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Westminster Hall

Tuesday 11 November 2014

[Mr Andrew Turner in the Chair]

UK Acorn Finance (Mortgages)

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

2.30 pm

Mr Elfyn Llwyd (Dwyfor Meirionnydd) (PC): It is a great pleasure, Mr Turner, to see you in the Chair and to serve under your able chairmanship.

I preface my comments by saying that, as a member of the legal profession, I am not given to making serious allegations about professional people; in fact, over the past 23 years, I might have done that twice, so I am not a serial offender in that regard. However, what I shall detail today is, to my way of thinking, one of the worst scandals that I have come across in all those years.

I am concerned about the Williams family—a farming family from Cwm Pennant, Garndolbenmaen, in my constituency. The husband inherited the farm in 1996 and subsequently transferred it into his name and that of his wife, with whom he had been working on the farm since 1980. In late 2009, they were introduced to Desmond Phillips of UK Acorn Finance Ltd by a Mr Peter Baskerville, a financial adviser. On 13 December 2010, a meeting was held at Mr Phillips’s office in Highbridge, Somerset; he then introduced them to a Mr Peter Williams, a solicitor who said that he would act for them. Their indebtedness at the time was approximately £650,000, of which £450,000 was owing to the Agricultural Mortgage Corporation plc at a favourable interest rate. After my constituents had made a complete financial disclosure, Mr Peter Williams, the solicitor, advised that he could not act for them after all as Mr Phillips was his client. That was curious.

On 13 January 2011, Mr and Mrs Williams had another meeting with Mr Phillips, again in Somerset. He introduced them to a Mr Thomas Brennan of Davies and Partners, solicitors. Mr Brennan said he would act for them; he was a close friend of Mr Peter Williams. After that meeting at Highbridge, a Mr Mark Sanders of Carver Knowles, on the instruction of Mr Desmond Phillips, valued the farm in north Wales at £2.2 million. Mr and Mrs Williams paid for that valuation. Mr Phillips then made numerous promises to them to provide additional funding, and on the basis of his promises they agreed to consolidate their borrowings with a mortgage advance from UK Acorn Finance Ltd. Initially, that was to be a short-term bridge for a few months, with the assurance that he—Mr Phillips—would thereafter transfer it to a cheaper lender. There were continual procrastination and delays from Phillips, and the transfer to a cheaper lender never happened. Instead, Mr and Mrs Williams had no choice other than a succession of massively expensive short-term bridging loans from UK Acorn Finance Ltd with no exit route other than the repossession of the farm.

On 22 April 2011, shortly after the charges on the farm were put in place in favour of the company, Mr Phillips and his daughter, Karen Phillips, visited the farm. Mr Phillips again promised additional funding,

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which never materialised. As a result, the farm was financially crippled, but Mr and Mrs Williams were assured that the mortgage would soon be transferred to a cheaper lender at 4% annual interest. That never happened—instead, they received notification shortly afterwards of repossession proceedings by UK Acorn Finance Ltd.

Mr and Mrs Williams were forced into a succession of short-term bridging loans of between three and six months with UK Acorn Finance Ltd, with enormous arrangement fees and interest costs resulting in a vicious spiral of unnecessary debt over which they had no control. Mr Phillips’s company was raking in all the money. UK Acorn Finance Ltd was owed in excess of £1.2 million with an increase of approximately £550,000 in two years. UK Acorn Finance Ltd has since repossessed the farm.

UK Acorn Finance Ltd always produced legal documentation for signing at the last minute and Mr and Mrs Williams signed it without legal representation or advice. The documents were sometimes driven up from Somerset to be signed and taken back there, Mr and Mrs Williams being told that time constraints made personal visits necessary to achieve the company’s deadlines.

Mr Phillips’s valuer subsequently reduced the value of the farm to £1.8 million. Mr and Mrs Williams were forced by Mr Phillips of UK Acorn Finance Ltd and his associates into enormous, spiralling mortgage debt. Peter Williams and his associate, the solicitor, knew from the outset that that would happen before their now obvious acts of conflict of interest—and, I believe, of conspiracy to defraud.

The true interest and cost of Mr Phillips’s actions have not been calculated, but they are clearly enormous. The reduction in the farm’s value from £2.2 million to £1.8 million, according to the valuer appointed by Mr Phillips—presumably to weaken the value ratio against the spiralling mortgage debt to UK Acorn Finance Ltd—and the manner in which the mortgage and financial affairs have been handled by Mr Phillips, his associates and lawyers, have clearly been reckless, if not, as I believe, fraudulent. Obviously, Mr and Mrs Williams’s credit rating is now in ruins.

In February 2011, Mr Phillips appointed a Mr N.R.C. Burd as the Law of Property Act 1925 receiver—by the way, Mr Burd appears quite often in such cases as the favoured receiver. Mr Peter Williams, then of solicitors Ebery Williams, acted for Mr Phillips, Mr Burd the receiver, Peter Baskerville and UK Acorn Farm Management Services Ltd, behind which stands Paul Johnson. My constituents were told by Mr Phillips that, although they had received no documentation from him, Williams’s company and solicitors had received £48,000. That was without their authority or consent. There were a few small, irregular payments to builders working on the farmhouse, who quickly withdrew their services because they were not being properly paid; Mr Phillips had given an assurance that he would make payments from money he held on their behalf. Mr Phillips has not accounted for a single penny. The total is believed to be in the region of £148,000, and none of that has been accounted for. The matter was reported to the police.

A Vivienne Williams, whose partner is Mr Peter Williams, the solicitor, now of Michelmores solicitors, previously of Burges Salmon, of Ebery Williams, of

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Wilsons Law and of Veale Wasbrough, still acts for Mr Phillips’s company, UK Acorn Finance Ltd and has succeeded in repossessing the farm and taking away Mr and Mrs Williams’s livelihood, their stock and their home. Everything they had on earth has gone.

Mr Peter Williams, of Burges Salmon and the various other establishments, does not stay long with a firm. I understand why. His normal modus operandi is one or all of the following in any particular case. The title deeds are split between the residential house and the land. There are separate mortgages on the house and the land and the property is then transferred into a limited company and mortgaged in the company’s name. The mortgage on the residential property then becomes a commercial transaction and is unregulated. All legal protection rights, including those of minor children, are removed by the above.

The house and land are then repossessed separately, devaluing in favour of purchasers who—believe it or not—are connected to the lender. On the way in, they value the property high to justify the payment of huge sums, which are clearly not sustainable and could not be paid back by the borrowers; on the way out, they undervalue it drastically, so that the person connected to the company can benefit.

The “business plan” in this case was prepared by Paul Johnson, who in reality was there to serve the key players: areas of weakness were exposed, particularly regarding cash flow, for exploitation by Peter Williams, Burges Salmon, UK Group and so on. As I said, a succession of short bridging loans in favour of UK Group was effected at a massive cost—an interest rate of 22%, at this time! Furthermore, fees of 9% were rolled up every six months, plus there were huge fees to solicitors and various agents. There was continual procrastination from them when it came to finding cheaper loans.

Jonathan Edwards (Carmarthen East and Dinefwr) (PC): My right hon. Friend is making a powerful case on his constituents’ behalf. In Talley in my constituency, there is a case that mirrors the structure of deception perpetrated against his constituents; it involves a company, associated with UK Acorn Finance, called UK Farm Finance Ltd. Does he share my concern that the farming community in particular is targeted and susceptible, because it is cash poor but asset rich? When the bridging loans mount up, people find that the position they are in quickly gets beyond their control.

Mr Llwyd: That is precisely the point. The farming community has been through a rather tortuous time in any event, in terms of income streams over the past five to seven years, so my hon. Friend’s point is absolutely correct. Farmers are more prone, but they are also in a worse position: unlike someone who loses a house and moves on, they lose absolutely everything. As I said, when they have inherited the property, as in Mr and Mrs Williams’s case, it is even sadder and worse.

Roger Williams (Brecon and Radnorshire) (LD): I congratulate the right hon. Gentleman on the forensic way in which he has examined and researched this issue. Does he agree that UK Acorn Finance targets landowners

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who may be in a vulnerable financial position, offering them help and succour, although its only real purpose is to get possession of the property and make a profit out of that?

Mr Llwyd: The hon. Gentleman is absolutely correct. That is certainly the conclusion to which I have come, as have several other Members of Parliament with constituents who have been badly affected by these scams—I can think of a worse word than scam, but not a polite one. As my hon. Friend the Member for Carmarthen East and Dinefwr (Jonathan Edwards) said, the farming community is more vulnerable than the average person, or has been.

Burges Salmon, the solicitors, had a charge on my constituents’ property for their fees, and endowment policies were assigned. There was also, interestingly, an agreement with the lender for Burges Salmon, the solicitors, to step aside should the lender wish to repossess. As director of the UK Group—they are all the same creature under these different names, hiding behind the corporate veil as some people choose to do—Mr Phillips had his name on the clients’ mortgage, making him a joint owner of the property if the clients were to die; he automatically became the sole owner by survivorship. I think that is hugely unusual.

There were broken promises of funding by Peter Williams and UK Group, upsetting key suppliers to clients, and particularly feed merchants. In effect, they were closing the farm and income stream down, making it impossible for Mr and Mrs Williams to pay the mortgage. That must be the most obvious breach of fiduciary duty there could possibly be, and I hope that the Government—I see that the Minister is listening intently—will be able to do something about this matter. Those are the main points on the way that those involved go about their business.

To my knowledge, there are 44 different complainants, all of whom had complained to Avon and Somerset police by June 2013. The victims are seriously concerned that the police allege that there is no evidence of wrongdoing by any of those involved. The victims have documentary evidence and other evidence that fraud has been committed, as I will now summarise. The police consistently refused to look at the evidence.

There have been fraudulent valuations. A number of valuations are available and in the possession of victims, with widely varying calculations for the same property over very short periods. E-mails and notes also indicate that inflated valuations were being sought by UK Acorn companies in order to lend at a supposedly 70% loan-to-value ratio—but in fact at a much higher LTV or even negative equity. Once money had been paid, minus the huge fees that were withdrawn, there was no chance of escape for the poor people who had entered into the mortgage agreements. Other brokers appear to have been involved; there are numerous companies—I will not go through them all, but they include Commercial First.

Karen Phillips of UK Group—the daughter of Mr Desmond Phillips—has admitted in a hearing in Exeter county court that she substituted execution pages of documents from one document to another. She claimed that she had done so with permission, but could not provide any proof. The above was common practice at UK Group and went alongside the planting

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and forgery of signatures—graphologists’ opinions have been sought and that has been proved in at least one or two cases—and deeds not being signed according to the Law of Property Act 1925. Signatures were obtained from victims and witnessed afterwards, in some cases, by people who had never met the signatory.

A number of tricks were regularly used to get loans through without proper advice and before the victim had a chance to understand properly what they were signing. That is disgraceful. There was a churning of mortgages, as I have explained, with numerous short-term mortgages. That churning was commonplace at UK Acorn Finance and the charges to be paid for those activities were not disclosed to victims before the commencement of the series of transactions.

In some documented cases, the changing of the mortgage did not provide the victim with any additional funds at all, merely adding further gross fees for the perpetrators. Surely that is fraud by misrepresentation. Evidence suggests that both the brokers and the lenders were involved in defrauding not only the borrowers, but the lenders to them and in the securitisation of the supposedly long-term documents.

Strong documentary evidence also suggests that most of the mortgages were set up to fail and that once executed, the lenders did their best to thwart the victims’ efforts to fund the repayments. The use of LPA receivers was suspect at the very least and it was the same character virtually each time. He certainly did not appear to have aimed to maximise the returns from repossessed properties, further disadvantaging victims. Des Phillips and others associated with him have purchased a considerable number of repossessed properties.

Cathy Jamieson (Kilmarnock and Loudoun) (Lab/Co-op): I am listening very carefully to the right hon. Gentleman, because I was not aware of these circumstances until he brought them to my attention. He has referred to police involvement, but I am wondering whether any of these firms or the people involved had contact either with the Financial Ombudsman Service or the Financial Conduct Authority, or its predecessors, in addition to the police. I am sure he will have more to say about the police, but did they also have contact with those organisations?

Mr Llwyd: Yes, they did, and I want to say a brief word about that towards the conclusion of my remarks. At least 44 cases were reported to the Avon and Somerset police, who unfortunately, took very little interest in what was going on—the chief executive of Avon and Somerset police is an ex-partner of Burges Salmon, by the way, so that is another interesting piece of information. Peter Williams was at one time a partner in Burges Salmon, as was John Smith, the chief executive of Avon and Somerset police, who was appointed in 2009. Avon and Somerset police describe themselves on their website as long-standing clients of Burges Salmon. That article also appears on Burges Salmon’s website.

All known complaints to the police and those handling this matter remain unanswered, and I have to ask why. Interestingly enough, they said that they could not find any criminal behaviour, but a detective constable, Niki White, of Avon and Somerset police came up to attend the repossession hearing in the Williamses’ case. Why exactly I do not know. On the one hand she was

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pretending to give some succour or comfort to the Williamses that the police were doing something, but on the other hand a letter from the manager of the financial investigation and economic crime section of the police to the solicitors acting on behalf of the perpetrators says:

“In your letter dated 16th August 2013, you have questioned DC White’s attendance at Court on the 7th August 2013. Her attendance on that day was to ensure that the Court understood the extent of the Police involvement and were not misled into believing that a criminal investigation was already underway.”

That was despite the police at the same time telling the right hon. Member for North Somerset (Dr Fox) that an investigation was under way and that it was an in-depth investigation. But interestingly, a couple of months after that letter, they say that

“we have been in discussion with other regulatory agencies. The purpose of this was to look at whether there are…other opportunities to address the situation or to influence regulation of this kind of activity in the future.”

They say that unfortunately they have not been able to progress it further. So they have concerns both on the criminal side, it seems to me, and, as the hon. Member for Kilmarnock and Loudoun (Cathy Jamieson) says, on the regulatory side, which I am sure we all share.

However, Avon and Somerset police have consistently blamed the Serious Fraud Office for not opening an investigation. That is ironic, because the police themselves have refused to open an investigation, although they have said to at least one Member of Parliament that they have done so. They have also tried to block Dyfed Powys police in Wales from investigating. I believe that something is amiss in Avon and Somerset police. As I have said, John Smith, the chief executive, is now writing to complainants and making decisions, but not mentioning the fact that he used to be a partner in one of the firms that is, or should be, in the firing line.

Let me say a word about Mr Desmond Phillips. Again, this touches on the important point that the hon. Lady made about regulation. In 1975, at the age of 22, Mr Phillips was made bankrupt. In 1976, he was convicted of theft at Shepton Mallet magistrates court. In 1987, his timber and haulage business collapsed, leaving creditors with a loss of £300,000. In 1991, Phillips’s company brokering endowment policies collapsed. Many customers were farmers. Insurance companies claimed that they were owed £300,000 on commissions that had been paid out on policies that failed to materialise or were subsequently cancelled.

In 1992, Phillips underwent his second bankruptcy, owing £170,000. That was discharged in the late 1990s. In 1994, the BBC Radio 4 programme “Face the Facts” was the first programme on Phillips. In 2008, there was a judgment against Phillips at the High Court in Manchester for £250,000 and costs. That was subsequently paid, I believe. In 2010, there was an individual voluntary agreement in respect of all his debts. In 2011, Acorn subsidiary UK Country Capital collapsed, owing £17.3 million to Barclays bank. On 16 April 2014, “Face the Facts” described him as “The Country Rogue”.

Two bankruptcies, one IVA and 14 county court judgments have been recorded against Mr Phillips and, believe it or not, a couple of years ago his licence to lend was renewed by the regulatory authority. That is quite incredible. I have documentation with me to show that Clive Maxwell, chief executive of the Office of Fair

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Trading, said that he was a fit and proper person to be lending money. I find that utterly incredible and I am sure that the Minister, in due course, will want to consider that aspect. In fact, Phillips’s licence was renewed in May 2012, so that was after most of the bad things that had happened and certainly after what had happened in the case of the Williamses.

I have said that I cannot understand why Avon and Somerset police have not researched this matter properly. I have myself dealt with the Serious Fraud Office and the Attorney-General and have met His Honour Judge Geoffrey Rivlin, the senior adviser to the fraud office. I was told by the fraud office that it deals only with very large frauds. In my instance, it is for £1.5 million, but if we multiply that by anything between 30 and 50 constituents or Members of Parliament, it is a massive fraud. No one can deny that.

I have said that there is a dossier of 44 cases that alleges similar conduct in them all. An especially incriminating document was prepared by Mr Levy, a barrister who specialises in this area. It is entitled “Appointments under flawed security”. He questions why Acorn has persistently used the LPA receiver Mr Burd. The only possible explanation is that Lloyds bank was comfortable with the methods used, because it was lending on to Acorn, as we know, and it was turning a blind eye to all that was happening, in breach of any fiduciary understanding that I have ever come across anyway.

In case anyone thinks that I am just a conspiracy theorist, the following Members of Parliament, to my certain knowledge—I am sure that there plenty of others—are also involved in trying to deal with the matter: my hon. Friend the Member for Carmarthen East and Dinefwr, the hon. Members for Vale of Clwyd (Chris Ruane), for Brecon and Radnorshire, for North Cornwall (Dan Rogerson), for Brigg and Goole (Andrew Percy), for North East Somerset (Jacob Rees-Mogg), for Pendle (Andrew Stephenson), for Penrith and The Border (Rory Stewart) and for Thirsk and Malton (Miss McIntosh), the right hon. Members for South East Cambridgeshire (Sir James Paice) and for Preseli Pembrokeshire (Stephen Crabb), the hon. Members for Caerphilly (Wayne David), for Wantage (Mr Vaizey), for Folkestone and Hythe (Damian Collins), for North Devon (Sir Nick Harvey) and for Selby and Ainsty (Nigel Adams), the right hon. Member for Bexhill and Battle (Gregory Barker) and the hon. Member for Somerton and Frome (Mr Heath). There is also a Member of the other place who is actively involved in trying to assist people whom he knows.

As I said, I have been in contact with Avon and Somerset police, North Wales police, the Attorney-General, the Serious Fraud Office, the regulators and His Honour Judge Geoffrey Rivlin, the chief adviser to the SFO. So far, very little has been achieved, and it is to my huge regret that that should be so.

The conclusion that I draw from this terribly unhappy affair is that even if the modus operandi of UK Acorn and the allied companies is not fraudulent—I believe that it is—they of course have been in flagrant breach of their fiduciary duties to the borrowers. What that means may be obvious, but I will explain it. There is a fiduciary duty on a lender to ensure that the borrower can sustain

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the payments under the mortgage; otherwise, it is a straightforward taking of his property. That is an obvious point, but in this case there have been instances in which there has been overvaluation of properties in order to make an advance that would not be sustainable on the business case. That is clear in virtually every case that I am aware of. I think there are elements that are criminal, and I hope that we will be able to shine a light on this behaviour, but even if I am wrong, there have been serious, repeated and consistent breaches of fiduciary duty.

I put to the Government the following points. I know that the Minister is in the Treasury, not the Home Office, but will she please pass some of this information on to her colleagues in the Home Office? I am sure that she will. I ask the Avon and Somerset police to come clean as to why they are not properly investigating or, alternatively, to say that they will now investigate thoroughly these very, very serious complaints. They are complaints that have ruined the lives of, to my knowledge, 44 or 45 families. I am sure that Members of Parliament will know of many other people who were affected, and there will be others who have not complained. There is even a woman who has completely lost her mind and is in prison as a direct result of the situation. I could name her, but I do not want to embarrass her. She is contact with me, and she is still in prison.

There are others who have lost absolutely everything. They have the shirt on their back, and that is about it. In the meantime, Desmond Phillips is still lending money recklessly and making huge amounts of money against the assets of innocent people whom he has duped. I would ask also that the Avon and Somerset police fully assist the Serious Fraud Office to undertake its work. I believe that we are talking about a massive fraud, in which the SFO, if it has any purpose at all, should be involved. I have been trying to persuade Sir David Green to get involved, and I do not know whether the problem is one of resource, or what it is. To my way of thinking, if we send the SFO one file that shows underhand behaviour, the SFO should consider it. We have sent 36 files to the SFO, all of which show similar, if not identical, MOs, which suggests to me that something is really amiss.

Jim Shannon (Strangford) (DUP): I apologise for not being here at the start of the debate. I had some constituents to see and I could not get down in time. I know of a number of families who had difficulties financially and who were referred to UK Acorn Finance Ltd for help. The company took advantage of their circumstances. Does the right hon. Gentleman now feel that it is time for Government to regulate the company? The regulation of loan companies is in the news today, and that company must be regulated as well.

Mr Llwyd: Absolutely, and the hon. Member for Kilmarnock and Loudoun made that point earlier. The hon. Member for Strangford (Jim Shannon) made that point well, and I am sure that the Minister heard it. I did not know that the hon. Gentleman also had constituents who were affected, but the case is evidently familiar to even more Members than the large number whose names I read out. I am sure that the Minister will have listened carefully to what the hon. Gentleman had to say.

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There is a need, in my view, immediately to withdraw Mr Phillips’s licence to work in the financial industry and, crucially, to consider whether the regulatory authorities have done their job well, or at all. There is an obvious rhetorical answer to that question. I would also like to see the investigation and urgent consideration of serious and deep breaches of fiduciary duty. I believe that we owe it to our constituents, many of whom have lost everything they had—their income, their livelihood, their homes, their heirlooms, their livestock and the roof above their heads. My constituents Mr and Mrs Williams believed, perhaps naively, that Phillips and UK Acorn Finance Ltd were on their side. They were clearly wrong, and they have paid an extremely heavy price. To deny them redress is wrong and, in my view, totally unacceptable.

3.3 pm

Cathy Jamieson (Kilmarnock and Loudoun) (Lab/Co-op): I congratulate the right hon. Member for Dwyfor Meirionnydd (Mr Llwyd) on securing the debate. He referred at the outset to his profession as a lawyer, and he has more than done justice to the case on behalf of his constituents. He said that he felt frustrated and aggrieved that a solution had not yet been achieved. It is clear from his presentation and the vigour with which he has prosecuted the case that the lack of a resolution of the situation does not reflect a lack of effort on his behalf.

I was not aware of the issue before the right hon. Gentleman brought it to my attention, and I am grateful to him for supplying background information. As the representative of a rural constituency, it occurred to me that many more people may have fallen prey to similar situations but, for various reasons, may not yet have approached a Member of Parliament or felt able to go into the public domain. We can only try to understand what it must have been like for the right hon. Gentleman’s constituents to have lost not only their family home and heritage, but their livelihood. Other Members, no doubt, have constituents who have been in similar circumstances.

It was interesting to hear the right hon. Gentleman’s description of the process. The Minister may want to say more about this, but it seemed to me that some of the issues that go back some time might now be caught by changes in the regulatory environment. I hope that is so, and I seek an assurance on that. Sadly, the situation the right hon. Gentleman described mirrors complaints we have heard about the financial services sector and the small business environment. In some cases, there have been suggestions of predatory—I use that word advisedly—activities, in which people came together to try to buy up small businesses that were in difficulty. A collection of people with connections would benefit from that, and they would not have the best interests of the clients at heart.

The right hon. Gentleman put across the point about fiduciary duty extremely well. On a day when we have heard that the Financial Conduct Authority has, at long last, taken steps to deal with some of the worst excesses in the payday lending industry, it is timely to reflect on what other areas need to be tightened up to ensure that practices such as the right hon. Gentleman described cannot happen. There are parallels between failing to carry out due diligence as to whether people can afford a product and whether it is the correct product for

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them; and instead of getting people out of a spiral of difficulty, setting them off on a downward spiral into further debt and increased interest charges, with the subsequent loss of their home and livelihood.

Some of the problems may be picked up by changes in the regulatory regime. However, I am concerned that, as the right hon. Gentleman has indicated, notwithstanding all the concerns about the individual whom he mentioned, that person is still deemed to be a fit and proper person. I am sure the Minister will want to reflect on that and tell us whether anything can be done to bring the matter to the attention of the regulatory authorities. In addition, perhaps the Home Office can be asked to look into the problems with the police. I cannot speak for the police and I do not know what the Home Office or the Serious Fraud Office would do, but a significant amount of evidence has been presented. Even if that evidence had been thoroughly investigated and nothing was found to be wrong, the process should be transparent and should not leave a scintilla of doubt about whether there were conflicts of interest or inappropriate behaviour. At the moment, no one can have confidence that the matter has been fully investigated.

I echo the points that have been made by the right hon. Gentleman and other Members on behalf of their constituents, and I look forward with interest to what the Minister has to say. She may have difficulty commenting on some of the specifics of the case, but I hope she will take up the point about passing information to the Home Office. I also ask her to consider whether anything further can be done to make sure that the Financial Conduct Authority is aware of the concerns raised in the debate. It is important that we assess which of the practices involved in the case would be caught by the changes in regulation, and whether there are any potential loopholes. I have taken a particular interest in having a fiduciary duty in financial services more broadly, and I continue, through Finance Bills and other measures, to try to have it written into legislation that anyone in any circumstances providing financial information and advice should be a bound by such a duty, as the right hon. Gentleman suggested.

I look forward to hearing what the Minister has to say. The issue’s being considered here today will not undo the wrongs and damage that have been done to the right hon. Gentleman’s constituents and others, but I hope it will be of some comfort to them to know that people are interested in it and wish to pursue it, in order to ensure that these things do not happen to anyone else in the future.

3.10 pm

The Exchequer Secretary to the Treasury (Priti Patel): It is a pleasure to serve under your chairmanship, Mr Turner.

I congratulate the right hon. Member for Dwyfor Meirionnydd (Mr Llwyd)—I hope my pronunciation is just about correct—on securing an extraordinary debate on what is, it is fair to say, a disturbing issue. He has been assiduous in his campaign to represent his constituents, and I pay tribute to him for the work he has done. I also thank him for sharing with me the background information on this very specific case, and I have read much of it.

Such debates are so important. By highlighting the facts and drawing them to the attention of the House, we can try to effect some change in the right place,

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notwithstanding the fact that the right hon. Gentleman gave a tremendous list of the organisations that have already been approached to investigate and address the case.

It is deeply disturbing to hear not only about what has happened and its overall impact on the right hon. Gentleman’s constituents, but that there are some 44 other cases, spanning about 20 other Members’ constituencies, and that so many other individuals have been targeted. I therefore pay tribute to the right hon. Gentleman for raising this distressing case and highlighting the range of issues associated with the individuals he named.

I hope the right hon. Gentleman and other Members will understand that it is not appropriate for me to comment specifically on the individual case, which is subject to a range of proceedings. However, I should make it clear that I intend to take away all the points he raised and to share them with the Home Office, as he suggested. That absolutely has to happen.

The right hon. Gentleman mentioned a specific individual’s history, and their case is quite alarming. He touched on bankruptcies, IVAs and county court judgments—the list is endless. He also mentioned that that individual’s licence was renewed in 2012. I will pass the case to the regulator. The Financial Conduct Authority is fully independent, but it will be sent the details he highlighted. It is only right and proper that the FCA, with the full powers that it has, look at this case.

I will share with Treasury and Home Office officials the details the right hon. Gentleman has raised. I will ask them to consider what steps the Government can take to address every concern he has outlined. It is only right and proper that we do that. In the meantime, I hope he and other Members will find it helpful if I set out the approach the Government take on some of the issues he has brought to the attention of the House.

The hon. Member for Kilmarnock and Loudoun (Cathy Jamieson) mentioned payday loans, which have, thankfully, come under greater regulation today. The legislation the Government have introduced, along with changes that have been made over the past few years, are intended to bring in more robust consumer protections. That is right and proper, because we do not want vulnerable individuals to be targeted in a malicious way. We have heard about one such case this afternoon, but we have seen similar cases with the payday loan industry, and it is right that the right protections are there.

That is why the Government established a strong, independent regulator—the Financial Conduct Authority—dedicated to ensuring that financial services firms treat their customers fairly. Fairness and transparency are absolutely key. We do not want to hear of cases such as this ever again. This is about protecting consumers. However, the protections provided by the FCA do not generally extend to lending to businesses in the same way as they do to consumers, as the right hon. Gentleman highlighted.

Mr Llwyd: I must say I am encouraged by the Minister’s response, because I believe she will diligently pass on the information about this case, and I am grateful for that. However, on commercial lending being different from domestic lending, there is every reason to leave

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farms in the domestic area, because if something goes wrong, people do not just lose a house, which is bad enough—they lose everything. The people in this case wanted to absolve themselves from ordinary, proper, decent responsibilities towards borrowers.

Priti Patel: I fully understand the impact on the individuals. We should be clear that people have lost their livelihood; this is about losing not just bricks and mortar and a roof, but an entire livelihood.

Cathy Jamieson: When the Minister makes her representations and passes information to the FCA, might she not want to highlight this issue? It appears that the intention has been to use a loophole—redefining a domestic premises as a business premises—potentially to get round some of the regulations.

Priti Patel: The point is well made. This is clearly about the impact on individuals and their livelihoods. We need to ensure that loopholes are closed and that individual protections are put in place. The Government are clear about being committed to introducing FCA regulation, where there is a clear case for doing so, in the right and proper way. However, there is a balance: we do not want to impose greater burdens, additional red tape and costs on financial firms, but we want to ensure at the same time that consumers are protected.

Businesses are expected to be better placed than consumers to judge whether contracts they make with other businesses are in their interests, so they do not necessarily need the protection of FCA regulation in the same way. However, the point that has been raised really is valid, because we are talking about the impact on smaller businesses. Of course, such businesses have a different right of recourse—to the Financial Ombudsman Service. This is always about the right kind of protections and information, and making sure that consumers are protected and loopholes closed. At the same time, however, there is, from a regulatory point of view, a fine balance.

I reiterate that this is a serious and significant case, and there are avenues I can look into—speaking to the Home Office, in particular, and asking Treasury officials to look into the issue.

For micro-businesses—businesses with a turnover of less than £2 million and fewer than 10 employees—the Financial Ombudsman Service is an independent, non-Government body established under statute to provide proportionate representation and independent resolution of complaints against financial services firms. That is predominantly for bank customers. Those decisions are binding, which is to be welcomed.

The right hon. Gentleman has made representations on behalf of his constituents, but there seems not to have been the positive engagement he is looking for, so we will address the issue on that basis.

I want to touch on the subject of fraud. If it is believed that a business is a victim of fraud, there is an additional avenue to explore. From April 2013, all reports of fraud are now made to Action Fraud rather than the police. The right hon. Gentleman spoke in some detail about Avon and Somerset Constabulary. Obviously he has engaged with it on behalf of his constituents; but Action Fraud is a Government-supported specialist fraud reporting and advice service. It is not a law enforcement body and therefore does not investigate

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crimes, but it provides a portal for the collection of crime reports and information so that they can be analysed. Going by the files and information that the right hon. Gentleman has sent me, there is a lot of information that could be analysed through law enforcement mechanisms. Where viable that would be sent out to the local force. I should be happy to discuss with the right hon. Gentleman how matters could be followed up using that avenue.

Although business lending is not regulated, the major lenders already take steps, as we have heard, to prevent repossessions and insolvencies. I understand the highly specific nature of the case that the right hon. Gentleman has brought to the House today, but there are processes through which businesses affected by repossession and insolvency can work properly with third parties on repayment plans and so on.

Cathy Jamieson: Given that the case we have heard about today concerned not only a business but a home, will the Minister commit at least to seeing whether anything else should be done about insolvency practice and guidelines in such circumstances?

Priti Patel: I am sure that the Government can look into that, because small businesses in particular suffer in such circumstances. Small businesses that are closely intertwined with family business become subject to different conditions from those affecting larger ones, and the implications are different for them if they reach the devastating time when they go into insolvency and get an individual voluntary arrangement. The process is traumatising, which takes us back to the point made by the right hon. Gentleman: it is a question of an individual’s livelihood, as well as a business.

Mr Llwyd: The Minister is, may I respectfully say, very responsive to what has been said. The hon. Member for Kilmarnock and Loudoun made the point that farms are a special case. We have already mentioned

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that they are often asset-rich but cash-poor; so they are there for the picking. Given that, to my knowledge, there are at least 44 different cases—perhaps 45, or perhaps even more—with roughly the same MO, surely there must now be a redefinition. Otherwise, the same thing will happen again. The people responsible are sharks who will continue to absolve themselves from regulation and play fast and loose with innocent people, with the disastrous results I have described.

Priti Patel: I think I have made it clear that the practices we have heard about this afternoon are wrong; we have heard about their devastating impact. Clearly, the case is distressing and complex, and we will look into every issue the right hon. Gentleman has raised. I will write to him personally once we have done so, and follow things up with him, to see how we can provide support and assistance in pursuing the matter. There is potential to examine definitions as well. I understand the circumstances in question, and the impact and implications of what has happened.

I hope I have been able to reassure the right hon. Gentleman that we are committed to putting in place the appropriate protections. We have really only touched on some of the areas in which the Government are working to protect consumers. We have heard a lot in the news today about payday loans—one such area. Today the right hon. Gentleman has brought the attention of the House to a very particular case. He has shown tremendous dedication to his constituents in supporting the affected families. He mentioned that there are potentially 44 other cases, and I would encourage the other Members who have such cases to engage in the issue as well. It is through such a collective evidence base that we will be able to effect change, and through due diligence and due process that we will get the justice needed by the right hon. Gentleman’s constituents.

3.25 pm

Sitting suspended.

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Great Eastern Main Line

4 pm

Ben Gummer (Ipswich) (Con): Setting aside the usual form, Mr Turner, it is a genuine pleasure to serve under your chairmanship. I hope, in this short Adjournment debate, to outline the case for investment in the Great Eastern main line.

I know that you are aware of the possibilities in East Anglia, Mr Turner—you have some knowledge of the area—but just to recap, we have in Norwich one of the largest agglomerations of scientific research and development in the country; just down the road from Ipswich, in Martlesham, we have the largest European centre of research and development in software; and we have the largest port in Britain in Felixstowe. Up and down the line we have centres of engineering and technical excellence that complement the amazing growth of Cambridge in our next-door county. Taken together, the counties of this region comprise the second largest contributor to the United Kingdom Exchequer of all UK regions and, indeed, it is one of only two regions that make a net contribution to Her Majesty’s Treasury. This region is already contributing significantly to British growth, jobs and prosperity, but herein lies the problem.

Although we are contributing significantly and growing—indeed, we grew throughout the recession—there is so much more that we could do, if only we had decent infrastructure connections. That is the miracle of East Anglia. It is not so much that all this is going on, but that we have achieved it with the oldest carriages, one of the slowest lines and some of the most expensive tickets for people going to Chelmsford, Colchester, Ipswich and Norwich. All that has been achieved, despite the lack of both a motorway and that critical train line.

That is the context of the Chancellor’s visit to Norwich this time last year, when we proposed to him a significant upgrade in railway infrastructure. He commissioned a task force, which I was happy to serve on, under the chairmanship of my hon. Friend the Member for Norwich North (Chloe Smith). That task force was able to bring together critical elements that had been lacking so far, including a broad, robust engineering research project into what was needed to bring additional services, improved reliability and increased speed to the London to Norwich line. We developed such a study to the demanding criteria of the Department for Transport. That is the basis of the report, which was delivered to the Chancellor last week.

In short, the proposal is for an investment in infrastructure of approximately £476 million, allied with a commitment that the 2016 franchise include investment in new rolling stock, not just for the inter-city carriages going all the way to Norwich, but for the suburban and commuter lines that run in between Essex and London and some running between Ipswich and London. Taken together, that new rolling stock and investment in infrastructure will add the capacity, speed and reliability improvements that we need so desperately on our line. At the conclusion of that investment, we would have new rolling stock running at 60 minutes, or just under, to Ipswich and 90 minutes to Norwich, and three services an hour to Norwich and four to Ipswich, with much better reliability than commuters have, sadly, had to put up with recently.

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This is a bold proposal, but not extravagant. We are not asking for High Speed 4, but we are asking for a decent railway that will take commuters and business people and travellers reliably, comfortably, safely and quickly between the world’s financial capital and our great regional centres. That is the basis of our demand. We expect to be able to produce in return a potential economic delivery of £4.5 billion, which is almost 10 times the amount of the original investment by the Department, should that be secured—one of the highest gross value added scores achieved by any rail project or proposal yet put before the Treasury.

People may ask, “If this is so blindingly obvious, given the huge economic return, why has it not happened before?” It has not happened so far because the region has lacked the political purpose to be able to deliver such a project. That is what is new. We have brought together local authorities, both district and county, and the New Anglia local enterprise partnership, and the Essex LEP. I should like to put on the record the excellent way the New Anglia LEP has co-ordinated the proposals and the excellent drive it is currently giving to Norfolk and Suffolk, which is delivering real benefits for our counties.

We also brought together all the region’s Members of Parliament. That, too, is different. There was not previously the drive—crucially, a cross-party drive— from representatives in Norfolk, Suffolk and Essex that now exists. Our beloved coalition colleague, the hon. Member for Norwich South (Simon Wright), has joined us here and we also had helpful interventions from our colleague, the hon. Member for Colchester (Sir Bob Russell). This has been a cross-party job, with all of us working together—councils, businesses and MPs—to put a coherent case for our constituents. If this investment is secured, we can deliver increased prosperity and more jobs— 10,000 more in my constituency—for our constituents. Most importantly, those will be high-value jobs, with people investing in high-value businesses in Ipswich, Norwich, Colchester and up and down the line. That is exciting.

I ask the Minister to confirm that she has seen the report and understands what we are asking for, and that she is going to lobby the Treasury for what is possibly one of the most exciting rail projects on her Department’s desk.

Although I have said that this is a cross-party arrangement, we have had a difficult time getting coherence from Labour party representatives in the region. The candidate for Norwich South favours full renationalisation of the railways. The candidate for Norwich North proposes that public bodies be allowed to bid for rail franchises, as Opposition Front Benchers have suggested; however, it is sad to see that the Opposition are not represented in this debate on an important matter for our region. That prompts me to conclude that if there were to be a Labour Government and significant legislative change, everything we are proposing would not just be put at risk: it would not happen. The project has to start in 2016—we have one window in control period five and at the beginning of control period six—if we are to succeed in getting new rolling stock ahead of the implementation of disability regulations in 2020.

We have to get this investment now. I know that both the Chancellor and the Department, which we have talked to, understand, yet the noises we hear from

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Labour suggest that they would first want to undertake a massive reorganisation of the rail industry. Frankly, if they do they will be unable to commit to a new franchise being let in 2016, nor to the kind of investment that is needed. Has the Minister received any representations from Opposition Front Benchers about this project? Do they support it and regard it as valuable? The candidate for my seat has said, in a cavalier fashion, that he cannot believe that a future Labour Government would go back on any proposals accepted by this coalition Government. I am sure the shadow Chancellor would be interested to know about the costed proposal that has been dumped in his lap, but, frankly, we have not heard about that from Opposition Front Benchers either. We accept that it is a large amount of money. It is a significant piece of investment, but it is not extravagant and it is needed. For true cross-party support on this, we need to have not only the commitment of this Government—they have been most helpful in allowing us to bring forward these proposals—but the cast-iron commitment of the shadow Chancellor that he would carry forward this investment, should there be a Labour Government in 2015. We do not only need that; we need the cast-iron commitment of the shadow Transport Secretary that there would be no top-down reorganisation of the rail industry, which would make all this impossible.

I raise those points only because they are the one fly in the ointment, and it is a wonderful ointment. It will make a significant difference to our region and to Norwich, Ipswich and towns in Essex. It will allow us to release our full potential as a key driver of the British economy. Most importantly to us as Members of Parliament representing mixed constituencies, it will give opportunities for jobs and prosperity to people who have so far been left behind, not just by previous Governments, but by previous representatives in our seats. That is why it is so important to us to achieve the investment now, for the good of our constituencies, our region and our people.

Several hon. Members rose

Mr Andrew Turner (in the Chair): I call Robert Halfon.

Robert Halfon (Harlow) (Con): I suggest, Mr Turner, as this debate is more directly relevant to the constituency of my hon. Friend the Member for Norwich North (Chloe Smith), that she go first. I know that she asked to speak after me, but I feel morally that that is the right thing to do.

4.11 pm

Chloe Smith (Norwich North) (Con): I thank my hon. Friend the Member for Harlow (Robert Halfon), who is kind in ceding his place. His moment will come very shortly. It is for me to add to the arguments of my hon. Friend the Member for Ipswich (Ben Gummer). As he capably laid out, this has been a big project. It has been a joint project, and we hope it will be successful. It is new for the region to have three counties working together, and that has been extremely important. We speak today with the full blessing of our colleagues on the task force from Essex—those in Parliament and those in the business community—and the many thousands of passengers who are signed up to the report. We have brought those people together for the first time in this kind of work. We have done the detailed analysis and it

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was our great pleasure to present that in the past few days to the Minister, the Secretary of State for Transport and the Chancellor, who asked us to set up the task force and put together the work.

My hon. Friend explained the ambition we have for our region. He is, in fact, the originator of the hope in our region that we can be the California of Europe. He is absolutely right to have set out what we could have back for the mere £476 million investment that we ask for. The benefit-cost ratio identified in the report is crystal clear and is higher than that for High Speed 2 at £9.50 generated for every £1 invested. That is another of the report’s strong arguments.

We think that the decision from here is simple. As my hon. Friend laid out, we ask for confirmation of the infrastructure improvements and that new rolling stock be provided for. There is, however, the downside: we cannot go on like this. We cannot go on without the improvements we call for in the report. Our constituents and people throughout Norfolk, Suffolk and Essex—including the tens of thousands of employees, students and passengers represented by those who signed up to the report—pay their way in tickets and season tickets, and they know they are not getting the service they deserve. We know they are not getting the service they deserve, and we have been honest about that in the report. The report is frank in saying that to miss this opportunity to invest would condemn those passengers—our constituents—to another decade of misery on this train line.

We cannot go on with such ageing rolling stock, for a number of very good reasons, one being the reliability problems it has caused. One need only to have looked at the Eastern Daily Press and other regional papers over the summer to have seen the chaos on our line resulting from breakdowns and delays. They compound each other, because of the quality of the stock and the infrastructure we are dealing with. We all have examples of constituents who have been prevented from getting to work at all—indeed, prevented from getting anywhere at all. That is not acceptable in this day and age, particularly given that they are already commuting up to two hours a day each way.

Another reason why we cannot continue with this rolling stock is that in years to come, it will be unlawful under the Disability Discrimination Act 1995. That underlines the point that now is the time for action on the rolling stock and the accompanying infrastructure improvements.

Simon Wright (Norwich South) (LD): I thank my hon. Friend, my hon. Friend the Member for Ipswich (Ben Gummer) and the task force for their incredibly important work. For all the reasons already given, I would like to see the rolling stock substantially improved, overhauled and, I hope, replaced with new stock. Does my hon. Friend the Member for Norwich North (Chloe Smith) agree that it is important that we consider the working environment provided by any replacement rolling stock? It must be comfortable and must provide free wi-fi for all passengers, power sockets and the various facilities that commuters and those working on these trains need.

Chloe Smith: I endorse the points made by my hon. Friend and constituency neighbour. The task force has been able to secure some short-term improvements—such

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as the provision of power points—not to all stock across the franchise fleet, but to the InterCity stock that serves his constituents and mine. That, however, just gets us to an equal starting point. We have so much more to do, as the report makes clear.

The task force has laid out the problem and how we can solve it. It has laid out the unique opportunity we have, why now is the time to act, and the consequences of not acting. Such investment does not go ahead without the commitment of Members of Parliament and the partners who worked with us on the report. These things do not happen by accident: we have pulled together a year’s worth of hard work, undertaken not only for those whom we represent, but for many thousands of passengers. I think they stand with us today in saying that these issues must be raised in Parliament, and it falls to us as their representatives to do so. I sincerely hope that we are successful, so that those passengers can once again have faith in their rail service.

4.18 pm

Robert Halfon (Harlow) (Con): It is a pleasure to serve under your chairmanship, Mr Turner. I will speak very briefly. First, I congratulate the three Members who are here. They are formidable fighters for their commuters. Although the debate is primarily on the Great Eastern main line, I will briefly talk about the problems of rail infrastructure across the east of England. In particular, I will talk about my line—the West Anglia line—because the problems of infrastructure investment are similar.

My constituents, many of whom commute from Harlow and surrounding villages to London, regularly complain of serious overcrowding on trains to Liverpool Street station, despite ticket prices continuing to increase. Does the Minister agree that, in addition to improvements to the Great Eastern main line, more investment is needed across the east of England and Essex and on the West Anglia main line in order to increase capacity on commuter trains and to ensure that commuters receive value for money? We need to invest not only in rolling stock, but in stations across Essex and the east of England, such as Harlow Mill, Sawbridgeworth, Roydon and, obviously, the main Harlow Town station. The smaller stations are badly in need of refurbishment and do not offer adequate protection from poor weather. Will the Minister look into that?

Many commuters frequently raise with me the fact that it is cheaper to travel by London underground from Epping rather than by train from Harlow. In some cases, it costs £25 a day rather than £50. I have just spoken about increasing capacity, but the Stansted Express should stop at Harlow more often and we need better rolling stock. We also need a proper move towards Oyster-isation and the smart-card system that has been promised to us in the past. If the Minister is unable to answer all my questions today, I would be grateful if she wrote to me.

4.21 pm

The Parliamentary Under-Secretary of State for Transport (Claire Perry): It is a pleasure to serve under your chairmanship, Mr Turner. I warmly and sincerely congratulate my hon.

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Friend the Member for Ipswich (Ben Gummer) on securing this vital debate on required future improvements in this vibrant region of the UK. I pay tribute both to the Members present today and to the team that has worked so hard with them on the report over the past year. I had the pleasure of meeting members of the team, particularly Mark Pendlington, who leads the New Anglia local enterprise partnership. I know that many others have also been involved in putting together this excellent piece of work.

The report is particularly helpful in that it sets out the underlying value that proper infrastructure development can bring. We are good at modelling transport benefits, but capturing the gross value added and the broader economic benefit is more difficult. However, the report is an exemplar of how to do that. The analysis will help to reinforce the need for and benefits of the vital investments in the transport system that serves the cities and communities of East Anglia, which, as so eloquently pointed out by my hon. Friend, is the UK’s second largest region in terms of economic contribution and is focused on high-value, white-hot growth industries, such as life sciences and biotech.

Of course, it is not only this region that needs rail investment. As my hon. Friend the Member for Harlow (Robert Halfon) pointed out, there is under-investment right across the railway network. In the past 20 years, we have seen record numbers of passengers taking record numbers of journeys. In some cases, however, the railways have kept up. Satisfaction, punctuality and safety have all increased, and EU figures found that we have the most improved railway in Europe. Despite that, extraordinary growth in demand coupled with a lag in infrastructure investment means that we face overcrowding in some parts of the country and areas where journey times may increase. The great thing is that, as a coalition Government, we are finally realising the vital role of investment in transport infrastructure. We are seeing record levels of railway investment and the biggest investment in rail and rolling stock since Victorian times, with £38 billion being spent over the next five years on maintaining, upgrading and improving the network.

Mr Andrew Turner (in the Chair): Order. I wonder whether the Minister could face the Chair.

Claire Perry: Forgive me, Mr Turner. You are quite right to correct me.

It is an opportune time to review the case for investment in the region, which is why the report is so timely. We have already committed to £170 million of track and signalling improvements on the Great Eastern main line next year and have agreed a package of improvements with the Abellio Greater Anglia franchise, including additional services between Stansted and Cambridge and refreshed trains on the Norwich to London route. I was joined by hon. Friends on a visit to road test some of the improvements. In fact, there is a photo somewhere of my hon. Friend the Member for Ipswich trying out the new loo—in a mock-up capacity only. It is good to see that we are not standing still and waiting for investment; we are upgrading in line with what passengers require, which means simple things such as new toilets that do not leak, new carpets and seat covers, plug sockets and new lighting. Regarding wi-fi, which is available to all

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customers on inter-city services and free to first-class passengers, we are trying to find out the future deployment plans. I agree with my hon. Friends that it is an important part of the package going forward and will write to them.

Abellio Greater Anglia will work with the industry to develop and deliver all the Government’s control period 5 projects, including Crossrail, Great Eastern main line infrastructure improvements, improvements to the Ely area, Stratford to Angel Road capacity improvements, a new station at Lea Bridge, and additional peak capacity in 2014 to 2019 into Kings Cross and Liverpool Street to meet forecast commuter growth. There will also be additional freight capacity. We have not discussed freight, but it is an exceptionally important part of the railway mix, and we are considering ways of unblocking lines to allow both and freight and passenger trains to run. This is an incredibly opportune time for such a report. My boss the Secretary of State and I have both read it, and we are looking carefully at how the improvements might be delivered.

I commend the work that the group behind the report has done to unblock some of the long-held barriers of party political or cross-county agendas. It has been refreshing to see a strong cross-party and cross-county approach to the work. My hon. Friend the Member for Ipswich asked whether I had received any representations from the Opposition Front-Bench team, or indeed any Opposition Member, on this subject, but the answer is no. I am unsurprised, however, given that the previous Government electrified only eight miles of track in 13 years and failed to realise the valuable role that transport plays in building economic growth in regions across the country.

Chloe Smith: Does the Minister agree that it is a great shame that Opposition Members are not present to speak for themselves on the matter?

Claire Perry: It is a great shame, but it does not surprise me.

The Government will now be asking Network Rail how to progress the detailed development of the case that has been eloquently made for the line-speed changes, using the funding provided in the current rail investment strategy, to fund the best-value-for-money elements for completion by 2019. The opportunity for shorter journey times will be included in the development of the franchise to 2016, which is to be awarded from October of that year onwards. That could lead to bidders for the new franchise being asked specifically in their proposals how to address the requirements set out in the “Norwich in 90” report, in particular the totemic achievement of the

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90-minute travel time. We propose to publish the consultation for the next East Anglia franchise on 1 December 2014, so it is an important time for anyone who wants to make further representations. In future franchise competitions, we expect bidders to give weight to both financial and quality considerations of rolling stock, focusing on passengers.

It is an exciting time for the rail industry across the UK. I heartily welcome the report, which represents an excellent forensic analysis of what can be unlocked with relatively small investment. I look forward to working with colleagues in taking the recommendations forward.

Ben Gummer: Does the Minister agree that letting the franchise in 2016 is a critical moment for ordering new rolling stock? If that were delayed, the report’s contents could not be delivered.

Claire Perry: My hon. Friend will be reassured to know that the new franchising timetable that my Department has put in place is running like clockwork—like a punctual train—so we anticipate that we will stick to the timetable.

Robert Halfon: Will the Minister give way?

Claire Perry: Just briefly, as I want to make a point about a visit that I am making on Friday.

Robert Halfon: Will the Minister confirm that she will write to me regarding my points about the West Anglia main line and Harlow?

Claire Perry: I was just moving on to what I am going to do. I will be delighted to write to or, even better, meet my hon. Friend to talk specifically about improvements for his hard-pressed commuters.

My hon. Friend the Member for Ipswich will be delighted to hear that I will be in his city—[Interruption.] Excuse me, his town.

Wayne David (Caerphilly) (Lab): Village?

Claire Perry: Town, definitely, sir. I will be in my hon. Friend’s town on Friday, where I look forward to attending the Suffolk rail conference and hearing about the importance of investment in the region and understanding a little more about what passengers require.

In conclusion, the report is a wonderful piece of work. I pay tribute to all those involved and look forward to working with my hon. Friends in the room—it would be lovely to have some input from Opposition Members on such an important issue—in trying to implement what is feasible and practicable.

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Welfare Reform (Welsh Valleys)

4.29 pm

Wayne David (Caerphilly) (Lab): It is a pleasure to serve under your chairmanship, Mr Turner.

As a Member of Parliament representing a seat in the south Wales valleys, I am only too aware of the impact on my constituents of the Government’s changes to welfare over the past few years. I have constituents who have had to wait nine months for their personal independence payment applications to be processed or who have had zero points allocated by Atos in their work capability assessments, only to win their cases on appeal and so achieve more than 15 points. I have had numerous cases of people who have experienced unfairness because of the bedroom tax. Many constituents who have come to my surgery are genuinely struggling to make ends meet. Such individuals are close to the point of despair because of the Government’s welfare changes.

Huw Irranca-Davies (Ogmore) (Lab): I congratulate my hon. Friend on securing this important debate and thank him for his generosity in giving way. May I draw his attention to a report that came out earlier this year, commissioned by the Government themselves, on the rise in food aid and food banks in the UK? Three causal factors were identified, two of which were the cumulative effect of benefit changes and the delays in the payment of those benefits, putting working people in the food banks.

Wayne David: My hon. Friend makes his point extremely well and reinforces my points about the everyday hardship experienced by so many of our people—our poor people, in particular. All of us who represent valley seats are well aware of such examples, and many others.

Jessica Morden (Newport East) (Lab): I thank my hon. Friend for securing an important debate on a piece of work that focuses on the valleys, but is also important for constituencies such as mine. Does he agree that the impacts that the report talks about are keenly felt by women in particular? Some reports estimate that 74% of savings from benefit changes come directly from women’s pockets.

Wayne David: My hon. Friend makes her point well. I am aware of an excellent paper prepared by Chwarae Teg that highlights how women are all too often at the sharp end of benefit changes in Wales and elsewhere.

I have been aware of all the changes on an individual basis, as they have affected my constituents, but until recently I was not fully aware of the impact that the reforms are having on the south Wales valleys as a whole.

Nia Griffith (Llanelli) (Lab): Does my hon. Friend agree that it is not simply the individuals who feel the effect, but the small businesses in the area and in our town centres, such as in Llanelli? More and more money is being sucked out of the community. It would be far better to tax the rich, rather than to penalise the poor, because the money of the poor goes straight back into the community.

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Wayne David: Yes. My hon. Friend touches on the central point of my speech. The welfare changes are having a detrimental effect not simply on individuals, but on the community as a whole, in a variety of different ways.

Jonathan Edwards (Carmarthen East and Dinefwr) (PC): On that theme, Sheffield Hallam university has just produced an important report on the welfare changes of the previous Labour Government and the coalition Government, indicating that more than £1 billion has been taken out of the Welsh economy as a result. The biggest single hit was the changes to incapacity benefit, which was a reform of his previous Labour Government.

Wayne David: The hon. Gentleman has led me on neatly to my next point and the central part of my contribution this afternoon. That is to talk not about the work of the previous Labour Government—yes, we began the process of welfare change, but we did it fairly—but about what we have seen since: a completely unfair introduction of welfare reform, or so-called welfare reform, that, more accurately, has been a way of making crude cuts affecting some of the poorest and most vulnerable in society.

As the hon. Gentleman said, however, an excellent report was published by the Industrial Communities Alliance in Wales. It was written by Christina Beatty and Steve Fothergill of the Centre For Regional Economic and Social Research at Sheffield Hallam university. The report sets out in well researched detail the scale of the Government’s cuts on one of the most deprived areas of the United Kingdom and quantifies in great detail the impact that those cuts are having on the economy of the south Wales valleys.

It is important to remember that not all the cuts have yet been implemented but, when they are, the valleys will lose around £430 million a year. That is an average of £650 per adult of working age. Those are massive figures, especially when we realise that the impact on the valleys is far greater than it is on virtually any other part of the United Kingdom. Without taking into account the household benefit cap and the bedroom tax, the overall financial loss for the United Kingdom as a whole is £475 per working-age adult—for the south-east of England, £370.

The contrast with the valleys is sharpest in parts of southern England outside London. In parts of Surrey, Berkshire, Hampshire, Oxfordshire and Buckinghamshire, the financial loss per adult of working age is estimated to be little more than a third of the loss for the people living in the south Wales valleys. The Government’s welfare cuts are therefore accentuating the already huge differences between well off and poor areas, and are having a hugely negative impact on the local economy across the old south Wales coalfields from Torfaen to Ammanford.

If that were not bad enough, Beatty and Fothergill have dug down to ward level and shown that the financial loss per adult in the poorest parts of the valleys is truly horrific. By looking at official Government data, they have shown that in Maerdy in the Rhondda the overall financial loss per adult is £1,050 per year and in Pen-y-waun, near Aberdare, it is £1,040 per year. In my own constituency, the loss is £820 in Bargoed and £790 in St James. In St James, for example, which includes some relatively well off areas, the loss is greatest at sub-ward level,

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among some of the poorest people in Caerphilly. If that is true in my constituency, I am sure that it is also true elsewhere.

The huge loss of income has not only a hugely negative effect on the individuals and families concerned, but a massive effect on the local economy—a point made by my hon. Friend the Member for Llanelli (Nia Griffith). Over time, Beatty and Fothergill estimate that some 3,000 jobs in consumer services can be expected to be lost as a result of the Government’s welfare policies. The Government’s argument, of course, is that reforming welfare in such a way is increasing the incentive for people to take up employment—I am sure we will hear that from the Minister—but the trouble is that in many parts of the valleys the local economy is incredibly weak and there is little sign of significant growth in quality job opportunities. What growth we do see tends to be in jobs that are part time, have zero-hour contracts attached to them and are very low paid.

There is another factor. Beatty and Fothergill have pointed out that the valleys have an archetypal “weak local economy” with a large pool of people who are unemployed. The consequence is that bringing into the labour market more people who have been on long-term disablement benefits does not necessarily lead to those people getting jobs. Men and women with health problems or disabilities, with few formal qualifications and little if any skilled work experience, and often in the latter phase of their working lives, are rarely employers’ first choice.

Ann Clwyd (Cynon Valley) (Lab): I am sure my hon. Friend will agree with me that the situation of disabled people in the valleys is particularly bad. We have the highest proportion of disabled people compared with other parts of the United Kingdom. Those people will be especially badly hit by the continuing cuts in welfare. Disability attendance allowance and housing benefit form part of a list of things that impact on them. Does he believe that particular attention needs to be paid to the needs of the disabled in the south Wales valleys?

Wayne David: Yes, indeed, that is absolutely correct. My right hon. Friend makes her point well. To begin with, we have a larger proportion of people who suffer from disabilities than many other parts of the United Kingdom, because of the industrial past of the south Wales valleys. Such people are being especially hard hit by the Government’s policies.

Many of the people who are losing benefits are not securing employment—certainly not of the reasonably well paid variety. They are suffering a huge cut in their income levels and their standard of living. The report by Beatty and Fothergill points to the resources coming to the valleys from the European Union and compares those to the financial loss from welfare reform. We all know that as west Wales and the valleys were originally designated an objective 1 area, and then a convergence area, they received significant European regional development fund and European social fund moneys. From 2014 to 2020, we will see additional EU aid amounting to £1.6 billion. That funding will be worth around £120 million per year to the valleys, but, as I said earlier, the valleys’ loss through welfare reform is estimated at £430 million a year. In other words, the welfare cuts will remove almost four times as much money as the valleys receive in EU regional aid.

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Let us not forget that the ongoing welfare cuts will be running in parallel with the harshest cuts in local government services that we have ever seen. Having been shielded by the Welsh Government until now, local government in the valleys is being forced to introduce unprecedented cuts in expenditure, which will inevitably hit hard those who rely most on local authority services: the sick, the disabled, women, the old, the young and the disadvantaged. Not only will services be hit, but we are likely to see jobs being lost and local economies suffering through the knock-on effects of the contraction of local government. Although the Beatty-Fothergill report does not examine what those cuts will mean, there is absolutely no doubt that they can only make a bad situation very much worse.

The Beatty-Fothergill report demonstrates that Wales is being hit harder by welfare reform than almost any other part of the United Kingdom, and that the valleys are being hit “exceptionally hard”. It concludes:

“The South Wales Valleys, long afflicted by the loss of jobs in coal, steel and manufacturing, have been the target of many regeneration efforts, some more successful than others. Welfare reform unequivocally works in the opposite direction: the poor will become poorer, and the poorest areas will fall further behind.”

Nothing highlights more clearly the need for a Labour Government in Westminster after next year’s general election. That Government need to pursue—I believe they will—policies that have at their heart the need to regenerate the economy of the south Wales valleys. We need policies that will provide well paid jobs, build on the excellent work of the Welsh Government’s jobs growth fund and harness creativity and drive so that entrepreneurship becomes the hallmark of the valleys.

Jonathan Edwards: I voted against the Welfare Reform Bill on Second Reading, and was proud to do so—reading the report, I feel vindicated. Will the hon. Gentleman outline which measures introduced by the current Government will be repealed by the next Labour Government, if there is one?

Wayne David: I am happy to say that top of our list will be the bedroom tax. We have made an unequivocal commitment to getting rid of that. Of course there will be welfare reform, but it will be genuine reform. The system needs to be modernised, but we will not place an undue burden on the poor and those who are least able to suffer cuts. Frankly, we will turn on its head a Government policy that is designed to make the poor poorer and the rich richer. We will have a Labour Government who will stand four-square behind ordinary people. Such a Government, armed with the policies that I outlined, will work in genuine partnership with the Welsh Government. I am confident that will happen and that a new and positive chapter will begin for the south Wales valleys.

4.44 pm

The Parliamentary Under-Secretary of State for Wales (Alun Cairns): It is a privilege to have the opportunity to respond to the debate and to serve under your chairmanship, Mr Turner. I congratulate the hon. Member for Caerphilly (Wayne David) on securing this important debate.

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I have listened carefully to the concerns raised by the hon. Gentleman and other right hon. and hon. Members who have contributed. The Government are making welfare changes that will turn around so many communities and offer them hope. I want to underline at the outset the context and circumstances in which our reforms are taking place.

The hon. Member for Caerphilly talked about the economic situation in the valley communities. I wonder whether he will acknowledge that although Wales is now the poorest part of the United Kingdom, that was not the situation inherited by the previous Labour Government in 1997. Over the duration of the previous Administration, Wales became the poorest part of the United Kingdom. We have heard about regeneration plans, but we did not see any of those plans succeed or transform the prospects of the communities that he highlighted.

Huw Irranca-Davies: Just to test the logic of the Minister’s proposition, does he recognise that the last time we saw a massive increase in those on incapacity benefit and other benefits was during the 1980s? I do not want to revisit the wholesale closure of the mines, but will he tell me what regeneration strategy was put in place at that time?

Alun Cairns: I find it strange that the hon. Gentleman has gone back to the 1980s. I was still in school—that is how long ago it was.

It is relevant that when this Government came to power in 2010, Wales was the poorest part, nationally or regionally, of the United Kingdom. In 1997, when the previous Labour Government came to power, it was not. There needs to be a recognition of the context in which the welfare changes are taking place. The data are quite stark. The hon. Member for Caerphilly mentioned support from European aid that has gone to west Wales and the valleys. I remember that that support was discussed as a one-off opportunity, but we have just come to the third prospective round of European aid. That demonstrates the legacy that the previous Administration left.

Nia Griffith: Will the Minister tell us what he is going to do to improve the record of his Government’s Work programme, which is failing the people in the valleys, and particularly those who are furthest from the workplace, such that Oxfam Cymru has said that some people are being “parked” and are not being given the opportunities they should have?

Alun Cairns: I am grateful to the hon. Lady for raising that point. I will cover that as I make some progress with my speech.

I want to underline the context in which the Government are responding, with Wales, sadly, the poorest part of the United Kingdom. We inherited a situation in which parts of Wales were also sadly blighted with worklessness. In some communities, a third of the working age population were claiming out-of-work benefits. The Government had to act. We have taken steps—

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Wayne David: Will the Minister give way on that point?

Alun Cairns: In a moment—with the greatest of respect, I would like to make an element of progress, certainly at the outset.

We have taken steps to deal with the legacy of a welfare system that encouraged dependency and penalised those who wanted to work. The benefits system was clearly broken. It did not work for claimants, for the economy or the people of those communities or for the nation’s finances. According to the Work and Pensions Committee, a parent who increased their hours from 16 to 30 hours of work a week would gain less than £1 for every extra hour they worked. It was hardly a system that incentivised people to do the right thing. That sort of example underlines absolutely the need for reform.

Paul Murphy (Torfaen) (Lab): Does the Minister accept the thrust of the Beatty-Fothergill report? In Torfaen, which is a valleys constituency, £34 million is sucked out of the local economy every year, depriving it of expansion and entrepreneurship in my constituency, just like all the other Welsh constituencies. Do the Government accept that that is a really serious issue that we need to look at?

Alun Cairns: I am grateful to the right hon. Gentleman for making that point, but that report does not take account of the incentives that are built into the welfare reforms, nor does it recognise the increased income that the poorest in the community will receive from the universal credit. I will come to that.

Nia Griffith: Will the Minister take up with the Secretary of State for Work and Pensions the serious issue of the taper on universal credit, which will mean that work will not pay? That is exactly the opposite of what he and we want to see.

Alun Cairns: I hope to come to universal credit if I make progress in my speech.

Welfare reform is part of the long-term economic plan to stabilise the nation’s economy, to deal with the years of financial mismanagement under the last Government, and to get the people of Britain, including Wales, back to work. The Government want to move people from dependence to independence. We must enable them to free themselves from a lifetime on benefits and enable them to achieve their ambitions.

The previous Government, to their credit, recognised the need for changes to the welfare system. Various Governments attempted to address the issues, but only tweaked an already failed system. Another tweak was not an option. An overhaul was required, so we are creating a new welfare system in Wales and throughout the UK based on flexibility, simplicity and fairness. We want a system that can respond to the modern and flexible labour market, while ensuring that no individual is worse off by accepting a job. We want a system that is easy for people to use.

Wayne David: The Minister says he does not want people to be worse off by accepting employment, but part of the Government’s strategy is to reduce the value

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of benefits so that there is more incentive for people to take low-wage jobs because they are receiving hardly anything, and sometimes nothing, on welfare.

Alun Cairns: I am trying to get on to universal credit, but I will highlight how the poorest will be better off financially. We cannot take one policy in isolation and we must consider the reduction in unemployment—I hope that the hon. Gentleman recognises and welcomes it—as well as other economic changes.

We want a system that is easy for people to use but ensures that customers receive all the benefits to which they are entitled. We want a fair system that reflects the heart of our nation—a nation that looks after those who need it but ensures fairness for hard-working individuals and families.

Worklessness needed addressing and is being addressed. Surely we must all be concerned that 200,000 people in Wales have never worked. That is wholly unsustainable. As Welsh MPs, we should want the Government to do all they can to move people from dependence to independence. I am sure the hon. Member for Caerphilly supports that and that we can continue to enable people to free themselves from a lifetime on benefits and enable them to achieve their goals.

Huw Irranca-Davies: Does the Minister accept my proposal that to free someone from benefits to go into a job with poverty pay is a strange sort of freedom? Does he agree that we must ensure that that work pays and that there is no increase in the bill on taxpayers to subsidise poverty pay, as there is at the moment, including with housing benefit?

Alun Cairns: The hon. Gentleman makes a point that I will try to cover when I come to universal credit. The introduction of universal credit will always make people better off while they are in work. I have highlighted one example and could cite many more of people who were trapped in the benefits system. All parties have recognised the need for reform and the universal credit will bring about the change to move people from dependence to independence. Clearly, it is not good for individuals, their families or their communities to be out of work and it is certainly not good for the rest of the nation.

Successive Governments have failed to tackle the problem, but we have tackled it head-on. We are working to improve the incentive to work because it remains the best route out of poverty. Hon. Members will be pleased to hear that the latest statistics show that the number of workless households in Wales has fallen by 19,000. Across the south Wales valleys, 17,000 more people are in work since the election and almost 12,000 have come off benefits. I hope that the hon. Member for Caerphilly will recognise that.

Wayne David: Does the Minister accept that in-work poverty is now greater than ever before?

Alun Cairns: That is one thing that universal credit will put right because people will always be better off. I will come to that in a moment. Our reforms are already reaping benefits. People are moving from dependency on benefits and into work. That is a positive step for Wales, for communities and for the individuals who, for far too long, have been locked in the benefits system.

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The welfare system we inherited was built for 1940s society and is no longer able to deliver the support that people need in a modern flexible labour market: the sort of market that communities are already adapting to. Our benefits system needs to reflect that and to support people who need it.

A flexible labour market will be supported by universal credit because households in Wales will be entitled to £163 more a month on average and 75% of those who will gain will be in the bottom 40% of the income distribution curve.

Nia Griffith: Will the Minister look again at research by the Joseph Rowntree Foundation that has shown that some families, by working more hours, will lose out? Will he ask the Secretary of State to look again at how the taper will work in universal credit?

Alun Cairns: I will happily look at the Joseph Rowntree Foundation’s report, but I again emphasise that universal credit will leave people with an average of £163 more a month and 75% of them will be in the bottom 40% of income distribution. My point is that the very poorest in society and the community will not only be incentivised by universal credit to get back into work, but receive an uplift in their monthly income as a result, as they stand. People will always be better off in work than in one example I have highlighted in which people were happy to work 16 hours a week because they retained their benefit, but working the 17th hour was simply not worth their while. That was not what they wanted, nor was it what employers wanted because of the inflexibility that that built into the labour market.

Ann Clwyd: What about the workers at Remploy? We heard all the arguments for shutting Remploy and getting rid of many disabled workers. I understand that very few of them have found alternative work. What about them?

Alun Cairns: With credit to the right hon. Lady, who has been a strong champion of constituents with disabled rights for many years and has gained respect throughout the House, I underline the comments made at the time by Disability Wales that Remploy and the segregation of disabled employees was something for the last century rather than this century. It wants the mainstreaming of disabled people. Disability Wales clearly recognises and champions that.

Jonathan Edwards: On universal credit, is it not the case, as the “Dispatches” programme highlighted last month, that the roll-out is in complete chaos and is a shambles, and that Jobcentre Plus is unable to deal with the demands of the roll-out set by the Department?

Alun Cairns: The hon. Gentleman will know that, in Wales, Shotton in Flintshire is where universal credit has been rolled out. The response has been remarkable in incentivising people into work. Some 75% have responded positively and said that they are now in a better position to find work as a result of universal credit than they were under the previous system.

In the minute remaining, I ask Opposition Members for support, because there is a responsibility on all MPs. Reference was made to council cuts and I underline the fact that council taxes in Wales rose when there had

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broadly been a freeze in England. We need to draw attention to that. Local authorities must keep their bills as low as possible.

Housing benefit has been considered and discussed. Only three local authorities in Wales applied for additional discretionary housing payments. Caerphilly was one, so I give recognition and credit to Caerphilly. If housing

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benefit and the spare room subsidy are such an issue, why did the other 19 local authorities in Wales not make an application for the additional funding that was available? I hope that the hon. Member for Caerphilly would support that.

5 pm

Sitting adjourned without Question put (Standing Order No. 10(13)).