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Westminster Hall

Thursday 28 January 2016

[Mr Andrew Turner in the Chair]

In-work Poverty

1.30 pm

Carolyn Harris (Swansea East) (Lab): I beg to move,

That this House has considered in-work poverty.

It is a pleasure to serve under your excellent chairmanship, Mr Turner. This Government are failing to make work pay, and their cuts to in-work support risk increasing the number of working families in poverty even further. Over the previous Parliament, average real wages fell by more than £1,000 a year. Furthermore, 2010 to 2020 will be the worst decade for pay growth in almost a century and the third worst since 1860.

Cuts to universal credit that begin in April will make 2.6 million working families £1,600 a year worse off by 2020, making it almost impossible for families to work their way out of poverty. The Government’s advice to working families set to be hit by those cuts is to work an additional 200 hours a year to recoup the losses. That is neither fair nor practical for millions of low-paid families who are already working full time. I am delighted to have secured this debate, so that we in the Opposition can bring forward the reality of those in our constituencies who are experiencing high levels of in-work poverty and to call on the Government to scrap their cuts to universal credit before the cuts take hold in April.

We know from the Social Mobility and Child Poverty Commission that 1.5 million children are in poverty because their working parents do not earn enough to secure a basic standard of living. Four out of 10 children in working poor households live in families where parents might be expected to enter work or work more hours. Owing to high levels of in-work poverty, the commission has warned that the cuts to universal credit will—in its words, not mine—

“make many working families significantly worse off.”

The commission has recommended that the Government reverse their cuts to universal credit, saying:

“These changes would have resulted in millions of families in low-paid work who are ‘doing the right thing’ and working as much as society expects them to, seeing their annual income fall by thousands of pounds on 1 April 2016.”

Despite the fears, the cuts to universal credit are still going ahead. It will be very difficult for many affected families to increase their hours of work and hourly pay to avoid big cuts to their incomes.

Christina Rees (Neath) (Lab): Does my hon. Friend know that 167,400 working families in Wales will be impacted by these cuts and that 134,600 of them are families with children?

Carolyn Harris: I do, and not only Wales is affected; this affects every constituency in the country.

Neil Coyle (Bermondsey and Old Southwark) (Lab): Would it surprise my hon. Friend to hear that, under universal credit plans, some 116,000 disabled people

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who are in work—and therefore doing the right thing, according to the Government’s narrative—will be £40 a week worse off under the Government’s proposal?

Carolyn Harris: That is a shocking indictment of the low consideration the Government have for people in need. For example, a lone parent working full time on the minimum wage who receives no support for their housing costs will experience a reduction of £2,600 a year—that is £50 a week. Nobody can afford to lose £50 a week.

The combined effect of income tax, national insurance and the universal credit taper will mean that universal credit claimants who pay income tax will keep only 24% of any increase in their earnings. They will have to increase their earnings by £210 a week—or, to put it in percentage terms, 72%—to make up the income loss they will face as a result of the reduction in support.

Nick Thomas-Symonds (Torfaen) (Lab): It is a pleasure to serve under your chairmanship, Mr Turner, and I congratulate my hon. Friend on securing the debate. She has given some figures about single parents, and this shows the full extent of the policy: for a single parent—say, a mother with one or more children—the work allowance of universal credit will be halved from this April, going from £8,808 to £4,764. In cash terms, that is a loss of £2,628 a year. Does that not show the stark reality of this policy?

Carolyn Harris: I thank my hon. Friend for his intervention, and I agree. That is a reality people face every day, and it can only get worse.

The short-term effect for current claimants of universal credit is that they face huge losses to income come April 2016. There are currently 155,000 recipients of universal credit, and the number is increasing every week, with an aim of there being 500,000 recipients by April this year.

During Work and Pensions questions recently, the Secretary of State claimed that the flexible support fund will act as transitional protection for current claimants and said that

“those who are on universal credit at present will be fully supported through the flexible support fund, which will provide all the resources necessary to ensure that their situation remains exactly the same as it is today.”—[Official Report, 7 December 2015; Vol. 603, c. 688.]

However, that existing fund is used for a different purpose. Its budget last year was £69 million, but the Office for Budget Responsibility estimates cuts to working families of £100 million next year, rising every year until they reach £3.2 billion in 2020.

Neil Coyle: I apologise for not thanking my hon. Friend for securing the debate in my previous intervention or saying what a pleasure it is to serve under your chairmanship, Mr Turner. The Secretary of State was referring to the number of people currently receiving universal credit who will be protected by some measure, but is that not a little disingenuous given that the Government are about 1,000 years behind schedule on delivering universal credit? They had expected some 2 million people to be on it by now. Should the Government not be a bit more embarrassed about mentioning the small number who are already receiving universal credit?

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Carolyn Harris: I agree entirely, and I will touch on that later in my speech.

When transitional protection is introduced for current tax credit recipients, the Government will bring in regulations to put that protection into law. Opposition Members are calling for the same guarantees—full transitional protection—to be put on a legal footing for current universal credit claimants. The medium-term effects of the cuts to universal credit will effectively create a postcode lottery or, as my hon. Friend the Member for Pontypridd (Owen Smith), the shadow Secretary of State for Work and Pensions, quite accurately described it, an “IDS lottery”. I doubt, however, whether those ticket holders will have a magic washing machine and end up as big winners. New and existing claimants of tax credits will receive far greater support than new and existing claimants of universal credit.

The longer-term effect by 2020 will be massively reduced support for working families. The Institute for Fiscal Studies estimates that by 2020, due to the £3.2 billion cut to the work allowance having been fully phased in, 2.6 million working families will be an average of £1,600 a year worse off. The Resolution Foundation found that when these cuts fully take effect by 2020, low and middle-income working families will lose an average of £1,000 a year, rising to £1,300 a year for those with children.

This is a political choice by this Government—a deliberate act to drastically reduce support for working families, at a time when the Government are cutting inheritance tax for homes worth more than £1 million. The contradictions in that comparison are frightening, to say the least. How can it be right to offer enhanced protection for those with wealth and catastrophic consequences for those who currently eke out a living on low pay? It cannot be right to reduce in-work support.

In my constituency office, we act as an agent for both the Trussell Trust food bank and the local Eastside food bank in Bonymaen, Swansea. We receive donations but also give out parcels in emergencies. Some 85% of the parcels given out are to families who are in work but struggling to make ends meet.

Further examples of the impact on working families from a detailed analysis by the Library show that a single parent of two children with gross earnings of £18,000 a year will experience a net reduction in their income of £2,601 next year, as a result of measures announced in the summer Budget that are still due to take effect in April 2016. For example, a single parent of one child who is earning the living wage will only increase their income by £40 for working an additional 12 hours. That compares with an increase of £92 for an additional 12 hours before the cuts to the work allowance were introduced.

It is time for the Secretary of State to stop playing cat and mouse with the real people of this country. The lack of Government Members here today indicates that they have bought into the Government’s rhetoric that in-work poverty is a myth and that they support the Government’s propaganda that it is of no real concern. However, the reality is that ordinary working people are continually playing catch-up, and all the Government want to do for them is to watch them run around chasing their own tails. It is immoral, irresponsible and reprehensible.

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I am very proud to represent real people who are paying the cost of this Government’s arrogance, and I will fight to ensure that their voice gets heard. We are led to believe that the Secretary of State for Work and Pensions has threated to resign if his masterplan is not followed through. If cuts to universal credit really were an issue to resign over, he would be long gone, and if he was, many thousands of decent, hard-working people across the UK would be celebrating both his resignation and the moral victory.

1.41 pm

Gerald Jones (Merthyr Tydfil and Rhymney) (Lab): It is a pleasure to serve under your chairmanship this afternoon, Mr Turner, and I congratulate my hon. Friend the Member for Swansea East (Carolyn Harris) on securing this important debate.

It is hard to justify why so many people live in poverty in a country as wealthy as the UK. I believe that one of the key explanations is that the welfare state, designed to protect us all against risks such as unemployment, illness and old age, simply fails to provide an adequate income for families and others when they are unable to support themselves fully.

It is truly shocking that in 2016, in-work poverty is growing. In some areas, the number of working households in poverty is greater than the number of non-working households. Major factors appear to be low pay and part-time work, and zero-hours contracts are also a major contributory factor.

Christina Rees: It was remiss of me not to say in my earlier intervention what a pleasure it is to serve under your chairmanship, Mr Turner.

Does my hon. Friend agree that although responsibility for tackling in-work poverty in Wales is a devolved issue, the levers for tackling it lie mainly with the UK Government? He mentioned zero-hours contracts, but I add to that the minimum wage, welfare benefits and, of course, the tax system.

Gerald Jones: I could not agree more. Both the Welsh Government and local government have tried to mitigate those circumstances, but the major levers lie here at Westminster.

Neil Coyle: May I add a London voice? Specific costs include much higher accommodation costs for many in London, which contribute to in-work poverty. However, the last Government hit something like 30,000 working people in Southwark with reductions in support and left 700 people in work using the local food bank, according to figures from Pecan, which is part of the Trussell Trust network.

Gerald Jones: I could not agree more with my hon. Friend, and the situation he describes is replicated in many areas across the UK.

Can it be right in 21st-century Britain that many people are working hard and cannot afford to live above the poverty line? As my hon. Friend the Member for Swansea East outlined, 85% of people receiving support from the food bank in her constituency are working people. In my constituency, many working families rely on food banks to be able to put food on the table. That is clearly not acceptable.

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Years of below-inflation wage increases, particularly in the public sector, have taken their toll on people’s incomes. In-work benefits such as tax credits are meant to support families against the worst effects of in-work poverty. The current proposals to change universal credit will clearly make matters worse for millions of working families. In Merthyr Tydfil and Rhymney alone, about 10,000 working families are likely to be adversely affected by the Government’s universal credit proposals by 2020.

Jobs must be a clear and critical part of any programme to end poverty. Access to jobs, and the quality of those jobs, must be addressed if families are to be able to work their way out of poverty. Low pay is a major factor in in-work poverty and is unfortunately a routine feature of much of the work available to poorer families. The national minimum wage sets a floor for pay levels, but one report shows that a couple with two children would need to work 58 hours a week at the minimum wage to lift themselves out of poverty.

As a county councillor prior to being elected to this place last May, I was proud to be associated with the introduction of the living wage at Caerphilly county borough council, one of a growing number of Labour councils in Wales that pay the living wage. I am proud of the many former colleagues in local government across the UK who are championing the true living wage, as promoted by the Living Wage Foundation, not the gimmick national living wage that the Chancellor has announced.

The low-paid sector is characterised by jobs that often do not provide steady employment. Moving in and out of work on a regular basis is common for lone parents and generates grave financial uncertainty for many families. Limits on the number of hours worked and zero-hours contracts mean that many people might work full-time one week, part-time the next and have no work the following week. Even if they have reliable employment, many find it hard to work enough hours, given their caring commitments and other barriers to employment.

Such situations can also compound problems with in-work benefit entitlements, such as housing benefit. The process for benefit assessment cannot be done efficiently, leaving households falling into rent arrears while things are readjusted and threatening the security of their tenure. Often, due to barriers to employment, people do not have the opportunity to increase their hours and therefore their income. As a result, many low-paid jobs are nothing more than poverty traps.

It is not just a lack of income that causes hardship in poorer families. Evidence shows that they also pay higher prices than others for many essential goods and services. Low-income families are often unable to take advantage of the cheaper prices that are routinely offered to customers paying by methods such as direct debit. The situation has been exacerbated by rising utility bills. With fuel prices coming down, the Government should bring more pressure to bear on utility firms to ensure that they do more to pass savings on to customers.

Finally, many people who are in work discover that their jobs are so low paid or insecure that they are unable to provide an income sufficient to lift themselves and their families out of poverty. The Government appear reluctant to reconfigure the tax system so that the richest households pay more of the burden.

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Policy changes such as the changes to inheritance tax, the reduction in the 50p income tax rate to 45p, the retention of the bedroom tax and the changes to universal credit mean that poorer families will continue to pay more than their fair share of tax.

To make a positive impact on tackling in-work poverty, the Government have to take action on the issues raised during this afternoon’s debate. Unfortunately, we are seeing very little evidence that they are serious about tackling in-work poverty. In fact, some of the Government’s proposals risk making matters worse. Will the Minister outline what the Government are doing to tackle urgently the unacceptable scale of in-work poverty facing people across our country?

1.48 pm

Mark Durkan (Foyle) (SDLP): It is a pleasure to serve under your chairmanship, Mr Turner, and I congratulate my hon. Friend the Member for Swansea East (Carolyn Harris) on securing this important debate.

Like my hon. Friend the Member for Merthyr Tydfil and Rhymney (Gerald Jones), I want to address these issues, first of all, based on the experience of people in my constituency. I represent the city of Derry—or Londonderry—which has very high unemployment. The constituency of Foyle ranks No. 1 for unemployment of all the constituencies in the House of Commons. As well as having very high long-term unemployment and very high youth unemployment, it also has a lot of underpaid employment. It is a border city, with all the challenges that that brings for our regional economy, and obviously it has suffered the impact of conflict. Every day, families and working people there contend with the same economic challenges that hon. Members throughout the House have mentioned, in an economy that has structural weaknesses. It is clear that for people in my constituency, the problem is not lack of work ethic but a lack of work. Much of the Government’s agenda and purpose, in the welfare reforms and other measures they have introduced in the last Parliament and this one, seems to be fixated on work ethic rather than availability of work.

That is why I have found myself in opposition to so many of the Government’s reforms and why, along with so many others—I was glad to see that they included Conservatives MPs—I challenged the Government’s proposals on tax credits. They would have hurt people who are in work but coping with marginal incomes given their family, work-related and other living costs. Those changes have been parked, but there has not been a complete U-turn. There has been merely a J-turn, which has gone part of the way. The Government intend to apply the same logic to universal credit, we are just not getting the early implementation of the plan for those still on tax credits. That plan will clearly increase working poverty. We have seen in the various figures that have been quoted—I will not rehearse all the figures from the Institute for Fiscal Studies and others—that there will be a real impact on the family income of people in work.

Christina Rees: As the hon. Gentleman knows, new claims for legacy benefits will cease by June 2018 and migration to universal credit will be completed by 2021. As the Department for Work and Pensions says it cannot estimate the number of people who will be on

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universal credit by the time the roll-out is complete, does he agree that it is difficult for us to deal with the problem in our constituencies?

Mark Durkan: I thank my hon. Friend for making that point. That is part of the conundrum that we have. On one hand, DWP tried to offer all sorts of assurances that the change had been platformed and well modelled and would be sound. On the other hand, we know that, to date, many of its assurances and plans have come to little. On other things, it says it does not have a basis for some of its contentions. We get into a circular argument, so we cannot accept its assurances or try to persuade others about them.

Let us be clear. The changes being made are not just those to work allowances, which are part of the Welfare Reform and Work Bill. The hon. Member for Neath referred to when DWP plans to roll the changes out. I will not go into all the administrative and political differences in welfare reform in Northern Ireland, but implementation there has been different so far. The decision has effectively been made to give Westminster direct rule powers on welfare reform, including on the provisions in the Bill. That will obviously have a long-term effect. Although the direct rule powers applying to Westminster include a sunset clause for the end of this year, the legislation passed under those powers will have an impact on my constituents for many long years.

On the impact of working poverty, we need to consider not just the changes to universal credit and how they will affect people who have made the transition to work and meet all the Government’s oft-quoted tests—being hard-working families, not being workshy and so on—but the fact that people will be subjected to invidious treatment in the levels of support they are allowed.

Let us consider the Government’s plans for universal credit and, in the longer term, tax credits—for example, how the two-child rule will affect working families. Let us compare that rule with what was passed in the last Parliament in a blaze of glory. The Minister was one of those who took the Childcare Payments Act 2014 through the last Parliament. The Government boasted that under Bill, parents would be able to claim up to £2,000 a child in childcare support, on the basis that it would be up to 20% of costs of up to £10,000. Let us think about what income bracket parents would need to be in if they were spending £10,000 a child on childcare and claiming up to 20% of that as childcare allowance.

That allowance was going to be bankable. People were going to have discretion to do what they wanted with it, but under universal credit they must claim the childcare element after the event and show the actual cost. They must spend the money before they get it back. That is not so for those who are better off and claiming childcare allowances, and of course they are not subject to a two-child rule. The plan is for one law for the working rich and one law for the working poor. That is why we must speak up about working poverty.

Those policy contradictions are not the only ones we need to raise with the Government. We all have a responsibility to think through the other implications for people working in our constituencies. There will be future liabilities from pension contribution changes, and student loan payments will have to be made through

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people’s income. The changes in the Housing and Planning Bill will have an impact on who is eligible to remain in social housing. There will be a cliff edge for families, who will face additional housing costs if they remain in employment with a certain income. All those issues will bite on family budgets and make a material difference to the worth of people’s earnings. We should address working poverty much more holistically and not on the basis of some of the more pretentious and specious claims that the Government make.

1.58 pm

Marion Fellows (Motherwell and Wishaw) (SNP): It is a pleasure to serve under your chairmanship, Mr Turner. I thank the hon. Member for Swansea East (Carolyn Harris) for securing the debate. I congratulate her on her passion, her facts and her real commitment to her constituents. It is sometimes refreshing to hear how it really is on the ground in the constituencies and how real people who work hard will suffer more and more because of the Government’s actions.

I commend the contributions of the hon. Members for Merthyr Tydfil and Rhymney (Gerald Jones) and for Foyle (Mark Durkan). The hon. Member for Merthyr Tydfil and Rhymney mentioned the problem of zero-hours contracts. “Making work pay” or “Work is the best route out of poverty” are great catchphrases, but people do not have a route out of poverty if they are working on zero-hours contracts and do not know from one week to another whether they will be earning or how much they will earn.

The hon. Member for Foyle gave us, as usual, some wonderful quotes. For example, he said that it is not a lack of work ethic that prevents people from working; it is a lack of work. That is true of many places across the country. He also said that there now seems to be one law for the working poor and another for the working rich. That will lead to even more social division across the United Kingdom.

Hon. Members may well be aware that last week the independent adviser on poverty and inequality, Naomi Eisenstadt, reported to the First Minister of Scotland on tackling poverty and she recommended that we build on living wage accreditation, which has been touched on in the debate. The new national living wage that the Conservative party is touting is not actually a new living wage. It is simply a small increase based on the national minimum wage; it is not much higher. It does not involve looking at actual household expenses and relating it to them. In Scotland, the Government have done a lot of work on trying to increase people’s income—maximise their income—and trying to support people in work. One thing that they have done is in the area of procurement. They have ensured that no firm can now get a contract in Scotland that does not pay the national living wage. It is £8.25 in Scotland and should be much higher.

Neil Coyle: Does the hon. Lady share our concern that this Government are even trying to scrap the measures of in-work poverty, and are the Scottish Government committed to keeping them?

Marion Fellows: The Scottish Government would actually like to have more powers over all this area, but unfortunately the Smith commission agreement or recommendations have not given the Scottish Government

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that amount of power. However, within what they are allowed to do, they are maximising, as far as they can, the wages that people get and the amount of work that they are able to get.

Another recommendation and another thing that the Scottish Government have been trying to do is to look at more family-friendly policies. A lot of in-work poverty affects women even more than it affects men. One recommendation and one thing that the Scottish Government will try to move forward is more free childcare to allow women to go to work. It is all very well being able to work, but what if people cannot afford the childcare? Again, that affects family incomes, and more and more children are being affected by that.

Scotland has the second highest proportion of employees paid the living wage—about 80%. The highest proportion is in the south-east of England, where it is 81.6%, but that is a function of the fact that there are many jobs in this part of the United Kingdom and employers have to compete in paying people. If there is high unemployment, there is no competition to raise wages. That has to be addressed.

Opposition Members really do believe that work is a good route out of poverty—indeed, it is the best route out of poverty—but we cannot ensure that that is the case unless we support people, and this Government are attacking the lowest-paid people in our communities, the poorest in our communities and the ones who have to work the hardest.

The hon. Member for Swansea East referred to the Minister saying that, because of the cuts that are going to happen and the reduction in the work allowance, people will just have to work longer. That is, in this day and age, an absolutely scandalous thing to say. We totally refute it, because making people work more and more will only make them ill and less able in the long term to provide for their families.

Neil Coyle: I thank the hon. Lady for giving way again; she is being generous about allowing interventions. Another group of working people may not be able to take on additional hours as a result of ill health or impairment. I do not know whether she is aware of the case of Denise Haddon, which was covered in the Daily Mirror. As a direct result of this Government’s introduction of personal independence payments, thousands of disabled people who are already trying to work and are supported through Motability vehicles will have them withdrawn and may not be able to continue in work.

Marion Fellows: I thank the hon. Gentleman for his intervention. Fortunately, I do not always get to read the Daily Mirror; it is not top of my reading list, as people can imagine. However, I am aware, as a constituency MP, of people who are losing PIP or who are being transferred to universal credit and who are suffering real hardship. There is a constant stream of constituents into my office, and I am obviously trying to help them, but it is hard when Government Members are absolutely determined to come down hard on the working poor by cutting some of the benefits that those people rely on to support their families.

This debate has shown that, again, there are real issues that Opposition Members are very keen that the Government should change track on. Whether they will listen I doubt, but it is very important for our constituents

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that the Government understand the real damage that they are doing to families, especially children and women, with this move. To ask a family to lose £1,300 to £1,600 a year when they are already on minimum wage and have no hope of getting more money is nothing short of disgraceful. It is totally abhorrent, and I hope that the Government will think again about introducing the cuts that they are proposing in April this year.

Mr Andrew Turner (in the Chair): I should apologise for not telling Members that the monitor was not working. However, you have about 10 minutes each.

2.6 pm

Nick Thomas-Symonds (Torfaen) (Lab): I again reiterate my pleasure at serving under your chairmanship, Mr Turner. I congratulate my hon. Friend the Member for Swansea East (Carolyn Harris) on securing the debate.

For the second time this week, I appear opposite this Minister in this Chamber. I am starting to get very worried about her and the hon. Member for Macclesfield (David Rutley), because they must be becoming extremely lonely. This is the second time this week that they have appeared in this Chamber without one Tory MP coming along to support them. Not one came for the child poverty debate on Tuesday or has come for this debate today. “Now why is that?”, I ask myself. I cannot believe for a moment that it is anything personal towards them. Nor can I believe that the Tory Whips Office has become so incompetent that it cannot even encourage hon. Members to attend a debate such as this. The Chancellor of the Exchequer’s leadership bid is already so long gone that I cannot believe that he has got them round to the Treasury to glad-hand them. It cannot be that, so why exactly is it?

I can only draw the conclusion that both child poverty and in-work poverty simply are not high enough on the Tory agenda for their MPs to come along here this week. That is the only explanation, and perhaps we should not be too surprised about it, given what the Secretary of State for Work and Pensions said—he does speak occasionally. Indeed, he was in the main Chamber this morning. He came to watch one of his Ministers, as he usually does. I think that he is trying to live up to the reputation of being the quiet man that he got when he was Tory party leader, because he does not say very much, although perhaps in some cases less is more. But he actually said, at the Tory party conference back on 6 October 2015, that he thought that tax credits were a “bribe”. That is how the Secretary of State sees support for people in work, so perhaps it should not surprise us that no Tory MPs are here to support the Minister and the hon. Gentleman.

Neil Coyle: Is my hon. Friend aware that in Bermondsey and Old Southwark 6,100 working families were claiming the tax credits that the Secretary of State apparently referred to as a “bribe”? I hope that the Minister will give some reassurance that those families will not be adversely affected by the introduction of universal credit.

Nick Thomas-Symonds: I, too, hope that that reassurance will be given this afternoon.

In contrast to the absence of any contribution from Conservative Members, we have heard passionate contributions from the Opposition. My hon. Friend the

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Member for Swansea East spoke with her usual verve and passion both on the issue and for her constituents. What a telling statistic it is that wage growth this decade is the third worst since 1860, when Palmerston was Prime Minister. That is an incredible and shocking statistic.

My hon. Friend the Member for Neath (Christina Rees) made several very good interventions, and her passion for Wales, in particular, shone through in what she said. Similarly, my hon. Friend the Member for Bermondsey and Old Southwark (Neil Coyle) put his finger on several crucial points, including the delays to universal credit. To be clear about this, I will quote from a press release of 1 November 2011 from the Secretary of State. What did he say? He said:

“Over one million people will be claiming Universal Credit by April 2014”.

Neil Coyle: He said it very quietly.

Nick Thomas-Symonds: Indeed, he would have been better off saying it quietly, because in November 2015, the actual figure was 155,568. He should be sanctioning himself, on the basis of such a performance. It shows an absolutely dreadful level of incompetence.

I congratulate my hon. Friend the Member for Merthyr Tydfil and Rhymney (Gerald Jones), who drew on his experience as a county borough councillor, and set out well the measures that Labour councils in Wales are implementing to try to deal with wage levels. My hon. Friend the Member for Foyle (Mark Durkan) spoke, as he always does, with great authority on the matter. His point about the availability of work, and his quote about there being one rule for the working rich and one for the working poor, really resonated in the context of the debate. I congratulate the hon. Member for Motherwell and Wishaw (Marion Fellows) on her speech, which was delivered with great passion.

Let us remind ourselves of what the Chancellor—his must be the longest leadership bid in recorded history—said on the “Today” programme on 8 October 2012:

“It is unfair that people listening to this programme going out to work see the neighbour next door with the blinds down because they are on benefits.”

I fundamentally disagree with that statement. The person behind the blinds could be disabled or vulnerable. Dare I say it, they might even have just worked a night shift, although that is something that seems to be lost on the Chancellor of the Exchequer. The Chancellor has been trying to draw a division between those who work and those who do not. He is not the only one who has a problem with the language that has been used in the debate. In September, the Secretary of State said, in answer to the hon. Member for Gloucester (Richard Graham), that

“the most important point is that we are looking to get that up to the level of normal, non-disabled people who are back in work.”—[Official Report, 7 September 2015; Vol. 599, c. 6.]

Normal, non-disabled people—what kind of language is that? What does that say to somebody who is disabled? I hope that the Minister will take the opportunity this afternoon to distance herself from such shocking remarks.

Even if we accepted that distinction between those who work and those who do not, the Secretary of State is now in such a mess that he is on the wrong side of his

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own dividing line. It is all very well to say that work is the route out of poverty, and of course we want to see more people in work, but the kind of poverty that we are talking about affects people who have jobs, and who go out to work. As the smoke lifts from the Chancellor’s U-turn on tax credit cuts, it has become clear that he is simply going to make the same £12 billion of cuts to universal credit. No one can tell me that when the Tories were going around during the election campaign and talking about their £12 billion of welfare cuts, people such as cleaners seriously thought that they would be affected.

Let me give another couple of examples. I gave the statistics for single parents to my hon. Friend the Member for Swansea East.

Christina Rees: Does my hon. Friend recognise that lone parents are already twice as likely as two-parent families to be in poverty? Single parents are worse hit in the combined reforms; as a share of income, they lose seven times more than two-parent families. By 2021, single parents will lose £1,300 a year, on average, even after taking into account wage increases and tax concessions.

Nick Thomas-Symonds: Single parents could be forgiven for thinking that the Government have a tin ear, as far as their needs are concerned. Let me give the example of a couple who live and work together, one or both of whom have limited capacity to work, because they are disabled. Work allowance will be cut from £7,700 to £4,700 this April, which will mean a loss of income of £3,000 a year. Single individuals will essentially lose everything, with a reduction of £1,332 and a net loss to income of £865. My hon. Friend the Member for Swansea East has mentioned the Social Mobility and Child Poverty Commission; its latest report was published as part of the glut of data that the Government put out just before Christmas, on 17 December. I quote from the commission:

“The immediate priority must be taking action to ensure that the introduction of Universal Credit does not make families with children who ‘do the right thing’ (in terms of working as much as society expects them to) worse off than they would be under the current system. That means reversing the cuts to Universal Credit work allowances enacted through the Universal Credit (Work Allowance) Amendment Regulations 2015 before they are implemented in April 2016.”

The commission is asking the Government to do that, and it is precisely what they should do.

What is the Government’s answer to the claim that they are attacking working people? At least the Ministers in the team are not shy about coming forward with the odd suggestion of what people should do to help themselves. We have heard the one about working more hours. I am not entirely sure how single parents are meant to do that, but perhaps the Government will explain that to us in due course. My particular favourite was the suggestion made by the Under-Secretary of State for Work and Pensions, the hon. Member for North West Cambridgeshire (Mr Vara), in the House on 6 January 2016. When he was asked about mitigating the effects of the social security changes, he said that we should not forget

“the fact that every time we fill up our tank with petrol there is a saving of £10 because of the freezing of the fuel duty.”—[Official Report, 6 January 2016; Vol. 604, c. 342.]

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In the 1980s, the unemployed were told to get on their bikes, but in 2016 the advice is to fill your car. If that is the best that the Government can offer the working people of this country, it shows the position they have reached.

The Government are in the worst of all worlds. Universal credit is the Secretary of State’s passion. The policy is his baby. He allegedly fights the Chancellor around the Cabinet table so that he can keep it going, although we might draw the conclusion that he is not doing so very effectively. We will have to wait until, I think, 2021 to see the full effects. The Secretary of State seems to be going for some kind of record for how long it takes to implement change at the DWP. The Government are in the worst of all worlds, because they lack both compassion and confidence.

2.16 pm

The Minister for Employment (Priti Patel): May I say what a pleasure it is to serve under your chairmanship, Mr Turner? I thank all Members for their interesting and lively contributions. As the hon. Member for Torfaen (Nick Thomas-Symonds) has said, this is our second debate on the topic this week. I will not respond to all his comments, because I have heard him make some of them before, especially those about my right hon. Friends the Secretary of State and the Chancellor. I recall commenting—not in the debate two days ago, but possibly two weeks ago—on some of the language that has been used when it comes to supporting work, supporting those who are in work and reforming our welfare system so that it supports people into work.

I recognise that this debate is about in-work poverty, although it has been quite broad. In the last five years, we have seen the movement of more than 2 million people into work and an employment rate of 74%, which is the highest since records began. Many of the generalised assumptions that have been raised in the debate are simply wrong, particularly given what we inherited in 2010. That movement of people into work came after the previous Labour Government had presided over the longest and deepest post-war recession, which wiped out nearly 6% of our economy. That did much to hurt people, who were put into poverty and saw their earnings decline, and it had a devastating impact on the country’s economy and resulted in the loss of jobs.

Three hon. Members from Wales spoke in the debate. If I recall correctly, the Office for National Statistics on employment, which were published last week, show that over the last year the number of people in work in Wales rose by 48,000, bringing the employment level up to 1.4 million—close to its highest ever level—with a rapidly growing employment rate. We have also seen an increase in the number of jobs in Swansea, Cardiff and Newport, and across Wales. New jobs were announced last week in Wales by major employers including BT, Admiral and General Dynamics.

Nick Thomas-Symonds: Will the Minister simply confirm that wage growth this decade is predicted to be the lowest since the 1920s? Does that not say everything about the wasted Tory decade?

Priti Patel: On the contrary. Average weekly earnings have grown consistently in the past year—

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Carolyn Harris: Will the Minister give way?

Priti Patel: Let me finish my sentence and I will. Wages have been growing faster than inflation for 14 consecutive months and, as much as the Labour party has been utterly disparaging about the introduction of the national living wage, which says a great deal about its attitude to pay increases, we know for a fact that when the national living wage is introduced later this year, we will see an enormous—

Carolyn Harris: Will the Minister give way?

Gerald Jones: It is a long sentence.

Priti Patel: I will give way in a moment. I have been very respectful by listening to and not intervening in the contributions of Opposition Members. More people will benefit when the national living wage is introduced in April.

Carolyn Harris: I feel suitably chastised. The Minister gave a list of job increases but she left off Tata Steel, where there have just been 750 job losses very close to my constituency.

Priti Patel: Tata is not a particular case study for Wales or the United Kingdom. I hope that the hon. Lady recognises that the steel industry faces huge challenges around the world. In China, people are also losing their jobs because of what has happened in the steel industry. Jobcentre Plus and the Department for Work and Pensions have been there from the outset to support people who have lost their jobs in the steel industry by helping their families at this very difficult time and supporting them to find work. The marketplace is challenging, but the hon. Lady is the Member of Parliament for a Welsh constituency and she has a duty to acknowledge the support that is being given—the work that Jobcentre Plus staff in her constituency are providing—to individuals and families who have lost their jobs.

Christina Rees: Surely the increase in jobs in Wales is down to the excellent policies of the Welsh Labour Government and schemes such as Jobs Growth Wales with EU investment.

Priti Patel: If it were not for the fact that this Government picked up the shambolic legacy of the Labour Government in 2010, rebalanced the economy and, importantly, created the right environment for the creation of new jobs, those new jobs in Wales would not exist today. We have supported lower corporation taxes and lower taxes for businesses to come to the UK to make the UK a much more competitive place.

We have heard voices from around the UK in the debate, including the hon. Members for Foyle (Mark Durkan) and for Motherwell and Wishaw (Marion Fellows). A record number of jobs have been created in Scotland and wages in Scotland are going up as a result.

Neil Coyle: The Minister seems to have the utmost confidence in the economic growth, which does not appear to have been shared in the latest survey of business leaders. Is their nervousness about the current

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state of the economy perhaps to do with the fact that the Chancellor seems set to take over from the lame duck Prime Minister?

Priti Patel: That intervention does not befit the hon. Gentleman.

Neil Coyle: That is up to the Chair.

Priti Patel: No—I have served with the hon. Gentleman on a Bill Committee in which he has made some valuable contributions. This is not about individuals. We live in a global world. Look at what is happening with the international economy right now. Stock markets around the world, including the UK, have faced a challenging start to the year. Business is right to be sensitive to global factors. I come back to the point that the UK has a highly competitive economy thanks to many difficult decisions undertaken by the Government in the previous Parliament, and we continue to make difficult decisions in this Parliament.

All the contributions this afternoon are valid. The hon. Member for Motherwell and Wishaw mentioned that individual constituents come to her on a weekly basis. If she would like to share with me her casework examples regarding universal credit, I would be happy to take them up. When it comes to stability, we have made choices. None of the opposition parties has presented solutions to the House this afternoon. Hon. Members said that universal credit should not exist and that they want to scrap it, but they have no alternatives for welfare reform or changes to the welfare system. As we heard in earlier debates today, to govern is to choose. Our choice is to reform welfare and to ensure that we support people into work.

Nick Thomas-Symonds: The Minister is generous in giving way. Will she clarify something on the Government’s welfare reform? Lord Freud said that the move from tax credits to universal credit will happen in the event that someone re-partners and in the event that there is a new member in the household. Is the modern-day Tory party really providing disincentives to marriage and having children?

Priti Patel: The hon. Gentleman is taking the noble Lord’s suggestion out of context. There was quite a substantial discussion about universal credit including a gross representation of the roll-out—the hon. Member for Bermondsey and Old Southwark (Neil Coyle) said, in jest, that it would be “a thousand years”. All hon. Members know, because they have heard it from me previously, that universal credit is now in three quarters of all jobcentres and will be in all jobcentres by April 2016, so it is a few more months and certainly not a thousand years as the hon. Gentleman suggested.

I come back to the principle of the reforms. Universal credit transforms the welfare system and has been designed

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to ensure that people are supported in work. It is a subject of many discussions I have had with the hon. Member for Bermondsey and Old Southwark in previous debates. Yes, there is a financial safety net and support through universal credit but, importantly, the universal credit system is designed to support people to progress in work. Jobcentres deliver support, providing a single point of contact with much more personalised support, advice and guidance from a dedicated work coach.

The concept of the work coach is working. I have sat in on many interviews when I go to see our colleagues—particularly work coaches—working in jobcentres and helping people to develop in their roles, especially people who are moving from part-time to full-time work or who are seeking to work more hours depending on personal circumstances. Work coaches help them to develop the right kind of skills and confidence to secure employment. Surely hon. Members cannot disagree with the fundamentals of supporting people into work, giving them confidence, and helping them to develop new skills, should that be the appropriate route for them.

I am proud of way in which we work with other aspects of the state when we look into co-locating our services with housing associations, further education colleges and local authorities. We have 30 fully co-located sites, where we can join up and bring public services together to ensure that we have the right kind of service delivery for individuals.

I am conscious of time as I can see the clock ticking, but I want to emphasise that the Government are fundamentally focused on providing in-work support through stronger local partnerships in constituencies to ensure that we support individuals on universal credit or benefits, help them to get back into work, and secure better employment outcomes and better futures for them in the long run.

2.29 pm

Carolyn Harris: Thank you for your excellent chairmanship, Mr Turner. I sincerely thank all Opposition colleagues for attending this debate on a day when they could be at the coalface addressing the problems caused by this Government’s policies. I thank the Minister for her response, and I would have liked to thank her for her warm words, but “condescending” and “passionless” are probably better descriptions. I leave here no wiser than I was coming in, except now I know that there is a total lack of understanding and passion for what is really happening in the UK in 2016. I urge the Government to rethink.

Question put and agreed to.


That this House has considered in-work poverty.

2.30 pm

Sitting suspended.

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Basic Payment Scheme

[Mr Clive Betts in the Chair]

3 pm

James Heappey (Wells) (Con): I beg to move,

That this House has considered the Basic Payment Scheme.

It is a pleasure to serve under your chairmanship, Mr Betts—I believe it is the first time. I thank the National Farmers Union, its members and officials back home in Somerset and its team nationally. They have been helpful in pulling together my thoughts, and I know that they are keen that the issues are heard in Parliament and responded to by the Government. I am grateful to the Minister for coming to hear the concerns and respond to the issues that are raised.

I also thank the many farmers and colleagues who have been in touch to share their thoughts on this important issue. Although we hear a great deal from other parts of our community through third-party campaigns and our email inboxes, farmers are not the sort to do that sort of thing. It is easy to think that because we have not had hundreds of farmers emailing us with their concerns, the basic payment scheme is not an issue, but that is simply not the style of farmers. Frankly, they are too busy out on their farms doing other things to write to their MP, so it is important that we act on the murmurs that we pick up on by debating them here.

There has been real anger and uncertainty in the farming community over the basic payment scheme. I well remember the Secretary of State’s visit to the Bath and West show last year. It was apparent even then that farmers were somewhat sceptical about the introduction of the new payment application scheme. They were nervous that it might not go well and were pushing her for assurances that payments would be delivered on time, as usual. There is a long tradition of British public sector IT projects not going too smoothly, so their scepticism was perhaps well founded, but it was absolutely crucial that we got it right given all the other pressures on the farming industry at that time and now. The problem is that we did not.

We should not underestimate the importance of our agricultural sector. We live in a global market. Food comes into this country from all over the world, but if we do not support our agricultural sector properly, both in how we subsidise it and in how we administer the subsidies, we are causing a real challenge for our nation’s food security. Farmers have irregular cash flows over the course of a year, and the basic payment scheme payment, which comes in the middle of winter, is a vital part of seeing them through the lean winter months.

Sir Henry Bellingham (North West Norfolk) (Con): I congratulate my hon. Friend on securing this debate on an incredibly important issue. This is also the time of year when everyone is trying to finish their tax returns. I have had representations from farmers in my constituency who do not have the money in the bank to pay their tax liability. Does he agree that it is essential that the Secretary of State for Environment, Food and Rural Affairs speaks to her counterparts in the Treasury to ensure that some allowance is made for situations where payments have not been made?

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James Heappey: I very much agree with my hon. Friend. I will shortly come on to some of the impacts of late payments that I have seen, but he makes a good point, which I hope the Minister will take away. Perhaps those of us here today might seek to lobby the Treasury on exactly that issue, because farmers have a great number of bills on their desks awaiting payment once the basic payment comes. We can perhaps ease the pressure by making their tax bill less urgent.

Michael Tomlinson (Mid Dorset and North Poole) (Con): I am grateful to my hon. Friend for securing this important debate. May I pick up on two things he has mentioned? First, I have had a number of meetings with farmers in Dorset who are concerned about the issue. Secondly, uncertainty is perhaps the key here. Farmers are asking for good communication and certainty. Perhaps my hon. Friend will comment on that. Part payment could be a solution and a way forward.

James Heappey: My hon. Friend does the farmers of Dorset a great service in raising those issues, which I intend to speak on at some length because they are hugely important.

I have the great honour of serving on the Select Committee on Energy and Climate Change, and one thing that I have observed is that we talk about energy security with great urgency—we are willing to bend our backs in government and in this place to ensure that we achieve energy security—yet we seem to be slightly less concerned about food security. I put it to the House that in many ways our food security is as important as our energy security and any other type of security, in that while the going is good we can rely on international markets, but when the going is bad, it is absolutely essential that we can feed ourselves. We must therefore be sensible and urgent in how we support farming to ensure that we maintain the sector.

Simon Hoare (North Dorset) (Con): Like others, I congratulate my hon. Friend on securing this debate. Given the huge volatility we have seen in the gate price for farm produce, whether that is livestock, meat or milk, and acknowledging that agriculture is the backbone of our south-west of England economy, does he share my concern that failure to get payments in full and on time could prove the tipping point for farmers who have been trading at the margins for too long? They may put up their hands and say, “I fought the fight to the end, and I am now giving up.” That would have a devastating effect on our combined Dorset economy and across the wider south-west.

James Heappey: My hon. Friend speaks with great authority, and he is absolutely right. Many farmers in Somerset, Dorset and across the south-west and the United Kingdom have had a difficult couple of years with the price of milk, beef and pork, and that has led to real challenges for them. This could be the time at which the bank manager turns round and says, “There is no opportunity to extend credit lines. I am afraid that enough is enough.” My hon. Friend’s point is absolutely right and rather tallies with what I was saying. We must not underestimate the importance of supporting our agricultural sector through difficult times, because we will need it to be as capable in the future as it is now.

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Mrs Anne-Marie Trevelyan (Berwick-upon-Tweed) (Con): I thank my hon. Friend for securing this important debate. I have been meeting regularly with farmers who are struggling. In large measure, Northumbrian farmers have very small farms and upland farms. Does he agree that it is unacceptable that DEFRA and the common agricultural policy system are the loan service? Farmers are having to carry the burden and the emotional and family pressures of having big debts, while DEFRA cannot manage to pay out on time and in full.

James Heappey: I absolutely agree with my hon. Friend. The issue has caused significant distress. When I reflect on some of the correspondence I have had from farmers in Somerset, I find that their anger subsides very quickly to real worry and concern for their livelihood and those of their families and the people they support through their business. The issue is hugely important.

Geoffrey Clifton-Brown (The Cotswolds) (Con): My hon. Friend is being very generous with his time. I draw attention to my declaration in the Register of Members’ Financial Interests.

The Rural Payments Agency said that it would make the vast majority of payments by the end of January. Does he agree that we need much better communication to farmers who will not be paid by the end of January, so that they know and can plan for when they might receive payments? Furthermore, does he agree that we need much greater certainty going forward that the RPA will deal with this year’s applications in a much more expeditious way than it did last year’s?

James Heappey: I very much agree with my hon. Friend. The term “vast majority” is rather loose, and we will come to that in a second.

There are three key issues in the debate. First, what is the current state of play? How many payments have been made as of today? How many will be made tomorrow—the last banking day of the month? How many payments will therefore be made by the end of January—the line the RPA previously drew in the sand? Secondly, what is the understanding of the Government and the RPA of what has gone wrong this year? How deep has their analysis been? How willing are they to apply the lessons learned to next year’s process? Thirdly, I invite the Minister to assure us, and all the farmers in this country, that these things will not happen again next year or, indeed, at any point in the future.

The difficulty is that there has been a shocking failure of expectation management by the RPA, and that comes down to the agency’s use of the term “vast majority”. When the RPA’s chief executive appeared before the NFU council on 13 October, he implied that about 90% of payments would be made by the end of January—that appeared to be the definition of “vast majority” at the time. However, shortly afterwards, about 17% of farmers were written to and told they would not be paid by the end of January, which indicates that, by default, the vast majority was to be defined as 80% to 85%. As of yesterday, however, only 70% of payments had been made. With one banking day left this month, therefore, we might conclude that 70% is the vast majority. The real problem is that “vast majority” is an awfully hard

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term to define, although I can say with absolute certainty that the vast majority of farmers agree with what I am saying today.

I hope the Minister will take this opportunity to confirm exactly how many payments have been completed. I hope he can also say with absolute certainty when we will reach the 95% threshold. In the previous year, 95% of payments were completed on the very first day that payments were made—1 December—and 98.5% were completed by 6 February. The year before, 92.3% of payments were completed by 4 December, and 97% were completed by 28 January. The year before that, 91% of payments were completed on 3 December, and 93.5% were completed by 31 December.

Technology is supposed to speed up advances, but in this case it seems to have slipped us into reverse. We need to say as quickly as possible when the remainder of farmers will be paid, and we need to be precise—we can no longer say, “You have an eight or nine-week window in which you will be paid.” People need to know now, with certainty, whether they will be paid in February, March, April, May or June. I hope the Minister agrees that the RPA should have that responsibility for everybody who is left unpaid after tomorrow.

For complex payments—involving, say, common land—we need to make split payments. We need to say that we will make the payment for the home farm now and that everything else can come later. People with complex claims are in real difficulties. Although they might ordinarily expect to be towards the back of the queue, they would still expect to receive their payment around now, and certainly within the next few weeks. This year, however, because of the backlog of more simple payments, they could have to wait much longer, and we must avoid that.

The impact of the delay is very serious. Tomorrow, we across the parliamentary estate will be paid, as will many other people across the country. Next week, standing orders and direct debits will almost certainly come out of our bank accounts to pay our mortgages and whatever other bills we have, and we will be confident that we can meet those bills, because we know what we will be paid tomorrow. Farmers, however, do not have that luxury, and they have not had since they received a letter towards the end of November telling them that the vast majority would be paid at some point in December or January. They expected that to mean that at least 80% to 85% of them, and perhaps even 90%, would be paid, but it appears that only about 70% have been paid in that window.

However, the issue goes further than that. A farmer has told me that he has £12,000 of unpaid invoices on his desk in his farm office. Those invoices are not to big feed suppliers or other big companies, but to small, local companies servicing the agricultural sector. Those companies have been made to wait for their money, because the farmer has not had his basic payment scheme payment. I understand from farmers down at the market in Bridgwater that the value of store lambs this year is depressed because farmers simply do not have the cash in their pockets to go to the market to buy livestock. That is having an impact, too.

There is also the cost of extra credit, as farmers have to go cap in hand—again—to their bank managers to secure an extension to their overdrafts or credit facilities. That comes at a cost, and it is a cost that farmers will

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bear, not the Government. We must take the impact of the delay seriously. We need to be able to say with absolute certainty when the payments will be made.

If Members will indulge me, I would like to suggest what lessons might be learned. I do not expect the list to be exhaustive—it is based on my reflections on what I have heard and on the wish list of the NFU, the Country Land and Business Association and others who have been in touch. However, I hope the Minister will take note of it. Indeed, I would hope that DEFRA and the RPA have already spotted all these things and more, and that work is already well under way to make sure that the lessons are applied to next year’s scheme.

First, what is being done to increase the capacity of the IT system? It crashed because it became overloaded. We need a guarantee that the system will be able to cope with the pressure placed on it next year when all farmers seek to apply for their payments.

Secondly, what is being done to preserve half-completed applications when connectivity is lost? We in rural areas are well used to trying to make a purchase online and going through that awful experience of seeing the broadband fall over at the crucial moment when we have clicked “Pay”, with the result that we do not know whether we have completed our purchase. Buying something on Amazon takes 10 minutes, but someone could have spent a couple of hours filling in their basic payment scheme application this year. If their broadband then fell over, as it so often does in rural areas, they would have had to go all the way back to square one and start again. It cannot be beyond the wit of man to develop an application system where, every time someone clicks “Next”, the application is saved. In that way, if the connectivity failed, or if the site could not cope with the demand, everything someone did beforehand would be there when they returned to it.

Furthermore, given all the problems this year, why not make sure that the data that have been verified for each farm are automatically carried over into next year’s applications? If the data need to be amended because of a change in a farmer’s circumstances, that is fine. What a wonderful help it would be to farmers, however, to know that data they submitted this year, which have been verified, will already be there waiting for them next year.

What is the reversionary option for those with poor connectivity? I believe that the Department has indicated—the Minister might like to nod if this is the case—that farmers will have the option to choose a paper application next year. If that has not been announced, perhaps it would be prudent to announce it in the near future. Many farmers simply cannot soldier through incredibly poor connectivity—below 1 megabit per second—to go through the online application process. Until we can improve their connectivity, it is unfair to expect them to endure that.

What can be done to improve the mechanism for confirming a successfully completed application? The feedback loop at the end of the online application is not particularly reassuring, and that seems to be a bit of an open goal. I am not particularly talented when it comes to IT, but even I have managed to figure out how to put an auto-reply on my email so that someone who sends me something automatically gets something back. People might quite welcome having something as basic as that as part of the online application process

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so that they immediately get confirmation that their application has been submitted. Thereafter, they could get progress checks, as happens with many mortgage companies, so that they could see how their application was progressing.

What can be done to better communicate an application’s progress and to provide greater certainty over when payments will be made? This year, we have been able to tell people only that their payments will be made within fairly broad spans of time. If we are going towards an online system, why can we not guarantee that once someone’s application has been made and they have been notified when each check has been gone through, they will immediately get an email saying that the payment will be in their bank account on a specific day?

What if the IT fails again? What is the RPA’s contingency plan for processing paper applications in 2017 more quickly? This year the system fell over and the Government rightly said they would accept paper applications, but the RPA clearly was not immediately capable of setting about the verification of those applications—hence the delay.

What sanction do the Government have in their contracts with those who provide the IT system, should it fall over this year or next year? Equally importantly—many farmers will be keen to hear about this—what is the sanction against the RPA and its senior leadership if it all happens again and there is no improvement in its communication? What is the timeline for scrubbing the payments portal to make sure that all the lessons learned this year will be incorporated into the process, both to improve the applications mechanism and to make sure that the guidance that farmers receive for next year’s application will fully incorporate everything that has been learned? Farmers are only two or three months from the time when they will need to apply.

What are the plans to maintain RPA staffing and resource at current levels until the Government are absolutely certain that the 2016-17 payment process is running smoothly? As I see it, the problem is that at the moment the RPA is fixed on having to make this year’s payments. It makes me very nervous that because of the immediate requirement to make payments now, no one has gone off into a dark room to work out what has gone wrong and what needs to be improved, and to make sure all those things get done before people make their applications for next year. It seems trite to say it, but I think it is important to do so: a mistake is a mistake, but repeating it is incompetence. I hope the RPA is painfully aware of how it will look if the same mistakes happen next year.

That leads me to perhaps the biggest issue in the debate, and the one that I suspect farmers are most nervously awaiting: the Minister’s absolute assurance that he and his Department are 100% confident that what happened is just a teething issue for year one, that all the lessons will be learned and applied, and that next year we will be back to the same success rate for the making of payments at the start of December as in previous years.

There is another area of uncertainty. This year has gone badly. We hope next year will be better, but what of the year after that, if the nation votes in a referendum to leave the European Union? That is causing great uncertainty for farmers, and although I do not necessarily want the debate to descend into that issue, I will quote a

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comment made in June by the Under-Secretary of State for Environment, Food and Rural Affairs, my hon. Friend the Member for Penrith and The Border (Rory Stewart):

“It is vital that, whatever happens in the vote on the European Union, the Conservative party—indeed, all parties in this House, I hope—and this country continue to provide deep support for farmers…We must take responsibility ourselves; we must say we believe in the support farmers currently get from Europe, and, whatever happens in the vote, we must continue to provide it”.—[Official Report, 1 June 2015; Vol. 596, c. 431.]

The NFU and farmers generally are rightly nervous about the outcome of the referendum, and I hope that the Minister, who is the Farming Minister, will agree with the Under-Secretary that it is inconceivable that the UK Government would not support agriculture if we were outside the European Union, in the same way that the EU currently supports it.

Nigel Adams (Selby and Ainsty) (Con): Does my hon. Friend share my concern that when asked at the Oxford farming conference how things might look for agriculture if we were outside the EU, the Secretary of State confirmed that the Government had not made any investigation of, or spent any resource on, what an exit might look like for agriculture?

James Heappey: I very much agree with my hon. Friend’s point. It does seem remiss. I understand why the Government do things in that way—in my last job in the Army I had a staff appointment at the Ministry of Defence when the Scottish referendum was announced, and we were told in no uncertain terms that there would be no contingency planning. The Department of State of which I was a very small part would continue to work on plan A and would address plan B thereafter. Farmers are putting up with an awful lot of uncertainty now. It is all self-inflicted for us this year, because of the BPS, but in future years it will be because of the referendum. I unequivocally support the referendum, but it would not take much for DEFRA to agree as a statement of principle that our farming sector is an essential part of the country’s economy and security, and therefore to agree, as the Under-Secretary of State has already done, that committing to support it is easy, and common sense.

The basic farm payment is another example of a public sector IT project going badly wrong. Our farmers, who have already had a tough couple of years, have once again been asked to carry the cost. We cannot be casual about the future of the farming industry. Food security is too important—as important as any other part of our national security. We need to know today when the remainder of the payments will be made and what lessons have been learned. We also need a guarantee that those lessons will be ruthlessly applied to next year’s process, so that the same thing does not happen again. Finally, we need to know that the Minister has absolute confidence in the RPA, that the 2016-17 payment scheme will run smoothly, and that farmers will get their money at the beginning of December as they have done in previous years.

3.26 pm

Chris Davies (Brecon and Radnorshire) (Con): It is a pleasure to serve under your chairmanship, Mr Betts. I congratulate my hon. Friend the Member for Wells

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(James Heappey) on securing the debate and on the valid points he made. I am sure that his constituents will feel their views were expertly represented, and I will do my best to put my points as eloquently as he put his.

This issue directly affects a large number of my constituents, as Brecon and Radnorshire is one of the most rural, and most farmed, areas in the UK, with many farmers who claim the basic payment. I accept that the payment process is devolved in Wales, but my constituents and I have many of the same concerns about the payments system that people in England have. I am sure the hon. Member for Blaenau Gwent (Nick Smith), my neighbour in Wales and the shadow Minister, will agree with many of my concerns.

I am a member of the Environment, Food and Rural Affairs Committee, and we have on several occasions quizzed the Minister—and, indeed, on Tuesday, the Secretary of State—on our concerns about the RPA. The chief executive of the RPA has also given evidence. I am delighted that they will all be coming before us again; we look forward to looking further into the mistakes and getting the exact reasons for them out of the chief executive.

Simon Hoare: My hon. Friend has had a joyous luxury that I have not partaken of—meeting the new people who are running the agency. Do we know what percentage of agency staff have ever farmed or been involved in farming?

Chris Davies: I thank my hon. Friend for that great intervention. We can only guess—and our guess might be that it is probably not a lot; but that is purely an assumption, and I cannot provide the facts. The Minister may be able to enlighten us further.

We must do everything we can to get the payments out to farmers as effectively and efficiently as possible, to resolve the current issue of delays to payments. I know of many local farmers in Wales who have received part-payments. Of course England has a completely different system. It does not have a part-payment system; it is paying fewer farmers, but in full. We need to get all the money out because in addition to the effect of payment delays on farmers’ cash flow, falling market prices of produce hamper the growth of the farming industry around the UK. With incomes low, many farmers tell me they are unable to pay suppliers until the payments come through. That has a direct impact on the ability to run local businesses and affects the whole rural economy. That is why we must do all we can to get payments out as quickly as possible.

Michael Tomlinson: Perhaps my hon. Friend will elaborate a little more on the part-payments that have been made and how well they have worked in his experience. Farmers whom I have met have said, “At least give us something now to help tide us over before we get the certainty of the full payment.” Perhaps he will elaborate on that a little more.

Chris Davies: I thank my hon. Friend for raising a very good question. In Wales, certain payments have been released—30%, 50%, 70%—but, as the permanent secretary told the Select Committee on Tuesday, the Department decided not to do that because that would mean a system of reprocessing claims, taking even

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longer to get the full payments out, so it was decided not to go down that route. I am sure the Minister will elaborate on exactly why, but that is what the Select Committee was told.

In Wales, the Welsh Government have in part put the delays down to a legal challenge to the new system that they intended to implement back in 2015, but I cannot help but wonder why there was not a back-up system in place as soon as the legal challenge was put in place. That would have ensured that farmers would not face the sort of delays they currently face today. Although I appreciate that that was not under the control of the Minister here today, I wonder whether he will join me in recommending that, should such a challenge be put in place on any side of any border in the future, reasonable back-up systems should be in place so that farmers are not adversely affected.

That brings me loosely on to my second point. Farmers do not seem to have been informed of what is happening with their claims. The uncertainty this creates should not continue, and I am glad to hear that both the RPA and the Welsh Assembly will now write to farmers to inform them of why their claims have been delayed. That said, can I urge the Minister to ensure that, included in the letter, will be a statement of when each farmer can expect to receive their payment, as this will enable farmers to better plan their cash flows and assure their suppliers of when they can expect to be paid. The Secretary of State and the permanent secretary told us on Tuesday that they expect payments to go out somewhere between February and June, but we know that the window closes in June and we could not get a more specific time. Perhaps the Minister will know a little more about that.

We should keep our farmers up to date because they need to plan for the future. Each farmer is a small business; some are very large businesses in our rural economy. Without being able to get their payments, they will not have a business plan, and that has an impact. We should resolve the issues that we currently face as quickly as possible. I also think it is vital that we learn the lessons from this year’s application process, as my hon. Friend the Member for Wells has emphasised heavily. While the crisis is still going on, it is difficult to analyse exactly what has gone wrong. The applications will begin again in May this year. Can the Minister outline the lessons that he believes the RPA and all administrative bodies can learn to ensure that we do not face the same issues again in the 2016 application period?

On the basic payment system more widely, what is the Minister’s view on the stringent nature of the Assembly’s application of the BPS rules? I have several constituents who are concerned that they are not receiving their full allocation owing to the nature of the satellite imagery used to assess their farm sizes. Simple issues such as the shadows of trees mean that farm sizes are being shrunk, as the shadows caused by the trees make wooded areas look larger on satellite images. This then shrinks the size of farms, often by considerable distances, and diminishes the payments that farmers receive. This causes delays to some farmers’ payments, so will the Minister press the Assembly to look at new, more efficient ways to process basic payment schemes? For too long the system has been too complicated, and it is about time we simplified it to best assist our farmers.

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In conclusion, I believe we face significant issues with this year’s applications that should be resolved as swiftly as possible, and I look forward to the Minister’s response on the issues that hon. Members raise today. The most important consideration we must take from the payment delays this time around is to ensure that not only are lessons learned, but also that resolutions are implemented in time for next year’s applications. Farmers should be able to focus their efforts on farming their land and not on form filling and concerning themselves with whether or when they will be paid. With all the current and predicted hardships that our farmers face, I implore the Minister to ensure that farmers’ basic payment scheme applications will not be a further hardship next year as well.

3.34 pm

Sir Henry Bellingham (North West Norfolk) (Con): It is a pleasure to serve under your chairmanship, Mr Betts. First, I declare my interests in the Register of Members’ Financial Interests. I also congratulate my hon. Friend the Member for Wells (James Heappey) on securing this debate and on his superb speech. I thank my hon. Friend the Member for Brecon and Radnorshire (Chris Davies) for his contribution as well.

North West Norfolk is predominantly a farming constituency. Norfolk and the rest of East Anglia make a massive contribution to food production in this country—to agriculture and food manufacturing—and many people think that places such as North West Norfolk and North Norfolk are the lands of big estates. There are plenty of big estates in my constituency, but there are also many small farmers as well, and many county council smallholders throughout the county. Particularly heading towards the west of my constituency, towards Peterborough and Wisbech, many small farmers are predominantly growers in the horticultural sector and might have a small arable operation as well. Things have not been easy, as the Minister knows. The wheat price has been volatile and is well down on its high. The beet sector, which was one of the absolute stalwart sectors in Norfolk, has been under a great deal of pressure, and a lot of farmers are coming out of beet growing because it is not profitable to stay in it.

The vegetable sector is, again, volatile. I also want to mention the pig sector, which is incredibly important in North West Norfolk. It is the one area that farmers have diversified into either as growers themselves or as farmers who are letting land for pig production. There are many well-known pig and poultry operators in East Anglia, and the sector, as the Minister knows, has been under a huge amount of pressure. The sector is suffering a lot of difficulties at the moment. In that context, the one thing that is incredibly important for farmers in my constituency is cash flow.

I have had representations from a significant number of farmers and landowners who have pointed out to me that the current state of affairs simply is not tolerable. Some have been paid—I am sure the Minister will in his reply flag the percentages and the numbers that have been paid—but a very large number of people have not been paid. That has a big impact not only on the many farmers who cannot pay their bills and who have invoices waiting to be sorted out but, as my hon. Friend the Member for Wells pointed out, on the wider rural economy through the knock-on effect on the small

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suppliers and small businesses that really cannot themselves put up with any interference with their cash flow. It is not the fault of farmers, because they do not have the money to pay the bills at the moment. They plan their year around the crops, around the seasons and also around the payments that come into their bank accounts. It is essential that we have immediate action.

I intervened on my hon. Friend the Member for Wells a moment ago and asked him about what HMRC should do. I know that the NFU has been having conversations with HMRC, but I very much hope that the Minister will take away from this debate that the one area that he and his ministerial colleagues have to look at straight away is HMRC. Is it being as sympathetic and as understanding as possible to farmers who have to pay their tax bills soon? In fact, if they do not pay by Monday, they will be charged interest. So I urge the Minister to have discussions with HMRC and to put in a request to Treasury Ministers that there should be a scheme for late payment for farmers who have not been paid their basic payments.

Marcus Fysh (Yeovil) (Con): Does my hon. Friend agree that the issue is not only about having a tax holiday, because many farms are not very profitable? When there is a cash-flow issue, as he has described, perhaps we should look at an emergency loan scheme against which they can draw.

Sir Henry Bellingham: I am grateful to my hon. Friend, who represents many farmers who are in the same position as mine. He makes a good point, because some of the smaller farmers will not even have a tax bill. Certainly some poultry and pig farmers in my constituency will be paying no tax, because they are not making a profit.

That leads me on to the possibility of partial payments. When the Minister winds up, I hope he will have a good look at the possibility of those farmers who have had their basic payment delayed receiving some sort of partial payment immediately. I understand from farmers in my constituency that some of the delays have been brought about by a series of problems, such as with cross-compliance or common land. In fact, it amazes me how much common land there is in my constituency—virtually every parish has common land and, although it is often owned in conjunction with local landowners, it is often farmed on long leases or by local estates. All sorts of problems lead to delays and I know of examples of farmers who have ticked every single box correctly and had no problems in the past, but because of one small issue over something quite trivial, everything has been delayed. Therefore, when there is no element of doubt about the farm, the business in question, and its record of paying taxes and abiding by rules and regulations, surely in such circumstances there must be scope for making a part-payment.

I also hope that the Minister will look at the farmers affected by the recent appalling floods. Scotland is under a different regime, but I have a friend, Mr David Baxendale, who farms in the borders at a place called Stanhope, on the upper reaches of the Tweed, and his area suffered its worst ever floods. He has seen damage to a large number of dykes and fencing, and his farm is

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under real pressure. I have no idea of exactly how big the damage bill is, but the answer is huge. Farmers in Scotland are suffering delays to their payment, too, and I hope that the Minister will look at them, as well as at farmers in Lancashire and Cumbria who might not have received their payment, but because they have been badly flooded face additional crises and problems to sort out. Will he look specifically at them?

My hon. Friends the Members for North Dorset (Simon Hoare), for Mid Dorset and North Poole (Michael Tomlinson), for Berwick-upon-Tweed (Mrs Trevelyan)—she has just departed the Chamber—and others made mention of the need for some sort of certainty. Given any delays or issues between a farmer and the Rural Payments Agency, I understand from the NFU and the CLA that communications have been poor. Will the Minister explain why those communications, letters and discussions have not gone more smoothly? Why has the RPA not been more understanding and more proactive? Perhaps it is about the staffing, as my hon. Friend the Member for Mid Dorset and North Poole said, or perhaps there are RPA people who do not understand enough about farming per se. Surely none of that is an excuse for any form of incompetence or lack of keenness on the part of the agency to provide a better service. Those farmers who have not had their payment, or may not get it in the next few weeks, above all else need some form of certainty —the information and communication.

Nigel Adams: We are not talking only about indicative chatter. I have met with many farmers, including almost 30 of them two Saturdays ago—incidentally, four of them had received their payment and several had received letters saying that they would not be paid in December and January—and quite a few have explained to me their frustration with what seems to be a severe lack of knowledge when they speak to the RPA. It was admitted to one farmer that a bunch of students were working there temporarily, and they simply did not understand the forms. Does my hon. Friend share my concern about that?

Sir Henry Bellingham: I certainly do share my hon. Friend’s concern. The NFU briefing stated that often the

“letters were vague and unhelpful”—

and that there was no clear commitment to improving communications. Furthermore, the Minister should be aware that the NFU is saying that the call centre has been unsympathetic and at times offhand and even rude to farmers. That is simply not acceptable.

Other hon. Members want to say a few words, so I will conclude with the one lesson that we must take away from the debate. Food security in Britain is incredibly important. The farming sector is one of our most important economic sectors, if not the most important for job creation, if we include food manufacturing and processing. It is a crucial sector. On the one hand, the Secretary of State and her team of Ministers, to give them credit, have been championing the sector. On the other hand, if the scheme is not improved and they do not get a grip on it, the very sector that they are championing will suffer unnecessarily. The Government pride themselves on competence and on Ministers really getting a grip on things, so I hope that the Minister present will live up to those expectations.

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Mr Clive Betts (in the Chair): Two more Members want to speak and we need to bring in the Front Benchers at 4 o’clock, so if you could each take no more than seven minutes, that would be helpful.

3.44 pm

Geoffrey Clifton-Brown (The Cotswolds) (Con): I am pleased to serve under your chairmanship, Mr Betts. I apologise to you and to Mr Speaker, because I did not intend to speak in this debate and that is why I have not written a letter asking to catch your eye, but I am delighted to be called. I congratulate my hon. Friend the Member for Wells (James Heappey) not only on securing the debate, which is of critical importance at this particular time, but on his clear and detailed understanding of the whole issue, which was very impressive. I am pleased to be following my good friend, my hon. Friend the Member for North West Norfolk (Sir Henry Bellingham). I, too, would like to talk about farming conditions in Norfolk, because I farm there, but I will limit my speech entirely to my constituents in Gloucestershire.

In common with the constituency of my hon. Friend the Member for Wells, the south-west generally has experienced an extraordinarily wet year. Conditions have been difficult for all farmers in the south-west. Mercifully, as yet, we have not yet suffered the severe flooding that we have suffered in the past, but that does not mean that conditions for farmers have not been extremely difficult.

My hon. Friend and other hon. Members have mentioned the volatility of commodity prices. I am sure that his farmers have things in common with my constituents, and I have a number of dairy farmers who have been clinging on, although I do not think that some of the smaller ones will be able to cling on for too much longer. As a result of volatile, low commodity prices, I think I am correct in saying that farming is at an all-time high of indebtedness. For many farmers that means that cash flow is critically important. In particular, as my hon. Friend the Member for North West Norfolk said, they have tax bills to pay this week, and if they do not pay them by Monday they will start to incur late interest payments, although no such payments are paid to them if their basic farm payment is late. I join others in appealing to the Inland Revenue to be sympathetic. If those farmers who have not yet had their basic payment are late with their tax returns, they should not be charged late interest. That would only be reasonable of the Government.

I cottoned on to the whole business way back in March. I am sorry to remind the Minister of this, but I asked him then if payments would be late this year and he assured me that they would not. What I would like from the debate is a full reply from the Minister as to what my farmers can expect going forward. Others have made detailed points, but we need to ensure that we understand and learn the lessons of the mistakes made this past year.

We all know about the IT systems, but I do not quite see why they have led to some 13,000-odd people not being paid by the end of January—that “vast majority” phrase I used in my intervention on my hon. Friend the Member for Wells. What does the vast majority look like? When can those 13,000-odd farmers expect to be paid?

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We then want to move forward and to ensure that the 2015 data of those who put in claims during 2015 are validated, so that they can start with that validated, prepopulated data on the system to make the whole business of the 2016 claim easier. I guess that claim will have to be done by the May deadline this year—it was extended to June last year—and that is not too long hence. We need to ensure that they have as easy a task as possible, and my hon. Friend made a number of really good points about that.

In common with many rural Members in the debate, a problem I have in many areas of my constituency is that they have no or very poor broadband connections. People find it difficult to make their claims. My hon. Friend made some good points about that as well, in particular about when the system drops out in the middle of a claim, so we need to ensure that up to that point it is saved, so that the whole thing does not have to be started again.

I have some questions about the IT system. Please will the Minister give us some realistic, concrete assurances that the IT system will be completed and up and running well before farmers have to start making their claims this year so that we do not repeat the poor start of last year? Is the IT system in-house or is it sent out to IT specialists? If the latter, will the same specialists be used next year and what lessons have they learnt?

We need assurance about 2016 payments because—while I do not want to cast gloom and doom on the industry—I suspect that if commodity prices stay where they are at the moment, conditions will be even more difficult by this time next year. It is therefore really important that farmers have certainty that their 2016 payments will be prompt, because when they speak with their bank managers they want to be able to negotiate a proper cash-flow system. I really hope that when my hon. Friend the Minister replies, he can give us some cast-iron assurances that turn out to be the reality.

3.50 pm

Simon Hoare (North Dorset) (Con): I had wanted to speak here, and while I thought that the Energy Bill Committee would preclude my attendance, such progress was made that we were able to have the afternoon off. I am therefore grateful to catch your eye, Mr Betts. I am incredibly lucky to represent North Dorset and predominantly the Blackmore vale and the Cranborne chase, where agriculture and all types of farming are deep within the DNA. Thomas Hardy, Dorset’s famous son, described the vast majority of my constituency as the vale of the small dairies. Against the trend, that remains the case, and long may it do so.

Back in the warm, balmy summer, as we sat under the awnings at the Gillingham and Shaftesbury show with the NFU in pouring rain, soaked down to our boxer shorts—another British summer of delight for farmers—I recounted the oft-told story of the two ladies who came up to London during the war. They were on a spree and wanted to have a look around the place, so they stopped a policeman and said, “Which side is the Foreign Office on?” and the policeman said, “By rumour, ours.” In relation to basic payments and the Rural Payments Agency, I said that we had had sound encouragement from Ministers and officials that the agency had got it and that clearly it was going to be on the side of farmers.

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We all know the backdrop, but it is worth briefly rehearsing it. There was the fall in the milk price—I am sure many of us have received a communication from Arla this week to say that its prices will go down still a bit further—and the reduction in commodity prices, compounded by bad weather in my constituency and many others in the south-west and the pernicious problem of bovine tuberculosis. That added up to farmers asking who could they look to for support and protection. I was able to say clearly, “Look, we have a majority Conservative Government and the Conservative party is many things, but, if it is anything, it is the party of the countryside. We understand the importance and vitality of the agricultural sector.”

Today, we have spoken about percentages. I am not sure whether 85% is the vast majority or whatever, but I always make this point: for a farmer waiting for that payment, non-payment is 100%. They cannot pay the feed bill, the vet’s bill, the fuel bill or for the car insurance just because their farming neighbour next door luckily got his payment. Farmers will be anxious about that.

That is why I raise this point. It is not the cheap knocking point we often make about officials and civil servants, but one is inexorably led to say that if perhaps there were more people with agricultural experience in the agency, they would understand more acutely and, as was mentioned my hon. Friend the Member for North West Norfolk (Sir Henry Bellingham), with greater sensitivity the importance of the payments. The basic payments are not the icing on the cake—for many farmers they are the cake. They are the difference between staying in business and going out of business.

Nigel Adams: My hon. Friend has put his points eloquently. Has he had any conversations with his farmers about the potential impact downstream—not too far downstream—of the national living wage? I have spoken to many growers who are very concerned about it. Does he share my worry on behalf of farmers, who will need some time to adapt?

Simon Hoare: My hon. Friend makes an incredibly valid point. Spiritually, I am a huge supporter of the living wage. It is a good thing and it is a credit to the Government that it has been announced, but it will clearly have a harder and greater impact on sectors of our national economy that trade at more marginal levels, and farming and agriculture is one of those. Given the good offices of the NFU and the fact that it is campaigning strongly on that, I hope that those messages will be heard in the Treasury and perhaps some form of taper might be introduced to ease in the living wage and stagger the impact.

Let us consider a catastrophic failure of UK agriculture. Farmers trading at the margins—my hon. Friends the Members for Brecon and Radnorshire (Chris Davies) and for Berwick-upon-Tweed (Mrs Trevelyan) represent some of the upland farmers and areas with strong dairy sectors—have been buffeted and blown around by so much over the years, but this is the last piece of wood in the game of Jenga to be pulled out, so the tottering edifice suddenly finds that its foundations are so flimsy that it collapses before our eyes.

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Of itself, that would be devastating, but it is worthwhile to set out the impacts. It would clearly have an impact, as referenced by my hon. Friend the Member for Wells (James Heappey), on food security. In a wider sense, it would have a deleterious impact on the nation’s biodiversity. It would have a huge impact on tourism, because our landscape, as we know, is not a natural one in great part. It is the product of centuries of farming and, when that goes, the beauty of the British countryside will be impoverished. For those farmers giving up, it will by necessity have a huge impact on their health—physical or mental—with a concomitant increase in demands on services. It would see an increase in the welfare bill, as farmers who have only been trained to be farmers and who are not in areas where diversification into other trades is readily possible suddenly find themselves at the end of their working career long before they envisaged. It would have a huge impact on so many areas of our national life.

There is often nothing more exhilarating than seeing the rural Conservative party in full cry after a Minister, but I think we will look to him this afternoon—our tails are up, our noses are down and he is giving good scent—[Laughter.] We are hunting within the law. We are not looking for a kill, but we are looking for clarity and certainty from him that he has confidence in the agency’s ability to appraise itself and not just trot out the phrase “lessons will be learnt” and then say, “Right, we have used that phrase, so we can go back to our usual management speak,” but ensure that the lessons learnt from the process are picked up. The agency must play its part along with others to ensure the long-term viability and vitality of our vital UK agricultural sector.

Mr Clive Betts (in the Chair): We will now move on to the Front Benchers, who have 10 minutes each.

3.59 pm

Ian Blackford (Ross, Skye and Lochaber) (SNP): It is a privilege to serve under your chairmanship, Mr Betts. Before I begin, I draw Members’ attention to my entry on the Register of Members’ Financial Interests: I own a croft in the north end of the Isle of Skye. This issue is important to us all, and it is certainly important to me as a small farmer. I thank the hon. Member for Wells (James Heappey) for securing this debate, which is important to us all in this Chamber. I also thank all Members who have spoken in the past hour or so with such passion and concern for their constituents.

The hon. Member for Wells said that farmers are not in the habit of writing to their MPs; that is a very important point. I go to our local marts, where people are selling livestock, which presents a great opportunity to hear people’s gripes, groans and mumbles. It is important we take seriously the contact we have with crofters and farmers, and that we understand the concerns they all face.

Many Members spoke of the importance of the agricultural sector to our economy. The hon. Members for Wells and for North Dorset (Simon Hoare) mentioned the importance of landscape, which I want to reiterate. We have to ensure that our farmers and crofters have a lifestyle that is supported and that they accept their obligations to look after the landscape. That is very important.

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I particularly enjoyed the end of the speech by the hon. Member for North Dorset, when he said that a number of Tory Back Benchers were in full cry after the Minister. I felt for the first time in this Parliament that we were making common cause, so his words were welcome. I thank all hon. Members who have spoken: the hon. Members for Wells, for Brecon and Radnorshire (Chris Davies), for North West Norfolk (Sir Henry Bellingham), for The Cotswolds (Geoffrey Clifton-Brown) and for North Dorset. The hon. Member for North West Norfolk mentioned floods. Support for farmers in flood-hit areas is important and something that both the Scottish and UK Governments take very seriously, and there is support for that.

We all recognise the importance of crofting and farming and ensuring the right support. We need to retain farms and crofts as part of our landscape across the country. From the Scottish National party’s point of view, in general, the new scheme is welcome. The crofters in my area will benefit quite substantially over the years to come. Support for crofters and farmers will increase from £30 million in 2013 to £33 million by 2019. That is most welcome and a recognition of the importance of their activities to our country.

We should remember that basic payments act as a safety net for farmers and crofters by supplementing their main business income. To qualify for support, farmers must actively farm their land and produce agricultural products that the public want. The scheme also delivers environmental and other benefits by requiring farmers and crofters to meet certain practices and farm in a sustainable way through cross-compliance.

It is worth explaining what has been happening in Scotland, including the challenges the scheme has brought and how that contrasts with the experience in England, Wales and Northern Ireland. Compared with previous years, basic payments have been delayed due to CAP complexities. The payment window of 1 December 2015 to June 2016 is the same as normal. However, delays with the development of the system meant that the Scottish Government were not ready to make payments as early as in previous years.

There have been 21,050 applications for CAP funding to process, 19,160 of which were for basic payments and the remainder of which were for other non-basic payment schemes. Under EU rules, only claims that have been fully checked and validated can be paid. The Scottish Government face the possibility of a financial penalty being imposed by the EU if that is not adhered to. There is a risk of reputational damage if a customer is overpaid and subsequently asked to return payments.

The key issue with the basic payment scheme, which NFU Scotland has raised concerns about, is that CAP reform has introduced complexities that have resulted in payments being made later than usual. The first direct farm payments arrived into bank accounts from Hogmanay onwards. Around 3,500 crofters and farmers have had payments from the Scottish Government, with a first instalment of 75% of their basic payment and 90% of the greening payment. The issue of part payment, which has been raised by many hon. Members, is important and is one that the Scottish Government were happy to take up.

The first payments have been made to around 3,500 farmers and crofters, totalling about £33 million. Further payments will be made between late January

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and April, in line with the payment schedule announced in December, and the Scottish Government will continue to work flat out. The Government and the NFU have engaged in dialogue with the banks to ensure the banks have been supporting both the farming and crofting communities. Initial payments will be worth a minimum of 70%. Those first payments were, generally speaking, the simplest cases that the Scottish Government were able to safely pay at higher percentages. Payments were also made in two parts in the last CAP reform in 2005, when the single farm payment scheme was introduced.

To help farmers understand what is happening, they have been sent an explanatory mailing. Letters have been issued to around 16,000 claimants with an estimate of the value of their new payment entitlements, and remaining claimants will get theirs when their entitlements have been calculated. A customer helpline was launched on 4 December 2015 to answer questions on payments and entitlements, and there have been approximately 1,278 calls to date.

As we understand it—I am sure the Minister will clarify this—33,000 farmers, or 38% of claimants, were paid in full in England on 1 December 2015, and 18,000 payments had been made in Northern Ireland by 4 December. England faced the additional cost of abandoning the online process and moving to a paper system, totalling £3 million to £4 million in March 2015, due to serious failings of the IT system. More farmers have been paid in England, as they have a less complex policy to implement.

In Scotland, there is added complexity with additional schemes, coupled with a new IT system, as the online process has not been abandoned in Scotland. Wales, like Scotland, will pay in two instalments to avoid a situation where farmers and crofters do not receive any funding until much later than normal in the payment window. That also avoids a situation where a customer is paid earlier but incorrectly and is then required to reimburse the Scottish Government. Some calculations are complex, and those cases, of which there are approximately 1,200, have yet to receive a letter. The Scottish Government are working to resolve those issues.

We have discussed the issue that many farmers may be tempted to leave the market. That is something we have seen in many of the crofting counties in Scotland over recent years. The Scotland Government recognise that Scottish crofters and farmers still receive the lowest level of support among farmers throughout the European Union. One plea I make to the Minister is that he revisit at the earliest opportunity the convergence uplift money, because that would make a big difference to crofters and farmers in Scotland. We should remember that when the European Union granted to the UK €223 million of additional support, it was principally to support Scottish crofters and farmers, yet we are not getting our fair share of that money.

We have talked about a review to come in the future, but the industry is facing a crisis. We are facing low prices, as well as unprecedented weather. In crofting counties in Scotland, crofters were still feeding beasts well into June last year. The cost of feeding animals has risen dramatically, and the value of livestock has declined. We need to ensure that our crofters and farmers get what they deserve. I appeal to the Minister for an early review of the convergence uplift system. We must ensure that people get their due regard.

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4.8 pm

Nick Smith (Blaenau Gwent) (Lab): It is a pleasure to serve under your chairmanship, Mr Betts. I thank the hon. Member for Wells (James Heappey) for securing the debate, and I also thank colleagues who have intervened and made contributions.

We have just heard a farmer’s deep lament, and the Minister has been pursued across these green fields today by his Back Benchers. The basic payment scheme is a bedrock of our agricultural industry. About 87,000 farmers and businesses depend on the payment to balance the books, to ensure workers are paid and to keep the bills from piling up. It is an important income when farm gate prices are low.

The Government wheeled out a new IT system to handle the payments for 2015—a system they were so confident in, it was hailed as a “digital exemplar”. Instead, it is a failed system that has cost the taxpayer millions, threatened us with hundreds of millions in penalty payments for years to come and put the livelihoods of many hard-working families at risk.

I have been talking to farmers since the Rural Payments Agency started making payments last autumn. They are worried and face mounting bills while they wait for money that the RPA refuses to give them a meaningful deadline for. How have the Government responded? They have been telling farmers to take out bank loans for which they will put in a good word—clearly a case of double standards, from a Government who were previously very keen to talk about paying off the credit card. One family farmer, who admitted to me that their bank overdraft was teetering at the edge of its current limit because of the lack of payment, put it like this:

“I believe that through no fault of their own, farmers deserve better.”

That is a powerful and sobering message.

Farmers do not deserve an IT system, designed to give them peace of mind, that stalls in such a spectacular fashion. The latest National Audit Office report was damning about a project that spiralled £60 million over budget; saw four leaders of the flagship system in just 12 months, with too many changes in direction; and saw top management embroiled in deep rifts that put stress on staff and led to childish squabbles and confrontations. The system failed so badly that pen and paper applications had to be introduced at the last minute. When I challenged the Minister at the Dispatch Box on why his Department had not got a grip, he talked up its intervention after the IT failure.

Staff have been working tirelessly since March to get applications finalised. Their Stakhanovite, round-the-clock efforts should be commended, but my question is simple: why did key Ministers not intervene sooner still to make sure that this IT project worked, so that the whole sorry debacle was avoided?

Farmers are paying for these mistakes, but all of us may soon be doing the same if the situation results in penalty payments to the EU. The Financial Times reported this week that Britain is facing £180 million worth of fines a year over failure by the RPA. The Secretary of State told the Select Committee on Environment, Food and Rural Affairs this week that one of DEFRA’s major savings could be to reduce those penalties in future. It intends, as the Secretary of State said, to

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“stop paying out money in fines that we could be putting into farms, environmental stewardship and flood defences.”

To test that point, with DEFRA budgets being slashed, does the Minister have an estimate of the amount of disallowance that will be paid as a result of this year’s failings?

In the short term, however, the Department must concentrate on ensuring that farmers get the money that they need as soon as possible. The farmers I have spoken to echo the NFU’s concern that there is a “fog of confusion” about when farmers will now receive their money. When I and colleagues warned the Government that thousands might be left without their basic payment for months, we were confidently told—I have heard this phrase already this afternoon—that the “vast majority” of payments would be made by the end of January. I am sorry to say that unless the Minister has much better news for us this afternoon, the “vast majority” target set by his boss has been missed by some margin.

In recent weeks, I wrote to the RPA chief executive because I was concerned that the target could be a problem. Unfortunately, that concern has proved to be the case. In a letter from the RPA chief executive today, I found out that 61,300 of 87,000 farmers have received this vital payment; £850 million of the allocated total fund of £1.43 billion has been handed out. That means that just under a third of farmers will not have received their payment and that 40% of the money remains unpaid.

Farmers will feel rightly let down by DEFRA Ministers’ hyperbole. This will be a kick in the guts for many. To put it in context, 95% of farmers in last year’s scheme were paid on the first day possible. Will the Minister now put farmers’ minds at rest and say when the target of the “vast majority” of payments will be reached? Can he put a firm figure on what a “vast majority” even is?

The new basic payment scheme IT system has been useless. Consequently, increased payments to Brussels look inevitable. Many farmers have been let down, so who is going to take responsibility for this sorry tale?

4.14 pm

The Minister of State, Department for Environment, Food and Rural Affairs (George Eustice): I congratulate my hon. Friend the Member for Wells (James Heappey) on securing this highly important debate. I completely understand—a number of hon. Members have discussed this—the importance of these payments to farmers, particularly in a year when farmers have suffered low commodity prices and when sectors, such as the dairy industry in particular, have been in the doldrums and suffering severe difficulties.

I will begin by agreeing with the hon. Member for Ross, Skye and Lochaber (Ian Blackford), who has the analysis of what has caused these problems this year absolutely spot on. He was no doubt briefed by the Scottish Government, who have had similar problems. The root cause of our difficulties is the new common agricultural policy. We aimed to get a simpler CAP in the last Parliament. However, we have ended up with something far more complex, because the European Commission was determined to add what it called the greening of pillar 1 payments. We therefore have to map every hedge in the entire country, and there is a whole plethora of rules about the minimum width of a hedge,

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the maximum width of a hedge, what size a gateway can be, what type of crops can be grown over the other side of a hedge—and it goes on and on forever. There is an incredibly complex set of greening rules, including the three-crop rule that every farmer must now grow three different crops on their holding.

In addition, we have seen the integrated administration and control system—a very intensive system of enforcement —brought into the pillar 2 schemes, which has also added complexity to our countryside stewardship scheme, which is causing a parallel problem.

To deal with all those problems, we needed a new IT system. The truth is that the core of that system—the bit that processed the rules—actually worked well. It was made by a company called Abaco, which had a track record in this area. The bit that processed the rules worked well, as did the payment engine—sometimes called the back end of the system—which is successfully paying people.

The bit that we had difficulty with at the beginning of last year was the interface at the front that was supposed to enable farmers to do their online applications. We realised by the time that we got to the end of February that it would not be possible to make that dovetail successfully at the correct speeds needed to do online applications last year, so we had to switch to a paper-based application and delay the deadline for a month.

I want to put on record my praise for the work that the RPA has put into the scheme. A number of hon. Members have been critical of the RPA, but I think that it falls to me, as the person who is dealing with it week in, week out, to praise its work. We have had between 800 and 1,000 people in the RPA working on this seven days a week to try to get these applications on the system and to get payments out to farmers as quickly as possible.

My hon. Friend the Member for Selby and Ainsty (Nigel Adams) asked whether we had the right expertise in the RPA. It is true that, in a typical year, we would have about 400 people working on BPS applications. We have brought in additional people from other agencies, as well as what is called the surge force of civil servants working in the Cabinet Office—a flexible team of people who can be deployed to unexpected workloads. Therefore, people are there who have not traditionally been in the RPA; nevertheless, they have worked incredibly hard to get to where we are now.

Turning to the RPA’s leadership, my hon. Friend the Member for Wells pointed to the exceptional track record we have had over the past three years. It was not always like that. A decade ago, things were in an incredibly bad state. Today, the same leadership team are turning around the difficulties we had at the start of this programme. They have delivered the exceptional results that he pointed to, and I have great confidence in them.

I will just point out what has been achieved to date. We took on this difficult position and paid 33,000 farmers on day one—on 1 December—when the payment window opened, and we had paid more than half by the end of December. As of yesterday—a number of Members have pointed this out—we have paid 61,278 farmers. That takes us to just over 70%. As I speak, we are working on the final batch of payments, which will go out before the end of March and will take us to the vast majority of payments having been made.

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James Heappey: I suspect that the Minister misspoke, but I invite him to clarify what he said. He said that we are working today on payments to be made by the end of March. Does he mean the end of the month?

George Eustice: Sorry, yes, I meant by the end of the month—I am sorry if I said by the end of March. We will have a final batch, which will take the figure probably above 75%, but it is not certain; that is still being worked on now.

We should highlight the fact that we worked quickly to get the dairy support fund out. It went out earlier than expected in the middle of November to help hard- pressed dairy farmers.

Nick Smith: I was just listening to the Minister’s comments. Will he confirm whether he thinks that the “vast majority” is 75% of farmers? Is that the definition he is using?

George Eustice: We could agonise over the definition of “vast majority”, but as far as I am concerned, “over 60,000” is a vast number of applications and a vast amount of work has gone into processing them.

We should recognise what has been done on the entry level and higher level stewardship schemes. Again, we had a difficult start because of the paper application process, but 97% of applicants have now had their first instalment and 60% have received their second instalment a month earlier than normal. We have made progress, but there is further to go.

Some people will ask why we cannot just pay and why things are so complicated. As the hon. Member for Ross, Skye and Lochaber said, there is a good reason for that. Under regulations and law, the EU requires certain inspections and verification to be carried out. The truth is that we tried to get the Commission to relax those requirements to enable us to expedite payments this year, but it refused. We cannot make those payments from the EU until those various checks and the validation of claims have been completed.

A number of hon. Members referred to communications. In November, we wrote to around 15,000 farmers whom we anticipated would not be paid by the end of January. The two primary groups are some 4,700 farmers with common land—I will come back to them—and around 9,000 farms that had inspections of one sort or another.

A number of hon. Members mentioned part-payments. We considered this, but we ruled it out and I will explain a couple of reasons why I think that we were right. Scotland has decided to make part-payments. It has 3,500 farmers and, according the latest figures I have seen, around 18% of them had received a part-payment of 70%. Compare that with this country where 70% of farmers have received everything. That is a better position to be in. Had we taken a decision in November at the end of last year to start chopping and changing plans again and messing around to try to get part-payments out, even fewer farmers might have received them, never mind receiving full payment.

Sir Henry Bellingham: I accept the Minister’s point about the overall strategy at DEFRA, but what about those really difficult and deserving cases with very complicated problems of reconciliation, cross-compliance

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and so on, such as those with commons? Surely, there is an argument in those few rare cases to go for part- payment.

George Eustice: I will come to that, but we should remember the experience of 2005. Some hon. Members have said we should learn lessons. Let us remember that in 2005 no one was paid in December, no one was paid in January, no one was paid in February and no one was paid in March. The first farmer to be paid was paid in March. Then, the last Labour Government decided to switch to a part-payment system and got themselves into a complete muddle that took a couple of years to sort out because of all the reconciliation that had to be done afterwards. They found that farmers had received inaccurate payments and it caused all manner of difficulties. For that reason, we should be cautious.

We should realise that, as a number of hon. Members have pointed out, the payment window does not open in May, but closes in May. The next application window opens in March, which is not long to go—five or so weeks. I want staff in the RPA to be working on making sure we get next year’s applications right and through, rather than messing around doing part-payments of this year’s applications.

I want to say what we have done. We have introduced a hardship fund. We have worked closely with groups such as the Farming Community Network that provide a triage process. If a farmer is suffering real hardship and cannot, for example, buy feed for their cattle, they are fast-tracked. In some cases, if we can we speed up an application, we make we sure we get it through as quickly as possible. In other cases when we suspect they will not be paid in a hurry, we have in many cases made part-payments on account cash-flowed by the Treasury—not EU-funded, which would expose us to difficulties, but on account from the Treasury.

Geoffrey Clifton-Brown: Will the Minister give way?

George Eustice: I will not give way because I want to cover a few more points and leave time for my hon. Friend the Member for Wells.

Some hon. Members have talked about the banks. I have been meeting them regularly and encouraging them to show forbearance to farmers. One reason why we sent a letter last November to those who were not expected to get their payment at the end of January was that they could take it to the banks, which were ready for that.

A number of hon. Members talked about communications. As I said, a letter out in November and a further letter has gone out to those not receiving payments now, in January. The RPA has held almost weekly meetings with key NFU office holders and regularly attends NFU councils, so I do not accept the allegation that people have been kept in the dark and not informed. What I can understand is the understandable frustration among farmers who have not yet received their payments. That is spilling out in criticism of communication, which is probably a little unfair.

I want to talk about next year. A number of hon. Members asked about lessons. The reality is that we now have all these data on the core system. For next

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year, farmers will start from the position they left off in this year. We are confident that having done all the difficult work to get those applications on, from here forward it will be far easier. We will offer paper applications to those farmers who want them next year, but we hope that those who were previously online—about 70% up until 2014—will return to being online.

I want quickly to cover the issue of commons, which was raised by a number of hon. Members. We had a legal challenge from a local authority in Minchinhampton. It challenged the very basis on which we used to make payments and it caused huge difficulty for everyone. The issue is not about just having a plan B; the problem is that the methodology that it has now forced on us through its challenge means that it is impossible to pay anyone on a common until we have resolved all those claims. Our biggest difficulty in relation to many of these commons is that the National Trust has a large, complex claim that has always taken a long time to resolve. That has caused us a particular difficulty with common land, but we are recognising that and doing what we can to try to speed things up.

I want to leave a bit of time for my hon. Friend the Member for Wells, but I will answer these questions. My hon. Friend the Member for The Cotswolds (Geoffrey Clifton-Brown) asked about the deadline for this year. It will be May; it will go back to the normal time. My hon. Friend the Member for Brecon and Radnorshire (Chris Davies) talked about some of the difficulties that the Welsh Government have experienced with requirements imposed by the EU, particularly in relation to accurate mapping and the difficulties with shade from woodlands. This goes back to my initial point. We are now in an era with an incredibly complex CAP, causing many difficulties.

We have had a very important debate, covering many different issues. We have not got on to the exciting issue of the European Union and the potential impact of the referendum, but we will have much more time to discuss that in the months ahead.

4.27 pm

James Heappey: I thank all hon. Members who have spoken in today’s debate and all those who made themselves available to brief us so that it could be so well informed. I would like to pick up a couple of points. I am very grateful to the Minister for attending. He is a worthy champion of our nation’s farming and fishing and has addressed the vast majority of the issues raised in the debate. He will expect us to hold him to account as we move forward. An uncertainty does remain, and that uncertainty is deeply worrying for our farmers; we have to recognise that.

We need to be absolutely clear about when the remaining payments will be made. I appreciate that it is very difficult to do that from the Minister’s place in a debate such as this, but I assume that the RPA is watching and I know that he will chase it when he gets back to his office to make absolutely sure that the plan for the remaining payments is communicated accurately and urgently, so that people know when their money will come. The point about speaking with colleagues at the Treasury to discuss what can be done about the looming tax deadline is a very good one, and I hope that the Minister will work on that.

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The Minister spoke about the IT system being good enough for Government work in its core process and in the payment engine. I just hope that he will note my suggestion, which has been made to me by others, that a system that is rural-proof—and that therefore saves every time someone clicks “next”—would be an important development.

George Eustice: I can confirm that the system already enables people to save part-prepared applications. I can confirm also that we are in constant dialogue with the Treasury and HMRC to encourage them to show forbearance.

James Heappey: My time is slipping by quickly, but I believe that that is an active decision to save. An automatic one, because people are not in control of when their system crashes or their broadband drops out, might be a worthwhile improvement.

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Most important of all, will the Minister reassure us that the RPA, although it is in very close contact with the big issue of making the remaining payments, has the space also to plan for what might come next year, and that these lessons can be applied? It would be unforgivable to have all the right urgency in making the remaining payments, but then for the lessons not to be applied for next year, so the same mistakes are made again. The Minister will expect us to hold him to account on that as we go forward. It is an urgent issue. We need to ensure that the mistakes are not repeated in relation to this year’s applications and next year’s payments.

4.30 pm

Motion lapsed, and sitting adjourned without Question put (Standing Order No. 10(14)).