third from its peak and borrowing in 2013-14 was under £100 billion for the first time in six years. The latest public finance release shows that the impact of the great recession is still being felt in our

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economy and the public finances. The Office for Budget Responsibility expects real earnings to rise faster than inflation, and receipts are expected to perform more strongly in the second half of the year. It is therefore important to stick to the plan, which is building a more resilient UK economy.

Ian Murray: The Chief Secretary to the Treasury will be aware that although unemployment has been falling, income tax receipts to the Treasury have stayed flat, despite the Government predicting a significant increase. Does that not show that this Government are presiding over an explosion of underemployment, zero-hours contracts and low pay, and until they deal with that, they will never bring the deficit down?

Danny Alexander: First, I would think that the hon. Gentleman would welcome the substantial increase in employment we have seen in the past two or three years—after all, it was his Front-Bench team who predicted that that would not happen under this Government. In fact, 80% of the jobs created in the past 12 months have been in full-time employment, not the part-time employment he is talking about, which is greater than the level in the economy as a whole.

Steve Baker (Wycombe) (Con): Tax receipts and deficit closure are contingent on a strong economy, so does the Minister welcome the fact that the Legatum Institute’s prosperity index shows that the UK is now the most prosperous economy in all the major EU countries?

Danny Alexander: I agree with my hon. Friend that strong tax receipts require a strong economy, and the focus of this Government’s economic policy since the coalition was formed has been to rebuild the UK economy and clear up the mess left to us by the Labour party. We now have the strongest growth in the major world economies, and Government Members should be very proud of that.

Mr John Spellar (Warley) (Lab): Revenue officials have always been slow to catch up with the latest tax-avoidance scams in the construction industry, the latest of which is the umbrella company. Such companies are costing the Revenue huge sums and are exploiting workers. This is spreading rapidly to other sectors, including supply teaching. What is the Minister going to do about the scandal of umbrella companies?

Danny Alexander: We introduced measures precisely to deal with intermediary companies, which are often vehicles for tax avoidance or for minimising tax. We take that very seriously. If the right hon. Gentleman has evidence that he wishes to bring to my attention of specific issues that have come to his attention, I would gladly look at it.

Mark Pawsey (Rugby) (Con): Does the Chief Secretary agree that the best way to increase tax receipts is to create the conditions for business confidence and growth? That is happening in my constituency, with the recruitment firm eResponse choosing to set up in Rugby because it has assessed that between 1,500 and 2,000 new jobs will become available.

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Danny Alexander: I welcome that sort of investment, and I very much agree with what my hon. Friend says. Businesses like that one, in every constituency up and down the country, are creating jobs because they have confidence in the economic policies of this Government.

Uncollected Tax

4. Heidi Alexander (Lewisham East) (Lab): What estimate Her Majesty’s Revenue and Customs has made of the amount of uncollected tax in the last year for which figures are available. [905841]

The Financial Secretary to the Treasury (Mr David Gauke): HMRC published its latest tax gap estimates on 16 October, and in 2012-13 the gap was estimated at £34 billion—6.8% of total tax due.

Heidi Alexander: Thirty-four billion pounds is a very significant amount of money, and under this Government the amount of uncollected tax has risen by £3 billion. Why has the Minister allowed that to happen?

Mr Gauke: Let us be clear: a rate of 6.8% is lower than was achieved in any year under the last Labour Government. In addition, HMRC’s yield—the money that has come in as a consequence of its efforts—was £7 billion higher in 2013-14 than it was in 2010-11. The fact is that this Government have an excellent record on dealing with tax avoidance, tax evasion and the tax gap.

Henry Smith (Crawley) (Con): Can the Chancellor of the Exchequer say how the Government are encouraging greater payment of tax through international agreements that we have achieved, for example, with Switzerland?

Mr Gauke: I am sure that the Chancellor can explain that, but as I am already at the Dispatch Box, I will answer the question. The UK has very much led the way in the OECD base erosion and profit shifting process, ensuring that the international tax system is fit for purpose. We have made good progress on that, but there is still work to do.

18. [905859] Nick Smith (Blaenau Gwent) (Lab): Does the Minister think that there is any link between the deep cuts to HMRC staff, particularly in Cardiff, and the uncollected tax that is rising under this Government?

Mr Gauke: As I say, what has happened under this Government is that the yield brought in by HMRC has increased year after year. The tax gap is lower for 2012-13 than it was in any year under the previous Labour Government. In truth, the record of HMRC is one of getting more from less, but we have invested in the areas that bring in money on tax avoidance and tax evasion.

Mr Philip Hollobone (Kettering) (Con): Will the Minister ensure that the unacceptable and unwelcome £1.7 billion bill from the European Union remains an uncollected tax demand, and that there will be no payment of interest on any late payment?

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Mr Gauke: First, I congratulate my hon. Friend on the ingenuity of his question. Secondly, let me repeat what the Prime Minister said: we will not be paying £1.7 billion on 1 December.

Mr Speaker: It was indeed an extremely ingenious question, as HMRC would not be the tax collector, but, understandably, that did not trouble the hon. Member for Kettering (Mr Hollobone) in any way.

20. [905862] Mr Iain McKenzie (Inverclyde) (Lab): One in four children across the UK lives in poverty while this Government allow £34 billion in unpaid tax to go astray. Does the Minister not see an urgency in collecting that tax so that he can eliminate that disgraceful statistic?

Mr Gauke: Let us be clear: the tax gap is lower than it was under the previous Government and yield is higher. By international standards, the UK has one of the lowest tax gaps in the world. We have a good record, but we always seek to do more, which is why at the Budget and autumn statement we have always been able to bring forward measures to deal with tax avoidance and tax evasion, and that is a record with which we will continue.

Shabana Mahmood (Birmingham, Ladywood) (Lab): The Minister has failed to acknowledge that families struggling to make ends meet expect the Government to ensure that everyone pays their fair share, and yet the amount of uncollected tax has risen by £3 billion since he came to office. Is it not the truth that that is both deeply unfair to hard-working families and further evidence that this Government have totally failed to tackle tax avoidance?

Mr Gauke: No; we have brought forward 40 measures to reduce tax avoidance, reduced the tax gap as a proportion of tax receipts, and increased by £7 billion the yield brought in by HMRC. The truth is that it is this Government who have acted in this area, and the record of the previous Government does not bear comparison.

Fiscal Consolidation

5. Stephen Hammond (Wimbledon) (Con): What progress he has made on his fiscal consolidation plans. [905842]

The Chief Secretary to the Treasury (Danny Alexander): The Government inherited the largest deficit since the second world war. Since then, we have made substantial progress in reducing the deficit. By the end of last year, borrowing had fallen by more than a third. The Government’s consolidation plans have been central to the reduction in the deficit. Indeed, by the end of last year, we had implemented 70% of the £126 billion of fiscal consolidation planned for the end of 2015-16.

Stephen Hammond: Does the Chief Secretary to the Treasury agree that if we have a credible plan to reduce the deficit, we can credibly plan to protect spending on the NHS and cut taxes? As the Labour party’s announced fiscal rules would allow for an extra £166 billion-worth

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of borrowing over the next Parliament, there can be no credibility in its deficit plan and in its plan for this country’s economy.

Danny Alexander: I agree with my hon. Friend that Labour’s plans would put at serious risk the jobs and stability that this coalition Government have secured. There is a lesson in what he says for all parties in this House, because economic credibility is hard to win and easy to throw away. Any party that does not put forward a plan to sort out the economy or offers unfunded tax cuts to the British people will put its credibility at serious risk.

Alison McGovern (Wirral South) (Lab): On the deficit, the Chancellor and the Chief Secretary to the Treasury have failed the test they set themselves, which is to close the deficit by the end of this Parliament. Worse than that, they have failed the test that my constituents set for them, which is to put money back in their pockets. That was said to me this week by a grandmother who is desperately worried about her grandson, as he is on a five-hour contract and unable to afford to take a day off work. What will the Chief Secretary do about that?

Danny Alexander: The first thing that we are doing is delivering on what we promised to do when we created this Government in the first place, which is to repair the deep damage that the hon. Lady has to admit was done to the economy under her party’s stewardship. We have now got the United Kingdom into a position in which we are creating more jobs than in the whole of the rest of the European Union combined, and we have the strongest growth rates in the developed world. She should welcome that as something that creates opportunities for young people.

Crispin Blunt (Reigate) (Con): This fiscal consolidation plan will be heavily influenced by the dramatic liberalisation of pensions announced in the Budget, which will be significantly influenced by the success or otherwise of the guidance guarantee that is now being legislated for. Does the Chief Secretary agree with Ros Altmann that the Financial Conduct Authority should ensure that people who do not receive or take the guidance in this new environment are at least asked proper questions about their circumstances, such as about their partner and their health?

Mr Speaker: Order. A question can be wide, at a stretch, but it should not also be over-long.

Danny Alexander: I agree with my hon. Friend that the pensions reforms are a great liberalisation of the pensions system. We will give people, rightly, the opportunity to make use of the money that they have saved for their retirement as and when they choose. The guidance guarantee is enormously important. We have been working closely with organisations such as Citizens Advice to make sure that people have access to the guidance in the way that my hon. Friend has set out, and we need to deliver on that.

Ms Margaret Ritchie (South Down) (SDLP): Has the Chief Secretary to the Treasury factored into his fiscal consolidation arithmetic the extra £1.7 billion contribution demanded by the EU? Does he accept that that payment

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is properly due under the formula agreed by the UK Government? When will it be paid, contrary to the answer given by the Chancellor?

Danny Alexander: The Office for Budget Responsibility takes into account forecasts for EU payments in its own forecasts. It did so at the time of the Budget and will do so again at the time of the autumn statement. A demand of this size in this manner is simply not acceptable, and we are absolutely right to do everything that we can to deal with the issue. That is what we in the coalition will ensure happens.

Tax Avoidance

7. Mark Hunter (Cheadle) (LD): What recent steps he has taken to reduce tax avoidance. [905844]

The Financial Secretary to the Treasury (Mr David Gauke): The Government have taken a wide range of actions to tackle tax avoidance over the Parliament, including introducing the UK’s first ever general anti-abuse rule. This year’s Finance Act introduced a tougher monitoring regime and penalties for promoters of high-risk tax avoidance schemes. We have also given HMRC the power to collect disputed tax bills up front. That removes the incentive for tax avoiders to delay and frustrate HMRC’s efforts to settle disputes and brings forward £4.3 billion in revenues.

Mark Hunter: I am aware that, as a result of measures taken by the coalition Government to crack down on tax avoidance, a record £24 billion in additional tax revenue was raised in the last financial year. Does my hon. Friend agree that much more remains to be done to make sure that multinationals such as Starbucks and Google pay their fair share?

Mr Gauke: My hon. Friend is right to highlight the record yield for the last financial year. Indeed, there are reasons to believe that that record may well be broken for this financial year. As for multinationals, I do not want to be drawn on individual companies, but it is right to say that we need to work internationally, as I mentioned earlier, through the OECD base erosion and profit shifting process. As my right hon. Friend the Chancellor made clear at the Conservative party conference, we are looking to take further action in respect of multinationals not paying the tax that they should.

Mr Frank Roy (Motherwell and Wishaw) (Lab): The Chancellor has said that the Swiss tax deal will raise £5 billion by next year. How much has been raised so far?

Mr Gauke: We have already got in about £800 million, and we will get more, but that is money that we would not otherwise have received. That is a deal worth doing. It is worth pointing out that some people said that if we had not had this deal with the Swiss—which has brought in additional revenue—we would not have been able to make progress on automatic exchange of information, whereas the reality is that just last week the Chancellor signed a deal on behalf of this country that made progress on that.

Charlie Elphicke (Dover) (Con): Does my hon. Friend the Minister agree that under the previous Government the tax gap grew and that all the running in this Parliament on ensuring that businesses pay their fair share of tax

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and cracking down on tax dodgers has come from our side of the House, and that this Government have made the case internationally as well?

Mr Gauke: The tax gap as a proportion of tax receipts was higher under the previous Government than for every year under this Government. We have introduced about 40 measures to close loopholes, one of which, on disguised remuneration, let us not forget the Labour party opposed.

Mr Gregory Campbell (East Londonderry) (DUP): Given the Government’s commitment to clamping down on tax avoidance, can the Minister give us a prediction or a commentary on the yield he expects next year as a result?

Mr Gauke: As we heard earlier, the yield for 2013-14 was £24 billion. HMRC anticipates that that will be broken and that the yield will be higher for this financial year—the details are to come, but that is encouraging. On the tax gap, the small increase is largely due to the VAT tax gap being higher in 2012-13 than the previous year, but we already know that for 2013-14 it will fall.

Regional Economies

8. John Pugh (Southport) (LD): What recent steps he has taken to rebalance regional economies. [905845]

The Exchequer Secretary to the Treasury (Priti Patel): This Government are committed to rebalancing the economy in order to strengthen every part of the UK. In July this year local growth deals were agreed with all 39 local enterprise partnerships across England. Each deal reflects the particular needs and capabilities of the local area. Growth deals are just one of several ongoing investment programmes aimed at helping every region in the United Kingdom achieve economic success.

John Pugh: May I explore the link with governance? What is the concrete evidence outside London of the slightest connection between economic growth and elected mayors?

Priti Patel: It is fair to say, as we have heard today, that devolving power to more local areas enables the regions to take responsibility for the decisions that affect their areas, which in the long run will create good, solid, strong local long-term economic plans.

Alison Seabeck (Plymouth, Moor View) (Lab): The Minister talks about supporting regional growth and rebalancing the economy, yet promises are being made— £7 billion to Greater Manchester, £7 billion potentially to top taxpayers. That money would sort out transport connectivity issues and help us grow our economy, so will she commit to the Dawlish avoiding line and the resilience measures that we need in the south-west now?

Priti Patel: We are currently looking specifically at that.

Ian Swales (Redcar) (LD): In the past four years the Tees valley has received five times as much investment from the regional growth fund as in the last four years of the Labour Government. That is going not just to

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large companies, but to smaller ones too, such as Wards and ElringKlinger in my constituency. Will the Minister ensure that regional growth funding continues to be a key element of rebalancing the economy?

Priti Patel: My hon. Friend is right that, by handing back power to local leaders, we are enabling them to back local jobs and to create prosperity and long-term economic growth. That is exactly what this Government are committed to doing.

Lucy Powell (Manchester Central) (Lab/Co-op): I welcome yesterday’s announcement in Greater Manchester and put on record my gratitude to the leadership in Greater Manchester for their efforts. May I offer some advice to the Chancellor? If he wants to endear himself further to the voters of Manchester, he might consider the totality of his Government’s policies on the area. When will he consider going further in fiscal devolution and secondary legislation devolution so that we can truly live up to our aims?

Priti Patel: I welcome the hon. Lady’s support for the package, which is substantial. The priority must be its implementation and delivery, and we look forward to working with all parties to make sure that it is a success.

Deficit Forecast

11. Stephen Timms (East Ham) (Lab): What recent forecast he has made of the change in the deficit between May 2010 and May 2015. [905849]

The Economic Secretary to the Treasury (Andrea Leadsom): In 2010 the Government inherited the largest deficit since the second world war at 10.2% of GDP. We have made substantial progress in reducing the deficit since 2010. By the end of the last financial year 2013-14, the deficit had fallen from £149 billion to £95.6 billion, estimated at Budget 2014. As a share of GDP that is a fall of more than a third from its peak.

Stephen Timms: The Chancellor’s promise to eradicate the deficit in this Parliament has long since been abandoned, but with the deficit going up in the first half of this financial year, the scaled-back aim of halving the deficit by the end of this Parliament looks in serious trouble as well. The Chief Secretary has just attacked the unfunded tax cuts that the Chancellor announced. Does the Minister still think that the tax deficit will even be halved by the end of the current financial year?

Andrea Leadsom: The right hon. Gentleman is possibly being a little mischievous. As a veteran Chief Secretary to the Treasury from the previous Government, he should well understand that, according to the OBR’s comments and looking at its 2010 forecast errors over time, the biggest difference between 2013 and earlier was the lack of external shock. In 2011, high commodity prices ate into disposable incomes and the euro area crisis damaged credit and confidence. He should well understand why the deficit reduction was impacted by external shocks.

Andrew Bridgen (North West Leicestershire) (Con): According to the International Monetary Fund’s “World Economic Outlook”, the UK is set to grow at rates that

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will put other major European economies to shame. What measures does the Minister believe have allowed that out-performance of our European partners?

Andrea Leadsom: My hon. Friend is quite right. The UK is now growing at the fastest rate in the G7 and, indeed, is forecast to grow at the fastest rate in the G20. That is the result of our long-term economic plan—reducing business tax rates in order to get more people into work; more people paying their taxes and more people able to bring home a wage. That long-term economic plan is what is bringing our economy back into growth.

Tax Credits

12. Mr Steve Reed (Croydon North) (Lab): How many working people are in receipt of tax credits. [905850]

The Exchequer Secretary to the Treasury (Priti Patel): In April 2014 there were 3.3 million people in work receiving tax credits, down from 4.8 million in April 2010.

Mr Reed: When the Chancellor came to office, less than a quarter of housing benefit claimants in Croydon were making claims to supplement low pay. Today that figure is two fifths. Will the Minister apologise for pushing growing numbers of hard-working Croydon families into poverty?

Priti Patel: When it comes to the cost of living, Labour’s great recession is what made the country and the hon. Gentleman’s constituents a whole lot poorer. We now have record levels of employment, including a 9% increase in his constituency. Perhaps he would like to welcome that.

Mr Stewart Jackson (Peterborough) (Con): There are a great many studies and much empirical evidence showing that the surest way to combat poverty is through work. Is it not a badge of pride for this Government that in four years we have reduced the number of people in households where no one works by 671,000?

Priti Patel: My hon. Friend is absolutely right. When it comes to tackling the country’s economic problems, we can improve living standards only by getting more people back into work. This Government have been reducing child poverty and ensuring that work pays.

Dame Anne Begg (Aberdeen South) (Lab): Tax credits are meant to be moving into universal credit. What timetable is the Treasury working to for phasing out tax credits?

Priti Patel: That matter will be subject to the next Parliament.

Mr Speaker: It is time to hear from a Lincolnshire knight—Sir Edward Leigh.

Sir Edward Leigh (Gainsborough) (Con): If someone comes here to work from the European Union, and if they are in a relatively low-paid job and receive tax credits as a form of benefit, they might effectively be paying no tax at all. Will the Government tell the

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European Commission that we should have a new system by which people have to pay tax for at least three years before drawing any tax credits or benefits?

Priti Patel: We have already made changes to that whole area, and that is something we will look at further.

Economic Growth

14. Bob Blackman (Harrow East) (Con): What estimate he has made of the rate of growth in the economy. [905852]

The Chief Secretary to the Treasury (Danny Alexander): In the year to the third quarter of 2014, GDP grew by 3%; it is now 3.4% above the pre-crisis peak. The International Monetary Fund expects the UK economy to be the fastest growing in the G7 in 2014.

Bob Blackman: Clearly the fact that we are leading our European partners in economic growth shows that the long-term economic plan is working. Does my right hon. Friend agree that, with the eurozone in crisis and external factors uncertain, the last thing we want to do is return the keys to those who crashed the car in the first place?

Danny Alexander: I am sorry that my hon. Friend has brought up the shadow Chancellor’s recent driving incidents, but I agree with the point that the Labour party made the economic mess that we—Liberal Democrats and Conservatives—came together in a coalition to sort out. We have made strong progress in this Parliament, including achieving the strongest growth in the G7. The last thing that the country needs is to hand the keys back to a majority Labour Government.

Mr Andrew Love (Edmonton) (Lab/Co-op): The long-term economic plan is not working in terms of the living standards of people up and down the country. What has been the rate of growth of wages over the past year?

Danny Alexander: The rate of growth of real wages has been low, and that needs continued attention in the months and years to come. However, I hope that the hon. Gentleman would join me in welcoming the fact that millions of our fellow citizens are now in work as opposed to being unemployed, as they were under the Labour Government. We now need to work to make sure that we increase business investment, enhance productivity, and make sure that the benefits of the economic growth we are seeing are shared as widely as possible. I think that he and I would agree about that.

Average Earnings/Rate of Inflation

15. Derek Twigg (Halton) (Lab): What recent comparative assessment he has made of growth in average earnings and the rate of inflation since May 2010. [905854]

The Financial Secretary to the Treasury (Mr David Gauke): Inflation is at 1.2%—lower than at any point since 2009. We appreciate that times have been tough for families in recent years, but as the Institute for Fiscal Studies has said, that is

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“a direct but delayed result of the 2008 recession”.

Since May 2010, this Government have taken decisive action to support families. We have increased the personal allowance, frozen fuel duty and council tax, and cut energy bills. In the past year, unemployment has fallen at the fastest rate since records began, and the proportion of workless households is lower than it ever was under the previous Government.

Derek Twigg: For how many months under this Government have wages risen faster than prices?

Mr Gauke: We have gone through a difficult period, but, as I said, that is

“a direct but delayed result of the 2008 recession”.

Employment Trends

16. Mr David Burrowes (Enfield, Southgate) (Con): What assessment he has made of recent trends in the level of employment. [905855]

The Economic Secretary to the Treasury (Andrea Leadsom): A record 30.76 million people are in employment. Since the coalition came to power, employment has increased by more than 1.7 million. Over 2 million private sector jobs have been created since early 2010, meaning that for every public sector job lost, over five have been created in the private sector.

Mr Burrowes: Can the Minister help my constituents, who are pleased by the record number of people in jobs in my constituency but confused by the Leader of the Opposition’s claim that our plan would mean the loss of 1 million jobs, and concerned about the impact that Labour’s pledges of more spending, more borrowing and higher taxes would have on jobs in my constituency?

Andrea Leadsom: My hon. Friend is right to point out that irony. Under this Government, we have just seen the biggest drop in unemployment ever. In particular, long-term unemployment and youth unemployment are dropping fast, giving hope, prospects and a decent wage to so many in our country. We should be celebrating these things and definitely not letting Labour put them in jeopardy.

Helen Jones (Warrington North) (Lab): Twenty per cent. of my constituents earn less than the living wage. People are working at two or three jobs and still cannot make ends meet. When is the Minister going to recognise that her so-called vaunted increase in employment is based on people earning poverty wages?

Andrea Leadsom: I completely refute what the hon. Lady says. A lot of the particularly big increases in employment have been among very young and older workers, who tend to earn less, but is not that great news for the longer-term prospects of those young people, who are off the unemployment register and developing skills for the future?

Pensions (Taxes)

17. Stephen Metcalfe (South Basildon and East Thurrock) (Con): What progress he has made on measures to reduce taxes on pensions. [905858]

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The Financial Secretary to the Treasury (Mr David Gauke): The Taxation of Pensions Bill that is currently before the House will reduce tax rates that previously applied if people wanted to withdraw money from their pension flexibly. It will also reduce the 55% tax rate on pension assets when someone dies. These tax cuts will leave people with more of their own money and more choice about how to spend it.

Stephen Metcalfe: These measures clearly show that we are the party on the side of those who do the right thing, work hard, and save. Does my hon. Friend agree that Labour would adversely affect those people through its new pensions tax plan?

Mr Gauke: My hon. Friend raises an important point. We often heard Labour Members say that they were going to oppose a tax cut for hedge funds. It turned out that it was not a tax cut for hedge funds but a tax cut that benefits pension funds, yet they want to reverse it.

Mark Lazarowicz (Edinburgh North and Leith) (Lab/Co-op): While the Minister is talking about cutting tax on pensions, will he spare a thought for the 4,000 members of the British Midland International pension scheme who lost considerable sums of pension entitlement when their airline was taken over? Lufthansa offered them substantial compensation, but Her Majesty’s Revenue and Customs is now insisting on taxing it. What is he doing about that?

Mr Gauke: I am grateful for the hon. Gentleman’s question and I have met a couple of hon. Members to discuss the issue. Her Majesty’s Revenue and Customs needs to apply the law as it currently stands, but that does not give it a great deal of discretion. This is a complicated matter and I am more than happy to set out details in writing for the hon. Gentleman.

Mark Menzies (Fylde) (Con): Given the significant number of pensioners in my Fylde constituency, may I welcome the sweeping reforms announced by the Chancellor earlier this year? What plans will be put in place to make sure that those pensioners who access their own money get sound advice?

Mr Gauke: As my hon. Friend will be aware, we have set out our plans for a guidance guarantee. My right hon. Friend the Chancellor has announced that we are working with Citizens Advice in particular to provide a face-to-face service. Good progress is being made, so that service will be available in good time for next April.

Topical Questions

T1. [905828] Mr Dennis Skinner (Bolsover) (Lab): If he will make a statement on his departmental responsibilities.

The Chancellor of the Exchequer (Mr George Osborne): The core purpose of the Treasury is to ensure the stability and prosperity of the economy.

Mr Skinner: How on earth can the Chancellor of the Exchequer justify a tax cut of £3 billion to those getting

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more than £150,000—like Nigel Farage—while at the same time cutting the wages of nurses and midwives? What a load of hypocrisy.

Mr Osborne: We have cut taxes for 25 million working people. In Bolsover, there are more people in work, fewer people unemployed and the claimant count is down by a third. It is the Conservative party that is the party of the working people now.

T4. [905831] Mr David Amess (Southend West) (Con): Does my right hon. Friend agree that the level of employment is a good economic indicator? If so, will he join me in congratulating Southend businesses on their outstanding apprenticeship schemes, which have helped a huge number of young people and reduced youth unemployment by 47%?

Mr Osborne: I certainly congratulate Southend businesses on the apprenticeship schemes they run. Apprenticeship schemes number 2 million in this Parliament and we aim to take that figure to 3 million in the next Parliament. That is all towards achieving our goal of full employment. We have the highest number of people in work, but we want to go further still.

Ed Balls (Morley and Outwood) (Lab/Co-op): The whole country was shocked to learn on the night the Prime Minister arrived at the European Council that the European Union is demanding from the UK a backpayment of a staggering £1.7 billion. The Prime Minister was unclear on this last week, so may I ask the Chancellor just how long before the Council meeting did he and his Ministers and officials learn that the UK was going to be asked to pay more, and why on earth did he not tell the Prime Minister?

Mr Osborne: First of all, may I say that it is very good to see the shadow Chancellor in his place? We had heard disturbing rumours that there was going to be a shadow Cabinet reshuffle. We waited nervously by the phones, but we are absolutely delighted that he is still in his place.

Let me answer the shadow Chancellor’s question directly. There was a meeting at the Commission on Friday 17 October. On Tuesday 21 October, Treasury officials prepared advice for me, and the Prime Minister was aware of the advice on Thursday 23 October. That is very similar to the timetable that the Dutch Government have set out.

Ed Balls: The revisions of the Office for National Statistics came months beforehand and the Financial Secretary knew weeks before. The Chancellor knew only two days before and he still forgot to tell the Prime Minister. Was he not just asleep on the job?

Let me ask the Chancellor another question about the way in which Europe is affecting the public finances. The Government promised to get net migration down to the tens of thousands. According to the latest figures, net migration is 243,000—up 38% on the previous year. Will the Chancellor confirm that his Budget forecast for net migration has been revised not down, but up? What is his assumption for net migration for the 2015 public finance forecasts?

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Mr Osborne: The reason there has been an increase in European migration is that the British economy is succeeding while the economies in Europe sadly are not. That is why we want to seek a different relationship with the European Union, to take into account that and other features of our relationship. I notice that the last Labour Chancellor now supports a referendum on Britain’s membership of the European Union, but the shadow Chancellor does not. The truth is this: we will set out our forecasts to the independent Office for Budget Responsibility, but the idea that Labour would get a better deal in Europe is total fantasy, alongside the shadow Chancellor’s fantasy that Labour left us with a golden economic legacy and that he has been right all along and everyone else is wrong. The right hon. Member for Lewes (Norman Baker) has resigned, so there is now a vacancy for a conspiracy theorist at the Home Office—the shadow Chancellor should apply.

T7. [905834] Andrew Jones (Harrogate and Knaresborough) (Con): Small businesses and retailers are the backbone of our economy. With small business rate relief, a relief for businesses re-occupying long-term empty properties and other discount schemes, this Government have shown their support for small business. Will my right hon. Friend go further and review the business rate system to ensure that it is fair and does not deter investment?

Mr Osborne: My hon. Friend makes a good point about the impact of business rates. That is of course why we have extended small business rate relief and helped 360,000 small properties. It is why we have offered the £1,000 high street discount to stores in Harrogate and elsewhere around the country. We are going to review the business rate system to make sure that it is simpler, fairer, more transparent and more responsive to economic circumstances, and he is very welcome to take part in that review.

T2. [905829] Gavin Shuker (Luton South) (Lab/Co-op): What is the link between the Chancellor’s £7 billion of unfunded tax cuts and his blocking of the OBR from auditing the tax and spend plans of other political parties ahead of the election? I suggest that the clue is in the question.

Mr Osborne: Interestingly, we conducted an independent review by one of the Canadian officials involved in auditing their finances—

Ed Balls: Oh, come on!

Mr Osborne: The right hon. Gentleman says “Come on”, but there were no independent forecasts when he was in the Treasury. He was the economic adviser who cooked up the forecasts, and came to the House and as a result misled this country about its economic fortunes. The OBR is working as an independent institution. The independent review of the OBR said that we should not

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extend its powers. We do not want the Labour party undermining the independent institution that has brought confidence back to public statistics.

T8. [905835] Margot James (Stourbridge) (Con): Last week, the Queen opened a new Jaguar Land Rover plant in Wolverhampton, which is creating 1,400 new jobs. The enterprise zone and the black country city deal are set to create nearly 10,000 more new jobs. Does my right hon. Friend agree that we could go even further in Birmingham and the black country if our local authorities followed the example set by those of the northern powerhouse?

Mr Osborne: The investment by Jaguar Land Rover is very welcome. I was at one of the Jaguar Land Rover plants in September, and saw the incredible investment that is going in there. The new engine plant in the black country is a huge and welcome investment in the west midlands. I take very seriously my hon. Friend’s suggestion that we should talk to authorities in the west midlands to see if we can build on what has been achieved in Greater Manchester. I would be very happy to start those discussions with civic leaders and local MPs.

T3. [905830] Heidi Alexander (Lewisham East) (Lab): Will the Chancellor confirm that the only way to reduce the £1.7 billion bill from the EU and avoid paying interest requires the UK to secure support from a qualified majority of EU members on rule changes and get a vote in the European Parliament on delaying the deadline for payment? How confident is he that he can achieve that?

Mr Osborne: We are operating under a tough set of rules. The rules were put in place in 2007.

T10. [905837] James Morris (Halesowen and Rowley Regis) (Con): There are now 1,217 fewer people claiming unemployment benefit in my constituency than in 2010. Does the Chancellor agree that we need to continue the job of reducing business taxes to incentivise business to create jobs, rather than to adopt the policy of slapping higher taxes on business, which will only have the effect of destroying jobs?

Mr Osborne: My hon. Friend is absolutely right. I have been lucky enough to visit successful manufacturing businesses in his constituency with him and, indeed, to see the investment that as a result we are able to make in new hospitals in the west midlands. He of course makes the very strong point that if you increase business taxes—that is the official policy of the Labour party—in such a competitive world, you will destroy jobs, reduce revenues and not be able to fund good public services.

T5. [905832] Bridget Phillipson (Houghton and Sunderland South) (Lab): Will the Chancellor, as the self-styled champion of the north, now look again at his early decisions and their impact, and will he commit to a fairer funding settlement for north-east councils?

Mr Osborne: The whole United Kingdom has had to make difficult decisions because we inherited a record budget deficit, but I am willing to work with councils

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in the north-east to see whether we can build on what we have achieved in Greater Manchester. There is real potential to do that and to make key investments in the infrastructure of the north-east. For example, I think there is a strong case for the A1 north of Newcastle to be dualled.

Richard Graham (Gloucester) (Con): This Government’s support for apprenticeships has hugely helped the 40% drop in youth unemployment in Gloucester. Will my right hon. Friend confirm that the Government will continue to look constructively at new and innovative vocational schemes in sectors where there are jobs available—such as HGV drivers, haulage companies, and electroplaters for the Poeton company—but a shortage of skills at the moment?

Mr Speaker: Order. I try to get in as many Members as possible, but I think some colleagues have forgotten—or perhaps never learned—that topical questions are supposed to be shorter. Please do not abuse the process because you are spoiling it for other people.

Mr Osborne: I know that my hon. Friend the Member for Gloucester (Richard Graham) has worked with local employers to improve skills, and I visited a successful apprenticeship and training scheme with him. We want to ensure that local employers are involved in shaping those apprenticeships and further education courses, and that is precisely what we are now setting up.

T6. [905833] Mr William Bain (Glasgow North East) (Lab): The Institute for Fiscal Studies has forecast that under the Chancellor’s current policies 900,000 more children will be in relative poverty by 2020 compared with 2011. Is his real attitude towards the working poor in this country too much stick and too little carrot?

The Chief Secretary to the Treasury (Danny Alexander): The hon. Gentleman raises an important point about child poverty, which under this Government is down. That does not in any way reduce the need for us to continue taking steps to reduce child poverty, the most important of which is having an economy that creates jobs. In the end, for most people the best route out of poverty is to get back into employment.

Guy Opperman (Hexham) (Con): May I urge the Chancellor to meet me and my hon. Friend the Member for Carlisle (John Stevenson) so that we can make the case for including the dualling of the A69 in the autumn statement? Hopefully such a meeting could be before the autumn statement takes place.

Mr George Osborne: My hon. Friends the Members for Hexham (Guy Opperman) and for Carlisle (John Stevenson) have made a strong case for improving transport links in the north of England and between the north-east and Carlisle. They have already brought the A69 to my attention, and I would be happy to have that meeting.

T9. [905836] Karl Turner (Kingston upon Hull East) (Lab): Given that the Chancellor is claiming to be the champion of the north, will he explain why he has

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given a £3 billion tax cut to people who earn £150,000 a year, while people in Hull are on average £1,600 a year worse off?

Mr Osborne: We have cut taxes, including taxes for people in the north of England, for 25 million working people. Under the Labour Government, the gap between the north and south increased. We are working across party divides with local authority leaders to get in the investment and change this decade-long imbalance in our country.

Greg Mulholland (Leeds North West) (LD): The last Labour Government cancelled the Supertram scheme in Leeds and then told the city that it could only have a bus-based solution. Does my right hon. Friend agree that as well as devo-max and “devo Manc”, we also need “devo Yorks”?

Danny Alexander: I could not agree more with my hon. Friend, and the Deputy Prime Minister has been championing that agenda in government for the last four and a half years. If the leaders of Leeds wish to come forward with proposals for further devolution and more power over the things he has been talking about, to ensure that we get the right economic developments in the Leeds area, we would be delighted to have those discussions in an active way, to try to settle a deal there as well.

Douglas Carswell (Clacton) (UKIP): The Chancellor has rightly said that Europe is in danger of pricing itself out of the world economy, and one way in which it is making itself uncompetitive is through its costly renewable energy agenda. Will he try to persuade his neighbour in Downing street to abandon that dogma and liberalise the UK energy market?

Mr George Osborne: The Prime Minister achieved a good deal for the United Kingdom, and got away from the solid and fixed renewables target that the Labour Government signed up to. If the hon. Gentleman wants Britain to leave the European Union, that will be achieved with a Conservative Government offering a referendum, and him having a vote and seeing what the outcome is. [Interruption.] Under the Conservative Government, the British people will get a referendum. We will make the argument for staying in a reformed Europe, and the hon. Gentleman can make the case he wants to make. That will not happen under a Labour Government.

Caroline Dinenage (Gosport) (Con): May I urge the Chancellor to support the Secretary of State for Business, Innovation and Skills in calls for banks not to shut the last branch in a town? HSBC is about to shut its last branch in Lee-on-Solent, leaving businesses with no banking support at all.

The Economic Secretary to the Treasury (Andrea Leadsom): My hon. Friend makes an important point. Many people are concerned about bank closures. I recently had a round table with a number of banks and challenger banks to discuss the issue, not least the change towards mobile and telephone banking. We are certainly looking closely at the matter.

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Barry Gardiner (Brent North) (Lab): Her Majesty’s Revenue and Customs figures released this month show that the amount of uncollected taxes has increased by £3 billion each year under the Chancellor. What difficulties has he found in collecting those taxes, and what does he propose to do about them?

The Financial Secretary to the Treasury (Mr David Gauke): I am not sure whether the hon. Gentleman was in the House when we debated that at some length a few minutes ago. The fact is that the tax gap for 2012-13 was

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lower as a percentage of tax receipts than in any year under the Labour Government. Tax yield from HMRC has gone up by £7 billion since 2010-11.

Several hon. Members rose—

Mr Speaker: Order. I am sorry to disappoint colleagues but, as they will know, at Treasury questions demand always massively outstrips supply. Whether the business managers want to extend the sessions or provide further sessions with the Chancellor’s concurrence, who knows? But we must now move on.

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London Borough of Tower Hamlets

12.36 pm

The Secretary of State for Communities and Local Government (Mr Eric Pickles): With permission Mr Speaker, I wish to make a statement about the London Borough of Tower Hamlets.

The Government have long been concerned about the worrying pattern of divisive community politics and alleged mismanagement of public money by the mayoral administration in Tower Hamlets. Following persuasive evidence presented to me making serious allegations in April, I commissioned PricewaterhouseCoopers to undertake a formal best value inspection report of the council. In my written statement this morning, I published the PwC report. It paints a deeply concerning picture of obfuscation, denial, secrecy, the breakdown of democratic scrutiny and accountability, and a culture of cronyism risking the corrupt spending of public funds.

Let me outline some of the conclusions. PwC found that the mayoral administration’s grants programme handed out taxpayers’ money with no apparent rationale for the grant awards. There were no objectives, and there was no fair or transparent approach to grants, which the council’s so-called corporate grants programme board was supposed to ensure. There was no proper monitoring. Grants were systematically made without transparency. Officer evaluation was overruled—across mainstream grants, 81% of all officer recommendations were rejected. More than £400,000 was given to bodies that failed the minimum criteria to be awarded anything at all.

On land disposal, properties were sold to third parties without proper process. Poplar town hall was sold to a company involving a person who had helped the mayor in his election campaign, against internal advice, and the winning bid was submitted after other bids had been opened. A number of other property transactions similarly had dubious processes.

Taxpayers’ money was spent on unlawful political advertising for the mayor. Ofcom ruled that the spending was in breach of the Communications Act 2003 and the code of broadcast advertising. There was a lack of any documentation or monitoring of the use of media advisers, so taxpayers’ money could be improperly and unlawfully used to pay for the mayor’s political activities.

Irregular practice took place in the awarding of contracts. For example, PwC identified cases in which one of the council’s officers recalls that, during a meeting, the mayor allegedly annotated a list of suppliers to indicate which suppliers he did not wish to be selected. As a whole, PwC concluded that the council had failed in numerous aspects to comply with the best value duty.

The council’s core governance arrangements have centred on the three statutory officers: the head of paid service, the chief financial officer, and the monitoring officer. The council has failed to make permanent appointments to those key positions. Currently, all three posts are held by interim appointments. PwC concludes that the governance arrangements do not appear capable of preventing or responding to the succession of failures by the mayoral administration. Executive power is unchecked and executive power has been misused.

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The PwC report is not the only evidence of where the council is seriously failing on high profile activities that are open to abuse by, for example, political interference. Concerns have been raised about the ability of the senior officers responsible—the electoral registration officer and the returning officer—to ensure the proper administration of elections. The current election petition on the May 2014 European and mayoral elections is now sub judice. I will make no comment on anything before the election court, but I note that on 1 July the Electoral Commission published a report on the elections in Tower Hamlets. The commission concluded that there are significant lessons for the returning officer appointed by the council. Immediate and sustained action must be taken to provide assurance that future elections and electoral registration will be well managed and efficiently and effectively delivered. Free and fair elections must be the bedrock of local democracy.

There is a clear picture that there has been a fundamental breakdown of governance in this mayoral administration. If unchecked, it will allow improper conduct to run rife, further undermining public confidence in the council, damaging community cohesion, and, ultimately, putting public services across the borough at risk. The consequence of this conclusion, expressed in formal terms, is that I am satisfied that the council is failing to comply with its best value duty. I will therefore need to consider exercising my powers of intervention to secure compliance with the duty. To that end, in line with procedures laid down in the Local Government Act 1999, I am today writing to the council to ask it to make representations, if it wishes, both on the PwC report and on the intervention package I am proposing.

The proposed package will need to do three things: first, it will need to put an end to all council activities that are not compatible with its best value duty; secondly, it will need to remove, so far as possible, the risk of further failures to comply with the duty; thirdly, it will need to rebuild the governance and financial management capacity of the council to secure its future compliance with the best value duty. My proposed intervention is centred on putting in place a team of three commissioners whom I will appoint and who will be accountable to me. Their role will be to oversee or, as appropriate, exercise certain functions of the council. I envisage that the commissioners will be in place until 31 March 2017. It will be open to Ministers to review this in the light of the progress made by the council to secure compliance with its best value duty.

To help me assess progress, I propose that within three months of launching the intervention the council will, with the commissioners, draw up and agree an action plan to secure the council’s future compliance with the best value duty. The commissioners will report to me at six-monthly intervals on progress being made. The action plan must reflect the specific intervention measures in the proposed package, which are as follows.

First, I propose to direct the council as a matter of urgency to undertake, as the commissioners may direct to their satisfaction, a recruitment exercise to make permanent appointments to the positions of the three statutory officers, all currently only interim appointments. I also propose to direct that any subsequent dismissal, suspension or further appointment of statutory officers must be with the agreement of the commissioners.

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Secondly, I propose to direct that the council’s functions on grant making are to be exercised by the commissioners. The council must provide the commissioners with all the assistance they need. The commissioners will have regard to any views the council has on individual grants.

Thirdly, I propose to direct that the council obtains the prior written agreement of the commissioners before entering into any commitment to dispose of, or otherwise transfer to third parties, property other than individual housing.

Fourthly, I propose to direct that the council prepares a fully costed plan for how its publicity functions can be properly exercised. It must agree that plan with the commissioners, report to the commissioners on the delivery of that plan and adopt any recommendation of the commissioners with respect to that plan or to publicity more generally.

Fifthly, I propose to direct that the council’s functions of appointing an electoral registration officer and a returning officer for elections are to be exercised as a matter of urgency by the commissioners.

Sixthly, I propose to direct the council to prepare with the commissioners a plan for addressing the weaknesses on contracting identified in the PwC report. It must seek the written agreement of the commissioners before entering into any contract or service agreement contrary to any recommendation of the statutory officers.

Finally, I am seeking two written undertakings from the council: first, that it will not, without my approval, enter into any agreement or modify any existing agreement for the making of grants, pending any decision on any proposed intervention package; and, secondly, that the council will not appoint or designate any statutory officer without my prior approval, pending any decisions on any proposed intervention package.

If I receive no satisfactory undertaking within 24 hours, I will use the urgency powers I have under statute. I can direct the council not to take any action on the making of grants or appointing of statutory officers without my approval in this interim period. I am also asking the council to provide information about any property transactions it has in the pipeline. Depending on what, if any, information I receive, I may need to use my urgency powers of direction to safeguard the council and its resources.

The council now has 14 days to make representations to me on the PwC report and on my proposed intervention package. I shall then consider carefully any representations the council makes and decide how to proceed. If I decide to intervene along these lines, I will then make the necessary statutory directions under the 1999 Act and appoint the commissioners. Any directions I make will be without prejudice to my making further directions, should it prove necessary. I will update the House on any conclusions in due course.

The report has cost just under £1 million, which will be borne by the council. It would have been much cheaper, had the mayoral administration not been so obstructive. But to place this spending in context, the financial irregularities identified relate to a £1.4 billion a year council budget. There is significant scope for taxpayers’ money to be protected and saved from these interventions. This is a rare occasion where central Government intervention is required.

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The commissioners I sent into Doncaster in 2010 show that such a targeted approach can turn around a dysfunctional mayoral administration. This thorough scrutiny by independent auditors shows we now have a stronger audit regime following the abolition of the Audit Commission, which did nothing to stop corrupt practices emerging.

Localism requires local accountability and local democracy. Municipal corruption undermines the local checks and balances that are vital in a democracy and essential in mayoral systems with their concentration of power. We cannot risk such corruption elsewhere, but it is not just about the money. The abuse of taxpayers’ money and the culture of cronyism reflects a partisan community politics that seeks to trade favours and spread division on the rates. Such behaviour is to the detriment of integration and community cohesion in Tower Hamlets and in our capital city.

This is a borough where there have been widespread allegations of extremism, homophobia and anti-Semitism that have been allowed to fester without proper challenge. Certainly, Tower Hamlets has challenges given its level of deprivation and its diverse population, but one has only to look across the border at the mayoral system in Newham to see that there is an alternative. Councils should be championing a common sense of identity and Britishness—across class, colour and creed.

In all of this, it is the residents of Tower Hamlets who are being let down, whose services are being put at risk, whose taxpayers’ money is being wasted and whose home borough is being criticised rather than being cited with municipal pride.

Despite rare cases such as that of Tower Hamlets, councils as a whole have a good record of transparency, probity and accountability, and that is a reputation worth protecting. As a former councillor, I am proud of the standing that local government has in the United Kingdom, and of what it contributes to the lives of our communities up and down the country. I will take whatever steps are necessary to uphold the good name of local government, because there can be no place for rotten boroughs in 21st-century Britain.

12.50 pm

Hilary Benn (Leeds Central) (Lab): I am grateful to the Secretary of State for allowing me to have advance sight of his statement. Given that he had received serious allegations about Tower Hamlets earlier this year, and given the material that had been submitted to the Department, it was clearly right for him to exercise the powers granted to him under the Local Government Act 1999 to appoint PricewaterhouseCoopers to conduct an inspection of the authority’s compliance with its best-value duty. As I said at the time, that audit had to be full, open and transparent if it was to command public confidence. The publication of PwC’s report today has fulfilled the requirements for openness and transparency, and it has certainly done a comprehensive job, which may well explain why the process has taken slightly longer than I think both sides had originally hoped.

The findings of the report are indeed very troubling. There was a lack of transparency in regard to the giving of grants, the governance of grant awards was not effective, and grants were given to organisations that

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had been ruled ineligible or did not meet the required evaluation score. As for property transactions, in three of the four cases that were investigated—those of Poplar town hall, Sutton street depot and Mellish street—the inspection concluded that

“the Authority failed to comply with its best value duty.”

In the case of Poplar town hall,

“The Authority accepted a late bid from the winning bidder after other bids had been opened, creating a risk of bid manipulation”,

and the authority did not, in fact, select the highest bidder.

In relation to publicity and the use of media advisers, the report refers to a finding by Ofcom that a broadcast constituted political advertising, and states that

“the clear implication is that Authority monies were spent inappropriately on what amounted to political advertising for the benefit of the Mayor…This in itself constitutes a failure to comply with the best value duty in this instance."

The overall conclusion of the inspection is that the current governance arrangements do not appear to be capable of preventing, or responding appropriately to, the failures identified. The fact that the council is still without permanent appointments to its three most important statutory officer posts should also be a matter of great concern to the House. In the light of what has been found, we support the course of action announced by the Secretary of State, although we must recognise that it is a very serious step to take. It is important for the considerable powers with which the Secretary of State has been entrusted to be used not lightly or because of a political disagreement with decisions made by a local authority, but because that local authority has failed in its statutory duties.

When does the Secretary of State propose to announce the names of the three commissioners, and what background and experience will he be looking for in appointing them? Does he intend to consult anyone in making the appointments? Will the commissioners be paid, and, if so, who will bear the cost? The Secretary of State said that he envisaged that the commissioners would be in place until March 2017. Will the length of their term of office depend on the progress that they and the council make, together with the mayor, in dealing with the problems that have been identified? What progress reports will the Secretary of State, and the House, receive? What relationship will the commissioners have with the elected councillors in Tower Hamlets, and what role does he envisage for wider local government in the provision of support for Tower Hamlets, as happened in the case of Doncaster?

At the time of the Secretary of State’s original decision to send in the auditors, he told the House that a file had also been passed to the Metropolitan police for their consideration. The police subsequently announced that they had found

“no credible evidence of criminality”.

Does the Secretary of State believe that the PwC report contains any further information that might warrant its being referred to the police, or is that aspect of the allegations now closed?

In respect of publicity, the inspection report says that a

“significant proportion of the budget is allocated to the”

—weekly—

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“publication of ‘East End Life’”,

which seems to be little more than a vehicle for promotion of the mayor. The Secretary of State knows of my concern about that particular publication. Will he tell us when he intends to make a final decision about “East End Life”?

There are, of course, other legal processes under way relating to Tower Hamlets, and it is right for us not to discuss them here. I will say, however, that given the concerns that have been expressed about the conduct of elections, we also support the Secretary of State’s decision to ask the commissioners to take responsibility for the appointment of an electoral registration officer and a returning officer for future elections.

Local authorities have important powers and duties, which they exercise on behalf of the people whom they represent. They should be free to do that independently, in the way that they see fit. However, with those powers come responsibilities, and, in particular, the responsibility to ensure that all decisions are made on an open, fair and transparent basis. The people of Tower Hamlets are proud to live alongside each other in a community that reflects the face of modern Britain, which is why there can be no place for the politics of division in Tower Hamlets or elsewhere, whatever its motivation. It is the job of every locally elected representative to care for the interests of all his or her constituents.

It seems clear from the report with which we have been presented today that those standards have not been upheld in a number of instances in the case of Tower Hamlets and its mayor. Just as, in April, Tower Hamlets welcomed the opportunity to demonstrate that council processes had been run appropriately—which, as we have learnt today, was not the case—it should now accept the findings of this report, and work with the commissioners to ensure that what has gone wrong is put right.

Mr Pickles: I agree with the right hon. Gentleman’s assessment. In particular, I agree with his view that in a diverse and vibrant community, a community to be proud of, it is the job and the responsibility of councillors and the mayor to ensure that no one feels out of place and everyone feels welcome.

The right hon. Gentleman asked me a number of questions, of which I hope I have made a reasonable note. He asked me for the names of the commissioners. I hope that he will forgive me: I have not yet made a decision. He asked whether I would want to consult and discuss matters once I had made a decision; well, of course I will. He asked about pay. The council will pay expenses and a reasonable fee. He asked about progress reports. As I said in my statement, we will expect such reports every six months, and, as in the case of Doncaster, we will of course share that information with the House.

I noted the right hon. Gentleman’s special pleading in respect of “East End Life”, which, perhaps, represents an exception to his usual views. We will listen to representations and make an announcement in due course, but that will be entirely separate from the process that I have described.

The right hon. Gentleman referred to criminal activities. I recall what the police said about the subject. I also recall their subsequent statement that they were continuing to look at the issues. I have no idea whether the report

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contains allegations of criminality, although we will of course send a copy to the police for their information. However, I have here a statement from the mayor of Tower Hamlets which relates directly to the right hon. Gentleman’s point. He said that I had announced that I was “concerned about potential fraud” and that

“the Evening Standard ran these claims on its front page” .

He added:

“These allegations have been rejected by PwC.

The report highlights flaws in processes. These are regrettable. We will learn from this report and strengthen our procedures accordingly.”

I am afraid to say that it seems to me that the mayor’s test is, “If you’re not actually caught with your fingers in the till, you’re innocent.” There are serious flaws in what has occurred. If I was the mayor of Tower Hamlets, I would be hanging my head in shame, because what he has allowed to occur in Tower Hamlets is shameful—not that I have made a final decision.

Mr Brian Binley (Northampton South) (Con): Forty years ago our electoral systems and controls were the envy of the world. They have deteriorated dramatically in the past 15 years and this report highlights that fact. This is not only a question for Tower Hamlets, but it features largely in Tower Hamlets. Will the Minister speak to the Electoral Commission to see whether we can have a proper review of electoral systems to ensure this sort of thing does not happen again in areas right across our country?

Mr Pickles: I am sure the Electoral Commission regularly reviews procedures, but my hon. Friend says things have deteriorated in the past few years, and he is of course right. Our rules and regulations with regard both to electoral law and to local government conduct assume people will behave reasonably—and the truth is that in the overwhelming majority of local authorities around the country people obey not only the law, but the spirit of the law—which makes it very difficult when we are dealing with an authority that has a cavalier disregard for good practice and probity. I will certainly ensure that the Electoral Commission is made aware of my hon. Friend’s very wise words.

Rushanara Ali (Bethnal Green and Bow) (Lab): Every community in our country is entitled to the highest standards of probity and honesty in our democracy, and no community should put up with lower standards and poor governance and transparency, so I welcome the sentiments expressed by the Secretary of State and the shadow Secretary of State. In particular, I welcome the Secretary of State’s commitment to appointing an electoral registration officer and returning officer. For too long the Electoral Commission has relayed concerns about public confidence in the electoral process, and it is vital that we give people confidence that the forthcoming elections will be free and fair. Can the Secretary of State say when those officers will be appointed, as this is, as he says, a matter of great urgency?

Mr Pickles: Clearly I will want to listen to what the council has to say to my suggestion, and we have given it two weeks to respond. Assuming—although I make

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no assumption—that I am not satisfied with its response, it will be a high priority for the appointed commissioners, should I decide to appoint them, to get those two people in place. Given that a general election and London elections are coming up, people need to feel confident in the system.

I did not reply to an earlier question so, with your indulgence, Mr Speaker, I would like to do so now: will we be looking to get a package of care together, as we did in Doncaster with the Local Government Association? Yes, of course we will.

Mike Freer (Finchley and Golders Green) (Con): I thank my right hon. Friend for his statement, but where taxpayers have been deliberately short-changed will he reconsider reintroducing surcharging?

Mr Pickles: I have no intention of reintroducing those measures in the lifetime of this Parliament. What is most important for us is to get a strong sense of corporate identity for Tower Hamlets and some transparency, so when people are overriding the sensible decisions made, they understand that it will be given the full glare of publicity.

Jim Fitzpatrick (Poplar and Limehouse) (Lab): Tower Hamlets is a great borough, whose reputation is being destroyed by independent mayor Lutfur Rahman and his Tower Hamlets First party. The mayor tries to present himself as a victim but, from reading the report, it seems that he and his senior colleagues are either in denial—they are the only people who do not know what is going on in Tower Hamlets—or they are lying to PricewaterhouseCoopers. Maybe the Secretary of State could indicate which he thinks is the case. Can he reassure us that the commissioners, if and when appointed, will meet the leaders of the Conservative and Labour groups on the council as a matter of urgency, and may I ask him to reconsider his decision to charge the taxpayers of Tower Hamlets the full sum of £1 million? Given the profile of Tower Hamlets—the poverty of the borough, notwithstanding the new business district, with Canary Wharf—charging Tower Hamlets taxpayers the £1 million seems unfair, especially as they are being victimised by Lutfur Rahman more than anyone else.

Mr Pickles: On the latter point, I entirely agree with the hon. Gentleman, but the method of charging is laid down in the legislation, and it needs to be emphasised strongly that the amount PricewaterhouseCoopers charged would have been considerably less had the mayor decided to co-operate and not to obfuscate and delay. The only reason I did not make this statement in July is the delays by that administration. If the mayor would like to make a substantial contribution out of his own pocket to the report, that would seem to me to be a sensible thing to do.

Robert Neill (Bromley and Chislehurst) (Con): My right hon. Friend will know that I recognise from personal experience that intervention of this kind is very seldom used and its significance is not to be understated, but will he accept from me, from the experience of when we worked together in Doncaster, that this is utterly justified in this case, and that cumulatively this well-balanced report from PricewaterhouseCoopers indicates an overall political culture that is worse than that discovered in the

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Doncaster case and that justifies the high level of intervention? Will he pay particular attention to the need to have strong commissioners with experience in electoral and administrative processes, because the lack of objectivity of former monitoring officers has been the subject of comment in the House before, and in Tower Hamlets opposition members, both Labour and Conservative, have in the past not had the protection from the statutory officers that they were entitled to when subject to personal—in the case of my friend Councillor Peter Golds, deliberate homophobic—abuse from supporters of the mayor? That cannot be accepted in a civilised country.

Mr Pickles: My hon. Friend was a very distinguished Minister in my Department, and he will know how long I agonised over the decision on Doncaster, because this kind of intervention goes against everything I believe in. I believe that local government is an independent entity and that is one of the strengths of our constitution, but there comes a point at which we need to ensure transparency, fairness and accountability, and it is certainly my hope that one of the commissioners will have extensive experience of practical election law and procedure, as that will strengthen that. It is also certainly my intention that Tower Hamlets will come out of this process much stronger.

Mr Clive Betts (Sheffield South East) (Lab): I welcome the actions and proposed actions of the Secretary of State and his comments about the general good conduct of local government and local councillors throughout the country. He referred to audit arrangements. There have been some changes, but there is nothing in them that means that throughout this period the auditor in Tower Hamlets did not have the ability and powers properly to audit these accounts. However, in December 2012 the overview and scrutiny committee, despite being quite weak in many respects, highlighted concerns about the grant process and asked for a referral to the district auditor. Despite that, the external auditor, KPMG, signed off these accounts without qualification for 2012-13, as it did for 2011-12. Are there not serious questions to be asked about the role of the external auditors in this regard and about their value for money, or lack of it, in carrying out this work?

Mr Pickles: I was probably unkind to the Audit Commission in many respects, but it did stand around doing nothing on this, as, indeed, it did on Doncaster—which required the LGA to act in Doncaster. The existing auditors have to answer for their own conduct, but I will say that I do not think this was their finest hour.

Eric Ollerenshaw (Lancaster and Fleetwood) (Con): There are some good councillors in Tower Hamlets representing the major parties and, as other hon. Members have said, they have been raising these issues for a number of years. Will the Secretary of State ensure that the commissioners have the powers to ensure that the statutory council meetings and the scrutiny meetings of the committees are carried out properly, so that those councillors who have a proper democratic mandate can finally be heard?

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Mr Pickles: I need to emphasise, and not just for form’s sake, that I am waiting to hear from Tower Hamlets in response to my report, but should I decide to appoint commissioners, one of their prime responsibilities would be to ensure that there was a robust system of transparency, scrutiny and accountability. The reason that I want to do that is that that is exactly what happens in just about every council up and down the land. That is normality, and no one ever really questions it. Sometimes, when I talk to other Government Departments about introducing new things for local government, people suggest nailing them down and making them a statutory duty, but the truth is that we probably do not need to do that. This is how local government operates, and how it has always operated. It puts its citizens first, so when we have one council that disregards that principle, it makes the system much more difficult to operate.

Mr Nick Raynsford (Greenwich and Woolwich) (Lab): I, too, welcome the Secretary of State’s statement, and I entirely support the actions that he has outlined. It is absolutely right that there should be effective intervention in the exceptional cases in which individual local authorities have manifestly failed. I was involved in a similar action some years ago in Hackney, which I am pleased to say led to significant improvements. Hackney is now a very different authority from what it was. One of the lessons from that is that intervention to root out problems should also involve trying to build on the strengths of the authority and of the elected members who want to transform the area. Will he tell us what more will be done to encourage the elected representatives of Tower Hamlets who want to transform that area for the better to work with the commissioners to achieve a lasting improvement in the service?

Mr Pickles: I might be doing the right hon. Gentleman a disservice, but I think he was the architect of the powers that I am currently using, so I shall be freshly polishing the substantial bust of him that sits in my office. He is right to refer to experience. In Doncaster, we used the Local Government Association and peer-to-peer monitoring, and we got alongside the councillors. It was not just the mayor that we were trying to bolster up; it was the councillors as well. We took cognisance of the fact that we needed to bring out the best. Not everything is wrong in Tower Hamlets, as the hon. Members for Poplar and Limehouse (Jim Fitzpatrick) and for Bethnal Green and Bow (Rushanara Ali) have said. It is a wonderful, vibrant place, but frankly it deserves better leadership.

Mr Speaker: I will leave open the question of whether a bust of the right hon. Member for Greenwich and Woolwich (Mr Raynsford) is any more or less substantial than any bust of the Secretary of State.

Paul Uppal (Wolverhampton South West) (Con): I thank my right hon. Friend for his statement, and I want to revisit a comment that has been made by colleagues on both sides of the House. It appears that the rot started to set in as a result of electoral fraud at the very beginning, and that that was the first step. Many people from a south Asian community background feel that it is unfortunate that this spotlight has been shone on the community. I hope that, for the sake of

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community cohesion, the proposed action can be a stepping stone towards ensuring that we have a full, robust and fair electoral system. Many migrants come to these shores to escape electoral fraud and dishonesty in the countries they came from.

Mr Pickles: I agree that electoral probity, honesty and transparency are hallmarks of our democracy. No one, on being elected—or failing to be elected—should have to wonder whether that was the electorate’s decision or a result of the system. With regard to your last remark, Mr Speaker, may I respectfully suggest that it is just a matter of scale?

Mr Speaker: We cannot explore this issue at length, but in terms of being intellectually substantial, the right hon. Member for Greenwich and Woolwich and the Secretary of State both score very highly.

Luciana Berger (Liverpool, Wavertree) (Lab/Co-op): Members on both sides of the House will be shocked by many elements of the report. Knowing how rigorous the process relating to securing grants is in Liverpool, I think many people will be appalled to learn that £407,700 was given to bodies in Tower Hamlets that failed to meet the minimum criteria for being awarded anything at all. What efforts will the Secretary of State’s Department be making to recover that money?

Mr Pickles: We will certainly look into that possibility. It is the council and the people of Tower Hamlets who have not received the appropriate sums. In the early part of the report, there is a map that shows how the grants have been allocated in a quite arbitrary way, concentrating them on just one area. The fact that more than £400,000 was simply handed out, as though by some mediaeval monarch, with no thought or consideration goes to the heart of the matter. Public money is precious and it should be accounted for. No one should receive public money without proper scrutiny. I refer the hon. Lady to the map on page 23 of the report, which shows the way in which the money has been distributed. It is an absolute disgrace.

Mr Speaker: We are all deeply grateful to the Secretary of State. I hope that everyone saw the map that he took the trouble to show to the House. Inspections can no doubt take place afterwards as well.

John Stevenson (Carlisle) (Con): Notwithstanding what has been going on in Tower Hamlets, does my right hon. Friend agree that elected mayors can provide a positive and effective form of leadership in local government?

Mr Pickles: Of course elected mayors can provide an effective form of leadership, but given their enormous power, they have an even greater obligation to ensure that there is proper scrutiny of their decisions and that the public have an opportunity to be assured that those decisions are made fairly and reasonably.

Meg Hillier (Hackney South and Shoreditch) (Lab/Co-op): I need to declare that my husband works for the Leadership Centre for Local Government. I welcome the Secretary of State’s statement and, in particular, his comments about good mayors. In Hackney, the mayor has done an incredible job of leading Hackney towards

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becoming one of the best local authorities in the country. I believe that the mayor of Tower Hamlets should resign on the back of this report. Will the Secretary of State comment on that? Will he also, for clarity, outline to the House what the citizens of Tower Hamlets could do to abandon the mayoral model if they chose to do so?

Mr Pickles: The most important thing is for us to get into a position in which the residents of Tower Hamlets can feel confident in the mayoral system and in the functioning of their local government, which is now at best dysfunctional and at worst riddled with cronyism and corruption. I am not entirely sure that it would be appropriate for us to consider a big constitutional change. This is not about something being wrong with the system; it is about something being fundamentally wrong with the way in which the system has operated and with the people that are chosen. Should the mayor decide to resign at this point—I have no belief that he will—can I say that he would not be missed?

Mr Stewart Jackson (Peterborough) (Con): I speak as a vice-president of the Local Government Association and I was a London borough councillor for eight years. I have seldom seen such an appalling indictment of local governance. It is appropriate that we should put on record our thanks and pay tribute to those brave civic leaders such as Councillor Peter Golds who blew the whistle, and to journalists such as Ted Jeory and Andrew Gilligan who, in the best journalistic tradition, have fought a lonely battle to reveal the crooked and rotten regime in Tower Hamlets. May I point out to my right hon. Friend that that regime came about following an election? As my hon. Friend the Member for Northampton South (Mr Binley) said, we need to revisit the election arrangements in Tower Hamlets, focusing on postal votes, personation, polling place identification and, particularly, voter intimidation at polling places. This is imperative, not just in Tower Hamlets but across the country.

Mr Pickles: My hon. Friend has a justified reputation for being knowledgeable about matters relating to elections, and if I have a particular problem in this area, he is the first person I seek out. He outlines the task that awaits the returning officer and the electoral registration officer in Tower Hamlets. I hope that robust schemes are put in to support those two officers, be that through commissioners or through the council, should I decide not to act.

Andrew Gwynne (Denton and Reddish) (Lab): I thank the Secretary of State and his shadow, my right hon. Friend the Member for Leeds Central (Hilary Benn), for defending the best traditions of local government in England from the Dispatch Box today. Given that this week we have seen a further roll-out of the mayoral model, particularly in Greater Manchester, perhaps now is the time for the Secretary of State to define more closely the roles, responsibilities and expectations of an elected mayor and to uphold the independence of the local civil service in law.

Mr Pickles: I am not sure whether it will be necessary to uphold the local officials, some of whose rights are enshrined in law. I refer the hon. Gentleman to the point I made earlier to the right hon. Member for

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Greenwich and Woolwich (Mr Raynsford), which is that for the most part local government operates under this system and we do not need to regulate it too closely because everyone operates, and has always done so, for the benefit of the public. The difficulty comes when a council disregards the norm, the rules and the normal give and take that occurs in local authorities. I am not entirely persuaded that we should legislate for all local authorities because one has behaved badly, but I am persuaded that whatever system we operate, be it a cabinet, committee or mayoral system—I do welcome the variety—it must conform to probity, transparency and accountability under the law.

Sir Richard Shepherd (Aldridge-Brownhills) (Con): Words such as “crooked” and “corrupt” have been used across the Floor of the House in response to the issues before us, yet the police have no reason for action. I just do not understand how one can reconcile corruption as laid out in the forms that my right hon. Friend has pointed out and there being no criminal implications whatsoever. What can be the answer?

Mr Pickles: That of course is a matter for the police—it is not a matter for me—but let me quote from the PwC report about the sale of Poplar town hall: It said:

“The Authority accepted a late bid from the winning bidder after other bids had been opened, creating a risk of bid manipulation…While the difference was small, the Authority did not in fact select the highest bidder, in spite of the external adviser’s recommendation to do so….The winning bidder was, as a matter of fact, connected to a person with other business interests that had an association with the Mayor.”

Would a well-run, accountable, transparent council act like that? I suggest that it would not.

Stephen Pound (Ealing North) (Lab): This report may not be welcome but it is certainly timely, and in its comprehensive nature it correctly identifies the mayor’s parlour as the most likely source of the foul, fetid, reeking stench that has been a blight on a wonderful part of our city. I appreciate that the Secretary of State does not wish to rewrite the handbook of local government, but one problem in Tower Hamlets is the conflation of the roles of executive mayor and chief executive officer, with officers of the local government civil service reporting directly to this joint body. Will the Secretary of State at least consider, as we expand the role of the mayoralty, a system that would avoid that sort of contradiction and that sort of conflation occurring in future?

Mr Pickles: The conflation is made worse by the fact that the head of paid services is an interim appointment. An interim appointee does not have the same authority as someone who has their feet well and truly under the table, which is why, should we decide to use commissioners, it would be a priority to get a person in place who cannot be removed without their permission. The hon. Gentleman will have heard that, should I decide to act, we are setting up a framework whereby things come into being if the principal officer’s advice is ignored. That is where things are important.

Charlie Elphicke (Dover) (Con): Some 20 years ago, I was elected to Lambeth council on a mandate to fight corruption. In that struggle, I found that it is a many-headed hydra and that these cultures are long in the making.

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Mayor Rahman has been running Tower Hamlets since 2008. Is it not right that there should be accounting as to how long this has been going on and how widespread the problem is?

Mr Pickles: One certainly wants to root out corruption, no matter where it took place and how long ago—that is fundamentally important. But the priority, should I decide to act, is to give the people of Tower Hamlets the opportunity to make a proper informed decision about their council and the mayor whereby, first, their votes would count, secondly, their voices will be heard and, thirdly, fairness will be there.

Andrew Bridgen (North West Leicestershire) (Con): Does the Secretary of State agree that the misuse of public funds and any hint of corruption or fraud in public office brings the whole of our political system into disrepute and risks undermining public confidence in our democracy, and therefore any such incidents should always be vigorously investigated and the individuals responsible held fully to account?

Mr Pickles: I entirely agree with that. Many of us will have experienced people on the doorstep saying, “All politicians are on the take. They are all on the make. They are all out for themselves.” Many of us in this Chamber can think of our local councillors, people we have seen in politics for years, and realise that the overwhelming majority are people who simply want to put something back into their local community, to do civic service and to contribute to the value of life. The thing about what has happened in Tower Hamlets is that it besmirches even the most benign, hardest-working councillor, in even the remotest part of this country. That is why I will consider acting.

Mr Philip Hollobone (Kettering) (Con): I refer the House to my entry in the register as a member of Kettering borough council. Is not one of themes common to what happened in Doncaster, Rotherham and Tower Hamlets the importance, but sometimes the ineffectiveness, of local government scrutiny by councillors in their own authority? What can be done to strengthen the power of scrutiny committees, and raise the profile and esteem of scrutiny work? Instead of councillors always wanting to be in the administration, they should increasingly want to be in the scrutiny side of things, to hold mayors and chairmen of committees to account for making decisions about very large sums?

Mr Speaker: We could learn from the hon. Gentleman’s parliamentary example.

Mr Pickles: Not for the first time, Mr Speaker, you take the words out of my mouth. My hon. Friend is a member of a very well-run council and he expresses some wise views. I would be interested in hearing his views, and those of any right hon. or hon. Member, as to how we might strengthen scrutiny in local authorities. Given that we have had a while to bed it down, there probably is a time for a re-examination.

Mr Betts indicated assent.

Mr Pickles: I see the Chair of the Select Committee nodding wisely.

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Abortion (Sex-Selection)

Motion for leave to bring in a Bill (Standing Order No. 23)

1.28 pm

Fiona Bruce (Congleton) (Con): I beg to move,

That leave be given to bring in a Bill to clarify the law relating to abortion on the basis of sex-selection; and for connected purposes.

Sex-selective abortions are happening in the UK, and there is widespread confusion over the law, which is why this Bill is needed. The Bill is extremely straightforward, merely clarifying that nothing in section 1 of the Abortion Act 1967 allows a pregnancy to be terminated on the grounds of the sex of the unborn child. It is a shame that this clarification is needed. Successive Health Ministers and even the Prime Minister have been very clear on the matter. They state that abortion for reasons of gender alone is illegal. The Prime Minister has described the practice as “simply appalling”. But these Ministers are being ignored. The British Pregnancy Advisory Service, which performs around 60,000 abortions a year, flatly disagrees with them. Even today, it is advising women, in one of its leaflets and on its website, that abortion for reasons of foetal sex is not illegal, because the law is “silent on the matter”.

The British Medical Association holds yet another interpretation. It argues that there may be cases where having a child of a particular gender may be

“a legal and ethical justification for an abortion”

on the grounds that the sex of the child may severely affect the pregnant woman’s mental health. I wish to address that point. Some say that the sex of the unborn child can be a legitimate ground for an abortion where a woman is being threatened with abuse if she carries the baby to term. Those who make that argument perhaps fail to realise that, in such tragic cases, it is not the sex of the child that is the ground for the abortion but the threat of abuse, which may constitute a physical or mental risk. I find it deplorable that anyone would be satisfied to provide a sex-selective abortion to a woman who, after she has had it, is then sent back to an abusive partner. What needs to be addressed in those dire circumstances is the abuse itself. Those women need help, and that is one aim of the Bill.

The BMA represents every doctor who permits or performs an abortion and BPAS is the UK’s biggest abortion provider. We cannot sit idly by as it contradicts Ministers over a practice that the Government state is illegal. Urgent clarification from this House is needed.

The main motivation for the Bill, which is more than merely a desire to achieve a consistent policy line on this issue, is that we know that sex-selective abortions are happening in the UK and little is being done to stop them. We know that because a growing number of courageous women are speaking out about their experiences. Here is the story of Rupinder, which is not her real name, told by Jeena International, which works with UK women who have sex-selective abortions.

“Rupinder decided to abort her third child as she was expecting a girl. She was the eldest of six girls and she recalls that each time her mother went to hospital how disappointed everyone was when each time it was a girl. This experience traumatised and consumed her so much that the thought of giving birth to a girl meant disappointment, betrayal and lowered status within the

4 Nov 2014 : Column 678

family and the community. Rupinder made a painful decision to abort which she now regrets as she felt that she had no other choice.”

Then there is the experience of Uraj—also not her real name—which might help to persuade those who doubt that son-preference is a problem in this country.

“During a routine ultra-sound scan Uraj’s husband asked what the sex of the baby was and was told a girl. During the drive home, there was pin drop silence in the car. When they arrived home, Uraj started to prepare the evening meal in the kitchen, trying to silence her daughter at the same time as she was crying. She knew her husband was not happy and was angry that she was expecting another girl. She remembers him repeatedly punching and kicking her in the stomach and passing out. When she regained consciousness her husband had walked out and he sent her divorce papers a couple of months later.”

Despite the existence of such stories, there are still those who claim that there is no evidence for the practice. In response to these critics, Rani Bilkhu, the director of Jeena International, said:

“Saying that there is no evidence is tantamount to saying that these women are lying and that our organisation is making things up.”

It is hard to disagree with her, and it is crucial to note that Ms Bilkhu is referring to the brave few who have come forward in the hope that, in so doing, they will help to combat the practice. Their stories are only the tip of the iceberg. Another organisation, Karma Nirvana, which runs a crisis helpline for women in such situations, says:

“We believe the prevalence of sex-selective abortion in the UK is currently under-reported and this has been the case for many years. We have received, and continue to receive, calls from victims who are pressured to identify the gender of the child for the purposes of identifying if it is a girl. Victims express how they are then pressured by family members to abort the child and to give reasons other than sex selection and how they face abuse if they refuse to request this or abort.”

To those who argue that there is no evidence of sex-selective abortion in the UK, I pose a question: what reason do we have to doubt the word of these organisations? If the testimony of these women and those who work with them is not enough, consider the statement of the GP and former BPAS consultant, Dr Vincent Argent, who said he had “no doubt” that this was a problem in the UK and that there were

“an awful lot of covert sex-selective abortions going on.”

Indeed, I am told that some hospitals operate a policy of not telling the women the sex of their baby for fear that it will lead to a sex-selective abortion.

We can no longer ignore the fact that sex-selective abortion is a reality in the UK. Lest anyone think that this is an issue that applies only in certain communities, they should consider the tragic fact that the words “family balancing” are heard with increasing frequency and understanding across the country.

Thankfully, at the moment, countrywide analyses of birth data do not seem to show significant gender imbalances, but sex-selective abortion is clearly happening. Surely we cannot be saying that we will do nothing until the statistics show a national skewing in gender ratios, as in other countries. That would be wrong. How many more women must come forward before we take action? The time at which Government support should have been offered to women such as Rupinder and Uraj passed long ago, which is why I, and other colleagues, have brought this Bill to the House today.

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The Bill is sponsored by 11 female MPs from all parts of the House and supported by a large number of other MPs. Today, I wish to place on record my thanks to those MPs, including: the hon. Members for Stoke-on-Trent South (Robert Flello) and for Linlithgow and East Falkirk (Michael Connarty), my hon. Friends the Members for Rossendale and Darwen (Jake Berry), for Dover (Charlie Elphicke), for Salisbury (John Glen), for Enfield, Southgate (Mr Burrowes), for Stroud (Neil Carmichael), for Daventry (Chris Heaton-Harris), for Stafford (Jeremy Lefroy), for Wolverhampton South West (Paul Uppal), for Harrow East (Bob Blackman), for Sittingbourne and Sheppey (Gordon Henderson), for Tewkesbury (Mr Robertson), for Calder Valley (Craig Whittaker) and for Cleethorpes (Martin Vickers), the hon. Member for East Lothian (Fiona O'Donnell), my hon. Friends the Members for Gainsborough (Sir Edward Leigh) and for Pudsey (Stuart Andrew), and my right hon. Friends the Members for Chelmsford (Mr Burns) and for North Somerset (Dr Fox). All of them support this Bill and I sincerely thank them for that.

Clause 1 would send a clear signal that abortion for gender is not permissible under UK law, clearing up considerable confusion. Subsection (2) would make it clear that the clarification relates only to sex-selective abortions, therefore putting the Bill squarely in line with the Government’s interpretation of the Abortion Act. Clause 2 obliges the Secretary of State for Health to ensure that the law is being upheld. That will enable the Government to think about ways to help such women.

This month, for the first time, the UK has dropped out of the gender equality top 20. It is a further damning indictment of our commitment to female parity that we allow national institutions to contradict the Government on an illegal practice that predominantly affects girls. Even worse, we are choosing to ignore the evidence of women who have gone on the record and who have suffered under this appalling practice. This has gone on long enough. We must now act. As an editorial in The Independent said in January:

“Sex-selective abortion is barbaric and socially destructive.”

This Bill would be a step on the way to addressing this tragic and discriminatory practice and the first and most fundamental form of violence against women and girls. I commend it to the House.

Question put (Standing Order No. 23).

The House divided:

Ayes 181, Noes 1.

Division No. 67]

[

1.38 pm

AYES

Aldous, Peter

Amess, Mr David

Austin, Ian

Banks, Gordon

Barclay, Stephen

Bebb, Guto

Begg, Dame Anne

Benyon, Richard

Binley, Mr Brian

Blackman, Bob

Bottomley, Sir Peter

Bradshaw, rh Mr Ben

Brady, Mr Graham

Bray, Angie

Bridgen, Andrew

Brown, Mr Russell

Browne, Mr Jeremy

Bruce, Fiona

Burns, Conor

Burrowes, Mr David

Burstow, rh Paul

Burt, rh Alistair

Burt, Lorely

Campbell, Mr Gregory

Cash, Sir William

Caton, Martin

Champion, Sarah

Chapman, Jenny

Clappison, Mr James

Clark, Katy

Clarke, rh Mr Tom

Clifton-Brown, Geoffrey

Clwyd, rh Ann

Colvile, Oliver

Connarty, Michael

Cooper, Rosie

Crausby, Mr David

Cunningham, Alex

Cunningham, Sir Tony

Danczuk, Simon

Davidson, Mr Ian

Davies, Philip

de Bois, Nick

Djanogly, Mr Jonathan

Donaldson, rh Mr Jeffrey M.

Donohoe, Mr Brian H.

Doughty, Stephen

Doyle, Gemma

Durkan, Mark

Esterson, Bill

Evans, Jonathan

Evans, Mr Nigel

Field, rh Mr Frank

Fitzpatrick, Jim

Francis, Dr Hywel

Freer, Mike

Fuller, Richard

Gale, Sir Roger

Gapes, Mike

Garnier, Sir Edward

Garnier, Mark

Gilmore, Sheila

Glass, Pat

Glindon, Mrs Mary

Graham, Richard

Gray, Mr James

Greatrex, Tom

Green, rh Damian

Grieve, rh Mr Dominic

Hames, Duncan

Hanson, rh Mr David

Harris, Rebecca

Hart, Simon

Harvey, Sir Nick

Havard, Mr Dai

Heath, Mr David

Heaton-Harris, Chris

Hemming, John

Henderson, Gordon

Hepburn, Mr Stephen

Hermon, Lady

Hillier, Meg

Hilling, Julie

Hoban, Mr Mark

Hoey, Kate

Hollobone, Mr Philip

Hood, Mr Jim

Hopkins, Kelvin

Howarth, Sir Gerald

Jackson, Mr Stewart

Jones, Helen

Jones, Susan Elan

Kane, Mike

Kaufman, rh Sir Gerald

Kawczynski, Daniel

Keeley, Barbara

Kelly, Chris

Knight, rh Sir Greg

Lazarowicz, Mark

Leech, Mr John

Lefroy, Jeremy

Leslie, Charlotte

Lilley, rh Mr Peter

Long, Naomi

Loughton, Tim

Luff, Sir Peter

Lumley, Karen

MacNeil, Mr Angus Brendan

Mactaggart, Fiona

Main, Mrs Anne

Malhotra, Seema

McCann, Mr Michael

McCartney, Karl

McCrea, Dr William

McDonnell, Dr Alasdair

McDonnell, John

McGovern, Jim

McGuire, rh Mrs Anne

McInnes, Liz

McKechin, Ann

McKenzie, Mr Iain

McKinnell, Catherine

Meale, Sir Alan

Mills, Nigel

Moon, Mrs Madeleine

Morrice, Graeme

(Livingston)

Morris, Grahame M.

(Easington)

Mosley, Stephen

Mudie, Mr George

Murphy, rh Paul

Murray, Ian

Murray, Sheryll

Nash, Pamela

Nuttall, Mr David

O'Donnell, Fiona

Offord, Dr Matthew

Ollerenshaw, Eric

Osborne, Sandra

Paisley, Ian

Perkins, Toby

Phillips, Stephen

Pound, Stephen

Prisk, Mr Mark

Pritchard, Mark

Randall, rh Sir John

Redwood, rh Mr John

Rees-Mogg, Jacob

Reid, Mr Alan

Ritchie, Ms Margaret

Robertson, rh Sir Hugh

Robertson, John

Robertson, Mr Laurence

Roy, Mr Frank

Roy, Lindsay

Russell, Sir Bob

Sanders, Mr Adrian

Seabeck, Alison

Shannon, Jim

Sharma, Mr Virendra

Shepherd, Sir Richard

Sheridan, Jim

Shuker, Gavin

Skinner, Mr Dennis

Smith, Henry

Spelman, rh Mrs Caroline

Stephenson, Andrew

Stevenson, John

Stunell, rh Sir Andrew

Syms, Mr Robert

Teather, Sarah

Thornberry, Emily

Thornton, Mike

Turner, Mr Andrew

Vickers, Martin

Walker, Mr Charles

Weir, Mr Mike

Wharton, James

White, Chris

Whittingdale, Mr John

Wiggin, Bill

Winnick, Mr David

Young, rh Sir George

Tellers for the Ayes:

Pauline Latham

and

David Simpson

NOES

Jackson, Glenda

Tellers for the Noes:

Steve Baker

and

Mr Gary Streeter

Question accordingly agreed to.