I apologise for the absence of my hon. Friend the Member for Brent North (Barry Gardiner). He has shadow ministerial responsibility for this brief, but he is indisposed, so I am standing in on his behalf. I wish him well for a speedy recovery. Finally, I of course congratulate the hon. Member for Richmond Park (Zac Goldsmith) on securing this debate, which has turned out to be incredibly effective. If it has served any purpose, it

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seems to have triggered, along with the e-petition, the decision to announce a further tranche of funding for Kew gardens. His contribution was passionate. He led the debate off with an excellent set of remarks that underlined the key point, which is the need for stability in Kew’s funding.

Kew remains one of the leading botanic gardens of the world. As my hon. Friend the Member for Hayes and Harlington (John McDonnell) pointed out, it is important not only to London, but to the whole of the UK and the world. It makes an essential contribution to our understanding of the world’s flora and to the conservation of plant and fungal biodiversity. It is clear that Kew’s committed team of scientists are highly valued internationally. Indeed, one could argue that it is difficult to overestimate the value of their contribution to plant science. They thoroughly deserve their reputation for world-leading research and for their essential conservation and curation work. In 2012, Kew was judged to be

“well placed to continue to make a significant and globally important contribution”

by the independent review panel chaired by Professor Georgina Mace. That review considered the position of Kew in 2010 and 2011. After a decade of investment from a Labour Government who understood the value of sound science, Kew was well placed to manage a slight real terms cut in its operational budget. That is where we were four years ago.

Today we have Richard Deverell, Kew’s director, warning of possible bankruptcy and a £5.5 million shortfall in Kew’s operational budget. I will refer to today’s announcement later in my remarks, because it alters things slightly. There is a stark difference between where we were and where we are, but that is what happens when we have a Tory-led Government who believe that protecting the environment holds back the economy. They seem to believe that we have to make a choice about whether we protect our economy or our natural environment.

Will the Minister clarify the evidence behind his Government’s approach to Kew, notwithstanding today’s announcement? Does he believe that Kew will be able to increase significantly its level of external funding, which seems to be the long-term plan, including for its core work? If so, why does he believe that and how will it be done? If not, he should be clear about the reasoning behind the Government’s initial decision to degrade the UK’s natural science capacity. The independent committee’s report contained a clear warning that

“Kew must guard against the risk that the allocation of its core funding is distorted by the need to chase external money.”

There is real concern that, in a context of declining resources for animal and plant science, Britain will not be able to deal with potential risks or new outbreaks of plant disease. I refer specifically to the recent outbreaks of ash dieback and oak processionary moth. Earlier this year, the Natural Capital Committee said that the incidence of disease has accelerated over the past 50 years. It also said that the current outbreak of ash dieback is expected to destroy all but a very small percentage of the total population of ash trees in Great Britain. Every time I go out walking in my constituency, I think about that and the difference that it could make to our landscapes

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and precious woodlands. With such a host of new pests and diseases attacking the United Kingdom’s native treescape, Kew’s scientists are more important than ever.

Climate change and the increasing presence of pests and diseases are placing additional stresses on our natural environment. We do not know exactly what impact they will have, but we must prepare properly for the increasing risks, and we simply cannot do that without Kew. Those who have a long-standing interest in the natural environment, as I do, will be asking why we are forced time and again to make basic arguments in favour of maintaining the levels of investment in environmental science. The Government clearly just do not get it, so it is worth rehearsing some of the basic points.

As many Members have said, Kew is a leader in plant conservation. It plays a major role in global assessments for the International Union for Conservation of Nature’s red list. The millennium seed bank supports the long-term conservation of wild species and the use of seed for innovation and adaptation in agriculture, horticulture, forestry and habitat restoration. Kew has a long tradition of global leadership and influence in plant discovery and description and in pure and applied research.

The Government’s failure to appreciate the value of Kew is one of the clearest signs that they do not take the environment seriously. Despite the sensible recommendations of the 2010 Chalmers independent review of Kew and the 2012 independent science review, Kew has been left on an unsustainable footing. That key point has been raised in, and crystallised by, today’s debate—the instability that Kew faces in the long term. It was illustrated perfectly by the hon. Member for Richmond Park and my hon. Friend the Member for Hayes and Harlington.

Today the Chief Secretary to the Treasury and the Deputy Prime Minister announced that an extra £2.3 million of Government funding has been secured through to April 2016. The right hon. Member for Banbury (Sir Tony Baldry) made the point that Kew should perhaps be funded by the Treasury, but some of us might argue that it already is effectively being funded by the Treasury, because this is the second time that the Treasury has bailed Kew out. That leads, however, to a few questions. Is the money additional grant funding or has it been moved from another part of DEFRA’s budget? If so, which programme is the money being transferred from? Does the £2.3 million include expected efficiency savings either from Kew or from elsewhere? Is the £2.3 million for operational or capital budget purposes? Will Kew receive all the £2.3 million in 2015-16?

The key point is that the announcement today—let’s face it, our Deputy Prime Minister is quite good at these kinds of announcements—does not negate the hand-to-mouth feel of the Government’s approach, which is one of the key reasons why the Science and Technology Committee is conducting an inquiry into the issue. I hope the Government will do more than just pay lip service to the Science and Technology Committee and its deliberations, because the £2.3 million does not deal with the issue, as Members here today have said repeatedly. As John Wood from the department of plant sciences at the university of Oxford said in his submission to that inquiry:

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“The lack of core funding is forcing Kew to abandon its traditional roles and research and instead head in the direction of research to which it is not suited. Much will be lost if this process continues.”

Today’s announcement does not deal with that fundamental point.

Environmental science should be a priority of the Government’s, but it could not be further down their list of priorities. Just look at the Environmental Audit Committee’s report published in September; it has an environmental traffic light scorecard that has no green on it. Would you expect a Government with an environmental scorecard coloured red, red, red and amber to understand the value of Kew? Of course not. Labour is committed to halting and reversing the decline of our natural environment, and we are clear that Kew has an important role to play in meeting that ambitious goal.

3.39 pm

The Parliamentary Under-Secretary of State for Environment, Food and Rural Affairs (Dan Rogerson): It is a pleasure to serve under your chairmanship today, Sir Alan. I, too, congratulate the hon. Member for Richmond Park (Zac Goldsmith) on securing the debate and all hon. Members on their contributions made both today and at other times when the future of the Royal Botanic Gardens, Kew has been discussed. I also congratulate Kew on its approach to refreshing how it delivers its science in the 21st century.

As lead Government sponsor for Kew, the funding that the Department for Environment, Food and Rural Affairs provides helps to support the institution as an international, collections-based, centre of expertise in plant and fungal identification, taxonomy, conservation, sustainable use and related research. It helps to support Kew in its role as a UNESCO world heritage site and supports Wakehurst Place, which is managed by Kew and is home to the millennium seed bank. The funding also supports Kew in its roles as the world’s most famous botanic garden, an important visitor attraction, which has been highlighted by hon. Members from London, and a provider of science-based education to the public.

Kew was founded over 255 years ago. The Government and Kew’s shared challenge is to ensure that its structure is resilient and fit for purpose to meet the challenges of the 21st century. Its new science strategy is vital. Kew is recognised throughout the world for its unrivalled assets and expertise, and we want further to enhance that reputation. Kew is not simply another academic institution; it maintains a world-renowned collection, which enables it to be unique in the science that it can provide. This debate and the Science and Technology Committee’s hearing tomorrow on the future of the Royal Botanic Gardens, Kew will help to inform the final details of a new science strategy for Kew.

We have been able to offer relative protection to Kew in terms of total Government funding. Average funding has been more than £27.4 million a year over the past five years. Between 2007 and 2010—the last comprehensive spending review period—the average was less than £27 million. Others have already mentioned it, but I am pleased to confirm an extra £2.3 million unrestricted resource funding for 2015-16, which the Government

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secured through the recent autumn statement and which was announced today by my right hon. Friend the Deputy Prime Minister.

Zac Goldsmith: I thank the Minister for giving way so early in his speech. I want to echo the point made by the hon. Member for Hayes and Harlington about the need for a full, open stakeholder meeting. The grant that the Minister alludes to is a one-off, a reprieve, a delay and nothing more than that, so there is a need for such a discussion. I ask him to address that point directly. If he could facilitate that meeting, I am sure that we would all appreciate it.

Dan Rogerson: I thank the hon. Gentleman for his intervention. I will return to that point and some of the long-term issues later.

The funding announced by the Deputy Prime Minister today maintains Kew’s resource funding at 2013-14 levels right through to April 2016, which is in recognition of the need to embed the restructuring in order to deliver a sustainable future for Kew and the globally recognised science work that it provides. The funding is in addition to the announcement made by the Deputy Prime Minister in September that unrestricted resource funding for RBG Kew will be maintained until April 2015 at 2013-14 levels. Kew was provided with an additional £1.5 million to honour that.

We fully support Kew’s efforts not only to balance the budget, but to increase commercial and other sources of funding. That approach not only reduces reliance on Government funding, but potentially opens up additional and new opportunities. In support of that, I can confirm that we have extended to Kew more of the freedoms that are available to certain museums and galleries, to which my right hon. Friend the Member for Banbury (Sir Tony Baldry) referred. In particular, that will mean that Kew can bid for preferential Government loans to pursue projects that will enhance its ability to grow self-generated income. Kew has been asking for that and I am pleased that the Deputy Prime Minister confirmed that today.

Kew is already a valued partner in delivering DEFRA’s strategic evidence priorities. It has unique assets and globally respected expertise and is a top performing scientific institute that helps to deliver DEFRA’s science objectives. I welcome Kew’s approach to refresh how it delivers that science in the 21st century. In turn, that will help to deliver what people want of Kew and what the Government need. I support Kew’s restructuring as it will enable the right skills to be in place to secure long-term success, to maintain a world-class facility and to be able to respond to future challenges. Kew’s scientists directly support DEFRA’s work in several ways. For example, they contribute to international biodiversity, to tackling climate change globally and to a resilient, sustainable and growing food and farming industry. They help with the bio-security system and our ability to respond to plant, pest or disease outbreaks and contribute towards halting the loss of biodiversity in England by 2020.

Kew has a dedicated, committed and professional work force, but it needs the right skills to deliver a new scientific vision and to respond to future global challenges. It cannot afford not to change. It may be easy to think that it is all about reducing costs, but the restructuring

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is about securing long-term stability for the institution and creating and maintaining a world-class facility for future generations. That will enable it to make a unique contribution to meeting the 21st century’s great social and environmental challenges, to which the hon. Member for Richmond Park referred in his opening remarks.

Restructuring will also ensure succession planning by introducing new career and development opportunities for staff, so that future generations have the capability to continue its science legacy. Kew cannot afford not to change if it is to continue to be the world-class organisation that we all want it to be. The restructuring clearly impacts on individuals in different ways. It is too early to tell what that means for every person working at Kew, but Richard Deverell and his team are offering every support to the people affected by the transition.

Zac Goldsmith: I worry that the Minister is approaching the end of his speech, so I want to make a point before he finishes. Some of Kew’s key work, as the Minister and other Members have identified, clearly crosses over into the realms of the Department for International Development. Has the Minister’s Department approached DFID at any point to ask whether what would represent an almost immeasurably small pinprick in its budget could be diverted to support specific work at Kew that relates to poverty alleviation, building resilience into the global food economy and dealing with climate change?

Dan Rogerson: Part of Kew’s restructuring involves making it better able to look at other opportunities, some of which may come from other sources of public funding. We want to make it ready to take advantage of that.

Zac Goldsmith: Will the Minister give way?

Dan Rogerson: May I make a little progress? I want to refer to the points made by other hon. Members and, indeed, those made by the hon. Gentleman.

Turning to heritage, it is an important Government priority to meet our obligations as a state party to the world heritage convention. We are working with Kew to ensure that it is using resources effectively and looking for innovative ways to maintain and secure a long-term effective use of the assets that it manages. We will continue to involve our colleagues in the Department for Culture, Media and Sport in those discussions. We have invested considerable capital funding in recent years to help Kew reduce operational costs and increase self-generating income, including support to the temperate house restoration project, where we underwrote £10 million, which is a UNESCO management priority.

On the issues raised by hon. and right hon. Members the debate, I have sought to set out that the coalition Government have had to deal with public spending challenges to reduce the deficit. The hon. Member for Aldershot (Sir Gerald Howarth) was at pains to point out his ideological leanings. Mine might be slightly different, but we can agree that we need to tackle the problem facing the country in order to deliver growth and guarantee future investment in public services. Although DEFRA has faced a budget reduction, as have all Departments, Kew has done slightly better than DEFRA

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more generally. My right hon. Friend the Member for Banbury was concerned that non-departmental public bodies are at the end of the queue. That is a bad pun, but it is not the situation with Kew.

John McDonnell: The point that we were trying to make is that Kew has missed out on other opportunities. Even though it plays a role as a heritage centre, it comes under the Department for Environment, Food and Rural Affairs and so it did not gain additional money from the Department for Culture, Media and Sport that others, museums in particular, received. Even though it plays a key education role, it did not gain the protection of the education budget. It was the same with regard to the Department for International Development. As Kew is funded directly by DEFRA, it has missed out on all those other funding opportunities over the past 15 to 17 years.

Dan Rogerson: I understand the hon. Gentleman’s point, his commitment to the institution and his desire to look at every opportunity to secure its work and underpin it for the future. The triennial review offers an opportunity to look at the position of the institution and where it sits in the Government structure. He has referred to that chance, and that is the proper time, rather than asking the question separately today.

Hon. Members have raised issues to do with science and the crucial work that is done. The hon. Member for Richmond Park talked about the need for succession planning, to which I referred a little, and Kew is looking at the courses and other work it does as academic provision to ensure that it is bringing through the next generation of expertise for the future. That is an important part of its work.

Hon. Members from all parties have been campaigning to keep Kew at the forefront of debate in the House and outside it among people at large. I have been on the receiving end of that, too, not only from the hon. Member for Richmond Park, but from Opposition Members. I have heard from Liberal Democrats in Richmond and elsewhere. Today, we had the announcement of my right hon. Friend the Deputy Prime Minister. So there has been pressure from throughout the country to ensure that we are doing the absolute best to protect Kew and all that it does.

As for the prospect of a further meeting, I will take that to my noble Friend Lord de Mauley, who is the responsible Minister. Given the Science and Technology Committee inquiry that is to begin tomorrow and the opportunities of the triennial review and the next comprehensive spending review, we will have to decide when the right point for such a meeting will be, but I will certainly take the proposal back to my noble Friend for his consideration. He is always happy to hear from Members of this House, as well as Members of another place, on the subject.

I also want to refute some of the little barbs sent in my direction by the hon. Member for Penistone and Stocksbridge (Angela Smith), who spoke for the Opposition. The Government have invested in science. As Forestry Minister, I know that the appointment of a chief plant health officer, the work on forestry research and so on are crucial, which is why we will continue to fund such things and take science forward.

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The hon. Lady also made some points about funding generally. We heard from her party leader a few days ago about the fact that all parties will need to tackle issues such as how much Government will be able to invest in public services, how much expenditure will have to come from taxation and how much will have to be borrowed in the future. Those are difficult questions for all of us to answer.

Angela Smith: The Minister is being generous with his time, but I wish to remind him that I asked questions about today’s announcement. We would like the answers to the questions, rather than responses to the points made.

Dan Rogerson: I was merely responding to the hon. Lady’s assertion that, somehow, all would have been well and rosy for every area of public spending had a Labour Government been in office. I suspect that that would not have been the case.

The hon. Lady wanted to know whether the money announced today was new money. It is—it is not money coming from elsewhere in DEFRA’s budget. The funding is unrestricted and has no conditions attached to it, so Kew will be able to use it across the range of its responsibilities. All that money will be available in 2015-16. I hope that that reassures her and answers her questions.

I am grateful for the opportunity to place on the record the Government’s commitment to the Royal Botanic Gardens, Kew. I thank hon. Members of all parties for their commitment and support. I hope that the announcement today by my right hon. Friend the Deputy Prime Minister demonstrates that the money is available to help the transition that the institution is having to make over the coming years towards the long-term future that we all wish to see.

John McDonnell: May I ask the Minister when we can look forward to the next instalment?

Dan Rogerson: The budgetary position has now been set out for the next 18 months, as the hon. Gentleman said, and the triennial review will then give us the opportunity to look at the future of Kew and where it sits in the Government apparatus. I thank him and all hon. Members for their contribution to the debate. I thank you, Sir Alan, for the opportunity to speak.

Sir Alan Meale (in the Chair): We have a short time remaining, Mr Goldsmith, if you would like to say something.

3.55 pm

Zac Goldsmith: I appreciate the unexpected perk, having spoken when I initiated the debate.

I do not know whether it is appropriate to ask the Minister to intervene, but I would welcome a clearer answer to my question on DFID funding, which is crucial. A lot of work that Kew does falls within the remit of DFID. If his Department has not yet approached DFID, will it now commit to doing so? DFID does some wonderful things, but no one would argue against the fact that huge chunks of money presided over by

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DFID are not as well spent as they might be. Kew would present a great opportunity to spend that money well.

I acknowledge the answer given to the hon. Member for Hayes and Harlington about the stakeholder meeting. When are we likely to hear back from the Minister about that meeting? There is not a lot of time between now and the election, and the meeting should happen before it. Although I am grateful for today’s bung, my concern is that it is a political device to kick the issue beyond the general election. As Members and campaigners, we are aware that if we are to have long-term stability for Kew, it will need to be secured this side of the election, because negotiating afterwards will be much harder.

Dan Rogerson: On the hon. Gentleman’s specific points, I will have to confirm with my noble Friend Lord de Mauley whether any such approach to or discussions with other Departments such as DFID have happened. The institution is going through a process and has been exploring with our officials in DEFRA the best path for getting to its future, but if we can help it to have conversations with other Departments, I am sure that that is possible and very much part of the bottom-up process of Kew deciding what would be appropriate. We would facilitate a conversation, rather than seek to push another Department to make a budget available unless it fits its core priorities. I will take the suggestion of a meeting back to my noble Friend.

On the hon. Gentleman’s political points, all the political parties are setting out our stalls for future funding. There are challenges. He and other hon. Members will look at what all the parties are saying about future funding of public services and will make up their own mind. With regard to the funding for Kew, however, the money is in place for 2015-16.

Zac Goldsmith: I put on record my thanks to the hon. Member for Hayes and Harlington, in particular, for campaigning so hard, which is appreciated by my constituents and by the staff and friends of Kew. It has not gone unnoticed. Personally, I am grateful to him for having pushed the issue so high up the agenda. We would not be having the debate or have seen the press release about the extra funding this morning had it not been for his leadership. I am also grateful for all the speeches.

Sir Gerald Howarth: Before my hon. Friend finishes, may I say how strongly I support his message to the Minister that he should be talking to DFID? The Department for International Development is simply awash with cash. It has had a bung of an extra £5 billion in the past four years. So much of the work that Kew does is overseas, helping developing countries, so I am sure that my hon. Friend and I can make a compelling case to the Minister to go and nick some of that cash off DFID.

Zac Goldsmith: With that, let us commit here and now as hon. Members and Back Benchers to visit the Secretary of State for International Development to make that case. My hon. Friend is absolutely right.

I thank you, Sir Alan, for presiding over the important debate. I hope that it is the beginning, not the end, of something positive.

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Barnett Formula

4.1 pm

Iain Stewart (Milton Keynes South) (Con): It is a pleasure to serve under your chairmanship, Sir Alan. I am grateful to have this opportunity to discuss the future of the Barnett formula in a little more depth than recent debates have allowed.

My reason for calling for the debate was neither to call for the abolition of Barnett, nor to say that it must stay unchanged for ever more. My motivation was born out of frustration at some of the ill-informed comments made about it. In advance of the draft legislation on further devolution to Scotland, which is due before Burns night next year, I want to put on the record an explanation of what the Barnett formula is and, perhaps more importantly, what it is not. I also put on the record that I absolutely support extra fiscal powers for the Scottish Parliament. That is good for the democratic accountability of Holyrood.

Mr Angus Brendan MacNeil (Na h-Eileanan an Iar) (SNP): The hon. Gentleman mentioned the Barnett formula and, before he goes too far, I want to highlight its operation. About a fortnight ago, the Treasury gave out money because roads and health in England had a shout for that. Therefore, from that followed Barnett consequentials to Northern Ireland, Wales and Scotland.

However, I notice that, if there is a need in Scotland, Wales or Northern Ireland for money for health or transport, the Treasury does not dip its hands in its pockets in the same way with Barnett consequentials running in the other direction. Barnett consequentials follow on from need in England. It is surely a governance problem when the Treasury responds only to health and transport needs in England and then we get consequentials. Should not the Treasury give money and have consequentials running in the other direction when need arises?

Sir Alan Meale (in the Chair): Order. May I point out to Members that we have only a short time for the debate? If interventions are to be made, can they be questions to the speaker at that time rather than statements? Hopefully everyone will have an opportunity to speak.

Iain Stewart: I am grateful for the hon. Gentleman’s intervention. If he bides his time a little, he will see that I will touch on some of those issues later on in my speech.

Karen Lumley (Redditch) (Con): Does my hon. Friend agree, though, that the majority of people in my constituency would think that the Barnett formula is unfair?

Iain Stewart: There certainly is that perception. Part of my motivation for securing the debate was to address such issues so that we can have a more informed debate on the fiscal relationship principally between Scotland and England. I am conscious that Members from Wales and Northern Ireland are in the Chamber as well. My comments will be principally about Scotland and England, but the arguments also apply to the rest of the United Kingdom. As I said, there is much ill-informed comment and misunderstanding about what the Barnett formula is and does and that is why I wanted to have this debate.

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As well as being misunderstood, the Barnett formula is much maligned. Contradictory simultaneous comments are made that it both penalises Scotland and is too generous to Scotland, but both of those cannot be right. I am reminded of a comment that Lord Foulkes made when he was a Scotland Office Minister about a decade ago:

“If the SNP think that Barnett is too mean and the English Tories think that it is too generous, most sensible people would think that it is just about right”.

For many years, reform of the Barnett formula has been parked in the “too difficult” box.

Jim Shannon (Strangford) (DUP): In Northern Ireland’s case the Barnett formula is just right. It recognises the need to keep the balance of wealth, because in Northern Ireland our wages are lower and the products we buy in shops are more expensive. At the same time, if the current talks work out—I hope that they do—and corporation tax is devolved to Northern Ireland, that could be a poisoned chalice. However, Northern Ireland has already been able to set its air passenger duty for long-haul flights with the permission of the British Government.

Iain Stewart: As I said earlier, the purpose of the debate is not to say whether Barnett is right or wrong or whether it needs to be changed or not; it is just to help inform a more considered debate about the issues.

Glyn Davies (Montgomeryshire) (Con): Will my hon. Friend give way?

Iain Stewart: Certainly. I will complete my tour around the United Kingdom.

Glyn Davies: I feel that Wales should have a contribution to this international debate. My hon. Friend is addressing the issue of clarity. In Wales, the lack of clarity in the Barnett deficit is leading the Welsh Government to resist financial accountability. Does he agree that it is vital that we find out what the Barnett deficit is? A whole range of figures have been bandied about. Most of them are untrue, but they are being used to prevent the financial accountability in Wales that we all want to see.

Iain Stewart: My hon. Friend makes an excellent point. There is a lot of darkness and cloud about these matters, and if we are to have a sensible debate about the fiscal balance between the component parts of the UK, we need that greater clarity.

Eric Ollerenshaw (Lancaster and Fleetwood) (Con): I think that Lancashire needs a say. In the debate that is coming on English votes and so on, does my hon. Friend agree that we need to be honest with the English people? There is a cost to being the biggest part of the Union and there is a cost to the Union. Whether we agree about Barnett or not, England will have to pay more than the rest of the component parts of the United Kingdom.

Iain Stewart: My hon. Friend as ever makes a good point. At the conclusion of my speech I will say a little more on that.

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Mr MacNeil: Will the hon. Gentleman give way?

Iain Stewart: Once more and then I must make some progress.

Mr MacNeil: While the hon. Member for Lancaster and Fleetwood (Eric Ollerenshaw) may be correct that England pays more, it pays more only because it is larger; it does not pay more per capita. Unfortunately, that has been Scotland’s preserve: it has paid more tax per capita into the UK each and every year for the past 33 years.

Iain Stewart: Again, I shall address those very points in a few moments. I want to shed some light on the issue. Critics of Barnett usually start by quoting Treasury figures that say that public spending per capita in Scotland is £1,600 greater than in England as a consequence of the Barnett formula. For once I may be in agreement with the hon. Gentleman, because that is not correct. The Barnett formula is only one part of the complex fiscal relationship between the different parts of the United Kingdom.

The Barnett formula applies only to certain parts of public spending. Currently, about 40% of public spending in Scotland is not covered by it because that spending is not determined by the Scottish Parliament. That proportion will reduce in time as further taxes are devolved, but that point is important. Nor does Barnett determine the size of the Scottish block grant as a whole. That has built up incrementally over the years and the Barnett formula determines only the annual changes.

In simple terms, Scotland gets a population share of a departmental budget change in England where the equivalent is determined by Holyrood. Each year, the changes for each spending programme are totalled up and an overall adjustment to the previous year’s block grant is made. It is then up to the Scottish Parliament to decide how it spends that grant; it is not hypothecated. If Scotland gets £100 million more for health services because of the change in England, it is not obliged to spend that on health. That partly explains why some public services and other matters in Scotland are different from south of the border.

It is important to note that when the formula was introduced in the late 1970s it was designed as a convergence formula to narrow public spending per capita between Scotland and England. In advance of the devolution legislation proposed by the Wilson and Callaghan Governments, the Treasury carried out a needs-based review to determine the extent to which public spending per capita in Scotland would need to be higher to provide a comparable level of public services to those in England. It was found that because of factors such as Scotland’s proportionally greater landmass, rural population, council housing stock and poor health indicators, spending needed to be 16% per capita higher than in England. It was actually 22% higher, so Barnett was introduced gradually to narrow the gap and avoid the annual round of what was described as table-thumping over agreements between the different spending Departments.

It would seem that convergence has not happened, and it is important to understand why. First, in the initial years of operation, the population share was never adjusted, and that was at a time when Scotland’s

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population relative to England was falling. For a decade or so, a bias was therefore built in to the formula in Scotland’s favour. In the 1990s, the population share was adjusted, but it helped to sustain the higher levels. Secondly, and more significantly, were the number of deals done outside the Barnett formula. Whatever calculation Barnett produced, there was always pressure, under Governments of all parties, for extra funding arrangements. In his autobiography, the noble Lord Lang notes that when he was Scottish Secretary, between 1990 and 1992, Barnett should have reduced the Scottish Office block grant by £17 million, but, as a result of separate deals agreed with the Treasury, it was increased by £340 million.

Mr MacNeil: Will the hon. Gentleman give way?

Iain Stewart: I hope that the hon. Gentleman will forgive me, but I must make some progress.

The simple point is that if Barnett were to be ended tomorrow, the issue of comparative spending would not go away. There has not been a needs-based review since the 1970s, in which time many economic, social and demographic changes have taken place, so we do not actually know what the current position is. There are also difficulties in defining exactly what territorial spending is. One example is the building of High Speed 2, a project of which both phases will be entirely within England. One could therefore argue that spending on it should accrue only to England, but there is a benefit to Scotland and Wales—

Mr MacNeil: And France.

Iain Stewart: I am not quite sure whether the hon. Gentleman’s geography is correct. High Speed 2 will go from London to Birmingham and the north of England.

Mr MacNeil: The hon. Gentleman has conceded, as he is right to do, that High Speed 2 will be built in England, and says that it will also bring benefits to Scotland. If there are benefits to Scotland in the north, surely there will also be benefits at the other end, in the south—namely, to France. The benefits will be not only within but outwith the United Kingdom. High Speed 2 is not running in Scotland, but the hon. Gentleman argues that it will benefit Scotland; if it is going to benefit Scotland, it will benefit France in the same way.

Iain Stewart: Given the fact that there is currently no straight link between High Speed 2 and High Speed 1, that is a slightly tangential point. I have simply given High Speed 2 as an example of how difficult it is to assign exactly public spending on a territorial basis; I could cite many other examples.

It is worth while to look not only at public spending relationships between Scotland and England and Wales and England, but within each nation and the regions of each nation. There is currently a process of further devolution in England, which is producing more demands for tax and spending powers in the cities and regions. The north of England says quite regularly, “We’re being hard done to because of the Barnett formula.” London says that it pays far more than it receives in public spending—[Interruption.] I am not saying whether that is right or wrong, merely that such comments are made.

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I have funding issues in Milton Keynes in my constituency: with a rapidly growing population, sometimes the funding formulae do not keep up with the population need. There are also tensions between urban and rural spending—the issue is not only between the component countries of the United Kingdom.

We must start to open up a wider debate about the allocation of public spending right across the UK, bearing in mind the fact that we have a finite pot of money. We must also look at the tax receipts side of the ledger, which is also controversial. We have never definitively established the comparative amount of taxes raised north and south of the border, or, indeed, within England, because we have never had to assign taxes territorially. Many studies have been conducted, but they have been based on controversial assumptions.

It is difficult to assign tax revenues on a territorial basis because we have long had a unitary system. For example, my father was employed by the Civil Aviation Authority. He was based at Prestwick but spent one week in every two working at head office in London. He commuted between the two, so his time was spent equally between Scotland and England, and, to throw another spanner into the works, his tax office was in Cardiff. It would not be impossible to unpick all that, but it would be difficult, for corporation taxes as well as personal taxes. Nevertheless, it is something that we will have to do if more tax powers are devolved to Holyrood. We must also look at the disaggregation of national insurance and pension receipts and liabilities.

Simple calls for the retention or abolition of Barnett are very wide of the mark. If we are going to dismantle what has been a unitary fiscal system, there are many aspects to consider. Without updated figures on the current costs of providing public spending in each nation of the UK and within each region of each nation, we are working in the dark. I gently suggest to my hon. Friend the Minister that the Treasury looks at providing those figures.

My final point echoes the excellent one made by my hon. Friend the Member for Lancaster and Fleetwood (Eric Ollerenshaw). We must look at this matter in the context of the cohesion of the United Kingdom. The hon. Member for Na h-Eileanan an Iar (Mr MacNeil) has left the Chamber, but his party, the SNP, lost the referendum. We must make the Union work better and we need a sense of fairness; as my hon. Friend the Member for Redditch (Karen Lumley) said, every part of the Union must be treated fairly.

A few years ago, I began to do research for a book, and I looked at what is done in places such as Canada, Germany, Spain and the United States with regard to different tax-raising and spending powers in the component parts. Whatever the system, everyone still argued about spending levels and transfers from more to less affluent areas. That will never end—it is part and parcel of political debate—but the important thing is that we have a sense of fairness. I hope that today’s debate has helped to shed some light on matters that are often simplified and on a debate that is often inflamed, and that I have made a useful contribution to a much longer debate that we must have about public spending in the UK.

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4.18 pm

The Financial Secretary to the Treasury (Mr David Gauke): It is a great pleasure to serve under your chairmanship this afternoon, Sir Alan. I congratulate my hon. Friend the Member for Milton Keynes South (Iain Stewart) on securing this debate and setting out his case in a characteristically thoughtful and analytical way. He brings great knowledge and expertise to the matter. I also thank other hon. Members for their contributions to this short debate, the timing of which is very appropriate. Given the momentous referendum in Scotland not that long ago and the Smith commission’s subsequent report, this subject has never been more topical. Furthermore, hon. Members will have seen that the Government have published a Command Paper today looking at the options for devolution in England. The paper acknowledges that the treatment of tax and spending decisions that impact on funding to the devolved Administrations will need to be considered in any solution.

Since its introduction over three decades ago, the Barnett formula has proved to be a durable and robust method of calculating changes to the block grants for the devolved Administrations, providing population-based shares of comparable UK Departments’ changes in spending. The leaders of the three main UK parties have confirmed that the Barnett formula will continue, and the House of Lords report in 2009, as we heard, recognised advantages such as simplicity, stability and the absence of ring-fencing. However, we also recognise the concerns expressed about the formula and we welcome all views on its continued implementation.

Jonathan Edwards (Carmarthen East and Dinefwr) (PC): The vow has been made to the people of Scotland that the Barnett formula will be preserved and that Barnett funding will be preserved at its current level. Does the Minister not agree with my analysis, therefore, that a new benchmark has been set for what we would term fair funding? Whereas before the argument was for some sort of needs-based formula, the argument is now about making sure that the people of Wales, for instance, are not disadvantaged compared with the people of Scotland in terms of public funding per head.

Mr Gauke: Let me turn to the issue of fairness for all parts of the United Kingdom, including for Wales—I assure the hon. Gentleman that I will get to that eventually. As my hon. Friend the Member for Milton Keynes South has mentioned, there is a perception, particularly in parts of England, that Scotland is overfunded because it offers generous policies on university tuition fees, for example. However, I must emphasise that devolved Administrations do not receive any additional funding for those policies. They accommodate them within existing budgets by prioritising those policies over others—for example, by not protecting school spending during this Parliament, as we have in England.

One of the purposes of devolution is to allow the devolved Administrations to make different policy choices. That was set out in 1997 in the statement of principles, which states:

“The key to these arrangements is Block budgets which the devolved administrations… will be free to deploy…in response to local priorities.”

In contrast, commentators in Scotland, Wales and Northern Ireland tend to be concerned about the Barnett squeeze convergence property of the Barnett formula,

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whereby the percentage changes in devolved Administration spending are lower than in England. However, the Barnett formula itself does not change the budgets of the devolved Administrations disproportionately to England’s: an extra pound per head in England means an extra pound per head in the rest of the UK. The so-called Barnett squeeze reflects the higher levels of spending per head in Scotland, Wales and Northern Ireland that have existed over many years, before and since devolution in the 1990s.

I know that some hon. Members consider Wales to be relatively underfunded as its spending has converged towards the level in England. In fact, spending per head there is 11% above England’s and has more than doubled in cash terms since devolution. Wales also benefits from large EU structural fund spending, having been awarded £1.9 billion from 2007 to 2013 and a similar amount for 2014 to 2020.

However, we recognise that there are concerns about relative levels of funding for Wales; that is why we have established a bilateral process to consider that in advance of each spending review. The most recent assessment, before the 2013 spending round, determined that convergence was not forecast to occur through to 2015-16 and that the existing level of Welsh funding was within the range suggested by the Holtham commission. The Government have now further agreed with the Welsh Government to review that process in the light of the tax and borrowing powers contained in the Wales Bill.

Glyn Davies: The Minister may have just answered the question I was going to ask, but perhaps he might reassure me on the uncertainty about the size of what I call the Barnett deficit in Wales. Everybody thinks it has decreased substantially over the last few years as a result of the change in public spending levels. Are we moving to a position where we will know precisely what that Barnett deficit is, because it is very important for the discussions that we are having about the powers over income tax that the Welsh Government should be taking on?

Mr Gauke: My hon. Friend raises an important point. I know that he has been very active in ensuring that the Welsh Government take advantage of the powers that may be available to them, and I know there is an issue of funding there. I hope that I did address his point by saying that the Government have agreed with the Welsh Government to review the process in the light of the tax and borrowing powers in the Wales Bill. I hope that process will satisfy him by shedding light on the issue that he raised.

I turn to the issue of the needs-based formula. I have heard it said that the Barnett formula does not take sufficient account of needs. The most basic issue here is that no one has been able to say how we would agree a needs-based assessment that would suit every part of the United Kingdom. However, far from being a static formula, the Barnett formula is regularly updated to take account of changes in population and levels of devolved responsibility.

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The budgets of the devolved Administrations cover a very wide range of devolved spending programmes. It is, of course, for the devolved Administrations to decide how to allocate their overall budget to individual programmes, reflecting their own policies and their own assessment of the needs of each country. The Barnett formula allows them the freedom to do that.

However, we believe that financial accountability can be improved in Scotland, Wales and Northern Ireland as the devolution settlements evolve. The Government’s record on that speaks for itself. Both the Scotland Act 2012 and the Wales Bill currently in Parliament will devolve new tax and borrowing powers. We have also committed to implementing Lord Smith’s heads of agreement in full. As we devolve further powers, Scotland and Wales will be responsible for raising far more of their funding, so their block grants will become less important. The impact of the Barnett formula on overall levels of funding will decline.

Finally, in highlighting today’s debate in The Daily Telegraph, my hon. Friend the Member for Milton Keynes South set out that the debate would be better informed if we had

“detailed and incontestable territorial public accounts”,

which is a point he made earlier. The Government do not disagree, but this is a complex matter. The Office for National Statistics is considering the development of sub-national accounts as part of its implementation of the European system of accounts, and it is also undertaking work on the comparability of official statistics across the United Kingdom.

It is right that a formula that has set out devolved spending for over a third of a century is continually kept under review to make it fit for the needs of the current day. The three main party leaders have stated that the Barnett formula will continue, and that is therefore what will happen. However, we continue to listen to the strong views on the formula from all parts of the United Kingdom, which have been represented in this debate this afternoon. In that spirit, I thank everyone for their contributions today. I particularly thank my hon. Friend the Member for Milton Keynes South, who has brought to this debate careful, thorough and thoughtful analysis. He has succeeded in shedding some light on an important issue and has highlighted some matters that can often be lost in this important debate.

Sir Alan Meale (in the Chair): Mr Stewart, would you like to add anything? We have a short period of time left.

Iain Stewart: I was not planning to, Sir Alan, but may I thank the Minister and other Members for their contributions? The debate has been helpful. I am particularly interested by the work of the Office for National Statistics on the development of sub-national accounts. I think that will help to inform the debate, but I am sure that this is not the last word on the subject.

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National Minimum Wage

4.30 pm

Sir Alan Meale (in the Chair): Before the start of the final debate, I point out that the vote that we had earlier added 11 minutes to the time scale. Because that time can be carried over to the next debate, hon. Members can finish at 5.11 pm, if there is not another vote in the meantime. You have a little extra time to play with, Mr Jarvis, if you want to take it; you can stick to your time scale if you so wish.

Dan Jarvis (Barnsley Central) (Lab): Thank you, Sir Alan. It is a pleasure to serve under your chairmanship. I begin by thanking Mr Speaker for granting this debate. It should really have taken place a fortnight ago, on Friday 28 November, the date for the Second Reading of my private Member’s Bill—the Low Pay Commission (National Minimum Wage) Bill. That is a Bill to make work pay: to strengthen the national minimum wage, to give greater powers to the Low Pay Commission and to tackle the scourge of low wages, which blights the lives of too many people across Britain today. Regrettably, we did not have an opportunity to debate my Bill. Two hon. Members, both of whom are known throughout the House as long-standing campaigners to undermine the minimum wage—I believe that one of them even voted against it in 1997—spoke for more than two hours to sabotage the earlier debate on a Bill to tackle revenge evictions, blocking my Bill as a result. Given that we were deprived of a debate that day and given that this issue means so much to so many across our country, I have called this debate to say now what I would have said then and to give the House the opportunity to debate the important matter of low pay.

Choosing the subject of my Bill was a difficult decision. I had no shortage of helpful suggestions, but ultimately it was the story of one woman that made up my mind. I wanted to make a difference to people such as Catherine. Catherine is a cleaner and housekeeper in my constituency. She juggles six different jobs, working in six different locations across Barnsley. She works more than 50 hours a week on the minimum wage. Like many people, Catherine struggles to make ends meet. Her pay packet does not stretch as far as it used to, especially as the real-terms value of the minimum wage has declined since 2010. When I asked her how that had affected her life, she said that she had had to cut down on what she described as “luxuries”. Soon I realised that she meant that she could not afford essentials such as clothes. “I just work to exist,” she said, “I can’t afford nice stuff. I just work to keep my head above water.”

Catherine does not have time to take notice of polls or political pundits, but what happens in our politics, what goes on in this place and the Governments we choose to serve us here will shape her life more than most. It is easy now to take it for granted that Catherine earns a national minimum wage at all. Before 1997, many workers like her were expected to work for as little as £1 or £2 an hour. In its first months of existence, the Low Pay Commission found appalling cases of factory employees earning only £1.22 an hour, care home workers taking home just £1.66 an hour and even a chip shop worker from Birmingham forced to make do with 80p an hour.

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It took a Labour Government to end that scandal. Their efforts were led by Sir Ian McCartney, the former Minister of State at the Department of Trade and Industry, who piloted the Bill that became the National Minimum Wage Act 1998 through the House, and by my right hon. Friend the Member for Derby South (Margaret Beckett), the former Secretary of State. The national minimum wage was one of Labour’s greatest achievements, but its path to becoming law included a record sitting in the House of 26 and a half hours as Members, mainly from the Conservative party, sat through the night, opposing the Bill line by line, to stand in the way of working people getting a decent wage for a hard day’s work. Today, their fears have failed to materialise. They were on the wrong side of history then, and the scourge of low pay explains why the Government’s plan to balance the nation’s books is failing now. A generation on from the national minimum wage becoming law, the low pay challenge for our country has changed. The national minimum wage did help to root out exploitation and extreme examples of poverty pay, but today we have huge numbers of people across Britain who do a hard day’s work and are still living on the breadline.

Catherine, whose story I shared earlier, is just one of more than 5 million people across Britain who are stuck on low pay. The number is up from 3.4 million in 2009 and is at an all-time record. Women and young people are being hit hardest. One third of all working women and nearly two fifths of 16 to 30-year-old employees do not earn a decent wage. Nearly two thirds of children living in poverty now live in families with someone in work. If we look at the proportion of our work force that is low paid, we see that Britain is towards the bottom of the pile, coming 25th out of 30 OECD countries.

Moreover, the real-terms value of the minimum wage is losing ground. The Low Pay Commission has acknowledged that its relative value has dropped significantly since 2004, and job creation in the lowest-paid sectors has exploded at double the rate of the rest of the economy since 2010. That partly explains why the Government now spend more on tax credits and social security for families in work than they do for the unemployed. It is why the Government have been forced to spend an extra £900 million on tax credits to top up low wages, and it is part of the reason why Ministers have had to spend £1.4 billion more than planned on housing benefit for people who cannot afford a roof over their head.

John Maynard Keynes famously once said:

“When the facts change, I change my mind.”

My central argument today is that as the challenge has changed, our approach to tackling low pay needs to evolve with it. Many of our country’s leading business voices have already called for the minimum wage to increase faster than it has done in the recent past. They include Sir Ian Cheshire, chief executive of Kingfisher, and Steve Marshall, executive chairman of Balfour Beatty. Professor Sir George Bain, the first chair of the Low Pay Commission, has described the organisation as a “child of its time” and has called for an ambitious target to bring the minimum wage closer to average earnings. We need the Government to put that into action.

Labour’s plan to tackle low pay—a plan mirrored in my Bill—preserves everything that has helped to make the Low Pay Commission such a success. I am referring

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to decision making based on strong research; a balance between the need for wage growth and concerns about the impact on employment; and a partnership approach between the employers who create the jobs and the employees who work the shifts. Let me run through the key points.

First, we need to give a mandate to the Secretary of State to set a target for the national minimum wage to increase over a Parliament at a rate higher than that for median earnings. I did not include a specific target in the Bill. Different people will have their own views on that. We as the Opposition have already expressed our ambition for a minimum wage closer to 58% of median earnings. The important point is that the act of setting a target alone would deliver a more ambitious approach to tackling low pay and a greater focus on what progress we are making. A clear long-term target such as that would give firms certainty and time to adapt their business models to boost productivity and support higher wages. It would also bring us closer to other countries such as Australia and European economies such as Belgium and Germany, where all the evidence shows that it is possible to support a higher minimum wage without any negative impact on employment.

The Low Pay Commission would keep its leadership role in delivering on the target and would set out a plan for how it could be achieved; and flexibility could be retained in the system. We know that the success of the minimum wage has been built on an approach that works hand in hand with industry and takes into account the state of our economy, so in the event of significant economic shocks, the Low Pay Commission could be required to present compelling evidence to the Government and to Parliament, setting out why it is not possible to meet the target during the proposed time frame. The Low Pay Commission could then make further recommendations to get progress towards the target back on track.

Steve Rotheram (Liverpool, Walton) (Lab): I am grateful to my hon. Friend for bringing this vital issue to the attention of the House. The rate of the national minimum wage is important, especially to those who receive it. Does he agree that it is a shocking indictment of the Government that unscrupulous employers who are paying less than the national minimum wage are getting away with it because such a small number have been prosecuted?

Dan Jarvis: My hon. Friend makes an important point, and the figures bear out what he has said. I would be interested to hear what the Minister has to say on that point, but I agree that the tiny number of rogue employers who have been prosecuted for paying people less than the national minimum wage is a disgrace. That reflects poorly on the Government’s record.

I believe that the proposal I have just outlined regarding the Low Pay Commission is straightforward and reasonable, and that it is the right thing to do. I would be grateful if the Minister would respond directly to that point.

Jim Shannon (Strangford) (DUP): I congratulate the hon. Gentleman on securing this important debate. The problem is not simply the minimum wage; many workers have had their hours reduced just to stay in employment. Some workers have not had a wage increase in three years. Some people do not even have the minimum wage

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let alone a living wage. Does he feel as well that the Government need to address the issue of the living wage so that people can survive?

Dan Jarvis: That is a helpful and constructive contribution. If the hon. Gentleman will bear with me, I will talk about the living wage later in my speech. It would be useful to hear what plans the Minister has. The hon. Gentleman makes an important point that we currently have record numbers of people in this country who are underemployed. Record numbers of people want to work full time but cannot get full-time work, so they are stuck in part-time employment and struggling to meet their costs. That is a good point, and I look forward to the Minister responding to it.

Liz McInnes (Heywood and Middleton) (Lab): In his deliberations, has my hon. Friend given any thought to the practice of many employers of paying the extremely low minimum rate for apprenticeships? Some employers set up bogus apprenticeships that last for only a few months so that they can get away with paying the absolutely paltry rate for apprentices, which I believe is less than £3 an hour. Has he looked at that aspect of the minimum wage and at the age-related minimum wage for under-18s?

Dan Jarvis: Completely by coincidence, my hon. Friend has made a timely contribution that neatly introduces the point that I was about to make. If we want to win the fight against poverty wages, the remit of the Low Pay Commission must be expanded. It should not be simply a national minimum wage commission that sets the level of wages; I believe that it should lead our national effort to tackle the problem of low pay. We need to give new powers to the Low Pay Commission to investigate the causes and consequences of low pay in different areas of our economy.

We know that some sectors have particular, systemic problems of low wages. More than half of cleaners, 48% of hospitality workers and more than 40% of hairdressers are paid less than £7 an hour. At the same time, other sectors—the banking sector, for instance—could pay a higher minimum wage. I would be grateful if the Minister could tell us today whether the Government would consider giving new powers to the Low Pay Commission to bring together task forces to tackle such issues. Those task forces could include all the key stakeholders and recommend a strategy to the Secretary of State on the best way forward.

Jim Shannon: To that list of bodies that the hon. Gentleman referred to, would he add the catering industry? Many workers in the catering industry receive a wage that they cannot live on, which is below the minimum.

Dan Jarvis: I absolutely would. There are number of different sectors of the economy to which that could be applied.

Alex Cunningham (Stockton North) (Lab) rose—

Dan Jarvis: I know that my hon. Friend has a specific concern about care workers, and I am happy to give way to him.

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Alex Cunningham: I am sure that my hon. Friend will agree that no matter at what level the minimum wage is set, it must be complied with. Would he be surprised to learn that although the Government claimed to include a minimum wage requirement in their social care commitment, such a requirement was not included? Following my intervention, the Minister who is responding to the debate added a paragraph to the commitment. Does my hon. Friend agree that a paragraph on a piece of paper is one thing, but we need much more robust action by Government to ensure that no one in the care industry or anywhere else is short-changed by unscrupulous employers?

Dan Jarvis: I absolutely agree with that point, and I am grateful for the work that my hon. Friend has done in that area. Robust action by the Government is required to ensure that no one in the care industry is short-changed by unscrupulous employers.

I conclude by putting on record the fact that if there is a Labour Government after 7 May next year, we will set a national goal of halving the number of people on low pay over the next 10 years. We will introduce a target for a minimum wage of at least £8 by 2020. We will use tax incentives to encourage more firms to pay a living wage, and we will make a world of difference to working people such as Catherine in my constituency. When I asked her what difference a higher wage would make to her life, she could not quite imagine it. She said:

“I could cut down my hours, couldn’t I? I would have some time to do other things.”

That is the important difference that I am arguing for today.

I would like to end with the words spoken in this place by my right hon. Friend the. Member for Derby South during the debate on the introduction of the national minimum wage 17 years ago. These words were true of the case for introducing the national minimum wage then, and they are true of the case for strengthening it now:

“That policy is right, it is fair, it is just and it is sensible. It is a clear example of how a Labour Government can and will make a real difference to the lives of people across Britain, contributing to fairness and prosperity for the many, not the few. I commend the Bill to the House.”—[Official Report, 16 December 1997; Vol. 303, c. 173.]

4.47 pm

The Parliamentary Under-Secretary of State for Business, Innovation and Skills (Jo Swinson): It is a great pleasure to serve under your chairmanship, Sir Alan. I congratulate the hon. Member for Barnsley Central (Dan Jarvis) on securing the debate, particularly after his less happy experience on Friday 28 November. I appreciate his frustration about Fridays. I have a vivid memory, from fairly early in my time as an MP, of spending an annoying Friday supporting a Bill promoted by the hon. Member for Edinburgh North and Leith (Mark Lazarowicz) on climate change and having the same experience of a couple of Members talking it out. The hon. Member for Barnsley Central mentioned the excellent Bill promoted by my hon. Friend the Member for Brent Central (Sarah Teather), which would have helped very

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vulnerable people, and I still hope that we will be able to find a way to take action on those issues. Of course, the opportunity to debate the Bill promoted by the hon. Gentleman was also a casualty of that experience. The procedure for dealing with private Members’ Bills on Fridays is something that I would be keen to see changed.

The hon. Gentleman started by talking about his constituent, Catherine. That is absolutely appropriate, because in discussions about the minimum wage it is easy to get caught up in the numbers of pounds and pence per hour. That is, of course, important, but it is also vital that we remember the individuals at the end of each payslip, who are working on a low wage that represents a minimum or floor.

The hon. Gentleman was right to set out the history of the minimum wage. He highlighted the difficulties that existed before 1997, and the fact that some factory workers earned £1.22 an hour. In 1996, I was 16, and in my first job in McDonald’s, I was paid £2.70 an hour. One of my good friends from school worked in a greengrocer on Saturdays, and she earned £1.90 an hour for lugging around sacks of potatoes.

The introduction of the national minimum wage was absolutely necessary, and the hon. Gentleman is right that it is an historic achievement that should be celebrated. Neither of us was in the House at the time, but my Liberal Democrat colleagues supported the national minimum wage. There perhaps was not agreement from everyone in the House, but the positive thing is that times have moved on and there is now wide acceptance of the national minimum wage’s importance. The Government are strong in our belief and commitment that the national minimum wage is a vital part of the employment protections and basic minimum standards in the labour market. Many business organisations are also strong supporters of the national minimum wage. Recent reports by organisations such as the CBI talk about the importance of supporting household budgets from a wider economic perspective.

The minimum wage level is always likely to be the subject of much discussion and interest, and we clearly need to find the right rate that helps as many low-paid workers as possible, but we must ensure that we do not damage employment prospects by setting the level too high. This year the Government accepted an above-inflation rise in the national minimum wage. In October, workers saw the biggest cash increase in their pay packets since 2008, which helps more than 1 million workers on the national minimum wage and means that anyone working full time on the national minimum wage gets an extra £355 a year in their pay packet. Of course, those workers are also helped by the increase in the tax threshold, which has taken more than 3 million low-paid individuals out of paying income tax and helped ensure that people’s money goes further because they keep more of what they earn.

John McDonnell (Hayes and Harlington) (Lab): I apologise to my hon. Friend the Member for Barnsley Central (Dan Jarvis) for being late. I was in the main Chamber. We seem to miss out young people in these debates. I am not sure whether he referred to the figures: for an 18 to 20-year-old the national minimum wage is £5.31; for a 16 to 17-year-old it is £3.79; and for apprentices it is £2.73. That must be a disgrace.

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Jo Swinson: The hon. Gentleman addresses both the youth rates and the apprentice rate, and the hon. Member for Heywood and Middleton (Liz McInnes) also raised that issue. I share those concerns, particularly on the apprentice rate. We want to encourage people to take up apprenticeships, and under this Government there has been a great increase in their number. Two million apprenticeships have started since the general election, but both hon. Members are right that £2.73 an hour is a very low rate. It is worth bearing in mind that the average pay for apprentices is upwards of £6 an hour and that most employers of apprentices pay well above the minimum rate, but there is also a concerning level of non-compliance with the apprentice minimum wage. Of course, there never used to be an apprentice minimum wage at all—it was introduced by the Government because apprentices were previously not covered by the national minimum wage. Although that was a step forward, there is still a real issue here.

Earlier this year, my right hon. Friend the Business Secretary stated that he is minded to seek a significant increase in the apprentice rate. He suggested that it might be combined with the £3.79 rate for 16 and 17-year-olds, which would provide a boost of more than £1 an hour. We have asked the Low Pay Commission to consider that carefully, and we look forward to hearing its views on the proposal as part of its overall report in February 2015.

The hon. Member for Heywood and Middleton mentioned bogus apprenticeships, under which people were taken on but not given the training that should go alongside an apprenticeship. The reason for the lower apprentice rate is because employers rightly have to support the development and upskilling of apprentices with training and qualifications. Where that is not happening, national minimum wage law is being broken, even if the apprentice rate is being paid. I encourage anyone who is concerned that they are not being paid the right amount to contact the pay and work rights helpline on 0800 917 2368. I will never tire of saying that number because I want people who are not properly paid the national minimum wage to get in touch and make a complaint. Her Majesty’s Revenue and Customs will investigate every complaint, and we have increased the resources available for enforcement. I am determined that people who do not properly pay the national minimum wage are brought to book and that those who have been underpaid are given the arrears that they are due. That would discourage employers who might be tempted not to pay properly.

The hon. Member for Liverpool, Walton (Steve Rotheram) mentioned prosecutions. I understand his point, but prosecution is not the only way to address non-compliance. The number of prosecutions is not high. We are talking single figures every year since 2007, and there are sometimes no prosecutions in a given year, but the number of prosecutions was in single figures when his party was in government, too. The reason for that is pretty compelling: the most important thing is that people who have not been paid the national minimum wage get the arrears that they are due. If they go through the civil process through which HMRC takes employers, people will get their arrears paid and a penalty will be paid to HMRC—there is effectively a fine for the employer—which delivers a better result for the employee. Of course, prosecution is appropriate in the most extreme circumstances where employers have

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been wilfully and continually not paying the national minimum wage, but given the costs of bringing a prosecution and the interest of ensuring that people get their arrears, the civil process is the right way to go about it.

Steve Rotheram: The Minister is absolutely right about trying to get the best deal for the person who has been short-changed. There is no argument about that, but the message needs to be sent out to unscrupulous employers who continue to underpay that they will be prosecuted. That is the only way that we will stop them, not by good will, nor by appealing to their better nature, but by saying, “If you continue to underpay your employees, we will prosecute.”

Jo Swinson: We may have a difference of opinion. I agree that there should be very tough consequences for employers who do not get it right. We have ensured that the fines are in place, increased the maximum penalty to £20,000 per worker—that is currently going through Parliament in the Small Business, Enterprise and Employment Bill—and introduced a naming and shaming scheme that is far more comprehensive than the previous scheme, the criteria of which were almost impossible to meet. We now regularly list employers that have not properly paid the national minimum wage, and we name them publicly so that in their local area people can be aware that those companies are not paying the national minimum wage, which affects the reputation of those businesses.

In response to the hon. Gentleman’s plea for more prosecutions, I would say that, in the cases that are named, in most circumstances the underpayment is not necessarily a malicious act by the employer. That does not make it right, and it does not make it okay, but very often someone has put the wrong digits into a computer program so somebody is not been paid the right pence per hour. There may be mistakes on the accommodation offset allowances or mistakes on the apprentice rate. Of course, if we increased the apprentice rate to the lower age rate, we would simplify the system and make it easier for employers to get it right. That is not an excuse, as employers have a responsibility to get it right, but I would not necessarily contend that those circumstances should also result in a criminal prosecution. Our tough penalty regime, increased fines and the reputational consequence of naming and shaming are the right way to address underpayment. We are increasing the resources available to HMRC to address this issue.

Jim Shannon: There might be an individual working for a firm who is getting less than the minimum wage. They might be concerned but there is a fear factor in pursuing the issue. That goes back to what the hon. Member for Liverpool, Walton (Steve Rotheram) said in his intervention. Is that part of the reason why we have a low prosecution rate? People fear losing their job for making a complaint. Would it be better for complaints to be tied to the company, not the individual?

Jo Swinson: I hope I can provide a lot of reassurance on those points. The hon. Gentleman is right that there is a fear factor, which is why it is important for people to recognise that they can make complaints in confidence. It will not necessarily be clear which member of staff has made a complaint. The HMRC investigator will not just go along to a company and say, “Can you show me the records for this particular member of staff?” The

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investigator can ask to see the records for all members of staff. That has two benefits. The first is confidentiality, but secondly, of course, if one member of staff is not being paid the minimum wage properly, it is possible—indeed, likely—that other members of staff are also not being paid properly.

To put the issue in context, the hon. Member for Strangford (Jim Shannon) suggested that the reason why there are not as many prosecutions as he might like is that people are not coming forward. Actually, since HMRC began enforcement back in 1999, more than 229,000 workers have received arrears worth more than £54 million. In the last year alone, £4.6 million in arrears was delivered to 22,600 workers, a significant 17% increase in the number of workers helped compared with 2009-10. The amount of arrears per case is also rising. HMRC is learning how to ensure that it does not just look at one person in the business; now it routinely looks much more widely at lots of workers within the same business. That is important to ensure that enforcement works.

We are the fastest-growing G7 economy at the moment, and that strong growth is reflected in our employment statistics, with more people in employment than ever before. That is good news, but hon. Members have raised issues about the type of employment and whether it is just insecure part-time employment. It is worth recognising that our figures from the Office for National Statistics show that full-time work made up three-quarters of the growth in employment since the election and 85% over the last year. The growth in the labour market is significantly of full-time work, but of course there are issues around the insecurity of work, which the Government are taking steps to address. We understand those issues too.

We will return to this matter, rightly, many times in this House. I pay tribute to the Members present today, who in their different elements have been campaigning on the issue. The hon. Member for Stockton North (Alex Cunningham) is particularly assiduous in the care sector, where HMRC has done a significant investigation and is seeking to follow up. That is an area where HMRC found a lot of non-compliance. We need to stay on the case of industries where there are greater problems, because lack of compliance is much less widespread in other industries.

Dan Jarvis: I am slightly concerned that the Minister might not address the fundamental issue that I raised in my speech, which is that the low pay challenge for the country has changed. Record numbers of people in low-paid work are struggling to make ends meet. I would be grateful if she critiqued the model that I proposed; I am thinking specifically of the five-year target and more powers for the Low Pay Commission. Will she respond on those two points?

Jo Swinson: Certainly; I am happy to. I understand where the hon. Gentleman and his Opposition colleagues are coming from when they call for a five-year target, but there are significant problems with that approach. Announcing an ambitious-sounding minimum wage level would not necessarily take into account future economic conditions, which could be a problem in two

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ways. If the economy did not perform as strongly as expected, job cuts could be the consequence of an ambitious target. Equally, if the economy did much better than anticipated, we might find that the target ended up holding back wage growth. We need to get the balance right.

My right hon. Friend the Business Secretary has said clearly that it would be helpful for the Low Pay Commission to be able to provide more forward guidance, so that it is no longer the case that once a year, business suddenly learns what the next rates will be without any idea of how things will go forward. It is worth bearing in mind what the Low Pay Commission has said about the period that we are entering now and whether we should be expecting further rises above inflation in the national minimum wage. That will be of great comfort to the many people who, like the constituent of the hon. Member for Barnsley Central, work for the national minimum wage.

On the taskforce suggestion that the hon. Gentleman made, a sectoral approach can be helpful, but there is a danger of distracting the Low Pay Commission from setting the basic rate of minimum wage. It is already considering the impact of the national minimum wage on pay, employment and competitiveness in the low-paying sectors, and it sets that out in its annual report. Members of the commission go out personally to visit lots of different organisations and employers across the UK in a range of sectors. In its recommendations, the commission manages to reflect back what it has considered after examining all the evidence.

However, there is an issue with the Government and others encouraging higher pay. The national minimum wage is not just what people are paid. It is just that: a minimum, a floor. It is right that we should set a basic level. Some employers will not be able to afford to pay more than the minimum wage. If somebody wants to come to any of our constituencies and set up a business, and they cannot afford to pay more than the minimum wage but they will provide jobs, we would probably welcome that. However, there are many businesses that probably can afford to pay more than the national minimum wage and currently choose not to. That is where we would like to encourage behavioural change.

I am heartened to see many employers making a virtue of the fact that they are living wage employers, for example, or making commitments about pay levels. We should encourage employers to compete with each other on such issues—with falling unemployment, that will be more possible in the months and years to come—because we should not just accept a situation in which it is expected that someone on the national minimum wage will stay there. We want basic jobs to be created with that wage floor, but we also want people to be able to progress from a national minimum wage job through the ranks. As their skills and the length of time with their employer increase, their wage should also. We will continue to encourage employers to pay more than the minimum wage where they can.

I know that hon. Members here will continue to campaign on the issue, and I thank everybody for such a constructive debate. I am, thankfully, not talked out.

Question put and agreed to.

5.6 pm

Sitting adjourned.