3.6 pm
Jonathan Edwards (Carmarthen East and Dinefwr) (PC): It is a pleasure to serve under your chairmanship, Mr Gray. I congratulate the hon. Member for Newport East (Jessica Morden) on securing the debate and on her opening remarks. We in Plaid Cymru have long recognised the importance of the Severn crossings to the Welsh economy, particularly to the public and businesses in the south of our country. The crossings affect the bulk of vehicular movements into Wales, and they are located on a key trans-European route. We believe that future decisions on tolls should not be made by the UK Government, and that it is essential that the tolls be put in Welsh hands following the return of the bridges to public ownership.
As always—as we have just witnessed with the delaying of the electrification of the Great Western line all the way to Swansea—the UK Government’s transport plans for Wales are cloaked in ambiguity. Rather than being straight with the people of Wales about what happens after the end of the concessionary period in 2018, the UK Government have said that they will continue to retrieve costs for an indefinite period.
Simon Hart (Carmarthen West and South Pembrokeshire) (Con): Does the hon. Gentleman not accept that the old Severn bridge is entirely on English soil, and that quite a lot of businesses on the English side of the border have an economic interest in the matter? To commence his speech by simply saying that control should be devolved to Cardiff is to disregard completely those who have an equally strong economic argument on the other side.
Jonathan Edwards: I am grateful for that intervention from my constituency neighbour, and I will deal with that subject later. It is the policy of the hon. Gentleman’s party in the National Assembly for the Welsh Government to receive ownership of the bridges after the end of the concessionary period. Indeed, his colleague, the hon. Member for Gower (Byron Davies) made that case in 2013 when he was transport spokesperson for the Conservative party in the National Assembly.
The UK Government are entitled to continue to recoup costs, as I understand it, until 2027, which means that Welsh motorists may continue to be a cash cow for the UK Treasury for nine further years after the
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end of the concessionary period. As has been said many times during the debate, the people of Wales deserve some straight answers for a change from the Minister about the UK Government’s intentions in relation to the bridges.
Research from the Welsh Government set out that the primary impact of the tolls is on the economy of Wales, rather than on any other part of the UK. The research, entitled, “The Impact of the Severn Tolls on the Welsh Economy”, states that the Severn tolls cost the Welsh economy more than £100 million a year. We believe, therefore, that the Government of Wales should have responsibility for future decisions on tolling. The bridges are the gateway to the Welsh economy, and just as Wales is responsible for roads and economic development, so we should be in control of the bridges when they come into public ownership in 2018. The UK Government must move on this issue and commit to devolving it.
A Plaid Cymru-led Government, post 2016, would reduce the tolls to levels that cover maintenance costs. There are other overheads to consider, such as staffing costs, traffic information provision and other externalities. The Welsh Affairs Committee estimated, based on maintenance costs, that tolls could comfortably be reduced to around £2 from 2013. That estimate included the peaks and troughs of maintenance costs, and is not simply based on a flat rate per year. The figure would have to be updated and reviewed in future, but it gives motorists and businesses a close estimate to consider for the time being. Using that estimate, figures from Arup show that a motorist paying the toll once a week could save around £218 a year. It goes without saying that online and smart payments are essential for the future. If they can be introduced for tolling in a city such as London, there is no reason why they cannot be introduced for a single route such as the M4.
The option of abolishing the toll should be kept under review. I recognise that it could help stimulate the economy and tourism. We want it to be a policy choice that can be made in Wales, depending on the financial situation. We need to look at its costs, affordability, and impact on society and the economy. We would also have to bear in mind that abolition will have a more significant effect, in increasing traffic, than reducing the tolls. There would be an effect on the M4 around Newport to deal with; Plaid Cymru has already recognised that that would cost money. There would also be an effect on the amount of haulage using the crossing instead of rail.
People travelling home to see their families, as well as tourists heading to Wales this summer, will be charged £6.50. Smaller businesses with vans will be charged over £13 and businesses with lorries just under £20 a go. The hon. Member for Newport East gave the example of the huge impact the toll has on the business of the haulage firm Owens, a firm that is well known in south Wales. The toll goes against everything the Welsh Government and the UK Government should be doing to improve the Welsh economy.
Representative bodies such as the Federation of Small Businesses are “vehemently opposed”—that is what the FSB said—to any bridge tolls being used to fund Labour’s new M4 plan. As for relieving the part of the M4 that is part of the road infrastructure served by the bridge, Plaid Cymru prefers the blue route option to the expensive
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black route option favoured by both the Welsh Government and the UK Government. The debacle about that earlier this month shows that the Labour Government in Cardiff may yet be forced to row back on their decision and implement Plaid Cymru’s much more viable plan, which would allow future investment throughout Wales rather than pumping all the money into one project in the south-east corner of the country. With that in mind, I make a plea for the Llandeilo and Ammanford bypass in my constituency, which has been waiting many years for funding to progress.
The hon. Member for Newport East has done the people of Wales a great service in securing this debate. However, I fear that her colleagues in Cardiff Bay have no share in her efforts. During the previous Parliament, Plaid Cymru submitted a freedom of information request to the Department for Transport. Between May 2011 and the end of 2013, the Labour Welsh Government failed to raise the issue of the Severn bridge tolls with the Westminster Government on any occasion—a dereliction of duty if ever there was one. There is precious little use in complaining about the tolls if the Labour Welsh Government are not prepared even to bother making representations.
Labour’s failure in that regard is symptomatic of the wider malaise in Cardiff Bay. The Government there are tired, sclerotic and devoid of vision and ambition when compared with a Plaid Cymru team full of dynamism, ambition and ideas to develop the economy and benefit the people of Wales.
Plaid Cymru recognises that the Severn tolls have been a burden on motorists, businesses and the public. We want to see them taken into Welsh hands and reduced, for the benefit of the economy.
3.13 pm
Chris Evans (Islwyn) (Lab/Co-op): It is a pleasure to serve under your chairmanship, Mr Gray. I congratulate my hon. Friend the Member for Newport East (Jessica Morden) on securing the debate. In the hours she has spent on this issue I am sure she could have walked to the Severn bridge and back. I had to check for a flying pig when the hon. Member for Monmouth (David T. C. Davies) was speaking; I did not think I would ever hear him advocate nationalisation with a straight face and without coming out in a rash and a cold sweat. I also congratulate the hon. Member for Carmarthen East and Dinefwr (Jonathan Edwards) on a speech that, once again, raised the ghost of Rebecca—he will know what I mean.
When the Severn bridge was debated in Parliament back in November 1990, it was spoken of as a link between Wales and the south-west of England, laying the foundations for greater growth for both, helping develop both economies to the benefit of all and providing the infrastructure Wales needed for internal and international trade. Today, sadly, the Severn bridge stands as a barrier to business. The tolls on tourists, on trucks transporting goods and on people travelling for work and for leisure are holding Wales back in an ever-increasingly competitive economy.
The Severn bridge is costing Wales a fortune. Tolls do not make sense for the people who have to pay to see relatives and friends or for the companies who lose hundreds of thousands of pounds each year. Put simply, they do not make sense for Wales. One study put the
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potential growth of the Welsh economy if tolls were abolished at £107 million a year. To put that in context, the bridge costs £15 million a year to run and raises £87 million a year in revenue.
The tolls are not just holding back potential growth; they are actively encouraging companies to base themselves in the Bristol area and the rest of the south-west rather than coming to Wales, where they are needed. That costs us in employment, taxes and, above all, prosperity. Per mile, the Severn bridge remains the most expensive toll road in the world to travel on, a record no one should be proud of. It is significantly more expensive than the Humber bridge and the M6 toll; it is even significantly more expensive than the next closest international example, the Akashi Kaikyo bridge in Japan—I should get a badge for pronouncing that.
The argument against the tolls is clear. I am pleased to note that, thanks to the work of my hon. Friend the Member for Newport East and others, the Chancellor has to some extent bowed to the pressure, as the category 2 tolls were ended in the March Budget. That was the beginning of the process, but it has been a slow one, and so more must now happen. The Government must once again accept what is needed to boost growth across Wales. Will the Minister say today that VAT will be removed from all tolls on the Severn bridge once it enters public ownership? That call comes not just from me, but from both sides of the House—the hon. Member for Monmouth called for it in his speech. It is eminently sensible, and I hope the Government listen to the Chair of the Welsh Affairs Committee. Conservative Members of the Welsh Assembly have also joined their voices to calls for a cut in the toll.
Beyond the political world, business leaders are also crying out for the change. In my constituency and in those of other hon. Members right across Wales, it is what business wants. I struggle to see why the Government will not commit to the change once the bridge enters public ownership. It is what businesses in Wales need.
Mr Mark Williams: Will the hon. Gentleman take the opportunity to reiterate the importance of the tourism sector? There has traditionally been a flow of people between the south-west of England and all of Wales—not just the south, but mid and north Wales. A speedy removal of VAT or, better still, scrapping the tolls would give a direct and immediate boost to the tourist sector in Wales.
Chris Evans: I agree entirely with the hon. Gentleman. He does great work as chair of the all-party group on the tourism and hospitality industry in Wales. The hon. Member for Strangford (Jim Shannon) mentioned that in Northern Ireland there are no tolls. The Irish have been very good at selling their culture, and telling people to come to Ireland to see the fantastic beaches. How can we do that in Wales if we have a tax on friends and relatives coming to see how great Wales is? When we think of business, we tend to think of heavy industry and rarely think of tourism. I represent a valleys constituency and have always believed that we do not talk up enough the beautiful valleys in Wales. The hon. Member for Carmarthen East and Dinefwr also represents a beautiful part of the country. How can we ask people to come to our constituencies if they are faced with what is clearly a tax when they get to the Severn bridge?
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It is time to end the tax on entering Wales that the Severn bridge toll has become. The Conservative party often talks about its desire to rebalance the economy away from London and the south of England, to spread prosperity to all regions. There is merit in that idea, and I agree with it. The Minister today has a chance to put those words into action.
There are not many issues in our politics that unite the Labour party, Plaid Cymru, business, tourists and the Conservative party—the hon. Member for Monmouth sometimes stands alone in the Conservative party—and even rarer are issues that unite north and south Wales, but this is one. The bridge stands as a barrier to trade and growth. I do not often quote or paraphrase Ronald Reagan. He said:
“Mr Gorbachev, tear down this wall.”
I say, Minister, tear down this toll.
3.19 pm
Drew Hendry (Inverness, Nairn, Badenoch and Strathspey) (SNP): I too congratulate the hon. Member for Newport East (Jessica Morden) on securing the debate. As a former user of the bridge and as the Member for Loch Ness—with reference to our earlier monster turnout—I am delighted to take part.
As the Minister will know, transport and infrastructure are devolved matters in Scotland, and that fact has allowed the Scottish Government to abolish tolls. That has been vital for the local economy and has kept money in people’s pockets at a crucial time. The Scottish National party said in its 2007 election manifesto that it would abolish the tolls, and within nine months as a minority Government it achieved that. Incidentally, the Abolition of Bridge Tolls (Scotland) Act 2008 was the first primary legislation of the new Government and was passed on 20 December 2007.
Abolishing the tolls means that day-to-day running costs and the costs of long-term capital works are met by the Scottish Government. The Scottish Government also provided a one-off grant of £14.8 million to allow the Tay Road Bridge Joint Board to repay all its outstanding loans. The average commuter, working five days a week and with six weeks’ holiday a year, saves a total of £230 a year using the Forth crossing or £184 a year on the Tay crossing. That was widely welcomed by the travelling public and local businesses on grounds of fairness for all.
Jonathan Edwards: Will my hon. Friend explain why the Scottish Government decided to abolish tolls entirely, rather than to move to a maintenance cost level? Was it because tolls were at that level already, or were they set higher than the maintenance level?
Drew Hendry: The tolls were of varying costs across the piece. There were some very high ones. The Skye bridge toll, for example, was punishing—even more so than the Severn bridge tolls—but it was about £1 on the Forth bridge. The issue was fairness and the economy across Scotland, and it was about making sure that there was not inequality. That was why we decided to abolish all tolls regardless of the costs involved. There was no good reason for requiring people to pay out of their own pocket to cross over a bridge to work, or for shopping or leisure, just by virtue of where they happened to live.
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The benefits have been clear. Abolishing tolls has helped the local economy and tourism, as people can access attractions, leisure activities, social events, shops and so on without being deterred by tolls. By doing that, as well as through measures such as freezing council tax, the SNP has ensured that money stays in people’s pockets. We ask not for whom the bridge tolls; the bridge tolls are free.
Because the matter is devolved, the Scottish Government were able to make the decision that most suited the local economy. The position of our sister party Plaid Cymru on the Severn bridges is to transfer them to Welsh Government ownership. Given the bridges’ position as the gateway to the south Wales economy, it makes sense for Wales to be in control of that strategic piece of infrastructure and to decide on appropriate levels of charging. It has the best understanding of the local economy and its needs. The Severn bridges have the highest bridge tolls in the country, and I believe that Plaid Cymru would like them to be cut to an estimated £1.50 to £2 per vehicle, to cover maintenance costs only. The hon. Member for Newport East has also proposed that.
Decisions about reviewing the price of tolls, what to do with the money raised from them—for instance, investing the surplus in public transport—or indeed whether to have tolls at all may best be made at local level. That has certainly proven to be the case for Scotland.
3.24 pm
Richard Burden (Birmingham, Northfield) (Lab): I add my congratulations to those that have been given to my hon. Friend the Member for Newport East (Jessica Morden) on securing this important debate and on her years of tireless campaigning on the issue. The same is true of other hon. Members, some of whom we have heard from today, including the Chair of the Welsh Affairs Committee, the hon. Member for Monmouth (David T. C. Davies), who made an important contribution. The hon. Member for Carmarthen East and Dinefwr (Jonathan Edwards) praised himself and his colleagues for their dynamism, and my hon. Friend the Member for Islwyn (Chris Evans) managed to achieve what I would have thought the impossible feat of getting Ronald Reagan into the debate. Finally, the hon. Member for Inverness, Nairn, Badenoch and Strathspey (Drew Hendry) managed to work in Robert Graves, so that was great creativity.
This is clearly a cross-party issue. It is clear that the crossings are an important transport link between England and Wales, playing a vital role for businesses and the economy as well as keeping friends and families in our two countries connected. So it is unfortunate that the cost and experience of using the crossings has been a source of such frustration for so long. I had a sense of déjà vu when I heard about this debate; then I recalled that it was almost exactly a year ago when my hon. Friend the Member for Newport East last obtained a debate on the issue. Something that has come across clearly today—I hope that the Minister has heard it—is the frustration shared by many hon. Members about the fact that the debate seems hardly to have moved on in a year. Today’s debate is my hon. Friend’s third
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Westminster Hall debate on the issue in five years, and the issues that have been raised show that there is still a lot more to do.
The Severn crossings provide an important link in Wales’s transport and economic infrastructure, and they are essential to the Welsh economy. As we have heard, 80,000 vehicles use the crossings every day. It is important that the toll price should provide a fair balance between the cost of better infrastructure and the benefits to the people using the bridge. It has been made clear in this debate that the costs of the Severn crossing tolls seem unfair. Road users relying on the crossings have been hit hard by an inflexible system and an old-fashioned payment system with annual rises until 2018. The charges are the highest of any crossing on the strategic road network. As my hon. Friend said, the current prices are £6.50 for a car, £13.10 for a light goods vehicle and £19.60 for an HGV. On the Humber bridge, a car now pays just £1.50 and an HGV £12. That is a huge issue for people who are already struggling. Transport is a major part of household budgets—a point that my hon. Friend made powerfully.
The Government may point out their commitment to scrapping VAT on tolls and removing the second tier that penalises vans after 2018. However, that does not solve the problem for private drivers or businesses. Private drivers will still have to fork out thousands before VAT is scrapped in 2018. Even then the toll price will still be significantly higher, as far as we can tell, than comparable tolls in the UK.
There are precedents for things that the Government could do. Since 2014 local people eligible for the resident discount scheme at the Dartford crossing have been able to make unlimited trips across for just £20 a year, ensuring that a toll on the strategic road network does not hinder local mobility. In the debate in 2014, I and other hon. Members recognised that there would be a challenge in defining “local” in relation to the Severn bridge and deciding where any discount would start and end, but that challenge underlines why the UK Government must develop the right kind of dialogue and forum with the Welsh Government and local authorities, so that they can look ahead and find a solution to the issue.
As my hon. Friend the Member for Newport East made clear, such practical issues need to be addressed, and they are certainly not addressed by coming out with a lot of rhetoric about English votes for English laws. The situation is a practical example of the necessity of co-operation. The Welsh Affairs Committee also emphasised that in 2011. Will the Minister set out what assessment his Department is undertaking of introducing a local residents’ scheme or some other flexible payment system for the Severn crossings, and what involvement other authorities have had in the matter so far?
Obviously, the tolls not only affect commuters and private drivers but have a significant impact on local businesses and the local economy. Many hon. Members have made that point, including my hon. Friend the Member for Llanelli (Nia Griffith). For local businesses, the excessive tolls are a cost that competitors elsewhere simply do not have to pay. We have heard claims that they can add up to £200,000 to a business’s bottom line. Sadly, the benefit of scrapping VAT will be minimal, particularly for HGVs and the freight industry, as they already claim VAT back on the toll. There will be savings only in processing the claims.
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Again, the Dartford crossing is a good example of how we could develop best practice, in that it operates an off-peak concession for drivers at night, which benefits HGVs. Surely we can look at some kind of off-peak concession in the case of the Severn bridges. I therefore ask the Government what assessment they are making of waiving tolls for night-time crossings or devising an off-peak concession. I remember that in the debate in March of last year, the Minister’s predecessor, the hon. Member for Scarborough and Whitby (Mr Goodwill), said that the Eurovignette directive currently imposes a 13% cap on discounts for HGVs, but that the discount currently stood only at 10%. I would be grateful if the Minister could update the House on whether those rates are still the same.
A number of hon. Members, including my hon. Friends the Members for Aberavon (Stephen Kinnock) and for Islwyn, my hon. Friend the Member for Caerphilly (Wayne David), who mentioned local government, and the hon. Member for Strangford (Jim Shannon), who brings experience from Northern Ireland, have said that tolls can have a big impact on economic growth. The Welsh Assembly has estimated an economic loss just for Wales of about £80 million a year. With the debt expected to be about £88 million in 2018, has the Minister received any representations about offsetting any of the debt with the toll rate in order to boost the local economy?
I have referred a lot to south Wales, but of course this is not simply about south Wales. The tolls have knock-on effects in England, such as congestion in places such as the Forest of Dean, which limit the whole region’s economy—something that the Government say they are trying to act on. Will the Minister therefore consider carrying out an economic impact study like the Welsh Assembly’s but including south-west England as well as Wales? Does he agree that when the necessary long-term strategy is being developed, it will be important to reach out to local enterprise partnerships and chambers of commerce as well as local authorities?
Next I want to consider the failure to modernise—a point made powerfully by my hon. Friend the Member for Cardiff South and Penarth (Stephen Doughty). We have heard today and in previous debates that the issue is not simply the cost of the crossing but the lack of convenience in how the tolls must be paid. More than a year later, road users without cash still have to enter their PIN into a handheld device, which takes time and slows transit. During last year’s debate, the Minister’s predecessor refused to consider technology enhancements that could speed up queues because, he said, the long-term future of the charging arrangements was not clear. That, I respectfully put to him, is the point that we have been making in this debate and previous debates—that is what needs to be sorted out. It is obvious that some form of toll charge will be in place after 2018 to cover maintenance costs, but I hope that the Minister will commit today to taking account of technological developments in considering how the tolls will be paid and in the long-term strategy.
Simpler solutions could be adopted. I have mentioned the Dartford crossing, and although I do not want to diverge too much from the subject of the debate, Mr Gray, I will just ask the Minister as an aside whether he has any news about the problems there, not with free flow itself but with unpaid notices. What discussions has he
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had with Highways England and Severn River Crossing plc on introducing contactless payment on the Severn bridge?
The questions that I have for the future are as follows. We have talked about reforms to pricing and payment that could benefit users, but they do not fundamentally address the main issue—that the concession will soon end. I reflected on the debt standing at £88 million. Can the Minister clarify that that is still the case? Can he also offer a more transparent breakdown of the debt, as well as the maintenance costs of both bridges?
The end date for the concession, as we know, is 2018. At that stage the crossing will revert to public ownership, and a decision about how the debt will be recovered and about future toll charges must therefore be made. When will the Government make those decisions? How, in practice, will they work in partnership with the Welsh Assembly and Severn River Crossing plc to prepare for that? The longer we wait, the longer users will have to endure the high charges and inconvenience that they have been enduring for too long.
I hope that the Minister will leave the debate having given us some reassurance on the important questions that my hon. Friends and other hon. Members have asked, and having given a commitment that there will be regular updates on what the Government are considering, whom they are talking to, what ideas are being developed and how the technology will be improved. We do not want to end up in yet another debate, at this time next year, asking the same questions but without any further information about what the Government will do in practice. The crossings are vital for the Welsh economy, the English economy and the co-operation that is so important between our two countries, so I hope that this time the Minister will give the House rather firmer information about how we will go forward than has been the case in the previous four debates.
3.36 pm
The Parliamentary Under-Secretary of State for Transport (Andrew Jones): It is a pleasure to serve under your chairmanship again, Mr Gray. I congratulate the hon. Member for Newport East (Jessica Morden)on securing this debate about tolls on the Severn crossings. It has become extremely clear, from contributions from hon. Members on both sides of the Chamber, just how important the crossings are to the economy of Wales and to the whole of the west of England. The argument has been made very strongly, particularly with reference to the high volumes of people crossing for tourism or for the manufacturing industry, reflecting key strengths of the Welsh economy.
I am pleased to respond to this Adjournment debate on a subject of great importance to the hon. Lady and her constituents. I know that she has campaigned on the matter for a considerable time. I was quite surprised, but very pleased to find the interest from right across the UK. Lessons from different parts of the UK can always be considered. I was also delighted to hear colleagues argue for less cost on business as a driver of economic growth. That is music to Conservative ears. I also recognise how it links firmly with the Government’s plans to drive infrastructure investment as a key lever of economic growth. I will just say a little, if I may, about how that will work.
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The Government have announced increased funding to deliver improvements on our road infrastructure network targeted entirely at delivering economic growth. Our commitment to deliver a step change in our transport infrastructure was made clear by my right hon. Friend the Chancellor of the Exchequer in his statement on 26 June 2013, when he announced the conclusions of the spending review of that year. I am sure that everyone will be aware of the Government’s announcement on 1 December 2014 of the road investment strategy. As part of that strategy, the investment plan outlines how we will invest in the strategic road network between now and 2021 to make the improvements that will put us on the path to delivering all our long-term economic goals. In total, the Government are investing £15.2 billion in more than 100 major schemes, which will enhance, renew and transform the network.
Of course, the strategic road network is solely in England and roads are a devolved responsibility in Wales, but the Government have also provided the Welsh Government with the borrowing powers to fund the new M4 relief road, which I hope will address the congestion that has long plagued that section of the M4. I am highlighting that, because it shows one way of working together—the principle of partnership that I consider to be very positive and that will be most important as we take forward the Severn crossings and their future.
More than 220 million Severn crossings have been paid for since 1992, and traffic has increased by more than 50% over that period. More than 13 million crossings were paid for last year, which is a significant increase of 3.7% on the previous year. We should also note that those figures cover only crossings into Wales—people pay a return toll—and not journeys in the opposite direction. It is reasonable to surmise that the total traffic figures are double the recorded tolls, which highlights the importance of the crossings to the economies of both countries and the role the crossings play in strengthening the bonds that already exist between the two nations, which is of course a key objective of many parties in this House.
The hon. Member for Newport East has raised several issues regarding the Severn crossings, including the tolls that are charged for using them. As she knows, for decades successive Governments of all persuasions have held the view that crossings on estuaries should be paid for by the user, rather than by the taxpayer. They have taken that approach because of the outstanding savings in both time and money that such expensive infrastructure projects make possible. It is important to make that point at this stage, and it should be remembered.
I hesitate to provide a historical context, because I know that the hon. Lady is acutely aware of all the history, but it is relevant. The first Severn bridge was tolled when it opened in 1966 to pay for its construction, and it enabled a direct link from the English motorway network into Wales. However, it was not long before the first crossing operated significantly above its designed traffic capacity, and it became clear that further capacity would be required. In order to fund a second crossing, a concession agreement was signed with Severn River Crossing Ltd, which took on the operation and maintenance of the first bridge and the construction of the new bridge. The second bridge subsequently opened in 1996.
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As is the norm with concession agreements, Severn River Crossing Ltd is authorised to collect tolls to meet its financial obligations. Those tolls are in place to repay the construction and financing costs of the second Severn crossing, to repay the remaining debt from the first river crossing and to maintain and operate both crossings, and the tolls form the company’s only source of income. The concession agreement was structured so that certain risks, such as costs relating to latent defects on the first crossing, were borne by the Government, rather than by Severn River Crossing Ltd. By taking on those risks, the Government were able to finance the construction of the second crossing and the maintenance of both crossings at much lower cost than they could otherwise have achieved. If those risks had been included in the concession arrangements, the tolls that users have paid for many years would necessarily have been considerably higher, which would have pushed back the concession further than the current projected end date of 2018.
Members have asked when the concession will finish. That will happen when it has achieved total income of £1.029 billion at 1989 prices, so it is not possible to give an exact date for when it will finish. We are able to project ahead based on current usage but, as I mentioned earlier, usage is going up, so the date may come forward.
Jessica Morden: Will the corporation tax cut have an impact? Does the Minister anticipate that that will bring forward the date when the concession ends?
Andrew Jones: The corporation tax cut should be viewed as part of a broader economic package to drive growth. The more economic activity we have, the greater the use of the crossings will be. The corporation tax rates paid by individual companies are not part of this process, but the overall activity that the Government are seeking to create through a vast focus on economic growth will certainly bring things forward, as more economic growth means more crossings, and more crossings mean more revenue, which means that the target will be reached earlier.
The Severn Bridges Act 1992 sets out the tolling arrangements and the basis for yearly increases in the toll rates. New toll rates are introduced on 1 January each year and are increased in line with the retail prices index using a formula that is then rounded up to the nearest 10p. I stress that the Secretary of State for Transport does not have the authority to reduce Severn tolls without amending primary legislation and obtaining the concessionaire’s agreement. The concessionaire is extremely unlikely to agree to anything that would affect its net revenue without compensation and agreement from its shareholders and lenders. That is a key point, because we are talking about what happens after the concession ends.
At the end of the concession, as everyone has noted, the crossings will revert to public ownership. As the Chancellor stated in his March Budget, once the crossings are in public ownership, VAT will no longer be payable on the tolls, which will be reflected in the toll prices. Members have asked for clarity on that, and I am happy to confirm that VAT on the tolls is going.
Jessica Morden:
The Minister will know that, as the tolls go up automatically in 2016 and 2017, by the time the toll increases are applied in 2018, taking off the VAT will return the tolls to about £5.60, according to
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my back-of-an-envelope calculation, which means that about 90p will come off in two and a half years’ time. Does he appreciate that that is no great shakes?
Andrew Jones: Removing VAT will result in a significant cost reduction. Of course, like all Members, I would like cost reductions in all sorts of areas of our economy, but to say that VAT reductions are matters of great insignificance is simply wrong. It should be remembered that further reductions in tolls for some vehicle classes once the crossings return to public ownership were also announced in the March Budget. The Chancellor announced that, when the concession to toll the crossings ends, the higher toll rate for vans will be reduced to the same rate as for cars, which will be a significant benefit to smaller businesses on both sides of the crossings. So we are considering some toll reductions, which is significant.
Our intention is to continue tolling after the projected end of the concession in 2018 simply to recover the costs that have been incurred in relation to the crossings that fall outside the agreement. The current projection of those costs stands at £88 million. We have not made any decisions about the operation and tolling arrangements for the crossings once the current regime ends. The road investment strategy contains the Government’s commitment to working with the Welsh Government and others to determine the long-term future of the Severn crossings. The Under-Secretary of State for Wales, my hon. Friend the Member for Vale of Glamorgan (Alun Cairns), who is sitting next to me, has done excellent work in highlighting the economic impact that the toll reduction for vans and the VAT reduction will have on the area and in explaining the importance of the crossings overall. We have already met to discuss that subject, and I anticipate that we will meet again shortly.
Stephen Kinnock: The Minister says that the Government have not yet made a decision, and 2018 is not that far away. As hon. Members said earlier, business abhors a vacuum. Business needs certainty, and it needs to know where its costs will be. Can we please have clarity on when the decision will be made and why it cannot be made within a defined period of time?
Andrew Jones: Although 2018 is not that far, it is still three years away. Work on what happens next is under way. We are looking at a potential end date for the concession of around 2018. It is a financial target, rather than a fixed date, which means that we have a requirement to plan appropriately, and I will address that next.
Jonathan Edwards: As I said in reply to an intervention during my contribution, the Minister’s party in Wales is campaigning for the Assembly elections, which are less than a year away, on the basis that the Welsh Government will have control of the Severn bridges and that, under his party’s control, the costs will be reduced. He has clearly not made up his mind on the ownership of the bridges following the end of the concessionary period. Is it not the case, therefore, that the pledges his party is making in Wales are not worth the paper they are written on?
Andrew Jones:
One aspect of devolved government, which is what we have now in the UK, is that the same party will hold different views in different areas, reflecting
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local circumstances. That happens throughout the UK, and I think that it is a positive rather than a negative that people are arguing, lobbying and making the case for their area. It happens, and we should get used to it, because it is here to stay while we have a United Kingdom with devolved Assemblies and Parliaments.
I mentioned that we have not yet made any decisions about the arrangements after the concession finishes, but the Government have been clear that we will need to make proper provision for the repayment of debt and for future maintenance.
Nia Griffith: I appreciate that we cannot expect to have all the answers today, and that there are difficult decisions to make and things to work out. However, can the Minister set a timetable in the very near future for when all those things will be done, so that come September, we will know what is likely to happen and when we are likely to get certainty? That is what we really want to know.
Andrew Jones: I cannot give the hon. Lady a final date, but I can tell her that that work has started and is taking place in the Department, with colleagues in the Wales Office. Let me leave hon. Members in no doubt that the Government are committed to the successful operation of the crossings. They are vital, and the economies on both sides have benefited greatly from their presence.
Richard Burden: I think that the Minister may inadvertently have misunderstood my hon. Friend’s question. She was not asking him when the Government will make their final decision; we understand that that will take some time. She was asking for a timetable or road map of the process whereby decisions will be made. Who will be talked to at which stage? Which agenda items will be discussed at which stage—the debt, toll levels, the technology, off-peak reductions? In the autumn, can the Minister give some kind of timetable for when those things will be considered?
Andrew Jones: I mentioned earlier that we are already committed by the road investment strategy to work with the Welsh Government, and we are more than happy to continue with all the strategy commitments. As I said, I have already started work with my colleagues in the Wales Office. I am expecting more work to be done over the summer and in the early autumn by my officials in the Department, and will be more than happy to share it more widely as we go forward, but I cannot yet give a specific date. However, it is work in progress, and we are starting that work. It will certainly involve wide co-operation and consultation.
David T. C. Davies: Can the Minister supply an answer in this debate to the questions about how much extra money the Government have received in VAT and industrial buildings allowance, and the costs of maintenance? If he cannot give those exact figures today, can he commit his Department to providing them before the autumn? Otherwise, I suspect that hon. Members might decide that they want to apply for another debate, and I will certainly support them if they do.
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Andrew Jones: The annual accounts for the Severn river crossings will be published shortly, and I will consider what other information can be made available. However, we must be a little cautious about hypothecating the amount of VAT raised, but on general principles of transparency, I am more than happy to supply that figure. I cannot stand here and give my hon. Friend large amounts of data this afternoon, but we will approach all investment issues on principles of transparency and collaboration, including data transparency.
Numerous questions were asked; I will answer some of them now. It was asked whether the Severn crossings could be handed over to the Welsh Government. I have absolutely no plan whatever to change ownership, but I have every intention of working together on future operation of the crossings. We will take that forward in partnership and consultation. The publication shortly of the annual accounts was mentioned. Many requests about consultation have been made. I am happy to commit to all that and to hear from all parties, including from local councils in the area and any local enterprise partnerships. The key point is that nothing has been decided. All policies are still under consideration.
Several colleagues mentioned technology. The opportunities presented by technology are significant, and it can make an enormous difference. I have started to consider whether we can take lessons from other free-flow schemes in our country, notably the DART tag scheme, which has made a significant time saving for commuters on the Dartford crossing. We are considering whether that could be used on the Severn. I am also considering whether it could be made collectable both ways; technology frees up opportunity, and I think that it would prove popular.
When the concession ends, we have a significant opportunity. I am extremely keen to ensure that we take it, because the whole project matters. We know full well, as has been made clear in this debate by colleagues from across the House, just how important the crossings are to the local economy and nationally. The people of the area have been paying to cross the Severn, but I remind colleagues that we are in a period of significant infrastructure investment. This Government are delivering the most ambitious road investment scheme since the 1970s. I view the Severn crossings as an integral part of our transport infrastructure, which is why we are taking
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forward work in my Department. We have three years to ensure that we get it right and to improve the situation for the area. This is a fantastic opportunity, and I look forward to working with colleagues here and locally to ensure that we get it right.
3.56 pm
Jessica Morden: I am grateful to the Minister for that response, although I suspect that hon. Members and Friends will have more questions to ask him. I thank colleagues for coming today; I counted about 15 in the Chamber, which shows the high level of interest in the topic.
In thanking the Minister for his response, I reiterate to him the list of points raised in this debate, and I suggest that he writes to all Members here to outline the answers to some of the questions asked, not least to spare him from having to come back yet again for another 90-minute debate on the Severn bridge tolls. To reiterate, the wish list from this debate includes financial information about the Severn bridge tabled for hon. Members to scrutinise—I am sure that the Select Committee on Welsh Affairs will return to that in its work—and a clear timetable about where we will be in future, as mentioned by my hon. Friend the Member for Llanelli. Perhaps the Minister will also commit to meeting groups of us to give us regular updates, not least to spare himself another debate.
Andrew Jones: I am happy to make that commitment.
Jessica Morden: I thank the Minister for that. To reiterate what the hon. Member for Monmouth and I said earlier, this Government have done extremely well out of the bridges; they have been a cash cow. The Government’s assertion that they might keep on tolling rather than reduce the high tolls after the concession ends—we know that although the debt will be £88 million, the Government have already recouped £154 million in VAT response—will not go down well. I would appreciate it if the Government reconsidered reducing the tolls further.
That this House has considered tolls on the Severn bridges.
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Avro Vulcan XH558
3.59 pm
Sir Gerald Howarth (Aldershot) (Con): I beg to move,
That this House has considered the end of service of the Avro Vulcan XH558.
I welcome you to the Chair, Mr Gray. Oh no, you’re about to leave!
[Sir David Amess in the Chair]
I welcome you, Sir David, to the Chair. I also welcome my right hon. Friend the Minister. [Interruption.] It is only a matter of time before he is elevated to the Privy Council. I welcome my hon. Friend the Minister, with whom I shared some experiences at the weekend of which I will speak later, and his most excellent Parliamentary Private Secretary, my hon. Friend the Member for Plymouth, Sutton and Devonport (Oliver Colvile).
I am grateful for the opportunity to place on record in the House the story of one of the most remarkable heritage projects of recent years. In doing so, I am extremely proud to declare my interest as a trustee of the Vulcan to the Sky trust and president of the British Air Display Association, which represents the interests of those who organise and participate in air shows across the country. Essentially, Vulcan bomber “X-ray Hotel five five eight”, as it is pronounced in the phonetic alphabet, which I shall use throughout the debate, last saw service in 1992, and 15 years later she was restored to flight by a band of highly professional volunteers. Since then she has dominated the air show circuit, drawing massive crowds everywhere she appears. Incredibly sadly, this display season looks like being her last, but of that, more later.
The Vulcan was the brainchild of aero-engineer Roy Chadwick, designer of the famous Lancaster bomber, immortalised through its role in “The Dam Busters”. Only 11 years separate the first flights of the Lancaster, in 1941, and the Vulcan, which was then led by Stuart Davies following Chadwick’s death in 1952. What an extraordinary testament to British aeronautical ingenuity. Designed as a high-level bomber to deliver Britain’s nuclear deterrent through the tense years of the cold war, before the deterrent became submarine-based in 1969, the Vulcan, of which 134 were delivered to the RAF, was only deployed once in anger. That was during the Falklands campaign when it, too, became immortalised in that amazing operation—Operation Black Buck—to bomb the runway at Port Stanley. It involved a 6,800 nautical mile round trip, lasting nearly 16 hours, with 18 air-to-air refuelling operations. Although the Army tend to be rather dismissive of the one bomb that landed in the middle of the runway—
Bob Stewart (Beckenham) (Con): Objection!
Sir Gerald Howarth: Objection not taken. I hope my hon. Friend is not seeking to intervene.
That bomb put the runway out of action. More importantly, it sent a clear message to Argentina that if we could pinpoint the runway in Port Stanley, we could rearrange Buenos Aires in a big way.
It is hardly surprising that with that pedigree, the public lamented the scrapping of the Vulcan fleet when, in 1992, XH558 made her last display flight in RAF
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service. A petition signed by more than 250,000 people calling on the Government to save her sparked a campaign that led to today’s feast of aeronautical brilliance. Sold for £25,000 in 1993, the aircraft was bought by C. Walton Ltd at Bruntingthorpe in Leicestershire. However, one man decided that the public should not be denied the chance to see XH558 take to the skies again. Step forward a nuclear physicist and IT company director, Dr Robert Pleming. In 1997, he and David Walton agreed to determine the feasibility of returning the aircraft to flight, based on sound management practice and a professional approach. Robert’s credibility won over the aircraft’s design authority, British Aerospace—now BAE Systems—which, in 1998, identified that Marshall Aerospace and Defence Group of Cambridge had the skills, capabilities, quality control and experience in one-off aircraft projects to satisfy the Civil Aviation Authority that the work required on XH558 would be done properly.
Jim Shannon (Strangford) (DUP): Obviously, we can look back on that era. The Vulcan signifies the triumph of British engineering, and that is something to be proud of for us as the nation of Great Britain and Northern Ireland. The British people loved it. The hon. Gentleman may be coming to that point.
Sir Gerald Howarth: The hon. Gentleman is absolutely right; it is a triumph of British engineering. I hope that he can see the Vulcan when she displays in Northern Ireland, for that is one of our most important displays.
Marshall Aerospace agreed to act as the engineering authority for the restoration project in 1999, supporting and overseeing the trust’s own professional engineering team, led by Andrew Edmondson, throughout. The race was on. Dr Pleming built a team that included Air Chief Marshal Sir Mike Knight, who commanded No. 1 Group during the Falklands war, and our former colleague—himself a Vulcan pilot—Keith Mans, then the Member for Wyre in Lancashire and now deputy leader of Hampshire County Council. Their professionalism resulted in the award of a £2.75 million grant from the Heritage Lottery Fund, which proved a major contribution to the eventual £7 million cost of restoration. In March 2007, I took Margaret Thatcher to see the project for herself and to introduce her to our chief pilot, Squadron Leader Martin Withers DFC—the man she had sent on that epic raid to the Falklands. It was a wonderful encounter.
The fundraising was always hard graft. Not infrequently were the team of engineers and support staff issued with redundancy notice threats. Things were particularly tight in about 2006, when I received a number of calls from Sir Mike Knight imploring me to solicit funds to keep the project going, and that moved me into action. I asked the then treasurer of the Conservative party, Jonathan—now Lord—Marland if he would give me the names of three wealthy Thatcherite Tories. In writing to the three, I suddenly realised the significance of the project. The aircraft had been at the forefront of the cold war battle to deter the Soviet threat and had been deployed only once in anger, in the Falklands. What connected the two? Margaret Thatcher. She played a huge part in ending the cold war and, as I mentioned, she ordered the Vulcan into the air to help recover the Falklands.
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I had one response. That late and great patriot, Sir Jack Hayward, true to his “Union Jack” soubriquet, rang me late one night from the United States and said, “So sorry to hear that those chaps might be out of a job; count me in for half a million.” I immediately called Sir Mike and said, “Hold the P45s!” Sir Jack had saved the project. It was a magnificent tribute to individual philanthropy that Sir Jack Hayward just responded like that. I had never taken a phone call like that before, nor have I since, and I savour it to this day. The trust made me a trustee on the strength of that one contribution. I have enjoyed being there ever since.
Thus it was that on October 18 2007, Al McDicken, Dave Thomas and Barry Masefield took XH558 to the skies once more, where she has been the star of the air show circuit ever since, performing more than 175 displays before a total audience of 12 million people. Roads are blocked around the display sites, and my parliamentary colleagues text me excitedly that they have just seen the Vulcan pass low over their homes. Other colleagues ask if I can arrange for their children—and of course themselves—to visit the aircraft. Luke Osborne, the Chancellor’s son, is among those keen young supporters. The Minister will be delighted to know that I am not going to be asking Luke’s father for more money for the project.
It costs more than £2 million a year to run the Vulcan. The professional side of the operation employs just 20 people, including our team of six superb full-time engineers—all experienced on Vulcan work when the aircraft was in service with the RAF—and the aircrew of Martin Withers, Bill Ramsey, Bill Perrins, Kev Rumens, Phil Davies and Jonathan Lazzari, and Phil O’Dell, the Rolls-Royce test pilot. The money is raised overwhelmingly from the general public, masterminded by our fundraising man, Michael Trotter. As colleagues know, I constantly sport the Vulcan lapel pin and never cease to be amazed by the number of people I meet who tell me quietly, “I give a few quid to keep that aeroplane flying.” It is genuinely the people’s aeroplane.
The Vulcan to the Sky club has 5,000 members and a crew of some 60 volunteers, who raise money through selling merchandise, including such things as original engine compressor blades mounted on a small block of wood at a bargain price of £125. At the royal international air tattoo last weekend, we had to rush in extra supplies. The weekend’s takings topped £75,000. A long queue of enthusiasts paid £5 a head to get up close to the aeroplane.
There are also corporate supporters and original equipment manufacturers who must be included in this roll of honour: Airbus UK and its indefatigable former chief executive officer, Robin Southwell; Eddie Forrester of Aerobytes; Goodrich; Meggitt; Eaton Aerospace; Dunlop Aircraft Tyres; General Electric; Kidde Graviner; Martin-Baker; Serco; Ultra; and Beagle Aerospace. I could go on and on, but of course at the end of the list must be Marshall Aerospace, which supports us so magnificently on the engineering side. The Minister will be pleased to know that we also acknowledge the enthusiastic support that we receive from the Royal Air Force, which clearly enjoys seeing one of its own commanding such universal public respect.
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The Vulcan to the Sky Trust recognises that over the eight years that Vulcan XH558 has been flying, she has generated a huge level of interest and support across the country, bringing a “once seen, never forgotten” experience to thousands of youngsters. When she stops flying, the trust plans for her to become the focal point for a number of skills initiatives at her home base, Robin Hood airport Doncaster Sheffield, formerly known to those of us with RAF connections as RAF Finningley.
The trust has announced plans to create the Etna project, an Eden project for aviation, engineering and technology, the first phase of which is already well under way in collaboration with the Aviation Skills Partnership. Why “Etna”, people may ask. Well, unknown to me before I became involved with this project, Mount Etna is the location of the mythical god Vulcan’s workshop. The Etna project will encompass an aviation academy, a heritage centre and the Etna centre, an innovative new facility aimed at inspiring youngsters in aviation, engineering and technology.
Under the leadership of the Aviation Skills Partnership, the Vulcan aviation academy will cater for all aspects of aviation skills across the ASP’s six areas of aviation: pilot; air traffic; airport operations; operations; crew; and aviation engineering. The Vulcan heritage centre will continue to provide the Vulcan experience for visitors and will introduce exciting new elements to the tours. The heritage centre will also represent a unique environment for business meetings and conferences. Vulcan XH558 will be maintained as a live, taxiing aircraft, and in addition, the trust aims to continue its involvement with heritage aviation by leading efforts to fly other iconic aircraft, to continue to inspire new generations of aviation professionals.
I want to put it on the record that I do not think any man could have done more than Dr Robert Pleming to epitomise an extraordinarily professional and competent approach to the management of complex former military aircraft, which has required the most amazing range of skills. The fact he was a nuclear scientist may have assisted him in developing those skills, but he has made a significant contribution. I do not think anybody could do better than to follow the example of how he brought this complex aircraft—the Vulcan bomber—out of disuse and back into the air, and then managed its operations in such a professional way. There is a lesson there for others who are engaged in the management of the warbirds that entertain the public around the country so much.
The objective of the exciting Etna centre is to help to solve the engineering and technical skills challenge that the country faces. The centre will build on XH558’s inspirational qualities to change the perceptions of the young, and those who influence them, about engineering and technology. Working examples of both heritage and modern technologies, and the stories of the people behind them, will show how interesting and rewarding careers in aviation and technology can be, for women as well as for men, and regardless of what an individual’s level of academic attainment might be.
The first phase of the academy and heritage centre is intended to operate within the current Vulcan hangar at Robin Hood airport. It is planned that from September 2017 all three elements will be co-located on a new single site on the edge of the airport, with access to the taxiways.
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I hope you will agree, Sir David, that this has been a most astonishing story, and one with which I and my fellow trustees—John Sharman, our chairman; Sir Donald Spiers, former Controller Aircraft at the Ministry of Defence; Ken Smart, former chief inspector at the air accidents investigation branch in Farnborough; Dr Steve Liddle, senior aerodynamicist at Lotus Formula 1; Air Commodore Edward Jarron, who is himself a former Vulcan pilot; and Richard Clarke, the former supporters club chairman—are proud to have been associated.
As I have said, this season marks the end of an era. On current plans, XH558 will cease to fly in the autumn. It is not because we have no money; it is not because of a lack of spares; and it is not because of the Civil Aviation Authority¸ whose chief test pilot stated after flying the aircraft in 2013 that XH558 was in the best condition she had ever been. The reason is that the original equipment manufacturers—BAE Systems, the successor to the Avro company, and Rolls-Royce, the engine manufacturer—have decided that they no longer feel able to accept the risk, because the retirement of staff means that the companies lack the technical competence to certify the aircraft.
That is disappointing for two reasons. First, we had asked only to complete the 10-year flight programme, which would mean that the last surviving all-British four-engine jet could fly through the 2016 season and, of course, display at Farnborough in my constituency. Secondly, there are many other vintage aircraft flying today that will be able to continue thrilling the crowds for years to come. Indeed, many people ask me how it is that aircraft far older than the 63-year-old Vulcan can continue flying while the Vulcan is due to be grounded. The Meteor, Britain’s first combat jet aircraft, the Vampire, not to mention the many Spitfires and Hurricanes, and that other Chadwick legend, the Lancaster, will all continue to enthral the crowds in their own way. And across the Atlantic, the B-52 looks like remaining in military service for 100 years.
Last weekend at the royal international air tattoo, XH558 taxied slowly to the runway threshold at RAF Fairford. As on so many occasions in the past, the 60,000-strong crowd stood up and moved forward as one to hear the famous Vulcan howl, as the four mighty Rolls-Royce Olympus engines wound up to propel this massive aircraft into the sky. They marvelled at the agility of this monster, with a wingspan of 110 feet; the magnificent wingover performed by Bill Ramsey and Kev Rumens; and her vast open bomb bay, which revealed her capacity to deliver awesome military air power. And they applauded loudly as she landed.
Our late colleague, David Taylor, the former Labour and Co-operative Member for North West Leicestershire, summed up the mighty Vulcan in an early-day motion in 2008 as
“an icon of British heritage and an invaluable asset in assisting today’s students to better understand British science, engineering and history”.
Alternatively, as XH558 proclaims on its nose cone:
“Honouring the Past—Inspiring the Future”.
Even at this late hour, perhaps we can persuade the manufacturers of today’s state-of-the-art technology that their masterpiece of the past, XH558, should serve one more year before we say farewell and the skies over the United Kingdom become a quieter place.
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4.18 pm
The Minister for Defence Procurement (Mr Philip Dunne): Sir David, I am sure you will join me in congratulating my hon. Friend the Member for Aldershot (Sir Gerald Howarth) on securing this debate and on paying such a moving tribute to this magnificent aircraft, which, as we can all tell from the tone of his remarks, he holds in very high regard indeed.
My hon. Friend also told us how he originally became a trustee of the Vulcan to the Sky Trust; I suspect that on the back of that public explanation, he may be invited to become a trustee of several other aviation charities in the future. He has been a doughty advocate for the trust. I share his respect and admiration for the dedicated enthusiasts, many of whom he named, whose tireless efforts returned this iconic aircraft to flying condition so that another generation might witness it in the skies over the UK. I met several of those volunteers at the royal international air tattoo last year, and was impressed by their dedication and commitment to this remarkable aircraft, which I enjoyed seeing again, albeit static, at RIAT this year.
The Avro Vulcan was introduced into service with the RAF in 1957. As we heard, 134 were produced for the Royal Air Force by Avro at its Woodford aerodrome site near Macclesfield between 1956 and 1965. It was designed as a long-range bomber capable of reaching targets far into the then Soviet Union. On its introduction, it represented the cutting edge of aviation and was a step change in technology from its wartime predecessors. It was a clear, iconic demonstration of the quality and vision of British engineering. The last operational Vulcan squadron disbanded in 1984, but the Vulcan continued with the RAF in a display role until it finally left service in 1993.
The Vulcan bomber was a stalwart of the so-called V-force, which comprised Vulcan, Victor and Valiant aircraft. The V-force provided Britain’s strategic nuclear deterrent during the dark days of the early cold war. The RAF’s Vulcan fleet was held in a state of continuous readiness to respond to any nuclear threat from potential aggressors. It required continuous training and dedication to maintain aircraft and aircrew at a constant state of peak readiness.
Bob Stewart: I want to challenge my very good friend the Member for Aldershot slightly on one point. My hon. Friend stated that there was only one operational attack by a Vulcan on the Falklands; as the Minister just outlined, the Vulcan fleet was operational from about 1957 to ’69, flying in the cold war on operations, defending our freedom and our right to exist. I should like to point that out. I slightly disagree on that small point.
Mr Dunne: My hon. Friend is right to emphasise the role played by Vulcan crews during the cold war, but of course my hon. Friend the Member for Aldershot is also correct in saying that the aircraft was only ever used once in a strike capacity, during the Falklands war. I will mention that in a moment.
The state of high readiness continued for many years, until the nuclear role of Vulcan bombers was replaced in 1969 by the Royal Navy’s fleet of Polaris and later Trident submarines. It is precisely because of the deterrent capability that it provided to our country that the
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Vulcan was never called on to use its nuclear capability in anger against the Warsaw pact. I am sure that my hon. Friend the Member for Aldershot agrees that that is precisely why the Government remain committed to the provision of a continuous at-sea deterrent today.
As we have just discussed, Vulcans did see action during the 1982 Falklands conflict. At that time, the Vulcan was already a 25-year veteran, approaching the end of its service life. There was no expectation that it would shortly be thrust into a critical role in the Falklands war. In the Black Buck raids, RAF Vulcan aircraft flying from Ascension Island carried out what were then the longest-distance bombing raids in history, covering a return distance of some 7,700 nautical miles. A total of five successful raids were made by Vulcan aircraft against the airfield and Argentinean radar installations at Port Stanley. A Vulcan bomber cratered the runway at Port Stanley and denied Argentinean fast jets a base from which to attack the taskforce. It also sent a clear strategic message to Argentina that Britain would take any necessary steps to defend its sovereign territory and protect the islanders’ right to determine who governed them—a policy that this Government still hold dear today. The House will be interested to know that Vulcan XM607, which completed the first of the Black Buck raids, is preserved at RAF Waddington, is much prized and can be seen by members of the public from the Waddington aircraft viewing enclosure.
The Black Buck raids were a testament to the courage of the men who flew all the aircraft involved and to those who supported them. I know that my hon. Friend will share my admiration for the Handley Page Victor tanker crews that assisted with the raids: a remarkable relay of some 12 tanker aircraft that ensured that the Vulcan was refuelled in mid-air five times per mission. That is a remarkable example of improvisation, professionalism, airmanship and military logistics.
Vulcan XH558 made its maiden flight in May 1960 and has flown more hours than any other Vulcan. It first served with 230 Operational Conversion Unit, providing training for pilots new to the Vulcan type, before transferring to front-line service with the Waddington wing. In 1973 it transferred to the maritime radar reconnaissance role and in 1982 was converted for use as a refuelling tanker. It finished its RAF career with the Vulcan display flight before making its final RAF flight in 1993.
Retiring from the RAF after many years of sterling service, the Vulcan was taken into private ownership, as we heard, thanks to the work of the Vulcan to the Sky Trust. It was returned to flying condition in 2007, since when it has been seen at many air shows across the UK. Although the preservation of the aircraft is not a core defence requirement, the RAF has in the past assisted
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where it could with this project to restore and maintain Vulcan XH558. It seconded a number of skilled RAF engineers to the restoration project and provided hangar space, notably at RAF Lyneham.
As I said, I saw the aircraft on the ground at RAF Fairford on Friday. Although it was static, it was the air platform subject to the greatest intensity of interest at the show. I saw the video of it flying in formation with the Red Arrows on Sunday, which must have been an utterly thrilling sight for the thousands of spectators present. I cannot think of a more fitting way for the RAF to mark its affection for this fine aircraft, with two icons of British aviation flying side by side. Even more appropriately, the Vulcan was once based at RAF Scampton in Lincolnshire, now home to the Red Arrows—evidence, if any was needed, of the great heritage of the RAF and the comforting ebb and flow of the past giving way to the future.
The MOD takes its commitment to the aviation heritage of this nation very seriously and is proud to do so. It is RAF heritage strategy, where possible, to preserve one of every aircraft type in the national collection at the RAF Museum. In the financial year that ended in April ’14, the MOD donated just over £9 million pounds in grant in aid to the RAF Museum, which preserves many of the nation’s finest military aircraft, including two Avro Vulcans, which can be viewed by all who visit the RAF Museum sites at Hendon or at Cosford, just outside my constituency in Shropshire—a good visit for all. The Imperial War Museum, which received a £21 million grant from the Department for Culture, Media and Sport last year, also has a Vulcan aircraft at its site at Duxford.
Many will share my hon. Friend’s disappointment that the Vulcan will not continue to fly and that we will not be able to spot it in the skies of the nation that it served and protected so diligently. But as we have also heard, it is encouraging to learn that the Vulcan will continue to play a pivotal role in the future, just it has in our past, albeit in a heritage capacity.
I was delighted to hear my hon. Friend mention the plans for the XH558 to be a living centrepiece for a Vulcan Aviation Academy and Heritage Centre at Robin Hood airport, near Doncaster, providing inspirational opportunities for the next generation to learn about aviation and help prepare them for future jobs in the aviation world. I am sure the House will welcome this admirable initiative, and I wish the project the very best.
I congratulate my good friend the Member for Aldershot on his fine championship of the Vulcan through his work on the trust. I also congratulate him on securing this debate and on giving us this opportunity to highlight the role that the Royal Air Force has played in serving this nation so well, using various aircraft types for close to 100 years.
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Euro Area
4.30 pm
John Redwood (Wokingham) (Con): I beg to move,
That this House has considered the UK’s relations with the Euro area and further Euro integration.
I am grateful to have secured this debate, because it is time that our Parliament discussed the big moves under way on the continent of Europe, which take the form of a major policy statement by the five presidents of the European Union on how they wish to make rapid progress to a more comprehensive union, including a political union. The document is a well-kept secret. It has been on the European Union website since the end of June. I have raised it a couple of times in the House and in interviews, but for some reason the British media do not seem to have realised that there is this radical prospectus, which is now official European Union policy, written and endorsed by the five presidents.
Some people in the United Kingdom will not have quite caught up with the idea that there are five presidents, but they are: the president of the European Council, who is the senior minister representing the member states’ ministerial teams; the president of the European Parliament, who represents the elected MEPs; the probably better known President of the Commission, who is Mr Juncker for the time being; the president of the European Central Bank, Mario Draghi, who is a bit better known thanks to the comings and goings over the Greek banking system and the Greek state debt problem; and the president of the Eurogroup, who is a little better known on British television screens because he has from time to time had to do the crisis response when we have had another difficult day in the relationships between Greece and the rest of the eurozone.
Those five very powerful men represent all the branches of the European Union. It is tempting to think that only three of the five presidents apply to the United Kingdom, because the UK, by common consent across the parties, is not a member of the euro and is therefore in a more independent position than EU member states that are members of the eurozone. The United Kingdom is a very small shareholder in the European Central Bank and has a non-paid-up, rather bigger shareholding ominously sitting there. Clearly the United Kingdom does not attend the Eurogroup meetings—it is right that we do not—but we have seen in the case of Greece that the Eurogroup cannot always deal with its financial problems. The European group of Ministers wished the UK to give consent to an emergency loan to Greece from outside the Eurogroup.
The problems that have emerged with Greece give the United Kingdom an important warning, as well as a sign that this period of change in the European Union gives us an opportunity. I hope our Prime Minister will utilise it to the full, both for the benefit of a happier United Kingdom in its relationships with the rest of the European Union and for the sake of the Eurogroup, which has its own need to drive further towards common financing and common decision making.
My first wish is that Her Majesty’s Government not be taken on a wild ride to political union. Some people in the proto-debate on what our relationship with the European Union should be seem to claim that staying in the European Union as it is currently constituted is a tolerable status quo that we need not worry about,
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because we know what it is like. However, there is nothing stable about it and no status quo. This is a wild ride to political union. The euro has been living through an intense and tragic crisis, which has highlighted to the custodians of the euro the need to go much further and faster in the direction of completing the creation of a comprehensive union that will look much like a federal state.
Richard Drax (South Dorset) (Con): I congratulate my right hon. Friend on securing this wonderful debate. His speech highlights to me and many others just what a disaster the eurozone is. On that issue and the plight of Greece, does he agree that the more the disaster unfurls, the more the eurozone tries to patch things together? Now, we have news of a eurozone parliament. That is exactly the sort of thing that my right hon. Friend is warning about.
John Redwood: Indeed. After I secured the debate, no less a figure than the President of the French Republic made an important speech saying that the recommendations of the five presidents of the European Union do not go far enough. I thought theirs was a blockbuster recipe for pretty comprehensive union, but the President of France has said that he would like them to go further and faster. He would like to supplant the current European Parliament, or put alongside it a euro area parliament, to provide some democratic accountability to the increasingly large and important decisions that the Eurogroup makes.
Sir William Cash (Stone) (Con): Will my right hon. Friend also note that, according to the press release I have here, President Hollande said that the eurozone needed a specific budget as well as its own government and parliament? In other words, they are going for political union or bust in the eurozone.
John Redwood: My hon. Friend is exactly right. The President of France has gone even further than the five presidents. I will briefly highlight what is in the rather lengthy and important report, because it has escaped most comment and attention in the United Kingdom. The five presidents say:
“For all economies to be permanently better off inside the euro area, they also need to be able to share the impact of shocks through risk-sharing within the EMU. In the short term, this risk-sharing can be achieved through integrated financial and capital markets”.
That is pretty comprehensive union, which they call “private risk-sharing”. Those markets would be
“combined with the necessary common backstops, i.e. a last-resort financial safety net”—
presumably that is public finance. They continue:
“In the medium term, as economic structures converge…public risk-sharing should be enhanced through a mechanism of fiscal stabilisation for the euro area as a whole.”
That is rather wordy and slightly opaque, but I think the meaning is clear. The five presidents have recognised that to have a successful single currency, taxpayer money needs to be standing behind the financial institutions—the banks and others—and the states involved in that financial union. That is exactly the issue that the tragedy of Greece has highlighted.
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Euro banknotes have no symbols of French or German taxpayers in the way that our banknotes have the Queen as a representation of the full power of the sovereign in Parliament and the revenues going into the Treasury. Euro banknotes do not have that, for the good reason that the symbols could not be agreed and there was a bit of reluctance to put the full power of taxpayers behind the banknote. They have a misleading symbol on them: the European Union flag. One has to ask why that is, when the United Kingdom—the largest country in the “outs”—has made clear that we have no wish to put any taxpayer money or finance behind the euro, because it is not our project and we are not part of it. That illustrates a much bigger problem that the eurozone is grappling with: who stands behind its banks? Who stands behind the member states when they get into financial difficulties? That problem has come out in the Greek struggle.
The five presidents go on to say:
“Progress must happen on four fronts: first, towards a genuine Economic Union…Second, towards a Financial Union that guarantees the integrity of our currency across the Monetary Union and increases risk-sharing…This means completing the Banking Union and accelerating the Capital Markets Union. Third, towards a Fiscal Union that delivers both fiscal sustainability and fiscal stabilisation”—
that means sharing tax revenues, basically—and
“finally, towards a Political Union that provides the foundation for all of the above through genuine democratic accountability”.
They go on to say that there will have to be a lot more common decision making or shared sovereignty, although I would call that the gift of sovereignty to a higher body. They say that
“this would require Member States to accept increasingly joint decision-making on elements of their respective national budgets and economic policies. Upon completion of a successful process of economic convergence and financial integration, this would pave the way for some degree of public risk sharing”—
that is, countries using other people’s taxes to sort out their own problems—
“which would at the same time have to be accompanied by stronger democratic participation”.
Sir Gerald Howarth (Aldershot) (Con): My right hon. Friend is making some incredibly important points. Would what he just quoted not be more accurately described as the “United States of Europe”?
John Redwood: I hope that it would be the United States of Euroland, but my hon. Friend is right. I hope that the Minister will say that we will not be part of it and that a plan exists to negotiate a new relationship for the United Kingdom. We will clearly need such a relationship, because no party in this House wants the UK to risk-share on that basis, putting in British taxpayer money to help Greece, Portugal or whoever is in trouble due to the euro.
The five presidents want a euro area system of competitiveness authorities that will try and create commonality of policy and outturn across the Union. They claim to have largely achieved the goal of bank supervision with the setting up of the single supervisory mechanism, but the single resolution mechanism is not fully implemented, and they want to complete a financial union, launching a common deposit insurance scheme and a full capital markets union. They want to
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get on with those immediately and not await treaty change, which they will need for some of their other proposals.
The five presidents ultimately want a single European capital markets supervisor, which would have great implications for the City of London and the conduct of our markets and our regulatory system were we to take part. They say that
“regulation creates incentives to risk-pooling and risk-sharing and ensures that all financial institutions have sufficient risk management structures in place and remain prudentially sound.”
Even more importantly, they go on to say, referring to the capital markets union:
“Taxation can also play an important role in terms of providing a neutral treatment for different but comparable activities and investments across jurisdictions.”
Will the United Kingdom be able to opt out of this capital markets union? If we sign up to it, does that mean that we would have to accept common European taxation on this rather important business interest for the UK?
Last, but by no means least, the report contains a heading referring to a euro-area treasury, under which it states:
“The Stability and Growth Pact remains the anchor for fiscal stability and confidence in the respect of our fiscal rules. In addition, a genuine Fiscal Union will require more joint decision-making on fiscal policy”—
in other words, a euro-area treasury.
Sir William Cash: My right hon. Friend knows this, but there is benefit in getting it on the record. The Germans and the French broke the stability and growth pact three years in succession with impunity when it suited them. On the question of how far our Government would go in accepting the proposals, does he agree that the creation of a eurozone is only a de facto organisation and not a legal one? We are caught up in this. When the fiscal compact was proposed, our Prime Minister, having listened to us, decided that he would veto. Would we not want him to veto all this as well and to make it clear that that is the case now?
John Redwood: My hon. Friend is right to draw attention to the legal complexities that the euro area and the EU face. He is right that there is no formal, treaty-backed legal entity of the euro in full. There is the relatively informal euro-group of Ministers, who meet monthly just before the full economic affairs council, to settle euro business.
The process has gone a bit further, because of course there is a separate legal entity called the European stability mechanism, which is a formal entity for bailing out or offering loans to euro states in need of additional money. It is currently the object of the entreaties of the Greek state as the Hellenic Republic seeks a long-term loan to replace the short-term loan that the European financial stabilisation mechanism has just provided to see it through July. Greece is currently in negotiation over €86 billion—Germany would like it to be less—of possible money from the ESM. There is a legal structure to do some of the financing but, as my hon. Friend rightly says, they probably need treaty modification and a firm legal basis for the euro. In recognition of that, the five presidents suggest that they may need to move towards having an elected-President of the eurozone,
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which I imagine would have full legal authority and would therefore give personality to the zone as a legal entity and which would make things easier from their point of view.
I am conscious that several colleagues have turned up to join in this debate and, with your permission Sir David, I would like to see whether they can be accommodated, so I will move rapidly on to my questions to the Minister. It seems that much of what the five presidents want is perfectly reasonable in the context of people who have set up a currency that does not yet have a country to love it or back it. They desperately need to make a lot of progress to create a political union, to create a flow of tax revenues and to provide the financial solidity that a main currency usually has, so I can see their agenda. We have already heard the French President say this week, “Let’s go further and faster”, so we know the direction of travel.
Will my hon. Friend reassure us that the UK could not conceivably travel that route? Having made the crucial decision not to join the euro, the British people and Parliament are not going to want to go down the route of political union. Will he also say where the British Government will now stand on the challenge or opportunity of full banking and capital markets union? There would be great hazards in the UK signing up to the full banking and capital markets union, because that would, by implication, drag us into the financing of the euro area and involve us in decisions that it would properly want to make for itself, as we are not a full member. I would be grateful to hear the latest Government thinking on how we can have our own independent markets but co-operate with and work alongside the euro area as it creates its capital markets union.
It seems to me that there will definitely have to be treaty change. The five presidents are suggesting that they can get by without treaty change until 2017, after which they will need it. From the UK’s point of view, that is an inconvenient date, because we would like treaty change as a result of our renegotiations. As the gap between the likely date of our referendum and the date for the euro area considering treaty changes is quite narrow, might one part of our renegotiation be to say to our partners in Europe, “As you need treaty changes quite soon and we would like them now, let’s bring the thing together”? Is it not the case that the treaty changes we need relate not only to the fact that the EU already has more power then we would like over aspects of our lives, but to the fact that it is about to take a lot more power to consolidate the euro? That is a step that we could not conceivably take.
The detailed issues under all that relate to who is responsible for recapitalising failing banks—for example, who is going to recapitalise the Greek banks? Are we fully insulated from all that? Are we now happy that the formulation from the European financial stabilisation mechanism is watertight so that there is no recourse to British taxpayers in the temporary loan to Greece? Can we ensure that all future bailout loans and other advances to euro states come entirely from euro funding and not from EU legal structures, which have added complications? Can we urge the euro area to ensure that it completes its banking arrangements as quickly as possible? It would be much to the convenience of not merely the Greeks but everyone else who needs to deal with Greece that its banks do not shut down for several weeks and can
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reopen, as they have done partially today, with a full service, so that they can be a proper part of the European market and the world economy.
This is a great opportunity for the UK from which the Prime Minister should take heart. I admire the honesty of the five presidents coming out with all this now, despite the Greek crisis and the knowledge that the UK wishes to negotiate a new relationship. I think it makes things much easier for us, and we should share that fact with the British public, which is what I am trying to do in my modest way today. We must say that there is a big plot afoot—a wild ride to political union that is not something to which the UK can sign up. We should not get in their way, but the price of our happy consent to their new arrangements must be a new set of arrangements for us to get back powers that insulate us from all this. We need to try to find a way to work alongside the euro without being part of it.
Sir David Amess (in the Chair): Order. The wind-ups will start at 10 past five. I want to call everyone who wants to speak, so I hope that colleagues will bear that in mind.
4.49 pm
Sir William Cash (Stone) (Con): It is a great pleasure to serve under your chairmanship, Sir David. Perhaps I should put on the record the fact that this morning I was re-elected as Chairman of the European Scrutiny Committee.
In a nutshell, everything that my right hon. Friend the Member for Wokingham (John Redwood) said is completely true. The current situation represents both a massive challenge and an opportunity for the Government. On a number of occasions, when the Prime Minister has been confronted with such difficult, challenging questions, he has decided to do the right thing. This debate, however, demonstrates that there is another new opportunity because of the disarray in the European Union.
The question of the relationship between the eurozone and the rest of the EU provides us with an opportunity, in particular given what President Hollande has said about wanting a eurozone budget, Government and Parliament, as I said in my intervention. That is completely inconceivable for the United Kingdom, the Government and our Parliament. We would be driven inexorably into all the nooks and crannies of those arrangements, because we are bound to be affected by them, as we already have been in the crisis that has engulfed Europe for the past five or six years and that I believe has been apparent since the Maastricht treaty in 1990.
The question of what President Hollande said a few days ago is important. In my judgment, what is significant is that he has a real problem with Germany—I will come on to Germany—because the question for France is one of sovereignty and the question for Germany is one of sharing the risk. That will present a significant problem between France and Germany, which is why Angela Merkel and President Hollande clearly had severe differences of opinion. This is a moment when it is imperative for the British Government to make their position clear. With France and Germany at loggerheads
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over the question of sovereignty and sharing economic risk, we have a classic Waterloo moment, when we should simply go straight through with our cavalry and say through the Financial Secretary to the Treasury and the Prime Minister what we will not have, that we want clarity and that this is not the time for fudge. This is the time for decisive action and to make it clear what we cannot possibly accept.
Other matters to be looked at include the purposes that lie behind what Wolfgang Schäuble has been edging and pushing, nudging and driving, during the Greek crisis. My right hon. Friend the Member for Wokingham and I each wrote essays in a recent book called “Visions of Europe II”, following on from “Visions of Europe”, which came out in 1993 and in which I quoted myself. I said, I hope not immodestly, that
“the answer to the German question lies primarily in Germany itself”,
“hand her the key to the legal structure of Europe with a majority voting system gravitating around alliances dependent on Germany simply hands to”
“legitimate power on a plate.”
We can say that that is exactly what has happened since I wrote those words in 1990.
Furthermore, because I wanted to be positive, I wrote:
“Britain wants to work together with Germany in a fair and balanced relationship, based on free trade, co-operation and democratic principles. She does not want to be forced into a legal structure dominated by Germany. Plans for a united Europe stray into the darkest political territory, and must be firmly rejected.”
That was in 1990, and here we are now.
“if Germany needs to be contained, the Germans must do it themselves…now is the time for the Germans to prove themselves”—
I am afraid that they have. Given the treatment of Greece, irrespective of whether there was culpability on the part of the Greeks, the really big landscape—the manner in which the whole European project has been driven forward since Maastricht—the really big landscape—the manner in which the whole European project has been driven forward since Maastricht—is that the Germans are now in control of the eurozone. No one doubts that. I have a whole stack of cuttings here, from Germany, including from Bild, and from French newspapers. I do not have time to go through them all, but every single newspaper throughout the whole of Europe—rather curiously, there was a fairly muted response from the British press—has made the assumption that it is now effectively a German eurozone, if not a German Europe.
It is not in our interests to allow that, or to allow ourselves to be affected by this situation. We will be driven into the second tier of a two-tier Europe. The eurozone is part of the over-arching legal framework of the EU as a whole, of which we are a part. That is what is driving us towards the exit of the European Union.
John Redwood: I wonder, Sir David, whether, if my hon. Friend agrees, it might be helpful to know how many colleagues would like to speak, so they can all have a fair amount of time.
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Sir William Cash: On that point, I will sit down so that others can have their shot. I simply wanted to get that point about Germany across.
4.56 pm
Craig Mackinlay (South Thanet) (Con): I pay particular tribute to my right hon. Friend the Member for Wokingham (John Redwood) for bringing this issue into the public arena. The words of the five presidents need to get out there.
The euro needs to work. It exists much as I foresaw, many years ago. In ’99, when the first 11 got together to have it as their currency—the number has expanded to 18—I foresaw the problems that would arise. On the Floor of the House this morning we heard that we have an adverse balance of payments situation, not least because sterling is strengthening thanks to difficulties in the eurozone. The situation may provide the impetus we now need even more to look rather further afield to our friends and the growing markets outside the EU, which are untainted by the euroland crisis and are more linked to the dollar world.
Some years ago, an insurance company had the strapline, “We never make a drama out of a crisis.” It seems to me that whenever there is a crisis, in the EU generally and in euroland in particular, there is an attempt to make an opportunity out of it. However, it is not used as an opportunity to argue for what we would say is sensible—that perhaps the EU ought to do less; the argument is always that the EU wants more. I suppose that is the new logic. If there is a single currency, then given the pressures and strains of such divergent economies, the logic will be what the five presidents have come up with: there has to be more of the same, and words like “divergence”, “difference”, “independence” and “democracy” have no place in that.
My right hon. Friend mentioned that there are five presidents across the EU. Dombrovskis is the Vice-President for the Euro and Social Dialogue—I must say I had not heard of him before—and his words encapsulate what the situation is moving towards:
“The Economic and Monetary Union has been strengthened in recent years, not least in the light of the financial and economic crisis. Yet it remains incomplete.”
These people want more. They want a competitiveness authority so that there are common wage agreements across borders and a European deposit insurance scheme. Then they claim that Europe needs strengthened democratic accountability. I truly wonder how the people of Greece can reconcile the idea of strengthened democratic accountability with what they have just gone through.
Richard Drax: My right hon. Friend the Member for Wokingham made the point that we should not get in the way, because things are going down a path that he rightly identified as the correct one under the circumstances. Perhaps I am being naive, but should we not be screaming from the rooftops, “Stop,” for all the reasons my hon. Friend the Member for South Thanet (Craig Mackinlay) has just mentioned—should we not tell them to get out of this experiment before millions more suffer?
Craig Mackinlay:
My hon. Friend makes a good point. Unemployment in many parts of euroland is now beyond any measure we have seen in respectable parts
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of the western world since the crises of the 1930s. For Greece, sadly, that unemployment is perhaps here to stay for a generation, if not more.
I mention Greece, but the people who need to ask themselves where they are going—perhaps they have not yet read the five presidents’ document—are of course the people of Germany. The recipe that the presidents propose is one of massive fiscal transfers guaranteed by the German taxpayer. Such transfers may work in the United States, and the people of Texas may be happy to support their colleagues, friends and family in Dakota, but I wonder whether that really holds true between Germany and Greece, which describes its supposed friends and colleagues in Germany in terms that I have not heard for a very long time.
I again pay tribute to my right hon. Friend the Member for Wokingham, but we need to recognise that what the presidents propose beyond 2017 requires a grand treaty change for the eurozone. If that is for them, fine, but it is certainly not for Britain. We have an opportunity to wrap together what we require, which is a proper treaty change to get a relationship that is in tune with the British people—a return to the free trade and friendship that we thought the EU was all about. Perhaps 2017 can be an excellent year for those who feel as many of my Conservative colleagues do, and they are in tune with many people outside this place and across the country.
I ask the Minister to consider that in the round. A crunch time has come, and it is obvious what our European colleagues want. They have not asked their people, and they dare not ask their people, but it is clear that this is becoming a Euro-state that is not right for Britain. I am in favour of a new relationship that I hope can be found for the good of Europe and for the good of Britain.
5.2 pm
Mr Steve Baker (Wycombe) (Con): It sometimes feels like we need a new language in which to have this conversation about the European Union and our relationship with it. I am grateful that, over the course of his career, my right hon. Friend the Prime Minister has on many occasions given us that language by saying things such as:
“It is the last gasp of an outdated ideology…that has no place in our new world of freedom”.
A new nation state is hoving into view, and people should be clear about what we are discussing. The question is: should we continue on the path into that new nation state? There can now be no doubt that that is the trajectory of the eurozone. Advocates of European Union membership on substantially the current basis are in danger of being blindsided. We can see from this debate’s attendance that people are not paying close attention to the important issue of what the five Euro-presidents have said. By the way, the “five Euro-presidents”—the ridiculousness of it is palpable.
The five Euro-presidents have set out a new nation state, and it is clear that those who advocate membership on a substantially unreformed basis have not kept up with events. Too often it seems that people complacently assume that there will be a yes vote and that things will go on as before in a kind of status quo, but there will be
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no status quo on the ballot paper when the referendum comes. The choice will be either to continue on a substantially unreformed basis, if the Prime Minister does not get what he wants, or to say no and continue on a fundamentally different basis. Of course, I hope that the Prime Minister succeeds in delivering everything that he has ever set out. When the day comes, I would like to see yes meaning a fundamentally different relationship with the European Union that we and the Prime Minister can wholeheartedly support, and I would like no to turn out to be something that we do not need to consider.
The five Euro-presidents have set out a path to a new European nation. I fear that the truth is that they will not be willing to allow us to move to a fundamentally different path and that, in due course, the choice will be either the wild ride to political union that my right hon. Friend the Member for Wokingham (John Redwood) set out or the conservative, moderate choice of sticking with our Parliament, our British courts, our British Lords and our ability to govern ourselves in the way that seems fit to us and that is accountable to the British people.
Dr Julian Lewis (New Forest East) (Con): I am grateful to my hon. Friend, and to my right hon. and hon. Friends who spoke earlier, for their efforts in delving so deeply into the questions without completely losing the will to live, but can he explain to me how, despite all their sufferings, the Greek people seem to regard membership of the euro as the addict regards the use of heroin? It does them enormous harm, yet they do not seem to be able to give it up.
Mr Baker: My right hon. Friend makes a good point, and it may be that through the euro system Greece has done rather well in the past, through the fact that money was very easy for Greece—probably much easier than it should have been—and a nation that had probably been quite parsimonious was encouraged to take advantage of cheap credit and get into bad debt problems. It may well be that that system encouraged Greece to believe that a new way of living beyond one’s needs was possible; but as good Conservatives we will recognise that one must live within one’s means and balance the books. One must have low taxes, small government and sound money. However, I do not want to divert my remarks too far down that path.
I want to pick up on something that my hon. Friend the Member for Stone (Sir William Cash) said about Germany. It has been an interesting journey, considering how people reflect on Germany. I am inclined to think that German commitment to the EU project is not malicious or controlling. It is not a problem, except that, perhaps because the EU is perceived as an anti-war project, the German people and their leaders have pursued the project far beyond what was reasonable, just and right, out of a sense of war guilt and a historical sense of shame. We as good individualists, in rejecting collectivism, may have to look at today’s generation of German people and say that they are not responsible for the horrors of the past. They must forgive themselves and move beyond the corrupting view that they have the responsibility to take forward, in a way that is quite dangerous, a project that can now be seen to have failed. History may not repeat itself, but it sometimes rhymes. We have had a horrible financial crisis.
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John Redwood: My hon. Friend made a funny remark about the apparent absurdity of the five presidents, but does he agree that they are not figures in a Gilbert and Sullivan opera, but are enormously powerful figures commanding billions and influencing the lives of hundreds of millions of people across Europe? Just as they took the exchange rate mechanism well beyond the point at which it did untold damage, they could do untold damage with their euro scheme. Is not that a reason why we should try to let them get it right, rather than making it more difficult for them?
Mr Baker: My right hon. Friend is right, and it is not for us to choose the destiny of the other peoples of Europe. We might offer them our advice in different ways, but since they now have the euro as a currency they had better make the best of it—although, again, I do not want to be drawn too far off into ideas about money and banking. We are in a fix. I agree with my right hon. Friend that since those people are extremely powerful, they had better make the best of it, and we should not get in their way.
I was saying that history, while not repeating itself, sometimes rhymes. We had an enormous credit expansion, which broke the banks and led us into a position of desperation in several countries of Europe. We should not in such circumstances cast aside democracy and assemble a supranational state that is not accountable to its people. There we would be running the risk of a tragic rhyme in history—a cataclysmic mistake, possibly, should it go wrong—and it really might. The evidence of history is that it might.
I want to mention four things: we should undo what I would call the spell of Plato—the idea that a guardian class can look after us, free of democracy. We should get off the road to serfdom. We should make sure that we reject the omnipotence of government, and we should overturn this managerial revolution. I refer of course to books by Popper, Hayek, Mises and Burnham, all books written during the period of war in the first half of the 20th century. They are books that I would commend to anyone, lest, while not repeating history, we rhyme with the tragic events of the past.
5.9 pm
Stuart Donaldson (West Aberdeenshire and Kincardine) (SNP): The right hon. Member for Wokingham (John Redwood) has a track record on these issues. I might describe it as history, given that his first European rebellion occurred during my pre-school years. Indeed, the book mentioned by the hon. Member for Stone (Sir William Cash), “Visions of Europe”, was written almost before I was born, but I will be sure to read the sequel, the slightly unoriginally titled “Visions of Europe II”.
It is good to have the opportunity to explore the questions of the UK’s relations with the euro area and further euro integration. As Members know, the Scottish National party won the European elections in Scotland with a clear manifesto commitment not to seek to join the euro, and that remains the case. There was a time, I am told, when the SNP agreed with the then UK Government that a decision on future euro membership would be subject to democratic and economic tests:
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membership could happen only if it was right for our economy and the people voted for it. Clearly, times have changed.
I think it is important to give some context for the debate. At the weekend, the latest opinion survey by Panelbase was published. The poll of more than 1,000 people in Scotland and just under 1,000 outwith Scotland found that support for staying in the EU, along with eurozone and non-eurozone partners, is higher in Scotland than elsewhere in the UK: 66% of Scottish respondents supported continued EU membership, compared with 51% in England being in favour of British exit. Those numbers will please some right hon. and hon. Members, but they highlight the importance of having a double majority rule for the forthcoming EU referendum to ensure that Scotland, and other UK nations, cannot be ripped out of the EU against our will.
The EU is far from perfect, but we must recognise that some 330,000 people in Scotland are involved in jobs related to trade with the EU and the continuation of the single market. We value that economic link and will seek to protect it. As set out by Scotland’s First Minister, the SNP is focused on two areas of reform. The first is straightforward: the EU should focus on economic and social policies that make a tangible difference to the lives of its citizens. Member states should, for example, have more flexibility in areas such as public health. We should work to complete the digital single market and focus efforts on creating a more integrated and connected energy market. Getting those issues right will bring benefits across eurozone and non-eurozone member states.
The second focus for the SNP is regulatory reform. The SNP Government in Scotland have already demonstrated what that can mean with reforms to the common fisheries policy. The reforms involve changes to allow more decisions to be made at a regional rather than an EU level.
Mr Andrew Turner (Isle of Wight) (Con): The hon. Gentleman is very helpful in allowing me to intervene, but I am not concerned about the things to come that he has mentioned. He must explain how Europe will head more in a euro direction over the next couple of years, just as my right hon. Friend the Member for Wokingham (John Redwood) discussed, rather than talk about where we are now.
Sir David Amess (in the Chair): Order. Before the hon. Gentleman responds to that intervention, I must remind him that he has only a minute and a half left.
Stuart Donaldson: Given the short time remaining, I will continue my speech.
I mentioned the possibility of British exit, but, of course, much of the strains in the eurozone today are centred on the possibility of Greek exit, as Members mentioned. As the Scottish Government have said, it has been, and remains, incumbent on all parties to work together to find an effective solution that allows the Greek economy and the Greek people the time and stability required to recover, and that also avoids unnecessary damage to the eurozone. As the IMF has acknowledged, some debt relief is an essential part of the recovery
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package. Ultimately, the key to recovery will be promoting growth to ensure an end to austerity.
During the Scottish independence referendum last year, much was made of the idea of solidarity. The SNP certainly supports the idea of solidarity within the EU and the eurozone. We also look for the eurozone states to work to promote stability and opportunities for growth, because a successful eurozone area is vital for our own economic opportunity and success. I am sure that we can all unite in supporting that outcome.
5.14 pm
Mr Pat McFadden (Wolverhampton South East) (Lab): Thank you, Sir David, for your chairmanship. I congratulate the right hon. Member for Wokingham (John Redwood) on securing the debate. It is a particular pleasure to end the term by debating some of these issues with my old friends on the Government Benches.
The right hon. Member for Wokingham chose his usual neutral language to describe the report of the five presidents as a plot to take us on a wild ride to a European superstate. I want briefly to discuss the report and pose two questions, not so much directly to the Minister but for consideration in the debate. First, is what the report outlines a threat to the UK, and secondly, will the measures in it happen? Let me elaborate on both of those points for a couple of minutes.
Of course, it is timely to be discussing how the eurozone moves forward in the wake of what we have seen in Greece in recent weeks, but it is also instructive, as has been said, that throughout all the difficulties, and even in the wake of the referendum that was held a couple of weeks ago in Greece, a majority of people both on the yes side and on the no side wanted to stay in the euro and the eurozone. That was not a referendum about breaking with the European Union.
The discussion about how the eurozone moves forward and tries to resolve some of the difficulties—weaknesses, one might say—in its architecture that have been exposed by the crisis is not a plot. It is not surprising that this discussion is happening. Indeed, the Chancellor of the Exchequer himself has said time after time that members of the eurozone will inevitably come closer together in the wake of the crisis and what it has exposed. The report does set out major changes—I will not detail them all, because the right hon. Member for Wokingham set them out—such as convergence, mutualisation, risk sharing and so on, but it is not a plot, and the direction of travel it sets out for the eurozone is not surprising in the wake of the crisis. As I said, the question for us is whether it is a threat. Surely it is in our interests that the eurozone sorts itself out, eases the unemployment that Members have referred to, secures better economic growth and becomes a stronger trading partner for our exporters and businesses. In fact, whether we were inside or outside the European Union, it would be in our interests for the eurozone to resolve its economic difficulties.
Sir William Cash: Will the right hon. Gentleman give way?
Mr McFadden: I would love to give way to the hon. Gentleman, and I do not want to be discourteous to him, but I have only a couple of minutes, so I ask him to forgive me for not giving way to him today.
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The right hon. Member for Wokingham and many others Members who have spoken in the debate have used language about seeing all this as a dastardly plot and a threat to the UK. I will not comment on each of the specific items in the five presidents report, but I argue that in a general sense, it is in our interests for the eurozone to sort itself out economically and become a stronger trading partner for the British economy. I do not see this as a zero-sum game in which a stronger eurozone is somehow a threat to the UK—not given that we have been a member of the EU for 40 years and it is our biggest trading partner, our biggest source of exports and the source of half our inward investment. However, continued economic weakness in the eurozone and a failure to resolve the problems that have been exposed in recent years would certainly not be in our interests. I therefore take a different view from the right hon. Gentleman.
The second point, which is related to whether the report represents a threat, is that although most of the report concentrates on the eurozone, some of the measures apply to all 28 member states. An example is the capital markets union, to which the right hon. Gentleman referred. That is being governed by Lord Hill, our own Commissioner and his party colleague. The UK is the member state with the strongest financial sector, and it has a world-class cluster of associated services such as accountancy, so that poses opportunities for the UK, not just challenges. We must not see everything that happens as a threat.
Let me move on to my second question—whether all this will happen. To an extent, I echo the question that the hon. Member for Stone (Sir William Cash) asked. Germany may well resist mutualisation because it involves taking on risk in other states, and other countries may resist subscribing to common rules. Although the five presidents report has a grand title, I suspect that the issues that it raises will be debated for some time to come, and it is not at all certain yet that everything it sets out will happen.
5.20 pm
The Financial Secretary to the Treasury (Mr David Gauke): It is a great pleasure to serve under your chairmanship, Sir David. I congratulate my right hon. Friend the Member for Wokingham (John Redwood) on securing this debate, and I thank all participants. It has been enlightening. I particularly congratulate my hon. Friend the Member for Stone (Sir William Cash) on his election—I am surprised that anyone would dare challenge him—and am delighted that he has been returned in place as Chairman of the European Scrutiny Committee.
As previous speakers have said, the UK’s relationship with the euro area and further euro area integration raise important challenges. That is particularly the case in the context of the situation in Greece. By not joining the euro, the UK retained the economic flexibility to adjust to shocks. This Government cannot be clearer: we are committed to keeping the pound and staying out of the euro area. Under protocol 15 of the treaties, the UK has a permanent opt-out from the euro area, so we are
“under no obligation to adopt the euro”.
That said, it seems likely that the euro area—I stress “the euro area”—will need further integration to stabilise
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its economy. That is the premise of the recent five presidents report. Our position is simple: the EU must be flexible enough to meet the interests of both those inside the euro area and those outside it. The single currency is not for everybody, but the single market is, so it must work for all of us. My right hon. Friend the Chancellor has made it clear that, as the euro area integrates, we will need to reconcile the integrity of the EU as a collection of 28 member states with the integration of the euro area as a currency union of 19 economies. Our interests as a euro-out must be protected.
The immediate outlook for the euro area is improving. Its first-quarter growth was 0.4%, the fastest rate of quarterly growth since 2011. Nevertheless, the outlook for growth remains sluggish, which should be of concern to us all. The lesson from our own experience in the United Kingdom is that what is needed to embed recovery is a mutually reinforcing mix of active monetary policy to stimulate demand, maintain price stability and support the flow of credit to the economy, clear commitments to medium-term fiscal discipline that provide a firm anchor for market confidence and a focus on growth-enhancing structural reforms to rebalance and strengthen the economy. We therefore welcome the European Central Bank’s recent actions to stimulate the economy and tackle the potentially damaging threat of deflation. However, as the latest forecasts show, ECB action alone is not sufficient to change materially the euro area’s growth trajectory. Structural reforms are crucial to support the effectiveness of the ECB’s action.
The Chancellor has long made clear his view that there is a remorseless logic meaning that the euro area, like any currency area, needs closer economic and fiscal integration to secure its future. The recently published five presidents report is part of an ongoing process to identify next steps to better governance in the euro area.
Dr Lewis: Is it our Chancellor’s view that there should develop in the eurozone a single state with a single Government?
Mr Gauke: The logic of the position—this point was made by numerous right hon. and hon. Members before the formation of the euro—is that if there is a currency union, certain other things flow from it. Indeed, we are seeing the consequences of that. In a way, it is the background to the five presidents report. It is part of an ongoing process to identify the next steps to better governance in the euro area. There is a clear appetite for reform demonstrated by the process, which echoes the conversations that the Prime Minister and Chancellor have had in their bilateral discussions. The Government have submitted two written contributions to the five presidents’ process. We note the report’s proposals and have set out its content and implications in an explanatory memorandum. Therefore the Government do not currently plan to issue a further formal response. However, although the report’s focus is on the euro area, many issues it covers affect the interests of all member states. The UK will therefore remain fully engaged in discussions in this area.
So far, other member states have expressed a range of views on the report’s proposals. It is worth nothing that these reviews have been mixed. As I said, it is in our
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interests that the euro is a successful, strong currency area, so we do not want to stand in the way of the euro area resolving its difficulties. However, we will not let integration of the euro area jeopardise the integrity of the single market or in any way disadvantage the UK. The Government are pushing for further reform to improve the single market, focusing on the digital single market; further liberalisation of sector-specific services; and better regulation for small and medium-sized enterprises.
In return for supporting the euro area’s efforts to stabilise its economy, we want a settlement between the UK and the euro area that protects the single market, that is stable and fair and that lasts. This is in the interests of everyone—it is the basis for stable and sustainable governance of a reformed and prosperous EU—and is one of the UK’s important objectives in its renegotiation with the EU.
It has been 40 years since the British people last had a say on our EU membership. The organisation has changed vastly since then and it is time that we addressed this matter. The British public are clear that they are not happy with the status quo. My right hon. Friend the Prime Minister is determined to address those concerns. He has already talked about four areas where he wants change: sovereignty, competitiveness, immigration and fairness. For example, ever-closer union—a theme that runs through the five presidents report, to some extent—may be right for others, but it is not right for Britain, and change should include increasing economic competitiveness to create jobs and growth for hard-working families, and reforming welfare to reduce the incentives that have led to mass immigration from Europe. Those things are important to us. These reforms will improve fairness, which cuts to the heart of today’s debate: protecting Britain’s interests outside the euro. They will also improve the EU’s effectiveness as a whole. We want a dynamic, competitive, outward-focused Europe, delivering prosperity and security for the benefit of every country in the EU, with the UK playing its role.
Sir William Cash: In a nutshell, on current account transactions, the UK runs a deficit with the other 27 member states of well over £60 billion a year. Germany, on the other hand, runs a surplus in the same year. How on earth can we continue on that basis?
Mr Gauke: In the time available, I will not attempt to address that point in great detail. I hope my hon. Friend will forgive me.
A key part of the UK’s response to the five presidents’ process was the need to focus reforms, as well as the work of the institutions that the presidents represent, on the important priorities of delivering jobs, growth and stability to the European economy. Working alongside national Parliaments to drive competitiveness and streamline costly processes should be at the heart of the EU’s mission. That will be the foundation of public support and legitimacy for the EU.
Efforts to improve competitiveness go hand in hand with improving our own productivity. We support the euro area in sorting out its own problems so it can function more effectively. We will not allow further integration of the euro area to jeopardise the integrity of the single market, or in any way disadvantage euro-out countries like the UK.
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5.29 pm
John Redwood:
I think that the debate illustrates that we need rather more time to do justice to these mighty issues. I hope that the Government take away from this short debate our enthusiasm for a new relationship with the EU and the opportunity that the five presidents report proposes. Let me reassure the Labour representative, the right hon. Member for Wolverhampton South East
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(Mr McFadden), that I said clearly that I wanted Labour to succeed and did not want to get in their way, but we ourselves must opt out of the wild ride to political union.
5.30 pm
Motion lapsed, and sitting adjourned without Question put (Standing Order No. 10(14)).