Mark Field: I very much agree with what my hon. Friend has said and with the intervention by our hon. Friend the Member for Aldershot (Sir Gerald Howarth), but does he not think that we would be greatly assisted in making the case for ensuring that there is no change

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in the European defence mechanism if we honoured our own commitments to ensure that at least 2% of our GDP is spent on defence and, given the insecurities of this world, rather more in the years to come?

Sir William Cash: I very much agree with that. Of course, there is this wave of counter-cyclical agreement and disagreement between my hon. Friend and me. Actually, that is encapsulated in a personal matter. We were, through our respective families, involved in the battles in Normandy, which I will not go into now, but which he knows about and I know about and which were extremely poignant and extremely relevant to what went on at that time.

Mark Field: My hon. Friend is far too modest to go into great detail or perhaps did not want to embarrass me, but I should point out that although his father served in the British Army, my great-uncle was serving in the Panzer regiment for the opposite side during that particular battle.

Sir William Cash: That was on 10 July 1944. My father got the military cross, and my hon. Friend’s great-uncle was on the other side, but there we are.

We must also—this is very delicate territory—remain clear that the United States, which has for more than 50 years impressed on the United Kingdom the importance of a more integrated Europe, must not be allowed to persuade us against our national interest in relation to the question of defence. However, this is not by any means only about defence. As I have explained, it is also about our economy and our trading relationships, which are punctuated by constant tensions embedded in our European relationship that, to a greater or lesser degree, are based on our alleged obligations under European law.

Most recently there was the budget surcharge issue, but there are also disputed areas of policy such as the European arrest warrant and, of course, the current wave of concern over immigration and freedom of movement, on which we are warned against infringing European law and on which we had very interesting exchanges with the Bundestag’s European affairs committee yesterday. It takes the view that one has to distinguish between workers and people, and that it is our fault that we have ended up where we are now, but as the shadow Minister, the right hon. Member for Wolverhampton South East (Mr McFadden), heard me say last night, of course we believe that that was the consequence of decisions taken by the former Labour Government. But there we are.

It must be said, however, that the European rule of law is itself a moveable feast at the whim of certain states. For example, in 2003, Germany and France themselves broke the stability and growth pact with impunity when it suited them. We are currently reminded by a proliferation of articles and books about the collapse of the Berlin wall that the German question, and its embodiment in European and our own and their political history, remains a constant national interest. In fact, very rarely do we talk about Germany in this country, but in Germany and in France they talk about it almost incessantly. Indeed, I recall taking part in a debate on the future of Europe in the then dilapidated Reichstag when the Berlin wall was still up, and putting

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my hand against the wall itself, and I recall a member of the German delegation vigorously waving his arms as I heard him through the Bakelite headphones vociferously remonstrating that, as he put it,

“my heart and soul rages with fervour and passion at the thought of a single government and a single parliament in this Reichstag.”

I warned the meeting that such language would merely rekindle old tensions—and that was before the wall came down.

As Peter Watson, who rightly reminds us in his book “The German Genius” about the great contribution of Germany to industry and art, said in a book review last week,

“no one has yet succeeded in explaining the collapse into barbarism that followed the First World War.”

I would add that nor has sufficient attention been given to the question of how to deal with a European Union—created to avoid everything that had happened in the aftermath of the first and second world wars—dominated, as it now is, by a peaceful but assertive Germany, based on a framework delivering supposedly irreversible policies that have delivered instability throughout Europe and vitally affected our own economy, our national interest and Westminster democratic accountability. Insufficient attention has been given to how we deal with that problem, and it is not just for us but for all the European member states, and Germany in particular.

Furthermore, far from containing German domination of the EU, the treaties have stimulated it. For all the protestations, the European Union has morphed into an increasingly undemocratic Europe, with Britain unacceptably relegated to the second tier and with Germany largely predominant over the whole, as well as the low-growth eurozone.

The Prime Minister was entirely right to state in his Bloomberg speech:

“Our national Parliament is the root of our democracy.”

We must address the question of a fundamental change in our relationship with the EU and the reassertion of sovereignty at Westminster and in our democracy. Those are the reasons why we were able to prevail in the dark days from 1940 to 1945, and we must not underestimate their importance today. Now we must do so again on those principles, but in very different circumstances. It is not enough merely to reform at the margins. We must resolve the European, and therefore the German, question in our own time. If negotiations for that purpose, above all else, cannot be resolved, we must leave the treaties and lead Europe on the right road to stability and peace, both for ourselves and for Europe—including Germany—as a whole. We must be, as Churchill said, “associated, but not absorbed.” For that purpose, we must pursue a policy of an association of nation states.

The Prime Minister’s purported renegotiations do not, at present, tackle the fundamental structural question of the treaties. The Foreign Secretary is right to indicate that we must never go into a negotiation unless we are prepared to get up from the table and walk away, but it is essential that we are told what our red lines are, and that they address the fundamental changes that we need within the EU. Immigration is, of course, a major issue, but the question of our borders is not simply a question of immigration. It is a question of parliamentary democracy and jurisdiction, and therefore it is about more than the

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symptoms of our problems with European integration and its impact on our entire political and economic national interest. Trade alone is not the arbiter of freedom and democracy; it flows from them, as do the laws that affect our economy and that have been so disadvantageous to us, as I have indicated already, in many areas.

The renegotiations cannot be successful in our national interest without a fundamental change in the architecture of the European Union. If we do not renegotiate and achieve such fundamental change, Germany’s predominance in the project will increase and the United Kingdom will be required to leave the EU. We must not be continually subjected and subordinated to being in the second tier of a two-tier Europe.

We are now at an historic moment at the crossroads of the European Union, which can be evaluated only on a broad historical landscape. I voted yes in 1975, and I attempted to reserve our Westminster sovereignty in the Single European Act in 1986. Maastricht and European Government changed all that. Britain and Germany have historically had, and still have, very different visions of Europe. We look to our borders, and Germany looks towards a broad, roaming European vision—a political union without borders.

Not so long ago, I referred in the book I mentioned, “Against a Federal Europe”, to Hans-Dietrich Genscher, who was Foreign Minister of Germany for 15 years and was one of the most powerful architects of reunification and the current European Union. Although he repudiated his former loyalties, Genscher stated:

“We Germans can be the architects of a united and indivisible Europe”

and that a strong Germany was good for Europe. In my analysis in 1999, from which I do not demur, I said that the assertion of a strong Germany being good for Europe

“begs many questions. Germany’s economic strength derives from the fact that she saturates the EC”—

as it was then—

“and Eastern Europe with her exports; if as seems likely, she consolidates this position via the single market, while gaining de facto control of the single currency, one could well envisage a scenario in which a strong Germany was bad for Europe. If industries in other countries were weakened or depleted by German domination and if the single currency removed the competitiveness of weaker economies, while the social charter…insulated German workers from competitively low wages abroad, then one could well imagine economic decline and rising unemployment on the periphery of the EC financing the German stranglehold.”

Who would argue today that that has not happened? I noted that at the 25th anniversary of the collapse of the Berlin wall, when Dr Michael Stürmer was asked on “Newsnight” how Germany had achieved such predominance, he indicated that it was “by default”. I reserve judgement on that.

Furthermore, we are not simply talking about Germany’s economic impact on other member states, whatever subsidies or defensive alliance through NATO they may receive in return. As I have said, the preamble to the German Basic Law of 1949 includes a policy leading to a United States of Europe as one of the constitutional foreign policy goals of Germany. As all those factors have aggregated, it has become ever more important for the United Kingdom to look to its own future. To that we must turn our determined attention, while seeking peaceful co-operation and trading relationships within

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Europe and with Germany. There will be no peace in an unstable Europe, which will implode with disastrous consequences. Such instability is inherent in the imbalanced structure of the whole, not only of the eurozone. We all want peace in Europe, but to ensure such peace we must restructure the treaties, not simply tinker with them.

We must clearly put this to Germany and the EU as a whole. The United Kingdom cannot and must not allow our democracy, in this Parliament, from which all political and economic action flows and which has saved Europe and herself for generations, to be in any way compromised. As William Pitt stated in his Guildhall speech in 1805:

“England has saved herself by her exertions and will, as I trust, save Europe by her example.”

Several hon. Members rose

John Robertson (in the Chair): Order, I will be calling the Front Benchers at about 3.40 pm, so hon. Members have about 10 minutes each.

3.9 pm

Jim Shannon (Strangford) (DUP): I congratulate the hon. Member for Stone (Sir William Cash) on bringing this matter to the House for consideration. Most, if not all of us probably share his opinion about the importance of discussing where we are going, and that resonates with all my constituents.

The hon. Gentleman said that he voted yes in 1975, but the Democratic Unionist party clearly took a “no” stance. However, it is good that all of us here today are of the same mind, even if we were not of the same mind back in 1975.

Sir Gerald Howarth: Just for the record, I should say that I campaigned for us not to join the European Economic Community in 1975.

Jim Shannon: The hon. Gentleman and my party were on same platform—that is good news, and I am glad to hear it.

As we move towards the Westminster election campaign next year, people’s minds are focusing on Europe, not just because of other parties’ stances on the issue, but because it affects their lives, and I want to talk about that.

The hon. Member for Stone is right that we cannot let Germany direct EU strategy or policy. We cannot allow debate on EU reform to be simply about tit-for-tat arguments on ideology. We need a real dose of realism, and today’s debate gives us that realism.

The worst of Europe damages the best of Britain. That is how I feel about the issue, and that is how I believe many others feel about it. The worst of Europe means red tape for businesses, mass immigration and less money for hard-working taxpayers. The May elections proved that the people of the EU are angry. The Government should not need reminding that the message sent loud and clear at our polls was that voters have had enough.

David Simpson (Upper Bann) (DUP): I congratulate the hon. Member for Stone (Sir William Cash) on obtaining the debate. The research notes we received for the debate say Germany wants Britain to remain part of the EU

“because of its economic and political weight”.

If that is the case, Germany and others are surely going to have to change their attitude dramatically.

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Jim Shannon: They will have to be very generous in trying to entice us, but it will probably take more than they are prepared to offer at this time.

There needs to be substantive change. There should be genuine change for the better. At the top of the shopping list should be tackling immigration and returning sovereignty to this Parliament so that we can legislate on behalf of those we represent. That is what we want to see: representation in Parliament, and Parliament having the necessary strength.

The background notes to the debate mention immigration, and it is important that we put on record that Mrs Merkel’s mantra is:

“Freedom of movement is very important. Nothing has changed”

in Germany’s position. According to the background notes, one of her fellow party members, Gunther Krichbaum, said:

“Cameron would get a bloody nose if he introduced quotas ‘unilaterally’”

on immigration. My hon. Friend is right that we need some conciliation, but there does not seem to be much evidence of it at the moment.

The Government need to send a signal of intent by calling for an end to the travelling European circus, which costs almost €200 million every year just bouncing between two cities in Europe. In a debate in the main Chamber last week, one of my colleagues also mentioned vanity projects. There are a great many things money is wasted on, and Germany supports and encourages that, but I do not believe we can.

According to Office for National Statistics provisional figures for the year ending June 2012, non-British net migration to the UK was 242,000, of which 72,000 people were EU nationals and 171,000 were from non-EU countries. Inward migration from the EU was mainly flat between 1991 and 2003, but, following EU enlargement in 2004, there was a significant jump in EU migration to the UK.

In 2003, research commissioned by the Home Office estimated that net immigration from the 2004 accession member states would be “relatively small”—between 5,000 and 13,000 immigrants per year. It actually worked out to be 42,000 a year between 2004 and 2010. That significant underestimate served to undermine public confidence in EU migration.

It is important to mention some of the comments made in Mrs Merkel’s speech to Parliament, which she made partly in English. She said,

“some expect my speech to pave the way for a fundamental reform of the European architecture which will satisfy all kinds of alleged or actual British wishes. I am afraid they are in for a disappointment.”

Conciliation in that? I don’t believe so. That is the issue in this debate.

Unsurprisingly, when figures are so far out, the public will become wary of Europe and of Government policy towards the EU. That became a particularly sensitive subject following the worldwide financial crisis of 2007-08, as belts were tightened and jobs were lost—many have still not been replaced. As the cost of living rises and wages stagnate, the public become increasingly alienated from freedom of movement.

On the red tape surrounding businesses in the United Kingdom of Great Britain and Northern Ireland, firms face a challenge, and I want to talk about that in the few minutes I have left. My hon. Friend the Member for

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Upper Bann (David Simpson) will have a personal knowledge of EU bureaucracy and what it means to businesses.

Our businesses produce superb products, offer world-class services and benefit from being able to sell to a European market of 500 million customers. However, businesses are often encumbered by problematic, poorly understood and burdensome European rules. The impact is clear: fewer inventions are patented, fewer sales are made, fewer goods are produced and fewer jobs are created.

The burden falls most on small and medium-sized firms, which make up the vast majority of businesses. I would like to give two examples. In farming, whether it is the dairy industry, the poultry or the pig business, or any of the goods produced on farms on the land in the United Kingdom of Great Britain and Northern Ireland, we have bureaucracy coming from Europe. Farmers nearly have to have a university degree to get through the red tape. They are not just farmers; they do not just till the land anymore—they do the books and deal with bureaucracy.

I represent the fishing village of Portavogie, and we have never seen so much bureaucracy coming from Europe in relation to fishing. There will be a debate on that in December, before a Minister goes to Brussels to fight our case. However, where once we had 110 or 120 boats from Portavogie fishing in the Irish sea, we now have 70. We have bureaucracy coming from Europe on white fish, and particularly cod. We have a cod recovery plan, which shows there is more cod in the Irish sea than there has been for umpteen years, but, yet again, the fishermen who agreed to the changes see no benefit from them. The bureaucracy in relation to fishing and farming is incredible.

The business taskforce was asked to develop a set of recommendations to reform British and European institutions. It was asked to address the barriers to overall competitiveness, starting a company, employing staff, expanding a business, trading across borders and innovation. According to the taskforce, implementing the recommendations could save billions of pounds, euros and kroner, and thousands of new firms and new jobs could be created. The creation of jobs and new products and technologies must be at the top of our priority list. We must encourage competitiveness so that businesses, including small and medium-sized enterprises, which make up a great deal of the firms in Strangford, and which are the backbone of my constituency, can compete in Europe and on the world stage.

Ultimately, we want an EU of openness and transparency, with equal economic opportunities for all member states. We must ensure that the EU is steered away from the ideological march towards a European federal superstate and towards a more flexible organisation that listens to and respects people in all its member countries. That is what the hon. Member for Stone said in introducing the debate, and that was the whole thrust of the debate.

The EU needs to be open for trade, closer to its people, living within its means and delivering value. That is the only way in which it can function properly, allowing each of its member states to flourish and ensuring that we in the United Kingdom of Great Britain and Northern Ireland benefit from our large

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number of trade partners, which will undoubtedly be boosted by the signing of the transatlantic trade and investment partnership at the G20 in Brisbane just a couple of days ago.

In conclusion, we must assert the sovereignty of the UK Parliament, enact the European Union (Referendum) Bill and allow British voters to have their say as soon as possible.

3.19 pm

Mr John Redwood (Wokingham) (Con): I rise to talk about two large European powers that are both, in their own ways, reluctant Europeans. It is well known that the United Kingdom made an historic and important decision, under the previous Labour Government, not to join the euro. Many of us campaigned actively for that decision. We strongly believed that if the United Kingdom joined the euro it could probably bring the currency down. It would be extremely damaging to our own economy and financial system. How glad I am that we prevailed on that Government. If the United Kingdom had been in the euro at the time of the great banking crash of 2007-08, we would have brought the euro down. The House may remember that it was the United Kingdom that brought down the euro’s progenitor, the exchange rate mechanism, which a previous Government mistakenly went into. Just as the forces of the Great British trading economy—an international economy with a strong dollar base—brought down the ERM, so I think we would have brought down the euro.

Now that we have made that historic decision, I see no intention on the part of any serious force in the United Kingdom to reverse it. I am pleased at that. I confidently predict that no party with any serious chance of winning a single seat in the Westminster Parliament in 2015 will campaign on the UK joining the euro between 2015 and 2020. I confidently predict that the same will be true if we have a general election in 2020. I do not see the mood changing. We have learned our lesson. We have understood that it will not work as an economic project.

We understood also that it does not work from the point of view of our democracy. As soon as a country begins to share a currency with other member states of the EU it must share many other things. Those countries are on a long journey towards a united states of Europe. They are discovering that they will need to share their policy on tax and public spending. It is no longer possible for people in Spain, Italy or Greece to think that they have a democratic right to choose their level of public spending, public borrowing or taxation. They are under increasingly tough controls from the centre. Germany is right about that: strong financial discipline is needed in a currency union if it is to work.

That is exactly the kind of control that the United Kingdom would never accept. I do not see parties of the left accepting that Europe should tell us to spend less; and I do not see parties of the right accepting that Europe should expect us to tax more. Indeed, some of us on the right would not want to be told to spend less in certain areas; and some on the left would not want to be told to tax more, in certain ways. We as a democracy say that the fount of our democracy is the elected Members of this Parliament; and that controlling taxation and our budget are central to our great national story. Our mother of Parliaments emerged to control the

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finances of the King and to say to the King or Queen, “You shall not tax more—or not without redress of grievance, or without our having a say over how the money is spent.” That is why the United Kingdom will rightly remain a reluctant European. We cannot accept the continuing pressure from the logic of the euro, that we should give away those fundamental birthrights—the democratic right to elect people to tax and spend, and change them if they tax and spend too little or too much, or in the wrong way.

I remember, as part of the anti-euro campaign, hitting on the phrase that joining a single currency would be like sharing a bank account with the neighbours. I used to say that I get on well with my neighbours. We have Christmas drinks and the odd summer party, and enjoy each others’ company. However, I do not know about other hon. Members, but I am not ready to share a bank account with my neighbours. I just have this feeling that if I were the prudent one, when I wanted to draw out some of my money to spend, the neighbours would have spent it. They might have wanted a fancier house, and taken out a big mortgage; then when I wanted a mortgage I would discover that our mortgage capacity had already been used up. That is exactly what being in a single currency is like. My opponents in those debates used to look for what was wrong with my analogy. I thought it was broadly right, but even I thought it might be a little bit of a try-on. Now that we have seen the euro scheme I realise that it was completely apt. That is exactly the position of countries such as Greece, Italy and Spain, in relation to Germany. Germany says “We do not want you using the collective mortgage, because we know you will borrow more, and we have got to do the saving.”

There is therefore an unhealthy tension, which is why I must talk about two reluctant Europeans. The other big power in Europe that is proving to be reluctant about the scheme of full European integration, providing the political backing to the single currency, is none other than Germany itself. At the very time when some Germans presume to lecture the United Kingdom on being a reluctant European—a very counterproductive thing to do, because it encourages Euroscepticism no end when Germans lecture us in that way—we find that Germany is busily trying to restrain the others from the impelling political logic of the euro, which must be to complete the political union to provide the backing to the currency.

If we exchange banknotes in the United Kingdom, we see on the banknote a symbol of our country. We see the monarch’s portrait. It is there partly because we like our monarch, but also as a symbol that the whole taxable capacity, the whole parliamentary and political weight, and the whole authority of the United Kingdom Parliament stands behind that banknote. People trust it, trade it and use it because they know that that is true. In time of crisis Parliament stands behind the Bank of England; the Bank of England stands behind the banknote; and the taxable capacity of the country is there for whatever crisis might arise. The problem with the euro is that there is as yet no symbol or political union to stand behind the banknote. That is why it has been subject to crisis after crisis. Pictures of bridges had to be used on the notes, and they could not be like any actual bridge to be found anywhere in Europe, because that might offend people. An Italian bridge might mean the Spaniards would be jealous; or perhaps they would be

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grateful that their bridge was not being pledged on the banknote—I do not know. There would have been tension or difficulties even over choosing the symbols for the banknote, so they had to choose something more anodyne.

There is a much bigger and more important political reality behind that; we are discovering that the full taxable capacity of the German state does not yet stand fully behind the euro, and that the rich and successful countries do not want to pool their riches and success with the poorer countries in the Union. Until they do, the currency will be crisis-stricken. The development of a second euro has already happened. The second euro was the Cypriot euro. Unbelievably in a first-world currency, people who had been foolish enough to deposit euros in a Cyprus bank could not take them out. When it was allowed, they were not worth €1; they were devalued before people could have their money back. That had to happen because the German taxable capacity would not stand behind the Cypriot bank. There is no way that, if a city or part of the United Kingdom—it would be invidious to give names—got into balance of payments or financial difficulties, people’s pounds, deposited in a bank in a part of the United Kingdom, would be first frozen and then devalued before they could be taken out. Everyone would rightly be scandalised and think it absurd. Yet that happened in the eurozone, because our reluctant European, Germany, would not stand behind the euro.

My prediction is that Germany is on a slow but inevitable march to standing behind the euro. In a way, I hope it is, because I wish the euro well and it needs to be a grown-up currency with proper transfers behind it; but the more Germany is on that movement towards being the paymaster, founder and discipline-provider of the euro area, the less possible it is for Britain to belong to that system. That is why I welcome the magnificent contribution that my hon. Friend the Member for Stone (Sir William Cash), has once again made to our national debate, and why I hope people are listening outside the Chamber, in addition to those who have kindly come to listen. Today’s debate is about the mighty subject of our generation. We wish our continent and the euro area well, but the United Kingdom must now find a new relationship. Just as surely as Germany needs to become the centrepiece of the political union to make a proper reality of the euro, so the United Kingdom, unwilling and unable to join it, will need a new, looser and different relationship with that emerging superpower—which will be not an armed superpower but an economic one, with, at last, the taxable capacity of Germany standing behind the rest.

It is important for that to happen quickly. I do not want to live in a Europe where there is practically no growth year after year and where there are sometimes rather bad crashes. I do not want to live in a Europe where the banking system is still riven by difficulty and disaster because there is not full support from the euro-area in the way we would expect from an integrated economic zone. I want to live in a Europe that is more vibrant, more exciting and more interesting.

I am very pleased that my country has stayed out of the euro; I am very pleased that, with our own financial and monetary policies, we now have a growth rate of which we can be proud and that gives our people hope; and I am very pleased that unemployment is coming

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down. It would make things so much easier for us if Europe had a growth rate of which we could be proud, if its unemployment rate was coming down and if it could offer hope to its young people. Europe cannot do that unless it either completes its currency union properly or breaks it up as soon as possible. We cannot join Europe in the former, and we do not wish to lecture it on the latter, so can we please get on with negotiating a relationship that works for Britain? Can we privately, not publicly, remind Germany that if she wishes this mighty project to work, she has to commit herself to it as fully as we have to disengaging?

3.30 pm

Dr Julian Lewis (New Forest East) (Con): In 1997 it was an act of rebellion for a Conservative candidate in the general election to campaign against the UK joining the single currency. Indeed, I had to resign my post at Conservative central office in order to do so. In the lifetime of this Parliament it was also an act of rebellion for a Conservative Member to vote for an in/out referendum. Both those rebellions are now seen as core Conservative commitments, and even the Labour party and many others, as my right hon. Friend the Member for Wokingham (Mr Redwood) said in his outstanding speech, would not dream of going to the electorate pledging themselves to trying to join the single European currency. That shows that, over time, progress can be made in opening people’s eyes to what is at stake with Britain’s troubled relationship with the European Union.

On two grounds in particular, no one could be better qualified to introduce such a debate than my hon. Friend the Member for Stone (Sir William Cash). First, as we have heard, his father won the military cross but also lost his life fighting to liberate France from German occupation in 1944. Secondly, although of course I knew that he is Chair of the European Scrutiny Committee, I did not learn until today that he has served on that Committee scrutinising Euro-legislation for the last 30 years, which is an exercise in self-flagellation bordering on the heroic.

There seem to be two strands to the idea of Germany in Europe, and the first strand appears to have something in common with what used to be said in the early years of NATO, which, as we all know, was once described as being designed

“to keep the Russians out, the Americans in, and the Germans down”.

In other words the idea was that, because Germany had twice brought world war to the European continent, the best way of preventing it happening again was to tie Germany into multinational alliances and institutions. That is one point of view; the other point of view is that it is not only about trying to prevent war in Europe. The question is whether it is an alternative way for Germany to exercise the sort of power and control in Europe that she failed to get by other means in those two terrible conflicts. I do not know which of those two strands is the primary motivation among German democratic politicians. Some of them may indeed be afraid of their country’s past being repeated; others may actually covet ways of gaining, through peaceful methods involving the slow

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absorption of other countries that are gradually drawn into the EU net, the sort of influence that they failed to gain in the past.

In the 1970s I studied the theory of international relations under the great Professor Sir Michael Howard, as he now is. One of the topics I studied was integration theory. The idea was that countries could be made to merge with each other not by telling them directly what the end product would be, but by drawing them through imperceptible degrees and through the exercise and creation of new common functions into an ever-closer relationship, so that they did not realise where they were going until they had already arrived at their destination.

I must admit that I was sceptical. I thought that countries might start on that path but that at some point they would wake up, realise the destination, decide that they did not want it and turn back. I admit that I have had to qualify my scepticism over the subsequent decades because, time and again, I have seen our country being drawn down that route. I wish I had £5 for every time somebody involved with the European project has said, “The high point”—or the high-water mark, or something else of that sort—“of European integration has now been reached.” Funnily enough, there is always one high-water mark after another. Frankly, I am getting fed up with it.

Mr Redwood: Has my hon. Friend also noticed that each successive federalising treaty has been explained to us as representing no serious transfer of power of any kind? How is it that we have so little power left?

Dr Lewis: Indeed. The process has become such a habit that the mask slips very rarely; but there was one notable occasion when the mask did slip. On new year’s eve just over a decade ago, when the European single currency was about to come into force, I saw the then President of the European Commission, Romano Prodi, being interviewed at midnight, and he was asked the following question: “This is a political project, isn’t it?” For once he let the mask slip, and he smiled beatifically and said, “It is an entirely political project.”

Sir Richard Shepherd (Aldridge-Brownhills) (Con): I am grateful to my hon. Friend for allowing me a brief intervention. In the 1980s the mantra of Conservative Governments and Ministers was “No essential loss of sovereignty.” That was haunted right through and dragged across the nation as if there was a truth in it. Any time anyone suggested that sovereignty is a perfect construction in itself, they immediately wanted to tell us why sovereignty was no longer sovereignty, having said there would be no loss of sovereignty.

Dr Lewis: I pay tribute to my hon. Friend who, like my hon. Friend the Member for Stone and my right hon. Friend the Member for Wokingham, has done so much over the years to try to arrest the slide to a destination that nobody in this country actually wants. The reality is that if there is a single currency, it will only work if there is a single economy. And if there is a single economy, it will only work if there is a single Government. And if there is a single Government, it will only work if there is a single country, which is what the architects of this scheme want us to have. Although they admit to each other that it is political, what they

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say to us is that it is economic and that it all depends on our economic and trading relationship with Europe. I conclude by saying that just because one has a strong trading relationship with other states, it does not mean that one has to merge one’s currency, one’s economy, one’s population, one’s foreign policy or one’s country with those other states. We want a good relationship with Europe, but we are our own country, which is how we intend to stay.

3.39 pm

Mr Pat McFadden (Wolverhampton South East) (Lab): It is a pleasure to serve under your chairmanship, Mr Robertson. I congratulate my near neighbour in the west midlands, the hon. Member for Stone (Sir William Cash), on securing the debate. I also greet the Minister for Europe, the right hon. Member for Aylesbury (Mr Lidington), with whom this is my first proper exchange since I took up this post a few weeks ago, and I thank all the right hon. and hon. Members who have contributed to the debate.

I have found the debate extremely interesting and revealing. It has been revealing to me because it has illustrated the plight of the Minister and the Prime Minister, for which I have some sympathy. As I have listened to the hon. Member for Stone, the right hon. Member for Wokingham (Mr Redwood) and the other hon. Members who have spoken, I have found myself asking what kind of renegotiation by the Prime Minister could possibly satisfy them, other than one leading to Britain’s withdrawal from the European Union. I would be grateful if the Minister addressed himself to that question in summing up. I have sympathy for the Prime Minister in the task that he has set himself, given the yardsticks set for him in this debate by his hon. and dear Friends.

As the hon. Member for Stone said, we had some interesting exchanges yesterday with the Bundestag’s Committee on the Affairs of the European Union, whose members have been visiting the UK this week. This debate is timely in a sense, because both of our countries are major members of the European Union but we look at the European Union through different eyes.

It is sometimes said that for Britain, EU membership is purely transactional. I hesitate to endorse that verdict. I think it is a mistake to ignore the commitment to democracy, equality, human rights and the peaceful resolution of problems that comes with membership. It is an achievement of no small significance that today it is almost inconceivable that two member states of the European Union could go to war with one another. Given what is happening on the fringes of the European Union, it would be wrong for us to dismiss that achievement.

Britain and Germany have different histories, and we look at the issue through different eyes, but there is an aspect of common values to it, as well as a purely transactional one. On a day-to-day basis, as I am sure the Minister will confirm, Britain and Germany have much in common in our approach to the European Union. In ordinary working meetings of the Council of Ministers, British and German Ministers often agree.

Of course, as this debate has rightly outlined, we do not always face the same issues. Germany is a member of the eurozone; indeed, it is the lead guarantor. The UK is not, and is highly unlikely to join the euro,

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meaning that Germany faces issues, such as banking union and fiscal compacts with other member states, that we in the UK sometimes do not, and we are not part of some of those agreements. We sometimes have a distinct approach to economic and financial issues. Given our rule and the size of the financial sector in the UK, and its global reach relative to the rest of our economy, it is absolutely right that we should reserve the right to take a distinctive approach on some of those issues.

Mr Redwood: Does that not mean that we need a new relationship? Does the right hon. Gentleman not see that, according to his logic, we cannot be in the room when a lot of financial matters are discussed because we are not part of the compacts relating to the euro?

Mr McFadden: The euro has been in place for some time. During that period, London’s financial strength has if anything grown, not diminished. I would not agree with the right hon. Gentleman if he suggested that being outside the euro somehow meant that we could not play a constructive role within the EU.

Mr Redwood: Will the right hon. Gentleman give way?

Mr McFadden: I will press on, if the right hon. Gentleman does not mind.

Another issue that has arisen in this debate is the free movement of people, which has been at the heart of discussion in the UK in recent months about our relationship with the EU. I have looked up the figures. Eurostat, for example, calculates that net migration from elsewhere in the EU in 2012 was 230,000 for Germany and 82,000 for the UK. It is important to give some context to the view that everyone from everywhere else in the EU is always migrating to the UK. That is not the case. There are significant migration flows into both Germany and Britain, and it is important to have a debate in both countries about the rules under which EU migration should operate.

The Government have made certain announcements about restricting access to benefits for some EU migrants, and my own party agrees that access to benefits should be conditional. Most EU migrants come to work and not to claim—the recent report by University college London showed that overall, they are net contributors—but of course it is not just an issue of accounting. It is important that we have rules that are seen to be fair, and that operate in fairness to our own citizens as well as to those who come here. Today, in my party, the shadow Home Secretary announced that we believe that an EU migration fund should be established to help local areas that find themselves under particular pressure due to freedom of movement. If freedom of movement is to remain a core principle, it is reasonable for member states to ask for some help from the EU budget to help communities adjust where there are consequences for local areas.

I believe that on this question, Britain and Germany have much in common. I do not believe that Germany wants the rules for access to benefits to be abused; a case came to the European Court of Justice the other day. The Prime Minister has taken us into new territory. He is now talking not just about conditionality for benefits under freedom of movement but about changing the principle of free movement itself. That approach

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appears to have been rebuffed by Chancellor Merkel, with the

Der Spiegel

report that she sees it as a red line that she would not cross, and that at that point she would stop her efforts to keep Britain in the European Union. It would be one thing if I thought that the Prime Minister’s shift in strategy had been carefully thought out, but he appears to have crossed the line with little thought for what it will mean for his renegotiation. Can the Minister tell us how many member states have told him that they support reform of the principle of free movement since the Prime Minister made his announcement?

Of course some Back Benchers, and perhaps some Conservative Members in this room, will be pleased by the shift because they may not want the Prime Minister’s renegotiation to succeed. Perhaps glory for them is defined not by a successful renegotiation but by one that fails, leading to UK withdrawal from the EU. I am afraid that there I must part company with the hon. Member for Strangford (Jim Shannon), who said that we might all be united in our view today. It is not a consensus shared by me or my party.

There are major British interests, in terms of jobs, employment rights and investment, in getting it right and in remaining part of the EU. What we are seeing is a governmental strategy, if one can call it that, which is led more by party management and trying to keep happy the party members who agree with the hon. Member for Stone than by our national interests. The danger for the Minister and the Government is that if he and his colleagues keep standing at the edge of the cliff and making demands in order that they will not jump, eventually other member states will stop their efforts to stop them from jumping and say, “Go ahead, and be our guest.”

3.50 pm

The Minister for Europe (Mr David Lidington): Mr Robertson, I welcome you to the Chair this afternoon. I also welcome the right hon. Member for Wolverhampton South East (Mr McFadden) to his first outing in Westminster Hall with his new responsibilities. In addition, I congratulate my hon. Friend the Member for Stone (Sir William Cash) on securing the debate. He and I have been discussing these issues for about 25 years—

Sir William Cash: Since 1990.

Mr Lidington: “Since 1990,” my hon. Friend reminds me. And as I will make clear in my remarks, there are some things that we agree upon and other things where there are perhaps some divergences in our respective approaches.

I will start with those areas on which I can find ready agreement with what my hon. Friend said in his opening remarks. I agree with him and other hon. Members when they say that the current levels of unemployment and low growth in Europe are a scandal and a cause of human misery, as well as an important cause of the widespread public discontent and anxiety that we see right across the continent. I also agree with those who have argued today that those economic challenges need to be addressed by a vigorous programme, primarily of supply-side reform, at both national and European

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level, focusing on the liberalisation of markets, especially in services, on deregulation and on embracing the opportunities offered by free trade. Those economic reforms are right not only for the UK but for Europe as a whole. I also say to hon. Members, frankly, that whether this country were in or out of the EU, endemic low growth and high unemployment in the rest of Europe are very bad news for businesses in this country, given the high proportion of our trade that is done with other EU companies and member states.

I agreed with what my right hon. Friend the Member for Wokingham (Mr Redwood) said when he expressed relief that this country had decided not to take part in the euro. I agree that that would not have been in this country’s interests and I continue to believe that it is not a project that it is in our interests to take part in.

I also agree that for those partners that have committed themselves to membership of the euro, the logic of a single currency and a single monetary policy must be for closer integration of economic and fiscal policy decisions, and in turn for there to be political arrangements to hold such decisions accountable. One of the central political questions for the EU in the years to come—the next decade or so—will be whether we can construct arrangements within Europe that permit those who have committed themselves to a single currency to integrate more closely, while genuinely respecting, and in full, the rights of those who choose to remain outside the euro. That also means ensuring that the EU, in both its rules and its working culture, guards against the kind of caucusing that my hon. Friend the Member for Stone warned us might be a possibility—a caucus among eurozone countries, effectively to write the rules for everybody else regardless of others’ interests or views.

I also agree with the case for more wide-reaching political reform at European level. The EU is too centralised, and is often too bossy. As the hon. Member for Strangford (Jim Shannon) said, we need to have an EU that shows greater flexibility and that is better able to accommodate the diversity that is needed among the 28 member states that there now are, rather than the six member states the EU started with.

There was some discussion about defence. I agree with those who argued that it is NATO and not the EU that is, and should remain, the key alliance for the maintenance of the security of this country and of Europe as a whole. As my hon. Friend the Member for Aldershot (Sir Gerald Howarth) said in an intervention, we still have a veto in regard to Europe’s common security and defence arrangements and we have exercised that veto in the way that he described.

Sir Richard Shepherd: The Minister will remember the visit of Mrs Merkel to the House of Lords, where she said she was absolutely convinced that what had held Europe peaceful was the EU, whereas I think most people in Westminster Hall today would think that it was, in fact, NATO that did that. Is it not NATO that is really the basis of the security of Europe?

Mr Lidington: I will come to that point a bit later on, but I do not think we need to say that those two institutions are polar opposites. It is true that it was NATO that defended democratic western Europe from Soviet militarism and aggression for more than half a century, and in doing so held out the hope of liberty for

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the enslaved nations of central Europe. I will come on to the role that the EU has played in the past 25 years in cementing democracies in those countries once they escaped from Soviet rule.

I will briefly continue on defence. Any treaty change that provided for EU armed forces would now need not only the agreement of the UK’s Government, under the requirement for unanimity, but, under the European Union Act 2011, an Act of Parliament and a referendum. Those things would be needed before such a change to treaties could take place.

The UK and Germany have different experiences of Europe. My hon. Friend the Member for Stone drew attention to how Germany, in the mid 20th century, saw the collapse or failure of national identity, institutions and culture, whereas for us that period in our history is very much about the vindication of those things. However, if we look at what has happened in the EU in the past quarter of a century, we have seen not only greater prosperity but how the peaceful collapse of the Berlin wall and the integration of the eastern Länder into the Federal Republic was followed by the establishment of the rule of law, democratic institutions and human rights in parts of our continent where those things had been crushed for most of the 20th century. And contrary to the argument of the hon. Member for Aldridge-Brownhills, I believe that it has been the accession process leading to EU membership that has made possible the institutionalisation of those reforms and entrenched them in a way that did not happen when infant democracies were formed after the treaty of Versailles at the end of the first world war.

The question of the UK’s membership of the EU should be based upon a clear-eyed assessment of our national interest, and in my view it ultimately needs to be decided by a referendum of the British people. However, the House needs to acknowledge that any relationship with Germany, or with the EU generally, that preserves simply the things that we like about membership and none of the things that we find difficult or irksome is not within the bounds of political possibility, and the same is true of the notion that leaving the EU would somehow free this country from the EU’s influence or rules. That has not been the experience of Norway or Switzerland, which can trade freely with the EU but also have to implement EU laws, pay into the EU budget and accept freedom of movement, without having any say or any vote upon those matters.

I think there is the prospect of serious EU reform; I also think there is growing recognition around the table in Brussels and in national capitals that that reform is necessary for the prosperity and the continuation of peaceful democracy throughout our continent; and I believe that under the Prime Minister’s leadership that is what we shall achieve.

3.59 pm

Sitting suspended for Divisions in the House.

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Armed Forces (Investment)

4.28 pm

Oliver Colvile (Plymouth, Sutton and Devonport) (Con): Thank you for calling me to speak, Mr Robertson. I am grateful for being allowed to hold this debate. May I just say what a privilege it is to be the Member of Parliament for Plymouth, Sutton and Devonport? I know that the hon. Member for Upper Bann (David Simpson) will be delighted to hear me say so. My constituency is of course the home of 3 Commando Brigade and one of the principal homes of not only the Royal Navy, but the Royal Marines. I should also potentially declare an interest in that I am a vice-chairman of the all-party parliamentary group for the armed forces, with special responsibility for the Royal Navy and the Royal Marines. I hope that I am their champion in this place.

Upon my election in 2010, I submitted a paper on the strategic defence and security review, which clearly set out that I fully supported the control of public expenditure and in which I named long-term care for the elderly and the defence of the realm as my political priorities within that reduced financial envelope. I argued that any military expeditions should be done within the context of NATO. While I recognise that there is at present no public appetite to put troops on the ground, particularly under conditions where eventual outcomes and aims are unclear, our armed forces have a high level of support. I found that out this weekend when I watched the Plymouth Argyle versus Portsmouth football game, which I will discuss in a moment. The country expects our Government to defend British interests. If we expect our military to engage outside the UK, we must ensure that it is equipped and manned properly. I press the Government to commit to spending at least 2% of our GDP on defence. If not, could we at least have a bit more?

At the weekend, as I mentioned, I went to watch Plymouth Argyle play Portsmouth—the dockyard game—at Home Park on armed forces day. I am delighted to report that Plymouth won 3-0, but I was sad that my hon. Friend the Member for Portsmouth North (Penny Mordaunt) had to see her side get a bit of a pasting. While speaking with some royal naval officers during half-time, I was told of a potential shortage of trained engineers. Indeed, at a meeting earlier today, I learned that the shortage could be 400,000 across the military. When the Minister replies, I will be grateful if he might explain what the Government are doing to ensure that we have the necessary number of trained engineers across all three of our military disciplines.

David Simpson (Upper Bann) (DUP): I congratulate the hon. Gentleman on obtaining the debate. May I put on record the thanks of the vast majority of the people of Northern Ireland for the tremendous work done by the armed forces in the Province, certainly during the difficult times? In this debate about the funding of the armed forces, will he include the aftercare of soldiers and of those who have come home with loss of limbs, mental health problems and so on?

Oliver Colvile: I will come on to that in due course.

I will be grateful if my right hon. Friend the Minister tells me what discussions his Department is having with the Department for Business, Innovation and Skills on

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plans for a new nuclear engineering college—located, I hope, in my constituency, but we will soon find out about that. In my opinion, the SDSR should not look simply at equipment; it should also continue to look at delivering the armed forces covenant for the families, a point made by the hon. Member for Upper Bann. That means improving housing conditions, providing better health care, especially mental health care, and education.

Most importantly, Britain is an island nation. As we prepare for the next SDSR, I urge the Government to ensure that resources are directed at protecting our trade routes. That means prioritising both the Royal Navy and the Royal Air Force.

Jim Shannon (Strangford) (DUP): That also means the Army, which I am sure the hon. Gentleman is coming to. When we look to the future, we need to see more boots on the ground. In Northern Ireland, whether regulars or reservists, we have had a big level of recruitment, and the biggest level of recruitment to the Territorial Army or Army Reserve that there has ever been in any part of the United Kingdom. Does he feel, as I feel, that the necessary resources should be made available to ensure that where there are large levels of recruitment, as in Northern Ireland, we continue to make that happen? I understand that resources are being squeezed, but it seems a pity at a time when people want to join the reservists.

Oliver Colvile: I am keen to ensure that we look after the Royal Navy and the Royal Marines as well. I understand that the Army plays a significant role, but my priority this afternoon is to talk up the interests of the Royal Navy, if I may.

My right hon. Friend the Minister should not be surprised about that, because I represent a major naval garrison city and, like him, I am a Navy brat. Without a strong Royal Navy, Christmas could be cancelled. We all expect to find fresh fruit and vegetables in our supermarkets. The majority of us want to buy wines from Australia, South America, South Africa and throughout the world. Imagine the number of letters and e-mails that we would all receive, especially from children, if Christmas were cancelled because such products were not available in our shops. So a key part of our defence strategy must be to retain our nuclear deterrent.

Since the 1990s Devonport has been the only dockyard in Britain that renews and refuels our nuclear submarine fleet. We also have the deep maintenance programme for our surface ships, though we share those somewhat with Portsmouth. Earlier this autumn my right hon. Friend the Secretary of State for Defence announced that he had signed a £2.6 billion agreement with Babcock that will safeguard 4,000 jobs for the next four years or so. I very much welcome that and thank the Secretary of State—if the Minister will pass that back to him—for safeguarding the jobs in our dockyard for the immediate future. I am concerned, though, that in six months’ time Drake’s drum could be called back into service, especially if the polls stay as they are.

Let me make it clear: I desperately hope that we have a Conservative Government with an overall majority after the general election. Many of the pundits, however, are predicting a hung Parliament in which Labour could be looking to do a deal with either the Liberal Democrats or the Scottish National party—

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Jim Shannon: Or the Democratic Unionist party.

Oliver Colvile: Or the DUP—but let me deal with the other two.

Earlier today I looked at the Liberal Democrats’ website. They are still saying:

“Britain's nuclear deterrent, which consists of four Trident submarines, is out-dated and expensive. It is a relic of the Cold War and not up-to-date in 21st century Britain. Nowadays, most of our threats come from individual terrorist groups, not communist countries with nuclear weapons.

The Liberal Democrats are the only main party willing to face up to those facts.

The UK has four Trident submarines on constant patrol, which are nearing the end of their life. A decision needs to be made about what we do to replace them.”

I emphasise that I am quoting the Liberal Democrats:

“It would be extremely expensive and unnecessary to replace all four submarines, so we propose to replace some of the submarines instead. They would not be on constant patrol but could be deployed if the threat from a nuclear-armed country increased.”

They quite obviously have taken no notice of what has been going on in Ukraine.

Dr Julian Lewis (New Forest East) (Con): My hon. Friend is making a crucial point. It is worth adding that the Liberal Democrats, when sending a submarine to sea, would send it unarmed, wait for a crisis to arise and then sail the submarine back to its home port in order to put the nuclear weapons on board, presumably by the grace and favour of the country now threatening us.

Oliver Colvile: I thank my hon. Friend for making that point. The Liberal Democrats are making it clear that they want to reduce the number of submarines and they might make that a condition of being in any coalition with the Labour party.

On Saturday, Nicola Sturgeon, the new leader of the SNP, told her party conference:

“My pledge to Scotland today is simple—the SNP will never, ever, put the Tories into government.”

She added that Labour would

“have to think again about putting a new generation of Trident nuclear weapons on the river Clyde.”

On Andrew Marr’s programme on Sunday, Mr Findlay, a candidate to be leader of the Scottish Labour party, set out a radical agenda for his party. He confirmed that under his leadership Scottish Labour would oppose Trident on the Clyde. He confirmed that that had been Scottish Labour’s policy for some little while. That is in line with the position of the Scottish trades unions.

I very much hope that the Minister will confirm that a future Conservative-led Government will remain committed to four continuous at-sea deterrent submarines. My concern is that if the nuclear submarines are thrown out of Scotland, the Government of the day might decide that our submarine base and dockyard should be relocated from Devonport to another site. Some 25,000 people in the travel-to-work area of Devonport depend on defence for their jobs.

Jim Shannon: There will always be a place for the base in Belfast, if that should happen. Be assured of our support for the Trident submarine. The DUP is committed to that.

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Oliver Colvile: I thank the hon. Gentleman, but I remind him that I am the Member of Parliament for Plymouth, Sutton and Devonport. I do not want to see the submarines going off to Northern Ireland, although it plays a significant role in things.

During the 10 years that I was the Conservative parliamentary candidate for Plymouth Sutton and, subsequently, for Plymouth, Sutton and Devonport, I found myself campaigning almost every day to keep the Devonport dockyard and naval base open. My interest in Devonport is not only due to my political candidature, but because my grandfather was the first lieutenant of HMS Vivid, the Devonport barracks, having served as the gunnery officer on Devonport-based HMS Valiant at the battle of Jutland, and my uncle commanded Stonehouse barracks before becoming commandant general of the Royal Marines.

The previous Labour Government proposed to move the Type 23s to Portsmouth. That would have left Plymouth with five Type 22s, which have subsequently been scrapped. The Labour Government also proposed to move the submarine fleet to Faslane, while retaining Devonport for the refuelling and refilling of the nuclear submarines, despite the fact that they had not gained agreement from the families. In my opinion, despite the very best efforts of my Labour predecessor, Mrs Linda Gilroy, and the hon. Member for Plymouth, Moor View (Alison Seabeck), the previous Labour Government were slowly but surely killing Devonport’s naval base and dockyard by a thousand cuts. I believe that was because Labour has no political clout in Devon and Cornwall. People need to remember that on 7 May next year.

In the past four and a half years, we have seen Devonport’s future as a naval base and dockyard become much more secure. The coalition Government have kept seven Type 23s at Devonport, moved HMS Protector from Portsmouth to Devonport from 1 April this year so that all our Antarctic resources are placed in one location, and delivered amphibious capability with Royal Marines Tamar at Devonport.

I seek confirmation from the Minister that at least seven of the Type 26s will be based at Devonport, although I would like the whole lot if I am quite honest—I realise that I am a bit greedy—and that one of the Type 26s will be named HMS Plymouth. I also ask him to clarify the timing for the move of the submarine fleet to Faslane and to state when the infrastructure will be ready. By confirming much of that, he will be helping to ensure that Drake’s drum can be put away again for the next five years and that we will not be hearing its drumbeat for many a year.

4.40 pm

The Minister for the Armed Forces (Mr Mark Francois): I congratulate my hon. Friend the Member for Plymouth, Sutton and Devonport (Oliver Colvile) on securing this debate and giving us the opportunity to discuss this important subject. Before turning to the matter at hand, namely investment in our armed forces, I will take this opportunity to offer my public thanks to him for his staunch support of the armed forces, including in his role as the vice-chairman for the Royal Navy and Royal Marines in the all-party group on the armed forces, and for his support of the 350th anniversary of the Royal Marines this year.

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As for investment in the armed forces, the UK is one of the 12 founding members of NATO and takes that role seriously. We have the second largest defence budget in the alliance, behind the United States, and the largest in the European Union. This Government are committed to and indeed meet both key NATO spending targets, spending 2% of our GDP on the defence budget and over 20% of that budget on new equipment. Those commitments were reaffirmed in September by the defence spending pledge made at the NATO summit that the UK proudly hosted in Wales.

Our equipment programme represents a substantial investment of some £164 billion over 10 years, and is expressed annually in our published defence equipment plan. The Army is receiving significant investment in a number of equipment programmes. In September, my right hon. Friend the Secretary of State for Defence announced a £3.5 billion contract for the highly advanced Scout armoured vehicle, which will boost our capability and sustain 1,300 jobs across the United Kingdom supply chain. We are also investing in expanding our fleet of battle-proven Foxhound armoured vehicles and upgrading our fleet of Apache attack helicopters and our Challenger 2 main battle tank fleet.

The Royal Air Force boasts an impressive equipment programme, which includes enhancing the Typhoon via Tranche 2 and Tranche 3 upgrades to maintain its battle-winning edge and procuring the new F-35 Lightning II joint strike fighter, which will place this country at the forefront of fighter technology, as the United Kingdom is the only level 1 partner with the United States in that programme. We recently announced agreement in principle to procure the next four F-35B aircraft for the United Kingdom. This month, the Ministry of Defence has taken delivery of its first A400M Atlas, marking the start of the RAF’s next generation of airlift capability. Production and delivery for the remaining fleet will continue at pace to deliver the full fleet of 22 aircraft by early 2018. We have also recently acquired 14 new heavy-lift Chinook Mk 6 helicopters, to be based at RAF Odiham, giving us one of the largest Chinook fleets in the world after the United States.

To move particularly close to my hon. Friend’s heart, the Royal Navy continues to be one of the premier navies in the world, especially as we look forward to the delivery of the Queen Elizabeth class aircraft carriers, the largest ships ever built in the United Kingdom. I was delighted and honoured to be at the naming ceremony of HMS Queen Elizabeth in July, a truly historic occasion. I was also pleased that the Prime Minister announced at the NATO summit that the second carrier, HMS Prince of Wales, will also be brought into service, ensuring that we always have one carrier available 100% of the time. The Navy is also procuring and supporting seven Astute class nuclear attack submarines and six Type 45 Destroyers, and is starting the transition from Type 23 frigates to the new Type 26 global combat ships. The recent contract award for three offshore patrol vessels also serves to strengthen the Royal Navy’s capabilities and maintain shipbuilding skills in the United Kingdom.

Dr Julian Lewis: Will the Minister confirm that 13 Type 26 vessels will be ordered?

Mr Francois: As my hon. Friend will know, we are still at the assessment phase for the Type 26 programme, but 13 is still the planning assumption.

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Additionally, the latest version of the Royal Marines’ protected mobility Viking vehicle is being rolled out, and four new Royal Fleet Auxiliary tankers will be built over the next four years, with the first due to enter service in 2016.

We are also making full provision for the successor deterrent system, providing the ultimate guarantee of our national security. In answer to the question asked by my hon. Friend the Member for Plymouth, Sutton and Devonport—and to an intervention by my hon. Friend the Member for New Forest East (Dr Lewis) before he has made it—the Royal Navy has maintained a continuous at-sea deterrent for over 50 years, based on four boats. It is envisaged that that will continue under a new Conservative Government.

Dr Julian Lewis: I would not have liked the Minister to have anticipated an intervention that was not then made, so can we therefore conclude that in a hung Parliament there would be no question of our ever agreeing again to a deal with another party to postpone the main-gate contract signing, as unfortunately happened in 2010?

Mr Francois: My hon. Friend, with his usual eloquence, tempts me down a difficult alley. I cannot give him the assurance that he wants on that point, but I think I have made the party’s position on four boats clear. I regret that I disappoint him, as I know he has hankered for a fifth boat for some time, but I cannot promise that to him either.

Furthermore, we are significantly increasing our investment in cyber-security, ensuring our armed forces are equipped with cutting edge capabilities across all environments. That combined investment is not only securing the best possible military capability, but helping to secure UK jobs and growth. The UK defence industry employs more than 160,000 people, with a turnover of some £22 billion.

I turn now to naval bases. For generations, up and down the country, many communities have given outstanding support to our armed forces. That is particularly true for those around the Royal Navy’s three main naval bases at Devonport, Portsmouth and Clyde.

Her Majesty’s naval base Devonport delivers world-class, safe and secure operational capability and support to the fleet. Devonport is home to Britain’s amphibious ships, HMS Ocean, HMS Bulwark and HMS Albion; HMS Protector, the ice patrol ship; survey vessels; half the Royal Navy’s frigates; flag officer sea training, the training hub of the front-line fleet; and the centre of amphibious excellence at Royal Marines Tamar. Devonport is also the main support base for the Royal Navy, particularly with its unique deep maintenance refuelling and defuelling facility for nuclear submarines.

The Devonport base employs 2,500 service personnel and MOD civilians, supports around 400 local firms and generates around 10% of Plymouth’s income. In all, some 25,000 people in Devonport’s travel-to-work area depend on defence for their livelihoods—and in my hon. Friend the Member for Plymouth, Sutton and Devonport they have a worthy champion.

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Portsmouth naval base is home to almost two thirds of the Royal Navy’s surface ships, including the Type 45 destroyers, half the Type 23 fleet and the mine countermeasures and fishery protection squadrons—something close to my heart, as my father, to whom my hon. Friend kindly referred, served on a minesweeper at D-day. HMS Clyde, the Falkland Islands patrol vessel, is also based at Portsmouth, which will be home to the two new Queen Elizabeth class aircraft carriers, the first of which should arrive in early 2017.

Her Majesty’s naval base Clyde is the naval service’s main presence in Scotland. It is home to the core of the submarine service, including the nation’s nuclear deterrent, and the Royal Navy’s newest and most advanced submarines, HMS Astute and HMS Ambush. From 2020, Clyde will be the Royal Navy’s single integrated submarine operating base and submarine centre of specialisation. The nearby Royal Navy armaments depot at Coulport is responsible for the storage, processing, maintenance and issue of key elements of the UK’s trident deterrent missile system and the ammunitioning of all submarine-embarked weapons.

The 2010 strategic defence and security review confirmed the requirement to maintain all three naval bases. This commitment is evidenced by the recently announced maritime support delivery framework—MSDF.

Turning specifically to that framework, on 13 October my right hon. Friend the Secretary of State for Defence notified the House that the Ministry of Defence had awarded two contracts to provide continued support to the management of the UK’s naval bases, and maintenance and repair of Royal Navy warships and submarines to ensure that they are able to meet their operational commitments. The award of these contracts, with a combined value of £3.2 billion, shows a clear indication of our continued commitment to invest in the support provided to the Royal Navy.

MSDF contracts have been awarded to both our industrial partners at naval bases. The contract awarded to Babcock to provide support services at Her Majesty’s naval bases at Devonport and Clyde is valued at £2.6 billion, and the contract awarded to BAE Systems to provide support services at Portsmouth naval base is worth some £600 million. The Babcock MSDF contract covers the 5.5 years to March 2020. The BAE Systems contract covers an initial period of 4.5 years to March 2019, with an option to extend it for an additional year.

We should recognise the contribution that this level of investment will make to the long-term economic health of the nation’s three main naval bases. They will sustain around 7,500 industry jobs across the three naval bases, with 4,000 of those jobs in my hon. Friend’s constituency at Devonport naval base. I thank him for his kind words and I will ensure that his gratitude is passed on personally to my right hon. Friend the Secretary of State, whom I will see in about an hour. I hope my hon. Friend the Member for Plymouth, Sutton and Devonport considers that to be telegraphing the message pretty quickly.

There will also be 1,500 jobs at Clyde naval base and more than 2,000 at Portsmouth. MSDF is a modern commercial and financial strategy replacing a number of existing support contracts with one wider contracting framework with each company. We have consolidated several different contracts into two main ones. This new strategy incentivises industry to transform and rationalise

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to meet the needs of the Royal Navy, to drive continuous performance improvement and to provide a better deal for defence and the taxpayer by delivering significant savings. We estimate that those savings will be of the order of £350 million over the life of the contracts.

Investment is not just about equipment, infrastructure and support contracts. It is also about people and we are investing in them. Like other employers, our armed forces face a challenge in recruiting and retaining personnel, especially in engineering and nuclear cadres. That is being addressed through a range of measures, including affiliations with four university technical colleges. My hon. Friend the Minister for Defence, Equipment Support and Technology—Min DEST—is in discussion with colleagues at the Department for Business, Innovation and Skills about a new engineering college. My understanding is that those discussions have not yet concluded and that there is still some way to go, but it may assist my hon. Friend the Member for Plymouth, Sutton and Devonport to know that it is planned that the next meeting on the project will take place early in the new year.

Jim Shannon: During an earlier intervention, I mentioned the take-up of reservists in Northern Ireland where, numerically, it is stronger than anywhere else in the United Kingdom, as the Minister will know. An issue that has been brought to my attention is the resources needed to ensure that they can capture more of the potential recruits in Northern Ireland. Can the Minister give us an indication of what he could do with that?

Mr Francois: First, the hon. Gentleman knows a lot about this as he has been a reservist in Northern Ireland; I pay tribute to his service. Secondly, I have visited Northern Ireland at least twice since I have been at the Ministry of Defence and while there I have visited several units, including the 2nd Battalion the Royal Irish Regiment which I believe is one of the best recruited infantry battalions anywhere in the Army Reserve. I was impressed by its spirit and determination and it was one of the best attended Army Reserve centres that I have been to since I have been in this job. We appreciate that in Northern Ireland there is a strong tradition of service in the armed forces and we will do what we can to continue that. I hope that volunteers will continue to come forward enthusiastically, as they have done in the past.

The Government fully understand the importance of our armed forces and the security and protection of our national interests at home and around the world. We absolutely understand the importance of our people and I hope that the House will accept that that is also important for me, as the son of a D-day veteran.

We have sorted out the mess that was defence spending under the previous Government and we have taken hard but necessary decisions. We now look ahead to the realisation of Future Force 2020. We take pride in our battle-winning armed forces that serve to defend this country and its allies. As the son of a man who served in the Royal Navy, I take great pride in the senior service which is so well served by those at Portsmouth, Clyde and Devonport.

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Housing Market (London)

4.55 pm

Ms Diane Abbott (Hackney North and Stoke Newington) (Lab): I am glad to have the opportunity to address this Chamber on London’s housing crisis. There is no doubt that if there is one issue that Londoners are agreed on, it is that the housing market in London is in a state of crisis. Before I close my remarks, I would like to touch on the New Era estate in Hackney, which illustrates some wider issues and whose tenants are faced with predator American developers and may be evicted by Christmas.

Meg Hillier (Hackney South and Shoreditch) (Lab/Co-op): Will my hon. Friend give way?

Ms Abbott: I will happily give way to my hon. Friend before I sit down.

The current London housing market is broken. The average house price in London is £600,000, nearly twice that in the rest of the country. The average monthly rent of a flat in London is over £1,500 a month and to put that into perspective, across the rest of the UK, landlords ask an average of just over £650. To illustrate how far the crisis has spread, a garage in Hackney was recently put on the market for £375,000 and an eight-car parking space in Mayfair was on offer for £2.25 million.

The effect of the inflated housing prices is manifold. For many young Londoners, owning their own home is just a dream. Does the Minister agree that an entire generation of young Londoners have been failed by the Government and the Mayor? A generation of young Londoners are trapped in an eternal cycle of unstable tenancies and extortionate letting fees, and faced with the inexorable truth that a vast chunk of their monthly earnings is immediately sunk into a black hole from which they can expect no real return. They cannot afford to buy in London, so they are forced to rent well into their 30s or to move outside the M25.

The issue is difficult not just for young Londoners hoping to buy; it is a real issue for employers because the cost of housing in London has dire consequences for recruitment in London. The NHS in London has one of the lowest retention rates and highest vacancy rates in the country. The vastly superheated housing market is a crucial issue behind that. I point the Minister to a report that the London Chamber of Commerce and Industry published in May highlighting the fact that over 40% of London businesses said that their ability to recruit and retain skilled workers was negatively affected by housing costs. I question whether the Government truly understand the impact of such issues in London. Does the Minister understand the seriousness of the implications of the inflated property prices and the difficulties of recruitment for London’s sustainable future?

I have seen first hand in Hackney how high property prices indirectly affect rents, including those in the social housing sector, placing extremely high pressure on our most vulnerable communities. Combined with housing benefit cuts, there is a danger that in the immediate future, we will see a social cleansing of zones 1 and 2.

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Another crucial element in London’s housing crisis is super-wealthy, non-domiciled international buyers who want to purchase property in central London. They are using London property as a status symbol and a safe deposit box, often keeping the properties empty for much of the year. Even in Hackney, large developments in Dalston had many units bought off-plan in the far east. The almost limitless supply of super-wealthy, non-domiciled buyers in the centre of London is causing a price ripple throughout zones 2 and 3, making it increasingly harder for ordinary families on average wages in previously affordable boroughs to meet their housing costs. Does the Minister agree that when it comes to international, non-domiciled buyers of central London property, we need to look seriously at financial measures designed to disincentivise that practice?

The other structural deficiency in the London housing market is the fact that local authorities are now allowing—or feeling that they have to allow—planning policies to be persistently flouted and affordable housing quotas to be ignored in the interests of huge overseas development consortia, such as the Malaysian consortium that is currently developing Battersea power station. The bottom line is that the London market is not a functioning market, and simply increasing the supply will not bring the cost of houses down for ordinary Londoners.

It seems to me that there are a number of things we can do. We need to tighten up on exploitative letting agencies that hit new tenants with exorbitant fees, and I am glad to say that Labour is moving in that direction. We need to allow councils to borrow to build; that is probably the single most important thing. The Labour Government had a wonderful record in renovating and doing up estates, but we simply did not build enough genuinely affordable housing. The only way that can be made good now is by allowing local authorities to borrow to build in order to produce housing that ordinary families can actually afford.

Some measure of rent stabilisation or rent control also needs to be considered. They have it in New York, San Francisco and Berlin—those are not Marxist municipalities, so if there is some measure of rent stabilisation in other big international cities, we can have it in London. Only if we can offer renters some prospect of stable rents will we be able to offer them the quality of life and the certainty in their communities that they now crave. Rent controls, in spite of what some Government Members have tried to imply, do not signify the first footfalls of a mass, state-led, nationwide socialist project. In a big international city, unless something is done to stabilise rents, the centre of that city will, over time, become out of reach to ordinary people.

We are leagues behind global leaders in addressing the problem of spiralling rents. Labour has raised the issue of a mansion tax, which I support in principle, but I am arguing that the proceeds from a mansion tax should be kept in the cities where it is raised. That would be in line with the recommendations of the London Finance Commission and other recent reports on finance in our big cities. If the money from the mansion tax in London was hypothecated to a London housing corporation, it could be used to build genuinely affordable housing—not the Boris Johnson version of affordable housing, which is 80% of market rates—and to offer mortgages to key workers in the public sector.

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My first mortgage was given to me by Westminster council, which gave out mortgages in the ’80s in the belief that people who got a mortgage and owned their own home would be more likely to be Tories. They got it wrong with me, but none the less, I am grateful for my very first mortgage. The mansion tax is a good idea in principle, but to sell it to Londoners, I believe that they ought to be able to see a direct benefit through investment in affordable housing in London.

That brings me to the New Era estate, which contains over 90 families, many of whom have lived there all their lives. It has always been deemed to be affordable housing, but sadly for those residents, all around Hoxton and in the City fringes of Hackney, a housing bubble has erupted that has made almost irresistible the profits to be made from clearing out those tenants and letting out the accommodation at market rents.

Who has stepped into the breach? A US developer called Westbrook Partners. It could not have less interest in housing ordinary people and in affordable housing. On its website, it describes itself as,

“a privately-owned, fully integrated real estate investment management company with offices in New York, Boston, Washington DC, Palm Beach, San Francisco, Los Angeles, London, Munich, Paris and Tokyo.”

It goes on to boast that it has

“raised…$10 billion of equity in $40 billion of real estate transactions”.

This entity is not interested in providing housing in principle; it is entirely profit driven and does not care about the consequences of its activities for the tenants who fall into its hands.

The company owns properties all over the United States. In 2007, it took over a large development—a rent-controlled building—in the Bronx. From then, the tenants saw heat and hot water being turned off and becoming sporadic. They found that repairs went undone and they started to be harassed. Fortunately, in New York rent-controlled apartments they have some rights, and finally, in April this year, the New York Attorney-General, Eric T. Schneiderman, reached a settlement with Westbrook. It had to make years of repairs and resolve thousands of building violations, and it had to pay more than $1 million in rebates for illegal fees and overcharges. When it comes to Westbrook, we do not have to look in a crystal ball; we can read the book and see how it has exploited tenants in other parts of the world—and yet, these are the predator property developers who have come into Hackney and purchased New Era.

What are Westbrook’s plans? I understand that it intends to issue a notice seeking possession to all the tenants, to clear and refurbish the estate for full market value prices—way out of the reach of most of the existing tenants—and that it has no plans to provide any houses for below market price. I also understand that it intends to sell in four or five years, flipping the properties at a profit.

The mayor of Hackney has written to Westbrook in the past 24 hours, asking it to reconsider its plans and to honour a commitment to no further rent increases until 2016. He is also asking that the new managing agents for New Era, Knight Frank, meet the council and engage with the residents. Even the Mayor of London—the Minister’s colleague, Boris Johnson—is calling for Westbrook to engage with the council and with the tenants.

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The tenants, many of whom have, as I said, lived all their lives on the estate, have asked me to say to the Minister that they simply do not understand why a foreign company is allowed to buy the estate and evict 92 residents, with no sense of whether the company is a fit and proper owner and no sense that the tenants have any protection. They have also asked me to ask what the Government will do to offer the tenants protection and support. I hope that the Minister will find it in his heart to say something supportive to those tenants, who are fearing eviction by Christmas.

Meg Hillier: As the constituency Member for the New Era estate, I, likewise, have had many conversations with tenants, who are very worried about their future. I also managed to speak to Knight Frank earlier today to urge if not only to honour the two-year rent and tenancy guarantee, as a minimum, but to look at having affordable rents to make sure that people who have lived there for 20 years or thereabouts—for a long time—do not find that their homes are removed from them. Does my hon. Friend agree that the real issue is people coming in who are looking at this as being about profit rather than about people and their homes, and that in London, we need a long-term private rented sector in which people can bring up families over a generation?

Ms Abbott: I entirely agree with my hon. Friend, although I would say that it is a question not just of long-term tenancies, but of rent stabilisation. It has become completely impossible for people to manage in a rental market in which there is no stabilisation and rents continue to spiral. I have spoken at some length about the New Era situation, because it reflects the way in which Londoners’ homes are becoming pieces on a chessboard for multi-billion-dollar international property developers.

Mr Andy Slaughter (Hammersmith) (Lab): That reminds me that the Financial Times scoop today is that the Qataris intend to buy up the High Speed 2 sites. One of those is in my constituency, where 24,000 homes are planned, but of course those 24,000 homes will be exactly those sky-high-priced luxury flats, because that is what the Mayor of London wants. Let us not ignore the fact that this is not happening by accident or because of market forces. It is a deliberate policy of this Government, Conservative councils and a Conservative Mayor to price my constituents out of London so that international developers can make a profit there.

Ms Abbott: I am grateful to my hon. Friend. There is no question but that we are seeing a process that is partly about how private developers are being facilitated and partly about what is happening with the Government’s so-called welfare reforms, which, as I said, is resulting in a form of social cleansing of zones 1 and 2 in London. That does not make for a sustainable community. How are hospitals, the fire service, local authorities and the public sector generally to recruit if ordinary people coming into the housing market for the first time increasingly can afford neither to buy nor to rent in zones 1, 2 and even 3? As my hon. Friend said, that is not by chance—by accident. When we have a Mayor who says that affordable means 80% of private sector rents, which is way out of the reach of anyone on an average salary in London, and who seems loth to intervene

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in what is happening, Londoners have to face the grim reality that a city that has always prided itself on its diversity and cohesiveness will see that diversity and cohesiveness torn asunder as we move towards social cleansing at the centre. If nothing is done about the current situation, London will become a place where people living in zones 1, 2 and 3 either are extremely wealthy or are serving the extremely wealthy. That is the only way people will be able to afford to live there.

As I said, there are a number of remedies that we need to look at. First and foremost, councils need to be able to borrow to build. We need some form of rent stabilisation. We also need to do something about rental agencies and the charges that private sector renters find themselves paying.

However, there are also a few things that we should not do. It has been suggested that one solution to London’s housing crisis lies in building on the green belt. As someone who spent most of her childhood on the edge of the green belt in Harrow and who now lives in the inner city, I do not believe that building on the green belt is the remedy. It is what developers always want, because building on the green belt is easier for them. They build executive houses that they can sell easily. But houses on the green belt are of no use to young professionals in the centre of the city, who want to be within reasonable commuting distance of their work. They are of no use to families in the centre of the city, who want family-sized housing that, again, is within commuting distance of their work. I therefore say very firmly that anyone proposing to build on the green belt is simply falling into a trap set for them by developers. We should look at the more than 50,000 brownfield sites in London and incentivise development on those sites. The truth is that London’s housing issues must be addressed primarily within the M25, because it would defeat the primary objectives of the green belt—to check urban sprawl and to support biodiversity—if we fell for what the developers are telling us and started to build on it in any great numbers.

London is the greatest city in the world. It has never been more energetic, more exciting or more prosperous, but I put it to the Minister that without urgent action to address the housing crisis, London’s future is at risk. The housing crisis is not just a question for young renters, people who cannot afford to buy and people in social housing and council housing, who are being forced out of London in some cases because of the cuts in housing benefit. It is also a question for older people who are themselves well housed but who look at their children, who may have professional jobs, and realise that they will never be able to afford to buy inside the M25. It is also a question for employers. As I said, it has become increasingly difficult for London employers to recruit because of excessive housing costs.

How does the Minister propose that a city such as London can function if teachers cannot live within commuting distance of the schools that they teach in, if nurses cannot live within commuting distance of the hospitals that they work in and if even policemen find themselves living way outside the communities that they police? The state of the housing market in London is our most pressing issue. What is happening on the New Era estate in the constituency of my hon. Friend the Member for Hackney South and Shoreditch (Meg Hillier) illustrates predatory property developers at their worst.

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I am grateful to the House for the time allotted this afternoon to raise these important issues and I look forward to hearing the Minister’s response and his comments on what he and the Government are doing to address this state of affairs.

Meg Hillier rose—

John Robertson (in the Chair): If the hon. Lady can make her speech in a minute and a half, she can have it.

5.16 pm

Meg Hillier (Hackney South and Shoreditch) (Lab/Co-op): Thank you for calling me, Mr Robertson. I want to return to the issue of the New Era estate, because those 92 households reflect one of the real challenges that my hon. Friend the Member for Hackney North and Stoke Newington (Ms Abbott) just touched on. This involves people in low to moderate-income jobs.

I refer people to a report that I partly authored in 2000-01 for the London assembly. These people are in good jobs. They work long hours and work hard. However, they are unable to afford anything in the private rented sector, possibly even in zone 6 in London. Particularly affected are those who would never qualify for social housing. The social housing restrictions are now so tight that single men who perhaps have children but are not living with them have so little choice about where to live that they are forced out of London in many cases. There is a real shortage of long-term, good-quality, affordable rented housing in both the social sector and, crucially, the intermediate private sector.

I urge the Minister to look at this issue. I have had answers before on the Floor of the House: Ministers, with a sweep of the hand, have said, “Oh, we’re doing work to improve the situation and ensure that private landlords can do a better job and invest longer term,” but nothing is mentioned about the rents, and there is real concern about that hugely important area. There was provision on the New Era estate for more than 80 years under the last private landlord—the only owner before it was sold. That has now gone. We saw this with the Crown Estate housing being sold, although happily it was bought by Peabody. That is at least a housing association, which we can have access to and talk to. However, there are real issues. We are seeing estate after estate—the Warner estate in Waltham Forest and other estates in London—

John Robertson (in the Chair): Order. I am sorry to interrupt the hon. Lady, but we must give the Minister time to respond.

5.18 pm

The Minister of State, Department for Communities and Local Government (Brandon Lewis): Thank you, Mr Robertson. It is a pleasure to respond to the debate under your chairmanship. Certainly towards the end of the speech by the hon. Member for Hackney North and Stoke Newington (Ms Abbott), I found an issue that we agree on—this is probably one of the rare times when we actually agree on something. I am referring to defence of the green belt, on which I absolutely support her comments, particularly in terms of urban sprawl. She makes a very good point on that.

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Going backwards from there, I start to disagree with the hon. Lady somewhat. I do not entirely disagree that London is the greatest city in the world, although as a Norfolk Member of Parliament I make a very strong pitch, as I am sure she would appreciate, for the great assets of Norwich. I encourage others to come and see Norwich.

To take the comments this afternoon more generally, it is important that we ensure that there is good-quality, affordable housing for everyone. An effective housing market has been and is a really important priority for the Government. Specifically in London, the Mayor of London has set himself a target of delivering 42,000 new homes a year, a figure that has not been matched in London by any Government since the 1930s. I am pleased that we have devolved power to the Mayor of London, who can look at what is right for London and make decisions for London.

When I visited City Mills development in Hackney this summer, I saw some of the really good regeneration and development that are being done. The development is creating more homes for people—I believe that the total number is going from some 450 to around 750—while getting rid of some ugly tower blocks and bringing back street scenes and community in attractive properties that people can be proud of, so that they can start to build a community again.

Since 2008, with 18 months left of his second term in office, the Mayor of London has already delivered more than 5,100 affordable homes in Hackney. That represents a considerable increase on the 4,220 affordable homes delivered during the previous Mayor’s eight years in office.

Ms Abbott: May I remind the Minister that the Mayor has much broader housing powers than the former Mayor had? That is a consequence of the former Mayor’s campaigning. I also remind the Minister that affordable housing, as the current Mayor defines it, means 80% of private sector rents. That is way out of the reach of ordinary people in Hackney.

Meg Hillier: rose

Brandon Lewis: I give way to the hon. Lady.

Meg Hillier: I point out that on the Colville estate, which is, coincidentally, opposite the New Era estate, the council is building homes for tenants. It is good quality social housing, just as the Minister described. That is a model for what can be achieved with good local leadership and the right funding, and it delivers long-term affordable homes. Surely the Minister can see that as a model, too. Hackney has the answers.

Brandon Lewis: Yes, and I am proud that more council houses are being built under this Government than under the previous Government. Councils are building council houses again. The hon. Member for Hackney North and Stoke Newington spoke about councils being able to deliver more and to borrow more.

At the start of self-financing, councils had borrowing headroom of £2.8 billion, which has not been entirely used up. I encourage councils to go ahead and progress with developing new housing. We have also recognised that some councils needed extra borrowing powers, so we have already announced £122 million of additional borrowing headroom for 22 authorities, to support the delivery of more homes in their areas. We have consulted

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on proposals to increase local transparency about the value of local authorities’ social housing assets. That is an important step forward.

We have had to rebuild the housing market in this country. There are now more than 4 million households in the private rented sector, and that number is increasing. Private rented sector rents in England—I appreciate that I am talking only about England—have fallen in real terms every year under this Government. Last year, the average increase in England was 1%, which is below inflation, for the 12 months ending in September. In London, rents increased by only 1.5% over the same period, with inflation at 1.2%. Local authorities are responsible for ensuring that standards are met, but the Government are taking steps to improve quality and choice in the private rented sector.

I want to see more people investing in the private rented sector. Landlords who own 10 properties or fewer make up by far the majority of the sector, and it would be good to see more institutional investment and professional experience in the sector. That is why we have established the £1 billion build to rent fund, which will have delivered contracts by March of next year for up to 10,000 new homes.

Some of those contracts are already in place for homes across London, and I expect more to follow. We have established the private rented sector taskforce to encourage more entrants into the sector, and we are determined not to jeopardise that investment by increasing red tape and unnecessary regulations, such as rent controls. Rent controls demolished the market last time they were introduced and reduced it to about 8%, although we are rebuilding that.

We recognise that standards must continue to improve. We want professionalism in the sector to increase, to make it more attractive to investors and tenants. We have taken action to tackle bad landlords so that they either improve or leave the sector. That is why I entirely support what the Mayor is doing with the London rental standard. We are also giving tenants the know-how, through our “How to rent” guide, to get rental deals that meet their needs.

Hon. Members have raised a couple of questions and suggestions. The hon. Member for Hackney North and Stoke Newington said that she supports the mansion tax in principle. I am sure that she will not be surprised to hear that I do not support it, not least because the effective delivery of a mansion tax would involve the revaluation of many homes. When that has been done elsewhere, it has caused problems for people right across the scale and tended to hit the most vulnerable. A mansion tax would also risk penalising people—in the main, pensioners—on low incomes whose properties have appreciated in value. The Opposition’s policy seems to change every day, however, so I have no doubt that it will develop and change further.

Hon. Members have said that they believe that foreign investment in the housing market is having a negative impact, and I think that we need to put that in context. Foreign investment in new housing has been helping to provide the finance required to build the housing that we need, particularly in a global city such as London. Without such up-front investment, financiers would not have released the cash needed for development to go

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ahead, and building would have completely stalled. The developments that we now have would not be in place.

Not only do those developments provide homes in which people can live and work, but they unlock associated affordable housing development. Even where property is foreign-owned, much of it is rented out, which generates an ongoing return for the investor. A good example is Battersea power station, which has been derelict and undeveloped for about 30 years. Development is now going forward thanks to a combination of private investment from Malaysia and public infrastructure support from the Government. To put the situation in perspective, the Bank of England recently estimated that foreign buyers represent only 3% of all residential property transactions in London.

Meg Hillier: I understand that something as intractable as Battersea power station may have needed a kick start from someone wealthy, wherever they were in the world. In Hackney, however, new developments are being bought off plan by landlords who will never set foot in the country. They were originally built to provide homes for local people, but they never reach the hands of local people. I do not think that that is what the Minister is talking about, and I hope that he does not support that approach.

Brandon Lewis: We sometimes also see British institutional investors—British companies—investing in the private rented sector overseas. In places where that has happened, they tend to be grateful to have good management. I want to see good management, good landlords and good institutional investment coming into the private rented sector. The Mayor of London has recently launched a mayoral concordat on new homes in the capital. Key developers have been contacted and asked to commit to selling new homes on every development to Londoners before, or at the same time as, they go to overseas buyers.

A couple of hon. Members spoke about properties being built and left empty. The number of empty homes across England is at its lowest rate since records began. The vacancy rate in London has dropped to below 2% for the first time ever. Hon. Members have touched on the question of how we improve the private rented sector by looking at letting agents. Although landlords and letting agents are free to set their own charges, they are prohibited from setting unfair terms or fees under existing consumer protection legislation.

Mr Slaughter: The Minister is talking about support for affordable housing and even social housing. Can he explain why he sat on, and subsequently overturned, the Planning Inspectorate’s report on the Shepherd’s Bush Market compulsory purchase order, which will destroy social housing, a 100-year-old market and small businesses simply to build more than 200 luxury flats on the site?

John Robertson (in the Chair): Order. The Minister will have to write to the hon. Gentleman.

5.28 pm

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