Commons Sitting of 17 July 1996

Preamble
The House met at half-past Nine o'clock
PRAYERS
[MADAM SPEAKER in the Chair]
PRAYERS

  Co-operative Movement
  Motion made, and Question proposed, That this House do now adjourn—[Mr. Bates.]
  9.34 am
  Mr. Ken Purchase: I must start with a declaration of interest as I am a fully paid-up member of both the Labour party and the Co-operative party. I stand here as an official Labour and Co-operative party Member of Parliament. At the forthcoming election I shall stand as an official candidate of both parties. Indeed, it is my hope that the media will so designate me and my 25 colleagues who will also stand as Labour and Co-operative candidates.
  It should not trouble Conservative Members that the Co-op is a loyal supporter of the Labour party. We are not troubled by the firm support given to the Conservative party by its retail friends and other friends in big business. It is not surprising that the people's business should support the people's party via its own political party. The difference is that the Co-op supports the Labour party via the Co-operative party quite openly, whereas one is never quite sure which businesses do or do not support the Tory party, not least because businesses operate under such a variety of trade names.
  The Co-operative party was set up in 1917 to put co-operators into Parliament. It is the political party of the co-operative movement. Our first Member of Parliament was elected for Kettering in 1918. We currently have a parliamentary group of 15, with four in the Lords and six Members of the European Parliament. We also have more than 700 local councillors. Our first Member of Parliament took the Labour Whip, and from 1925 the Labour party and the Co-operative party have been linked by a formal national agreement.
  I should mention at this point that following the new proposals on openness and transparency in the House, the Co-operative party has just written a new agreement with the Labour party to ensure that that transparency is there for all to see and to understand. It is only the fourth time since 1945 that that agreement has had to be renegotiated.
  There are three key concepts of great importance to the co-operative movement. First, the Co-operative party is a political party representing the co-operative movement. Our candidates stand as joint representatives of the Labour and Co-operative parties. That link is also declared in our election literature so there is no pretence or camouflage.
  I hope to demonstrate by example what co-operative principles mean in practice. To take a wider view, the co-operative movement in the United Kingdom is
  1060
  significant because of its economic impact and the diverse range of products and services provided by its members. Co-operatives are active in retailing, insurance, banking, agriculture, housing and in a variety of industrial and commercial activities as worker co-operatives and credit unions. Those unions are the fastest growing sector of our movement and they enable members to save together to provide loans at very low rates of interest.
  The diversity of the co-operative movement is reflected in the range of services organised co-operatively and include taxi drivers, actors' agencies, general practitioners and even some symphony orchestras. I hope that Members who belong to the Wine Society, which was founded in 1874, will not be too surprised to learn that it is also a co-operative. Tower colliery in south Wales is one of the newest and most successful co-operatives, showing what can be achieved when workers come together for their mutual benefit.
  Co-operatives make a major contribution to the economic life of this country. The ubiquitous Co-op, with nearly 5,000 outlets, is a force to be reckoned with on the high street and out of town. It has a combined turnover of about £7.5 billion and employs about 120,000 staff nationwide. Following the creation of Milk Marque, the co-operative that replaced the milk marketing boards, the turnover of the agricultural co-operative movement approaches that of the retail sector.
  Other sectors are much smaller but provide the crucial element of choice to their members. Latest estimates suggest that about 10,000 co-operators are working for their own benefit in 2,000 worker co-operatives. I pay tribute to the industrial common ownership movement, which is to be congratulated on the work that it has done since the introduction of the Industrial Common Ownership Act 1976.
  Tenants are exercising control of their living environment in more than 530 housing co-operatives. There are 500 credit unions, encouraging their members to save and providing low-cost finance to members, many of whom lack access to traditional forms of credit. For instance, in my constituency, there are now three credit unions, all in what might be termed areas where income is at a premium, where people have often been exploited with high-interest loans. Through the new system of credit unions they are gaining access to low-cost finance. An increasing number of employees of large organisations, such as British Airways, the local authorities and the police service, have joined credit unions or formed credit unions of their own.
  Co-operatives are dynamic organisations, responding to their members' needs and gaps in the marketplace and in the competitive environment in which they operate. Imaginative projects are developing in every sector. In the past two years, The Creative Consumer Co-operative Ltd. raised more than £800,000 in a share issue to open a chain of shops entitled Out of this World. These embodied the value of ethical customers—those who want to shop for a better world. Its fourth shop, in Oxford, is about to open, following in the footsteps of Bristol, Newcastle and Nottingham. Four more are planned, responding to the demands of shoppers in towns and cities throughout the country.
  In February this year, Lord Merlyn-Rees, with the support of the Co-operative bank, launched the Co-operative Housing Finance Society. It seeks to build

  1061
  on the advantages of fully mutual housing co-operatives, by creating a financing system that will achieve lower funding costs and greater availability of loans to housing co-operatives. Already, agreed facilities of about £24 million have been put in place, with commitments from the Nationwide, Woolwich and Alliance and Leicester building societies.
  I mentioned the recent formation of general practitioner co-operatives to respond to the demands of their new contract. Co-operatives of nurses and care workers are also springing up, and a great deal of interest is being shown in co-operatives as a vehicle for delivering health care. That process culminated in a research study by the Department of Health into the relevance of community well-being centres to the objectives in "The Health of the Nation".
  Recently, in response to the Government drive towards the total privatisation of residential care for the elderly, my colleague, my right hon. Friend the Member for Manchester, Wythenshawe (Mr. Morris), launched his co-operative care initiative to set in train the process of setting up not-for-profit day centres and residential homes, to offer a service that responds to the wishes of elderly people, many of whom are anxious that their care is being bartered on the open market.
  The first such schemes are due to be announced later this year and will come on stream soon afterwards. In the black country, in Walsall, a carers' co-op, Walsall Carers' Co-operative, has already operated for about five years, employing about 150 workers who also own the business. They have done a splendid job in co-operation with Walsall social services, providing excellent services for many people in that borough.
  Credit unions are expanding rapidly. I welcome the discussions between the two organisations representing credit unions nationwide, and hope that they will lead to more effective representation to national Government of their members in future.
  Following years of growing disenchantment with agricultural co-operatives, the creation of Milk Marque shows a growing recognition by farmers that their interests in the marketplace can best be represented by the co-operative form of enterprise.
  Overlaying all that activity has been the formation of a representative body for the co-operative movement—the United Kingdom Co-operative Council. Established four years ago as a successor organisation to the National Co-operative Development Agency, the UKCC has undertaken many useful studies. It has established a forum for discussion of relevant issues and created a voice for the co-operative movement in its dealings with Government and Government Departments. Perhaps the most beneficial effect of the formation of the UKCC has been the increasing recognition and understanding of the common concerns of each of the different sectors of the co-operative movement and the need for a unified approach to finding solutions.
  I shall briefly consider several of these concerns. Much heat—but often, sadly, not much light—is generated when the Government attempt to establish what is commonly called a level playing field. Even a superficial comparison shows that that does not exist between co-operatives and their competitors in the company sector.
  1062
  Whereas there have been successive Companies Acts in the past 17 years, the Government have not even taken the opportunity to include co-operatives in many of the provisions of those Acts. Administration orders, created in the reform of the insolvency laws, allow companies in financial difficulties the option of continuing trading in a form of receivership which allows the possibility of re-establishing the business as a going concern at some time. That option is not available to co-operatives, which must either merge or go bust when they could be offered an alternative that might lead to a better outcome.
  Registration of a co-operative is significantly more expensive than registration of a company, and more bureaucratic and time-consuming. As a result, many co-operatives can and do register as companies under the Industrial Common Ownership Act 1976. In recent years, most new co-operatives have used the company format in preference to the more traditional Industrial and Provident Societies Acts, and this is likely to continue, even with the limited changes made in recent deregulation orders.
  That failure adds considerably to the confusion that currently exists between co-operatives and companies. Not all organisations registered under the Companies Acts are companies, and not all organisations registered under the Industrial and Provident Societies Acts are co-operatives. Co-operatives should have a clear identity, which specifies the unique difference between them and their competitors in the company sector.
  Many would comment that recent reforms in company legislation and in the legal framework and regulatory regime for building societies and friendly societies, requiring greater disclosure and accountability to members or shareholders, give co-operatives an added advantage. That is not.so.
  Member investor confidence is as crucial to the success of a co-operative as shareholder confidence in the company sector. The retail co-operative sector has therefore introduced a code of best practice in corporate governance, which it hopes will achieve the highest standards of transparency and accountability. That followed a report of an eight-member working party which examined the unique features of co-operative organisations. Its key recommendations included the disclosure of contracts and remuneration of chief executives and directors; regular reviews of members' activity, policy and practices; and clear and detailed annual reports, providing balanced and understandable assessment of the society's financial situation, which can easily be understood by its members.
  Members welcome the higher standards inherent in current company legislation as a reflection of their commitment to the co-operative movement's ethical values of openness, honesty and social responsibility.
  Most seriously, co-operatives are disadvantaged by company law and taxation regimes. In a recent consultation exercise carried out in the co-operative sector, considerable concern was expressed about its future status, arising from the flood of conversions of major building societies. Among the reasons given by the Halifax, Abbey National and the Woolwich for their decision to demutualise were: the need for greater access to capital; diversification; risk; and, in some cases, size. Interestingly, any claims that conversion would achieve greater efficiency have been rather muted. Perhaps that has something to do with the conclusions of the recent

  1063
  Government review which showed that the sector not only ensures diversity and choice but is characterised by organisations that are financially strong, well capitalised and efficiently managed. That has been amply borne out by independent research comparing building societies with their competitors in the private sector.
  The consultation document, including the Minister's last-minute additions to it, was published in March and contained proposals for a new building societies Bill. It has proved a disappointment. It certainly does not live up to the claims that it will give equal treatment to societies that remain mutual and those that convert. With the Government remaining deaf to the pleading of the sector for protection against speculative short-term investment, it is clear that if building societies' status is to be assured, that will depend on their own determination.
  I remind Members that the original purpose of our building societies was to provide a haven for local investors—in bricks and mortar; to ensure that people who wanted to build and live in houses in their own communities had access to reasonably cheap finance; and to give local trades people in the construction industry an outlet for their work. The system worked remarkably well, and only in recent years has the deterioration in a local approach become apparent.
  A recent Touche Ross report highlighted a number of key ingredients for success, among them the leadership and the membership of a building society. That is already recognised by a number of societies that remain committed to their mutual status—most notably, the Nationwide and the Bradford and Bingley, not to mention my local society, the Birmingham Midshires.
  I welcome this return to the original objectives on which the movement was founded. Quite apart from the abject failure of the Government to recognise the co-operative sector as a valid and viable form of business, the lessons for the mutual movement, which includes the co-operative sector, must include a recognition of the dangers of losing touch with the membership and of power residing with a management over which members have little or no influence.
  Co-operatives are democratic organisations, based on the principle of one member, one vote. As commercial organisations, co-operatives also have to work in a competitive environment; hence they need to raise capital to expand their businesses. These two pressures often conflict and push a co-operative in opposite directions, but both are critical to its success and must be considered as such.
  I start from the premise that co-operatives should be financed in a way that allows them to achieve their primary objective of providing benefits to their members. That means that they must remain under members' control. In short, the guiding principle is that labour shall employ capital: not the other way round. But in a world dominated by the owners of capital, co-operators have often been limited by a rigid adherence to the principles of their movement, which call for a limited return on capital.
  More recently, there has been a widespread recognition—reflected in the new co-operative principles agreed at the International Co-operative Alliance congress in Manchester last year—that co-operatives must secure adequate finance in a way that does not sacrifice the members' control of the enterprise. That clearly implies change, albeit limited.
  1064
  Capital can be raised from only three sources: from members, from internal sources, or from outside the co-operative movement. Recognising the limitations on the first two sources, the debate in recent years has concentrated on opportunities to raise capital from outside, and the consequential impact on the organisation and its members. It should be admitted at the outset that a number of recent studies in different sectors have tried to show that there is no shortage of capital, and that the main problem for co-operatives is to make better and more efficient use of the capital already at their disposal. I do not want to enter that debate today, although I recognise that we must all strive towards the most efficient use of available resources. There is broad agreement, however, that if the co-operative form of enterprise is to become more widely accepted, access to new sources of capital must be made easier.
  Consider as an example the creation of the permanent interest-bearing security as a mechanism for raising funds for the expansion of building societies. Experience has led to the creation of a specialised market for this type of security, in recognition of the special mutual features of building societies. The same would apply to co-operative societies, which would require a similar type of special security in recognition of their unique co-operative nature. The complex legal requirements and costs attached to raising finance—listing particulars and issuing prospectuses—militate against traditional share offers for the development of co-operatives.
  An alternative would be to seek new ways of tapping funds from the retail savings market. Currently, co-operatives, mainly in the retail sector, raise capital both from members and by co-operative bond issues. Both ways encounter increasing difficulty competing in the sophisticated retail savings market. The advent of PEPs and TESSAs, offering tax incentives, is having a devastating effect on this traditional source of income from members' funds—yet when the matter was raised in the House the Minister objected to a co-operative TESSA on the grounds of the costs of compliance with the financial services and banking Acts. Retail co-operatives are already subject to heavy compliance costs associated with the co-operative deposit protection scheme. Indeed, escalating compliance costs have become a political hot potato, especially among smaller financial institutions such as friendly societies.
  In any review of compliance costs, recognition of the special features of member organisations might offer opportunities for co-operatives to raise funds in the retail market.
  Democracy lies at the heart of co-operative activity, but for that democracy to be meaningful members must be fully informed and in a position to exercise their responsibilities as owners of the business. Hence the importance of member education. In recent years there have been numerous examples across all sectors of the movement of innovative programmes to ensure that members and—especially—directors have the knowledge required to undertake their statutory duties. An interesting case in point has been the formation of the Institute of Co-operative Directors in the retail sector, requiring members to undertake a course of study leading to a diploma and to further opportunities to undertake higher studies. Although membership is by no means universal among directors in the sector, the institute has been judged

  1065
  a success and has made a major contribution to improving the skills of lay members undertaking the stewardship of large and complex retail organisations.
  Ordinary members must be kept informed. That may mean members receiving a copy of the annual report—although I recognise that in the agriculture and retail sectors, both of which have large numbers of members, the costs may prove prohibitive. Participation rates in the democratic procedures of co-operatives vary greatly. In worker co-ops rates are generally high, although they decline as organisations increase in size—not invariably, but usually. Credit unions and housing co-operatives tend to have lower participation rates, depending on size and circumstance. Perhaps understandably, retail societies, with their large numbers of consumer members, are at the bottom of the participation league. Rarely do more than one in 100 of their members participate.
  I believe that democracy is important enough for co-operative societies to carry out a democratic audit. The registrar should therefore have a monitoring role to ensure that societies are democratically as well as financially sound.
  I hope that my remarks have sufficed to show that, far from being a relic of the Victorian era, the co-operative movement is innovative, flexible and responsive to the demands of a changing society. Over the past 30 years, there have been numerous problems, and major obstacles to the movement's success still lie ahead. The movement also has many strengths and opportunities for future expansion.
  I remain confident that the co-operative movement will continue to make a significant contribution, not only to the economic well-being of the country but in providing an opportunity for its members to contribute to the social and community objectives that form an integral part of its work.
  9.59 am
  Mr. Thomas McAvoy: First, I declare an interest as a Co-operative party-sponsored Member of Parliament with, as outlined in the Register of Members' Interests, no personal gain.
  I congratulate my hon. Friend the Member for Wolverhampton, North-East (Mr. Purchase) on securing this debate. Since coming to the House, he has been a consistent advocate of the principles of co-operation and we in the co-operative movement have every respect for his efforts in that respect. They are much appreciated.
  I welcome this debate because it provides me and other hon. Members with an opportunity to speak about the co-operative movement. I shall concentrate on its contribution to the economic and social life of Scotland. Not only do co-operatives make a major contribution but they are innovative and responsive, often developing products and services in sectors of the economy and parts of the country where their capitalist-based competitors fear to tread. The co-operative retail sector, for example, could be regarded as a misnomer as it includes the funeral undertaking service, travel concessions, agriculture, insurance and banking.
  Last year, the co-operative movement contributed more than £700 million to the Scottish economy. More than 80 per cent. of that trade came from the two largest
  1066
  societies, CWS and Scottish Midland, both of which show a remarkable resilience to the threats posed by their competitors and the increasing concentration of the major players in the sector. The co-operative movement welcomes competition because, ultimately, it is a consumer movement and competition provides a service to consumers.
  The co-operative movement does well in Scotland partly because of the strong relationship between those organisations and the communities that they serve. Long before most of the major retailing groups had established a presence in Scotland, Scottish CWS had committed itself to serving the more remote communities of the highlands and islands. That culminated, earlier this year, in the opening of the first super-store in the Western Isles. Situated in Stornoway, the development will make a major contribution to the local economy, employing 160 staff and providing a wide range of services, with 12,000 different products on offer.
  Similarly, Scottish Midland, with some 20 per cent. of co-operative trade, has expressed its confidence in the Scottish economy by re-opening a former super-store in Dundee and purchasing a new fast-growing retail business in the profitable toiletries market. Both organisations considerably increased their investment in new stores and other facilities and are confident that they can continue to improve services and benefits to members in all parts of the country.
  Latest estimates suggest that there are some 400 agricultural co-operatives and a multitude of fishing and other related co-operatives in Scotland. Those contribute to the strength and vitality of the farming and fishing industries, which are vital to the Scottish economy's success.
  As my hon. Friend the Member for Wolverhampton, North-East said, one of the fastest-growing sectors of co-operative enterprises is the credit union movement. In the past two years, it has grown by 18 per cent. and 15 per cent. respectively. It has 113 member organisations in Scotland, which was more than 20 per cent. of the UK total at the end of last year. Those provide much-needed credit facilities to some 70,000 members. The concept of mutuality suffered a severe blow in the 1980s, which, in years to come, will be regarded as a selfish decade. The credit union movement is a demonstration of practical mutuality, which is commercially successful but also contributes to the social and cultural benefits of those involved.
  In the 19 years since its launch in 1977, the Scottish Co-operative Development Committee, recently renamed Employee Ownership Scotland, has played a major part in the creation of some 100 worker co-operatives of which almost half are in the Greater Glasgow conurbation. Its decision to refocus its activities following a major review is a recognition of the new funding regime following changes in Scottish local government and the Scottish Development Agency. It reflects the growing attraction to both sides of industry of giving employees a stake in the workplace and it forms a sensible partnership with its continuing work as a development agency for worker co-operatives. I emphasise the principle of co-operation. Neither side of industry and commerce has anything to fear from advocating the principle of co-operation because everybody then feels that he or she has a stake in the business or enterprise and contributes accordingly.

  1067
  Scotland is also the home of the business community movement in Britain. That originated from an initiative of the Highlands and Islands development board to set up a community co-operative programme in the mid-1970s. Similar developments followed through the establishment of a specialist unit by Strathclyde regional council, followed by similar units in other regions of the country. As a former member of Strathclyde regional council, I was well aware of that work and participated in it. Obviously, the work ceased with the unfortunate demise of that council, which, in years to come, will be regarded as an act of vandalism.
  Although no official statistics exist on the extent of the community business sector—the matter has been raised in questions to the Minister—rough estimates suggest that there are some 400 training enterprises in the United Kingdom and that, remarkably, more than half of those are in Scotland.
  My hon. Friend the Member for Wolverhampton, North-East mentioned the lack of adequate sources of capital for the development of co-operatives. The high street banks, with the obvious and honourable exception of the Co-operative bank, do not really understand co-operatives or the motivation of those who set them up. The conventional view is that, with no equity, the balance sheet looks decidedly risky, even when members' financial commitment to the co-operative is substantial. Unreasonable demands for security are often made on members and there is the risk that the bank, through some misunderstanding, will pull the plug in circumstances where the co-operative is still viable. As one would expect, that has led to many co-operatives, even when they have a strong case for support, to be wary of approaching their local banks for loan finance. The venture capital companies are all but cut off from the co-operative sector as they cannot take an equity stake in the enterprise. The experience of convertible preference shares or other quasi-equity has been fruitful for neither party.
  Co-operatives do not have access to the long-term capital markets. As a result, a number of co-operative organisations, mainly in the agricultural sector, have converted to company status. But that is not a solution for those committed to the principles and ethos of co-operative enterprise. The picture is similar in the public sector. Last July, I raised the related issue of support for co-operatives in Scotland in a question to the Scottish Office Minister and was referred to Scottish Enterprise. On 18 July 1995, I received a reply from the chairman, Professor Donald MacKay. Although he said that he encouraged
  "the creation and growth of businesses",
  he saw no difference between co-operatives and what he termed
  "a whole range of structures that can be adopted by businesses".
  Sadly, that approach is all too common among development agencies, which seem ill at ease with structures that deny them control in circumstances where investment has gone sour.
  I fully understand the pressures on Scottish Enterprise and Employee Ownership Scotland to increase Scotland's business birth rate, which languishes at the bottom of the national league tables. However, that could be helped by a more flexible approach that respects the differences in ethos and structure of co-operatives by working with
  1068
  members to achieve joint objectives. Most of my constituency has now moved into the geographical area of Lanarkshire development agency. I certainly detected a more aware and more flexible approach to the principles of co-operative business in my earlier relationships with Lanarkshire development agency and I look forward to a long and fruitful relationship with that agency. Attitudes to co-operatives, in both the public and private sectors, must become more enlightened if co-operatives are to make a more substantial contribution to employment in Scotland.
  The recent publication of a resource pack by the United Kingdom Co-operative Council, which my hon. Friend the Member for Wolverhampton, North-East mentioned earlier, describes how to set up and run a co-operative. The pack will be circulated to every Department of Trade and Industry office and business link office and should go some way to breaking down the present barriers of incomprehension.
  Mr. Mike Gapes: Does my hon. Friend agree that attitudes in this country are way behind those in many other European countries, which have a much more positive approach to financing and supporting co-operatives? The international aspects of the co-operative movement are not properly understood in this country. Tens of millions of people, in Europe and in other continents, are involved in co-operatives, including producer co-operatives and other co-operatives that are at the fore of the economies of those countries, especially those in Europe. We should give greater emphasis to that in our discussions in this country.
  Mr. McAvoy: The European Union is having an increasing effect on attitudes in this country and certainly many lessons can be learned from European Union countries from their attitude to the principles of co-operation. I agree with my hon. Friend.
  As well as European Union developments, I hope that the introduction of a Scottish Parliament by a future Labour Government, not to mention a Welsh assembly and regional government in England after the next election, will benefit the co-operative movement. I see that the hon. Member for Langbaurgh (Mr. Bates) is in his place. There are not many Scottish Conservative Members and I imagine that the hon. Gentleman will sit on the Opposition Front Bench after the election. I hope that he will tell the powers-that-be about what I have said today. A Scottish Parliament would provide an opportunity more adequately to respond to the opportunities to develop the co-operative sector as a major contributor to increases in the affluence and well-being of the people of Scotland.
  10.11 am
  Mr. Jon Owen Jones: I congratulate my hon. Friend the Member for Wolverhampton, North-East (Mr. Purchase) on initiating this debate. Like the previous two speakers, I am a member of the Co-operative party as well as the Labour party. The Co-operative party exists to promote the interests of a different way of arranging industry and retail transactions. Co-operatives provide a different form of ownership from private, Government or local government ownership of industry, because all those who work in a co-operative industry, including sometimes the customers of a retail organisation, share ownership.

  1069
  I shall refer to a particular form of co-operative that has developed in my region of south Wales. South Wales has seen huge industrial change, more so than many parts of the country, over the past few years and it has seen continual dramatic change for the past 30 or 40 years. Early in this century, the south Wales economy was completely dominated by one major industry—coal mining—in which some 500,000 people were involved. By 1984, the coal-mining industry had shrunk to 20,000 people and, today, the deep coal-mining industry is represented by a single colliery, which is a co-operative.
  I shall tell the House a little of the history of south Wales. The National Union of Mineworkers was developed by the strong South Wales Miners Federation, which debated in 1913 what should happen to the mining industry and how it should be developed. We know that the mineworkers eventually came to believe that nationalisation was the answer, but back in 1913 the leader of the South Wales Miners Federation, Mr. Noah Ablett, argued that nationalisation would be bad for miners in the long run and that the workers should be involved in the ownership of the industry—in other words, a co-operative. Sadly, he did not win the argument at that time, but it is interesting that that argument was being made by far-sighted leaders.
  We know the sad history of the miners' strike and what followed thereafter. In 1984, 20,000 miners worked in south Wales in 22 pits and, today, we have just one pit. But that one pit, Tower colliery, is now a beacon of co-operation and an inspiration to workers, throughout this country and abroad, who wish to form co-operatives.
  Tower colliery became a co-operative venture in December 1995. A few years earlier, the then owners, the National Coal Board, had described that colliery and other collieries in south Wales as fundamentally uneconomic and a waste of Government money because they produced coal that could not be sold. Under the inspirational leadership of Tyrone O'Sullivan, the workers in that colliery have proved that they were being deceived and that those who were running down the industry may have had a political purpose when they deliberately closed pits that would have had a profitable future if they had been run by people who believed in them. Tower colliery has, uniquely, been given that opportunity. It is run by people who believe in the enterprise and who share ownership, so they have a mutual interest in ensuring its success.
  There are 235 owners of Tower colliery—the work force of the colliery. Each contributed an initial £8,000 in 1995 to buy the project. It was difficult for them to raise that money because they are not wealthy people, but they made a significant contribution of capital to the project. Of course, that was not enough and they had to raise more capital from the banks. They had to convince capital owners elsewhere that they would succeed and it is to the credit of Barclays bank that it contributed to the setting up of Tower colliery.
  Contrary to the expectations of many, and perhaps the hopes of some, the pit has made a profit of £3.5 million in the first 18 months. It is expected that that profit level will double next year. Every single underground worker in the industry is paid at least £20,000 per annum and even the lowest paid surface worker gets £236 a week, which is a significant wage in the top of the Cynon
  1070
  Valley. They are not frittering away their profits on increasing wages—they are investing in new plant and equipment so that they will have a profitable future.
  The wage rates have not been achieved by paying bonuses to people who produce faster than others—each and every worker is paid the same wage, and the rate is significantly better than that paid in the private sector. This work force has a common destiny and an interest in ensuring the success of the enterprise. Tower colliery is an example of what co-operation is and can be about. It has been achieved in the face of a hostile Government who closed many pits that could have been successful co-operatives. I am not saying that all of the 20 pits that were in existence in 1984 could have done what Tower colliery has done, but half a dozen could have if they had been supported by a Government who wanted that to happen.
  Mrs. Ann Clwyd: Hear, hear.
  Mr. Jones: I thank my hon. Friend for coming into the House—I told her that I would mention her constituency. She was instrumental in achieving the publicity and the pressure to make the co-operative movement a success. In 1995, she spent some time sitting underground in the Tower colliery until the Government were forced to see sense. I congratulate her on behalf of the people of the Cynon Valley and the co-operative movement.
  Tower colliery is an example of what can be done. I hope that a new Labour Government will understand that co-operatives are there to be nurtured and promoted, and that they are a better way of arranging industry than the old-fashioned nationalisation which has often proved not to be the success that was hoped.
  10.22 am
  Mr. Dennis Turner: I declare an interest as a Labour and Co-operative Member of Parliament, and I shall be standing as a Labour and Co-operative party candidate in the next general election. I am chairman of a co-operative in my home town of Bilston.
  In this expansive debate on the values and the principles of the co-operative movement, I shall dwell briefly on the promotion of housing co-operatives as an ideal way of harnessing personal responsibility in meeting housing need and the right of all people to participate in the key decisions affecting their home and environment, which should be available to all through a strong housing co-operative movement playing its part in the sustainable regeneration of urban and rural communities.
  It saddens me to tell hon. Members that the Government have failed the housing co-operative sector. As chairman of the all-party parliamentary group for housing co-operatives, I am extremely disillusioned with promises that have been made by successive Ministers. In 1992, the "Time for Action" campaign was launched with the prime objective of reversing the decline in investment in housing co-operatives by securing positive support from the Government and the Housing Corporation. The campaign was launched against a background of declining investment in housing co-operatives.
  In 1975, the Campbell report recommended that 10 per cent. of the Housing Corporation's annual development programme should be used to fund new co-operative

  1071
  housing development, but the best that was achieved was 6 per cent. in the early 1980s. Hon. Members can judge the steady rate of decline for themselves. In 1990–91, 4.3 per cent. was dedicated by the Housing Corporation; in 1991–92, the figure was 2.4 per cent.; in 1992–93, it was 1.94 per cent.: in 1993–94, 2.7 per cent.; in 1994–95, 1.8 per cent.; and in 1995–96, 0.6 per cent. That is despite the fact that in 1993–94 the Housing Corporation set a target of 3.44 per cent. of the approved development programme for rented housing co-operative development.
  In the local authority sector, the rapid growth in tenant management co-operatives and other forms of tenant control is being slowed down by the inflexible arrangements for administering the right to manage granted by leasehold reform through the Housing and Urban Development Act 1993. In the year of the introduction of the right to manage, 32 proposal notices were served by tenant management organisations, compared with 80 to 90 new prospects in the preceding 12 months.
  Tenant management organisations are threatened again by the Housing Bill, which fails to take account of them in the local housing company provisions. I am meeting the Minister for Local Government, Housing and Urban Regeneration and members of the all-party group on this issue later today, and I hope that some progress can be made.
  I draw hon. Members' attention to this lack of positive support for housing co-operatives and other forms of tenant control. Even though there is growing acknowledgement of the benefits of this potentially dynamic third force in meeting our country's housing need, what better evidence could there be than the recent Price Waterhouse report, entitled "Tenants in Control", which concluded that housing co-operatives and other tenant management organisations were very effective mechanisms for securing improved housing services, higher levels of tenant satisfaction and more economic running costs. It is time that the Government gave this sector of housing the positive support that it needs.
  10.28 am
  Mr. Barry Sheerman: I congratulate my hon. Friend the Member for Wolverhampton, North-East (Mr. Purchase) on introducing the debate. He made a comprehensive speech and referred to every aspect of co-operation that I can think of. I congratulate him on getting the debate and on its content—a remarkable survey of co-operation and what it can contribute to the British economy and British social life.
  I have a double whammy of a declaration of interest. Long before I joined the Co-operative party, I lived in south Wales—there seems to be a south Wales connection today—and I started what I think was the first co-operative development agency in England and in Wales: the West Glamorgan co-operative development agency. I also started a consultancy that gave advice to workers' co-operatives. I have been a consultant for 20 years and I run my own consultancy, giving advice to co-operatives both at home and abroad. I am particularly interested in industrial or worker co-operatives. The day after I joined the Co-operative party, I became the secretary of the Swansea Co-operative party. I am now a sponsored candidate and I have been closely associated with the co-operative movement for a long time.
  1072
  This morning's debate illustrates the belief that co-operation can play an important part in our economy. I have given advice to overseas countries which are often looking for ways of breaking through a tidy retail sector where there is no competition and where agreement between a group of stores keeps prices high for the consumer. Such countries are looking for an alternative that will provide real competition. Many people fear that, if there were no co-operative presence on the high streets in the United Kingdom, the big five retail supermarkets would have a stranglehold on the British consumer. We play an important role in the retail movement.
  My attitude to co-operatives is sometimes considered quite radical. I believe that, if we achieve a synthesis between consumer and worker co-operation in the retail sector, we will have a more effective co-operative system. I argue within the movement—in the good co-operative tradition—that we should change the nature of co-operation to involve the workers more fully.
  I am always pleased to point out that there is a workers' co-operative in one of the smartest areas of London. The Peter Jones store, which is part of the John Lewis Partnership—a workers' co-operative—dominates Sloane square. When hon. Members look for new initiatives for good-quality shopping centres—as I am now doing in my constituency—and for an anchor tenant that will bring prestige to a shopping development, they look to the Co-operative Wholesale Society, the Co-operative Retail Society, an independent co-op or the John Lewis Partnership workers' co-operative, which is one of the most successful, high-quality retailers around.
  Workers' co-operatives are exciting. I agree with the Leader of the Opposition's continued emphasis on stakeholding: it is a genuinely exciting idea. As a co-operator, I believe that the people of this country are missing out. Co-operation is a tried and tested way of giving people a stake in society. The hon. Member for Langbaurgh (Mr. Bates) smiles, but he should visit deprived estates where poverty really exists—and it is present in every constituency represented by 651 Members of Parliament. We can offer people hope by giving them a stake in society.
  One way to do that is to get people involved in credit unions so that they are not abused by those who offer exploitative terms of credit. Some people cannot obtain credit: the high street banks will not allow them to open accounts. Increasingly, the poor in our country have no access to the usual means of finance and they are prey to ghastly people who ratchet up interest rates and force them into a cycle of poverty and debt. Many people do not understand how deep the problem goes. Credit unions present the opportunity to borrow money at reasonable rates of interest. I believe that the Government have a strong responsibility to open up the credit union sector in order to combat poverty in our country. An incoming Labour Government would address that problem.
  Co-operation can also help to break the cycle of welfare dependency. All parties recognise that the welfare system has gone wrong in some areas, and the way in which we tackle the problem is crucial. If we introduce people to co-operation, they could set up small co-operatives and take charge of their own lives—whether running small workers' co-operatives, running housing estates or owning houses in small housing co-operatives. They are ways of giving people a stake in society and of returning to a participatory style of life that has been lost.

  1073
  I think that all hon. Members share in the excitement about what co-operation can achieve. How exciting it would be if we had a Government who believed in co-operation, in breaking the cycle of poverty and in giving people a stake in society and allowing them to become fully democratic. I have been a Member of Parliament since 1979 and I have witnessed a worrying slide away from democracy. A large percentage of the population do not vote. They do not care about democracy: they think that it is not for them. If we get people involved in the community and give them control of their lives, we will break through and they will become democrats again.
  Many co-operative opportunities are available, but the Government must speak with a firm voice and say, "We will do something about this." We have some of the best ideas around—other countries desperately want to see what we have to offer. We have the necessary mechanisms in place. Why do training and enterprise councils not back co-operatives? They are supposed to support enterprise. They do that in other sectors—sometimes they do a good job—but they are doing very little to assist with co-operation.
  I approve of business links—I think that the scheme is doing a fair job. However, it would do even better under a Labour Government, who would give it more power and energy. We want to help co-operatives as well as other enterprises. My hon. Friend the Member for Wolverhampton, South-East (Mr. Turner) spoke of housing and my hon. Friend the Member for Cardiff, Central (Mr. Jones) referred to the Tower colliery. This country can achieve many things because we have a culture of co-operation: we do not have to invent it. New, exciting, relevant and up-to-the-minute ideas are waiting to be nurtured.
  10.36 am
  Mr. Alfred Morris: I want most warmly to congratulate my hon. Friend the Member for Wolverhampton, North-East (Mr. Purchase) on his initiative in securing this important debate. He appreciates that I could not have been here from the outset without cancelling, at very short notice, a commitment to constituents that I made more than two months ago.
  The House will have sensed that, for many of us, this is a familial occasion. Many of my hon. Friends will have declared their interest in the debate as co-operatively sponsored Members of Parliament. I declare my interest, with legitimate pride, in a movement that has achieved so much for people all over this country and all over the world over the past 150 and more years.
  By securing this debate, my hon. Friend is focusing parliamentary and public attention on a movement that is as admirable an example of principle and achievement as Britain has to offer. I have the great good fortune of having been sponsored as a Member of Parliament by the co-operative movement for 32 years and as a co-operative parliamentary candidate for 41 years. I rejoice in that—more especially since most of the federal institutions in the co-operative movement in this country are based in my native city, Manchester, and because I am the city's first ever co-operatively sponsored Member of Parliament.
  1074
  I am delighted that my hon. Friends the Members for Edinburgh, Central (Mr. Darling) and for Middlesbrough (Mr. Bell) are here on the Opposition Front Bench. Both of them have given long and devoted service to the co-operative movement. I know, as a former president of the movement, in what very high regard they are held by co-operators in Scotland and in the north-east of this country. I am very glad as well to see that my hon. Friend the Member for Cynon Valley (Mrs. Clwyd) is with us for the debate. Again, she is someone who has taken a lifelong interest in the co-operative movement. I hope that the Minister, when she replies, will do so helpfully, by which I mean positively.
  10.40 am
  Mr. Alistair Darling: It is a pleasure to follow my right hon. Friend the Member for Manchester, Wythenshawe (Mr. Morris), who has made a long and distinguished contribution to the co-operative movement over the years. My hon. Friend the Member for Middlesbrough (Mr. Bell) and I are grateful to him for his kind remarks. He will know from his own experience of speaking from the Front Bench that it is nice when kind remarks are aimed in our direction. We are most grateful and we shall make the most of it.
  I congratulate my hon. Friend the Member for Wolverhampton, North-East (Mr. Purchase) on the debate. He raised a number of important points on which I want to touch. Our colleagues, the hon. Members for Glasgow, Rutherglen (Mr. McAvoy), for Wolverhampton, South-East (Mr. Turner), for Cardiff, Central (Mr. Jones) and for Huddersfield (Mr. Sheerman), made useful contributions and emphasised the importance of co-operation, to which I shall return in just a moment.
  People who follow these matters will see that, on the Opposition Benches, there is substantial interest in the co-operative movement. It is far from being something from the past. As my hon. Friend the Member for Rutherglen said, we believe that co-operation is a model on which we can build in the future.
  It is important to emphasise the value, the importance, of the co-operative movement and the ideals behind it. As my hon. Friend the Member for Ilford, South (Mr. Gapes) said, there are lessons to be drawn from Europe on this. My hon. Friend the Member for Wolverhampton, North-East emphasised the importance of demonstrating the value of co-operation not just to the general public but to the members—the co-operators. Indeed, many of the speeches dwelt on what has happened to the building societies in the past two to three years, and we now have an opportunity to learn from that. It is important to demonstrate the benefits of mutuality and of co-operation before the movement transforms to more conventional types of ownership.
  People who have listened to the debate will see that the importance of the co-operative movement is there for all to see—perhaps we should shout about it more often—for example, in the credit unions. As my hon. Friend the Member for Huddersfield said, too many people do not have access to conventional financing from banks, because banks are losing interest. Ironically, with all these conversions and changes, there will be an increasing temptation for the institutions to cherry-pick—to pick the people with the best prospects—and those who need the benefit of finance at a price that they can afford will be

  1075
  turned away from many of the institutions. It is tragic when former mutual societies—now public limited companies—do that, as I fear some will.
  As my hon. Friend the Member for Wolverhampton, South-East said, the importance of the co-operative movement is there in housing co-operatives, in retail, agriculture and others parts of industry. These are excellent examples of where co-operation works. It is important that we encourage this form of ownership, and Government policy should be directed towards such diversity. We live in a changing world. We live in a dynamic economy, and any dynamic economy should have different forms and models of ownership that are able to be operated on a level playing field, and then people can choose which form is appropriate for the venture in which they are engaged.
  As was emphasised by every hon. Member who spoke in the debate--I think that I am the only hon. Member who is not a Co-operative Member of Parliament, so in that sense I have no interest to declare—the ideals of the co-operative movement and the Labour party are almost identical. Indeed, the Labour party has always recognised that individuals prosper best when they co-operate together. That is what socialism is about. That is what the ideals of the Labour party are about. We want to encourage co-operative endeavour for the benefit of members. As has been said, it is an integral part of our view of a stakeholder economy: where people come together and have a stake in the enterprise in which they are engaged, and everyone, whether in management or on the shop floor, is bonded together in the same endeavour—the success of the company or institution.
  More than that, it is a direct form of ownership. It is like partnership or employee share ownership. It is an opportunity to ensure that people who work in an enterprise feel part of it and committed to it. As my hon. Friend the Member for Cardiff, Central said, it has moved on from the old models of nationalisation, which did not provide direct ownership. Indeed, one reason why nationalisation lost support was that many people did not have that intimate relationship between themselves and the institutions in which they worked. I believe that co-operation, having a stake in the place where one works, is vital, and that is very much at the core of the Labour party's philosophy.
  I said that we should learn from building society experience. It is a great pity that the benefits of mutuality were never passed on, never demonstrated, to members of building societies. Ironically, only recently have building societies realised that they have to show their members that there is value in mutuality. Many now pass on the benefits of mutuality in the shape of lower interest rates; others give re wards for long service to savers who stick with them for a long time. The co-operative movement has to learn from that. It is best to show the benefits of co-operation before people start talking about conversion to plc status. If mutuality has benefits, let us hear about them now. Do not wait until there is pressure to convert.
  I understand the pressures to convert. Many hon. Members referred to the understandable concern about access to capital. I understand those difficulties, and we certainly do not take the view that the co-operative model, the mutual model, is the only one. In any economy, a variety of options should be open. We should not get ourselves into a position where people do not feel that there is any value in maintaining the co-operative because
  1076
  the benefits of it have not been passed on to them. It is a great pity that building societies did not demonstrate the value of mutuality long before now. It has come very late in the day, and that is a great pity. As my hon. Friend the Member for Rutherglen said, in years to come, many people will regret the passing of many of the substantial building societies.
  As my hon. Friend the Member for Wolverhampton, North-East said, much work has been done to demonstrate how the Government could assist the co-operative movement, and we look forward to hearing what the Minister has to say about that.
  My hon. Friend mentioned a number of issues, including access to capital, taxation and, in particular, compliance costs, about which I feel strongly, particularly for the financial services industry. The Economic Secretary and I have had many debates about this, and I do not suppose that we shall see eye to eye on it today, any more than we have in the past, but I believe that, as part of reforming and simplifying the Financial Services Act 1986, we could help many institutions that find the compliance costs out of all proportion to the benefits that are gained. That point does not apply only to co-ops and credit unions, as it is happening right across the industry. That is an example of where the Government could assist.
  It is important that, if the Government are to encourage more co-operative endeavour—they should regard it not as something from the past, some quaint model, but something that is quite normal and wholly beneficial—they must do so not through subsidies or intervention but by ensuring a climate in which the co-operative movement can flourish.
  I hope that the debate will ensure that the next Parliament, if not this one, will address some of the problems. The Labour party knows where it stands. Perhaps we shall find out whether the Government understand the value of co-operation. Sadly, I do not think that they have been converted to that cause.
  10.48 am
  The Economic Secretary to the Treasury (Mrs. Angela Knight): I congratulate the hon. Member for Wolverhampton, North-East (Mr. Purchase) on raising this important subject. It has been a wide-ranging debate, and I suspect wider than many people who have no knowledge of the co-operative movement would have expected. It has become clear that not only is the co-operative movement well represented and very active throughout the country but there is a strong co-operative presence in the House.
  I also congratulate others who have taken part in the debate, including the right hon. Member for Manchester, Wythenshawe (Mr. Morris) and the hon. Members for Wolverhampton, South-East (Mr. Turner), for Glasgow, Rutherglen (Mr. McAvoy), for Huddersfield (Mr. Sheerman), for Cardiff, Central (Mr. Jones) and for Edinburgh, Central (Mr. Darling).
  As has been pointed out today, considerable benefits are being experienced because of the strength and diversity of the co-operative movement. As the hon. Member for Wolverhampton, North-East knows, most co-operatives in Great Britain choose to register under the Industrial and Provident Societies Act 1965. He may be interested to learn that, while the links between the Labour

  1077
  party and the co-operative movement are well known, many Conservative clubs are also registered under the Act.
  There are some 11,000 industrial and provident societies, with 10 million members and assets well in excess of £30 billion. Retail societies provide services for nearly 7 million members. Many of us who live in towns are used to shopping at the Co-op: the suit that I am wearing was bought from the Ilkeston Co-op, and I am sure that, if any hon. Gentlemen wish to improve their sartorial elegance, the Ilkeston Co-op will be only too happy to oblige.
  I am pleased that attention has been paid to credit unions, which is a strongly growing sector. They provide a source of finance that would not otherwise be available. Their activities are enormously diverse, and a large number of people continue to enjoy the benefits of membership. That demonstrates that the co-operative movement has a valuable role.
  I was interested to read about the aims of the United Kingdom Co-operative Council, to which I think we can all subscribe. The council proposes to provide for discussion and debate in the wider co-operative sector, to seek to represent the interests of co-operatives, to raise the profile of the sector, to maintain and develop contacts with co-operative organisations outside the United Kingdom and to initiate and support study, research and other activities consistent with the council's aims. I wish it well. It recently produced a considered report relating to primary legislation for co-operatives. I fully understand the thinking behind its approach, and appreciate the amount of effort that went into formulating the report. As hon. Members will know, the Government do not propose to introduce a new co-operatives Bill, but we are considering the content of the council's proposals very carefully.
  One of those proposals is the establishment of a co-operatives commissioner, originally as head of a new statutory body, but now, it seems, as someone who would continue to be served by the staff of the Registry of Friendly Societies. The commissioner would have one role supervising co-operative societies, and another as the Government's chief source of advice on the sector. It appears, however, that we already have such a figure in the Chief Registrar of Friendly Societies. The registry is a statutory body—a Government Department—and it advises us.
  Since the publication of the UKCC's proposals, it has become clear that there is no consensus within the sector on what new powers or responsibilities the commissioner should have. I feel that, for the moment, our attitude should be, "If it ain't broke, don't fix it"; but some aspects clearly need to be addressed. I hope that we are already addressing them in part with our deregulation proposals, which are contained in the Deregulation (Industrial and Provident Societies) Order 1996.
  The order was made on 3 July this year, and will come into force on 1 September. It will give effect to seven proposals. The first is to reduce the minimum number of members required to form a society from seven to three. The hon. Member for Wolverhampton, North-East expressed concern about the fact that there was a difference between registering as a co-op and registering
  1078
  as a company, evidently feeling that it was easier to register as a company than as a co-operative. By reducing the minimum to three, however, the order should encourage small, new mutual organisations to adopt the industrial and provident legal structure that they may well consider appropriate to them. I believe that we shall start to see the benefits of that at the beginning of September, and I hope that the measure will resolve the problem identified by the hon. Gentleman.
  The order makes other proposals that are appropriate to the co-operative movement, and will make it easier for it to flourish with as few unnecessary rules and regulations as possible. The order will reduce the requirement for up to nine signatures when a federal society applies for registration: only the secretaries of the first two corporate members will be required to sign the application. It will allow more time for societies to submit their annual returns: they will now have seven months from the end of the year. That will reduce some of the pressures that some societies experience.
  The order will extend the deadline for recording a charge against a society's assets from 14 days to 21, and will allow societies to submit late charges without a High Court order, subject to the protection of third parties. That proposal brings societies into line with companies. The audit requirements for non-deposit-taking societies under the 1965 Act and the Friendly Societies Act 1974 will be relaxed, and that too will bring societies into line with companies. I hope that that, in conjunction with the preparation for group account changes, will remove some of the barriers that the hon. Member for Wolverhampton, North-East identified, and will give us—if I may use that corny old expression—more of a level playing field, so that co-operatives will not feel forced to go down the road of company registration if they do not wish to.
  The principle of mutuality has featured in much of what has been said today. That principle is very strong in co-operatives. For once, I agree with the hon. Member for Edinburgh, Central: it is essential that co-operatives show the benefits of mutuality first. They must ensure that those benefits are tangible, and that their members are aware of them. Many building societies have woken up to that need rather late. If people are not aware of its benefits, mutuality may disappear, and those people will say that they wish that they had some form of mutual organisation. In the case of both building societies and co-operatives, mutuality in its numerous forms has served the country well for many years, and will continue to do so.
  Points were raised about the availability and employment of capital. That is, of course, a complicated subject. If the rules allow it, a member can take up to £20,000 in share capital: that limit is laid down in the 1965 Act. As for commercial borrowing, societies' own rules will specify what they can do.
  Wider issues were raised, including the issue of tax-exempt special savings accounts. It is proposed that, if a society's rules are silent on the subject, the society cannot offer TESSAs. If it wishes to do so, it must comply with the appropriate Acts. There must be regulation to govern such matters; if there were not, we should have a free-for-all rather than the investor protection that we all want. I assure the House that the Government are actively considering financial services regulations that are as appropriate as possible. The minute I sit down, I shall run from the House to give a speech on regulation and its future in this sector, because there is a need to ensure that

  1079
  it is more appropriate, better targeted and less bureaucratic, not just for the co-operative movement but for the wider financial services industry.
  Other points were raised by hon. Members. The hon. Member for Rutherglen mentioned the importance to the Scottish economy of credit unions and a new store that is being set up there. He was concerned in particular about banks' attitudes to co-operatives and thought that their value was perhaps not as well known as it should be. I will take that matter up in my meetings with banks because I want to ensure that there is a variety of structure in this country and that, if people want to form a co-operative and if that co-operative will benefit, they can do so.
  Mr. Deputy Speaker (Mr. Michael Morris): Order. We must move to the next subject.

  Clergy Pensions
  [Relevant document: The Fifth Report from the Social Security Committee, House of Commons Paper No. 340 of Session 1995–96 on Church of England pensions.]
  11 am
  Mr. Michael Alison: My colleagues and I in the Church Commissioners are grateful for your great help, Mr. Deputy Speaker, in allowing us to have this debate in prime morning parliamentary time on important matters relating to Church of England pensions.
  The Order Paper shows that the fifth report of the Select Committee on Social Security, House of Commons paper No. 340 on Church of England pensions, is relevant. In that context, I should like to express warm thanks to the hon. Member for Birkenhead (Mr. Field), the Select Committee Chairman, and to thank Committee members, especially my hon. Friends the Members for Cheadle (Mr. Day), for Westbury (Mr. Faber), for Colchester, North (Mr. Jenkin), for Gainsborough and Horncastle (Mr. Leigh), for Dover (Mr. Shaw) and for Harrow, West (Mr. Hughes), and the hon. Members for Islington, North (Mr. Corbyn), for South Antrim (Mr. Forsythe) and for Vauxhall (Miss Hoey), for all their services: for the probing and painstaking, yet sympathetic and constructive, way in which they have occupied themselves with the sensitive issue of Church of England clergy pensions, for their attendance at endless meetings to take evidence and to consider drafts and so on. The House and particularly the Church Commissioners are very much in their debt.
  The Church Commissioners are of course accountable to Parliament, and the Select Committee's inquiries and reports have given rise to two debates about Church of England affairs on the Floor of the House within the space of 14 months. That is a striking signal of Parliament's concern for its responsibilities, and it will greatly encourage people outside who depend on a proper oversight of the commissioners' exercise of stewardship, which the Select Committee has certainly undertaken.
  The Select Committee's fifth report addresses directly the issue of clergy pensions. I need not remind colleagues that pensions generally have been one of the major financial issues that Parliament has considered in recent years, so Church of England pensions fit into that general picture of reform, but with some specially complex features and variations.
  The Church Commissioners' forerunners were established to relieve the poverty of the poorest clergy, and to rationalise the Church of England's endowments so that the new towns and cities that were springing up during the industrial revolution could be churched and ministered to. It might be taken for granted now, but the unique nationwide ministry of the Church of England was sustained during those Victorian and Edwardian decades of rapid change, moving with the people from its rural idyll in pre-industrial revolution times into harsh, urban locations, where the Church of England could so easily have chosen not to venture.
  Despite all that has happened in the intervening century and the growth of secularism, the decline in churchgoing, and Matthew Arnold's "melancholy, long, withdrawing roar" of the sea of faith, the Church of England has retained its nationwide ministry. As has often been said, the clergy are, in some of our most deprived cities and

  1081
  city areas, the last remaining representatives of the professional classes. Everyone else—lawyers, solicitors, local government officials—has retired to the leafy suburbs. It is the clergyman who remains at the heart of the inner city, keeping the Christian gospel of care and compassion alive in precisely the sort of bleak, unpromising places where it is most needed.
  The Church Commissioners' funds have been a primary source of support, helping all parishes with the cost of ministry and, in particular since 1954, with pensions.
  Mr. Bernard Jenkin: Does my right hon. Friend agree that the work of clergymen of all faiths in the inner cities is significant, but that that of the Church of England is especially significant because of the peculiar constitutional position that professional clergymen and the Church of England have: they have a statutory responsibility for universal coverage of the country, which no other faith has?
  Mr. Alison: I am much obliged to my hon. Friend for reminding us of that and for putting it on the record; the Church of England is unique. The very fact that we are discussing the Church Commissioners' affairs underlines the fact that that statutory duty and responsibility is vastly underpinned by the Church Commissioners' funds—the parliamentary charity with which we are concerned today. The two go together. I take my hon. Friend's point.
  During the 1980s, however, the commissioners' resources have became overextended and their need for more income has led them in recent years to invest too heavily in property. Both the Select Committee's reports on Church of England affairs have had some harsh things to say about that, and the lessons have been taken to heart. The property portfolio is being slimmed down on a controlled programme and the proceeds switched into equities here and abroad, which offer the best long-term prospect of promoting income growth in line with projected expenditure.
  The proportion of assets in commercial property has halved from a peak of more than 50 per cent. in 1990 to 23 per cent. at the end of 1995. In the same period, borrowing has fallen from more than £500 million to just £23 million. In the past three years, the value of the total fund, which was written down by the notorious figure of £800 million between 1989 and 1992, has risen by £600 million. Expenditure has been cut to the same cash level as in 1989 and a further £18 million is being cut this year and in 1997. Those reductions have not only helped to reduce the income deficit; they have enabled the commissioners to start rebalancing the investments.
  That recovery should reassure Parliament of the commissioners' renewed competence and professionalism under the leadership of Sir Michael Colman, who took over as First Church Estates Commissioner in 1993, but the longer-term structural imbalance between assets and liabilities, which was crystallised by the investment losses to which I have referred, must still be rectified.
  The Church of England has accepted that the commissioners' assets cannot stretch to carrying the whole cost of pensions and honouring their other trusts and commitments, of which my hon. Friend the Member for Colchester, North has just reminded us. The
  1082
  implications of the present situation are dramatically illustrated by the pattern of expenditure on stipends and on pensions. In 1986, the two categories of expenditure were in balance, at £35 million a year each. By 1995, the ratio had moved almost two to one in the direction of pensions, the cost of which more than doubled in that decade. That was a deliberate improvement in the pensions position and a reflection of what the Church of England felt was right and proper for its retired pensioners. It was associated with the introduction of a compulsory retirement age for clergy, who had in many cases simply soldiered on since the stipend was their only source of income. If the change in the ratio were allowed to continue, the commissioners' ability to fund ministry in poorer parishes would be wiped out.
  In essence, the Church of England's proposals for funding clergy pensions are to split the liability in two, with a closed and ultimately self-liquidating scheme for past and current beneficiaries and a new fully contributory scheme for future entrants. The dividing line would be some fixed date in the future—for the sake of illustration, 1 January 1998.
  Under the new arrangement, the commissioners will meet the cost of past service liabilities accrued up to the date of change—pencilled in for 1998—and dioceses will raise funds from parishes to meet the cost of pension contributions after that date. The General Synod in York approved the continuation of the current scale of pension benefits for future service last Monday, with the support of the diocesan boards of finance. For the record and to remind colleagues, in the round, the pension represents two thirds of the previous year's national stipend per 37 years of service. The national stipend is in the region of £14,000 a year, in addition to which a lump sum of £26,750 is also available for the retired clergyman.
  The General Synod has endorsed and committed itself to continuing that frame of pension provision. It is accepted that the Church Commissioners will have to make transitional provision to reinforce the limited impact of pension contributions for the new scheme in early years. Discussions about that interim help are at an advanced stage between the commissioners and the diocesan boards of finance. The latter are planning to take on the full cost over six or seven years.
  One key principle for shaping the new arrangement that has been of particular interest to the Select Committee is that the commissioners should be empowered to use capital for pension purposes. That is a radical innovation and an unprecedented departure from the basis on which Parliament originally legislated to set up the commission. Until now, only income flows from the capital, and not the capital itself, could be disbursed by the commissioners. I shall say more on that sensitive issue.
  A draft pensions Measure to give effect to the new contributory proposals was approved by the General Synod of the Church of England last November. The Measure is now before a Revision Committee of the Synod. Recognising Parliament's particular interest in draft legislation that involves the commissioners' assets, the Synod has invited interested parliamentarians to submit suggestions for the Revision Committee's consideration so that Parliament can influence the drafting of the Measure before it is set in concrete. This debate is one of the obvious opportunities for that input, and the Select Committee's report is another primary source of input to the pension Measure's revision stage.

  1083
  The first recommendation of the Select Committee is that the new powers that the Church of England is seeking should provide for the full application of the more general, secular legislation passed by Parliament recently to regulate and control pension schemes in the round, particularly matters relating to the so-called minimum funding requirement. The Church of England intends that the new arrangements should offer the same safeguards as secular schemes, subject essentially to the same regulations and controls, but adapted where necessary to reflect the practical realities of the Church of England's fund-raising arrangements—essentially through parish donations—and, in the case of clergymen, the technical lack of an employer. The pensions board is in discussion with Government Departments about those issues.
  The Select Committee's second and fourth recommendations concern the use of the commissioners' capital. Parliament has an interest in that matter, since roughly one third of the capital derived from the Crown and was given in trust for the maintenance of the clergy of the Church of England in the deployment to which my hon. Friend the Member for Colchester, North referred. The other two thirds of the capital derive from Church sources. Parliament set up the Church Commissioners in 1947 to consolidate and hold in trust those capital sources and resources on behalf of Church and state for the same common purpose: the maintenance of the clergy of the Church of England in that national and statutory deployment to which my hon. Friend referred. The Select Committee is understandably cautious, therefore, about the expenditure of capital.
  Hon. Members may wonder why capital has to be spent at all. I am afraid that the answer is sheer practicality. The commissioners' projected pensions expenditure, including transitional help for the dioceses, would greatly exceed their likely income unless they suspended other expenditure—breaching their trusts and imposing additional burdens on dioceses—or repeated the errors of the 1980s by moving back into high-yielding investments, such as property and gilts, at the expense of future capital and income growth. The power to spend capital, if given to the Church of England by Parliament, would enable the commissioners to meet their obligations while pursuing a prudent and fruitful investment policy.
  Another aspect needs to be borne in mind, however, especially by those who may suspect that the use of capital is an exercise in selling the family silver. Under the proposed arrangements, a new fund of contributions from dioceses will build up as the commissioners spend the capital needed to satisfy the past service liability. Although not an exact symmetry, as the sand flows out of one hourglass, fresh sand will be flowing into another.
  Rev. Martin Smyth: I was puzzled when the right hon. Gentleman referred to the six-year period. I come from another Church background. We realised that the change would take longer. Secondly, is there a place for the clergy contributing to their pensions, which is what we have done in our Church? That has resulted in a marked improvement in the pension schemes.
  Mr. Alison: The time frame to which I referred relates to pension liabilities that will arise from the new entrants contributory scheme. In the early years, although vast sums will not be flowing in, there will not be a vast
  1084
  number of beneficiaries. By definition, the scheme will be for people who are at the outset of their careers. Contributions to and demands on the fund will, to some extent, increase in parallel.
  The difficulty with the hon. Gentleman's second point is that Church of England clergy are not exactly highly paid. They receive a stipend of about £14,000 a year to bring up a family. If they were asked to make a pension contribution, their stipend would have to be raised to offset the extra cost, and that would place further obligations on parishes to supplement the stipend. There would be the additional disadvantage of further national insurance contribution liabilities for the extra money given to clergy to offset pension contributions. On balance, it was felt that a contributory scheme from the parishes only was the most rational proposal. It was simply an exercise in how to use resources most efficiently, given the overarching presence of that dark shadow—the state tax and national insurance collector.
  The Select Committee's second main recommendation would enable the commissioners to meet their obligations for the first five years, including the transitional support needed to cushion the introduction of pension contributions. Leaving aside for a moment whether these changes should be effected by a Church of England Measure or by a Bill in Parliament, the Committee's proposals would go quite a long way to meeting the Church of England's requirements. I know that many in the Church of England would prefer the commissioners to acquire a permanent power to spend capital on an unlimited scale, including the power to transfer capital to a new pension fund. It must be admitted that the Select Committee's recommendations inevitably leave some uncertainty about how the commissioners could manage their commitments after the recommended five years. It is in this context that some in the Church of England find a major attraction in being allowed to have a fixed and final capital transfusion; it would cost about £1.2 billion or £1.3 billion to wipe out future liability in one fell swoop.
  Sir Michael Colman's evidence to the Select Committee, and his note reproduced on pages 25 to 30 of the Committee's report, underline the commissioners' reservations about draconian transfers of capital, at least until there is an established contribution flow into the future service fund. An initial limitation on their power to spend capital would effectively defer the issue of a wholesale transfer of capital, and I hope that the Church of England will accept that what the Select Committee proposes in this, its most significant recommendation, can be the basis on which the Measure is revised and moved forward.
  If it is possible to secure an accommodation with those who have drafted the General Synod's propositions and members of the Revision Committee, I suspect that the Church of England might press for the stipulated period to be not five years, as recommended by the hon. Member for Birkenhead, but a period to tie in with the likely required transition period for support for the new fund, which is more likely to be seven years. The Revision Committee favours inserting a seven-year maximum on the length of the transition period. That might be a more appropriate time frame, chiming in with the harmony that may arise if the Select Committee is happy for its five-year recommendation to be extended to, say, seven years.
  At the end of the transition period, if all goes well, the Church of England will be able to show that the new arrangements are working smoothly and that parishes

  1085
  have proved their ability and willingness to meet the cost of pension contributions. Further legislation might then be simply a matter of finishing off what had already been well begun.
  I turn finally to the Select Committee's comments about the implications of the Turnbull commission's recommendations for the control of Church Commissioners' assets under some future structural framework of change. Turnbull recommended in the report, "Working As One Body", that the proposed archbishops' council should take over the Church Commissioners' responsibility for applying their income. The commissioners' role would ultimately be reduced to managing assets and declaring, so to speak, an annual dividend to the new council.
  Work on Turnbull is more complex and less far forward than the pension proposals. The steering group under the aegis of the two archbishops is charged with the follow-up to the report, and this follow-up group is addressing a wide range of key issues using the Turnbull report more as a vision than as a cut-and-dried blueprint.
  The evidence given to the Select Committee by Philip Mawer, Secretary-General to the General Synod, was a clear exposition of the case for reforming the commissioners and their role by Measure as opposed to Bill. This is the way in which Church legislation has been handled for more than 75 years, and it enables the Church to design its own proposals in its own time with its own internal and external consultations. The Church is alert to the fact that, on issues affecting the commissioners' assets, Members of this House and of another place would like input into the drafting, as is in effect provided for by the Select Committee's recommendations on the forthcoming clergy pensions Measure and by this debate.
  The Select Committee's report sets out with equal clarity and robustness the opposite case: that proposals affecting the independent control of the commissioners' assets—in this case the application of their income—should be legislated for by Bill rather than by Measure. This suggestion has, I am bound to say, caused considerable anxiety in some quarters of the Church of England, who fear that it would represent retrogression from the devolved powers granted by Parliament in 1919.
  I hope that colleagues in the House today and members of the Select Committee will allow me, for the moment at least, to sidestep this, the Committee's fourth and most controversial recommendation—effectively that changes that might arise from the proposed Turnbull organisational reforms should be the subject of a parliamentary Bill rather than a Measure. The key phrase in the recommendation is "further changes", to distinguish these from the pensions Measure that the report majored on. At present, such changes have not been officially, specifically and finally formulated, and must lie in the realm of the hypothetical. The scale and scope of what may in the end be proposed will properly determine the shape of a Bill versus Measure debate, but we are simply not there yet.
  I hope, however, that at least today's debate and the immense impact that the Select Committee's inquiry and recommendations had on the Church of England draft pensions Measure will indicate that Parliament has not been, and cannot be, bypassed, even on the minutiae of what is proposed in Church Measures.
  11.28 am
  Mr. Frank Field: It is always a pleasure to follow the right hon. Member for Selby (Mr. Alison) in these debates, and it is particularly so today. Once again, we are witnessing the ability of some Members of Parliament to maintain their friendships with different, if not disparate, groups, both in the House and outside, and to be able to tell the truth as they see it. In an age when roughing up politicians is more popular than the national lottery, it is a pleasure to draw attention to those hon. Members who add distinction to public life. In that context, I am happy to draw attention to the contribution that the right hon. Member for Selby always makes to our debates and to the welfare of the nation.
  I would also make a second general comment by way of introduction, and that concerns the performance of the commissioners. I wish to emphasise what the right hon. Gentleman has said about the leadership of the commissioners and the stewardship that they are giving us. The Select Committee has given a clear vote of confidence to Sir Michael Colman, the First Church Estates Commissioner, to Patrick Locke, the secretary, and to the staff of the Commission for the way in which they have recovered from the shocking event of losing so much of the historic resources only a few years ago. The Select Committee was critical at that time, and obviously that remains in our memory, but as we move into a new area where confidence is required, it is important that the Select Committee can, without any equivocation, make that recommendation to the House about its feelings for those who currently work for the Church Commissioners.
  Technically, today we are debating what is happening about pensions, particularly pensions for the clergy of the Church of England, but we cannot do that in a way which divorces our debate from the English nation. We cannot understand the history of England without considering how it is interwoven with the history of the Church.
  One of the many great distinguishing marks of the Anglican Church in Britain is the fact that, because of its closeness to the English nation, it has understood how much religion the English are prepared to take, which is not very much. It has designed its ministry according to that fact rather than in ignorance of that fact; hence the importance of the Peel reforms of the late 1830s and 1840s which gave us, first, the ecclesiastical commissioners and then, as the right hon. Member for Selby said, the Church Commissioners in the 1940s. In regrouping the historic assets, Peel and the Church Commissioners sought to ensure that clergy would be paid for in those areas which could not pay for their clergy.
  Owen Chadwick's biography of Hensley Hanson showed how, at the start of his career, he was a deep opponent of establishment, subsequently became a fan of establishment, and then, when he saw that there was a possibility of a Labour Government appointing bishops, became an opponent of establishment again. At the start of his career, after graduating from Oxford, he was appointed to act as a tutor to one of the great shipping families in Merseyside. It was as a result of his observations of life in Birkenhead and the way in which the Church tried to perform its role of administering to the nation that Hensley Hanson became a convert to establishment. He did not believe that the poorest areas of Britain could support their clergy.

  1087
  In a sense, that is the backdrop to today's debate and the concern expressed in the Select Committee's report that, while it is crucial that past pension commitments are honoured, we 'want to do so in a flexible way so that the commissioners can fulfil their other great historic role, which has been to maintain a national presence in Britain while having a real understanding of the English and their religion. If that is broken, it should be broken by the populace itself, not because we have not got right the financial affairs of the Church Commissioners and their relationship with Synod.
  Having made those introductory remarks, I want to address my comments to two aspects of the report. The first concerns the pension proposals themselves. The second concerns the Select Committee's recommendation—which the right hon. Member for Selby, for good reason, sidestepped today—on whether the moving of the historic assets away from their current stewardship should be by Bill or Measure.
  The question which most concerned the Select Committee, arid which we now have a chance to debate on the Floor of the House of Commons, which a hope the Revision Committee will be able to consider, concerns the form of the pension proposals that are implicit in the Measure. Because people, perhaps rightly, are sensitive about the comments that we make, I preface my comments by saying that I am not trying to criticise those people who drew up the draft Measure. They clearly had instructions from Synod to establish pension schemes, and the Measure does that. However, I am anxious that they should think further than the mere form of the legislation that they at some stage will ask the House to approve.
  It is implicit in the Measure as currently drafted that the form of the pension provision will be a company pension scheme. I want to suggest three reasons why, when the Church, both as Synod and as diocesan boards of finance, and even more importantly as local parishes, begins the debate in earnest on the form of pension provision, it will find that the company pension model is unsatisfactory because of the financial liabilities that it will place on diocesan boards of finance and parochial church councils. Unless other reforms are adopted, those two bodies will be asked to accept unqualified, open-ended financial liabilities.
  Diocesan boards of finance and parochial church councils are charitable bodies, the first by registration and the second by declaration. If one considers how the Charities Act 1992 impinges on their duties, it is clear that they must act prudently and should not commit themselves to debts which amount to more than their assets; yet that is what we shall be asking them to do if we go down the route of an ordinary company pension scheme type model for the second pension scheme that will be enacted by the measure.
  The first scheme relates to past entitlements which have already been earned, for which the commissioners take responsibility. and the diocesan boards of finance and parochial church councils would take responsibility for the second scheme. We cannot ask them to undertake that responsibility because, with the best will in the world, they cannot meet it. They cannot know that they will have the resources to meet that responsibility. That is not to say that they should not meet them, but that they should design a pension arrangement so that they can meet them.
  Mr. Bernard Jenkin: I wish to emphasise what the hon. Gentleman is saying. The bodies that he has described do not decide the terms and nature of the liabilities that they will enter into. The benefits of being in the pension scheme are decided by the trustees of the pension scheme, so they would be taking on liabilities that they simply could not control.
  Mr. Field: Not for the first time the hon. Gentleman puts the point better than I. With that emphasis, I leave my first objection or worry about the current provisions that we are considering.
  Mr. Peter Hardy: Some people have begun to understand what the obligations will be under the charity regulations. Many hon. Members will have become separated from charities with which they have been involved because their attendance here does not allow them to attend the charitable boards regularly. Is it not possible that people who have played an enormous part in the life of their parish church councils, and who would probably have been prepared to commit themselves in future, would hesitate to do so if we were to go down that route?
  Mr. Field: That is part of my worry. Again, my hon. Friend makes that point in friendship to those drafting the Measure, not in a hostile manner. We are anxious that when the Measure comes to Parliament, it should be in the best form that we could propose—not best in that it is the most popular in today's terms but in that it is a contract sustainable over the generations and not merely in the first year of its existence.
  My second concern is that the parochial church councils, and especially the parishioners, will be anxious when they realise that the clergy will be dealt with in different ways under the proposals. I understand why the commissioners want to meet the future pension liabilities of bishops, deans and what are extraordinarily called the higher clergy, but most of us would think that there is no higher calling than that of parish priest. The higher clergy may have additional responsibilities, but the cardinal role of parish priest should not be undermined.
  If I were an ordinary parish priest in Birkenhead, I would be slightly anxious that my future pension liability was to be met from the second fund, which will be dependent on what the laity contribute each year, while those of senior clerics would be met from the historic assets. That is not acceptable. It will cause problems in this House and even greater problems with the laity in our parishes. They will feel that that is not fair treatment of the clergy who bear the burden of the day, especially those who have the toughest parishes, whose children are often beaten up at school because they speak with slightly different accents and whose houses are regularly ransacked by yobboes. We should treat that group as the most privileged, and not subject it to risks to which we are not willing to put bishops, deans and other clergy.
  Thirdly, it is a fantasy to think that even if the House voted half the assets over to a new pension scheme, it would close the commissioners' responsibilities. They would not be able to defend the rest of their assets from a company pension scheme that cannot maintain its flow of income. There would be enormous moral pressure on them to hand over yet more assets to meet any deficit that the dioceses or parishes did not meet.

  1089
  I therefore propose a form of pension provision that I believe is sustainable in the long run and that can safeguard the remaining assets of the commissioners once they have met their current liabilities to past pension commitments. I hope that the Church will consider seriously a personal pension scheme, whether group or individual. That would be a simple form of pension provision that would be easily understood. The assets that would be built up would be in the name of the priests. The assets would not be collectively owned, lost or damaged if anything untoward happened to the scheme.
  Clearly, the House would have to take into account the circumstances that the Church will have to meet under a personal pension scheme, which, I believe, would unlock the door to a much wider pension reform for people who are not in funded pension schemes and who have no cover other than the state retirement pension. That would give the House the opportunity to consider personal pensions to which contributions may be irregular. We should accept that people should not be fined or lose assets because of irregular contributions.
  People should be allowed to pay small inheritances into their pension schemes. While I do not think that any of our clergy do the lottery, the pension scheme should allow winnings to be paid in rather than dissipated. People should clearly understand that the scheme is theirs. A unit trust-backed, individually owned personal pension scheme would give maximum security to our clergy and allow parish church councils and diocesan boards of finance to enter into a legal agreement honestly, knowing that their commitments can be fulfilled. The Church, by seeking such a Measure, would unlock the debate that we need about how to universalise second-funded pension provision.
  I have taken a long time, so I shall speak only briefly on the historic assets. I shall try to choose my words carefully and I hope that my brevity will not be misunderstood. When we considered the difference between a Measure and a Bill, in no way was the Committee trying to overturn the 1919 settlement, whether by frontal attack or in a subtle manner. We were trying to register only that while the Church rightly has all the self-government given it by the Church of England Assembly (Powers) Act 1919, the historic resources of the church and nation are a different matter from all the other Measures considered in the House, such as the ordination of women or the alternative service book, which largely put aside the Book of Common Prayer.
  My second point is addressed to the Archbishop's advisers. He has an enormously difficult job to manage the Church in an age in which it is not an easy task. There are many centres of power to which he is responsible—the Synod, the commissioners and Parliament. When his advisers help him to respond to reports from this House, I hope that they will not do so in a partial spirit. If they do, they will guide him into even greater troubles than he currently has to manage. Above all, they should help him to take a global view rather than the partial or campaigning view of any of the different sects that are trying to gain dominance in the Church.
  Thirdly, the theology of the matter has come into play. We are told that it is an offence to think that the Church cannot do precisely what it wants because it is the
  1090
  physical representation of Christ in this country. That sounds fine as theology, but we should remember that the Anglican Church was established by the Crown. Even if it were formally disestablished, everyone in Britain is subject to the rules and regulations made by Parliament. It would not give the Church special privileges, although they may claim that its theology was only as old as the Tractarians. The Tractarians have done much mischief to the English Church and this is clearly part of their legacy.
  The Turnbull report is a deeply un-Anglican document because it believes that one can concentrate power. It says that it is establishing an archbishops council, but it is a model of the Roman curia. The Church is free, if it wishes, to opt for that reform, but it will not be sustainable because it is trying to graft something on to a body that will reject it.
  The Anglican Church was established in an age of great extremes, and those who founded it tried to find a middle way to accommodate those extremes. Part of that settlement meant that although we are always taught that we are a clergy-led Church, historically we have always been a laity-led Church. That lay representation has devolved power through many Church institutions. To try to group them together because one is passionate about the ministry of the Church is to try to take a short cut that will flounder.
  That is a personal comment. The Church has every freedom to embark upon those reforms; the Select Committee merely asks in innocence whether the Church cannot achieve most of the reforms that it wants to introduce as a result of the Turnbull report without even coming to the House. The Select Committee put down the marker—and my right hon. Friend the Member for Selby, the Second Church Estates Commissioner, has emphasised the point publicly at most opportunities—that when we come to the ownership and control over the historic assets of the Church, we have a different agenda from all the other subjects that have been presented to the House since 1919.
  11.50 am
  The Parliamentary Under-Secretary of State for the Home Department (Mr. Tom Sackville): I shall not attempt to answer the debate, as is sometimes the role of the Minister, but simply make a brief intervention to welcome the fact that the debate is taking place and to make a couple of points on behalf of the Government.
  First, I thank my right hon. Friend the Member for Selby (Mr. Alison) and the hon. Member for Birkenhead (Mr. Field) for their thoughtful contributions. I am sure that many people would wish that the deliberations of the House were carried on in today's atmosphere more often. We are aware that there are those who are involved in Church matters, be it their local church or wider than that, and there are others who have little involvement. Those hon. Members who are present are deeply involved in Church matters—perhaps there should be more.
  All of us are aware of the difficulties that the Church faces in the latter part of the 20th century. Some of them have been referred to already.
  When I arrived at the parish of Irnham in Lincolnshire on Christmas eve, following a long drive through rush-hour traffic, I found that I had been volunteered to accompany five carols at midnight at the local parish church. That filled me with some alarm because my

  1091
  musical talents are more in the nature of a nightclub pianist than a church organist. I had been volunteered because the regular organist had gone down with pneumonia. When I arrived at the church to practise, I got an inkling of why that might be. None the less, everything went off well. My main problem with the rather simple instrument that I had to play was in discovering the trick of getting the last verse played much louder than all the rest so as to go out on a heroic note without one of those pedals that change the settings. I finally solved the problem by asking my sister-in-law, the estimable Mrs. Bevan, to sit beside me on the bench and pull out all the stops for the last verse. That was the first time I understood the full force of that phrase.
  I congratulate the Church Commissioners on having pulled out all the stops to get the affairs of the Commission back in order. There is no doubt that the affairs of those who are or will be eligible for a pension from the Church are in the best possible hands. Sir Michael Colman and my right hon. Friend the Member for Selby and his colleagues should be congratulated on what they have achieved.
  Those who are employed by the Church live for a long time, perhaps because they have a fulfilling career, so there is a huge liability, which we must take seriously. Whatever changes are made, we must be certain that they are in line with recent pensions legislation so that the pensions and any other arrangements that are made for those involved have the full protection of the law.
  As for whether any changes should be achieved by Measure, I hope that some arrangement can be reached so that we can continue the honourable long tradition of affecting changes in Church matters by Measure. As has been suggested, it is quite possible that some transitional or partial change in the arrangements could be achieved by Measure, but in the end it will be a House of Commons decision. It is perhaps worth placing on record that if a radical proposal was made to transfer a substantial part of the funds of the Church Commissioners, the House may decide that a Bill was required—as it might regarding any radical change to the Commission.
  For 13 years, I have often listened to my right hon. Friend the Member for Selby reporting on Church matters. It is a sad fact that he is retiring from service in the House, because there will be a great gap. Over the years, he has made a huge contribution to steering that difficult relationship between the Church and the state. As they say in show business, I am sure that he will be a hard act to follow.
  11.55 am
  Mr. Alun Michael: None of us comes to debates unencumbered by our experiences and personal histories. I was brought up as a Welsh Presbyterian and then accepted into the Church of England while at university in England. For the past 30 years, however, I have been a communicant in the disestablished Church in Wales. I am therefore able to combine sympathy and objectivity in the debate.
  I speak with some trepidation, because I am an expert in neither ecclesiastical nor legal matters—I am certainly not an expert in ecclesiastical law. The way in which we approach such matters in the House requires a good deal of care as well as sympathy.
  1092
  It is clear that important principles have to be dealt with and financial problems need to be resolved regarding the Church of England's pensions for its clergy and the responsibilities of Parliament to respond to its proposals.
  The right hon. Member for Selby (Mr. Alison) has, as always, made a massive contribution towards enabling us to understand our responsibilities and the way forward. The report of the Select Committee on Social Security is a valuable contribution, because it refers to matters that need to be considered and resolved.
  It is inevitable that one of the difficulties that we must face is how Parliament should respond to proposals to resolve the problem. When we last debated the issue on the Floor of the House, I expressed the view on behalf of the Opposition that the resolution of the long-term problems would require primary legislation. At the time we understood that the Archbishop of Canterbury and his advisers felt that that contribution had been helpful to the debate. That view about primary legislation was not questioned, and it has just been in the past couple of weeks that a different view has been expressed to us.
  We are sympathetic to the need to deal with the immediate problems as expeditiously as possible—that desire informs the recommendations of the Select Committee. As the right hon. Member for Selby acknowledged, provision for the longer term requires difficult questions to be answered. It has been said that there is nothing, including pensions, in the long term as well as in the short term that cannot be resolved by Measure. Indeed, that is the view of the right hon. Member for Selby. Some of the briefing documents have suggested that, since 1919, there has been no case of a Church of England matter being dealt with other than by Measure.
  The briefing from the House of Commons Library reached a similar conclusion. The basis for the expeditious treatment of Church of England matters was clear when it was pointed out in 1919 that only 33 out of the 217 Church Bills that had been introduced from 1880 to 1913 had been successful. The position has been greatly improved by the existence of an expeditious way of responding to matters resolved by, and proposals brought forward from, the Church authorities.
  The Church of England Assembly (Powers) Act 1919 set up an arrangement whereby Parliament could deal with those matters expeditiously, and explicitly stated that the Measures
  "shall have the force and effect of an Act of Parliament on the Royal Assent being signified thereto in the same manner as to Acts of Parliament".
  A question remains. I have been told that, although Parliament has the power to introduce legislation, it has never done so, and that that even applied to the establishment of the Church Commissioners in 1947. In reading through the briefings and texts in the Library just before the debate, however, I was surprised to read of the Church of England Convocations Act 1966, which represented the use of an Act by Parliament after 1919.
  I argue that we have a responsibility to consider the right means, by Act or Measure, to resolve the issues before us. That needs proper discussion to ensure that we fulfil the responsibilities of Parliament in the right way.
  The responsibilities are obviously shared. The recommendations leading to the 1919 Act came from the Convocations, and that was regarded as important in

  1093
  showing that the Church Assembly's powers rested on the authority of the Convocations as well as Parliament. Similarly, the responsibility to help to resolve those issues is shared by Parliament and the Church authorities. That was demonstrated again after disestablishment, when the Church in Wales did not take over its share of funds. Instead, a different settlement was reached: in effect, the Church in Wales was disendowed at that time. I believe the position in Ireland to be similar.
  I mention those points to show that a responsibility rests on Parliament to ensure that what it does is an appropriate response to the proposals of the Church authorities. We should properly understand our responsibilities as well as our powers. As the Minister rightly said, there is an element that requires sensible discussion and resolution, so that Parliament and the Church can proceed co-operatively in agreement, and so that we do not end up arguing about constitutional issues that might be an obstacle to a proper, lasting resolution of those issues.
  The Select Committee report is a helpful contribution to the process of working towards a solution; but an interim solution, which is what is suggested, must be seen only in the context of a clear view of the long-term resolution of issues and how Parliament is asked to respond.
  The Select Committee report makes the point, reinforced by my hon. Friend the Member for Birkenhead (Mr. Field), that many of the reforms that the Church wishes to make can be undertaken without requiring endorsement by Parliament. I am sure that the reinforcement of that point today will be regarded as helpful. I am sure that Parliament would wish to encourage progress wherever possible.
  Obviously, the reference in the report to the limit to a five-year arrangement is an attempt to say that a step forward can be taken, with agreement, in sympathetic consideration of the problems that confront the Church. In response, the right hon. Member for Selby made the valid point that a seven-year arrangement might be preferable to a five-year arrangement, and I am certain that we would be sympathetic to that variation on the recommendations of the Select Committee.
  This matter will be easier to resolve in the context of a long-term agreement or settlement. I hope that my comments today will be regarded as helpful, so that the issues can be discussed, formally and informally, as soon as possible, to try to find ways to prevent us from encountering procedural blockages, which would not be in the interests of the Church or of Parliament.
  I am sure that parliamentarians and Parliament will be willing to listen to the views of the Church authorities and to seek a resolution that meets the needs of the Church of England, protects the poorer parishes and thus the needs of the inner cities—for which the Church has a deeply felt and recently voiced concern—and allows Parliament to fulfil its responsibilities in accordance with the law. Obviously, clarification on the procedure is needed, and it is sensible for that to be discussed as soon as possible by all the parties involved.
  We must be careful not to interfere in the Church's independent decision-making responsibilities, but we must ensure that Parliament fulfils its separate and distinct responsibilities. Parliament and Church are very different
  1094
  in their constitution, culture and decision-making processes. Partnership and the sharing of responsibilities between different organisations are always difficult. There is an obligation on each to respect and understand the duties and responsibilities of the other. Dialogue is necessary to achieve what my hon. Friend the Member for Birkenhead described as a sustainable solution to intractable problems.
  I welcome the briefing and information with which we have been provided in the past few days by the Church authorities, and the authorities' willingness to engage in discussion about the responsibility that Parliament must fulfil. It is right that we should seek to resolve those issues together, and I thank the right hon. Member for Selby for seeking today's debate. It has allowed us to express a wish, which the Minister also expressed, to resolve these matters by agreement, to tease out the correct responsibilities of Parliament and to establish a way forward that will be sustainable and deal in the long term with the issues. If we do so, it will allow Parliament and the Church authorities to sleep securely in their beds at night.
  12.6 pm
  Mr. Bernard Jenkin: I am grateful for the opportunity to participate in the debate, and I very much welcome the comments by my right hon. Friend the Member for Selby (Mr. Alison). He struck exactly the right note, and reflected many of the Select Committee's anxieties as well as our enthusiasm for the Church Commissioners and the confidence that we now have in them.
  I pay tribute to Sir Michael Colman. He took on the difficult task of repairing the procedures and the management of the assets under the charge of the Church Commissioners and—perhaps much harder—the task of repairing the commissioners' reputation.
  It should be well understood that our most recent report reveals a switch in emphasis from our previous report, which strongly criticised the way in which the Church Commissioners had handled their affairs. That switch in emphasis may have caught some other participants in the debate about Church affairs a little off guard.
  I can well understand why the Synod, having been frustrated year after year in its investment policy and by the lack of support for projects that it considered important, should feel that the mismanagement of the assets should herald complete reform and change of the Church Commissioners. That is not the Committee's view. The Committee strongly feels—I am sure that the hon. Member for Birkenhead (Mr. Field) would endorse this—that the commissioners have repaired themselves effectively and can once again become a firm financial anchor for the Church of England, to the benefit of the Church of England and the whole nation.
  The role of the Church Commissioners depends principally on capital. The Church Commissioners are the capital of the Church—the two are indivisible, which is why that capital has such a peculiar status in the minds of those who serve on the Select Committee and, I hope, of those who serve in the House. I remind my right hon. Friend the Member for Selby of what he said at the press conference about our report. He said that he would regard any Measure that significantly depleted the capital of the Church Commissioners—apart from the current pension

  1095
  position—as "inexpedient", and that it would be so regarded by the Ecclesiastical Committee of this House. It is not for me to prejudge any Measure that may come before that Committee, but my right hon. Friend's use of the word "inexpedient" reflected widespread concern in this House.
  I endorse the warnings issued by the hon. Member for Birkenhead about going for a major single transfer to try to relieve the commissioners of the pensions obligation. Anyone who has been involved in occupational pensions knows that it is impossible accurately to measure what that obligation is. Moreover, if such a transfer is made, who will be responsible for any resulting deficit, and who will own any surplus? This applies especially to the sort of closed fund that has been mooted to deal separately with historic pension liabilities, while new liabilities are taken on by a different fund.
  I also endorse what the hon. Member for Birkenhead said about the type of pension that should be available to clergymen. Traditional occupational pension schemes are a legacy of a more paternalist age when pensions were designed to attract people to certain forms of employment and to keep them there. The idea of portable pensions is relatively new, as is the idea of the personal ownership of pensions.
  Public confidence in pensions is not strong at present, so we should not be surprised to find that the clergy worry about their pensions, given the recent history of the Church Commissioners. We want the enthusiastic support of the laity to help to provide the funds for these pensions. That is why I think it would be better to come up with some sort of group personal pension scheme that allowed parishes to see exactly what they contribute to their clergymen's pension funds. It will be much easier to attract the funds if people can see the purposes for which they are used—easier, for instance, than asking parishes to contribute to a general fund of indefinable liabilities that is not owned by anyone in particular.
  We are presented here with a huge opportunity to open up new forms of giving to the Church of England, to attract new funds that allow parishes and parishioners to see that they are contributing to the pension of a particular individual. We also want to give clergymen a heightened sense of security. Given the size of their stipends, it may be inappropriate to ask them to contribute to their own pensions, but there should be no obstacle to giving clergymen and women more control over the contributions made on their behalf. That is a more realistic way of controlling liabilities. I refer to an individualised money purchase scheme that enables people to benefit from what they have put in, instead of building up an undefinable liability that may eventually end up on the books of the Church Commissioners, thereby reducing their ability to pay for the work of the Church throughout the nation and especially in poorer parishes.
  I reiterate the point about the 1919 settlement and to place on record the assurances given when the Bill was passing through Parliament. Introducing the Bill to the House of Lords, the Archbishop of Canterbury said that it
  "does not take away from Parliament any power which it at present possesses … Although there is an increased power of doing work better, I am by no means anxious to suggest that it is freeing us from State control in its proper place. It does not do so."—[Official Report, House of Lords, 3 June 1919; Vol. 34, c. 989.]
  1096
  Subsequently, in 1935 a report from the Archbishops' Commission summarised the impact of the Act—I quote from paragraphs 36 to 39 of our report—as follows. The Church of England Assembly (Powers) Act
  "left constitutional relations of Church and State substantially unaltered. The sole legislative authority after, as before, its passing is the King acting by advice of the two Houses of Parliament. What the Enabling Act did was to offer an alternative process by which Parliament could determine the advice which it should give the King. The Church Assembly"—
  the predecessor of the Synod—
  "is entitled to 'frame legislation'; if it does so, Parliament considers whether or not it shall advise the King to give effect to the legislation so framed."
  Now comes an important assurance:
  "Moreover, the old power of legislating by Parliamentary Bill without any reference to the Church Assembly remains unimpaired."
  It is of course unlikely that Parliament would initiate Church legislation without the consent and involvement of everyone in the Church of England. The quotation dates from 1935, long after the 1919 Act had been passed. At the very least it legitimises the discussion between parliamentarians and members of the Church of England about the appropriate role of Parliament in Church affairs.
  12.17 pm
  Sir Sydney Chapman: I dare to intervene briefly, first to congratulate my right hon. Friend the Member for Selby (Mr. Alison) on the way in which he introduced the debate. I join others in thanking him for the tremendous service that he has given to the role of Second Church Estates Commissioner over the years.
  I hope that the cardinal objective of those managing the Church of England's investments will always be to maximise those investments. Of course the Church cannot be amoral; it will not want to invest in certain companies or places. But I hope that it will not reduce its property portfolio on the grounds that it wants nothing to do with property. Rather, it should reduce it so as not to depend entirely on one sector of our economy.
  I share the view of the hon. Member for Birkenhead (Mr. Field) that we cannot divorce any discussion of the clergy's pensions from other Church matters. I very much hope that those who allocate the national lottery funds will recognise the importance of conserving the splendour of our ecclesiastical architecture. By that I mean not just our great and wonderful cathedrals but our glorious parish churches—including churches that do not belong to the Church of England.
  I have been immensely informed by this debate, but it has brought me once again to the realisation that parishioners must make whatever financial contribution they can to their church. It cannot just be left to the Church Commissioners. I recognise the difficulties: while there may be money in the leafy suburbs, it is hard to come by in city centres. But I would like much more twinning of churches between the leafy suburbs and city centres. I hope that that can be encouraged, although it is obviously a matter of personal priority and commitment in the individual parishes.
  In conclusion, I should like to make a point for discussion. I am not competent enough to judge whether the changes should be brought about by, if not enshrined through, a Measure by the Synod or a Bill in Parliament.

  1097
  As a member of the Ecclesiastical Committee, I sometimes regret the straitjacket of that Committee's purpose, which is merely to find Measures from the Synod either expedient or not expedient. I should like much more interchange so that a Measure from the Synod could be brought before the Ecclesiastical Committee and ideas and thoughts carried back, just as we are trying to encourage much of the legislation in the House to go to Special Standing Committees and be given more time for consideration before the remaining procedures.
  Mr. Alison: As a distinguished ex-member of the Whips' Office, how would my hon. Friend feel about the occasional substitution of parliamentary Bills for Church Measures? He will understand the implications, from a Whip's point of view, of what might then arise.
  Sir Sydney Chapman: After six and half years in the Whips' Office, my scarred memory leads me to believe that anything is possible, although the Whips' Office tries to avoid most things. I understand the point that my right hon. Friend makes. I would like the Ecclesiastical Committee's role to be more flexible, but I recognise that that in itself would require the 1919 Act to be amended.

  Petrol Supplies (Highlands and Islands)
  12.21 pm
  Mrs. Ray Michie: I am grateful for the opportunity to discuss the supply and price of petrol in the highlands and islands, as the matter is causing increasing concern not only to those who live in the area, where cars are not a luxury but a vital lifeline for people to go to work, to shop, and to visit the doctor or chemist. There is no choice when public transport is minimal or non-existent. The matter also concerns bodies involved in rural affairs, particularly those responsible for promoting the economic and social welfare of the area, such as the local enterprise councils and local authorities.
  I am well aware of the widespread concern about high petrol prices and continuity of supply in other parts of rural Scotland, particularly in the Borders area represented by my right hon. and hon. Friends; but, as the title of this debate suggests, I shall concentrate today on the highlands and the unique situation of the many islands.
  First, I shall give some examples of real prices and real places. I have brought along a map to assist the Minister, who may wish to refer to some of those places. The average cost of leaded petrol in the highlands and islands is 65.5p a litre, whereas the average cost in Edinburgh is 57p a litre. The average cost of unleaded petrol in the highlands and islands is 60p a litre, whereas, in a place like Dunfermline, it is 52p. For leaded petrol, a village in Shetland pays 66p a litre; Dornoch pays 67p; Ullapool pays 62p; and Tiree, an island in my constituency, pays 74p.
  Someone heading to Tiree from Glasgow may fill up his car at Dumbarton and pay 54p a litre. He will travel through Tarbet on Loch Lomond, where the price goes up to 60p, on to Inverary where it costs 63p, and to Oban, where it goes down a little to 60p. He then drives his car on to the ferry, and pays a single fare of £65 and an extra £9.85 if he has a passenger. He arrives on the island of Tiree, to be faced with a price of 74p a litre. On the island of Colonsay in my constituency, Mr. Charles Mackinnon, who operates the school bus, would pay 49p a litre for diesel in Glasgow but must pay 86p a litre on the island.
  A number of recent reports and surveys reflect growing anxiety at spiralling petrol costs and the future of supplies. The Rural Scotland Price Survey gives definitive figures showing the knock-on effect on the cost of living in those areas. In a paper published last month, the Scottish Consumer Council makes a telling statement:
  "All of the 15 least accessible travel-to-work areas in the UK are in Scotland. Ten are in the highlands and islands."
  A report issued last January by Halcrow Fox for the Highlands and Islands Action Group on Hydrocarbon Fuel Issues found that petrol prices in the highlands and islands
  "are up to 11 per cent. greater than in urban locations in Scotland."
  The excellent submission by the Western Isles council to the Trade and Industry Select Committee draws attention to the fact that, in 1981, despite a lot of pressure, the Office of Fair Trading declined to take action, but eventually did so in 1987 by referring the matter to the Monopolies and Mergers Commission. However, it declined to conduct its own investigation into rural prices, and the MMC conclusion at that time was negative.
  The Petrol Retailers Association, which gave evidence to the Trade and Industry Select Committee on the subject on 4 June, criticises the role of the Office of Fair Trading,

  1099
  and accuses it of failing to provide details of its market monitoring. I believe that it should be much more responsive to the concerns of those who want answers to the problem of petrol costs.
  The Office of Fair Trading may not have much in the way of resources, but I hope that the Minister will encourage it to monitor the market. That would be easier to do if pricing were more transparent at wholesale level. Despite the fact that petrol prices have been falling at forecourt pumps throughout the UK, they have remained unacceptably high in the highlands and islands. The MMC has said in the past that it is all due to sparse populations and geographical factors, but that is no answer. The problem does not appear to rest with the small retailer who may put only up to 3p on a litre, simply to stay in business.
  My second point—I hope the Minister will address it—is about the rapid closure of retail outlets for petrol, which is happening at an alarming rate, for a number of reasons, including the cost of upgrading petrol stations to meet increasingly stringent requirements such as storage tank testing and modifying pipe work as demanded by the petrol recovery directive; and increases in the real price of petrol to encourage the switch from private to public transport. That is laughable, because there is no public transport in many areas.
  I have been told, but I cannot confirm the information, that Shell will not renew its contracts with garages that sell fewer than 2 million litres of petrol and diesel a year. The closure of petrol stations will have disastrous consequences for the availability of fuel and for jobs. It has been estimated that more than 600 jobs could be lost in the highlands and islands in the next 10 years, with four out of every 10 filling stations facing closure.
  At the end of June, the Pier garage on the island of Jura in my constituency closed, leaving the island without any petrol or diesel. The owner has been offered a grant, but cannot find the rest of the money required to make up the total for capital investment. The island of Coll is in a similar position, because the cost of replacing the antiquated pump and tank is beyond the means of the retailer who provides the only outlet on the island.
  I have a copy of a letter that was sent to my hon. Friend the Member for Inverness, Nairn and Lochaber (Sir R. Johnston)—I am glad to see him in his place—earlier this month about the non-existence of petrol and diesel outlets in the Acharacle area. The writer states:
  "About forty years ago, there were five petrol pumps in this area, and hardly any cars. Now most households have at least one car, and there is no petrol in the Acharacle area … Tourists coming into the area now are having great difficulty, not knowing about the petrol situation."
  Apart from the effect on people living and working in the area, the lack of petrol outlets will have a detrimental effect on the tourist trade, which is such an important industry in the highlands and islands.
  Mr. Charles Kennedy: Will my hon. Friend stress to the Minister that the problem, as she has argued throughout her speech, affects the whole highlands and islands area? For example, Miss Wallace, who runs the Kinlochewe service station in the Wester Ross area in my constituency, has been to see me. Her letter to me states:
  "My own fate after 28 years in this business is bad enough, but the demise of numerous stations will inevitably send shock waves through all the businesses as all are dependent on the tourist trade."
  1100
  Those comments, and those that my hon. Friend has quoted from her constituents, underscore the need for the action that she has recommended.
  Mrs. Michie: I am grateful to my hon. Friend for that example. There are many such examples, and an increasing number of letters in our post bags stress what is happening in the highlands and islands.
  I have tried to give the Minister a picture of what is happening, and I would like him to tell me what can be done. Will he refer the matter to the MMC, so that we can find out what the oil companies and supermarket chains intend to do in the light of threats to continuing supply, as a result of—it appears—private price wars in urban areas?
  Can he also say why there is no national distribution network, and will he consider a derogation from the strictest legal requirements to upgrade petrol stations in remote areas? Will he also consider realistic financial support directed towards investment in the petrol stations and to the pump price of fuels? Will he consider establishing an investment fund, financed by the oil companies, to assist the small retailer? I thank the Minister for listening to the debate, and I hope that I have impressed on him the gravity of the situation. I look forward to his reply.
  12.35 pm
  The Minister for Competition and Consumer Affairs (Mr. John M. Taylor): I congratulate the hon. Member for Argyll and Bute (Mrs. Michie) on securing the Adjournment debate. I am also pleased that, as I reply to her, my right hon. Friend the Minister of State, Scottish Office is in his place.
  I may be an Englishman, but I take no persuading that Scotland is arguably the most beautiful country in the world. The hon. Lady may be surprised to learn that I have visited Orkney, Shetland, Skye, Harris, Lewis, North Uist, South Uist, Benbecula and Barra, and have travelled extensively in mainland Scotland. I realise that not all those places are in her constituency, but when I looked across the Pentland firth, I strongly suspect that I was in the constituency of the hon. Member for Ross, Cromarty and Skye (Mr. Kennedy).
  Mr. Charles Kennedy: The Minister did not get the Tory nomination in any of those places.
  Mr. Taylor: No, I did not, to my lasting shame. It is hard to repair my frailty and inadequacy in that regard, and it is extremely uncomfortable to be reminded of my failures in such a public forum.
  The grandeur of Scotland is matchless, and remoteness is a part of it, but it is also also part of the problem of petrol and petrol pricing. If I fail to answer any of the points that the hon. Member for Argyll and Bute raised so gracefully in her eloquent speech, I invite her to meet me, and perhaps she would write to me to let me know the key points on which she would like further comment.
  The hon. Member spoke about the need for an MMC investigation into petrol supplies in the highlands and islands. As she knows, the commission reported on the supply of petrol by wholesale in the United Kingdom in February 1990. It examined petrol prices in the highlands and islands in detail, as an example of the problem of

  1101
  petrol prices in rural areas. The MMC found that average prices in the highlands and islands were higher than in the rest of the United Kingdom, and higher than in the rest of Scotland.
  It has been argued that customers are paying high prices for petrol because of lack of competition. It is true that petrol stations are not thick on the ground in the highlands and islands, and the nearest competitor to every station may be some distance away. However, a number of factors may contribute to the higher prices for petrol in the highlands and islands than elsewhere in Britain.
  The MMC concluded that the higher prices charged in the highlands and islands were primarily the result of loss of economies of scale, which resulted from low turnover at individual petrol stations, which itself resulted from low population density. The average site volume in the highlands and islands was about one fifth of the United Kingdom-wide average.
  Fixed costs spread across low volumes of sales tend to mean that higher prices for individual sales must be achieved if outlets are to make a profit or break even. Therefore, their profits may be the same as, or even lower than, outlets in other areas, despite the fact that their prices may be higher. Higher costs of transport to remote locations and less intense competition at both wholesale and retail level are additional factors. The Monopolies and Mergers Commission found no evidence that wholesalers were making excessive profits from sales.
  The hon. Lady will be aware that, under the competition legislation, responsibility for considering and, if appropriate, investigating allegations of anticompetitive behaviour or abuse of monopoly power lies with the Director General of Fair Trading, John Bridgeman. It is for the director general to consider whether the situation warrants a reference to the Monopolies and Mergers Commission. The independence of the director general is a fundamental part of our competition framework.
  The Office of Fair Trading has been keeping the supply and pricing of petrol under review, and has been investigating individual complaints about petrol pricing in the highlands and islands. It has found no evidence that the conclusions reached by the Monopolies and Mergers Commission in 1990 no longer hold good.
  Madam Deputy Speaker, you may be aware that the Director General of Fair Trading gave written evidence to the Trade and Industry Select Committee hearing on petrol pricing on 26 June. He reported that he had looked into recent developments in petrol retailing, including Esso's "Price Watch" campaign, and had found that price competition was strong but not predatory. Furthermore, he considered that consumers were benefiting from cheaper petrol prices as a result of this competition between the oil majors and the supermarkets. However, if the hon. Lady or any other hon. Member has evidence of anti-competitive practices by petrol retailers or wholesalers in the highlands and islands, I urge them to bring it to the attention of the Office of Fair Trading.
  In recent years, there has been a widening of the retail price differential. It has been suggested that this is because the MMC was given misleading information about the price of petrol in the highlands and islands during its investigation, and that this should be investigated. I have
  1102
  not seen sufficient evidence to justify any such review. Rather, the widening of the retail price differential reflects the fact that prices have been falling in urban areas as a result of increased competition between the large oil companies and the supermarkets.
  It is undeniable that price competition in petrol retailing is very keen at the moment. This is particularly true in areas of high outlet concentration, where the major oil companies and the supermarket-owned petrol stations are competing for market share—this is particularly true in the suburban part of the west midlands that I represent. This has resulted in the bottom of the price range being pushed down, rather than the top of the price range being pushed up.
  Oil suppliers already give support to retailers through solus-tie agreements. This is an exclusive contract between the retailer and petrol supplier, usually for five years, which gives the retailer various advantages—ranging from help with infrastructure costs, guaranteed supplies of petrol, advantages from marketing under a brand name, and financial incentives. There are other incentives, including the retailer receiving advice on environmental issues and improvements to the retail outlet.
  Other types of contract are available to the retailer, such as licenses and franchises, each giving different advantages and flexibilities. Some retailers may decide not to have any contract at all, preferring instead to negotiate with suppliers as and when they require deliveries. It is for individual retailers to decide what type of contract they want, and to negotiate with oil suppliers accordingly.
  It has been suggested that petrol retailers in the highlands and islands might be subject to lower rates. The hon. Lady will no doubt be aware that the Scottish Office published a consultation paper about a business rates relief scheme for village shops on 7 June 1996.
  The paper proposes that certain small general stores and post offices in rural villages will in future be entitled to at least 50 per cent. relief on their rates bills, and local authorities will be able to top this up to 100 per cent. In addition, local authorities will have wide discretionary powers to grant relief to other rural shops and businesses that are of benefit to the rural community. It will be for individual local authorities to determine whether independent rural petrol stations fall into this category.
  I understand that many petrol stations in the highlands and islands are a number of years old, and the costs of replacement and upkeep will be high. Outlets may need to be upgraded to offer additional services, to keep existing customers or to attract new customers. Improvements must be made to comply with health and safety, and environmental, regulations. For example, the European Community directive on the recovery of petrol vapour during the storage and distribution of petrol requires outlets to have their pipework modified to minimise pollution by petrol vapours.
  However, the directive applies only to outlets with a throughput of more than 100,000 litres of petrol per year. Also, it is possible to provide exemptions for outlets with a throughput of up to 500,000 litres per year in areas where emissions are unlikely to contribute significantly to environmental and health problems. The requirements of the directive do not apply to existing stations below 500,000 litres a year until 2004 and we would expect the exemptions to cover a large percentage of petrol stations in the highlands and islands.

  1103
  There is a Health and Safety Executive requirement that storage tanks be tested after 20, 25 and 30 years, and biennially thereafter. There is a fee for the testing, and tanks that fail will have to be improved or replaced. As I mentioned earlier, fuel suppliers may well be able to offer financial assistance to their retailers for infrastructure improvements.
  It has been reported in the press that the metrication changes that took place last October have imposed significant costs on petrol stations that sold petrol by the gallon. I understand that a large proportion of the costs referred to in press reports are probably related not to metrication but to the necessary upgrading of petrol stations to meet safety standards, which I mentioned earlier. The cost of converting a petrol pump from imperial to metric can he relatively modest—in most cases, I understand that it should not exceed £ 1,000. My Department has ensured that advice on conversion is made available through the National Weights and Measures Laboratory.
  The hon. Lady has called for public sector support for investment in petrol station infrastructure. I do not see this as a workable proposal. If rural petrol stations were given special treatment, why not rural shops or rural pubs? Where would we stop? The money would have to come from somewhere, and the generality of taxpayers would have to pay.
  However, the recently created Scottish rural challenge fund offers £500,000 to promote and support innovative new projects that would make a significant impact on particular social and economic problems in rural areas. This could include projects such as community petrol stations offering significant benefits to the local area.
  It seems clear that higher petrol prices in remote and rural areas are not the result of anti-competitive practices by the wholesalers or the retailers, but reflect the supply and demand conditions in those areas.
  The higher cost of supply and the low demand resulting from low population density lead to higher costs and thus to higher prices. The Office of Fair Trading will continue to keep the market under review, but I am afraid that low population density is not something that the Office of Fair Trading or the MMC can remedy. I thank the hon. Lady for her debate this morning. I note her concerns, and I understand them.
  12.50 pm
  Sitting suspended.

  Solon Housing Association
  On resuming—
  1 pm
  Mr. Michael Stern: The subject of anti-social behaviour by what newspapers frequently call "neighbours from hell" has been a staple of social housing throughout the country for some time, and the Government are, of course, in the process of taking steps to provide local authorities with the power to do something about such behaviour. Whether authorities such as Bristol will actually use the power is another matter.
  My reason for raising the subject of 50 Concorde drive in my constituency and the behaviour of its shifting population is not just to draw attention to another example of neighbours from hell; it is also to note that housing practices by local authorities, which it appeared had been stamped out in the 1970s, are beginning to re-emerge in the voluntary housing movement.
  In my younger days in politics, I was an active member of a Conservative organisation known as the Bow Group, and it was in 1976 that I was first asked, as an officer of that group, to edit a draft pamphlet on the use of local authority tenants as weapons against owner-occupiers in property that the council wished to buy in the London borough of Hillingdon.
  The pamphlet was written by a young Hillingdon councillor, Michael Lawrence—who has since achieved rather greater fame by going on to do other things, such as running the stock exchange—and it concerned the activities of a socialist-dominated London council, led then by the now infamous Alderman Bartlett, which was buying individual houses in an area that it wished to dominate for local authority housing and was choosing less than satisfactory tenants to occupy them, in the hope that other properties would then fall into the council's lap and obviate the need for compulsory purchase procedures.
  The pamphlet noted:
  "It has always been possible through existing powers for a local authority to turn itself voluntarily into an active acquirer and developer of land, and some Socialist authorities have been particularly aggressive in this field. People living within the areas of these authorities have had to fight to preserve their homes and protect their environment using any appeal procedures available to them, and have experienced considerable distress in the process. In some cases their existing rights of appeal have proved inadequate".
  The aim of Hillingdon at the time was, quite clearly, the increasing acquisition of private housing for municipal development, changing the balance of ownership away from the private individual.
  The Conservative Government were eventually successful in stamping out such socialist housing practices, not least by the repeal of the Community Land Act 1975. I should like to draw to the attention of my hon. Friend the Minister the fact that it appears that such practices are beginning to return, at least in the use of less than satisfactory tenants to change the character of a whole area, through the voluntary housing movement rather than through local authorities.
  Solon Housing Association (South West) Ltd. purchased 50 Concorde drive in my constituency in the early 1990s, with, I believe, Housing Corporation—that is to say, public—money, and in early 1994 it moved in as the new tenants Miss McNeil and her two children, who

  1105
  are now aged three and six. Her brother, currently in prison, also gives 50 Concorde drive as his permanent address.
  Solon, to quote from its statement of purpose, is
  "a locally-based housing association providing and managing good quality homes, working with people in greatest housing need, primarily in the inner city of Bristol. It is committed to working in partnership with tenants, local authorities and other agencies to achieve this aim. It intends to achieve its aim by: new build schemes on in-fill sites; bringing empty privately and publicly-owned properties back into use; working in partnership with Bristol City Council in the redevelopment of the renewal areas; maintaining and improving our existing housing stock".
  Ms Jean Corston: Will the hon. Gentleman give way?
  Mr. Stern: I am afraid that I cannot. I have little time, so I shall not be able to give way.
  In its 1994–95 annual report, a copy of which I shall place in the Library, Solon lists the various factors that it takes into account in assessing or selecting tenants, and notes that it regards itself as accountable to tenants and applicants for housing to the housing corporation and to local authorities. The House will note that nowhere in its resounding list of objectives is there any mention of working with individuals who might be affected by the housing association's activities.
  The House will also note that there is no mention of what the association actually does—purchase existing housing stock if already owned or tenanted—although the 1994–95 annual report, having stated its aims and objectives as excluding purchase in those circumstances, then goes on to mention that, during that year, 15 such purchases were made. In addition, and perhaps not surprisingly, there is no mention in the report—unlike many company reports—of the addresses of the directors; I doubt whether they live next door to a Solon housing association property.
  As with many housing associations, substantial amounts of public money, through the Housing Corporation and the single regeneration budget, are applied by the association in furthering its aims as stated, although some of that money inevitably went into financing the rise in rent arrears held by the association on its books from 1993 to 1995.
  I return to the central omission from any of the housing policies, transfer policies or acquisition-of-information policies set out by the association in all its documents. Nowhere is mention made of any consideration whatever being given to the suitability of the tenant to the house that they are to be offered to occupy, despite growing public concern at the effects of anti-social behaviour by tenants on their neighbours.
  The Government's own Green Paper, "Anti-Social Behaviour on Council Estates", published in April 1995, noted:
  "Such behaviour manifests itself in many different ways and at varying levels of intensity. This can include vandalism, noise, verbal and physical abuse, threats of violence, racial harassment, damage to property, trespass, nuisance from dogs, car repairs on the street, joyriding, domestic violence, drugs and other criminal activities such as burglary".
  1106
  Inevitably, the majority—if not all—of these activities have been forced on the neighbours of 50 Concorde drive during the tenancy of that property, and the garage further up the street that goes with it, by Miss McNeil, her children and their juvenile visitors, who seem strangely reluctant to attend school during normal hours, and the more adult visitors who come to the house at all times of the day and night, frequently gaining entry by unorthodox means such as the bathroom window. Indeed, it is fair to say that there have been times when occupation of the house by the visitors has been more frequent than that by Miss McNeil.
  As for the garages grouped further along Concorde drive—one of the garages automatically comes with the tenancy of No. 50—complaints consist of numerous youths hanging around, vandalising cars, climbing on and damaging the garage roofs, under the apparent leadership, or at least the spirited concurrence, of the McNeil family, adult and children, which makes improvement of those garages by other owners a complete waste of time. More seriously, arson inside the garage belonging to No. 50, and the regular destruction of its doors, have led other legitimate users of the garages to park their vehicles elsewhere for safety reasons.
  But it is the conduct of Miss McNeil and her circle that gives most cause for concern. Its impact on their immediate neighbours extends to perhaps a dozen houses on either side. Since the matter was first drawn to my attention in 1994, I have received reports of threats against other children; of fighting in the house, the garden and the street outside; of people coming and going 24 hours a day—in particular, a series of men late at night—of rubbish and stolen cars dumped nearby; of glass strewn in the road in the presence of Miss McNeil and regular visitors; of alleged drug activity; and of all the more common regular annoyances to neighbours that are associated with a house of this type.
  Police activity is inevitably limited to regular visits and the occasional arrest for aggravated vehicle taking. Also inevitably—this brings me back to the main purpose of the debate—the activity of the housing association has been between limited and non-existent.
  I first wrote to Solon's housing manager in December 1994, after Miss McNeil had been a tenant for a little over half a year. I received regular complaints from the occupants of adjoining houses—and the occupants of the garages adjoining that belonging to No. 50—throughout 1995, as I have throughout 1996 to date, and I encouraged the complainants to write to Solon. In the absence of any observable action on the part of either the housing association or any of its directors or officers, I wrote requesting an urgent meeting with the director to discuss what action might be available to the association.
  I wrote that letter on 8 February this year. After reminders from me, issued on 19 April and 9 May, a meeting was eventually arranged for 14 June. At that meeting, it was explained to me that the delay was due to the fact that, shortly after my original request for a meeting, Miss McNeil had produced a series of allegations of racial harassment—I have not been able to establish by whom—and the association had considered it inappropriate to meet me while such complaints were being investigated, and, inevitably, rejected. Needless to say, I am not sure that I accept that explanation. The 14 June meeting was of no value: it did not chart even a potential way forward.

  1107
  I know that the Government are already aware of part of the problem, and proposing probationary tenancies in order to prevent the terrorising of neighbours in at least some of the ways that I have described. It is a pity that, in Bristol—and therefore in housing associations that depend entirely on Bristol to supply a substantial number of tenants for the properties they own, or control in other ways, in that city—the emerging opinion is that such probationary tenancies would oppress tenants, and are therefore not appropriate to housing circumstances.
  The Government do not appear to be dealing with the possibility that housing associations—or, at least, this housing association; I cannot say whether it is typical—are returning to the socialist housing policies of the 1970s, when rented housing was used as an instrument of change in the character of an area. That is why I have raised the issue today. I have not done so in order to attack an individual tenant; I believe that Miss McNeil and those who surround her are symptoms of a greater malaise. That malaise is represented by the policy of inactivity adopted by Solon.
  Solon receives substantial sums of public money. I do not believe that my constituents, who contribute that money, expect it to be used as an instrument for their own financial and social impoverishment.
  1.14 pm
  The Parliamentary Under-Secretary of State for the Environment (Mr. James Clappison): My hon. Friend the Member for Bristol, North-West (Mr. Stern) has raised some interesting points. I am sure that he will understand if I do not go into all the details of those points, but try to deal with the general concerns that he has expressed. I am particularly pleased that he has raised the important subject of anti-social behaviour, which enables me to tell the House of the Government's commitment to tackling that problem. shall return to the measures that vie are taking in a moment; first, however, I wish to deal with housing policy issues arising from my hon. Friend's speech.
  The cornerstone of our housing policy is our acknowledgement that most people want to own their homes. We remain firmly committed to the continued growth of sustainable home ownership. During the next 10 years, we expect an additional 1.5 million householders to become home owners. Nevertheless, we recognise that some people prefer to rent. I am about to say something about housing associations and their role in providing social rented accommodation, but we are determined to sustain the revival in the private rented sector, which we believe can play a part in meeting housing need.
  Private renting is important as a complement to the social rented sector. We are committed to maintaining an effective housing benefit system that helps low-income households to rent in both the private and social rented sectors. We are determined to learn from the mistakes of previous socialist Administrations, and to recognise in our housing policies that affordable rented accommodation need not be in public ownership.
  As my hon. Friend may know, the Housing Bill that is currently passing through Parliament contains provisions that will, we hope, bring a further supply of private rented accommodation on to the market by easing some of the formalities that landlords must undergo before letting
  1108
  properties on assured shorthold tenancies and, in some circumstances, making it easier for them to recover possession in the case of that and other forms of tenancy. Since the late 1980s, when important reforms were introduced, there has been a substantial increase in the private rented sector. We look forward to a continuation of that.
  My hon. Friend is particularly concerned about the housing associations. We have given social tenants a real choice between having a local authority as their landlord and having a housing association. Housing associations are now the main providers of new social housing. They have attracted more than £5.5 billion in private finance during the past five years to stretch public finance further—through the Housing Corporation and local authorities—so that more homes can be built. We continue to give generous support to the Housing Corporation's approved development programme, and about £1 billion of investment this year will attract a further £800 million in private finance.
  The average cost of building a new housing-association home has fallen by about 40 per cent. in real terms. During a similar five-year period—the period that I have just mentioned—more than a quarter of a million homes for social renting or shared ownership have been provided by the building of new homes and the rehabilitation of old ones. In addition, about 60,000 lettings have been created through incentive and do-it-yourself shared ownership schemes.
  The housing association movement is contributing to our regeneration objectives by rehabilitating existing empty properties and letting them to people in need, but the purchase of existing satisfactory street properties or new empty properties forms a small part of the Housing Corporation's programme—less than 8 per cent. of new homes in the corporation's development programme for 1995–96. Such purchases are approved for public funding where they meet locally identified housing needs on a most cost-effective basis.
  I understand that Bristol has some 5,500 empty homes in the private sector, and that it has a strategy for bringing those back into use by working in partnership with housing associations in the city. I am sure that the House will be aware of the importance that we attach to bringing empty properties back into use. The vast majority of empty properties are in the private sector, although it is important for local authorities and others to manage their housing stock effectively to avoid empty properties. In Bristol, the local authority operates a common housing register with its housing association partners, so that it can work closely with them on the allocation of properties, and ensure that the best use is made of all available stock.
  Housing associations play an important part in diversifying tenure to help to build balanced, stable and responsible communities—breaking down the barriers between old, sprawling estates and the rest of the community. The Housing Corporation's programme promotes mixed communities, embracing both tenure mix—rent and shared ownership—and a social mix of young and old and low-income and better-off groups. In 1996–97, 11 per cent. of the rent allocations and 30 per cent. of the allocations for new homes for shared ownership are for schemes that form part of a mixed tenure development. Around 80 per cent. of approvals are for homes that, when completed, will form part of a cluster of 40 or fewer social homes.

  1109
  I listened carefully to my hon. Friend's comments on housing association tenants. As I have said, I am not prepared to go into the details of the matter, for reasons that he will understand, but it is appropriate to say something about housing associations' record. In general, they have a good record of responsible management, not just in terms of keeping their properties in good repair, but in achieving a good match between tenants and their properties, which is important.
  It is in the interest of associations to manage their properties with care and consideration, so that they and their tenants are respected as "good neighbours" to other residents. In the particular case that has been mentioned, it is up to the housing association to consider what action might be appropriate, and to explore with Bristol council what solutions might be appropriate.
  Mr. Stern: My hon. Friend is developing an important point, which is part of the core of my argument. To what extent does he have powers as a Minister to draw a case to the attention of the Housing Corporation, through which funds are channelled to housing associations, when it is felt, for any reason, that a housing association is not meeting the standards that he has outlined?
  Mr. Clappison: My hon. Friend will be aware of housing associations' position in respect of their tenants, and of housing associations' opportunities to recover possession in certain circumstances. I appreciate and will reflect on his important and interesting point on the relationship with the Housing Corporation.
  I know that my hon. Friend will be interested in the Government's response to the problem of anti-social behaviour. Part of that response is ensuring that authorities and others concerned are aware of all the remedies available to them. The Association of District Councils's "Winning Communities" document covers the full range of remedies. The good practice unit of the Chartered Institute of Housing, funded by the Department of the Environment, produced another useful and practical document in December last year entitled "Neighbourhood Nuisance: Ending the Nightmare". I accept that neighbourhood nuisance can be a problem that results in a nightmare.
  The Government believe that repossession cases need to be handled more quickly. Part of our response was the publication on 29 March of a Government-wide guide to getting the best out of the court system. It contains a quick reference list of steps to take, and more detailed guidance on the possession process.
  Of course, we need a range of responses to different forms of bad behaviour. Those include—this will especially interest my hon. Friend—tightening tenancy agreements to make them more readily enforceable, using mediation and counselling to try to resolve disputes before they escalate, use of injunctions, and, if all else fails, seeking the eviction of the tenants concerned.
  Above all, we must make it clear to tenants that anti-social behaviour is simply unacceptable, and that, in the worst cases, the consequences could be the loss of their home. The revised council tenants' charter, which was issued last summer, stresses that tenants have responsibilities as well as rights, and that those responsibilities include being a good neighbour.
  1110
  My hon. Friend will be interested in our proposals in the Housing Bill, some of which I have adverted to. In developing the proposal for introductory tenancies in the Bill, the Government were responding to an idea proposed by local authorities. A consultation exercise conducted last year showed a clear consensus that measures to deal with anti-social behaviour should be available for authorities, if they wish, as part of a wider strategy for tackling the problem.
  The Bill provides for the existing ground for possession because of nuisance or annoyance to neighbours to be strengthened in four important ways. It will apply, first, to behaviour "in the locality" of the tenant's homes; secondly, to behaviour of visitors to the property; thirdly, to behaviour "likely to cause", in the words of the Bill, a nuisance or annoyance; and, finally, where a person has been convicted of an arrestable offence in the locality of the property.
  At present, it can be difficult to mount a successful case for eviction. Some courts have interpreted
  "nuisance or annoyance to neighbours"
  as behaviour affecting those living adjacent to the perpetrator, but the effects of a tenant's behaviour can often be felt over a far wider area. The revised ground widens the scope to deal with such activity in the locality. That is an important addition. Similarly, frequent visitors to a flat or house can be disturbing to other tenants, so the activities of visitors will now be covered, which is another important addition.
  Perhaps the most far-reaching of the amendments to the existing grounds for possession is the inclusion of behaviour
  "likely to cause nuisance or annoyance"
  as a ground for eviction. One of the most difficult aspects of obtaining a successful eviction is getting neighbours to testify against other tenants. Understandably, they are often too frightened to come forward for fear of reprisals.
  The amendment's practical effect is that third-party witnesses, whether professional witnesses, local authority officers or perhaps even police officers, will be able to provide the evidence. Some local authorities have already taken that course, but others may have been deterred from doing so by doubts over whether the courts would accept such evidence. This provision will pave the way for far wider use of professional witnesses.
  The Bill introduces a new ground for possession related to domestic violence. There has been growing concern not only about how such violence impinges on neighbours, but about the way in which, after the victim flees, the violent partner is often rewarded by remaining in the family home. That can be especially irksome for a local authority when that person occupies a much sought after family-sized property.
  The amendments that the Bill makes to help speed up the repossession process will enable a landlord to start possession proceedings against a tenant as soon as a notice for possession has been issued, rather than waiting the customary 28 days in cases of nuisance or annoyance. In cases in which the court thinks it just and equitable, the notice can be dispensed with altogether.
  The final element in the legislative package is a power to allow the courts to attach a power of arrest to an injunction taken out by a local authority or other social landlord, to prevent a breach of a tenancy agreement by

  1111
  anti-social behaviour. The Bill also provides a specific power for all local authorities to take out injunctions to restrain the behaviour of anyone who comes on to their estates to cause nuisance. The power of arrest will offer the victim immediate protection.
  The provisions in the Bill apply to both local authorities and housing associations in their capacity as social landlords, with the exception of the proposals for introductory tenancies. However, housing associations can grant assured shorthold tenancies—
  Madam Deputy Speaker (Dame Janet Fookes): Order. We must move on to the next topic.

  Belling
  1.30 pm
  Mr. Peter L. Pike: I am glad once again to have the opportunity to raise issues relating to the Belling pension fund and to concentrate on issues that should have given us a red light and warning signals long before Belling finally went bankrupt in May 1992.
  This is not the first debate that I have initiated on the Belling fiasco—I should call it the Belling fraud. Many former employees of that group will not get their full pension entitlement as a result of the frauds that took place. Mrs. Eileen Smith, the secretary of the pensioners' association, made it clear in a letter of 3 July to McKennas, the solicitors working with the Law Debenture Trust Corporation—the trustees—that the pensioners do not accept the liquidator's offer of £2 million.
  Mr. Wignall—one of the people representing the workers who live in my constituency, although he lives just over the border in Accrington—recently received a letter from the pensions ombudsman, stating:
  "There are … 60 other cases ahead of yours in the 'queue'."
  He had requested that the pensions ombudsman investigate the problems relating to the Belling pension situation.
  I accept that the Belling problem is not of the same size or extent as the Maxwell fraud, but to those involved, including many of my constituents, the effects are just as serious and the Government need to respond in a similar way. My constituents will not accept the view that Ministers have put forward that, because fewer people are involved and the scale is not the same, they should be dealt with differently.
  I shall attempt to focus on how Belling was able to continue to trade when it was insolvent and to ask why the Department of Trade and Industry failed to pick that up and to stop it trading. Members of the pension fund feel that the Department has failed adequately to study what has happened since the crash of May 1992. It is the view of the pensioners' association that action could and should have been taken under the 1986 legislation. The association states that it is now certain that all the evidence in the possession of the liquidators, receivers and trustees had not been passed to the Department, as is required by law.
  The issue is not of concern to my constituents in Burnley alone—indeed, a number of hon. Members have responded to their concerned constituents on the subject and another 37 have signed early-day motion 338 on the issue.
  On 24 January, Charles Deacon, a lawyer, and Keith Fuller, a business man, were found guilty of swindling the pension fund of more than £2 million. The BBC special "Money Box" programme of 29 January highlighted the incredible frauds committed by Charles Deacon—Belling was not the only victim. The Minister has had a transcript of that programme. Anyone who did not see it would find that swindle and the others that Charles Deacon committed incredible and outrageous—they even involved using the name of the President of the United States.
  The Deacon fraud was not the only one to which the Belling pension fund was a victim, although that would have been serious enough. Others within Belling were

  1113
  guilty of at least serious incompetence and, in the eyes of many, of fraud. Mr. Richard Belling did a last-minute deal in an earlier court case to save himself from having to go to trial. I cannot say that he was guilty of any criminal offence, but he was certainly guilty of incompetence and perhaps of desperation in trying to save his company in a way that did not add up legally and was not viable. As a result of those actions, the pensioners and those with deferred pensions stand to lose.
  On 29 February, the Under—Secretary of State for Trade and Industry, who is to reply to the debate, kindly met the hon. Member for Edmonton (Dr. Twinn) and myself.
  Dr. Ian Twinn: I am grateful to the hon. Gentleman for giving way and I congratulate him on his work on behalf of the pensioners, not just in his constituency but throughout the United Kingdom. Colleagues on both sides of the House have written to both of us, expressing their deep concern about what has happened. I am pleased that he mentioned the Maxwell fraud, because although the scale is different, for the individual pensioner's concerned it is the same. Hon. Members should be concerned about what happened.
  The fact that someone can help themselves to pensioners' money must remain of great concern to my hon. Friend the Under-Secretary of State as well as to the House. I hope that because of this debate we will hear more about what can be done to stop such frauds taking place.
  I wonder if the hon. Gentleman—
  Madam Deputy Speaker (Dame Janet Fookes): Order. That was far too long for an intervention.
  Mr. Pike: Thank you, Madam Deputy Speaker, but I nevertheless welcome the comments by the hon. Member for Edmonton and agree with everything he said. His intervention shows that this is not a party-political issue, which is important. Hon. Members on both sides of the House are equally concerned about pensioners losing what they are entitled to as a result of such actions.
  At my meeting with the Under-Secretary of State, I gave him a dossier that Mr. Wignall presented to me. Along with Mr. Conquest, he has kept me fully briefed on this complex case. They are both members of the pensioners' association that represents the workers involved. To give all the facts that I have on my files relating to the case, I would need several hours and not just a quarter of an hour.
  On 19 March, the Minister replied to me in writing on several matters that I had put to him at the meeting. He wrote:
  "it is for the liquidators of the company to form a view as to whether The Midland Bank acted beyond their remit and in effect directed the company's affairs. If they did and could be shown to have acted as a shadow director, the liquidator of the company could, if he thought it commercially prudent, apply to the court for an order that the bank contribute to the company's assets in the liquidation which would in turn lead to a larger dividend for the pension fund. However only the liquidator has the right to make such an application and it is for him to consider the extent of the bank's involvement in the company's affairs and the costs and likelihood of success of any action against the bank.
  1114
  We also discussed at the meeting the level of compensation awarded by The Law Society. I understand that on their solicitors' advice, the trustees have accepted £577,000 by way of compensation from The Law Society together with payment of their legal costs. The sum is considerably less than the losses suffered by the pension fund as a result of the fraudulent activities of Mr Deacon and his associate and I would have been pleased to have seen a substantially higher level of compensation paid. However any settlement is a matter for the Trustees and the Law Society.
  I have asked my officials to find out what the current position is relating to any disciplinary action which may be being taken or contemplated against the other professionals who were involved in the Belling affair and I will let you know the outcome of their enquiries as soon as possible."
  I have written to the Law Society on several occasions, putting the case that its compensation should have been higher, having regard to other legal advice given to the pension fund and Belling at the time, and not solely the role of Mr. Deacon. Regrettably, the assistant director of the Law Society turned down that request, saying:
  "My office has recently been in correspondence with Mr J Wignall who has raised the point that inadequate advice was apparently given to Mr Stewart by Messrs Vanderpump and Sykes as well as by Messrs Barlow Lyde and Gilbert. Regrettably, the opinion of this office is that any such alleged negligence would have no material effect on the Committee's decision. Section 36(2) of the Solicitors Act 1974 sets out the statutory limitations of the Fund which are to compensate an applicant for loss suffered as a result of the dishonesty of a solicitor or for hardship being suffered as a result of a failure by a solicitor to account for monies.
  When reaching their decision, the Committee were of the opinion that the former Trustees of the Pension Fund had acted both in breach of trust, as they had previously been advised that they could not borrow money from the Pension Fund for the purposes of the Belling Company, and acted negligently in failing to take adequate steps to protect the money that they were improperly borrowing.
  If either of these failures has its roots in inadequate or negligent legal advice taken by the former Trustees then that may well give a separate course of action against those giving the advice and in respect of which an indemnity should be afforded to the firms concerned by the Solicitors Indemnity Fund".
  The process goes on and on but pensioners see no solution to their problem.
  In another letter of 25 April 1996, the Minister said:
  "As to action by regulatory bodies, the Institute of Chartered Accountants in England and Wales is still considering complaints made by Mr. Wignall against Mr. Keevil of Hereward Phillips, the auditors and Mr. Stewart, a director of the company. However, it does not appear that any disciplinary action is being taken by other regulatory bodies against their members in this matter."
  It is not surprising that members of the pension fund feel aggrieved. They feel that the professionals and professional bodies have failed them. They are aware that recovery expenses to date total £2,281,185, with some £900,000 having gone to the lawyers. They believe that the Insolvency Act and Company Directors Disqualification Act 1986 have served no useful purpose.
  We must consider the way in which costs mount in trying to recover moneys. Again, I do not make a political point when I say that, but it is wrong that people who have committed no offence should have to bear such costs to secure their entitlements.
  In March 1993, a list of matters for investigation was presented to Buchler Phillips by pension fund members. Time after time, information has been presented to everyone and all the relevant organisations involved. It is clear to everyone that Belling was bankrupt long before May 1992, and it should have been clear that fraud had been committed in trying to save the company.

  1115
  I shall take a little time to give a few of the indicators that point to that knowledge, but there is a great deal of other information on our files. In order to be brief I shall use the information that until relatively recently was confidential and therefore unavailable to me, the Department and others.
  In the auditors' report from Hereward Phillips dated 22 October 1991, the auditors stated that the company had incurred
  "a loss… £6,405,369… during the nine months ended 29 December 1990; and at that date its current liabilities exceeded its current assets by £1,482,345."
  Regrettably, the auditors were unable take into consideration the fact that the proposed sale of Compound Sections, which they believed would improve Belling's situation, was the subject of fraud using pension fund moneys.
  Indeed, the next auditors' report of 3 December 1991 stated:
  "Following this sale revised borrowing facilities were made available to the company by its bankers."
  Yet no reference is made to the £2.1 million towards this sale from the pension fund. As had been stated in Peat Marwick's report to the trustees only a month before, this money was used in the sale and paid directly to the bank. To be exact, the pension fund bought Compound Sections, and of this money £2.75 million was used to repay the bank and to extend banking facilities. Clearly the trustees were acting in the interests of the company and Midland bank and not in the interests of pension fund members in agreeing to use funds in this way.
  Mr. Stewart and Mr. Belling were guilty of allowing this to happen—indeed, of enabling it to happen. On 22 October 1991, Belling wrote to Vanderpump and Sykes, solicitors:
  "In view of the results for the year the auditors have felt it necessary to qualify the audit report. However if by the time they are required to sign their audit report the sale of Compound Sections Limited, and confirmation of on-going financing from the Midland Bank plc are both available, then they have confirmed that they would be able to give a clean audit report, without qualification."
  Is it not strange to allow the sale of a subsidiary at an inflated price to its own pension fund to secure an unqualified audit statement? One must ask, why did the trustees agree to such fraudulent use of the fund, and why did the auditors accept the financial statements?
  In a letter dated 10 December 1991, Mr. Stewart says that the pension fund trustees have had two independent reports prepared for them in relation to the acquisition of Compound Sections. One of these, from Greig Middleton, advised the trustees:
  "The value of Compound Sections if sold on an open market as a going concern would be in order of £5.25 million, on the basis of a willing buyer and a willing seller."
  That proved to be far from the true value because the company was ultimately sold for £1.25 million. Belling was its major customer. On 2 December the Belling pension fund paid £5.5 million for Compound Sections. In the letter of 10 December Mr. Stewart says:
  "As part of the contract between Belling and Co Ltd and the Belling Pension Fund for the sale of Compound Sections Ltd Belling warranted a profit of not less than £750,000 for both the years 1991 and 1992.
  In the event that this profit is not achieved Belling will pay to the Pension Fund a 7 times multiple for the shortfall in 1991, and a 31 times multiple of any shortfall in 1992 subject to a maximum of £1.25m in respect of each year."
  1116
  It is not even as though the trustees had not been warned about using the pension fund for such a loan. In a letter dated 19 September, Harlow, Lyde and Gilbert, solicitors, stated:
  "We do not believe that the trustee has the power under the Trust Board to make loans and take security therefore.
  The Trustees must determine that the investment will benefit the fund and will not place at risk the part of the fund so invested. We are concerned, given the relationship of the Company to the fund that some doubt may be cast upon the exercise of the trustees' power to invest in the manner proposed."
  The solicitors also express alarm about the valuations of Belling, stating that, at £14 million, it is grossly inflated. Indeed, they go into great detail about the relationship with the bank and further show that the valuation was unrealistic.
  On 21 September 1990, Barlow, Lyde and Gilbert again confirmed:
  "Counsel is in no doubt that the Trustees are not empowered by the Trust Deed to make loans and take security… At law, investments made by trustees on the security of property must be secured by first mortgages. The Trustees will appreciate therefore, that even if we assume that the valuation of £14 million expressed in the valuation of May 1990 is accurate… and given that Midland Bank plc require priority of £8.5 million the maximum amount of any loan would be approximately £833,000 if the Trustees are to have benefit of this provision. Any such loan should be secured by a first mortgage. Unless the company discharges the first mortgage in favour of Midland Bank plc, there are substantial doubts as to whether the trustees can properly invest in the Company in this way."
  The closing tone of the letter warns:
  "if the Trustees have any doubts whatsoever about the solvency of the Company, any investment in the Company should be avoided. It is possible that if the Company became insolvent within the term of the loan the monies advanced may be irrecoverable and any security granted would be liable to be set aside."
  The closing advice stated:
  "Having had the benefit of Counsel's view in relation to the issues which we perceive in this transaction we cannot recommend that the Trustees invest in the company at this time."
  Yet, in a letter to Midland bank in April 1991, referring to the purchase of Compound Sections, Mr. Stewart stated:
  "We have now received Counsel's advice that it is legally possible for the Pension Fund to acquire this property. This amends our earlier understanding of the provisions of the Pension Trust Deed. The Pension Fund Trustees… are now arranging for the appropriate professional advice."
  Where did that contradictory advice come from, or had the trustees disregarded the advice given to them?
  In a letter dated the same day to the corporate bank manager of Midland bank, Mr. Stewart instructed the trustees that the bank
  "as a condition of advancing further monies to the Group have requested that any surplus monies resulting from the winding up of the Pension Fund should be paid into the account of Belling and Company Limited with the Midland Bank.
  The bank requires an irrevocable confirmation from the Pension Fund Trustees that they will do so."
  Mr. Stewart's final assertion in this letter shows just how serious the company's position was at this time:
  "It is one of the conditions which the bank is requesting before it is prepared to advance further financing to the Company, without which it will be difficult for it to continue to trade, thereby putting the livelihood of the members of the Fund at risk."

  1117
  The following month, Mr. Stewart arranged to meet Mr. Deacon to discuss a substantial loan of $50 million, interest of $3.5 million on which had to be paid up front and is shown as a borrowing, without authority, from the pension fund on 30 June of £2.3 million.
  Despite a worsening scenario, Mr. Stewart again wrote to the trustees of the fund on 1 July 1991 asking for the pension fund to pay surplus moneys into the company's account. He ended his letter saying:
  "You will understand that without the support of our Bankers it will not be possible for the Belling Group to continue to trade".
  One must ask how Belling continued to trade for another 18 months—nearly two years—before it went bankrupt. Warning bells should have sounded and the Department of Trade and Industry should have acted. Many professional organisations and advisers failed to give the necessary signals and act properly. It is a disgrace that ordinary honest working people have lost out on their pension entitlement as a result of what took place in those sad events of 1990, 1991 and 1992.
  1.50 pm
  The Parliamentary Under-Secretary of State for Trade and Industry (Mr. Phillip Oppenheim): I congratulate the hon. Member for Burnley (Mr. Pike) on securing this debate on a matter with which he has been closely concerned, as has my hon. Friend the Member for Edmonton (Dr. Twinn), and which has been the subject of much consideration.
  In responding to the debate I begin by extending my, and the Government's, sympathies to those who have been affected by the failure of Belling and Company Ltd. and the apparent shortfall in that company's pension fund. I am aware of the distress and anxiety caused by the circumstances of this case.
  Occupational pension schemes are established under trust law and it is therefore for the scheme trustees to decide which, if any, legal actions to pursue and to take action on the legal costs likely to be incurred. That is exactly what has occurred in this case.
  For the hon. Gentleman's information, Department of Trade and Industry officials have been told by the trustees that, on their solicitor's advice, they have now accepted £577,000 by way of compensation from the Law Society together with their legal costs. They have also recovered £200,000 from the former directors of Belling—£40,000 from Mr. Stewart and in excess £150,000 from Mr. Belling. Inclusive of offers that have been made for settlement, recoveries for the pension fund should total approximately £3.43 million.
  I am also pleased to say that the actuary's latest projections are more optimistic than hitherto in that members who were pensioners on 12 February 1993, the date on which Belling went into liquidation, will continue to receive benefits in full. For other members, benefits earned before 31 March 1988 will be able to be provided in full, and guaranteed minimum pension benefits which relate totally to service after 31 March 1988 when the plan was contracted out will also be able to be met in full.
  Benefits earned after 31 March 1988 in excess of the guaranteed minimum pensions are not likely to be able to be provided in full. However, I emphasise that the
  1118
  guaranteed minimum amount will be provided. That category of benefit comes last in line and the uncertainties remaining as to the final position of the pension fund make it difficult to predict how much, over and above the guaranteed minimum, will be paid.
  The facts concerning the important issue of directors' disqualification are as follows. On 29 May 1992 two insolvency practitioner partners of KPMG Peat Marwick were appointed joint administrative receivers of Belling and Company. The administrative receivers were appointed by the company's bank, the Midland bank.
  The Company Directors Disqualification Act 1986 provides that where a company goes into administrative receivership and voluntary liquidation among other insolvency proceedings the insolvency practitioner concerned has a duty to report to the Secretary of State if it appears that the conduct of any director makes him unfit to take part in the management of a company. In order that the insolvency practitioner can have time to consider all the relevant facts the legislation allows him up to six months to make his report.
  In the case of Belling, the joint administrative receivers submitted a report in December 1992 and subsequently the joint voluntary liquidators submitted an interim return on 30 September 1993 as at that time they did not have sufficient information to form an opinion as to the directors' conduct. That report was finally received by the disqualification unit on 29 July 1994.
  I can confirm that the administrative receivers, but not the voluntary liquidators, did identify what they considered to be aspects of misconduct on the part of the principal directors, Mr. Belling, Mr. Clifton and Mr. Stewart. Those gentlemen were also directors of Belling Pension Fund Ltd., a trustee of the Belling Company Ltd. retirements benefits plan, and Mr. Belling was also a trustee of the pension fund in his personal capacity.
  The reports submitted by the administrative receivers and voluntary liquidators were considered most carefully by the Insolvency Service's disqualification unit. Those reports raised questions about the directors' conduct, but they did not provide sufficient evidence to justify disqualification proceedings being taken against them. Any proceedings would have had to have been commenced within two years, that is, by 28 May 1994.
  I emphasise that disqualification orders are made for the protection of the public but they also penalise the directors concerned. The courts therefore require a very high standard of proof before they will make a disqualification order. The Secretary of State must, therefore, decide, on the balance of probabilities and on the basis of the facts of each individual case, whether it is expedient in the public interest to commence disqualification proceedings. It would not be a proper exercise of his discretion to proceed where a sufficient case could not be made out.
  In securing the passage of the Insolvency Act and the Company Directors Disqualification Act, the Government gave a statutory form to their commitment to ensure that those who abuse the privilege of limited liability—through wrongful trading—can be made personally liable, or can be prevented from enjoying that privilege for a set period by being disqualified. That power is used extensively and more than 3,000 individuals who have

  1119
  been disqualified bear witness to that. However, in all cases there was sufficient evidence to show that they should be disqualified, which was not so in this case.
  The protection of pensioners is crucial. Since the Maxwell and Belling cases, the Government have secured the passage of the Pensions Act 1995, which should ensure that all pension schemes are properly run in the interests of their members, and that if a fraud such as that perpetrated in the Belling case occurs the scheme will receive compensation. Therefore, the Government have acted on behalf of pensioners as a result of the Maxwell and other cases. Action can be taken against trustees and directors only if they prove to be seriously negligent or fraudulent, which was not possible in the Belling case. It was open to the liquidators or the pensioners to take action if they felt that they had a strong enough case.
  The real villains of this piece, Mr. Deacon and Mr. Fuller, have been appropriately dealt with and the efforts of the trustees in recovering money for the pension
  1120
  fund have brought about a significant improvement in the financial position. I do not see what further action my Department could take at the moment to improve the position of the pensioners on whose behalf the hon. Member for Burnley and my hon. Friend the Member for Edmonton have argued so eloquently in the House and at meetings in the Department.
  It seems that the effects on the Belling pensioners will not be as severe as was first thought and that they will all receive, at the very least, the minimum guaranteed amount, and, in most cases, an amount in excess of that. I take this opportunity to wish the trustees well in their efforts to restore the fund to as near a solvent position as possible.
  It being two minutes to Two o'clock, the motion for the Adjournment of the House lapsed, without Question put.
  Sitting suspended, pursuant to Standing Order No. 10 (Wednesday sittings), till half-past Two o'clock.

Oral Answers to Questions

  Commercial Debt
  Mr. Waterson: To ask the President of the Board of Trade what representations he has received on a statutory right of interest on late payment of commercial debt. [36065]
  Dr. Spink: To ask the President of the Board of Trade what representations he has received on a statutory right of interest on late payment of commercial debt. [36075]
  The Minister for Small Business, Industry and Energy (Mr. Richard Page): I announced to the House on 11 January 1996 that I was seeking representations to inform a review of the case for introducing a statutory right to interest. More than 100 submissions were received. The resulting analysis has been placed in the Library.
  Mr. Waterson: Is my hon. Friend aware that many small businesses in my constituency are concerned about late payments by large companies and other organisations? When I talk to local business organisations, such as the chamber of commerce, the industrial association and the business association, there are mixed views on whether a statutory right of interest is appropriate. What is the Government's policy on that?
  Mr. Page: Few hon. Members have more experience than I of the issue of late payment to small firms, and I know how important it is to them. I understand the confusion about a statutory right to interest, but no magic bullet or cure will automatically result. Some facts must be appreciated. Companies, both large and small, can charge interest for late payment. However, any company that will not pay must still be taken to court and go through the due processes. A statutory right to interest is not the easy solution.
  Dr. Spink: I echo the concerns of my hon. Friend the Member for Eastbourne (Mr. Waterson). Does my hon. Friend the Minister agree that there are dangers in a statutory right of interest, especially for small and medium-sized enterprises? Have the Government done research to discover the views of SMEs?
  Mr. Page: The submission that has been laid in the Library shows that eight out of nine of the small firms organisations that have made representations came out against a statutory right to interest. The one that supported it is, I understand, the smallest of those organisations. I have not taken that as the be-all and end-all. Various surveys have been carried out, such as those by the Institute of Directors, on the moneys owed by and to small businesses, and by the university of Bradford. Both concluded that small businesses receive more credit than they give. An effective pointer emerges from that: small
  1122
  businesses that carry out effective credit management control stand a 38 per cent. better chance of receiving their money than those that do not.
  Mr. Dalyell: If the Minister does not have much experience, the Deputy Prime Minister does. What is the Deputy Prime Minister's advice?
  Mr. Page: My right hon. Friend the Deputy Prime Minister's advice was quite simple. He said that, when a company could not pay because of cash flow difficulties, it should contact the creditors, reach an arrangement and thereby enable the company to get over its difficulties rather than walking away and not paying.
  Mrs. Roche: The House should not be surprised by the Minister's complacency, given that the Government pay their own bills late and have a Deputy Prime Minister who boasts about stringing along his creditors. In fact, that right hon. Gentleman is actually blaming small firms for under-performing and the recession. What does the Minister say about the survey conducted by the Forum of Private Business, which found that 95 per cent. of firms supported the Labour party's proposals for a statutory right of interest? What about the findings of the surveys conducted by Lloyds bank and Business Pages? Given the Government's small majority, the Minister should heed the fact that a quarter of his Back Benchers support the Labour party's policy for a statutory right to interest on late payment.
  Mr. Page: The hon. Lady asked three questions. As soon as I was appointed as Minister with responsibility for small firms, I asked for a review of the Government's policy on payment. Although that showed that we had a good record, my right hon. Friend the Prime Minister decided that that policy should be further monitored and toughened. That is exactly what will happen. The results will be out in the autumn. I thank the hon. Lady for her support of that particular campaign.
  I admire the hon. Lady's loyalty in supporting the Leader of the Opposition's policy on statutory right of interest. That policy was made on the hoof before the results of the consultation were known, and simply shows that Labour wants to tell business what to do, whereas we want to consult business.
  Sir John Cope: Is my hon. Friend aware that I have always opposed a statutory right to interest, as suggested in the question, because I believe that it would be a danger to a large number of small businesses and not be much help to many others? I am, however, a strong supporter of the proposals in his document on tackling late payment. They include a recommendation for a statement of payment practice in the directors' report. I realise that the consultation period is still running, but it represents the way to improve matters.
  Mr. Page: My right hon. Friend is very experienced concerning the small firms sector. We are endeavouring to change the culture. We have required companies to state their payment policy in their annual reports. We are consulting now on the point made by my right hon. Friend about companies publishing their payment practice in their reports. The Government are leading by example by getting every Department to sign up to the prompt

  1123
  payment code. The Lord Chancellor is conducting a review to ensure that the civil enforcement agencies operate more efficiently. A change of culture is the way forward and that is the direction in which we are pushing.

  Rechar Funding
  Mr. Barnes: To ask the President of the Board of Trade what representations he has received recently concerning Rechar funding; and if he will make a statement. [36066]
  The Minister for Industry and Energy (Mr. Tim Eggar): My Department received five representations. I announced additional allocations to Rechar and other European structural funds community initiatives to the House on 3 July.
  Mr. Barnes: As you know, Madam Speaker, I have been to see the Minister this morning at his pre-meeting, along with the hon. Member for Eastbourne (Mr. Waterson) and various other hon. Members. I must say that it was something of a damp squib, and that we did not rehearse this question.
  In the past, the coalfield communities have felt that the Rechar moneys were ripped off by the Government because of the problem of additionality. Can we ensure that the moneys that are to be available to four areas for community initiatives as a result of recent decisions will be distributed in such a way that the coalfield communities get their fair whack? Has everything been done by the Government to ensure that the total amount for the initiatives is distributed fairly, including a fair element for the coalfield communities?
  Mr. Eggar: I thank the hon. Gentleman for coming along to my meeting. I was particularly grateful to him for telling me that he was coming via Mr. Matthew Parris. I am sure that he will find that my answer is more beneficial as a result of that meeting. I was able to tell him, for example, that his constituency will also benefit from Resider. I hope that a decision on that will be made by the Commission within a few days.
  On Rechar, I hope that the hon. Gentleman will accept that the additional allocation of money that became due exceeded the expectations of the Coalfield Communities Campaign. Its representatives wrote to me asking me to ensure that they received at least 18 million ecu; I was able to announce recently that they will receive 20 million ecu. I am keen that Rechar 2 funds should be spent expeditiously and effectively. I am sure that we will try to do that in the hon. Gentleman's constituency as well as in other newly qualifying areas.
  Mr. Tredinnick: Is my right hon. Friend aware that the Barlestone and Osbaston community association project for a new sports hall in my constituency has been effectively stopped because of a change of criteria in the Rechar 2 rules, which exclude recreational projects? Does he agree that, although the current criteria help former coalfield communities in many ways, the failure to include projects for recreation should perhaps be considered again, and would he care to look into that matter if I write to him?
  Mr. Eggar: I can do better than that. I am in the business of offering meetings, and I would be delighted to offer my hon. Friend a meeting to discuss it.

  National Minimum Wage
  Mr. Ian Bruce: To ask the President of the Board of Trade what assessment he has made of the impact on the number of UK jobs of the introduction of a national minimum wage at a level of £4 an hour. [36067]
  The President of the Board of Trade and Secretary of State for Trade and Industry (Mr. Ian Lang): Officials in my Department estimate that a national minimum wage set at £4 an hour, and with only half restoration of pay differentials, could result in the loss of 1 million jobs.
  Mr. Bruce: Has my right hon. Friend been able to do any calculations on the basis of documents produced by the Labour party before the last general election, which included a calculation of how minimum wages should be set and said that they would start at half average earnings and move to two thirds? Can he confirm that, on today's high wages, created by the Conservative Government, that would be £4.46 to start and £5.54 in the full Parliament? Can he confirm that in America, whose example is often quoted by Opposition Members, real earnings per hour for the minimum wage are about £2.30?
  Mr. Lang: My hon. Friend is absolutely right to draw attention to the dangers of the minimum wage. A minimum wage would be ratcheted up in the way that he implies and, obviously, the higher it went the more jobs would be lost. It would not only be jobs lost; it would be company profits hit and inflation stirred up. That was the view of a study by Kleinwort Benson. Similarly adverse findings resulted from studies by the Organisation for Economic Co-operation and Development and the International Monetary Fund and appeared in the EC White Paper "Growth, Competitiveness, Employment".
  Even with the increase proposed for the current year, the minimum wage in the United States would be about £3. That bears no comparison to the territory that the Labour party is in.
  Mr. Winnick: Is it not the height of hypocrisy for there to be such strenuous opposition to a national minimum wage from Tory Members, who usually have at least one outside interest and, in many cases, have a host of directorships?
  If poverty wages are to be maintained, how will people be able to take out private insurance along the lines described in the leaked document from the Treasury? That leaked document demonstrates what a nightmare it would be if this Tory Government were re-elected.
  Mr. Lang: It is not just the Tory party that opposes a minimum wage; the Confederation of British Industry, the Institute of Directors, the chambers of commerce, industry, small businesses, the engineering industry and the clothing retailers' industry oppose it. As the hon. Gentleman is in the business of talking about hypocrisy, he might reflect on the fact that the bottom 10 per cent. of the work force have enjoyed an increase in take-home pay under this Government of £27 a week in real terms whereas, when the Labour party was in government, that bottom 10 per cent. suffered a reduction of £1.
  Mr. John Marshall: Is my right hon. Friend aware that Unison, which acts as a sponsor of some Opposition Members, has called for a national minimum wage of £6 an hour? Would that not mean that even more people would be unemployed, and is it not immoral for Members of the House to vote for the unemployment of their constituents? Does that not demonstrate that new Labour means new danger?
  Mr. Lang: My hon. Friend is absolutely right, and those who are most vulnerable, who are least skilled, would lose their jobs first. The undoubted consequence of this policy of the Labour party, like so many of its other policies, would be an increase in unemployment and inflation and a loss of competitiveness.
  Mr. Hoon: The President knows full well that Labour has not set a figure for a minimum wage. Does he accept, however, that, in a report published yesterday, the OECD stated that a minimum wage would not cause job losses for women, young people or the unskilled? Does he further accept that the Employment Policy Institute has said that a minimum wage would not cause job losses? Does he accept that a New Jersey survey shows that increasing the minimum wage takes people out of unemployment by removing them from the poverty trap? If, in the face of that overwhelming evidence, the right hon. Gentleman does not accept the facts, will he tell us the lowest pay that he would expect people to work for—and the lowest wage that he would work for himself?
  Mr. Lang: I do not accept the hon. Gentleman's so-called facts. All the evidence from all the studies that we have seen points in the other direction. Only today, the CBI produced its manifesto in which it points out the dangers of a national minimum wage. Unemployment among youngsters, the most vulnerable category, in countries with a national minimum wage is running at 25 per cent. in Belgium, at 27 per cent. in France and at 42 per cent. in Spain. That should make the hon. Gentleman realise the real dangers that a national minimum wage would bring to young people.
  It is about time the Labour party told us what its national minimum wage would be. Why do not Labour Members come clean and defend the policy in which they pretend to believe?

  Small Firms
  Mr. Patrick Thompson: To ask the President of the Board of Trade how many small businesses currently operate in the United Kingdom; and what was the equivalent figure in 1979. [36071]
  Mr. Lang: Provisional estimates show there were 3.7 million businesses with fewer than 50 employees at the end of 1994, the most recent year for which statistics are available. Comparable estimates for 1979 show that there were then only 2.4 million such businesses.
  Mr. Thompson: Given the success of small businesses in increasing their share of national output since 1979, which must be a tribute to the Government's policies, does my right hon. Friend agree that more of them should exploit the business links network so as to develop and grow? Can that network be used to encourage small
  1126
  businesses to keep in touch with schools and colleges, thereby enabling them to understand better the whole business of wealth creation?
  Mr. Lang: My hon. Friend is absolutely right. The business links network has more than 230 outlets operating around the country and was designed specifically with the interests of small and medium-sized enterprises in mind, to give them access to the skills, advice and assistance, in a one-stop shop, that they would not otherwise be able to obtain. My hon. Friend is also right to emphasise the importance of education and training. The operation of business links in conjunction with the work of the training and enterprise councils and further education colleges underlines the importance of training and the benefits that it can bring to small businesses.
  Mr. Harvey: Although hon. Members on both sides of the House will welcome the growth in the number of small businesses, does the Minister share my concern that too many of them are still failing? In particular, will he comment on the latest figures from Dun and Bradstreet showing a 10.8 per cent. increase in the number of failed businesses in the south-west of England in the first half of this year, compared with a national decrease? Recovery may be gaining pace in some areas, but will the right hon. Gentleman acknowledge that it is still patchy?
  Mr. Lang: I hope that the hon. Gentleman will welcome the fact that the number of insolvencies and bankruptcies is falling. Moreover, the number of company start-ups, estimated by the banks last year at 400,000, is estimated by them this year to be over 500,000. There is undoubtedly a growing momentum in economic activity; I am encouraged by the continued improvement in the survival rate of small businesses.
  Mr. Atkins: Does my right hon. Friend recognise that the horticulture industry comprises more than its fair share of small and medium-sized enterprises, and that they do a remarkable job for the food industry? Does he also recognise that the industry is concerned about the impact of some EU directives on small businesses? Will he assure me and anyone else in whose constituency the horticulture industry operates that he will continue to do all that he possibly can to ensure that small businesses in this important sector are given the treatment that they deserve?
  Mr. Lang: I am happy to give my hon. Friend that assurance. The horticultural sector was prominent in a trade mission that I took to Japan earlier this year to seek to gain business in the massive£10 billion Japanese horticultural market. I share my hon. Friend's concern that small businesses, like all other businesses, should not be overburdened by EU directives and regulations. It is the Government's purpose to minimise the impact of such burdens on businesses.
  Mr. Ashton: Is the Minister aware that the big businesses that he shut down, called coal mines, are not being replaced by small businesses in his enterprise zones because of bureaucracy in the Coal Authority and English Partnerships? Does he realise that they have been wrangling over different sites for 10 months, and that the business men who want to come into areas like Manton Wood and many

  1127
  of my hon. Friends' constituencies cannot get agreement on the land because those agencies insist on selling the land as a package instead of in small parcels? The quangos 'which the Secretary of State set up and his policy of shutting down coal mines have created a great bottleneck.
  Mr. Lang: Clearly, agreement must take place in negotiations on specific cases. I understand that, in that case, the price for the land has not yet been agreed, but the Government offices in the area and all the Government agencies, including business links and the training and enterprise councils, are designed to smooth the path of small businesses and encourage the establishment of new economic activity. They have been very successful in that.
  In the specific case to which the hon. Gentleman refers, there is clearly a continuing problem. If he would write to me with more details on it, I should be happy to follow it up for him.
  Mr. Steen: As a deregulator like me, my right hon. Friend will realise that 8,101 new statutory instruments have been created in the House in the past two years, and the cost to small industry has been £8.75 billion. Does he agree that, if we could reduce the number of rules and regulations emanating from all Departments, including his, it would help small industry a great deal more than anything else?
  Mr. Lang: I am grateful to my hon. Friend for confirming that he and I share an ambition to deregulate. Many of the regulations passed have been consolidating regulations designed to reduce the overall number. My hon. Friend will welcome the Government's deregulatory record for small businesses—for example, single notification for tax and national insurance, new rights and enforcement actions, streamlined development controls and the draft Industrial Tribunals Bill, designed to reduce the costs and burdens of negotiating industrial disputes.
  Mr. Hain: What assessment has the right hon. Gentleman made of the impact on small businesses of lifting or abolishing the letter monopoly, as consumers will probably have to pay VAT on postage for letters handled by private couriers?
  Mr. Lang: The Government are considering the possible need to lift the monopoly on the Royal Mail in circumstances in which a strike is designed to undermine the delivery of mail and thus harm the public interest and damage the economy. The dispute is a matter for the unions and the Post Office to resolve, but the Government will deal with the public interest and act as appropriate.
  Mr. Thurnham: I hope that my right hon. Friend will consider lifting the Post Office monopoly if there are further postal strikes. Is he aware of firms such as Document Interlink in my constituency, which can help small firms with urgent letter deliveries in such circumstances?
  Mr. Lang: I note what my hon. Friend says. As was made clear last week, we are consulting on the implications of taking that step.
  Mrs. Beckett: Is the Secretary of State aware of the concern expressed by those who chair business links about what they call their bad relationship with his Department? As that was a Labour idea, does it not show that the Government make as big a hash of implementing our ideas as they do of their own? Does he recognise that even a working business link programme can only do so much to help small businesses if the economy is not well run and growing? Does not today's leaked Treasury document show that Ministers expect Britain's future standing in the world to decline, just as under their stewardship we have already fallen from 13th to 18th in the world prosperity league?
  Mr. Lang: The right hon. Lady is talking through a hole in her hat, as usual. Our economy is performing better than any comparable economy in Europe. Unemployment is substantially below the European average; new companies are being created; public expenditure is under control; and inflation has been at an all-time low for the longest period for 50 years. This country's economic performance stands comparison with that of any other country in Europe or the Group of Seven nations. It is time that the Opposition acknowledged that, instead of talking Britain down.

  Fireworks
  Ms Church: To ask the President of the Board of Trade what assessment he has made of the advantages of introducing the draft code of practice for fireworks being drawn up by trading standards officers. [36072]
  The Minister for Competition and Consumer Affairs (Mr. John M. Taylor): The draft code of practice produced by the fireworks industry will be considered along with other comments I expect to receive in response to the forthcoming discussion document on firework controls.
  Ms Church: I thank the Minister for that answer. As a former health and safety inspector and a mother of two young sons, I am horrified by the increase in firework accidents which has followed the Government's deregulation of import controls since 1994. What plans has the Minister to control specific dangerous fireworks, such as aerial shells, which have already claimed one life, before November this year?
  Mr. Taylor: I am concerned about fireworks, especially imported ones, and I am especially concerned about the safety of young people. I am considering the draft industry code of practice and I am anxious to support trading standards officers. I will issue a discussion document shortly and will take account of all the responses, especially from trading standards officers. We will run a strong fireworks safety campaign this year.
  Mr. Bernard Jenkin: I urge my hon. Friend not to be seduced by the sparkle of the hon. Member for Dagenham (Ms Church). Will my hon. Friend consider what real fireworks would be ignited if we imposed a national minimum wage and the social chapter and if we increased taxation and public expenditure under new Labour?
  Mr. Taylor rose—
  Madam Speaker: Order. I am sorry, but this question concerns fireworks. The hon. Member for Colchester, North (Mr. Jenkin) was not ingenious enough and we will move on.

  Telephones (Fraudulent Charging)
  Mr. Timms: To ask the President of the Board of Trade what assessment he has made of the level of fraudulent charging for international calls to premium rate telephone services available outside the United Kingdom. [36074]
  The Minister for Science and Technology (Mr. Ian Taylor): International audiotext services are not billed in the distinctive manner of domestic premium rate services, and are not easily distinguishable by telecoms operators from other international services. I am therefore not aware of any assessments of the amount of fraud arising from international audiotext services.
  Mr. Timms: Did the Minister read an article in the Scottish Sunday Mail a week ago, which documented a number of cases of people who had received large bills for calls to overseas premium rate services that they were adamant they had not made and no one else had access to their telephone lines to make? Does the Minister agree that British Telecom's approach—that those people are all lying or are grievously mistaken—is growing thin? Will the Minister use his influence with British Telecom, through the Office of Telecommunications, to ensure that the company takes seriously the increasing likelihood that serious fraud is being perpetrated?
  Mr. Taylor: The hon. Gentleman has raised an article from the Scottish Sunday Mail in June. We have considered it and British Telecom was concerned about the matter. I am not sure that the problem is fraud so much as misuse. Those numbers have been misused because of the failure to use the facility of the bar in equipment in a person's property. We are concerned whether there is genuine abuse of international calls. I am delighted that the International Telemedia Association has been formed and I hope that it works with the Independent Committee for the Supervision of Standards of Telephone Information Services, which is considering premium rate services in this country. If those two organisations compare notes, perhaps the surface operators can devise a set of standards that can be commonly applied.
  Mr. Thomason: Notwithstanding that difficulty, can my hon. Friend confirm that British Telecom's price levels have fallen by more than 40 per cent. in real terms since privatisation, which was opposed by the Opposition?
  Mr. Taylor: The Labour party sometimes tries to be "with it" on modern information and communication technology. It opposed liberalisation all the way through the 1980s and 1990s, but that is the basis on which we now deliver competitive services. Opposition Members may wish to note that we recently liberalised international telephony, and that has already provoked British Telecom and Mercury to reduce their international call charges.
  1130
  We expect to license many other operators so that this country can be a genuine international hub for telephony and business.

  Emerging Technologies
  Mr. Bendel: To ask the President of the Board of Trade what plans he has to increase the proportion of gross domestic product devoted to the research and development of emerging technologies in British industry. [36076]
  Mr. Ian Taylor: My Department will continue to support innovation, including research and development, and to extol its benefits to British industry with the aim of encouraging investment in it. For this reason, we have conducted the foresight programme, and delivery programmes such as Link, the teaching company scheme, the crusade for biotechnology and the information society initiative, to encourage industry's investment in, and use of, new technologies.
  Mr. Bendel: In general, the level of research and development in this country is below that in many of our competitors, including Japan, Germany and the United States. Given the importance of the emerging technologies for the future of our country—particularly in areas such as the Thames valley, where I come from—does the Minister feel that the current level of research and development is disappointing? Does he feel that it is time that the Government did more to help encourage research and development?
  Mr. Taylor: Recently, the hon. Member for Newbury and I visited a company in his constituency that is at the forefront of technological development, thanks to the revolution that we have created in telecommunications. The Government are doing an enormous amount to stimulate British industry, and the best examples in this country can compare with any in the world.
  As I said in the foreword to the recent "Research and Development Scoreboard", there is a long tail of laggards who are not putting enough into research and development. We are trying to get them closer to the science base in our universities and to stimulate them to increase their understanding that research and development and innovation will be crucial to their competitive edge as we go into the next century.
  Mr. Batiste: Does my hon. Friend agree that, while the "Research and Development Scoreboard" is useful as the best evidence that is available at present, it is deficient in measuring all the research and development that takes place within the United Kingdom and in providing the basis for effective comparison with other countries? Will he and his Department make efforts to find a way to refine this information so that effective and accurate comparisons can be drawn in the future?
  Mr. Taylor: My hon. Friend is absolutely right: this is a hugely complicated area on which to find figures. A lot of out-sourcing of research and development is sometimes not picked up in the figures, and some of the work that is done in our universities is more attributable to companies than to the universities, so it needs to be taken into account. However, overall, I am happy that there is

  1131
  enough relevance in the statistics to show that British industry needs to do more, which is why we have a series of delivery programmes geared to technology foresight, such as Link and the teaching company scheme—and wherever I go around the country I find that they have been successful. We want more participants from industry to come forward and take part.
  Mr. Ingram: Does the Minister agree that the United Kingdom is the only major industrial country to reduce the proportion of gross domestic product it invested in research and development between 1991 and 1993? Does he agree with the view expressed by a civil servant in his Department's innovation unit who said that we have been outgunned two to one by our international competitors? Have not the Government created a culture of underfunding and under-investment in the bedrock of our economy: research and development? Instead of passing the blame on to industry for under-investment, will the Minister accept and recognise the failings of the Government in this area?
  Mr. Taylor: The proportion of GDP that the United Kingdom has invested in research and development has held up against all the other G7 countries, except France, since the last recession. I am criticising industry where it needs to be criticised. The hon. Gentleman should pay tribute where tribute is due. The Government have introduced a large number of schemes in an attempt to stimulate further interest in research and development.
  The Department of Trade and Industry's work in this area is shown by its commitment to a cash-flat budget over the next few years, despite pressures elsewhere in government on budgetary constraints. Last weekend, I spoke with the German Minister—I know the difficulty that he has protecting his budget. He thinks that we are doing rather well, as do the inward investors coming into this country who are contributing to research and development. There is no doubt that the picture here is a good deal brighter than the hon. Gentleman is prepared to admit. By paying tribute to the British companies that are doing well, we may stimulate the others to do better.
  Mr. Nigel Evans: Does my hon. Friend agree that, if we are to encourage private industry to invest more in research and development into emerging technologies, we must ensure that we do not heap extra bureaucracy on them, that we deregulate as much as possible and that we do not heap on them the social chapter, the minimum wage and the various other policies that new Labour would introduce? They would be new dangers to companies that are looking to invest more in research and development.
  Mr. Taylor: My hon. Friend puts his finger neatly on a key point. The Labour party is keen to introduce regulations, but the economic sectors that are necessary to the country's prosperity are fast-moving, high technology sectors, such as biotechnology, which need a stable regulatory environment and minimum Government intervention. We should not pile upon them social costs that are not necessary to their performance. The atmosphere that we have created in industry—particularly in high technology—through liberalisation has proved an enormous success and a benefit to this country. We want to keep it that way—and to keep the Opposition's hands off it.

  Inward Investment
  Mr. Canavan: To ask the President of the Board of Trade what plans he has to change the arrangements for attracting inward investment to the United Kingdom. [36077]
  Mr. Lang: The United Kingdom's inward investment record is second to none and the envy of many of our competitors. I was able to announce on 9 July that my Department's Invest in Britain Bureau registered a record number of 477 inward investment decisions into the United Kingdom in 1995–96, creating a record 48,256 new jobs which represents a 30 per cent. increase over last year's record. That is a considerable tribute to our administrative arrangements.
  Mr. Canavan: As a former Secretary of State for Scotland, will the President of the Board of Trade pay tribute to the work of Locate in Scotland and to that of local authorities and local enterprise companies in attracting inward investment, such as Exabyte and PM Support Services in Central park in Larbert? In view of reports that the Government are considering centralising arrangements to attract inward investment, will the President of the Board of Trade give an absolute assurance that there will be no reduction in the role and the powers of Locate in Scotland?
  Mr. Lang: I am happy to assure the hon. Gentleman that I have no plans to seek to inhibit the performance of Locate in Scotland. I spent nine years, as Minister responsible for industry and as Secretary of State, helping to build up Locate in Scotland and to secure record inward investment figures. The success of such agencies, coupled with the Government's overall economic performance, has made the United Kingdom an attractive place to locate. We have attracted more than 40 per cent. of both American and Japanese inward investment in the European Union. The Labour party's policies would bring that successful run to an end and start to drive away investors.
  Sir Donald Thompson: Is my right hon. Friend aware of the message that multinational companies in my constituency are sending? They tell me that, although take-home pay in Britain is broadly the same as in other continental countries, the on-costs for business in those countries is four times as great as for multinationals that are trading in Great Britain.
  Mr. Lang: My hon. Friend is absolutely right. That is one of the reasons why we should not accept the social chapter and sign on for it—as the Labour party would. It is significant that, last year, in addition to the successful inward investment decision by Siemens to locate in the United Kingdom, 57 companies—more than one a week—decided to relocate from Germany to the United Kingdom. That is a measure of our competitiveness.

  Manufacturing Industry
  Mr. Win Griffiths: To ask the President of the Board of Trade when he next plans to meet his European Union counterparts to discuss measures to strengthen manufacturing industry. [36078]
  The Parliamentary Under-Secretary of State for Trade and Industry (Mr. Phillip Oppenheim): My colleagues and I meet our European Union counterparts regularly to discuss a wide range of industrial issues.
  Mr. Griffiths: When the Minister next visits Europe, will he reassure his European counterparts that the recent welcome deal with LG in Newport in south Wales was well within the European Union's rules for regional aid? Will he tell the Conservative candidate for Newport, West, Peter Clarke, that he is out of order to claim that the money that the Government gave to support the company's relocation to south Wales was a waste? Will he disown that Conservative candidate here and now?
  Mr. Oppenheim: If the hon. Gentleman will listen for a second, I will tell him that we now have a major inflow of inward investment—in stark contrast with the 1970s, when multinationals fell over themselves to move production away from Britain—because British manufacturing productivity growth since 1979 has been the fastest of any major industrial country. Our social costs are low also. That means that Britain is not a low wage haven for inward investors, but a low cost haven. That is why the company has come to south Wales and why unemployment in the hon. Gentleman's constituency has fallen to 7 per cent. I thought that he would welcome that fact instead of try to make irrelevant, cheap and silly party political points.
  Mr. Quentin Davies: Following the Government's great success in opening up the telecommunications market in the European Union, and now their efforts to open up the energy market, is it not time that we considered the possibility of extending the single market to cover the defence industries? If we did, would not all member states gain greatly from increased competition and reduced procurement costs? Since we have—judged by the volume of our defence exports—the most successful defence industry in the Union, would not we gain disproportionately in terms of the industrial and employment benefits of such a move?
  Mr. Oppenheim: One reason why we have the most successful defence industry in Europe is that, during the past 15 years, we took the hard decisions that allowed our industry to become efficient and productive. Indeed, we are already going down the route of more shared projects with other European countries.
  My hon. Friend mentioned telecommunications and energy, in respect of which we were at the forefront of liberalisation and yet were opposed at every turn by the Opposition. Now, apparently, the Opposition have decided that they are great liberalisers, which shows that Labour's policy formation cycle is, first, to oppose our policies and, secondly, when it sees that they work, rather shamefacedly and slyly to adopt them.
  Mrs. Mahon: How will privatising the road network help manufacturing? How will manufacturers be helped by having to pay profits to private companies? Surely it will add to the cost. Is this the real Tory manifesto for the next election?
  Mr. Oppenheim: I am sorry, but because of the gabble from the Opposition Benches and the animal noises—not that I dislike animals—I missed the first part of the hon. Lady's question.
  Mrs. Mahon: How will road privatisation help manufacturing? Surely a toll on travel costs will simply put profits into the hands of private owners and do nothing to help manufacturing.
  Mr. Oppenheim: Apart from the fact that there are absolutely no plans to privatise the road network, I should have thought that the hon. Lady's question would have been better addressed to the Department of Transport.
  Mr. Forman: When my hon. Friend meets his European counterparts to discuss manufacturing, will he point out to them and, indeed, to the House today that, since 1981, our manufactured exports have expanded faster than those of France, Germany or Japan? Does not that demonstrate clearly that we have the right policies?
  Mr. Oppenheim: My hon. Friend is absolutely right. Not only manufactured exports have done well since 1979. In the 1980s and 1990s, we had the fastest growth of manufacturing productivity of any developed country. Our manufacturing output growth, which was negative under the last Labour Government—manufacturing output fell under the last Labour Government—has increased in line with the average for Europe for the first time since the war. I believe that that shows that we have transformed our manufacturing industry from being a laggard to being at least as good as the average and, in some cases, as good as the best.
  Dr. Howells: On strengthening the position of manufacturing industry in Europe, is the Minister aware that this country's electricity generating equipment is some of the finest in the world; that, in general, our electricity supply industry is among the most efficient and cost effective in the world; and that it is hungry to compete in lucrative markets such as Germany and France, where currently it is excluded by the protectionist attitudes of those Governments? If he is aware of that, why did the Government sign up on 20 June to a miserably inadequate deal to open up a small part of the electricity supply market in Europe? In so doing, the Government limited severely the possibility to create new jobs for British workers in this burgeoning sector. Was it part of some shabby trade-off to secure the beef deal?
  Mr. Oppenheim: The hon. Gentleman attributes more conspiratorial motives to the Conservatives than we are capable of—[HON. MEMBERS: "Oh!"]—and significantly more than Opposition Members are capable of. His question is rather interesting, because it shows that the much-touted slogan new Labour, new danger is not always right. This is a classic example of new Labour, no danger. Unfortunately, the hon. Gentleman is totally out of line with the rest of his hon. Friends. He says—[Interruption.] May I ask Opposition Members to listen for just one minute? The hon. Gentleman says that we have the most efficient electricity generation in Europe. Does the hon. Member for Bolsover (Mr. Skinner) agree with that? I do not know. We have the most efficient electricity generation in Europe because, over the past 10 years, we made the difficult decision to move to gas. Gas is cleaner and cheaper, yet virtually every Opposition Member opposed that move. I do not understand how the hon. Gentleman can argue for more energy liberalisation in

  1135
  Europe, when only three weeks ago he was flinging out press releases right, left and centre opposing European liberalisation of postal systems. Where is the consistency in that?
  Mr. Nicholas Winterton: Will my hon. Friend confirm that, for the first time in history, Germany is exporting manufacturing capacity not only to this country, but to other parts of the world, including the Pacific rim—
  Mr. Jacques Arnold: And Latin America.
  Mr. Winterton: And, indeed, the United States of America.
  Mr. Arnold: Latin America.
  Mr. Winterton: In fact, it applies to North America and South America. The reason is the substantial social costs that Germany must bear. Those costs are very damaging to its industry. Does its experience teach us any lessons?
  Hon. Members: Answer.
  Mr. Oppenheim: I will do my best to answer.
  My hon. Friend is right. After decades during which the productivity, efficiency and competitiveness gap between us and Germany widened, during the 1980s and 1990s we have managed to close no less than three quarters of that: gap, which is a tribute to the efforts of British manufacturing. It is a shame that Opposition Members sometimes do not recognise the enormous progress made by British industry since 1979.
  Mr. Purchase: To ask the President of the Board of Trade what additional measures he plans to encourage manufacturing industries; and if he will make a statement. [36080]
  Mr. Oppenheim: Manufacturing is served best by a stable economic environment with low inflation and historically low interest rates. Manufacturing output has risen by 8 per cent. since the beginning of the recovery, and is expected to continue to grow this year and next.
  Mr. Purchase: Should not the Minister read recent reports rather than lecture Opposition Members and expect them to listen to him? Does not the most recent report of the Office for National Statistics show that factory production is stagnating? Is it not also true that, according to a Government-backed report, poor productivity, low levels of innovation and even lower levels of investment are now threatening the competitiveness of the west midlands?
  Mr. Oppenheim: The hon. Gentleman is right, to the extent that we must not be complacent about our manufacturing performance. I would not claim for one minute that we are yet as good at manufacturing as the best in the world; what I will say is that, since 1979, we have made significant progress in narrowing the gap that widened so dramatically under the last Labour
  1136
  Government, when our manufacturing output fell and our manufacturing productivity growth was lower than that of any other major industrialised country.
  Mr. Jacques Arnold: Is not one of the factors that encourage manufacturing industry in this country the Government's hacking away at red tape? Does not that compare very favourably with what is happening on the continent, where red tape is growing like a triffid—particularly given the requirements of the social chapter, which Opposition Members would like to impose on this country?
  Mr. Oppenheim: I entirely agree. Although Opposition Members often speak the language of free and open markets nowadays—supposedly—in practice they are still old-fashioned interventionists and protectionists. Most of them are, anyway. That is manifested by the Labour party's dishonest minimum wage policy. It is doubly dishonest. It pretends to the less well-off that there is some easy, cost-free way of raising their wages without increasing their productivity, and it does not have the guts or the honesty to tell the low paid at what level it would set the minimum wage. Nor do we know how many of those low paid people would be not low paid, but not paid at all.

  Insurance Market
  Mr. Pickthall: To ask the President of the Board of Trade when he last met the council of Lloyd's to discuss the operation of the insurance market. [36081]
  The Minister for Trade (Mr. Anthony Nelson): I last met the chairman of Lloyd's on 2 July.
  Mr. Pickthall: In his conversations with Lloyd's, has the Minister taken the opportunity to discuss its concerns about its inability to cover some of the effects of global warming, particularly storm and flood damage in the American east? Will he discuss those matters with the Secretary of State for the Environment, who is busy telling us that he is saving the world's ecology while Britain's great insurance centre seems to expect that it will be unable to cover a recurrence of the disasters in 1987 to 1992 that caused some of the problems that it is busy trying to unravel?
  Mr. Nelson: Lloyd's has a well-deserved reputation for specialist cover provision, and its international business has always been innovative and usually well able to cope with unusual demands. That is not to say that every specific cover policy is necessarily commercial or that it must be able to cover every incident that arises. Those are matters for Lloyd's. I will be happy to take them up when I next meet the chairman, but they are essentially for the commercial judgment of Lloyd's, which has, by and large, a pre-eminent reputation in providing such cover internationally.
  Mr. Bell: Does the Minister accept—
  Mr. Michael Brown: The hon. Gentleman is a Lloyd's name.
  Mr. Bell: Fifty-one Lloyd's names were Members of Parliament. One was a Labour Member and 50 were Tory. The one Labour Member got out and did not lose a penny. The 50 Tories who stayed in lost their shirts. What does that tell us about who best knows the City and who can best run the country? I thank the hon. Gentleman for that sedentary intervention. The cheque is in the post.
  The Minister has referred to the deserved reputation of Lloyd's, but was it not obscene that £88,000 million was lost between 1988 and 1992, which caused many a name severe hardship? Is it not right, however, that the Equitas plan proposed by Lloyd's should be given fair wind and support, and that, on the back of its success, we should have proper independent regulation of Lloyd's so that the obscene losses of the past cannot be repeated? In that context, and in the context of friendship and amity, if the Government wish to introduce an independent regulatory framework between now and the general election, the Opposition would give it a sympathetic examination.
  Mr. Nelson: I am sure that the hon. Gentleman will join me in welcoming the fact that Lloyd's has recently announced a return to significant profits. That will benefit people who continued as names. Their judgment in so doing is, in many cases, to be commended. They will benefit from that revival in fortunes which, sadly, the hon. Gentleman will not, so it is open to question whose was the better judgment.
  This is an important point. I appreciate what the hon. Gentleman says. It is in the interests of policyholders worldwide, of our capital markets' security and of the confidence not just of people who put up risk capital in insurance markets, but of other financial markets, that the reconstruction and renewal programme goes through. Like the hon. Gentleman, I am delighted that, this week, some 95 per cent. of names appear to have supported it. Although my interest in the matter is principally towards policyholders rather than the names, it is undoubtedly good news that Lloyd's appears to be on the right track. I hope that we, like Lloyd's, can look forward to a healthy future.

  National Minimum Wage
  Mrs. Lait: To ask the President of the Board of Trade what representations he has received on the impact of a national minimum wage of £4 on employment in small businesses. [36082]
  Mr. Lang: I have received representations from numerous organisations, including the Institute of Directors, the Confederation of British Industry, the British Clothing Industry Association, the Engineering Employers Federation and the British Chambers of Commerce, all of which have said that companies, including many small firms, would be severely hit by a minimum wage.
  A recent report said that small firms would
  "come under pressure to survive".
  Mrs. Lait: Does my right hon. Friend accept that, in the constituency of Hastings and Rye, the tourism and rest home sectors are two of the principal industries? Does he agree that, if a national minimum wage were introduced into those two sectors, British holiday makers would go
  1138
  abroad rather than spend money in the United Kingdom, because tourism would be uncompetitive, and rest homes would have to put up prices, which would go straight on to public spending and hence to higher taxation? Is not that another example of new Labour being new danger?
  Mr. Lang: My hon. Friend is right. In an answer to an earlier question, I mentioned the estimate that 1 million jobs would be lost with a national minimum wage of £4 an hour. A recent survey estimated that about 128,000 of those jobs would be lost in the south-east of England.
  Mr. Sheerman: Is the President of the Board of Trade aware that it is not the minimum wage that is affecting business and small business today? He must know that half the competitive advantage that we got by a massive devaluation of our currency has already been frittered away and that our productivity is slipping away as well. What is he doing about that? That is what matters to the British economy, not the red herring of the national minimum wage.
  Mr. Lang: The hon. Gentleman may call it a red herring, but perhaps he would like to tell his right hon. and hon. Friends on the Labour Front Bench that it is. They are planning to introduce a national minimum wage that would destroy jobs and competitiveness. The Confederation of British Industry has estimated that the cost to industry of a minimum wage of £4.25 an hour would be £5.7 billion. That would destroy jobs and profitability and undermine the record export and good manufacturing figures that we have achieved without a minimum wage.
  Mr. Congdon: Does my right hon. Friend agree that, if the European experience is anything to go by, young people are one of the groups who would suffer most from the introduction of a national minimum wage? Is not the reality that a national minimum wage would simply price young people out of a job? Is not that why it should be strongly resisted by the Government?
  Mr. Lang: My hon. Friend is right. That is one reason why countries on the continent of Europe that have a national minimum wage also have almost twice the level of youth unemployment that we have.

  Steel
  Mr. MacShane: To ask the President of the Board of Trade what steps he is taking to boost demand for products made by the United Kingdom steel industry. [36083]
  Mr. Eggar: My Department is working with the steel industry to ensure that it is well placed to deliver the best quality and range of steel products required to meet demand from users at home and abroad.
  Mr. MacShane: Since this is the last time that the right hon. Gentleman will answer for steel before he jumps off the Titanic into the lucrative boardroom nirvana reserved for ex-Ministers, may I place on record the fact that he has courteously received Opposition steel delegations to discuss the steel industry? So, will he finally join me in

  1139
  congratulating Allied Wire and Steel and British Steel on setting up a European works council under the social chapter?
  Mr. Eggar: Since it is a time for pleasantries, I congratulate the hon. Gentleman on the publication of his book today. I notice that it marks yet another step in his movement towards a Front-Bench position, which he so desires. I should warn him, however, having read the press release about his book, that he may be harming rather than helping his chances because it contains more policy commitments than all the Labour policy documents put together.
  Mr. Budgen: Will my right hon. Friend concede that, although the steel and manufacturing industries are important to this country, they are but sectional interests? This afternoon's questions show that the Labour party is constantly looking for special support from the taxpayer, and special concessions to various sections of the economy that it favours. If that is going to be the way, there will be a financial crisis if we ever have the misfortune of Labour forming a Government.
  Mr. Eggar: take my hon. Friend's point, but part of Government's role is to assist our industry to compete effectively at home and abroad.

  Research Industry
  Mr. Bill Michie: To ask the President of the Board of Trade how much the United Kingdom spent on research and development per capita in the last year for which figures are available. [36084]
  Mr. Ian Taylor: In 1994, the latest year for which figures are available, the amount spent by the United Kingdom on gross expenditure on research and development—GERD—per capita was £251.60.
  Mr. Michie: As one who—admittedly many years ago now—was involved in research and development, and noting the Minister's answer to Question 10, I should like to know whether the Minister accepts that our expenditure on research and development has not kept pace with the other G7 countries, which is probably why we have dropped from 13th to 18th place in the prosperity league. Will the Minister assure the House that there is no point in having short-term gimmicks? We need long-term investment in research and development—otherwise we will finish up as a screwdriver nation.
  Mr. Taylor: Business investment levels in research and development have been rising year on year, but I accept that, in terms of the "Research and Development Scoreboard", they are at a lower level of intensity than those of some of our main competitors. We are urging business to do more. I should clarify that the science base—which is the budget of the Office of Science and Technology and the research budget of the Higher Education Funding Council—has risen by more than 10 per cent. over the past 10 years, which is a remarkable achievement in view of other budgetary pressures. The science base is, therefore, healthy. We are now attempting to attract more private sector capital to add to our own expenditure, as was recently shown by the foresight challenge awards, in which £30 million of Government money brought in £62 million in private sector money.

Points of Order
3.30 pm
Mrs. Gwyneth Dunwoody: On a point of order, Madam Speaker. I know that you have tried very hard to encourage Ministers to answer questions, but it now seems virtually impossible to get a factual reply that does not include the latest asinine slogan and that bears very little relationship with the responsibilities of Ministers. May I ask you to encourage not only Ministers but Opposition Front Benchers to realise that the purpose of Question Time is to question Ministers about the Government's responsibility? It would be quite nice if the House of Commons could occasionally hear the odd answer that relates to the question asked.
Madam Speaker: The hon. Lady is absolutely right, and I am sure that she has expressed sentiments held by all hon. Members. Some weeks ago, I pointed out to Ministers and to Back Benchers their responsibilities at Question Time. Ministers are of course responsible because they comprise the Executive. They are responsible for answering questions and for Government policy, and questions should be answered clearly. This is all laid down in "Erskine May". I ask Ministers and hon. Members to read "Erskine May". I hate to be tedious and repetitious, but, occasionally, I am afraid that it is necessary.
Mr. Max Madden: On a point of order, Madam Speaker, of which I have given you and the Minister of State, Home Office, the hon. Member for Maidstone (Miss Widdecombe), notice.
At columns 823 and 824 of Hansard on 15 July 1996—during the proceedings on the Asylum and Immigration Bill—the Minister of State said that Chinese women who were victims of forcible abortion, sterilisation or genital mutilation or who were fearful of such torture could apply for asylum in the UK by going to the British embassy in Beijing. She said that the merits of their claims would be considered.
As you will know, Madam Speaker, it has been the long-standing policy of the Foreign Office to refuse asylum applications from overseas. It is clear that the Minister's statement on Monday was extremely misleading, and clearly it persuaded some hon. Members in their voting intentions on the relevant amendment. Unless the Minister of State's statements are withdrawn, I fear that the voting intentions of those in the other place, who are due to consider that Bill again on Monday, could be equally influenced. Therefore, I should be most grateful if you could use your good offices to persuade the Minister to withdraw the extremely misleading statement that I am sure that she made inadvertently on Monday.
Madam Speaker: I am grateful to the hon. Gentleman for giving me notice of his point of order. The hon. Gentleman and the House will appreciate that I cannot allow further debate to take place on the Bill, which the House considered on Monday and which another place will consider again shortly. What the hon. Gentleman has said today has not only been heard in this House, but, no doubt, will have been noted elsewhere.
Mr. David Alton: Further to that point of order, Madam Speaker.
Mr. Paul Flynn: Further to that point of order, Madam Speaker.
Madam Speaker: There can be no further points of order. I have dealt with the matter.
Mr. Tam Dalyell: Further to that point of order, Madam Speaker, but with regard to a different Minister. During proceedings on the Asylum and Immigration Bill, the Secretary of State for Social Security, in response to speeches that some of us made on the trauma of rape and the three days in which to seek asylum, also gave some rather specific assurances. What my hon. Friend the Member for Bradford, West (Mr. Madden) has said about the Minister of State, Home Office, surely also applies to the Secretary of State for Social Security. Whereas you, Madam Speaker, say that the matter will be noted, with Parliament going into recess, is it sufficient simply to note something that has really been misleading to the House of Commons?
Madam Speaker: As the hon. Gentleman and the House are aware, Ministers speaking from the Front Bench are responsible for the Government's policy and the comments that they make. I made the point that what has been said will be noted elsewhere, because, as I am sure the hon. Gentleman and the House are aware, the matter is shortly to be considered again in the other place.
Mr. Harry Barnes: Further to my point of order yesterday, Madam Speaker, concerning the kind letter that I have received from the hon. Member for Swindon, signed "Yours ever, Simon Coombs", the large ministerial conference Room which was booked is available only for Ministers of the Crown and is, therefore, a privilege provided by the House for ministerial purposes. It is clear that it has been used for party political purposes in order to arrange the business of the House. That seems to cross the line that should be carefully maintained between ministerial activity and party political activity. I hope, therefore, that you will consider carefully the way in which ministerial Rooms in the House are being used in order to ensure that they are used correctly for ministerial, not party political purposes.
Madam Speaker: I shall certainly do so and I shall also ask the Serjeant at Arms to investigate the matter.
Mr. Alton: On a new point of order, Madam Speaker, but connected with the Asylum and Immigration Bill. Tomorrow morning, new immigration rules and changes to the current rules will be presented to a Committee and they will be debated for an hour and a half. Will you ask the Clerks to consider the propriety of such a Committee meeting to consider those questions in advance of Royal Assent being given to that Bill and the debate in the House earlier this week not yet having been resumed in another place? Is it not precipitous to be bringing forward yet more changes in immigration rules in an obscure Committee while Parliament is considering that major piece of legislation?
Madam Speaker: I am not fully aware of the matter which the hon. Gentleman raises, but I shall certainly consider it. He seems to have made an important point and it is up to me to examine it as soon as I can and I shall do so.
Mr. Robert Maclennan: On a point of order relating to that raised by the hon. Member for Crewe and Nantwich (Mrs. Dunwoody). When a Minister clearly fails to answer a question, in the manner in which the Minister for Industry and Energy turned a question from the hon. Member for Rotherham (Mr. MacShane) into a comment upon a book release, is it a matter which you, Madam Speaker, might consider would give rise to a second supplementary question being asked, or might the matter appropriately be considered by the Procedure Committee, as used to be the practice some years ago?
Madam Speaker: Whether a Minister answers as he should is not a matter for me. As I said earlier, it is the Minister who is responsible for his comments. However, while we can have a joke or two across the Floor of the House—we all enjoy a little humour—serious questions must be answered seriously. Ministers are responsible for answering questions and I hope that they will take to heart what I have said today.
Mr. Flynn: On a point of order, Madam Speaker. It is some years since we have asked any stranger to come to the Bar of the House to apologise, but is not there a case to ask one individual to do so for a vicious and entirely unjustified attack on the Secretary of State for Wales. For his work in attracting 6,000 jobs to my constituency, the Secretary of State has been described by an individual in an article in The Sunday Times as "deluded" and "simple minded", and his work in attracting those jobs has been described as "pimping for Britain". Should not that man,
1144
the Conservative candidate for Newport, West, be called to the Bar of the House to apologise to the Secretary of State for Wales?
Madam Speaker: If the statement was made outside the House and the Minister concerned takes objection to it, the matter is in his own hands: he can go to litigation. Perhaps he will do so.
Mr. David Shaw: Further to the earlier point of order about the use of Rooms in the House of Commons, Madam Speaker, and your reference to the Serjeant at Arms, would it be sensible to refer to him the fact that there are several meetings around the Palace of Westminster which are not open to Members of Parliament generally but are designed to save the bacon of a member of the shadow Cabinet who is under threat? Could the Serjeant at Arms investigate that misuse of the facilities of the House of Commons?
Madam Speaker: I think that we are getting down to frivolities. We have more work to do than that.

BILL PRESENTED
  TOWN AND COUNTRY PLANNING (REVOCATION OF OLD PERMISSIONS)
  Mr. Dafydd Wigley presented a Bill to require completion notices to be served in the case of old planning permissions: And the same was read the First time; and ordered to be read a Second time upon Monday 14 October and to be printed. [Bill 181.]

  Witness Protection
  3.40 pm
  Mr. Jim Cunningham: I beg to move,
  That leave be given to bring in a Bill to help the witnesses and victims of anti-social behaviour give evidence against criminal neighbours.
  This Bill has attracted cross-party support. I am sure that hon. Members have much experience of anti-social behaviour. The Bill does not apply only to council house tenants but to private tenants and owner-occupiers.
  Half a century ago, William Temple wrote:
  "Man is naturally and incurably social."
  How little could he have imagined the situation that plagues us today. There is a rising tide of anti-social behaviour, and each successive wave further erodes our communities. Even as I speak, someone's quality of life is being destroyed or eroded by people to whom the values of social responsibility and tolerance are merely words.
  Tenants are affected by anti-social behaviour, and in Coventry, 742 cases of anti-social behaviour were reported in the past 12 months. That is but the tip of a huge and growing iceberg. Much anti-social behaviour goes unreported because of fear of reprisal or intimidation. It is that problem at which my Bill is aimed. It goes to the heart of the problem, while understanding that much more needs to be done if anti-social behaviour is to be combated comprehensively. It recognises the priority given to witness anonymity by local authorities and tenants' associations alike.
  I must explain what I mean by the much-used phrase "anti-social behaviour". It is not an easily defined activity. Different people are annoyed by different things. What is anti-social to one person is not necessarily anti-social to another. Yet it is fair to describe it as behaviour that limits our ability to enjoy a quiet life. We can agree that all citizens have the right to go about their daily business free from the fear of harassment, persistent interference or criminal behaviour. Civil society is built upon that basic premise. It is a balance between the rights we have in society and the duties that we owe to each other. That balance is destroyed daily by vandalism, verbal and physical abuse and racial harassment.
  Although it is difficult to define anti-social behaviour, its results are easy to see. The Minister for Local Government, Housing and Urban Regeneration has said:
  "Anti-social behaviour by a small minority of people can have a devastating effect on a neighbourhood, causing misery and despair."
  Communities are besieged by a daily torrent of abuse and criminal behaviour. Whole streets or estates are controlled by people who rule by fear. The victims are left fearful, miserable and helpless. They are helpless because they dare not report their aggressors. To do so would invite further intimidation, especially as they usually live in close proximity to each other.
  According to a Home Office study published in 1994, as much as 25 per cent. of anti-social crime goes unreported. It is a classic Catch-22 situation. Either the victim suffers in silence, allowing the aggressor to go unpunished, or he or she takes action, in the knowledge that doing so may put him or her, and, in many cases, their families at great risk.
  1146
  It is not difficult to understand why victims feel that the criminal justice system is weighted against them. The whole process is reliant on bravery and that courage must be extended to the courtroom itself. The threat of intimidation spreads to the courtroom, as the 1993 royal commission on criminal justice made clear. As a member of one of the families giving evidence against a certain family in Manchester put it:
  "I was afraid. I've young children. But in the end I knew what I had to do."
  Yet without witnesses' evidence, nothing can be done to tackle the perpetrators of criminal behaviour. So although local authorities have developed innovative responses to the problem within the existing legislative framework, there is only so much that can be done without initial evidence.
  A nucleus of authorities has established the local authority officer working group. It has introduced a range of measures including strengthened tenancy agreements and 24-hour emergency teams. Coventry city council has led the way with the use of injunctions, but it is restricted by the fact that power remains in the hands of the aggressors as long as victims are too afraid to start proceedings against them. It need not be that way under the provisions of my Bill.
  In essence, by ensuring that those witnesses who give evidence remain anonymous, the Bill goes a long way to encouraging them to come forward with their vital evidence. Under the Bill, witnesses or victims of anti-social behaviour would give initial evidence to a police or housing officer. Justification as to why mediation would be inappropriate to their case would have to be given. The ultimate discretion would lie with the police or housing officer. That provision recognises the benefits that mediation can have in resolving cases of anti-social behaviour, as outlined in a Department of the Environment paper that was released in 1994.
  Many hon. Members present will be aware of the work done by the umbrella organisation, Mediation UK. Yet mediation is often inappropriate, especially in cases involving violence. Should mediation be deemed unsuitable, the police or housing officer could provide the content of the witness statement in court without revealing the identity of the witness. Of course, such action could take place only if there were reasonable grounds for believing that not to do so would place the witness at possible risk. The police or housing officer would have to testify on good evidence to the complaints that had been received.
  At present it is possible for an individual judge to accommodate the fear of reprisal. He can consider evidence that does not identify the names of victims. That is by no means a regular facility, and more often than not potential witnesses withdraw from any proceedings as soon as they realise that they may be identified.
  One question that may be asked of the Bill is that of natural justice. That principle demands that witnesses appear in court to answer for the evidence that they give. That need not be subverted by my Bill, which, if necessary, allows for a court-appointed official to interview or cross-examine the witness in closed court. The defendant or defendant's lawyer would be absent. Again, if necessary, questions to the witness may be suggested beforehand by the defence, and it would be provided with a transcript of the interview. Of course,

  1147
  throughout the proceedings the identity of the witness would not be revealed, so the principle of natural justice is upheld and the due legal necessities remain intact.
  The Bill is fundamental to helping the victims of anti-social behaviour. It is not enough to offer them protection only after the event, for that does little to encourage witnesses to come forward in the first place. Furthermore, that is expensive and often results in witnesses being forced to leave their homes. No, it is time to help communities to win back their streets. We must offer victims the surety of anonymity in reporting anti-social behaviour either to the police or local housing officers.
  I urge the House to give its wholehearted support to the Bill.
  Question put and agreed to.
  Bill ordered to be brought in by Mr. Jim Cunningham, Mr. James Pawsey, Ms Janet Anderson, Mr. Ian Pearson, Mr. Brian David Jenkins, Ms Liz Lynne, Mr. Geoffrey Robinson, Mr. Robert Ainsworth, Mr. Simon Hughes, Mr. Michael Connarty and Mr. Bill Olner.

  WITNESS PROTECTION
  Mr. Jim Cunningham accordingly presented a Bill to help the witnesses and victims of anti-social behaviour give evidence against criminal neighbours: And the same was read the First time; and ordered to be read a Second time upon Tuesday 23 July and to be printed. [Bill 182.]

  The Economy
  [Relevant document: The Minutes of Evidence taken before the Treasury Committee on Monday 15th July and Tuesday 16th July, House of Commons Papers Nos. 614-i and-ii of 1995–96.]
  Madam Speaker: I have selected the amendment standing in the name of the Leader of the Opposition. I regret that between 7 o'clock and 9 o'clock speeches must be limited to 10 minutes.
  3.49 pm
  The Chancellor of the Exchequer (Mr. Kenneth Clarke): I beg to move,
  That this House welcomes the publication of the Government's latest forecast, which shows growth strengthening, prosperity rising, inflation falling to within the Government's target of 2½ per cent. or less, and a further decline in Government borrowing; notes that the United Kingdom has a lower unemployment rate, a higher proportion of its people in work and a lower burden of tax and public spending than any other major European country; and recognises that the favourable economic outlook reflects the success of the Government's policies to promote a modern, deregulated, dynamic and more competitive economy.
  The motion is about the summer economic forecast. I make that obvious statement to start with because I do not believe that we shall hear anything about the summer economic forecast from Labour Members. They never ask for debates on the economy, they fear debates on the economy when they come and they do not talk much about the economy when they arrive.
  There are some very good reasons for that. The 1996 summer economic forecast sets out an extremely attractive prospect for the British economy as it enters its fifth year of economic expansion. The overriding objective of all economic policy is to deliver jobs and prosperity to our constituents and to continue to deliver jobs and prosperity consistently over a period of years. That is what is happening now. Living standards are rising. Unemployment is falling. The total number of jobs has been increasing. The forecast shows that that is set to continue into the future, as long as we stick to the policies of this Conservative Government and we do not allow Labour to ruin it.
  Mr. David Winnick: I notice that the Government's motion makes no mention of the Treasury document that has been leaked. Is it not important that the Chancellor should make some reference to what are obviously recommendations to destroy what is left of the welfare state? Why has that been left out of the motion, and does the Chancellor intend to speak about it?
  Mr. Clarke: I wish that the hon. Member for Dunfermline, East (Mr. Brown) could have found someone better than that to raise that matter at this early stage. He spent all day trying to distract attention from the summer economic forecast with this ridiculous thing, and I think that we should start protecting gullible journalists from him.
  A grade 7 civil servant in my Department produced a document, which does not advocate policies—it is not policy advice. It talks about the grading and management structure of the Department into the future in certain eventualities. It first appeared about eight weeks ago in

  1149
  the Daily Mail and people had to find it for me; I had never seen it. It had nothing to do with policy; it was not intended for Ministers; it did not emanate from the Government. I found that the Daily Mail had totally misreported it, and I forgot it.
  I accept that I had underrated the hon. Member for Dunfermline, East. He saw this morning that unemployment was likely to come down. Our unemployment figures are down to the lowest since 1991. He had seen the summer economic forecast, he knew what the prospects were in it, and alas, poor Times, alas, poor British Broadcasting Corporation, out he went, with his document from my grade 7, and tried to describe it in a preposterous way. I feel that the world has gone mad when this justifies the front page and leader of The Times.
  I do not mind debating my views and I believe that the Opposition have no answer to them, but I must tell the hon. Member for Walsall, North (Mr. Winnick) that that document will not give him any enlightenment and he should turn to the summer economic forecast to discover what actually matters to ordinary men and women in this country and their prospects for the future.
  Mr. Gordon Brown: Given that this morning I also saw the minutes of the meeting with the Governor of the Bank of England at which the Chancellor of the Exchequer had to report that manufacturing output was down and manufacturing investment was very poor indeed, and given that the document from the Treasury that he talks about says that, under current policies, Britain will fall behind Thailand within the next 20 years, will the Chancellor, as the person in charge of the Treasury, tell us when he was first offered or received a copy of the document, and can he confirm whether it is true that a proposal under active consideration is the privatisation of the roads, to be treated as a utility rather than a public service? When did he see it? Are the proposals correct?
  Mr. Clarke: There were several questions in that, and I will try to deal with them all.
  The hon. Gentleman has seen the minutes of the meeting; I will return to that subject. I will give him time to prepare himself, because it poses a difficult question about interest rates. Those are things which, as Chancellor of the Exchequer, one has to raise or lower—they have an effect on the performance of the economy. The right hon. Gentleman finds that difficult to understand; usually he cannot even deal with the question. Does he agree with me, with the benefit of hindsight and having seen the Governor's opinion, on the direction in which interest rates should be moved?
  Mr. Gordon Brown: Of course I do.
  Mr. Clarke: Did the right hon. Gentleman say that he agreed with me? Good heavens!
  Mr. Brown: Does the Chancellor recall that when the interest rate decision was announced I said that the state of manufacturing and of investment was such that an interest rate cut had to be justified? Will he also explain why, four years into what he says is a recovery,
  1150
  manufacturing output in the last quarter of last year and the first quarter of this year was technically in recession, and why investment has never recovered during this "recovery"?
  Mr. Clarke: The right hon. Gentleman knows perfectly well from the minutes that the Governor agrees with me and with every other forecaster that the recovery is strengthening and will continue to strengthen. The Governor did express some concern about inflationary pressures building up in the economy if it grew too fast. It is absurd to read the minutes and then try to describe the Governor's advice as supporting the right hon. Gentleman's view that we are heading for decline.
  This is the first time that the right hon. Gentleman has ever said that he agrees with me. Indeed, it is the first economic opinion that he has given us in two years. He talks of stimulating manufacturing production by means of an interest rate cut. That will worry the Governor a great deal. If the right hon. Gentleman intends to set monetary policy so as to demand-manage manufacturing, the Governor will deal with him sternly and he will find himself facing punitive financial markets which will rapidly put up interest rates whatever he may want to do.
  We set interest rates to achieve an inflation target, and we have been successful in hitting that target. The reason why I was flabbergasted when the right hon. Gentleman said that he agreed with me about interest rates is that he does not have an inflation target. He used to have a slight excuse for never giving an opinion on interest rates—because he did not have an opinion on the policy determining what to do. One of the dangers of a Labour Government, if the right hon. Gentleman were ever in control, would be that inflation would rise and come back to destroy the British recovery.
  The right hon. Gentleman asked me some questions about that fatuous document.
  Mr. Dennis Skinner: When did the Chancellor first hear of it?
  Mr. Clarke: I first heard of the existence of the document when a report appeared in the Daily Mail seven or eight weeks ago. I imagined then that it had been leaked by the Labour party. After a while I discovered that the reference must be to this particular document; someone told me of its existence and produced the bit to which the Daily Mail seemed to be referring—which had been totally misreported. This morning I suddenly discovered that another bit of the document had been leaked by the right hon. Member for Dunfermline, East. This time he claimed to have found in the document a description of the end of the welfare state. On the way to the interview this morning I finally obtained a copy and began to go through it.
  The right hon. Gentleman knows perfectly well that the document does not bear the construction that he has put on it. It is, as I say, not a policy document. It is not policy advice. It was written by a middle-ranking official in my Department. [HON. MEMBERS: "Ah!"] A grade 7 official; the highest grade is grade 1. This grade 7 had been asked to advise on future management structures as part of an exercise determining what the management and staffing of the Treasury should be. The document advocates no policies and describes none. It is certainly not worth the attention being paid to it.

  1151
  The right hon. Member for Dunfermline, East talks about being overtaken by Thailand. He is a great league table man. It is nice to see him turn to a new league table—his last one was fairly useless. Thailand has roughly the same population as the United Kingdom but it is a much poorer country. We are achieving the fastest growth in western Europe; Thailand is achieving the growth of a south-east Asian tiger economy—it is doing very well. Sometimes I joke with Thai politicians whom I know, along the lines that if they were to keep their growth going at its current rate, and we kept ours going at our current rate, theoretically Thailand would have the same GDP as the United Kingdom by about 2020. This is not even a serious academic discussion because, as Thailand's economy matures, it will not grow at that rate. We shall be overtaken by Thailand only if a Labour Government are in power for so long that they destroy the recovery that we have in place and make us start to go backwards in this highly competitive world where things are changing.
  Mr. Gordon Brown: I am glad to hear that the kids in the office have been promoted to middle-ranking officials in the course of just a few hours. Will the Chancellor answer my question: is the privatisation of the roads under active consideration, as the document says? Will he also deal with the point that a meeting is taking place today, at the Government's request, between the heads of Britain's largest insurance companies to discuss ways in which their industry can take over responsibility for the welfare state? The BBC has footage of people going into that meeting, so what is going on?
  Mr. Clarke: I hope that the right hon. Gentleman did not send a journalist to that meeting. I shall no doubt eventually find out what it is about.
  I doubt whether those officials have the first idea about what is going on as regards the Government's consideration of their roads policy because they are not at a sufficiently senior level to know. As the right hon. Gentleman well knows, we are changing the financing of the roads programme, and moving from the traditional method of capital provision into the design, build, finance and operate method. That method is used throughout the world, including in his beloved Thailand, to provide infrastructure investment in a modern way. The BBC and The Times may believe the right hon. Gentleman but nobody else believes that that means privatising the roads system, as he puts it. He should deal with the policies that we are putting forward—those which he knows I am following. He does not do so because he has no reply to them and is extremely frightened about producing the policies that he would have to follow if ever we made the mistake of giving him responsibility for my office.
  Several hon. Members rose—
  Mr. Clarke: I shall give way in a moment, but as I am still on page 1 of my speech, I should like to make some progress with it. I shall insist on putting on the record, so that those who read Hansard rather than newspapers misled by the Opposition's spin doctors can know, what the summary economic forecast reveals.
  The United Kingdom has enjoyed the strongest recovery since 1992 of any major European country. I expect output to continue to grow at a healthy rate of
  1152
  2½ per cent. this year, strengthening to 3¼ per cent. in 1997. For this year, that is a bit below the 3 per cent. that I expected at the time of the Budget, but all serious commentators have revised down their forecasts for most of the major economies, including the UK, as a result of the slowdown on continental Europe.
  The OECD shares my view that the UK will remain easily the fastest growing major European economy in 1996, 1997 and beyond. [Interruption.]
  As I turned to that part of the forecast which is extremely encouraging news for this country, I heard the hon. Member for Bolsover (Mr. Skinner) say, "Let's go to sleep". That is the Labour party's reaction to our enterprise economy and the way in which the Government are going. If the hon. Gentleman goes to sleep, let him dream of what would happen if the higher taxes, spending and borrowing of a Government with a Chancellor who has no targets or objectives were ever elected. He will then wake up and find that he is in an extremely attractive economic environment.
  Mr. Skinner: The Chancellor misheard me. When he put his head down and started reading the brief from the new kids on the block, I said that the Tories behind him would now go to sleep, as they probably will. What moral authority does he have to talk to the British people about economic forecasts or anything else when all his Ministers say—he will probably repeat it—that to keep inflation down to 3 per cent., workers outside this building will have to get 3 per cent. or less? Yet he and his hon. and right hon. Friends abstained in the vote on whether every Cabinet Minister should get £103,000. If there is enough money in the country for Cabinet members to get £103,000, why should not pensioners and workers be treated the same?
  Mr. Clarke: Earnings increases in this country are running at the rate of 3½ per cent. this year and that is far below the inflationary pay rises that people such as the hon. Gentleman used to inflict on the British economy whenever we had a flicker of recovery in the past. We have low inflation—the headline level of inflation is 2.3 per cent.—and that is one of the reasons why the real living standards of the people whom he and I represent are increasing. Sensible levels of pay settlements are paid for by productivity and performance. That is the world that the hon. Gentleman woke up to, but still does not like, only a few years ago and it is benefiting his constituents and mine.
  In the recent parliamentary pay conflict, I voted in the same Lobby as the hon. Member for Bolsover (Mr. Skinner). It is unusual for our views to coincide—
  Mr. Skinner: You abstained.
  Mr. Clarke: I did not abstain on my salary. The figure that the hon. Gentleman cited was for a ministerial salary that I do not receive because it is meant to come into effect in the next Parliament. [Interruption.] When I take office in the next Parliament, it will not be for the money, but for the pleasure of keeping the right hon. Member for Dunfermline, East away from the nation's affairs.
  Mr. Malcolm Bruce rose—
  Mr. Clarke: I shall give way to the Liberal Democrat spokesman in a moment, but I shall give the House a little more good news from the summer economic forecast while I have the chance to keep the debate roughly on the subject before the Labour party changes it to a subject that it would prefer.
  Consumer spending will provide the motor for the accelerating growth that everybody—not just I—knows will occur later this year and next. Confidence has been strengthening steadily and the most recent figures from the Confederation of British Industry show reports from retailers of the strongest high street sales growth for more than five years.
  Living standards are rising. Tax cuts and faster growth in real earnings mean that a family on average earnings is expected to be about £450 better off in real terms this year compared with last year. That is a substantial improvement. Such families are now £4,500 better off in today's money each year than they were in 1978–89 before the Government took office. My forecast is—and I do not believe that it will be challenged—that real personal disposable income will grow by 2.5 per cent. in 1996 and by 3 per cent. in 1997.
  The forecast is not only about stronger consumer demand: I expect investment to strengthen, too. The climate for investment is excellent: growth is strengthening, profitability is high, company finances are strong and company taxes and interest rates are low. For all those reasons, I expect business investment to grow by more than 7 per cent. this year and next. The manufacturing sector should revive as stocks return to desired levels and as demand in Europe recovers.
  I turn to the subject of employment.
  Dr. Lynne Jones rose—
  Mr. Clarke: Perhaps the hon. Lady has a comment to make about employment.
  Dr. Lynne Jones: The Chancellor talks about increased consumer spending and his forecast suggests that world trade in manufacturing will grow by more than 7 per cent. Is not he worried that manufacturing output in this country is set to rise by only 1.25 per cent? Is not he worried that consumer demand will lead only to an increase in imports because of his failure to create a sound economic manufacturing base?
  Mr. Clarke: We had strong manufacturing employment when the recovery started, but that has stalled largely—not wholly, but largely—because of a fall in activity in our major markets in western Europe. As those markets pick up, there is every sign that manufacturing activity will pick up. The bit of involuntary stock building that seems to have happened will fall away and the manufacturing recovery will continue. These are good times for manufacturing in the United Kingdom and that is why people come to this country from Korea, when they want to manufacture goods, to make the largest investments in western Europe.
  The hon. Member for Birmingham, Selly Oak (Dr. Jones) mentioned comparisons in trade growth between this country and the rest of world. One reason for the recent slowdown is that Britain remains strongest in north America and western Europe, which tend to be
  1154
  among the slower growing markets in the world compared with the seemingly remorseless growth in south-east Asia, Latin America and other emerging markets. We are competitive now in those areas and we have built up an investment portfolio. British firms are active in those areas and the prospects are right for us to gain a share of manufacturing trade.
  Mr. Malcolm Bruce: The Chancellor is painting a rosy picture, as always. He has avoided referring to his borrowing forecast and to his reduced growth forecast. Yesterday, the Governor of the Bank of England said that he was uncomfortable with the current level of borrowing and that the Chancellor should also be uncomfortable with it. He also indicated that interest rates would be able to come down further if we had an independent central bank. In principle, the Chancellor is in favour of going into a monetary union, where we would have to have an independent central bank, and his leaked document said that if we stay out we will need an independent central bank. Is it not time that he made a common-sense decision about it?
  Mr. Kenneth Clarke: The two subjects that the House should consider—if we had an Opposition worthy of the name—are the decisions on inflation and interest rates, and the public finances. They are the issues that we should debate when we look at a summer forecast. We have just heard that the Opposition do not have much to say on inflation and interest rates. On the public finances, it is a little difficult for a shadow Chancellor—who would go for higher taxation and higher spending—to explain where he stands on the public finances, apart from making a noise about them.
  Today, the other news is that there has been a fall in the level of unemployment, which is at its lowest level since 1991. The United Kingdom is into its fourth year of good news on jobs. The number of people in jobs has been boosted by approximately 700,000 since the recovery began. Claimant unemployment has fallen by more than 800,000, and I expect it to continue to fall. Compared with the other major European countries, we have the lowest rate of unemployment, more of our people in work and the lowest costs on job creation—which is why employers come to this country. For every £100 in wages paid by an employer in Britain, overheads are £18 compared with £32 to £44 in Germany, France and Italy. It is attractive to create jobs here, and almost impossible to create jobs in western Europe, even where there is growth and recovery.
  The Labour party should face up to the fact that a flexible labour market and low overheads have helped to make the United Kingdom a magnet for overseas investment. In 1995, the United Kingdom attracted more than £20 billion in foreign direct investment, which gives us a trading edge and is an attraction for inward investors. That would be directly threatened by the adoption of the social chapter, the minimum wage or the instinctive approach of the Labour party.
  Mr. Denis MacShane: Is the Chancellor aware that yesterday there was a critique of his policy launch in Yorkshire which said that the problem with the British economy is too much slow growth industry, too little innovation, too few good managers, too little investment in research and development, and too many

  1155
  children leaving school ill educated? That report was produced by the Yorkshire and Humberside regional office of the Government and it was launched by the Deputy Prime Minister. If the Deputy Prime Minister was telling the truth yesterday, what on earth is he doing today?
  Mr. Clarke: I have not heard this particular version of the Deputy Prime Minister's launch in Yorkshire yesterday. I work with the Deputy Prime Minister, I know the Deputy Prime Minister, and the Deputy Prime Minister agrees with me on economic policy and shares my description of what is happening to the British economy. In desperation, the Labour party is saying that the Deputy Prime Minister is on its side on this issue—it is deluding itself. Those matters have been tackled, which is why things are going better.
  I refer to the decisions on inflation and interest rates. All this has been achieved against a backdrop of falling inflation. Underlying inflation has been below 4 per cent. for three and a half years, the longest period of sustained low inflation for almost 50 years. We are well on course to hit the Government's inflation target of 2½ per cent. or less by the end of the year. Doubts have been raised about that achievement many times in debate in the House, but I do not think that we shall hear much about it from either side today. I expect underlying inflation to be 2½ per cent. by the end of 1996 and 2¼ per cent. by the middle of 1997.
  Mr. Ken Livingstone: Will the Chancellor give way?
  Mr. Clarke: No, I must address the key points and explain what has happened in the past six weeks. The excellent inflation performance has enabled me to cut interest rates four times since last year's Budget. The most recent cut—to 5¾ per cent.—occurred after my monthly meeting with the Governor on 5 June. The minutes of that meeting—which were published today—show that, on balance, the Governor thought that interest rates at that time should remain at 6 per cent. It was a fine judgment, and I decided to move to 5¾ per cent.
  That decision will be analysed, but we must examine the background in order to see how the Governor and I are handling the pursuit of a policy to which we are strongly committed. The inflation record that I cited—our best for 50 years—proves that the Ken and Eddie show is a pretty successful team performance. Six weeks ago, the Governor and I differed by just ¼ per cent. The Governor agrees that, by any standards, it is a narrow debate. He accepts, as I do, that there are risks on both sides. In his Mansion House speech—his public pronouncement made shortly after our meeting—he said:
  "There is a … downside risk to activity in the short term. There is, on the other hand, accumulating evidence of strengthening demand … which could come to represent an upside risk to the inflation target, further ahead."
  As we can see from those remarks, he was concentrating on what he believed to be the dangers of the upside demand growing too quickly and not on the depressing statistics referred to by the right hon. Member for Dunfermline, East.
  We came to a decision. We share a commitment to achieving a low inflation economy, although we are often reported as disagreeing about other matters. Yesterday,
  1156
  by chance, I had lunch with the Governor and we were amused that, after giving evidence before the Select Committee for five hours, commentators had to scratch around trying to find any differences between us.
  My final decision six weeks ago was based on careful assessment and particularly on the lack of inflationary pressures in the economy. We have easing cost pressures, spectacularly good producer prices—both input and output prices—spare capacity and moderate earnings growth which has abated slightly since then. I judged that another ¼ per cent. cut was sensible and posed no threat to the Government's inflation target. That target must continue to guide me; I will not take any risks with inflation. On the basis of that determination, the Governor and I work comfortably together in pursuit of the same objectives.
  Since that meeting—I do not know whether we will ever know whether the ¼ per cent. cut was quite right; it may become clear in 18 months—the good news on inflation has continued, with some of the lowest rates of producer price inflation for a decade and input prices nearly 5 per cent. lower than a year ago. Moderation in earnings growth is continuing, with earnings growth at 3½ per cent. in May—down from 3¾ per cent. in April. In the immediate aftermath, inflationary pressures remain very subdued and I am confident that, 18 months out, we will still be on a safe course.
  I sought—and, rather surprisingly, got—the views of the right hon. Member for Dunfermline, East regarding the interest rate change. He gave rather bizarre reasons for supporting it. In the past, he has advocated that I reduce interest rates in each and every circumstance. I hope that he will study the minutes of the meetings carefully, begin to cotton on to what is happening and appreciate that we have combined the recovery with the lowest inflation rates that this country has seen for half a century.
  If the right hon. Gentleman is minded to address those issues in his speech, I ask him also to clarify other issues besides interest rates. Does he agree with my inflation target? He does not have one of his own, but what does he think of my target of 2½ per cent? Does he dare comment? Does he agree with my borrowing target? That was the other issue raised. [Interruption.] There is some excitement about borrowing; I look forward to discussing with a big-spending political party how we will tackle borrowing in this country. If we are to have a serious debate about borrowing, the right hon. Gentleman should say whether he agrees with my borrowing target.
  Mr. Skinner: Which one?
  Mr. Clarke: Bringing the Budget towards balance over the medium term is the only objective that I have ever pursued.
  Does the right hon. Gentleman agree with my spending target, to bring expenditure down to 40 per cent. of GDP? He is not usually able to answer that. Does he agree with my taxation target, to get the basic rate down, when we can afford it, to 20p in the pound? The truth is that he does not dare to answer any of those questions. He knows the reality that lies behind his silence. He knows that all those objectives would be utterly beyond the reach of any Labour Government who could ever get elected to power in this country.

  1157
  The right hon. Gentleman will not tell us his opinion on what I do, and he will not tell us what he wants to do. That is the difference between Government and Opposition.
  Several hon. Members rose—
  Mr. Clarke: I shall deal with borrowing and then give way to the hon. Member for Coventry, North-West (Mr. Robinson), who has been persistent.
  Government borrowing is steadily coming down from the £45 billion that we reached at one point. The PSBR in the past financial year was £32.2 billion—£3 billion higher than I anticipated at the time of the Budget. That was because people paid less taxes than I expected at the time of the Budget. In the forecast, I expect the PSBR to continue to come down to £27 billion in 1996–97, and to come down further to £23 billion in 1997–98. My commitment to keep the PSBR coming down towards balance in the medium term remains as strong as ever. Under the right hon. Member for Dunfermline, East, the PSBR would go in only one direction—upwards yet again; up and up and threatening our recovery.
  Much nonsense has been written in recent days about our revenue forecasts. Let me set the record straight so that we are all clear about how the forecasts have been adjusted. Tax revenues are rising quite strongly because the economy is strengthening. It is precisely because our tax revenues are rising and because we are holding public spending so firm that public borrowing is falling, as I have just described. Where the forecasts have changed is that taxes are not rising quite as fast as we expected and borrowing is not falling as fast as we expected. People are not paying as much tax as I expected, even after the tax cuts that I made last November. That, if anybody wants to address what is set out in the forecasts, is the real nature of the issue.
  I said a lot about forecasts to the Select Committee. Forecasts are needed, but they should not be used—particularly forecasts for tax revenues—in this slightly ridiculous fashion to comment, as some people have in the past few days. Forecasting tax revenues is about forecasting people's behaviour. What my boffins, as I called them the other day, had to do, was to a make a judgment—which is all they can do of people's behaviour, based on all the past evidence. The Treasury makes no secret if its forecasts change, which is why we have two forecasts a year, or if they are subject to a margin of error, as they always have been.
  The key fact is that the policy is intact. Revenues are rising, despite my reducing tax rates, because the economy is strengthening and the revenue is coming in. Borrowing is going down. I would prefer to see borrowing come down faster, but the right hon. Gentleman exaggerates the problem absurdly. He has to, poor thing, as he has little else to complain about in the economic outlook.
  Mr. Clive Betts: The Chancellor is relying on forecasts to say that the PSBR is coming down. Does he accept that his PSBR forecast for the last financial year, in the summer of 1995, was lower than his current PSBR forecast for this year? His PSBR
  1158
  forecasts are rising. Is not that a travesty for a Government who in 1992 said that the PSBR would come down to balance in the medium term? Is not his policy a shambles; or in 1992 did he and his party deliberately mislead the electorate in the general election?
  Mr. Clarke: Now I know why Sheffield city council went bust. The hon. Gentleman, an expert on borrowing and the difficulties caused thereby, is comparing one year's forecast with others and is using that to try to refute my description of a PSBR that is steadily falling in reality and of revenues that are steadily rising for good reasons. The economy is improving and the revenues are coming in. Alas, the poor citizens of Sheffield had a foretaste of what would occur to the citizens of the United Kingdom if such an approach to borrowing, and the complete absence of any suggestion about what should be done about it, were to come from the Labour party.
  The facts are these. We will have halved public borrowing as a share of gross domestic product over three years, and we will be heading towards balance. Staying on that path enables me to keep interest rates and inflation down. It is one of the ways in which I intend to make Britain the most successful economy in western Europe—and the way in which to keep all that on course is to impose tight control on public spending.
  Mr. Geoffrey Robinson: The Chancellor made a good point about the fall in the public sector borrowing requirement. It is coming down, of course, but, as the Chancellor must know, it is coming down much less quickly than it should be at this point in the cycle. It is not just that the forecasts have been so way out, although by any sensible standard they have been lamentable; nor is the hole in the public sector entirely attributable to the fact that the Chancellor is receiving lower tax revenues than he expected. This is a structural problem.
  There must be some poor member of grade 7 in the Chancellor's Department whom he could lambast yet again, and whose career prospects he could blight with his sarcasm de haut en bas. Will he tell the House what the borrowing requirement should be at this point in the cycle? That is the key question. Are we £5 million out, or £10 million out, and what will the Chancellor do about it?
  Mr. Clarke: It is not possible to pluck out a figure and say that that is the stage that the recovery has reached. What we should achieve is balance in the medium term, so that we can ride out the cycle. The hon. Gentleman has conceded that borrowing is coming down; the important thing is that it should continue to come down. It is coming down because we have controlled public spending, despite the Labour party's opposition every time we have made the necessary decisions. As I have said, revenues are not rising as quickly as we anticipated, and we must address that in policy terms—which means continuing control of public spending. We do not have a structural problem, as the hon. Gentleman suggests. I must point out to him not only that he and his party have opposed past reductions in, and controls on, public spending, but that his party would pose a structural problem in regard to public spending and public borrowing if it ever came to office.
  Let me underline my conviction that we can embark on the process that I have described by explaining what has happened to Britain's public spending. That will help the

  1159
  hon. Gentleman to understand how we are controlling public spending by protecting all the priority public services which I believe it is our duty to improve and maintain. In the 1980s, after we took over from Labour, across the rest of Europe the modern state remorselessly took an ever greater share of almost every nation's wealth—going in the direction that would obviously be followed by a Labour Government, whether they called themselves new Labour, old Labour or anything else. We in Britain have had a Conservative Government, and we have held the line since the early 1980s. Having a Conservative Government has produced a huge improvement in our economic conditions, compared with those created by social democracy—and even Christian democracy—in the rest of western Europe. A far lower proportion of our GDP goes into Government spending than is the case in any other major European country. That was not so before we had a Conservative Government, and it is one reason why we are performing better than our neighbours.
  Twenty years ago, the share of national income taken by Government spending in the United Kingdom was above the western European average. This year, it is expected to be 7 per cent. below that average. The rest of Europe has woken up to that, and is facing up to problems that we have already tackled. The German Government have a medium-term target of cutting the share of public spending in national income by 4 per cent., after which the figure will still be 46 per cent. of GDP. In France, the share looks likely to remain above 50 per cent. for some time. The United Kingdom, however, has a structured policy. I expect our share of national income that goes on public spending to fall sharply over the forecast period, from 42.25 per cent. last year to just 40.5 per cent. in 1997–98. That is within sight of the Government's target of 40 per cent. of GDP.
  We have hit our public spending targets each year for the past three years. Taken together, my three Budgets have cut £53 billion from the published public expenditure plans. We have taken a tough approach each year in order to find funds for our priorities. We have achieved that reduction while increasing expenditure on the national health service, schools, the police and other services on which the country depends. We are now therefore facing up, as everyone knows, to a public spending demand that meets the need to get public sector borrowing firmly back on the right course, as it should be.
  I always get a lot of advice on that from the touchline. I have had three years, I think, of the toughest public spending rounds of any modern Chancellor because these are low inflationary days and there are none of the old fudges to hide the problem away. I am always grateful, however, for such advice, as most people are on these occasions, but the key thing is that we carry conviction when we say that we can control spending and deliver our priority services. Our opponents do not have any credibility on that.
  My policy is to lower borrowing and to cut taxes whenever sensibly possible. I want taxes to come down. Lower direct taxes are a spur to entrepreneurship and improve the real economy's efficiency, but that involves proper control of public expenditure. That is not confronted by the Labour party. There is no sensible debate on public finances in the Labour party, except these comments on the public sector borrowing requirement. There is no debate. There is merely delusion.
  1160
  We have seen the Labour party's advance manifesto, which trailed five commitments and claimed to identify how to pay for them. The method of paying for them appeared to be a windfall tax, which has to be paid by someone, if it is ever levied. It will fall either on consumers, shareholders or employees. The Labour party does not appear to know. It does not know which companies will pay for it. A windfall tax is a one-off tax. There is no explanation of how the Labour party will continue spending money on those policy commitments, even if it were mad enough to introduce the policies.
  The abolition of the assisted places scheme was going to pay for some desirable things, except that the Labour party got the mathematics all wrong. The only other source of revenue of which I have heard is that, apparently, a Labour Government will cut child benefit to all parents whose children stay on in the sixth form or go on into further education. That is it on where the money comes from. There were a few pledges in the paper, but we have been considering the Labour party's other pledges and we reckon that a lot of pledges are not in that document. It continues not to say anything about those pledges. Anyone who knows anything about Labour's recent policy statements knows that it is committed to many more policies than that.
  Even in his last conference speech, the right hon. Member for Dunfermline, East committed himself to regional development agencies. We still do not now how they would be run and how much they would cost. That is only one of many commitments that Labour would have to finance. It gives some undertakings on tax. It says nothing, wisely from its point of view, about capital or corporate taxes. It refuses to rule out increasing the higher rate of income tax. It even refuses to rule out increasing the basic rate.
  The Labour party's mini-manifesto uses just waffle such as establishing
  "a new trust on tax with the British people."
  How can anyone trust the Labour party on tax if it will not give people even an inkling of its basic tax plans for everyone? Here is the clarity that Labour musters on the subject:
  "Democratic socialism is not about high taxes on ordinary families".
  Is that concrete enough for anyone to believe that Labour poses no danger? The warning is clear: watch out for what the Labour party would define as an "ordinary family" and for what it means by "high taxes". What it is actually talking about is taxing the British people and economy much more heavily than at present and certainly more heavily than we will.
  Mr. Tam Dalyell: Will the Chancellor of the Exchequer give way?
  Mr. Clarke: I must conclude.
  I say without fear of sensible contradiction that the UK is facing the most promising prospects for a generation. How different things looked in 1979, when we inherited a shambolic, inflation-prone economy. [Interruption.] Let me take the 1979 comparison. Hon. Members say that we have slipped behind in the league tables. In 1979, when the Conservatives came in, the Organisation for Economic Co-operation and Development report said of the UK economy:

  1161
  "By the Spring of 1978 the rate of increase in consumer prices had fallen from its peak of nearly 27 per cent in 1975 to about 7 per cent".
  That was supposed to be a pat on the back for the previous Government. In 1996, the OECD said:
  "Inflation performance over the past four years has been remarkably good."
  In 1979, the OECD said:
  "By the end of 1978 British external competitiveness was at its worst level since 1966".
  In 1996 the OECD said:
  "International cost competitiveness remains sound".
  In 1979, the OECD reported:
  "Amendments to the Finance Bill in Parliament by the Opposition Parties led to a reduction in the basic rate of income tax from 34 to 33 per cent."
  Contrast that with this year's OECD report, which states:
  "Tax measures announced in the 1996–97 Budget included: basic rate of income tax reduced from 25 to 24 per cent.; a widening of the 20 per cent. lower rate band by £700; standard rate of tax on savings income cut from 25 to 20 per cent."
  Mr. Skinner: They are falling asleep behind you.
  Mr. Clarke: Opposition Members should try to wake up their Front-Bench team. They should be taken out of the torpor of persuading themselves that the British economy is not a success and is not headed for more success. They should face up to the responsibility of deciding how they are going to face that.
  Those are the successes of 17 years of Conservative Government—successes that I am proud of and that we are not going to throw away. Only the return of a Labour Government could blight the prospects of the public beginning to enjoy the full fruits of that economic success.
  4.35 pm
  Mr. Gordon Brown: When I heard the Chancellor warming to his theme that Britain faces the best prospects for a generation, I wondered where we had heard that before—where we had heard the same boasts, the same promises of a balanced Budget, and the same prospects outlined for higher investment and growth. Perhaps I can jog the right hon. and learned Gentleman's memory. We faced
  "the best economic outlook that most people of today's working generation have ever faced in their lifetime."
  Yes, that was the Chancellor, speaking as industry spokesman, on 20 March 1986, before the Conservatives led us into an election and then a recession as a result of their policies.
  What else did the Chancellor say that he has said today? That we have
  "the best record for growth of any major economy in Europe."
  That was on 3 June 1986, before the Conservatives let spending get out of control and forced us into a recession again.
  The summer forecast states:
  "exports have been fairly flat … manufacturing output has been roughly flat … construction has been roughly flat … investment yet to show a very clear cyclical upturn".
  1162
  That is the problem of the Government's recovery—it is neither investment nor industry-led, nor is it now export-led. As in 1986 and 1987, the Government are relying on a one-off consumer boom.
  The Chancellor quoted the OECD, but let me tell him where we are in the OECD league. We are 20th out of 24 for growth, 13th for inflation—we are 18th for this year—19th for employment growth, and 17th for unemployment rates over the past 17 years. The reason is that manufacturing investment has barely recovered since 1979, and manufacturing output is now only 20 per cent. of the economy. We have heard all these boasts from the Chancellor and the Conservative party in the past 17 years: the pound to be stronger than the deutschmark; zero inflation; the transformation of our prospects; the productivity revolution; and then, the enterprise centre of Europe.
  Let me remind the Chancellor that, last week, the regional statistics of the Conservative Government—not a leaked document—which are published in "Regional Trends", clearly showed that Britain is not top of the European league but ninth. Every one of our nine regions except the south-east and East Anglia is below the European average. In half our regions, income per head is about half that of the most successful region in Europe.
  Is it not surprising to discover, therefore, that, in contrast to the bluster from the Chancellor and his smug and self-satisfied account of the economy today, in private the Treasury does not believe a word of it? His Department's view of this country's economic prospects under the Government is such that it believes that we will continue to decline in the economic league of world nations. The only solution that they can contemplate and put to the Chancellor is the privatisation of the welfare state.
  The document says:
  "There is a further proposal under active consideration for the privatisation of roads."
  Will he answer that question?
  Mr. Kenneth Clarke: I have answered it once. The document contains no proposals on the privatisation of the welfare state, as the right hon. Gentleman knows. It is preposterous to waste the time of the House with a management document. The only recommendations that this document makes are on grading levels and on possible needs for expertise in the next century under a variety of configurations. It is pathetic to produce documents of this kind as a substitute for having to debate economic policy on the floor of the House of Commons.
  Mr. Brown: The Chancellor protests too much. He is trying to reduce the document to the status of some work experience project that went wrong in the Treasury.
  We know from the interview given by the Financial Secretary at lunchtime that the document was instigated by, and went directly to, the permanent secretary to the Treasury. The Chancellor now tells us that it was available to him, if he had bothered to read it, several weeks ago. We now know that all the directors in the Treasury have been involved in its planning. Will the right hon. and learned Gentleman now answer my question: is privatisation of the roads under active consideration?
  Mr. Clarke: I do not know how the right hon. Gentleman defines those terms; the document does not do so. He is asking a question about a subject that he cannot

  1163
  define. I have explained the Government's perfectly well known policy on the private financing of infrastructure, and I thought that the Labour party was in favour of it. He is scratching about. Is this reference to privatising the roads programme the extreme agenda for abolishing the welfare state? I have not discussed the report with officials, because they did not think that it would arise. What exactly does he want to find out?
  Mr. Brown: The Chancellor will not answer the question. Is the privatisation of roads under active consideration? He refuses to answer.
  Mr. Clarke: Will the right hon. Gentleman explain what he means by the privatisation of the roads programme?
  Mr. Brown: The document says:
  "A further proposal under active consideration is the privatisation of the roads."
  [Interruption.] I am reading from the document, and this is only the first question that I have for the Chancellor. It continues:
  "It would be to treat roads as a utility rather than a public service. Ownership would be transferred to regulated private companies who would receive their income from road users."
  Does the Chancellor deny that the proposal is under active consideration?
  Mr. Clarke: It is not the policy.
  Mr. Brown: Is this proposal under active consideration? He will not answer that question.
  Mr. Clarke: For heaven's sake. The right hon. Gentleman is meant to shadow me. He should be shadowing the policies I propound, with, I think, considerable clarity and consistency. He is quite incapable of entering into any serious discussion of economic policy. He scratches about using management documents in my Department to try to goad me on to ground that he knows is not the policy of me or the Government.
  Mr. Brown: Either the statement is factually wrong and the Chancellor should deny its authenticity altogether, or the right hon. and learned Gentleman is not prepared to answer the question directly.
  Let us move on to the second question. The document says:
  "Consideration is currently being given to reducing state support for post-16 education on the grounds that rising demand is unaffordable and that private returns to individuals and their employers exceed social returns."
  Is this under active consideration?
  Mr. Clarke: It is by the Labour party. I am being advised by people who have obviously penetrated the mysteries of Labour policy documents rather better than I have. It is not the policy of the Government. That document is not policy advice. The right hon. Gentleman should be engaging in a debate about the summer economic forecasts.
  Mr. Brown: But once again this is why the public have no trust in politicians. [Interruption.]
  Mr. Deputy Speaker (Sir Geoffrey Lofthouse): Order. The House must now settle down. The Chancellor was given a reasonable hearing, and the shadow Chancellor must have the same.
  Mr. Brown: I ask the Chancellor: is a proposal to reduce state support for post-16 education under consideration? The document says:
  "Consideration is currently being given to reducing state support."
  Can he give me a straight answer?
  The Chancellor is now asking the Chief Secretary. He cannot tell me that that proposal is not under consideration, and I have to assume that, despite all that is said about the Labour party having an open review, in private the Conservatives, in the most hypocritical way, have been discussing reducing support for over-16s. [Interruption.] The Chancellor cannot correct it, can he?
  Mr. Clarke: I have not asked the grade 7 who wrote this what it is based on. I can only answer for the Government's policy. I did not know that the document was being prepared in the Department, so I do not know who is considering what. All I can say is that it has nothing to do with the Government. It has nothing to do with the debate.
  As the right hon. Gentleman knows, it is not the Government's policy to contemplate these things. My hon. Friend the Chief Secretary says that part of the document contemplates the consequences to the Treasury of higher public spending under a Labour Government. Is that the right hon. Gentleman's policy? That might be slightly more relevant to where we are.
  Mr. Brown: The document says that consideration is currently being given to that. Again, I am not satisfied, and I do not think that the country will be.
  Let us move on to the third proposition. The whole gist of the document is that, because—[Interruption.]
  Mr. Deputy Speaker: Order. I have just told the House that it must settle down and give the shadow Chancellor a fair hearing.
  Mr. Rod Richards rose—
  Mr. Douglas French rose—
  Mr. Brown: I am not giving way at the moment. I have given way about 10 times to the Chancellor to allow him to clarify a point, which he has not been able to do after 10 interventions.
  The document's third point is:
  "Britain will move down the league ranking of world nations."
  It says:
  "There will be a major shift in economic power away from Britain."
  It suggests that Britain will fall behind Mexico, Brazil and Thailand, and that, in 2015, national income per head in Thailand and other countries will be higher than ours, despite the fact that income in Thailand is a third of ours at the moment.

  1165
  The problem is that, far from the Treasury contemplating that and asking what it can do to improve our status in the world league, the document says that the issue is how we can manage decline. It says:
  "Greater economic power is likely to be followed by greater demands for political power. Our role in the international organisations will change as we move down the ranking. The issue is how we retain any influence."
  The Opposition will not accept the pessimism and defeatism implied in that document. We will take the measures that will reverse the decline. After 17 years of Conservative government, the Treasury says that there is no head of department in the Treasury who has any responsibility for dealing with the problems of the real economy. That is a sad indictment of 17 years of Conservative rule.
  The main point that the document comes to is that, as a result of the economic decline that Britain will experience, and as a result of our falling down the world league—what it calls
  "expected change in the UK's relevant position in the world economy"—
  we shall not be able to afford the welfare state.
  What proposals are being put forward? The House should be clear that, despite the Chancellor's bluster, these are real proposals. First, the document says that it will examine key elements—
  Mr. Quentin Davies: Will the right hon. Gentleman give way?
  Mr. Brown: I will not. I shall explain to the House what is in the document, so that it can judge whether the Chancellor is being accurate with it about the Treasury's intentions in the matter.
  Mr. David Shaw: The right hon. Gentleman is out of order.
  Mr. Deputy Speaker: Order. The Chair will decide what is in order.
  Mr. Tim Yeo: On a point of order, Mr. Deputy Speaker. Is it in order for the House to have to listen to extensive quotations from a document that has not been made available to hon. Members?
  Mr. Deputy Speaker: It must be in order, or the Chair would have ruled it out of order.
  Mr. Brown: I do not know why Conservative Members are getting so upset.
  Earlier this morning, the right hon. Member for Wokingham (Mr. Redwood) said:
  "I am glad that the Treasury is looking through these ideas".
  The chairman of the Back-Bench Conservative finance committee, the hon. Member for Bridlington (Mr. Townend), said that he welcomed many of the ideas. Five Conservative Members produced the No Turning Back group pamphlet, "Three Phases of Changes in the Welfare State". The third phase would
  1166
  "Give people the opportunity to contract out of unemployment and invalidity insurance. Give people the opportunity to contract out of the basic state pension. Make employers insure employees against industrial injuries."
  [Laughter.] How can the Chancellor and Conservative Members laugh at proposals as if they had never heard of them before, when they are being actively advocated by senior members of the Conservative party, many of whom are sitting here today?
  Far from Treasury civil servants dreaming up ideas from nowhere, they are examining ideas that are being floated by Back-Bench Members—and, in some cases, members of the Cabinet—including the Secretary of State for Social Security. That is the issue we should face. Let us consider what is being proposed.
  Mr. Quentin Davies: Will the right hon. Gentleman finally come out from the smokescreen behind which he has been hiding for the whole of his speech so far, and answer some of the fundamental questions put to him by my right hon. and learned Friend the Chancellor? For example, what would be his target for the public sector borrowing rate?
  Mr. Brown: The hon. Gentleman has on one occasion at least voted with us recently because of his concern about what is happening, and I am glad that he has intervened. He went to the electorate saying that he wanted to pay for continuing improvements in health, education and other services, unlike the chairman of the Conservative Back-Bench finance committee, who said this morning that he was looking for big cuts in education and other social services as a result of this document, or the right hon. Member for Wokingham, who also wants major cuts.
  Far from the proposals that I am outlining being isolated fringe elements—
  Mr. John Redwood: Will the right hon. Gentleman put the record straight and make it clear that I have always said that education, health, defence and law and order should be protected? I made it clear this morning that there were ideas in the paper that could never be adopted by a Conservative Government, but were attractive to the Labour party.
  Mr. Brown: Yes, but the right hon. Member for Wokingham and the Chancellor do not see eye to eye on this. The right hon. Member for Wokingham this morning said:
  "A lot of these ideas are being discussed. Some are being rejected. Some are being welcomed or pushed."
  Later, on the "One O'clock News", he said:
  "Some of it is Government policy. Some it may become Government policy."
  Far from suggesting that the document should be thrown aside and regarded as the work of cranks, as the Chancellor said this morning, the right hon. Member for Wokingham supports many of the document's proposals.
  Mr. Iain Duncan Smith: Given the logic of the right hon. Gentleman's argument, can we assume that, because the hon. Members for Newham, North-West (Mr. Banks), for Bolsover (Mr. Skinner) and others

  1167
  advocate much higher public expenditure and higher taxation, the right hon. Gentleman will tell us that that is Labour policy?
  Mr. Brown: Once again, I am extremely glad that the hon. Gentleman has intervened, because he can confirm that he was the author of the pamphlet that suggested privatising pensions, unemployment insurance and sickness insurance. Far from Conservatives rushing to tell us in the debate that they support the Chancellor on all those issues, the truth is that, by self-selection to intervene, the No Turning Back group is dominating the agenda in the Conservative party all the time.
  Let us look at what those proposals involve.
  Mr. Richards: Will the right hon. Gentleman give way?
  Mr. Brown: I will give way once more.
  Mr. Richards: I am grateful to the right hon. Gentleman for giving way before he gets to the substance of his speech. Will he answer a quite simple question? Is the proportion of gross domestic product spent by the Government too high or too low?
  Mr. Brown: I tell the hon. Gentleman that the proportion of borrowing by the Government is too high. What I would say to him is that his question should have been addressed to the Chancellor. Why is it—
  Mr. David Shaw: Answer the question.
  Mr. Brown: Why is it that borrowing was raised from £22 billion to £27 billion—something that would not excite the chairman of the Conservative Back Bench finance committee? Why is it—
  Mr. Shaw: Answer the question.
  Mr. Deputy Speaker: Order.
  Mr. Brown: Why is it that, at the last election, the Conservatives told us that borrowing in the next five years would be about £100 billion, and it has turned out to be about £150 billion or more? Why have they been 50 per cent. out on the borrowing figures? Why cannot we trust the Tories with the public finances? That is the truth of the matter.
  Mr. Anthony Coombs: Will the right hon. Gentleman give way?
  Mr. Brown: Once more.
  Mr. Coombs: If the right hon. Gentleman is saying that borrowing is too high, can he explain to the House how the ratio of the public sector borrowing requirement to GDP in the past 16 years of Conservative government is under half what it was during the last Labour Government?
  Mr. Brown: The hon. Gentleman knows that his Government have had massive oil revenues and privatisation proceeds, which have gone on current
  1168
  consumption. He also knows that the share of public spending taken by the Government in the past 17 years is, on average, exactly what it was when Labour left office.
  So, far from the Conservatives having a great record of coming into office and cutting the proportion of public spending in the national income, it is exactly the same as it was. I will tell the hon. Gentleman why: we are spending money to pay the bills of failure. We are spending money on unemployment, crime and social decay as a result of the Conservatives' failure to run an economy that is sufficiently successful to ensure that we do not have to finance the bills of unemployment.
  When it comes to the next general election, I have some sympathy for many of the Conservative Members in the No Turning Back group. They said at the last election that they would cut public spending as a share of the national income, but in fact, when we get to that election, it will not be less than 40 per cent. as the Chancellor predicted it would be two years ago. As he rightly says, it will be more than 40 per cent. [Interruption.] That is the record—
  Mr. Michael Brown: What would you spend?
  Mr. Gordon Brown: There is no use the hon. Gentleman shouting from a sedentary position.
  Mr. Michael Brown rose—
  Mr. Gordon Brown: He shouts about spending, but he should have asked that question of the Chancellor long ago.
  Why are we spending so much on unemployment? Why are we spending on the bills of failure? Why have the Conservatives failed to create an economy that can provide sufficiently high sustainable growth to solve the problems of unemployment in our midst?
  The Chancellor raised the question of the windfall tax. I make no apologies for saying that it will be an election issue, because we will tackle the problems of youth and long-term unemployment and give a fair deal to unemployed people by tackling the excess and unfair profits of the privatised utilities—profits that I believe even most members of the Conservative party cannot, in their more enlightened moments, ever defend.
  Mr. Quentin Davies: On a point of order, Mr. Deputy Speaker. I wonder whether you would be kind enough to ask the Serjeant at Arms to check the sound amplification system in the Chamber. A few minutes ago, I asked the right hon. Gentleman an extremely clear question: what—
  Mr. Deputy Speaker: Order. That is a total abuse of the House. It is not a point of order for me. It is nothing but gimmickry.
  Mr. Brown: The House will agree that I have given way on numerous occasions—[HON. MEMBERS: "Answer the question."]—including, if I count correctly, about 10 times to the Chancellor to allow him to deny that the proposals in the document are under active consideration by the Conservative Government. He failed to answer my questions, and the press will understand that he did so.
  Let me conclude by saying a number of things about—
  Dr. Lynne Jones: It is time that Opposition Members had a bite at the cherry.
  Do not Conservative Members' comments show that they plan to reduce the share of gross domestic product spent on government by further eroding the welfare state—a process which they have already begun, by removing mortgage protection from people who become unemployed and by going down the road of forcing people to take out private insurance for long-term care? It is not really credible, is it, for them to argue about reducing Government spending as a share of GDP by forcing people to spend more of their own money on taking out private insurance, which costs them far more?
  Mr. Brown: I am grateful to my hon. Friend for her intervention. [HON. MEMBERS: "More spending."] I have made no secret of the fact that we will use the privatised utilities' resources to take action against the problems of unemployment. That will be a central issue of the next general election. Conservative Members will regret defending the utilities, and becoming the political voice of the utilities in this Chamber and in the country.
  Let us conclude by examining—[Interruption.] Hon. Members should listen to what is being said about the condition of the economy, because they will have to answer in their marginal seats for what is happening.
  After 17 years of Conservative government, what has happened to the country? First, there is more poverty than there was in 1979. The Chancellor makes speeches saying that the poor are getting richer. He makes speeches with his Social Security Minister, saying that the poor can now buy videos and freezers, and that there is no real problem of poverty in our midst.
  But the report issued this morning reveals the truth. It refers to "widening inequality" of income and earnings, and says that, over the last 20 years, the UK has seen an 18 per cent. fall in income among its poorer groups. So far from the poor getting richer, the poor—according to the official in the Treasury, who has studied those matters in that section of the report—have got poorer. The Chancellor cannot deny it.
  What about inequality since 1979? The Government suggest that all have benefited from their policies. The report says that, between 1979 and 1993, incomes for the poor fell by 10 per cent., and that, whereas weekly earnings for males in the highest deciles were 2.5 times higher than for the bottom decile, they were 3.3 times higher by April 1995—a massive widening of inequality, which has taken place under Conservative Governments. That is the second fact of life under the present Government.
  What is the third fact of life under the present Government? In 1979, the then Chancellor, in his first Budget, said that the job of the Conservative Government was to reverse national economic decline. What has happened since 1979, as the Treasury report confirms today? Not only are we ninth out of 15th in Europe, and not only does the Treasury predict that we shall fall to the levels of Thailand, Mexico and Brazil, but it confirms, as we already know, that Britain has slumped from 13th to 18th in the world prosperity league.
  Try as the Chancellor does to wriggle out of it, all he need do is read the competitiveness review published only a few days ago to find that the figures showing that we have fallen behind in the world prosperity league have been confirmed.
  1170
  It must be an acute embarrassment to the Chancellor today that, despite all his claims about the economy, the Treasury knows that we are slipping behind. It is an acute embarrassment that, despite all that he says about poverty, the Treasury in its document says that poverty has worsened. It is an acute embarrassment for the Government that, despite all they say about narrowing inequality, the Treasury talks about widening inequality.
  Our argument is that, when the Government should be fighting economic decline, they are only managing it. Our argument is that, when they should be modernising and rebuilding our welfare state, they are serious only about proposals in the Treasury to reduce and privatise it. Our argument is that, when they should be studying countries that have rebuilt their welfare state, they are looking instead to America, and the Republicans who want to dismantle it.
  The Government are not fit to govern the country. The Chancellor is not fit to rule a Treasury when he does not even know what goes on in it. Substantial sections of the Conservative party now support the privatisation of the welfare state. The Government have failed on the economy and failed on the welfare state, and they should be out of office as soon as possible.
  5.4 pm
  Mr. John Redwood: I wish to praise the kids in the Treasury. I believe that they have done us a great service today. They have certainly done no service to the shadow Chancellor. He obviously dropped his speech on the Floor. We shall never know whether the one that he dropped would have been any better than the one that we heard.
  The kids in the Treasury have sprung a trap for the shadow Chancellor. I hope that their friends, the teenage scribblers, have been watching and listening, because they will be able to write a great deal of fun tomorrow about that dreadful performance by the Opposition spokesman.
  I see quite a lot of the comment in the leaked paper as being in that honourable British civil service tradition of preparing for the unlikely or the implausible. I remember that the British civil service spent much time and energy preparing for a Liberal-led coalition in 1986. The Liberals were preparing for Government at the time and, in the civil service, Liberal options were being run through the computer to discover what things would look like, were they to appear as the Government.
  Then, in 1991, the British civil service prepared actively for the potential success of that other lost cause—a Labour Government in 1992, led by Neil Kinnock. In that spirit, the kids in the Treasury have been studying Opposition policies again in part in the leaked document. Today the House should consider two of those, which have been partially highlighted, very charmingly, by the shadow Chancellor.
  The first policy is that of charging motorists more so that the roads may be privatised. The Opposition look stunned, but of course Labour and Liberal politicians say that motorists should pay more. They say that they want congestion taxes and road pricing. They say that they want to push people off the roads into the trains, or on to the buses on some of the roads that they do not want to build. That is their avowed policy. The document shows that the civil service is preparing, and considering whether there is any money in that idea.

  1171
  Conservative Members prefer active policies to promote competition and choice in public transport, so that more people will want to go by public transport. I trust that the Government will make it clear, in the reply to the debate, that they are still saying no to motorway tolls and tariffs on existing roads, because we have already bought those roads. We should not have to pay twice for them.
  The second policy that the civil service is rightly examining is a policy that the Labour party must be studying today, in its 16 to 18-year-old review. We know that the shadow Chancellor wants to take child benefit away from 16 to 18-year-olds. If that is the comprehensive review that Labour Members have promised the public that it is, presumably they are also considering taking away the free sixth form place. I trust that our Government will make it crystal clear that we are in favour of the free sixth form place.
  The Labour party is deeply worried about that, because it says that the elite, who get the sixth form place at school for the A-level course, may be exploiting those who do not stay on at school and take the A-level course, and they are considering the idea of training taxes and student: loans and other ways of financing those who will not stay on at school. Perhaps they are considering taking away the free place as well.
  Towards the end of 1992, things were not good in the British economy. We had 3 million people out of work. There had been massive job losses and factory closures. The Chancellor of the Exchequer had to say to the nation that, if we stayed in the exchange rate mechanism, interest rates might have to be lifted to 15 per cent. That was a sad time. I am delighted that we came out of the exchange rate mechanism, and I am delighted that it is the Government's policy not to go back in. But I remember the Opposition in those days fully supporting that policy. They were at one with us on being in the exchange rate mechanism. I do not remember them praising our exit or praising the policies that we adopted after we came out of the ERM. Indeed, the Opposition have never supported the policies of the past four years which have created this excellent economic recovery.
  I therefore hope that shadow spokesmen will take the opportunity to say that they were wrong to back the policy, and that they do not want our country to go back into the ERM and suffer the consequences.
  Mr. MacShane: I believe the right hon. Gentleman was a member of the Government at the time. Why did he not have the courage of his convictions then, instead of waiting until he could stab his leader in the back last year?
  Mr. Redwood: It is the leader of the Conservative party who has clearly stated that we are not going back into the ERM. If the hon. Gentleman looks at the record, he will clearly see that I described why I thought the exchange rate mechanism was wrong before we entered it—I put that on the public record. As a loyal member of the Government, I kept my reservations for private debate inside Government; but I can assure the hon. Gentleman that I was not shy there of saying why I thought we needed lower interest rates and why I welcomed our departure from the ERM.
  Mr. Bruce Grocott: The right hon. Gentleman will recall saying eloquently during his leadership bid of just over a year ago, "No change, no chance," in respect of Government economic policy. Does he now think the policy has changed, or is it still his view that the Government have no chance?
  Mr. Redwood: The Opposition have to ask questions like that because they are so ashamed of their policies. I can assure the hon. Gentleman that I did say, "No change, no chance." I thought that right then and I think it right today. There have been some welcome changes. I welcomed the Chancellor's Budget of last year, which produced tax cuts and some spending cuts. I shall be going on to urge him to do a little more in that direction—just so that the Opposition feel really unhappy about the prospects of a tax-cutting Government fuelling a decent economic recovery based on Conservative policies.
  Mr. Michael Connarty rose—
  Mr. Redwood: I know that the hon. Gentleman is eager, but I have been enjoying answering the previous question.
  Mr. Connarty: Before the right hon. Gentleman's mind strays from his statement about the ERM, will he say whether he thinks that the Government should never go back into it?
  Mr. Redwood: No, I do not think it would ever be right to go back into the exchange rate mechanism. My right hon. Friend the Prime Minister has clearly ruled it out. I just wish that the Opposition, four years on, would learn from our experience of the ERM and would come out against it too. But we are not particularly worried about what the Opposition think. We have work to get on with in the Conservative Administration in support of the Conservative Government.
  The summer forecast says that next year general Government expenditure will rise by £13.5 billion, or 4.4 per cent. It says that there will be an additional £2 billion of spending compared with the Red Book forecast at the time of the last Budget. I urge the Cabinet and my right hon. and learned Friend the Chancellor to think again about these very large increases. It is possible to have a first-class education service, defence, law and order policies and a health service, and to ensure that they get reasonable increases next year while lowering these forecast increases. Before the summer forecast, I proposed £6 billion less increased expenditure; having seen the forecast, I now think that £7 billion less is necessary, given the extra increase in general expenditure proposed in that forecast. [Interruption.] Opposition Members seem to be keen to know where the money should come from, in general and specifically—so I shall tell them.
  In general terms, the contingency fund could be halved from £5 billion to £2.5 billion, just as it has been this year. I believe that the inflation forecast that the Government are using is too high, so they could reduce the forecast requirement to meet increases in prices and wages by £2.5 billion. That is what can be done with a low inflation policy—lots of benefits flow from it. We do not need a 4.4 per cent. increase in expenditure if inflation is about 2 per cent. and if wages rise by only 3 per cent.

  1173
  I should like more money to be switched from grant to private finance in areas such as housing and urban regeneration. The Department of the Environment is a reasonably sized Department with a big budget. I think it would be quite possible to switch £500 million out of grant and into private finance for the housing associations and the Housing Corporation. The cost of halving the rate of grant could easily be recouped by raising the money in the City of London. Furthermore, I should like £200 million to be shifted in a similar way within the single regeneration budget; and I would like the urban development corporations, now under starter's orders to wind up their business, to accelerate the disposal of their assets. I should like the regional government offices in England to be scrapped, with a saving of about 1,000 officials and a great deal of real estate. I should like much of the 10 million sq ft of empty office space around the country—especially in London—in Government ownership or leased by the Government to be returned to more productive use so that the money could be received by the Treasury or a rental income could be enjoyed.
  I see the right hon. Member for Dunfermline, East (Mr. Brown) looking worried. He knows that these are good ideas which could really cut expenditure and lower taxation. I see him in active discussions with his hon. Friend the Member for Oxford, East (Mr. Smith), who is supposed to know something about public spending. I hear that there is one spending pledge that the shadow Chancellor must make—for a better telephone service in House of Commons offices. I hear that he is reluctant to receive calls from the hon. Member for Hartlepool (Mr. Mandelson), and that he is desperate for one of those telephone systems that will warn him when his hon. Friend has rung him up.
  The Labour party is after a deeply over-governed Britain. It wants more government from Brussels, more regional government, more government from Whitehall, many more quangos and more government from shire hall and town hall. The Labour party occasionally says that it thinks we have too many quangos. Why then do Labour Members propose a massive expansion of quango-land? Why do they want regional development agencies? Why are they after a new quango to settle a minimum wage? Why are they after a whole rash of bodies to intervene and to invest around the country—when we are at last putting together a series of policies that make this country the fastest growing economy in western Europe and one of the big international challengers in the emerging global market?
  Of course, every extra bit of government brings with it the need for extra taxation. We already have on the record the Labour party's requirement for a tartan tax, a training tax, a utilities tax and a London tax—four new taxes which the Labour party suggests on top of those that we already have. I agree that we have too many taxes already and that they are still too high, which is why I urge my right hon. and learned Friend to bring in another good Conservative Budget that cuts those taxes and even removes some of them altogether.
  I welcomed the Prime Minister's statement last summer that he wanted capital gains tax and inheritance tax removed as soon as possible. I urge the Chancellor to look particularly at capital gains tax, which brings in only about
  1174
  £900 million these days. Surely it is possible to capture quite a lot of that revenue by taxing short-term gains and very large gains made by companies while exempting many more people from CGT. I see that the Chancellor smiles at that, but with a budget of £320 billion, and with revenue having slipped by £4.4 billion in the past few months, £900 million is not a large sum, although it is an important sum. In any case, not all of it would be lost. Some of the revenue would be retained in the way that I have outlined, and the Treasury would receive more in the end because there would be many more transactions in the economy that would fall prey to various taxes already in position. I am sure that the Chancellor would wish to help the Prime Minister fulfil his excellent pledge.
  In the 1980s, the Conservatives showed that cutting tax rates brings in more revenue.
  Dr. Lynne Jones: The right hon. Gentleman has been advising the Chancellor on tax cuts. In doing so, either he is making arbitrary selections that have no credibility, or he is proposing tax cuts at the expense of the very poor. For instance, if he cuts grant to housing associations, he presumably realises that there would be a consequential increase in rents, thereby increasing housing benefits costs. Or is he also proposing cuts in housing benefit, which would also affect the poorest people—just as all his other suggestions would?
  Mr. Redwood: I have made no such requirement: my figures are net of any consequences for rents and housing benefit. As the hon. Lady points out, people on the lowest incomes are protected from any impact of changes in grant rate to housing associations because they receive housing benefit. She might like to reflect on the fact that the Labour party has not put a single figure on any change that it would like in public spending, borrowing or taxation. The Opposition cannot tell us how they would get borrowing down or whether they would impose the extra taxes already in their policy documents. They certainly do not have a clue how to re-jig the £320 billion budget proposed for next year by the Government. But I am not surprised by that.
  Only the Conservative party can deliver lower tax rates, lower spending and lower borrowing. I urge the Government to look again at our success in the 1980s, when we had the courage to cut rates and more money came in. Moreover, we obtained more money by cutting tax rates for the richest people because more of them stayed here, fewer employed clever lawyers and tax advisers, and more paid their dues. That was reflected in a big surge in revenues from those more successful members of our community.
  We need lower taxes, lower borrowing and lower spending. That is how to win the election—and how to strike terror in the heart of the right hon. Member for Dunfermline, East. I say again: three cheers for the boys in the Treasury who have, yet again, shown how the right hon. Gentleman has nothing to say for a better or more prosperous Britain, and everything to say about shady leaked documents.
  5.20 pm
  Mr. Robert Sheldon: I agree with the right hon. Member for Wokingham (Mr. Redwood) that the civil service rightly examines all

  1175
  possibilities, but I had not realised that it was examining the possibilities of the Redwood agenda. It is now clear that civil servants were taking into account the possibility that the right hon. Gentleman would exert more influence on the next Government than on the present one. There was always a group within the Treasury who believed that our economic performance would decline in the years ahead and thought that, rather than reverse that economic decline, they should manage it. That body of opinion received considerable support from the actions of the right hon. Member for Wokingham, because it could find no way to deal with the problems that he mentioned and the solutions that he proposed.
  Once again, we have had a long gap between the Budget and this economic debate. The House has too few economic debates and it is clear that the economic timetable needs urgent revision. There is now a serious proposition to alter the parliamentary year. Whatever is decided, it must allow the Chancellor of the Exchequer to submit to debate in the Chamber more frequently.
  I acknowledge the valuable role played by the Treasury Select Committee in taking its evidence. The trouble is that that should be in addition to, rather than instead of, debate in the House. I read the Chancellor's evidence and found it informative, but his evidence would have been better put forward in the Chamber. Questioning can take place in the Treasury Select Committee. I am worried that the minutes of evidence, which are so important, are not published until long afterwards, so they do not become part of our economic discussions. Exceptionally, the minutes were produced quickly and those were valuable, but unless we can have a kind of Hansard reporting of Select Committees, the proceedings cannot form part of our discussions as I would like.
  Every time I raise those matters, I am told about the difficulties and costs. I do not accept those arguments. When I gave evidence to the Nolan committee, the previous day's verbatim report was handed to me and I found it valuable in understanding the evidence that previous witnesses had given. It is at least as important to have the evidence given by senior Ministers, particularly the Chancellor of the Exchequer, so that it can be incorporated in our economic discussions on those important matters. I shall continue my efforts to bring that about.
  The economic position facing us today comes after 17 years of one-party rule. It is extremely rare for a Government to stay in office long enough for such a full appraisal of their long-term performance to be undertaken. Indeed, it is unique in this century. It is unique also because, since the war, Governments have laid claim to controlling the Government's economy for the good of their people. This Government have had 17 years, so there can be no excuse for such a dismal performance. If a Government who claim economic competence cannot show it within 17 years, they can hardly claim that a fresh beginning lies in wait just around the corner.
  The Government have had an undistinguished 17 years. They commenced it with the most foolish nonsense that any Government have introduced—their belief that monetarism could foretell the future. They believed that, if they controlled sterling M3, they could double the rate of VAT and that that would not cause inflation because monetarism was under control. That nonsense produced
  1176
  an inflation rate of 23 per cent. without the problems of the world oil price rise, which caused inflation under a Labour Government five years previously.
  The Government's monetarist philosophy was in ruin, but not before they caused disastrous consequences to industry between 1979 and 1981. During that period, with the pound at$2.40 and DM5, and interest rates of 17.5 per cent., industrial production fell by 12 per cent. A third of the manufacturing companies in my constituency closed their doors. They were not old, out-of-date industries but ordinary, standard industries which exist in Germany, Japan and every other country. They should have survived, but, once they closed, they never reopened. We bear the scars of that disaster to this day.
  In 1985, following the North sea oil bonanza, the brakes were taken off and the Prime Minister announced that Britain's economic miracle was about to come. That led to the second disaster of the house price boom, coupled with the introduction of the poll tax.
  The third major economic disaster in that 17-year period came on black Wednesday, when billions of pounds were spent trying to rescue sterling, which had to yield to the very market forces that the Government had so loudly trumpeted. The Government were crushed by their own economic theories of market forces. Seldom has nemesis triumphed as it did on that occasion.
  This nation has the great advantage of being good at selling financial services. If we had a population of 5 million or possibly even 10 million, we would be a very prosperous country. However good the City of London is, it cannot supplant the failure to achieve anything like an equivalent success in our manufacturing industry. Indeed, the success of our financial services industry makes it more likely that many of our brightest people will not consider a future in industry. The Government must intervene to support that vital part of our economy.
  In the Financial Times of 1 February 1996, the Secretary of State for Trade and Industry accepted that too much emphasis had been placed on promoting service industries and that manufacturing had entered a difficult time. I welcome that repentance, but I would be more impressed if it were a prelude to direct action to solve the problem. I see no evidence of that.
  Page 17 of the 1996 "Summer Economic Forecast" says:
  "The prospect is … for a rise in business investment over the next two years".
  But page 15 of the 1994 "Summer Economic Forecast" said:
  "As the momentum of recovery … strengthens business investment is forecast to rise by 7 per cent. in 1995."
  In the event, it grew by 1.5 per cent. The "Summer Economic Forecast" of the following year said:
  "Business investment is forecast to grow by nearly 5 per cent. in 1995."
  In the event, it grew by 1.5 per cent. This year's "Summer Economic Forecast" also says:
  "Business investment … is forecast to grow by 7¾ per cent. in 1996 as a whole".
  All that the Government can give us is optimism that is wholly out of line with their previous experience. Year after year, they overstate the expansion that will come, and year after year they are proved wrong. I understand the difficulties of forecasting.
  Mr. Allan Rogers: Does my right hon. Friend accept that it was not just the Government's incompetence that led to such a rapid decline in our manufacturing capacity during the 1980s but the policies of the European Economic Community in the early 1980s? As the result of the Davignon plan for the steel industry, for example, this country's production was cut from 21 million tonnes to some 11 million tonnes. At the same time, however, our German and French competitors—they were not partners, whatever they said—increased production. Within the straitjacket of some European policies, we shall face the same problems again.
  Mr. Sheldon: That may have been an additional factor but, apart from what happens in Europe, the Government have responsibility for what happens here. Their optimism is wholly out of line with previous experience.
  Mr. Ray Whitney: The hon. Member for Rhondda (Mr. Rogers) mentioned the steel industry. Will the right hon. Gentleman confirm that British Steel is by far the most profitable steel industry in the developed world? Last year, it made a profit of £1.1 billion.
  Mr. Sheldon: One can always point to one, two, three or four industries that are doing very well, but it is important to consider manufacturing industry as a whole. We lost one third of the companies in my constituency. We do not have now the level of investment that we had in 1979, and that is the problem today. Unless we face up to that problem, we will not be able to remedy the great errors of the past.
  I understand the difficulties of forecasting, but the Government's forecasting failures are especially serious because of their inability to distinguish between their dreams and their experience. If they considered the reality and could see that their optimism was unjustified, they might take some action. Far from being satisfied by their expectations for the future, the Government should face up to their major failure. The Government have not provided the crucial investment without which we shall not be able to compete with second and even third-tier European economies, let alone the rapidly expanding economies of the far east.
  The danger is that our standing in the industrial world has fallen. When our economic performance is compared with that of other countries, our privileged international status is seriously threatened, even though we are a member of the Group of Seven. Since 1979, our share of world trade in manufactured goods has fallen from 7 to 5.2 per cent., and that is less than in Italy, France, Germany, Japan or the United States. Investment in manufacturing is 6 per cent. lower than in 1979.
  In the light of lower than expected investment, it is essential that investment incentives are reconsidered. In particular, I never tire of repeating that the 25 per cent. capital allowance on investment is no incentive at all. It is a disincentive when the true depreciation of the asset is taken into account. Few assets depreciate by less than 25 per cent. in the first year, and I know of some industries in which the commission given to the salesman is 25 per cent. The allowance is an disincentive to investment. This is no time for dogma and the Labour party's views on the allowance are most commendable. My right hon. Friend the Member for Dunfermline, East
  1178
  (Mr. Brown) should be congratulated on pressing the issue time and again. The initial allowances should be increased to at least 50 per cent. or higher. The only loss to the Revenue is that corporation tax comes in later. That is a cost, but it is a lower cost than the failure to deal properly with the manufacturing sector.
  Most Governments in the post-war years have been guilty of tunnel vision when assessing economic priorities. One economic indicator always seems to be dominant at any one time. In turn, the dominant indicator has been the preservation of the sterling exchange rate, sterling M3 and the mantra of monetarism. Now the inflation rate usurps all other indicators of the economy. That is not to say that those indicators are not important, but they should not usurp all the others in turn. No one should run an economy in that way. The Chancellor of the Exchequer would have an easy time if he had to consider only one economic indicator. I am not against the use of indicators, but I object to the primacy accorded to one that usurps the role of all the others when economic goals are determined.
  Mr. Barry Legg: The right hon. Gentleman has said that he does not believe in running the economy according to one economic rule. What does he think about the assertion by the right hon. Member for Dunfermline, East (Mr. Brown) that the public sector deficit should be governed by what he calls the golden rule?
  Mr. Sheldon: That is one element among others in the context of the whole. The Government have to consider unemployment, inflation, the balance of payments and the public sector borrowing requirement. The task of running the economy is to pay true regard to all those factors. If investment had been accorded the same privileged position as some indicators have in the past, I might not have needed to be so critical of the Government's tunnel vision. Investment, especially manufacturing investment, has always been one of the residuals in the construction of our economic future, and it is time to move it much higher up the agenda.
  The Chancellor of the Exchequer is rightly concerned about the fall in receipts from VAT. When VAT was introduced at the rate of 10 per cent., there was little avoidance. At 15 per cent., it became a greater burden; but the present rate of 17.5 per cent. encourages considerable ingenuity to minimise payment. The Chancellor of the Exchequer, in his evidence to the Treasury Committee, seemed to accept that point.
  The way in which the Government have increased indirect taxes has resulted in great unfairness. The only progressive tax that we now possess is income tax. It used to be claimed that VAT was broadly neutral, but the changes introduced by the Government have made it more regressive. The principle of a progressive tax system, whereby taxes are borne more by those with broad shoulders, was not only a Labour conviction; it was shared by most Conservatives, but that was in the day of one-nation Tories. I can hope only that—following long years of Labour Government—the Conservative party will rediscover its roots.
  5.36 pm
  Mr. John Townend: Since we came out of the exchange rate mechanism—the Labour party was keen for us to be members and wants us to rejoin—

  1179
  in most respects the economy has been run very well by the Government. The United Kingdom has had the benefit of a competitive pound and lower interest rates without the jump in inflation that normally follows a decline in the currency. The Government deserve credit for that. We have had the longest maintained level of low inflation for decades, the economy has recovered and we have had four to five years of consistent growth.
  The right hon. Member for Ashton-under-Lyne (Mr. Sheldon) mentioned investment. Growth has been helped by our good record on inward investment. Today, we have learnt that unemployment is now lower than it was five years ago. Unemployment has fallen faster here than anywhere else in Europe and we now have one of the lowest levels in Europe. The Chancellor's handling of monetary policy cannot be faulted. The differences between my right hon. and learned Friend and the Governor of the Bank of England, which receive so much publicity, are small, but in fairness to my right hon. and learned Friend he has been proved correct about the appropriate level of interest rates for the British economy.
  I agree with my right hon. Friend the Member for Wokingham (Mr. Redwood) that the Government, as Conservatives, still face one great challenge. We are spending too much, borrowing too much and taxing too much. We could be accused by a man visiting from. Mars of being too socialist. Whatever the sweet words of the Leader of the Opposition, nobody doubts that the Labour party will always be the party that taxes most, borrows most and spends most.
  The Chancellor said earlier that public expenditure was 42.25 per cent. of gross domestic product. It is significant and disappointing that public expenditure as a percentage of GDP was 42.25 per cent. when we came to power in 1979. Although we aim to bring the percentage down to under 40 per cent., we have a long way to go to reach the 35 per cent. level that spending reached in 1964–65 or even the 38 per cent. level of 1988–89.
  The Labour party criticises the Conservative party for being the party of cuts. Since the last election, public expenditure has increased by approximately 18 per cent. in real terms, after allowing for inflation. So much for the talk of cutting public expenditure and of slash and burn. In the past, the Treasury has used mirrors when it has talked about cutting public expenditure. The Treasury has cut the aspirations of Ministers who like to increase spending—it has cut the rate of the increase, rather than the rate of spending.
  The Government have set a target: to bring spending below 40 per cent. of gross domestic product—and I hope that that will accelerate. It is significant that, despite all the talk from the Labour party—that it has reformed, that it will not spend big and that it will not have big taxes—it has not made a commitment about a target of spending as a percentage of GDP.
  The largest departmental budget is social services. Its spending has increased from £16 billion in 1979 to £93 billion today. Even allowing for inflation, that is an increase of almost 2.75 times in real terms, which is a record that any socialist party could be proud of. We have given in far too often to the demands of special interest lobbies. In the process, we have helped to create benefit dependency among a significant section of the population. The taxpayer has become a soft touch.
  1180
  For example, I understand that most of the IRA activists are on social security benefits, that most of the new-age travellers are on social security benefits and that, until this week, we were spending £200 million a year paying social security benefits to illegal asylum seekers. My right hon. Friend the Secretary of State for Social Security has done an excellent job of starting to deal with the problem, but despite what he has done, he has not reduced spending or even stopped it from rising. It is particularly worrying that social security spending has continued to rise over the past four or five years, when unemployment has fallen and we have had economic growth. I would have expected social security spending to fall in such circumstances.
  We are no different from any other country in Europe, and we must now set about cutting this albatross of our financial system. I shall give hon. Members a few of my ideas. We need a much more radical approach to the black economy. It hits the Government's finances in two ways: because of the loss of tax and insurance contributions on the earnings of people working in the black economy and because most people in the black economy are also claiming social security benefits. Beveridge's aim—which we all support—was to aid people who could not get a job; it was not to give people an alternative to working.
  We have to promote some revolutionary solutions. We cannot get an identity card too quickly, particularly for those drawing benefits. We have to do something about the scandal of national health insurance numbers—I understand that there are at least 2 million more numbers than there are people who should have them. Recently, I saw an interesting and well-researched programme on television which showed that some people have five or six different identities, claim five or six different benefits, in different towns, and are working. We have to contemplate introducing workfare, so that if people do not do some sort of work for the community, they do not get benefits.
  I also believe that we will have to limit the number of children for whom benefit can be paid. Many people are quite capable of working but, because they have children, they cannot work. I presume that all hon. Members have come across examples of that in their constituencies.
  Mr. Rogers: Say that again.
  Mr. Townend: It is not my fault if the hon. Gentleman was not listening. One of the great growth areas of social security spending is on one-parent families—almost one in three children now lives in a one-parent family. We should do everything possible to keep families together and to reduce the soaring divorce rate. While I have every sympathy with widows and deserted wives, I believe that we have been far too generous to single, teenage, unmarried girls. We should remove benefit as an option for them. With today's education, young girls should know the options: contraception, adoption, abortion—although some people are opposed to it—and staying home with mum.
  Some Labour Members will say that this is a callous approach, but I recall that, when we said that we would stop paying social security benefits to the wives and families of strikers, we faced the same accusation. We had the courage to take that action and, within two years, the number of days lost as a result of strikes plummeted. If we did what I suggest, within a couple of years the number of pregnancies among single girls would drop.

  1181
  We are spending millions of pounds on fostering, but adoption costs the state virtually nothing. Because of social workers' prejudice against adoption, the number of adoptions is minuscule and many couples who want to adopt and provide wonderful homes are denied the opportunity. For some reason, social workers dislike adoption, and they make it difficult for people to adopt. I think the reason is that, when children are adopted, they leave the control of social workers, whereas if children are in foster homes, we need more social workers. The number of social workers has soared in recent decades and, by and large, society is no better off than it was 30 years ago. We are now facing the same problem with a new fashion: counselling. If we do not hit it on the head, there will be an explosion in jobs and expenditure just as there was with social workers. The cost to the taxpayer will be enormous.
  Mr. Richard Spring: The right hon. Member for Dunfermline, East (Mr. Brown) made a truly appalling speech. Does my hon. Friend think that he is having a conversation with a stress counsellor? I think he probably needs one.
  Mr. Townend: The right hon. Gentleman does not need to talk to a counsellor—he needs to learn some common sense and how the economy works. It is a pity that he has not been running a real business.
  There could be savings everywhere. We all think health should be a priority. We have allocated far too much money to the AIDS campaign because of the pressure from the homosexual lobby. It has turned out not to be a heterosexual disease. I spoke to a consultant at the weekend who said that the amount of money that has been allocated to AIDS is out of proportion to the danger when compared with other health issues. This week, I read in the newspaper that we have spent £15,000 on a sex-change operation for a 70-year-old.
  Education is important. Last week, I received a letter from my local council—it is not a Conservative-controlled local authority—saying how easy it is for students to commit grant fraud. Law and order is quite rightly a Conservative priority. We are sending more people to gaol, which is costing us more. If a lifer goes to gaol at an early age, it can cost the taxpayer £1 million. There are too many lifers in gaol because of our obsession against physical punishment. Capital punishment should be restored for the worst murders, such as the person who murdered Mrs. Russell and her children. Capital punishment would be a deterrent and it would save the taxpayer an enormous amount of money. Too many thugs are gaoled too young. If we brought back corporal punishment for the first or second offence, we would probably prevent many young offenders from embarking on a life of crime and save a lot of money.
  Mr. Rogers: The hon. Gentleman has had a go at young mothers, the prison population and all sorts of other people in society. When will he get around to gipsies and Jewish people?
  Mr. Townend: That comment is unworthy of the hon. Gentleman. With respect, it is a very racist remark from a member of a party that I thought had set its face against racism. There is nothing wrong with suggesting saving public money by sending fewer people to gaol.
  1182
  I have said for many years that charity begins at home. Hon. Members are very good at producing league tables, and I can report that the United Kingdom is the world's fifth highest spender on overseas aid. The aid budget has been virtually ring-fenced—my spies tell me that that was due to the powerful influence of the previous Foreign Secretary. I suggest that there is no case for special treatment when we have a high borrowing requirement. The overseas aid budget should be cut.
  The arts always receive special consideration at Budget time. The national lottery now pours tens of millions of pounds into arts, and that budget should no longer be protected.
  I agree entirely with my right hon. Friend the Member for Wokingham who said that the difference between what was allowed for inflation and the actual, lower, inflation rate should be clawed back from Government Departments. We should aim to reduce the control total by some £6 billion to £8 billion. Most of that money should be devoted to reducing the taxation burden so that we can re-establish ourselves as the low spending, low tax party. Some of the money could go to speeding up the reduction of the public sector borrowing requirement. Tax cuts matched by spending cuts are economically sound and economically beneficial.
  We must maintain the PSBR on a downward trend. As we have heard, the reductions in the past year were due to a shortfall in revenue. Several factors are involved, including the loss of excise duty on tobacco and alcoholic drinks—I have personal knowledge of that subject as I have been involved with the industry for years—due to large-scale smuggling controlled by the criminal element, and imports for personal consumption. That is costing the Treasury hundreds of millions—if not billions—of pounds. I think that people forget that value added tax is lost along with excise duty.
  I have mentioned the black economy. VAT continues to be lost in the black economy, and in the secondary economy from those people who have jobs and pay tax but moonlight. The skilful practices of accountants employed by multinational companies have led to reduced corporation tax revenue. We must deal with those problems.
  We are at a critical stage: the Chancellor holds in his hands our chance of victory at the next election. If I had time, I would address the question of the single currency. If we get off the fence and announce our opposition in principle, and if we reduce spending, taxes and borrowing, there will be clear blue water between the Government and the Labour party in the economic sphere. I am sure that, when the time comes, the British people will choose our alternative.
  5.52 pm
  Mr. Malcolm Bruce: I shall not respond to that rather nasty speech from the hon. Member for Bridlington (Mr. Townend): it seemed to comprise a caricature collection of the most odious right-wing prejudices that one could assemble—if that is an economic policy, I sincerely hope that the British people will not vote for it.
  I enjoyed the speech of the right hon. Member for Wokingham (Mr. Redwood). I thought it good rumbustious politics, but bad economics. I am wrestling with costing a spending programme, but the right hon.

  1183
  Gentleman did not convince me that he has found the basis for real spending cuts or the machinery for delivering significant tax cuts.
  Mr. Redwood: Will the hon. Gentleman explain to the House why Liberal Democrats in the county of Berkshire spent a lot of money on a campaign to save the county council, yet when the matter came before the House no Liberal Democrats spoke or voted to protect that council? Was that money well spent? Would it not have been better spent on education?
  Mr. Bruce: I thought that the right hon. Gentleman intended to give further elucidation of economic policy. As to local politics in Berkshire, the Conservatives have the votes to deliver the campaign's objectives and, regrettably, the Liberal Democrats do not. We would deliver them if we could.
  Reference has been made to a leaked Treasury document. I think that its fundamental substance was over-promoted, but no doubt it has been the source of some entertainment and information. I do not know whether it was a training exercise by kids or an indication that things are so bad in the Government that the kids have taken over the kindergarten, but it was clearly an exploration of a range of policy options—if only to see what one could come up with in a brainstorming session.
  The right hon. Member for Wokingham and others in his party who follow the right-wing agenda tend to talk rather glibly about cutting public spending and about lower taxation at 35 per cent. or 30 per cent. They suggest that people will pay less tax and nothing terrible will happen to public services. The reality is that service provision, particularly for the poor and the disadvantaged, would inevitably be squeezed, and there is no guarantee that those on middle incomes would be better off. There is no guarantee that national insurance benefits and premiums will be cheaper if privatised.
  It is a deception to suggest that we can cut taxes without pain and without corresponding losses. We should thank the kids because they have flushed out the real substance of the debate. In that sense, I am grateful for the opportunity to see what the tax cutting agenda is all about.
  Mr. Tim Smith: Does the hon. Gentleman accept that there is a clear correlation between the level of public spending—the proportion of gross domestic product spent by the Government—and economic growth? We support the policy not for ideological reasons, but because we believe that it will lead to higher growth from which everyone will benefit.
  Mr. Bruce: That is not necessarily true as an economic thesis—it depends on how the money is spent, not on who spends it. Countries with high levels of Government spending as a proportion of GDP have sustained consistently higher growth rates than the United Kingdom. While it may be a good discipline and a perfectly legitimate objective, I do not think that the hon. Gentleman describes a fundamental law of economics.
  My party and I welcome several aspects of the report. It said that, whatever course of action this country takes in relation to monetary policy and monetary union, we should have—and would need—an independent central bank sooner rather than later. The report argues
  1184
  that if we join the single currency we shall, by definition, sign up to the European central bank. If we stay out, having qualified, we must have our own independent central bank so as to reassure the markets that we will behave in a responsible fashion.
  That view was also articulated clearly by the Governor of the Bank of England. As an independent central banker, he would be bound to say that. However, he made two further points. First, referring to sustainable low inflation and to our achievements in the past four or five years, he pointed out that Britain has a long way to go before it has a track record of real confidence and competence in those areas compared with our competitors. Therefore, we must reassure the markets that we shall not politicise decisions. Secondly, he pointed out that when political decisions are separated from those of the central bankers there is a premium on long-term interest rates of between 0.5 per cent. and 1 per cent. That would save the Government £300 million over five years on current debt levels. It is a significant benefit for the Government and for those in the economy for whom the rate of interest is an important factor. There are strong, sound economic arguments and benefits.
  It is interesting to note that the most resistance to the idea of an independent central bank comes from the right of the Conservative party and the left of the Labour party. That is because they want to interfere in the economy on a day-to-day basis for political reasons. We have suffered stop-go economics over the years for that very reason. It does not, of course, deny that the Government set the policy within which the bank operates, but it means that from day to day people can have confidence that economic factors are uppermost in the minds of central bankers.
  In reply to a question from me, the Governor of the Bank of England reaffirmed his conviction that its forecasts and concerns about inflation are real and legitimate. He did not accept the Chancellor's argument that the Bank of England's inflation forecasts are always wrong, because they have not been. Indeed, he agreed with me—although he was more polite about it—that the Chancellor had some nerve to attack the Bank of England for its inflation forecast in the very week when he announced that his borrowing forecasts were £4.5 billion out and his growth forecasts were ½ per cent. out.
  Mr. Livingstone: Why do Liberal Democrats, who are so committed to extending democracy in every other sphere, want to remove from democratic accountability key elements of the economy which affect the lives of every voter? If he examines the track record for the past 100 years of advice from the Bank of England, to which he wants to give this power—whether it was telling Churchill to go back on the gold standard or telling the current Government to join the exchange rate mechanism at an over-inflated rate—he will see that it has been irredeemably wrong decade after decade.
  Mr. Bruce: The hon. Gentleman completely misunderstands what an independent central bank is about. The decisions that he mentioned are policy decisions, which would continue to be determined by the Government and by Parliament. An independent central bank is about the day-to-day administration of a policy set by Parliament and by the Government. Out of 15 member states in the European Union, we are the only

  1185
  one that operates in this way, and the only one that has not had consistently low inflation or consistent patterns of growth. Other countries have, and the hon. Gentleman should recognise that there may be some reason for that.
  Mr. Barry Field: If the Liberal Democrats are so in favour of a European central bank, why does the Liberal Democrat-controlled Isle of Wight council want to come out of Europe altogether and have devolution?
  Mr. Bruce: I am not aware that the campaign was for the council to come out of Europe altogether; it was to have autonomy within the United Kingdom. Indeed, as a Scottish Member of Parliament, I sincerely hope that Scotland will soon have its own Parliament within the United Kingdom and the European Union.
  Mr. Spring: Will the hon. Gentleman give way?
  Mr. Bruce: No, I shall not give way again—I have a speech to make.
  The issue in the debate today has been the summer economic statement, and the Government have had to acknowledge that what the Chancellor told the House in his Budget was fundamentally incorrect. The forecast was wrong. It was interesting that, when pressed in the Select Committee on Monday, his reaction to forecasting was to say, "Who believes forecasts anyway?" Then, when asked why he bothered to make them, he made rather a slip: he said that he had to do so by law because there was some socialist measure that the Government had forgotten to repeal, but he did not really pay much attention to these things.
  At the time of the Budget, the Chancellor led us to believe that the forecasts were serious, accurate, and his best guess as to what was going to happen. They were, of course, his justification for recommending a cut in income tax—a cut that the figures now clearly show was not justified at the time. I submit that he knew that perfectly well, but he needed to put phoney figures into his Budget, at the wrong end of any forecast that he could have got from his independent advisers. The only way in which he could meet the demands of the baying hordes on his Back Benches was by cooking the forecasts and then saying afterwards, "Well, who believes forecasts anyway?" That is exactly what he is now trying to with the forthcoming Budget, and, I presume, the general election campaign, which he is to fight not on the Tory record but on the forecast: optimistic forecast—poor record.
  It is worth putting it on record that the borrowing deficit forecast is higher than that for the same time last year. All the confident assertions that borrowing is coming down may well turn out to be over-optimistic. There is an indication that the borrowing outturn for this year could be as high as or even higher than it was last year. The Chancellor of the Exchequer is on record as saying that there would be no justification for cutting taxes if public sector borrowing was at £30 billion or above. He cut taxes when it was £30 billion. He is, apparently, considering cutting taxes further when, potentially, it will continue to be above £30 billion, which demonstrates quite clearly
  1186
  that he is an irresponsible Chancellor who is determined to pursue political policies rather than the economic interests of the country, and is doing so in circumstances that will damage the country's long-term prospects. Perhaps he is doing that because he does not expect to be in charge of them for very much longer. That can be the only conclusion.
  Some aspects of our economic performance are welcome. We are, of course, experiencing growth and low inflation, which is welcome. There has been a fall in unemployment, but from very high levels. I shall briefly go through some of the claims and qualify what the Government suggest, and the enthusiasm and euphoria with which they sometimes promotes their claims.
  At times, we are told that inflation is down and out. I submit that it must be under control for a significantly longer period before we can say for certain that it is back in the box. Inflation is low right across the world. In fact, ours is the fourth highest in the European Union. We have not yet demonstrated that in terms of inflationary pressures we have the mechanism in place that could keep it under control. That is one of the reasons why the Liberal Democrats believe that allowing the central bank to take the key decisions on inflation on a day-to-day basis would keep inflation down, as well as having a clearer target.
  Unemployment is falling, but it is still above 2 million, even using the official figures. In fact, although this month's figures show that unemployment has fallen by 14,000, employment has fallen by 34,000, which is a sign of people dropping off the register rather than finding work, and that is rather different. When the Conservative Government came to power using the slogan, "Labour isn't working," unemployment was 1.29 million. There are now 2 million unemployed. Indeed, the figure was 1.66 million when the present Prime Minister came into office. In all the circumstances, unemployment is far too high, and it is one of the main reasons why the social services budget, about which the hon. Member for Bridlington complained, is high and is failing to come under control.
  The next claim that the Government make is that Britain's growth is the highest in Europe, but that is only because Britain went into recession first and so came out first. Between 1989, when Britain went into recession, and the end of 1995, the British economy grew by 7.2 per cent. compared with the German economy at 16.5 per cent., the French economy at 8.5 per cent., the Italian economy at 10.3 per cent., the American economy at 15.4 per cent. and the Japanese economy at 13.4 per cent. Our performance across that period is modest in the extreme, and it is a short window of comparison on a very low base.
  The Government say that taxes are coming down, but even the hon. Member for Bridlington acknowledged that the total Government tax take as a proportion of GDP is exactly the same as it was under the last Labour Government. In the meantime, more than half the accumulated national debt has been incurred since the present Prime Minister took office. That is hardly the record of a Government of sound financial management who have public finances under control.
  The recovery in consumption has almost nothing whatever to do with the Government; it has much more to do with the changing character of our building societies and the windfalls that they inject into the economy.

  1187
  It is my contention that a number of fundamental changes in policy are necessary if the Government are to ensure that the benefits which have genuinely been achieved continue into the long term. It is the contention of my party that sustainable low inflation and permanently low interest rates will help to create the climate for long-term investment, confidence and stability. That is desirable. To achieve that, we maintain that Britain must reassure people in the markets at home and abroad that what we are doing in public finance is consistent, long term and responsible and will not be knocked off course for short-term political considerations.
  I regret to say that, with survival at stake, the Government demonstrate that short-term political considerations could well compromise our long-term benefits. If that is so, they will pay a heavy penalty in the long term. This country needs continuity and stability in those areas. If the Government go for broke on a tax cut that they cannot justify, and if they fail to recognise the need to keep inflation under control and to listen to the advice of independent commentators and forecasters, they could blow away our chance—a chance that we cannot afford to miss—to become genuinely competitive in Europe and in the world.
  6.9 pm
  Mr. Richard Spring: I am grateful for the opportunity to speak.
  I must say to the hon. Member for Gordon (Mr. Bruce) that I am rather concerned about his apparent fixation with an independent central bank. It strikes me as irrelevant for Liberal Democrats to alight on such a policy when they are entirely committed to a politically and economically integrated Europe. That would effectively mean our losing sovereignty in terms of our economy, given that we would have a single currency and, by definition, a single European bank. Notwithstanding the interest with which the hon. Gentleman spoke of the establishment of an independent central bank, it would prove irrelevant if his party's policies were ever carried out.
  Last week, something of seminal importance happened in this country. There was a massive investment in Britain, the largest ever investment in Europe from abroad. I refer, of course, to the £1.7 billion investment in Wales by LG of South Korea. It will create 6,100 jobs, and the spillover effect will create some 20,000 jobs in south Wales in toto.
  In the same week—I believe that it was the very same day—300 new jobs were created in a joint venture between Unipart and Honda. Honda has come to this country, and has been part of the great revitalisation of the motor industry. I mention that because economics is not some high-flown theory; it is about people's lives, livelihoods, hopes, dreams and aspirations. If those aspirations are to be fulfilled, we in this country must produce the goods and services that the world wants and we want in our home market; there is no escape from that.
  We do not need a plethora of economic statistics to know—especially after last week's massive investment—that something profoundly positive must have happened in this country in the last few years to persuade the South Koreans, and many others, to participate in our dynamic economy.
  In the last three years, foreign investment has created 114,000 new jobs, and 285,000 jobs have been safeguarded. Last year alone, 477 new deals were
  1188
  announced, and 60 per cent. of the companies that located or expanded in the United Kingdom were already established here. Over the past decade, an enormous amount—£100 billion—has been invested directly here in manufacturing and other industries by companies located abroad.
  Is that because we provide a single point of entry to the European Union? There is undoubtedly some truth in that: this is an enormous single market, which is available to any investor. There is another truth, however. A third of all the new deals are already European. A total of 1,500 German companies operate here. More German companies are now coming into the United Kingdom than are going into the United States, whose population is nearly five times the size of ours.
  What is so significant and exciting about that huge endorsement of our economic success and progress—we have heard nothing of this from Labour Members—is the effect on the gap between the richest and the poorest parts of the United Kingdom, which is now narrower than it has been for 20 years. Fifteen or 20 years ago, there was undoubtedly a discrepancy between the economic performance of different parts of the country. The narrowing of that gap is in large measure due to the vote of confidence given to us by the massive inflow of foreign investment.
  Mr. MacShane: Does the German investment to which the hon. Gentleman referred consist simply of new investment and new jobs, or does it include the purchase of Rover and a large number of banks because of the devaluation of the pound? What part of that investment consists of new jobs, new factories and new investment, and what part involves deutschmarks buying British companies because the pound makes them so cheap?
  Mr. Spring: As I have said, a third of the new deals are European, and a substantial number of those are German. The United Kingdom is now preferable even to the United States in investment terms. That is a huge endorsement of what we are doing. We have the most benign economic environment that we have had since the war.
  There is a world shortage of capital, which has begun to increase in the past 18 months, but there is enormous competition for capital investment. Last week, we heard President Mandela speak. One of his most important purposes in coming here was to try to attract scarce foreign investment into South Africa. That is clearly happening all over the world, but—despite the competition to attract capital, and although Europe is, on the whole, not a preferred centre for investment compared with many other parts of the world—we in Britain have been extremely successful, attracting some 40 per cent. of US investment and some 40 per cent. of Japanese investment.
  That has happened because, almost uniquely in Europe, we have provided low corporate taxation, low inflation and a business-friendly environment. The creation of jobs has meant a rise in the standard of living for our entire population.
  Mr. Rogers: The hon. Gentleman has described the way in which investment is coming into this country. Does he accept that, on occasion, we have paid a high

  1189
  price by buying in jobs? I am not saying that that is wrong in policy terms; we welcome all jobs, particularly in areas such as the one that I represent. Nevertheless, I find it strange that many indigenous companies are closing.
  As my right hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon) pointed out, under the Government supported by the hon. Gentleman, our manufacturing capacity has almost collapsed. That applies particularly to indigenous companies that do not seem to receive the same support as companies that are bought in.
  Mr. Spring: Following the flow of foreign capital into this country, we have seen improved management methods and employer-employee relations. We have also seen a raising of standards among domestic suppliers, particularly in the automotive industry. Automotive suppliers have been able to supply high-quality goods—the sort of goods that Japanese car manufacturers have wanted. That has had a beneficial effect on the local economy.
  What does this mean at the micro level? As I have said, we should remember that we are talking about jobs, livelihoods and aspirations. In my constituency, unemployment is now down to 4.1 per cent., and in Bury St. Edmunds, the main town in my constituency, it has fallen to below 3.7 per cent. The expansion of East Anglia's economy has meant that my constituency now has one of the lowest unemployment levels since the war. The important thing is that we are not getting some soufflé-type economic recovery. It has been slow and steady, without the inflationary excesses that have dogged our economic performance so often since the war.
  When we think about economics, its application and its job-creation possibilities, we must remember that other industrialised countries throughout Europe are suffering the tragedy of youth unemployment. In countries such as France, the youth unemployment level is about twice the UK level. The European Union average is substantially above our own. In Spain, which has a minimum wage set-up similar to the one advocated by the Labour party, youth unemployment is 41.2 per cent. What a tragedy of blighted human lives. The artificiality of the minimum wage is destroying the prospect of economic growth and employment.
  The other side of the coin is that, as unemployment comes down, vacancies grow. In June, they were up another 13,000, to 218,000. We should remind ourselves that we have the highest employment level of people of working age of any large European country.
  Until the past 10 or 15 years, East Anglia had not enjoyed the economic prosperity of some other parts of the UK, but, in the first half of 1996, there were improvements in order books, profits, investment spending and jobs.
  A survey undertaken by the Lloyd's bank commercial service showed that 40 per cent. of companies were increasing their investment spending. Amid a welter of good statistics, cash flow has improved demonstrably. That is crucial, because about 90 per cent. of the work force in East Anglia, which does not have the industrial tradition of other parts of the UK, work in firms and enterprises of 25 employees or less. Therefore, what happens to small businesses and their cash flow is crucial.
  1190
  This week, the Organisation for Economic Co-operation and Development annual employment report contrasted the continuing fall in UK unemployment with the rising unemployment in France and Germany. We can contrast our present position only with the shambles of strikes, inflation and balance of payment crises that became indelibly associated with the UK during the 1970s, and no wonder. We had 98 per cent. taxation and a terrifying brain drain, which deprived the UK of a generation of dynamic entrepreneurs, with adverse long-term consequences.
  That is one of the main reasons why I felt compelled to get involved in a political career. Travelling the world as a British business man, I felt ashamed to have to apologise for the shambles and anarchy that obtained in the UK in the 1970s. What a total contrast we have today. The huge success in the UK is clear. Our work force is flexible and adaptable. Our employers are not burdened with job-destroying social on-costs, and the trade unions no longer hold our country to ransom.
  Manufacturing industry, however, is not the only beneficiary of the economy's improvement in terms of attracting overseas investment. The latest Confederation of British Industry quarterly survey, conducted with Coopers and Lybrand, shows that there is considerably more business optimism in the financial services industries, which are growing at their fastest rate since March 1993, with banks, building societies and life insurers reporting the strongest rises in confidence.
  We hear about the elusive feel-good factor, but house prices are undoubtedly beginning to rise—not, as they have in the past, led by inflation, but because the affordability index is so good, and it is attractive for people to buy. They are not spurred to do so by inflation or a desire to beat the price index, but because of increasing confidence, of growing employment opportunities, of low interest rates, of the cash flows that they create in people's budgets, and of the solidity and stability that low inflation brings to the UK.
  It is significant that people are reflecting that confidence in taking out new mortgage loans. In the three months to May, new approved mortgage loans were up to £18.1 billion. That compares with £15.1 billion for the same period in 1995. As my right hon. and learned Friend the Chancellor of the Exchequer has forecast, in the second half of 1996, the consumer will increasingly play an important part in the economic recovery.
  In June, for example, sales volumes increased for the ninth time in as many months. Consumer spending was at its highest level since January 1990. All that will contribute to a greater sense of well-being and solidity in the months and years to come. Since its peak in 1992, unemployment has fallen by 800,000—we have the lowest unemployment level of any major European country. We are a glorious exception in a sea of rising unemployment throughout Europe.
  It is instructive to note—this is significant—that, if we consider the pattern of job creation since 1973, we see that, in the 12 countries in the EU, before the other three joined, there was a net expansion in jobs of only 5 million. Appallingly, 90 per cent. of them were in the public sector. By contrast, the United States of America, whose population size and labour force of 142 million are similar to those of the EU, has created 36 million jobs in the private sector, and only 5 million in the public sector.

  1191
  That is because it has a flexible labour market and an entrepreneurial culture that is increasingly becoming the hallmark of the UK.
  Mr. MacShane: And a minimum wage.
  Mr. Spring: The United States has a minimum wage that is far below the level remotely mooted by Labour Members and their trade union friends.
  Given our export propensities, there has been a slowdown in France and in Germany. That has had some impact on our export performance. Nevertheless, much of our recovery has been led by an excellent export effort throughout the world.
  Is it not significant that the United States economy and culture are marked by this labour flexibility, and that it has enjoyed above-average growth and job creation? Is it not significant that, in the past few years, it has been able to dominate the capital-intensive, high-technology growth sector with remarkable success, beating Japan in the process? The two are inextricably linked.
  We have heard a great deal about debt. Since 1993, the UK Government's borrowing has fallen faster than that of any other EU country except Sweden. The UK is the only major industrial country in which the ratio of gross public debt to gross domestic product has fallen since 1979. No other European country but France has a comparable debt-GDP ratio. With the exception of Luxembourg, the ratios in all the other European countries are substantially higher. Some are very high: for example, Belgium's ratio is well over 100 per cent., as are those of Italy and Greece.
  We have heard much about debt this afternoon. The reality is that it has certainly become a problem throughout the industrialised world. We are grappling with it with much greater success than our European neighbours.
  Dr. Jeremy Bray: The hon. Gentleman is being careful in selecting his initial data for his comparisons. Can he tell us what has been happening to the national debt-to-GDP ratio for the past couple of years? It is creeping up dangerously near to the 60 per cent. level required for avoiding the excessive debt and deficit procedures within the European Union.
  Mr. Spring: The latest information that I have obtained from the European Commission suggests that the debt-to-GDP ratio in the United Kingdom is 52.5 per cent., which, as I said, is among the lowest in Europe, and well below the European average.
  We have heard a speech by the right hon. Member for Dunfermline, East (Mr. Brown), but we have had no indications of interest rate policy, inflation targets or exchange rate policy. We do not seem to have heard any more about that famous 10p tax rate. It was never raised during debates on the Finance Bill, and seems also to have been forgotten. We have heard nothing about how post-neo-classical endogenous growth theory could be relevant in 1996 or to the present state of our economy.
  From listening to the right hon. Member for Dunfermline, East and hearing the sentiments of Opposition Members, one gathers that all their impulses are towards higher taxation, involvement in industry, which will mean poorer industrial relations, and, through that, higher unemployment. That means the social chapter and the job-destroying minimum wage.
  1192
  In contrast to the painful experience that anyone who has sold for Britain in the past has had to endure either here or abroad, the situation now is entirely different. We have the most benign economic scenario we have had since the war. That means jobs and opportunities for the people of Britain. We have not heard one word of constructive suggestion from the Opposition. That is why, when it comes to it, the people of Britain will be trusting us at the next general election.
  6.31 pm
  Mr. Denzil Davies: The right hon. Member for Wokingham (Mr. Redwood) is not in the Chamber at present, and I do not criticise him for that. He mentioned the boys at the Treasury. The Chancellor confirmed earlier that they were boys. Having only read reports in the newspapers, what I found depressing about their thinking the unthinkable was how fashionable it was. I suppose that boys will be boys—they will wear the latest fashionable clothes, drive the latest fashionable cars and acquire the latest fashionable goods.
  How very fashionable to say that we should privatise the welfare state. There is nothing new or imaginative about that. That is the fashion. It may have started in the United States. It is certainly rife in this country, perhaps even across the political divide in certain sectors. It was profoundly depressing to hear that suggested as one of the solutions to the decline—there may well be a decline, as western economies, including Britain, have perhaps to decline relatively as other economies get stronger. If we are going to decline relatively, I hope that we will not try to heap all the burdens of decline on the welfare state and believe that, by privatising it, we can protect everyone from the decline that might result from a global economy, and from other countries catching up with what we have done in the past 100 years.
  I was pleased to hear my right hon. Friend the Member for Dunfermline, East (Mr. Brown) condemn the policy of privatising the welfare state. If we are going to think the unthinkable, I hope that the unthinkable does not include privatising the welfare state.
  The Chancellor told us that we must concentrate on the document, and I will concentrate on the public sector borrowing requirement. My right hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon) and I know all about the PSBR. We spent a lot of time on it in the 1970s, and it is back again.
  The hon. Member for Gordon (Mr. Bruce), who spoke for the Liberal party, suggested that the Chancellor was cooking the books. If he can cook the PSBR, he is doing very well. It looks to me as though he has not yet been very successful at cooking the books. So far, he has failed to the tune of £4.5 billion, and there have only been three months of this financial year. In the Budget, he told us that the PSBR would be £22.4 billion. Now he tells us that it will be £26.9 billion, and only three months has gone by—he still has three quarters of the year to go.
  I like the £0.9 billion figure—it is a splendid figure. Night after night, the boys at the Treasury with their slide rules—I suppose they do not have those any more—their calculators or whatever, are fine-tuning the £0.9 billion to try somehow to give an air of sophistication and certainty to an unsophisticated and uncertain exercise.
  I think that the Budget will be on 26 November. I do not know whether the date has been announced, but it will certainly be towards the end of the November. We will

  1193
  probably have another PSBR forecast in the Budget. I have no idea what it will be, and nor does the Chancellor, probably. It could be a little less—£26.9 billion or £26.7 billion—or it could be a little more than £27.1 billion. No one knows. I know one thing—it will be a forecast that shows a figure lower than the outturn for last year.
  "Outturn" is a good Treasury word. It really means the bill, cheque or tally that we have to pay at the end of the year. For last year, the outturn was £32.2 billion, so the November forecast will certainly be less than that, because there must be a declining trend. There is always a declining trend next year, and next year will be the year of the declining trend, so we can be sure that the forecast at least will be less than £32.2 billion. I think that the outturn will probably be £30 billion next year. I understand that the Bank of England is seeking to fund the deficit on that basis. Who knows? At least there will be a declining trend next year.
  The Chancellor is not very worried about the PSBR at the moment—probably because he will not be around to pick up the tab. He will no doubt be performing his last function as Chancellor in November, during the Budget.
  It is not difficult to predict how that Budget will go. The Treasury spin doctors will put out the warm words early, before the Budget. It will be a tough public spending round. There will be squeals and blood on the walls—or lots of tomato ketchup—and blood on the carpets. Next year will be a tough year for public expenditure, but by then there will have been a change of Government. The Chancellor may be Chancellor after the election, who knows? He probably will not. But next year will be a tough time for public expenditure, so we can be certain of a tough spending round.
  Not only will we be told that next year is going to be a tough year for public expenditure, but, because of that, there will be room for tax cuts—not the politically motivated tax cuts that some people suggest. Not at all: because of the tough spending round next year, we shall have prudent tax cuts, which the country can afford and which have been earned. But there will be tax cuts, based on the reality of a public expenditure total for next year. Whether that total will be achieved I know not, but if it is not, I suspect that the public expenditure borrowing requirement for the following year will approach £50 billion.
  The Chancellor's life is made even better by the fact that tax cuts will start on 1 April—I see the hon. Member for Milton Keynes, South-West (Mr. Legg) smiling in anticipation—and the election campaign will be held in early May. From 1 April, each pay packet or salary cheque will benefit from this "tough Budget" and the "prudent" tax cuts.
  Chancellors these days, unlike the period when my right hon. Friend the Member for Ashton-under-Lyne and I were in government, have to worry not only about the public sector borrowing requirement but about something else, by which the Liberal party is no doubt delighted. They must worry about—dare I say it?—a new danger that comes from Europe, and apparently is called the general Government financial deficit.
  The Chancellor is a good European, but he is not doing very well on the general Government financial deficit. He went to Brussels the other day to see his political
  1194
  masters, and Jacques Santer had him in that little room with only one desk, a table and a white wall, and told him off. He said, "Chancellor, you are not doing very well on the general Government financial deficit."
  Because it is European, the figures for the general Government financial deficit are different; indeed, its make-up is different. Governments cannot spend their privatisation money—it sounds like a good idea in many ways. Because the Europeans are so eccentric, the calendar year and fiscal year are the same for the general Government financial deficit.
  We now have two Governments in Britain—one at Westminster and one in Brussels—which makes this necessary. The Central Statistical Office states that borrowing on the general Government financial deficit for the 1995 calendar year was 6 per cent. of GDP. The Maastricht treaty, if I dare mention it, requires a target of 3 per cent. Therefore, between now and 1999 the deficit will have to be halved.
  The hon. Member for Bury St. Edmunds (Mr. Spring) mentioned public debt, but that too is creeping up to 55 or 56 per cent. and by 1999, it may be 60 per cent.
  Mr. Spring indicated dissent.
  Mr. Davies: The hon. Gentleman shakes his head. I do not know how he knows these things; perhaps he can cook the books. Public debt is on an increasing trend.
  In its forecasts, the Treasury has managed to reduce the 6 per cent. figure to 5 per cent. for the fiscal year 1995‴96. I do not know what the general Government financial deficit for the 1996 calendar year will be, but I am fairly sure that it will be between 5 and 6 per cent.
  A reduction from 6 per cent. to 3 per cent. will require reductions in public expenditure of about £18 billion. A reduction from 5 per cent. will require reductions of about £12 billion. Ernst and Young, the Item Club of forecasters, basing its forecast on Treasury models, concluded that joining the single currency would cost 500,000 jobs. That is an optimistic assessment based on optimistic Treasury figures.
  We are talking about enormous reductions in public expenditure or increases in taxation. Reducing the figure from 6 to 3 per cent. would require an increase in income tax of 7p in the pound, or an increase in VAT of 6 to 7 per cent. I accept that the figures may change, but they will not be much below 5 per cent. That is the price that Britain will pay if it signs up to a single currency.
  Of one thing we can be sure: the price of signing up to a single currency will not be paid by tax increases. Throughout Europe, public expenditure is being cut, with consequential reductions in growth, to enable countries to sign up to a single currency.
  The price of a single currency will be paid not by the chattering classes, by the Director General of the CBI, who almost every week makes a speech in its favour, or by Mr. John Monks, who apparently is General Secretary of the TUC and who also makes a speech in its favour every week and seemingly is quite happy to send his members in the vanguard and in the first wave over the top into the Passchendaele of a single currency—but by cuts in public expenditure.
  Surprise surprise: it will be paid by cuts in the welfare state and in social security. It will be paid by the unemployed, the disabled and the poor people of Europe,

  1195
  not by the chattering classes—not by the European political and bureaucratic elite, among whom I include the British.
  Whatever happens to the single currency, my right hon. Friends will inherit from the Government a legacy of profligate public finances and public debt. It will not be the first time that, sadly, a Labour Government will have to clear up the mess left by the party of sound money. I do not envy them their task.
  6.46 pm
  Mr. Ray Whitney: It is a great pleasure to follow the right hon. Gentleman because he is one of the authentic voices of old Labour; the place would not be the same without him. His speech was a happy and interesting contrast to the rather less easy to define voice and visage of new Labour on its Front Bench.
  The right hon. Gentleman, in his genial way, seems to have let the past 20 years of economic experience pass him by—the economic experience of not only this country but of virtually every country in the world that has come to understand the workings of the market economy and the benefits that it can bring. He is happily ensconced in his ferocious antipathy to any sensible co-operation with our European neighbours and in his own happy neo-Keynesian world, which he never wants to leave and in which he is comfortable.
  That contrasts with the other function that the right hon. Gentleman serves—as a memento of the unhappy (lays of the last Labour Government, at which time I think I am right in saying that he graced an important office in the Treasury. In those days, the Chancellor did not go to Brussels to debate the general Government financial deficit—under which it will be decided whether our economy meets the severe Maastricht criteria, or, as I would put it, whether we are in the Premier league—but went cap in hand to the International Monetary Fund for a bail-out operation. The right hon. Gentleman's then boss, Lord Healey, turned around at the airport and rushed back to Great George street because of the chaos and mess in the British economy that had been identified by the IMF. For the right hon. Gentleman to suggest that Labour Governments have to clear up after Conservative Governments is, to put it at its mildest, standing truth on its head. But at least the right hon. Gentleman had a few facts and figures to offer, which was in extraordinarily marked contrast to his right hon. Friend the shadow Chancellor.
  I came to today's debate filled with hope that at long last we would have a glimmer of Labour's economic policy. During recent years, we have grown accustomed to the shadow Chancellor being completely trounced, hit out of the ground, by my right hon. and learned Friend the Chancellor, because he has no figures to offer and no solutions to put forward. But for two reasons I thought that this afternoon there was a chance that that situation would change.
  First, the general election gets ever nearer, and surely one of these fine days we must hear something from the shadow Chancellor about his own policies. Occasionally, something peeps out, such as the 10p income tax or the removal of child benefit from 16 to 18-year-olds, but then they are pushed back in the box again because they prove unpalatable and unsaleable not only to the general public but to his right hon. and hon. Friends in the constituency Labour party.
  1196
  But I thought that this afternoon we would have something. I was also looking forward to the benefit of the gurus. We hear a lot these days about how, at long last, the Labour party has found some intellectual holy grail, and we have Mr. Kay, Mr. Gray and Mr. Hutton, and even the hon. Member for Hartlepool (Mr. Mandelson) who, allegedly, had had an intellectual input into the new Labour party.
  But when one analyses it, it is an intellectual input dated circa 1965 which seems to have remained impervious to the experience that we have all had during the last 30 years. It has been rediscovered at the dinner parties of Islington and has seeped through to the Leader of the Opposition and, I had hoped at some remove, to the shadow Chancellor. But not a bit of it. We had no analysis from any of those gurus, and no reference to them at all.
  The high falutin' economic theory which the shadow Chancellor discovered a few months ago was forgotten. Now, hurrah hurrah, we are back to a document produced by a grade 7 officer in the Treasury for a particular purpose which, as far as I understand, was something to do with Treasury staffing in the early years of the next century. We heard absolutely nothing at all about the Labour party's policies.
  It has been a dangerous afternoon for the shadow Chancellor. He is fortunate that the debate has been so poorly attended, particularly by Opposition Members. Had they been here when the right hon. Gentleman was speaking, his chances in the shadow Cabinet elections would have been seriously dented. On the basis of his performance this afternoon, it would have been entirely merited that his career prospects should have suffered a severe setback. Time after time we asked questions about his figures for the PSBR, interest rates, public spending and all the rest, but answer came there none. Those questions were consistently evaded.
  But the input of a Labour Government is becoming increasingly clear day by day. Everyone is now beginning to understand that the minimum wage, at whatever rate it is set, will cause serious trouble. It will either cause serious economic trouble because it will be set at a rate which will cause severe problems for employers and certainly increase unemployment by hundreds of thousands, if not a million more, or it will cause trouble because it is set so low that the Labour party's friends in the trade unions will make trouble.
  Little bits are also leaking out about the reintroduction of the special "rights" of trade unions, such as the right of secondary picketing, and all those things, quite apart from the pledges on public spending. Those harsh commitments which Labour would try to realise if it ever took office would be disastrous for Britain's public finances. Of course, borrowing should be lower but any suggestion that the Labour party has any idea about how to improve the borrowing situation is sheer poppycock.
  This has been an extraordinarily bad afternoon for the Labour party, but it has been a good afternoon for the country because it will have given the electors—if we still have a few ladies and gentlemen of the press here to report it—at least some idea of the Labour party's total bankruptcy, which seems starker as the days go by.
  We had a complete denigration of the Government's economic achievements, about one or two of which I shall remind the House. We hear a lot about investment, certainly from the Labour party, again without any

  1197
  figures. Since we came to office, £100 billion of inward investment has come to Britain. Investment in British industry has risen at a rate six times faster than under Labour. Although we have only 1 per cent. of the world's population, we are the world's fifth largest trading nation. We have the lowest rate of inflation, the lowest basic rate of tax for 50 years and the lowest mortgage rates for 30 years.
  To hear the catalogue of negativism that we have had from the Opposition Benches, including the Liberal Democrats, completely destroys not only their case but the value of debates in the House. We have only silence on their policies and a total misrepresentation of not just the Government's achievements but those of the country. There is a great deal to shout from the rafters about the success of Britain's workers and managers, yet none of that do we hear from the Labour party. Instead, we have thinly veiled threats about what will happen. That is the message that I hope will come from this debate.
  The right hon. Member for Llanelli and my hon. Friend the Member for Bridlington (Mr. Townend) referred to the single currency and European monetary union. As we consider future economic decisions we need a calm national economic debate on that, removed from the hysteria which has clouded our debates on the European Union, of which the right hon. Gentleman's contribution gave us an example.
  I believe that European monetary union and the single currency will happen in 1999. It may not be on 1 January, but it will be in the course of that year and it may involve six countries rather than more. But we should work on the assumption that it will happen whether we are in it or not. I believe, too, that we, as sensible good-housekeeping Conservatives, should recognise the criteria of low inflation and the limits on budget deficits and national debt. Whether we enter the single currency or not, we should welcome those criteria and pin our colours to their mast.
  Thirdly, as and when the project is launched, we must consider carefully the consequences of staying out and of going in. The consequences if we stay out will be threatening, especially in respect of financial stability and interest rates in Britain. I do not say that we could, should or need to take a decision about joining it in the first wave—when the train leaves the station, to use the old cliché. Before we rule it out, and we must certainly not throw away the highly favourable negotiating position that the Prime Minister secured for us at Maastricht on monetary union, we must take careful stock of Britain's national interest. Of course we must consider sovereignty but we should also recognise that in today's world, no country—certainly not a medium-sized one—is, in the economic sense, truly sovereign. That word has to be handled with great care. No Chancellor of the Exchequer presenting his Budget stands as an island without regard to the international situation.
  I am the first to recognise the importance of sovereignty across a range of aspects, but we should be careful of glibly throwing the single currency project out of the window on the basis of some emotive quotation about national sovereignty. Sovereignty is important, but it is by no means the only criterion that we should take into account. More important, for my money, are the stability
  1198
  of the economy, the financial climate in which we operate and the need to ensure that our industry is not crippled by high interest rates.
  I have every confidence that under our Government, with my right hon. Friend the Prime Minister and my right hon. and learned Friend the Chancellor of the Exchequer leading our economic decisions, the impressive successes that we have achieved, sometimes against a difficult economic background and to some of which I have referred, will continue. We should meet the criteria for the single currency and we would then have the option to join it, should it make sense when we come to make that decision. That must be Britain's aspiration. The only danger is a change of Government that would bring into office Labour's Front-Bench spokesmen, who have not a single idea to offer.
  Several hon. Members rose—
  Madam Deputy Speaker (Dame Janet Fookes): Order. Before I call the next speaker, may I remind the House that the 10-minute limit on speeches is operational from 7 pm until 9 pm.
  7.2 pm
  Mr. Geoffrey Robinson: I will not follow the hon. Member for Wycombe (Mr. Whitney) in much of what he said, but I shall pick up his remarks on the contributions of the two Front-Bench spokesmen. For all that the Chancellor of the Exchequer—and the hon. Member for Wycombe took this up—protested that the leaked Treasury document was about management structure, by his own admission he had not examined what has already been printed today in The Times about it.
  It is unbecoming for the Chancellor, or, indeed, a distinguished former diplomat such as the hon. Member for Wycombe, to harp on about a junior, grade 7 civil servant. They know that the tone of their remarks was supercilious, sarcastic and quite unnecessary. I hope that the Chancellor will take an early opportunity to correct the impression that he must have given to that unfortunate civil servant and say that it will not be held against him. Grade 7 civil servants do not get up one day and produce such documents by free association. He was clearly acting under instructions, we are led to believe, from the permanent secretary himself. The document clearly carries some weight in Treasury circles.
  Mr. Whitney: When I was a grade 7 civil servant, I would have been horrified if my work had been bandied about in the House of Commons. It would have been very odd.
  Mr. Robinson: That remark is now on record and I am sure that the grade 7 civil servant will feel all the better for it.
  The document is not about management structure. If we need a report on management organisation, we need one on who is running the Treasury. If the Chancellor really does not know about important work such as this being commissioned by the permanent secretary, there is something wrong. We know that the Chancellor does not like to read and is not a detail man but he should be in charge of his Department. It is clear that he is not.

  1199
  The document is about long-term policies. It has been prepared at the request of a senior civil servant and reflects the views of the right hon. Member for Wokingham (Mr. Redwood), as he made clear in his speech. It is about the wholesale privatisation of pensions and the welfare state. If it were not for the 10-minute rule, I would like to read all of it, but some of it will do. It talks about the privatisation of unemployment and amounted incapacity benefit and states:
  "Privatising contributory benefits would be a further major step in the UK: in the main they cover insurable risks (retirement, incapacity and unemployment) and could therefore be replaced by private insurance either voluntary or compulsory."
  There is nothing about management there; that is policy.
  The same is true of what the document says about privatisation of the roads:
  "A further proposal under advice consideration would be to treat roads as a utility rather than a public service … Ownership would be transferred to regulated private companies who would receive their income from road users."
  It was remarkable that my right hon. Friend the Member for Dunfermline, East (Mr. Brown) three times gave way to the Chancellor so that he could say whether that was the case. My right hon. Friend was being unkind because I do not think that the Chancellor knows whether it is being considered. He said that it was not Government policy but did not say whether he was considering it. I am sure that he is not; he does not know what is happening in his Department. There is a series of major advance studies in the Treasury which involve privatisation the like of which we have not seen before. Either the Chancellor is being hypocritical and dishonest with the House and himself—he knows or he does not know—or he is just plain incompetent. I reckon that he would settle—and I think that he has—for the latter.
  Another interesting part of the document that must be brought out is the issue of closed government: the dishonesty with which government is being conducted. It states:
  "When advice was given the possibility that it might be published at a later date would have to be taken into account. We would not be able to re-write or edit papers or fillet files as now."
  No doubt the hon. Member for Wycombe has had great experience in such matters.
  I understand that the Foreign Office tradition is that under the 30-year rule, files can be filleted so that sensitive and secret documents of national interest which concern the activities that we read about every week cannot be published as official Government papers. The leaked document is not talking about that but about what is happening now. Papers are being rewritten and edited and files filleted. That is not good enough and some explanation for that paragraph is urgently required.
  It is clear that the Chancellor is unhappy with the summer forecast for the PSBR, with which my right hon. Friend the Member for Llanelli (Mr. Davies) dealt with humorously, although we both know the serious side of that problem. The Chancellor kindly gave way to me earlier and I asked him about the hole in the public finances. He looks forward to balancing the Budget by 1998–99. The first forecast that he gave—it may have been in 1994–95—proved to be about £15 billion out on the PSBR. As hon. Members have said, forecasting is difficult but the scale of the error in that forecast is enormous. I have studied the matter over the years and it
  1200
  is bigger than any previous error. That poses a problem for the Chancellor, because he cannot explain a £15 billion gap—or come near to explaining it—by the loss of tax revenues, whether from VAT or from the revenues that would have resulted from a higher rate of growth. That simply cannot come near to explaining the gap. The Chancellor must therefore answer the question to which we still await an answer: at this stage in the economic cycle and according to the Government's best estimate, what should the borrowing requirement be and how far out is it? That difference begins to represent a real structural problem that must be tackled.
  The right hon. and learned Gentleman's cavalier attitude to that problem, and more general cavalier attitude throughout the debate, might suggest that he does not expect to be in office for much longer. In fact, he gave the game away when he said that he would not pick up his increased ministerial salary because it does not come into effect until next year. Any clearer giveaway from him would be difficult to imagine. It is clear that the Chancellor has given up the ghost and is letting us slide gently towards yet another Tory pre-election consumer boom. We have seen them all since 1964 and—
  Madam Deputy Speaker: Order. May I remind the hon. Gentleman that he should be addressing me? I prefer not to look at his back.
  Mr. Robinson: I apologise, Madam Deputy Speaker.
  The Chancellor will not be with us much longer and he is setting up a pre-election consumer boom of some considerable proportion. It is clear from what the Governor of the Bank of England has said and written in the minutes that he is as concerned as we are about that prospect.
  Because the public sector borrowing requirement has got out of control the national debt has doubled to £390 billion. It costs the average family £1,000 a year to service it.
  Let us consider other economic indicators which, as we have learnt from the debate, reveal our progressive slippage down the performance league tables. One Conservative Member said that we had done well at creating new jobs, but we are 19th out of 24 in the OECD table. According to the table for investment we are 19th; in that for growth rates, we are 13th; and, as we all know, that for overall prosperity reveals that we have slipped from the 13th to the 18th position. It is difficult for the Opposition to mention those growth tables because it is often said that we are trying to run the country down. We are not. It is no betrayal of the country to concentrate on them; it would be a gross betrayal if we did not and failed to face the facts that they clearly imply to us. It would be a betrayal if we failed to realise that something urgent and serious must be done about them.
  It is clear from the Treasury documents that the Government have accepted that we are in decline and should go on declining. To reverse that attitude it is clear that we need government by a new party, with new vision and new confidence to tackle the problems. The Government have lost that confidence. They do not believe that they can achieve anything, so they are living with youth unemployment and long-term unemployment. They do nothing about those problems except to try to distract attention from the sane, sound policy as the

  1201
  Labour party has developed to tackle our fundamental social and economic problems. It is only when the Government produce proposals to deal with those problems that we can even remotely take their summer forecast seriously.
  In the meanwhile, the alternative for the country will come in the new year with the election and a new Government, which the Labour party will form.
  7.12 pm
  Mr. Nigel Forman: It is a pleasure to follow the hon. Member for Coventry, North-West (Mr. Robinson). I might almost call him my hon. Friend, because he will remember, if others do not, that we came into the House on the same day more than 20 years ago, together with my right hon. Friend the Member for Wirral, West (Mr. Hunt). I listened with respect to the hon. Gentleman, because he is a knowledgeable and thoughtful man whom I wish we could see more often in the House. I understand, however, that he has certain responsibilities outside, including a new magazine, about which you, Madam Deputy Speaker, may have heard.
  The hon. Gentleman was right about forecasting. I took that up with the Chancellor and his advisers when I questioned them recently at a sitting of the Treasury Select Committee, because the degrees of error are staggering. Let me give the House a few examples. On fixed investment in the summary table, the forecast for 1997 is that it should increase by 5.5 per cent., but the average error in previous forecasts on that investment is 4.5 per cent. The forecast for manufacturing output in 1997 is 3 per cent., but the average error based on errors in previous forecasts is 2.5 per cent. The figure for the GDP deflator in 1997 is put at 2 per cent. for the financial year, but the average error in that forecast is 1.25 per cent.
  Much has been said about the public sector borrowing requirement forecast. According to the summary table, the forecast for 1997 is £23 billion, but the average error of forecast on the basis of previous average errors is £12 billion. The House can clearly appreciate that the hon. Member for Coventry, North-West had a fair point. There are probably a variety of factors to explain those errors, including the facts that we do not collect statistics quite as meticulously and as comprehensively as we used to and that the current series of statistics are not quite as reliable as they used to be, again for a variety of reasons.
  We are the most open economy in the world, certainly the most open of the OECD countries, and that has an effect on our national economic statistics as well. I do not have time to go into that, because of the 10-minute limit and judging from the pulsatingly crowded Benches around me, so I had better resume reading from my notes.
  Earlier today, we listened to a characteristic speech from the right hon. Member for Dunfermline, East (Mr. Brown). I congratulate him on his elevation to the Privy Council. To begin with, his speech was characteristic because of its triviality. He seized on some non-event, which was caricatured on the front page of The Times, which itself has become a trivial newspaper, I regret to say. His speech was also characteristic because of a certain vacuity to which we have got used not only in Labour amendments but in Opposition Front-Bench
  1202
  spokesmen's speeches. The reason is not hard to find—for some time, those on the Opposition Front Bench have behaved as though they were a secret society. There is little sense of humour in what the right hon. Member for Dunfermline, East says, and certainly no sense of irony of the kind that I much enjoyed in the speech of the right hon. Member for Llanelli (Mr. Davies). I always enjoy listening to him.
  There was one departure from the norm in the speech of the right hon. Member for Dunfermline, East, which took some of my right hon. and hon. Friends slightly by surprise, when he appeared to break the habit of a recent lifetime—first, by agreeing with my right hon. and learned Friend the Chancellor that he had been right to cut interest rates on the last occasion, which we have not heard him say before, and, secondly, by offering the House a definite view, and you could have knocked me over with a feather, when he said that he thought that the PSBR should be lower. He did not say why, how or how he would endeavour to bring that about were he to be sitting on the Treasury Bench. None the less, it was a view and we welcome it for that.
  Mr. Whitney: A policy.
  Mr. Forman: Well, I am not sure that it was a policy, but it was certainly a view. As my hon. Friend the Member for Wycombe (Mr. Whitney) has said, time is running out for the Labour party. The Opposition will soon have to face up to the British people and explain to them honestly and clearly what they would seek to do if they were to become the Government. So far, they have not done so, except on a tiny red credit card, which I keep in my pocket, along the lines of new Labour, new danger. Apart from that, there is no real substance to their policy.
  Let us look at the Labour amendment on the Order Paper, which is lengthy and takes up a slab of that document. That amendment has 190 words, but hon. Members might be interested to know that just 34 apply to what the Labour party would seek to do and what might pass for a policy. It is worth reading that section out—certainly no one else has done so, and certainly the right hon. Member for Dunfermline, East did not draw attention to his own amendment. It
  "calls for policies dedicated to higher levels of sustainable growth consistent with low inflation, higher levels of productive investment and a fairer Britain in which the welfare state helps people from benefits into jobs."
  Those are worthy, pious and admirable statements, but they do not constitute a policy. I hoped all the more fervently that the right hon. Gentleman would offer us a policy in his speech, but I regret that that did not happen. He spent too much time worrying about other things.
  The truth is that this country is in an extremely strong economic position. I shall not weary the House by citing the obvious statistics which I have written down; I shall use them on another occasion, probably in my constituency. The truth is that the record is good. We have everything to be proud of; the important thing is that we do not fall into the temptation of talking this country down, because it is the people of our country whose efforts have created that success, within the sound and prudent framework set by the Government.
  It is also important to be clear about the global context within which our economy must now operate. With the growing importance of global markets, global media and

  1203
  global companies making global products, the United Kingdom is especially well qualified to participate in the new world environment.
  I remind the House of a figure that has not been given so far. In this country, we constitute 1 per cent. of world population and create 3 per cent. of world GDP and 5 per cent. of world trade. By that simple and rather impressive scale, one can see the weight that we carry in the world in spite of our relatively small size vis-a-vis other countries.
  The reason is clear. Ours is the most open advanced economy. As several hon. Gentlemen have said, we are the fifth largest importer and exporter, exporting more per head than Japan. We have the highest ratio of both inward and outward investment to GDP of any country. That means that we, more than most, must recognise and incorporate the new realities in our policy. Those realities are, first, the fact that there are greater limits on the power of national Governments than some of us would like to acknowledge; secondly, the greater importance of attracting and retaining mobile capital, mobile people and mobile technology because, if we do not attract them, they will go elsewhere; and, thirdly, the greater importance of social and human capital in securing and retaining a comparative advantage in that very competitive world. On that third point, there is consensus between the Government and the Opposition. Both believe that investment in human and social capital must have priority for the coming period.
  Against that background, I shall describe, in capsule summary, the best approach for any Government to take. I am glad that the Government whom I support are adopting that approach.
  First, any Government should have a monetary policy that remains credible in the light of all the relevant data, especially the condition of the real economy, financial market expectations and the decisions of other monetary authorities. Secondly, they should have a fiscal policy that errs on the side of caution, and is designed to reduce the PSBR and to balance monetary policy so that, if monetary policy is easing, it may be considered necessary to tighten fiscal policy and vice versa. Within that, the Government should have a tax policy that concentrates on an approach founded on the broadest possible tax base at the lowest possible rates, and the greatest possible simplicity. I have argued that case previously.
  Thirdly, and finally, it is obviously vital to complement those two main levers of policy with a raft of supply side policies, which need to enhance our competitiveness and to result in investment in physical infrastructure, but most of all in investment in human capital. We must learn the lessons from our main competitors, in Asia, the Pacific rim and elsewhere, who invest massively in education and training in all its forms. It pays off for them hand over fist in the global market.
  Let us play to our cultural strengths, take advantage of what we achieved and build on our policies, which have been a manifest success.
  7.22 pm
  Dr. Jeremy Bray: The story in the "Summer Economic Forecast" is yet again one of virtue postponed. As the hon. Member for Carshalton and Wallington (Mr. Forman) said—he is always fair, so let me try to be so too—all is not bad. Growth has continued,
  1204
  albeit not as fast as expected, inflation is under control and the balance of payments is healthy. It is just a small matter of public borrowing. Does that matter?
  The 1995 forecast of the PSBR for 1995–96 was £29 billion and the outturn £32 billion—an error of only £3 billion, less than 0.5 per cent. of GDP. That is not bad, but it is not the whole story. The problem is the Government's repeated and accumulating failure to meet their PSBR target. The 1995 summer forecast of the PSBR for 1996–97 was £16 billion. The 1996 summer forecast has revised that to £27 billion.
  The Maastricht hurdle for joining monetary union in the first round is that in 1997–98 the general Government deficit should be less than 3 per cent. of GDP, and in the summer forecast we just squeak in at £23 billion, with no safety margin. Britain has been comfortably below the required debt to GDP ratio of 60 per cent., and a Conservative Member said that we were well below. In fact, the ratio increased from 54.25 per cent. in 1995–96 to a forecast 56 per cent. in 1997–98.
  Once we are over the required debt to GDP ratio, we are in the debilitating position of having to deflate an otherwise well-balanced economy just to repay our debt. Does that matter? Will monetary union be a problem? Then forget about monetary union! The trouble is that talk about monetary union has made the Maastricht conditions the criteria of a healthy economy, inside or outside monetary union. If we continue to breach those Maastricht conditions, we shall find that we must maintain higher interest rates or become vulnerable to flights of capital.
  Does that not make the whole Maastricht story an even greater disaster? Should we not battle for a more relaxed order, which allows economies to grow and Governments to borrow to meet reasonable needs? It is a tempting argument, but the prize of avoiding crisis and maintaining steady growth is great. Highest among the rewards would be a return to something much nearer full employment, with unemployment falling below the 1 million mark. It is quite attainable, with a well-managed economy, some time in the next six or seven years.
  Conservative Members appear incredibly slow at taking up the clear evidence repeatedly given by the shadow Chancellor. The Labour policy for borrowing is specified in the golden rule—borrow only to finance investment. The summer forecast gives some good numbers on that. Net capital spending of the public sector in 1997–98 is forecast to be only £8 billion, or 1 per cent. of GDP, which is a much tighter limit on borrowing than the 3 per cent. or £23 billion of Maastricht. It is nearer the balanced budget target, which the Chancellor claims to be pursuing as a medium-term objective but never even approaches.
  I hope that we will look forward to increasing public investment under Labour. The European Union excessive deficits procedure—the Maastricht targets—only becomes tighter than the golden rule, on these definitions, when the £15 billion deficit on current expenditure in the summer forecast has been eliminated and net capital spending has trebled to £23 billion.
  I doubt that those are the figures or the definitions that my right hon. Friend the shadow Chancellor has in mind. If the golden rile is to become a more substantial target than the vague medium-term aspiration of the Chancellor for a balanced budget, it will have to be an important element in a balanced set of objectives, appropriately defined along with other objectives.

  1205
  The memory of hon. Members and of the country, not to mention the financial markets, of the undignified chase by the noble Lords Howe and Lawson through all the Ms defining the money supply before their successors ended up with the exchange rate, and then inflation, as their targets is all too vivid.
  For Budget planning purposes in November, I would guess that the Chancellor will rely on maintaining the 3 per cent. PSBR for 1997–98 and make a 2 per cent. or £2 billion or £3 billion tax cut as an election sweetener—no more than that—with matching cuts in public spending and no change in the forecast PSBR. The trouble with that is that the Chancellor's borrowing forecasts are suspect. The errors in recently published forecasts have been mentioned. In fact, the revisions of forecasts and the errors have been less than the £12 billion average error in the past 10 years, but they have all been one way.
  To overcome the problem, the proper course for the Chancellor in the Budget—I hope that the Chief Secretary takes due note of this—would be to make the increase in tax revenues or the cuts in public expenditure needed to reduce borrowing much nearer £5 billion or £6 billion. If he does not do so, the incoming Labour Government will be easily and credibly able to say, when they see the books, that the position is much worse than the Chancellor has said, blaming whatever tax and expenditure changes are then needed on the Tories.
  The reflection on the economic competence of the Tories will refresh the memory of the mistakes that they made—the 1988 reflation, the over-valuation of the pound on entering the exchange rate mechanism and the ignominy of leaving it. I would be sorry for the Chancellor, because he has in many ways managed the economy rather well during his chancellorship, after the disasters of his predecessors.
  Let me repeat a suggestion that I have already put to the Chancellor. The smart thing for him to do would be to open the Treasury's books and to publish them. If we have not had an election by then, a good time to do that would be the Budget in November. The books would demonstrate the reasons for the limits on the tax cuts that the Government are then able to make, and the underlying strength of the economy in the medium term—if the right steps are taken now.
  The neat way to open the books would be to set up the Treasury's modelling, forecasting and analysis operations as an arm's-length Treasury agency, for which there is ample precedent, and to publish full forecasts and all the supporting material. This is an operation in the Treasury that can stand the light of day. Such openness would also do a power of good to the other forecasters, national and international, some of whose methods are rather worse than the Treasury's. Once the books were open, a Labour Government would hardly shut them again.
  Present practice on publishing Treasury forecasts, as noted on the title page of the summer forecast, still follows the requirements of my amendment to the Industry Act 1975, as noted by successive Chancellors. I suggest that it is time the Chancellor took another look at that procedure. This will be the last year I shall be able to contribute to this debate on the summer forecast, and I offer this to the Chancellor as a parting present. If the right hon. and learned Gentleman fails to open the books in this way, I trust that my right hon. Friend will do so when he takes over.
  1206
  Modern markets, and the major structural changes through which the economy and the next Government will have to pass will make great demands on the quality of government. They require a greater clarity and definition in the making and presentation of Government policy than we have yet attained.
  7.50 pm
  Mr. Barry Legg: This afternoon, the right hon. Member for Dunfermline, East (Mr. Brown) tried to have a bit of fun with a leaked document—he tried to embarrass the Chancellor of the Exchequer with it. If we want to embarrass the Opposition, however, we do not need to find a leaked document. All we need is £10 with which to buy a document called "New Labour: New Life for Britain". Thumbing through the document we come across many things with which to embarrass the Labour party, particularly with regard to its economic policies.
  First, we find the idea of the golden rule. The right hon. Member for Dunfermline, East says:
  "We will only borrow to invest and not to fund current expenditure."
  He says that in the document, but he will not repeat it in the House or give the House any definition of what he means by "invest".
  This afternoon, we have heard many quotations from the evidence that the Treasury Committee has taken in the past few days, but we have not yet heard the most apposite quotation from that evidence. It came when the hon. Member for Hackney, North and Stoke Newington (Ms Abbott) referred to the golden rule as a joke. She was spot on. She must have foreseen the sort of speech that the shadow Chancellor would deliver this afternoon. When asked to comment on the golden rule, the Governor of the Bank of England was more measured, saying only that
  "the analytic basis for this rule is suspect".
  Tonight, the hon. Member for Oxford, East (Mr. Smith) will have to come up with a definition of what he means by investment, which Labour Front Benchers currently use a catch-all. The hon. Member for Hackney, North and Stoke Newington is obviously worried that the definition will be used to cut public spending. Judging by the speech we heard this afternoon by the right hon. Member for Llanelli (Mr. Davies), he too believes that it will be used as a device to cut spending. It could be—but it could also be used as a device to raise public spending, which would be more in tune with Labour's past. Labour could redefine items of current spending as spending incurred for investment—and hence as an excuse to raise public expenditure, and taxes.
  At the moment, current expenditure exceeds taxation, so if Labour does not want to run a deficit, it will have the perfect excuse to raise taxation. In current conditions, Labour would have to raise it by £15 billion—the equivalent of 9p on income tax—to meet that policy objective.
  The onus is therefore on Labour to explain tonight exactly what the policy means and to put an end to the jokes from Labour Back Benchers and the cynicism in the financial community.
  The next Labour policy that we find in the document is the wish to depoliticise the setting of interest rates. Of course the Opposition want to do that; they know that,

  1207
  under Labour, interest rates would go up and they want to find someone else to blame when they do. The first scapegoat will be set up in the form of a monetary committee at the Bank of England, which will be given the job of setting interest rates so that, when they rise, Labour will be able to blame the Bank of England.
  As the right hon. Member for Llanelli implied, behind the monetary committee is the European central bank. If transferring interest rate decisions to the Bank of England does not put enough distance between the Labour Government and the blame, they can go the whole hog and transfer the setting of interest rates to the European central bank in Frankfurt. So much is clear from Labour's agenda.
  The next item in the document—just about the only policy mentioned by the right hon. Member for Dunfermline, East this afternoon—is the windfall tax, but there is no evidence of how it will be operated. There was a windfall tax on the banks in the early 1980s. It was simple to devise a way of calculating windfalls, based on the deposits held by the banks at a fixed point in time. But Labour has given us no idea of how it would calculate its windfall tax, although it is implied that it would be levied across all the utilities: gas, water, electricity and BT. What would it be based on—turnover, number of employees or a surcharge on other taxes?
  The only people Labour seems to be getting at by way of this tax are the very ones of whom the Opposition are supposed to be in favour—long-term investors. It is they who would be hit by this arbitrary tax. If the Opposition really believe that the utilities' profits are too high, they should deal with that through regulation. That is precisely what the Government have done. Dealing with the utilities' profits by regulation means that the benefits are returned to the consumer, who pays lower prices. That is what privatisation is all about. Labour does not accept that route because it does not want to give the consumer the benefits. It wants the money in the hands of the state—always the Labour theme.
  So much for Labour's embarrassing economic policies. There is also an attempt to give the impression that Labour is not far from the Conservatives in terms of economic policy. I say that there is a world of difference between Conservative and Labour economic policy. This afternoon, the shadow Chancellor endeavoured to throw up a smoke-screen because he is embarrassed by all the recent good news about the economy. The good news is that negative equity has declined by half in the past three months. There is good news today about lower unemployment. Last week there was good news about a fall in wholesale prices. Interest rates are at their lowest for 30 years. All this is a great embarrassment to Labour, showing the clear difference between our parties' policies.
  Since 1979, we have reduced public spending as a proportion of GDP to a much lower level than have our major European competitors. France, Germany and Italy have pushed up public spending as a proportion of GDP whereas we have kept it down. We are now enjoying the benefits of that, with a lower tax rate as a percentage of GDP than all our major European competitors. We are also benefiting from lower social security contributions, so our wage costs are competitive. That is the difference that Conservative economic policies are making. Our competitive wage costs make Britain a more attractive place for companies around the world to invest in.
  1208
  We have also done well on manufacturing. Labour Members often talk about manufacturing but productivity in manufacturing has risen sharply under a Conservative Government. We are now at the top of the table of the seven leading industrial countries for the rate of increase in manufacturing productivity. When Labour was in office, productivity in manufacturing halted, which is why manufacturing went into decline. There was no economic basis for maintaining manufacturing at that level.
  Earlier this afternoon, several of my hon. Friends spoke of the need for the Chancellor to cut public spending. This is the point in the cycle when public spending needs to be cut. The prospect is for the private sector to grow strongly in 1997. In those conditions, public spending must be brought down by £6 billion to £7 billion for the coming year. During the lifetime of this Parliament, public spending has increased by £70 billion. There has been a 12 per cent. increase in real terms, amounting to £30 billion—roughly the size of our present deficit.
  7.14 pm
  Mr. Ken Livingstone: Having heard such a litany of good news, it is hard to believe that an ungrateful British public still put the Labour party 20 per cent. ahead in the opinion polls. There is no gratitude in politics.
  Conservative Members have attempted to talk up the wonderful position that we are in, but a good way to test what people think about the soundness of the British economy is to look at the yield from long-term Government bonds. The international markets are not full of dreadful lefties like us, constantly running the nation down. They consist of people who invest their own and other people's money, having seriously assessed the strength of the rival economies.
  Interest rates for long-term Government bonds are consistently high. Government bonds in Japan yield 3 per cent.; in the United States and Germany they yield 6 per cent.; but here they run at two percentage points more than that. The international markets are making a fair assessment about the underlying weaknesses of the British economy, which is reflected in long-term 10-year bonds. Their assessment of the British economy 10 years hence is distinctly unfavourable compared with our major competitors, yet we are told how much better we are doing than they are.
  As my hon. Friend the Member for Motherwell, South (Dr. Bray) said, one or two good things have happened under the present Chancellor. He has been the least bad Chancellor of the past 17 years. He was right to face down Eddie George on interest rates, and right to cut interests again recently. I still believe that they are too high. I see no reason why they should ever be more than two percentage points above the real inflation rate, so we could seriously think about deducting a further point. That would be extremely good for investment in Britain and for our economy.
  We are being held back by the mad policies of the Bundesbank, which still goes for high interest rates and tight economic policies. In the past seven or eight years, to help get President Bush re-elected, the dollar has been massively undervalued against the deutschmark, so the whole of the European trading bloc has been at a competitive disadvantage vis-à-vis the United States.
  The "Summer Economic Forecast" talks of the sluggishness of the European economies, but so long as the Bundesbank continues to be crippled by the

  1209
  psychology of what happened in the Weimar republic it will consistently take decisions that damage Europe's economic competitiveness and put us at a disadvantage vis-à-vis Japan and America. We should argue strongly against the Bundesbank's restrictive policies, because if we become locked into an exchange rate mechanism again, it will be even worse. At present, monetary union is inconceivable given the relative weakness of the British economy against the German economy.
  We are supposed to have a monetarist Government making sound money, but the public sector borrowing requirement is going up as though Militant were running the country—borrow, borrow, borrow. Derek Hatton must somehow be working the system. It is absolutely bizarre. That money must be repaid. Conservative Members say, "We are not borrowing as much this year as we did last year," but we pay interest on all the extra money that we borrow, which is a drain on our annual Budget. As my hon. Friend the Member for Motherwell, South said, we are getting dangerously close to the 60 per cent. level.
  Lenin said that the best way to precipitate a revolution is to debauch a nation's currency. After 17 years of this lot, the relative value of our currency against the basket of others has declined by 25 to 30 per cent., weakening the economy all the way along. Competitive devaluation is not the only way out of our economic problems and should be a one-off rather than a consistent strategy. The undermining of the pound year after year leads one to assume that successive Chancellors of the Exchequer, acting on Lenin's advice, must have been working for the KGB all along. They could not have done more damage to the British economy if they had been paid to do so. No sound economic base has been created.
  Now, everyone is clutching the gimmicky idea that things will be alright if we have an independent central bank and that all the problems will be solved if we give powers to bankers with no democratic accountability. I do not believe that that will happen. The advice of an independent central bank, whether it is the Federal Reserve in America, the Bundesbank in Europe or Eddie George—who, fortunately, is not too independent—is always cautious and conservative and will always favour finance over industry. I see no logic in an established democracy saying that those key and vital decisions, which affect everyone's lives, should be taken out of the politically accountable arena.
  The Liberals are openly in favour of that idea, and I detect one or two worrying phrases in the new Labour policy document about our policy on it. If Labour Front-Bench Members think that the majority of Labour Members agree with them about an independent central bank, they have another think coming. From my conversations with Labour Members, I can tell them that the majority do not support the idea of an independent central bank. If the next Labour Government poodles off in that direction, they may fall flat on their faces and have to be rescued by votes from Tory Members. I want accountability for those vital financial issues to remain on the Floor of the House, where the people's representatives can challenge those who take the decisions.
  Our economy fails because of lack of investment. I return to the subject again and again. Britain consistently invests less than its major competitors. We invest some 15 per cent. of GDP whereas most of Europe invests 20 per cent. And
  1210
  Japan invests nearly 30 per cent. As long as we continue to invest less, we shall continue to fail. I welcome the emphasis that Labour Front-Bench Members have in the past couple of years put on increasing investment, although I should like to hear them say how we shall do it. Perhaps I may throw in an idea or two for debate.
  When we look at what has happened over the past 17 years, we see a stark shift in the British economy. On the day that Mrs. Thatcher was elected Prime Minister, wages were 66 per cent. of GDP and dividend payments were 1.5 per cent. Last year, wages were 62 per cent. of GDP—that is why there is no feel-good factor: there has been a massive shift away from wages and incomes in real terms—but dividend payments rose to 5.8 per cent. The Government have presided over a shift in consumption from wage earners to those in receipt of dividends. Their logic must have been that, if company profitability is increased, companies will expand, invest and capture new markets—but they have not done so. Companies have taken short-term profits and inflated top salaries.
  A Labour Government will have to intervene to change the way our financial sector works to prevent such short-termism. That will mean a tax on dividends, or dividend controls, and a much greater bias in the tax system in favour of investment. We will not go backward so that the next Labour Chancellor, or some new Mintech, decides investment for each individual, but we can change the tax system so that every company director recognises that it will be better to invest more and take out less in short-term profits. If we do that, we can lay the foundation for a successful reconstruction of our economy. If we do not, we risk being removed from government again after one term, as we have been in the past.
  The chilling aspect of today's leak from the Treasury whiz kids is the insight it gives into the policies of the Tory party five years hence. Every time it has gone into opposition, it has come back more reactionary and with worse policies. We will never be forgiven if, when we get our chance in government in the next few months, we squander it and are out again after five years. We will have to win a second term, not only to complete our transformation of Britain, but to save the people from the policies that the Treasury is now discussing.
  The people behind the Treasury paper have considered the trends among Tory Members and have made a realistic assessment of who will run the Tory party after its election defeat and the direction in which they will take it. They will make Newt Gingrich look like a kindly gentleman. We know that the Secretary of State for Defence's personal adviser often zips over to meet members of the Republican Congress. That is the danger we face, and we will never be forgiven if we squander the chance that the British people are about to give us. The key to making our programme work is tackling investment and ending short-termism.
  7.51 pm
  Mr. Anthony Coombs: I did not think that I would ever agree with the Labour party's latter-day John the Baptist, the hon. Member for Brent, East (Mr. Livingstone), but I agree with his comments about the single currency and an independent central bank. I also agreed with him when he described the left as constantly talking Britain down, because that is what we have heard from Labour Members during the debate.

  1211
  I was pleased that my hon. Friends, including my right hon. and learned Friend the Chancellor of the Exchequer, pointed out the real successes of the Conservative Government and their economic policy over the past few years.
  I have all the statistics and I will not bore the House with them, but it is significant that growth has been consistent and sustained in the past few years. Consumer spending confidence is returning, and that is consistent with the low rate of inflation. Unemployment also continues to fall. For example, on today's figures, unemployment in my constituency of Wyre Forest has fallen by 3.3 per cent. in the past month. Therefore, as a result of the Government's economic policies, 228 people have found jobs now who did not have them before. The unemployment figure has fallen by nearly 40 per cent. since 1992.
  Contrary to what has been said about exchange rates, terms of trade are improving in this country, as the "Summer Economic Forecast" reveals. It is small wonder that the director general of the German industry confederation said, after he had analysed the situation in Europe, that the United Kingdom economy, not the German economy, was best placed to deal with the challenge of international competitiveness. George Simpson, who will soon take over as the chief executive of GEC, formerly Lucas, and who is entrenched in manufacturing industry in Britain, has said recently that he cannot remember a time in his 25 to 30 years in business when macro-economic policy has been better managed to allow this country's manufacturing businesses to compete.
  In The Sunday Times last week, David Smith, who is not exactly a fan of the Government, claimed that
  "accelerating growth … on the back of rising consumer spending … is something of a dream scenario for a chancellor facing an election. When it is combined with low inflation … scheduled to drop"—
  from this year to next—
  "and a narrowing trade deficit, it becomes the Treasury equivalent of fantasy football."
  The Government's economic performance is not a fantasy. If it were, fewer people would come to invest in this country.
  Another article in The Sunday Times outlined the huge investment in this country by big companies from foreign countries. Accumulated investment in 1978 totalled £28 billion, but the figure is now £200 billion. Last year, no fewer than 48,250 jobs were created—an increase of a third on the previous year—by 477 manufacturing projects, not including the recent one in south Wales about which we have heard this afternoon. That investment is coming here because of good industrial relations, low-wage costs and, especially, non-wage costs compared with other European countries. We also have good skills and attitudes. In the same article, Professor Bhattacharyya, Warwick university's professor of manufacturing systems, discusses the new factories being built by foreign investors. He makes the point that the new factories are not low-tech, "screwdriver" assembly plants and he continues:
  "These factories are not copies of plants in the companies' home countries … They are adjusting to British conditions so that, effectively, they and we are reaching a happy compromise. The result, as long as macro-economic policies are sound"—
  as indeed they are—
  "will he a transformation of our competitiveness."
  Dr. Lynne Jones: Will the hon. Gentleman give way?
  Mr. Coombs: No, I have only 10 minutes.
  The transformation would be sorely tried, even destroyed, should a Labour Government ever be able to implement their policies. I found it appalling that the right hon. Member for Dunfermline, East (Mr. Brown)—who purports to be the next Chancellor of the Exchequer if, heaven forfend, the Labour party were to win the election—could not advance any policies or targets for inflation, the minimum wage, the ratio of debt to GDP or tax rates. The only policy he seems to have produced in the past two years is the 10 per cent. tax rate—he has quietly dropped that now—which even the Institute for Fiscal Studies described as a gimmick.
  The Labour party can run, but it cannot hide—to use Ronald Reagan's words. It drops hints about the appalling regime that it would visit on British industry if ever it got its hands on the levers of power. We have seen 30 new spending pledges in the Labour party's recent manifesto. The leader of the Labour party made no fewer than 15 spending pledges during his speech at last year's conference. The Labour party seems to vote against every attempt to reduce longer-term spending and it has spent its windfall tax on utilities 11 times already. It has tried to tie growth targets to inflation targets, but its economic adviser, Gavyn Davis, has said that that raises dangers of inflationary pressure.
  The Labour party wants to impose the social chapter and it thinks that secondary picketing, which visits ills on companies not even involved in industrial disputes, can be sensible, workable and fair. It has also made noises about regional development agencies that will second-guess investment by trying to make investment decisions for business men. That will lower the rate of return, lower investment and politicise the industrial scene in the way that effectively bankrupted this country in the 1970s, when the last Labour Government could not manage their affairs and had to call in the International Monetary Fund.
  The Labour party has no credibility and the Government are right to believe that we cannot stand still in an increasingly competitive world: we must constantly change for the better. I agree with my right hon. Friend the Member for Wokingham (Mr. Redwood) that we must reduce Government expenditure. The need for a reduction is shown by the fact that the control total is scheduled to rise by 5.5 per cent. in the next two years, in an environment of low inflation. That total also assumes that there will be no increase of any size in cyclical social security payments. A reduction of £6 billion or £7 billion pounds is not unattainable.
  Strangely, I also agree with the hon. Member for Brent, East in relation to interest rates. I think that there is a lot of slack in the economy and that we could reduce interest rates without taking any risk on inflation—all the inflation indicators appear to be happily depressed at the present time. Recently, the Institute of Chartered Accountants released a survey showing that lack of finance for small companies is the biggest inhibitor of growth. If people can get cheap finance, there will be more investment and growth.
  I welcome the bonds for pensioners that were introduced in the last Budget—I believe that they are 7 per cent. or 7.5 per cent. gross. Obviously, pensioners will suffer because of low nominal interest rates. I believe that

  1213
  we should go further in the next Budget and change gross to net—that is, introduce bonds for pensioners paid on a net basis. That would give pensioners a return on their savings and encourage thrift, which is necessary if we are to encourage investment over the next few years.
  I congratulate the Government on their summer economic forecast and the report that goes with it. It is good, sound macro-economic management. The Labour party does not have any credibility so far as its non-promises are concerned. We would see a return to the 1970s, which is the last thing that the vast majority of my constituents want. New Labour will be the same danger as old Labour. I support the summer economic forecast.
  8 pm
  Mr. Hugh Bayley: Last November—at the time of the last Budget—I asked the Library to calculate the level of taxation, at constant prices, under the last Labour Government and in every year since then. The figures revealed that, in real terms, every year that the Conservatives have been in power they have taken more money in taxes from the British people than the Labour party did in any year of the last Labour Government.
  When I raised that fact in debate, Government Members said that it was not true. They then looked at the figures and saw that it was true and they admitted that taxes under the Conservatives had risen in real terms, but they claimed that a lower percentage of our national wealth—our gross domestic product—was taken in taxes. That is also wrong. In 1978–79, 34.3 per cent. of GDP was taken in tax, and that percentage has been higher every year since the Conservatives have been in power. It is projected that this year taxation will be 36.3 per cent. of GDP. Government Members finally admitted that taxes have been higher both in real terms and as a percentage of the national wealth under the Conservatives than was the case under the last Labour Government, but claimed that it is because borrowing under the Conservatives has been less. That is also wrong.
  I asked the Library to update the figures for this debate. It has given me a set of figures, at 1995–96 prices. In relation to income tax—the flagship of the Conservative party's fraudulent claim that it is charging people lower taxation than the last Labour Government—in 1978–79 the then Labour Government took £57.2 billion in income tax at today's prices whereas last year the Conservative Government took an all-time high of £68 billion in income tax.
  Social security contributions have increased from £30.6 billion, at current prices, under the last Labour Government to £46 billion. Taxes on expenditure, including VAT, are up from £71.7 billion under the last Labour Government to £118.8 billion now. If one looks at the total taxation figures, in the last year of the Labour Government it was £175.2 billion, or £3,070 per person, at 1995–96 prices; this year, according to the forecast that we are debating today, it is £264.4 billion, or £4,640 per person. As a proportion of GDP, taxation is higher now than it was in 1979 when Labour was in power.
  As for the public sector borrowing requirement, excluding privatisation receipts, in the last year of the last Labour Government it was £27.4 billion at today's prices; last year it was £34.6 billion—a borrowing of £591 per
  1214
  person. I shall look at the PSBR broken down on a per capita basis, because that makes it more understandable for me and for most people in this country. I shall look at what the Conservative Government have borrowed since the last general election: in 1992–93, they borrowed £824 for every man, woman and child in this country; in 1993–94, they borrowed £912 per person; in 1994–95, they borrowed £743 per person; in 1995–96, they borrowed £591 per person; this year it is projected that they will borrow £523. They have borrowed more than £3,500 per person, and they claim to be a fiscally prudent Conservative Government. They cannot keep living on tick—at some point they have to repay the money. Borrowing is fine in the short term, but it is deferred taxation. That is why the Labour party subscribes to the golden rule that we should borrow only for investment.
  The Chief Secretary to the Treasury (Mr. William Waldegrave): What was the PSBR average as a percentage of GDP under the last Labour Government?
  Mr. Bayley: I do not have that figure with me, but I know that it went down.
  Mr. Waldegrave: The average was 7 per cent. of GDP.
  Mr. Bayley: We left Government in 1979 with borrowing as a percentage of GDP lower than we inherited from the Heath Government. The Conservative Government have increased borrowing in real terms. Of course borrowing has gone up and down—that is the nature of the economic cycle—but the Conservatives are claiming that the reason why the level of taxation under them has been higher every year than that levied by the Labour Government in 1979 is that borrowing is under control: that is a myth, and we need to dispel it today.
  How are we to deal with this problem? The Government's secret agenda—which was spelt out in The Times today—seems to accept that the country is locked in an inevitable spiral of economic decline, that we are going to be overtaken by Indonesia, Brazil and Thailand, that there is nothing we can do about it and that we must respond by cutting welfare. That will create a two-nation Britain: the rich will pay more for insurance, for razor wire and for security for their property; the poor will become ever poorer, more desperate and more disadvantaged.
  The Conservative policy follows the orthodoxy of Newt Gingrich's contract with America and it has now become the orthodoxy of young career civil servants in the Treasury. The Conservatives seem to have forgotten that Newt Gingrich's contract with America was a failure. He may still be the Speaker of the House, but he is marginalised and Dole lags in the polls. I refer to comment from the United States. E. J. Dionne from the Washington Post has recently written a book in which he says that America is on the threshold of a new progressive era because the contract with America simply did not work.
  The No Turning Back group and many people in the Treasury are calling for privatisation of the welfare state. Former NHS chief executive Duncan Nichol, in his "Healthcare 2000" report, called for the NHS to contract to become a welfare service for the poor. We should not be surprised to hear that, as he now works for BUPA. The study was funded by the private sector and it is in his interests to argue for private welfare.

  1215
  It does not have to be like that. This country faces a simple choice: the option proposed by the No Turning Back group—the right wing of the Conservative party—and by civil servants in the Treasury of ever-increasing decline and lack of competitiveness, including the privatisation of welfare, or Labour's welfare-to-work strategy, which would begin the slow and difficult task of reducing the amount of public finance that is spent keeping people out of work. Under that strategy, people would be trained for work in order to improve this country's wealth and provide the resources to rebuild the welfare state.
  8.10 pm
  Mr. David Tredinnick: When I was chosen as a parliamentary candidate for the constituency of Bosworth, I was told that the seat reflected opinions across England. I was told that it was a "swing" constituency and that I should monitor the statistics carefully. I have good reason to do that because, as the hon. Member for Oxford, East (Mr. Smith) will recall, the seat was originally held for the Labour party by the well-known former socialist Woodrow Wyatt. My predecessor Sir Adam Butler won the seat from him for the Conservatives and my hon. Friends will rejoice to hear that it is held by the Conservatives now with a 20,000 majority.
  I pay tribute to the Trades Union Congress, which inspired my speech by sending me statistics reflecting the trends in middle England and in my constituency. My constituency is located geographically in the middle of England, on the boundary of the east and west midlands, on the county boundary of Leicestershire and Warwickshire, and two miles from High Cross, the Roman centre of England. The TUC wrote to tell me how the unemployment pattern has changed among my constituents aged under 20 and under 25.
  Some 110 people aged under 20 are registered as unemployed in my constituency. I regret that fact. However, in 1991 the figure was 181. Therefore, we have seen a decrease of 71—a 40 per cent. reduction in the number of young unemployed. The unemployment figure for the under-25s is only slightly less impressive. It is now 430, but in 1991 it was 622—that is a reduction of more than 30 per cent.
  The Government's economic policies have made it possible to reduce unemployment among the young. There has been a tremendous increase in inward investment in the part of the east midlands that I represent. We have heard about the Korean investments in south Wales, which I welcome. Investment in my area has been assisted by the Government's sensible policies and the approach adopted by my local council—which was controlled by the Conservatives until recently—over the years in encouraging companies to relocate to my area.
  The economy of the east midlands has grown faster than the United Kingdom average. I would be concerned about that if I were a Labour Member of Parliament because, if the Labour party cannot win seats in the midlands at the next election, it will have little chance of forming a Government. The relatively low cost base in the east midlands makes it attractive to investors. I fear that, if a minimum wage were introduced, we would see a massive shedding of jobs in my constituency.
  I am proud to represent a hosiery and knitwear constituency. Many of my constituents are employed in that industry. which has taken great steps forward in
  1216
  recent years. It has always faced competition from cheap imports and very low labour rates abroad. If the Labour party were to come to power, I have no doubt that the minimum wage would prove immensely damaging to my constituents' prospects.
  I was much entertained by the speech of the hon. Member for Brent, East (Mr. Livingstone)—I regret that he is no longer in his place. Having stood in the 1981 Greater London council election and observed his style of politics, I remember that his approach was not too different from that of Newt Gingrich—I recall leisure centres appearing in the Brent constituency before general elections. He made an appalling contribution to the governance and management of London. In view of his track record, it is astonishing that he should talk about the transformation of Britain under Labour.
  The policies of my right hon. Friend the Prime Minister have improved the road network in Leicestershire, with the Leicester western bypass, the A5, and new junctions on the M1 and the M69. However, there is mounting pressure on industrial space. Finding companies to move to the area is not a problem in Hinckley: the problem is where to put them. The Government's economic policies have proved so successful that companies are flocking to the area. Bulldog Computers is located on four sites but it cannot find one single site. I urge the local councillors to address that issue. I hope that the battle for space will be resolved successfully.
  Companies that produce machine tools and metal works are also doing very well. The hon. Member for Oxford, East will be interested to learn that some car dealers in my constituency are reporting a 40 per cent. increase in sales from last year. The MG is in great demand from Trinity Motors, which is the main Rover distributor. Perhaps the hon. Gentleman will cast his mind back to the days of Red Robbo at Longbridge. Will he stand at the Dispatch Box and say that the British motor industry was better off in those days? Of course he will not because he knows that our policies have transformed Britain's motor industry. We introduced the disciplines of Japanese construction and management and revitalised Rover, saved Aston Martin and injected new capital into Jaguar. The Conservative Government are responsible for improving the motor industry, and the hon. Gentleman should recognise that fact.
  The hosiery and knitwear industry faces real problems with the introduction of new environmental standards which threaten some of the dye works in Hinckley. I have appealed to Severn Trent to review the huge costs that it proposes to impose on some manufacturers in my constituency. I hope that Severn Trent will resolve that matter so that small companies are not forced to pay 100,000 for their own treatment works.
  We are now in our fifth year of growth. Gross domestic product is projected to grow by 2.5 per cent. in 1996. Personal incomes increased by 3 per cent. in 1995 and they will continue to rise rapidly. House prices are up 5 per cent. while mortgage rates are at their lowest level for 30 years. Inflation has been crushed. As my hon. Friend the Member for Wyre Forest (Mr. Coombs)—he is in the Chamber but not in his proper place; he is a man of many places and many parts—said, this country's macroeconomic policies are the best for 30 years. We now have a balanced economy, and the stability that is so vital to the future of Britain. That stability would, of course,

  1217
  be destroyed by the Labour party, which already has 30 pledges in its manifesto which would involve higher spending.
  What will a publicly owned, publicly accountable railway system cost? What will happen if council tax capping goes? I shall not entertain the House with the list of 30 pledges again, as I am sure that we heard it earlier, but with these additional spending policies, it is simply inconceivable that taxes will not rise under a Labour Government. We must recognise that. Labour cannot have it both ways. They will not give the true story to the British electorate. What is their target for the PSBR; interest rates; public spending; local government settlements; health spending; defence spending; inflation; and spending on police? They will not tell us.
  I would fear for Hinckley and the surrounding areas in my Bosworth constituency if the Labour party ever found power again. It is new Labour, perhaps, but new danger for sure.
  8.20 pm
  Mr. Ian Pearson: Over the past few weeks, we have seen a ritual massaging of expectations from the Chancellor, talking down the scope for tax cuts in advance of the Budget. The summer economic forecast continues that process, carefully massaging figures and talking up the United Kingdom's prospects in advance of the tax cuts that are sure to come.
  There is every sign that the Chancellor is playing fast and loose with inflation, stoking up a pre-election consumer boom in a cynical attempt to buy votes. One has only to look at some of the figures in the summer economic forecast to see that. It predicts that consumer spending will grow by 4¼ per cent. in 1997, which cannot easily be reconciled with projections that inflation will fall back to 2¼ per cent. next year. Both M0 and M4 are outside their monetary range.
  I do not believe reports that inflation is dead. It is essential that we continue to bear down on inflation. Frankly, I am not convinced that we have done that sufficiently. The Government's record on inflation is poor by comparative standards. We are 10th or 11th out of 15 EU countries, depending on whether the measure of inflation is the current year method or the average inflation rate of one year compared with the previous, which seems to be the criterion that is likely to be adopted under Maastricht.
  Mr. Tim Smith: Will the hon. Gentleman remind the House what the average rate of inflation was under the last Labour Government?
  Mr. Pearson: I remind the House that I had just left school and was at university during the last Labour Government.
  The Maastricht convergence criteria—that an economy has to be within 1.5 per cent. of the best three countries on inflation—is a useful discipline, but we should go further if we are serious about bearing down on inflation. As a policy on inflation, we should aim to be in the bottom quartile of EU countries in the medium term. Depending on the method used to calculate inflation, that implies a maximum inflation rate of 1.4 per cent. or 1.6
  1218
  per cent. currently. I see no reason why, in the medium term, Britain should not aim to have inflation rates in the lowest quartile of our competitors. If we are to have a competitive, modern economy, our inflation record must be at least as good as that of Germany, France, the Benelux countries and Finland, which are some of the best performing countries at the moment.
  With manufacturing flat on its back, but most of the economy starting to go like a train and consumer spending looking set to boom, it would be stupid and irresponsible for the Chancellor to look for a further ¼ per cent. cut in interest rates at the end of the month. I suspect that the financial markets might let him get away with it, but the best course of action at the moment would be for interest rates to remain at the same level.
  I am concerned about the future of manufacturing industry. Interest rates are a crude weapon at the best of times, and I believe that what is required in the Budget—preferably sooner—are targeted initiatives to stimulate manufacturing and the construction sector, such as the phased release of local authority housing capital receipts. It is mind boggling that the Government have not considered and implemented that as an option.
  The summer economic forecast revises down projected growth figures from 3 per cent. to 2¼ per cent. for this financial year. It is part of a miserable track record on growth. The average growth rate since 1979 has been just 1.9 per cent. a year—worse than any other Group of Seven country or, indeed, any other major EU country. In the 1990s, the United Kingdom economy growth rate has averaged less than 1 per cent.
  I believe that we should set a target and try to increase the sustainable trend rate of growth to 3 per cent. per annum. That would put growth rates back almost to what they were in the 1960s, and almost to what the Government achieved in the 1980s. That is a wholly acceptable and sustainable policy objective. It would, however, require far better performance than the Government have achieved to date.
  At the heart of such a policy objective is an improvement in this country's manufacturing sector. It is a disgrace that the summer economic forecast shows that the trade balance in non-oil goods was in deficit to the tune of £15¾ billion in the past financial year, which is projected to increase by a further £3 billion to £18¾ billion in 1996, and to be still higher in 1997. I accept that oil, services and interest on profits and dividends have helped to pull back some of our trade performance, but we are still not doing nearly good enough, particularly when export profit margins are still high, providing strong incentives for UK firms to supply foreign markets, and at a time when profits and the rate of return on capital remain high by historical standards.
  Some promising leading indicators have come out of the Confederation of British Industry and the British Chamber of Commerce recently, but all too often the promise has been "jam tomorrow," and that has not happened. We have to do better, and we need to look at initiatives to support manufacturing industry, such as tax breaks for research and development, restructuring the capital gains tax system to encourage greater long-term investment. We also need to examine the entire structure of the advance corporation tax system if we are to provide the support that United Kingdom manufacturing industry needs.

  1219
  Finally, on the state of the nation's finances, at the time of the November 1994 Budget, when optimism was at a peak, the PSBR for 1995–96 and 1996–97 was forecast at 3 per cent. and 1¾ per cent. of GDP respectively. The gap between the outturn now expected in this summer's economic forecast, and the one expected little more than a year ago, is £13.9 billion. That is equivalent to 7p in the pound on the basic rate of income tax. What is more, the public sector ratio of net debt to GDP will have jumped from 27 per cent. in 1991 to 46 per cent. at the end of this year. It is not a sustainable performance, and it is a disgraceful record.
  Our finances are in a hole. There appears to be a structural problem with corporation tax revenues and VAT revenues, and no amount of jiggery-pokery, with changes to the VAT payment on account scheme, in an attempt to put more money in this financial year, will solve that problem. The Government have blown a hole in public finances. They deserve to be blown away as soon as possible.
  8.29 pm
  Mr. Tim Smith: Listening to the debate, one is inclined to ask oneself whether Labour Members have read the "Summer Economic Forecast" which we are supposed to be discussing. The hon. Member for Dudley, West (Mr. Pearson) spoke of Britain's exports. What has the forecast to say about that? It says:
  "UK trade is highly competitive. Much of the gain to cost competitiveness and all of the gain to import price competitiveness have been maintained since sterling's exit from the ERM in 1992."
  It also says that in 1995
  "exports of non-oil goods"—
  that is precisely what the hon. Gentleman was concerned about—
  "grew by 8¼ per cent."
  I would have thought that an 8 per cent. growth rate in exports was pretty good—perhaps even comparable to the kind of growth that the right hon. Member for Dunfermline, East (Mr. Brown) apparently thinks the whole economy should enjoy, as does Thailand, perhaps rather unrealistically.
  The document also states:
  "Exports fell slightly in the fourth quarter of last year, when activity in Europe weakened, but then increased by 3½. per cent in the first quarter of this year."
  I consider that a pretty strong export position. It is ludicrous to complain that we have a large imbalance in terms of non-oil trade: if we view the current account as a whole, we see that this country is broadly in balance. The current account deficit is about 0.5 per cent. of GDP, a very small proportion.
  What irritates me about debates of this kind is the way in which Labour Members constantly run down Britain's manufacturing industry. The hon. Member for Dudley, West said that manufacturing was flat on its back. That is an outrageous criticism of British manufacturing: some British manufacturing companies can now take on the world. We have world-class companies in a range of industries. I am thinking particularly of pharmaceutical companies—very successful British companies in which there has been a tremendous amount of foreign investment, especially from America. Aerospace is
  1220
  another example. There has been investment by British Aerospace, and by many other successful companies—such as Shorts in Northern Ireland, owned by Bombardier of Canada.
  Mr. Pearson: I am not convinced by what the hon. Gentleman is saying about our export performance. At this stage in the economic cycle, our balance of payments should be in surplus. We cannot get around the fact that we have a deficit in manufactured goods to the tune of £18 billion or more.
  I do not want to talk the UK economy down; I do not want to talk the manufacturing sector down. I want to get us out of the mind set of the Beazer Homes league, and put us into the competitive position of the premiership. Let me quote a Japanese maxim: those who are dissatisfied will never make progress. We need constructive criticism; what we do not need are platitudes that suggest that everything in the garden is all right.
  Mr. Smith: The hon. Gentleman overlooks the fact that the Government have taken a series of supply-side measures over the past 17 years which have improved the United Kingdom's competitive position. For example, the productivity gap in manufacturing between this country and Germany has been considerably eroded. I believe that we are now in a much stronger trading position than either Germany or France. Both those countries desperately need to take the kind of supply-side measures that our Government have taken if they are to restore their own competitiveness. We are in an extremely strong position, and I am very sorry that the Opposition see fit to complain constantly about our circumstances.
  I congratulate my right hon. and learned Friend the Chancellor of the Exchequer. In the three years during which he has held his present office—I think that it is about three years—he has been one of the most successful Chancellors since the second world war. He has had to make some very difficult judgments, and he has got them right. As a result, we have arrived at a virtuous circle which few people would have predicted 15, 20 or 25 years ago.
  People used to say that in circumstances such as these—circumstances in which there was a good rate of economic growth and consumer spending was forecast to increase by more than 4 per cent. in the ensuing year, as the hon. Member for Dudley, West said—there would be inflationary pressures in the system. I do not agree with the hon. Gentleman. I think that the Chancellor has it absolutely right. Of course we should not be complacent about inflation, but I believe that there is plenty of spare capacity in the economy and that we shall see continuing growth without inflation. That is a remarkable achievement by the Government.
  I welcome the motion, and the Government's economic achievements. I hope that no sudden or fundamental changes will be made to their economic policy. I think that, if we continue our current policy, the benefits will gradually feed through to the consumer. As my hon. Friend the Member for Bosworth (Mr. Tredinnick) said, the housing market is picking up, and I think that the number of people with negative equity will start to decline.
  I am sorry to say—because I am sometimes quite entertained by speeches made by the right hon. Member for Dunfermline, East—that the right hon. Gentleman's

  1221
  speech was the worst that we have ever heard from him. It contained no humour, and nothing about economic policy. What a contrast it made with the speech of my right hon. Friend the Member for Wokingham (Mr. Redwood). It was an insult to the House. [Interruption.] The hon. Member for Rotherham (Mr. MacShane) cackles from a sedentary position, but the fact is that we heard constructive proposals from my right hon. Friend the Member for Wokingham, although we may not have agreed with every one of them. We did not hear a single constructive idea from the shadow Chancellor.
  Mr. MacShane: Is the hon. Gentleman prepared to apply the equivalent phrase to the Chancellor?
  Mr. Smith: I certainly am. I do not know where the hon. Gentleman has been, but I have said that I consider my right hon. and learned Friend to be one of the most successful Chancellors since the war. I mean that. I believe that his management of the economy has been greatly in the interests of the United Kingdom, and I am desperately worried by even the faintest prospect that the right hon. Member for Dunfermline, East might take over at the Treasury, because the record of past Labour Governments is so appalling.
  The hon. Member for Dudley, West (Mr. Pearson) said that he was at school at the time. I wonder what happened to his pocket money in 1975. I wonder whether his father increased his pocket money by 25 per cent.—for that is what he would have had to give to maintain the purchasing power of the hon. Gentleman's pocket money. People forget that, but we shall soon be celebrating—if that is the right word—the arrival of Dr. Johannes Witteveen, the director of the International Monetary Fund. He had to come in to sort out the United Kingdom's finances.
  Mr. Bayley: My hon. Friend the Member for Dudley, West (Mr. Pearson) pointed out that the United Kingdom is currently 10th or 11th out of the 15 European Union countries in the inflation league. Would the hon. Gentleman care to tell us where the UK was placed under the last Labour Government?
  Mr. Smith: Bottom of the league. The Labour Government's inflation record was appalling, and I am astonished that the hon. Gentleman even mentions it. I remember it better than most. I came into the House in April 1977, at the height of Chancellor Healey's unpopularity, when inflation was rising for the second time and the miners in Ashfield were concerned about the amount of money that was being taken from them in income tax. The standard rate of income tax was 35 per cent. One of the present Government's most magnificent achievements was to reduce that to 24 per cent., which has made a considerable difference to incentives. People should not be allowed to forget the last Labour Government's appalling record on inflation, tax, spending and borrowing.
  As I have said, it is 20 years since the IMF was hauled into this country to sort out the problems of the Labour Government. That is the extent of the depths that we reached. This country was the sick man of Europe. That is the short answer to the point on league tables made
  1222
  by the hon. Member for York (Mr. Bayley). People were desperately worried about this country's economic position. Today, this country is in a stronger position than for many years and that is why I warmly welcome the Government motion.
  8.39 pm
  Mr. Barry Jones: I am glad to follow the hon. Member for Beaconsfield (Mr. Smith), but I disagreed with his speech. Her Majesty's Government have had a bad time today, not because the Chancellor of the Exchequer gave the distinct impression that he was not in charge of his Department or because the right hon. Member for Wokingham (Mr. Redwood) made another bid to seize his party's intellectual leadership, but because Conservative Members looked divided.
  The right hon. Member for Wokingham made an animated and seemingly spontaneous speech. He was listened to by Conservative Members as a leadership contender and as a rebel. He set out his stall and suddenly we had a debate. As we listened and watched, some of us thought that we had discerned the opening round of the imminent general election.
  Whatever, my right hon. Friend the Member for Dunfermline, East (Mr. Brown), the shadow Chancellor, had a good time. He played the Chancellor like the angler plays his catch. By the time my right hon. Friend had finished with him, the Chancellor had resolved to return speedily to the Treasury so as to skin that anonymous grade 7 civil servant who had constructed such an explosive right-wing memorandum.
  References have been made to investment in Wales and to the 6,000 Korean jobs coming our way. That investment coup is one of the greatest ever for Wales in the employment sector. It is a great credit to the Welsh Office, to Newport county borough and to the Welsh Development Agency. All in all, it is a great credit to the people of Wales. In the years ahead into the next century, in south-east Wales, there is likely to be an explosion of prosperity. I hope so. The recipe for that success will include expanded training capacity in south-east Wales, two River Severn bridges, an effective motorway system and two good go-ahead cities in Newport and in Cardiff. I emphasise also the availability of a co-operative, loyal and flexible labour force. I hope that the former steelworkers and coal miners from the eastern valleys get a fair crack of the whip when they seek the available jobs. After the torrent of redundancies that they have suffered, they deserve to do so.
  May I make a plea for British Steel? What will the Government do? It is the third largest producer in the world. In 1994–95, it had revenues of £6.2 billion. It is now in the top 10 of Britain's best exporters, and everyone says that it is a lean and powerful industry. Hon. Members may know that 46 per cent. of its production is exported. Its European Union competitors, however, are not playing fair. Illegal subsidies are being paid. For example, the Belgian Government pump subsidies into a loss-making steelworks in Wallonia. My steelworkers at the Great Shotton steelworks seek a level playing field on which to compete with their EU rivals. After losing about 10,000 jobs in a short period, those steelworkers deserve that level playing field and more help from the Government.
  In our country, 560,000 people under 25 years of age and 168,000 people under 20 years of age are unemployed. In my constituency, the figures are 621 and

  1223
  189 respectively. I did not hear a scintilla of a proposal or policy from the Chancellor which would enable those groups of our fellow citizens to be given priority for work and for training, which was regrettable.
  In that context, if I may make a strong constituency point, the proposed closure of the jobcentre in the largest town in my constituency is cruel nonsense. The Buckley jobcentre is a valued facility which is used by many hundreds of people each week. The town of Buckley is appalled at the proposal to close the jobcentre. The town council of Buckley is astonished that the proposal should have been made. We all think that the centre should remain open. 'We want Ministers to intervene and to instruct the Benefits Agency to think again. No closure should be the answer. We and the community that I represent believe that the closure proposal engenders only distrust and insecurity in a large community.
  The request from north-east Wales is for the restoration of development area status, which was only recently taken from us by the Government in policy changes. We need both the social chapter and the minimum wage. Many people in work are bereft of dignity and of security and they have precious little hope. If the army of the young unemployed are not given better training and more meaningful work, in the fullness of time, they may wreck the communities in which they live. Throughout the Chancellor's speech, I did not hear him give answers to these deep-seated problems. He was over-sanguine in his approach. He gave us no new policies.
  The astonishing thing is that Britain has squandered £120 billion-worth of North sea oil revenues. In recent years, Britain has also squandered £80 billion-worth of proceeds from privatisation. We must ask: where did those moneys go? This national treasure was certainly not invested to any considerable degree in British manufacturing, in railway infrastructure, in the national health service, in the school service or in municipal housing. Those are sufficient reasons for us to say to the Government, "For heaven's sake, call the general election and face the country."
  8.47 pm
  Mr. David Shaw: There is no doubt that the "Summer Economic Forecast" is a remarkable document, because almost every page contains a considerable amount of good news. The only marginally less than good news is that the deficit is not coming down as fast as we would like, but it is coming down, so the document has a considerable amount of improving trends and good news—the sort of news of which any Government can be justly proud.
  We are starting our fifth year of economic growth. Even my constituents, especially those in the building trade, who had a particularly tough recession, are now acknowledging the improvements in the economy and the fact that trade for them is better than for some time. In my constituency, employment figures are much better than for some years. When I fought the general election in Dover in 1992, unemployment was some 15 per cent. more than it is today. We have a significantly improving trend, and I certainly hope that that will continue and that my constituents continue to benefit from a Conservative Government for many years to come.
  I was enormously disappointed by the speech of the Opposition spokesman. The right hon. Member for Dunfermline, East (Mr. Brown) sometimes manages to get
  1224
  a laugh or two in the House. He sometimes manages to entertain us and comes out with some interesting arguments. The speech today was the most appalling that I have heard from the Opposition. There was little mention of the economy. It was all on some civil servant's desktop exercise in the lower basement section of the Treasury—probably one of the sections that is prone to flooding and has a number of rats that eat away at the paperwork. I do not think that the Treasury desktop exercise was of much value and it certainly should not have taken up the amount of debate that it did.
  What had the shadow Chancellor learned from that desktop exercise? It was something about Thailand, which he alleged would overtake the United Kingdom. He should watch his affair with Thailand carefully, or he will earn the nickname of Bangkok Brown in this Chamber. It is laughable to suggest that Thailand has a better economy than the United Kingdom, or is likely to have one for many years, if ever. It is also laughable to imply that the current growth rate in Thailand is to do with socialism in any way, shape or form. Far eastern countries such as Thailand, Japan and Malaysia, which are experiencing strong growth rates, are doing so without socialism. They do not achieve high economic growth rates through a minimum wage or a social chapter. They steer clear of those disadvantages, which the Labour party wants to impose on us. They do not use socialist policies in Malaysia; they use strong, free market policies with an entrepreneurial background to them.
  The weakness in Labour's argument is that they are not only weak on policies, but weak on attacking our policies. They try to attack us on borrowing. When Labour was in office, it borrowed at twice today's levels. The Opposition try to attack us on the national debt now, but it was much higher as a proportion of gross domestic product when Labour was in office than it is today.
  One of the great successes of the 1980s was that we used oil revenues to keep our debt down. The United Kingdom has much less borrowing as a proportion of GDP compared with many counties in the European Union and the rest of the world. Indeed, we also ran our economy sensibly in relation to unfunded pension liabilities. Those are a major problem in many European countries, including Germany, France and Italy, but they are not a major problem in the United Kingdom. We have managed our social security and unfunded pension liabilities much better than any of the other European countries—those major countries that now have considerable difficulties to which they must face up. The cost of those difficulties may be as high as £10 trillion in the next 50 years. I hope that we never have those problems, and we have to ensure that we never have a socialist Government that would give us them.
  Mr. Bayley: At constant prices in 1974, the Labour Government inherited from the Heath Government a public sector borrowing requirement of £43 billion in today's prices. By the time we left office, it was down to £27.4 billion. Last year, it was up to £34.6 billion and it is projected to be £30.7 billion next year. Surely we had a better record on getting the PSBR down than the Conservative party, which has put it up.
  Mr. Shaw: The hon. Gentleman is trying to inflate the PSBR by a retail prices index figure. He is not considering the gross domestic product. He should consider how much

  1225
  GDP and debt are as a proportion of the PSBR. If he did so, he would realise that the Labour Government left office with average borrowing of some 7 per cent. of GDP, as the Chief Secretary to the Treasury told us earlier. It is less than half that today—we are down to just over 3 per cent. of GDP on an annual deficit basis.
  Also, we do not have the unfunded pension liability problems of Europe, so we are more likely to meet the Maastricht criteria than Germany, France and Italy. Those countries will meet them only if they are fiddled criteria. This country's position is very strong indeed.
  The Labour party has been distorting other figures. The Opposition tried to refer to the proportion of taxes taken by GDP today, but they did not say that one has to add taxes and borrowing together to get a true measure of what the Government are taking out of the economy. I am pleased to say that, this year, the Government have got the proportion of the economy taken out by taxes and borrowing down below what it was when Labour was in office in 1979. More important, we have got it down below what it was under Labour, with lower interest rates because the City is confident that this Government are worth lending to. It charged a Labour Government a higher rate of interest.
  Mr. Bayley rose—
  Mr. Shaw: I would like to give way again, but cannot do so because of the time.
  In the remaining part of my speech, I want to question Labour policies. The main policy which I heard was of taxing the utilities and squeezing resources out of them. Who is going to pay? Do the British public think that, if Labour squeezes the utilities, the money comes from nowhere? Of course it does not. It is real money that the utilities would have to find, and there are only two sources: ultimately, they would have to find it from the shareholders or from the customers. Who are the shareholders? They are the 16 million ordinary men and women who are savers in pension funds, private pension funds and life insurance. So, the Opposition have said today that their tax on the utilities will squeeze shareholders who are savers in pension funds, private pensions and life insurance. Ordinary men and women will have their savings squeezed by Labour, if there is a windfall profit tax on the utilities.
  Ultimately, customers will also have to pay the tax. That means that electricity, water and gas bills will rise. It means that we will have to have a wattage tax, a water tax and a therm tax. Three new Labour taxes that will hit the utilities and their customers. The Opposition have not even explained what they will do in Scotland with the windfall tax on Scottish water, which is in the public sector. Who will pay the extra windfall tax in Scotland, or will it be an extra surcharge on English people? Will we have to pay on English water the extra money for Scotland? The reality is that Labour will tax the consumer and it will charge the consumer.
  Mr. Deputy Speaker (Sir Geoffrey Lofthouse): Order. Time is up.
  Several hon. Members rose—
  Mr. Deputy Speaker: Order. If the hon. Members who are hoping to catch my eye are brief, they will be able to speak.
  8.58 pm
  Mr. Stephen Timms: During Nelson Mandela's visit to London last week, the joy and celebration surrounding the President were palpable. We can be proud of the welcome that our communities gave to a man who restored many people's faith in politics.
  The welcome for President Mandela in Brixton was warmer than ever, but he saw there a side of modern Britain that I suspect the Government would rather he had not seen. For despite the tremendous spirit of people who live in Brixton and in my constituency, such places give the lie to the Chancellor's portrayal of a country in the full bloom of economic recovery.
  Mr. Mandela saw a community where, for many, the idea of a secure job is nothing but a pipedream; where an increasing number, particularly of young men, but also of young women, have never had a job; and where too many young people face the prospect of permanent exclusion from economic life—of moving from being unemployed to being unemployable. The community that the President of South Africa saw should, for all its spirit and resilience, make the Chancellor very uncomfortable indeed. The Government have failed the hardest pressed, and all of us are paying the price. That is the context for the debate.
  The most telling comment on the President's visit was made in a television interview with one of the community leaders in Brixton, who has lived there for a long time. He said that things are getting gradually worse in the community because of the large and growing number of young people, especially young men, who do not have a job, who have never had a job and who have no prospect of a job in the foreseeable future. That is a dreadful state of affairs for them, but not only for them, and that is what the Government have disastrously overlooked. The price is being paid not only by young unemployed people, but by the whole community—in benefit payments, in wasted energy and ability, in crime and in a next generation brought up from birth in a hopeless situation.
  I am pleased that my right hon. Friend the Member for Dunfermline, East (Mr. Brown) has put that problem at the heart of his economic programme for the next Government, with a pledge to get 250,000 under-25s off benefit and into work. We neglect those people at our peril, and we cannot afford to do so for much longer.
  The Chancellor may not have many friends in Brixton, but he does not seem to have all that many friends elsewhere—he certainly does not have many in the press. When he published the "Summer Economic Forecast" last week, the Financial Times said that it showed that Britain's fiscal position
  "could be toppling into a hole".
  Far from having room for tax cuts, as his party has required of him, the Financial Times says:
  "On plausible assumptions about economic growth, fiscal buoyancy and spending, tax increases may be required."
  Yesterday in the Treasury Committee, the Governor of the Bank of England told us that the poor state of the public finances worried him. He said:
  "It leaves me uncomfortable that there has been this kind of slippage",
  and he referred to the unsustainability of the 4¼ per cent. growth in consumer expenditure that the Chancellor forecasts for next year. The Chancellor's continued bland denial of the problems in the economy must be disconcerting indeed.

  1227
  One might assume that the Chancellor has one or two friends on the Conservative Back Benches—presumably he does, although they have not been evident in the debate. The hon. Member for Beaconsfield (Mr. Smith) paid tribute to the Chancellor, but on the whole we have heard Conservative Members' usual attacks about his spending too much. We heard an interesting speech from the right hon. Member for Wokingham (Mr. Redwood), who seemed to believe that some accounting devices to do with contingencies could be used to achieve substantial spending reductions.
  Presumably the Chancellor still has one or two friends on his Back Benches: according to one Conservative Member quoted in Sunday Business he has not just one or two, but five. We are told that that is the number of Conservative Members who believe in what he is doing.
  There are real problems in the economy, and they have been laid out once again in the Treasury's "Summer Economic Forecast". In particular, the level of public borrowing is giving great cause for concern. After yesterday's announcement of a £3.7 billion deficit just last month, expectations are clearly rising that this latest revision will have to be revised in the wrong direction again.
  There are some serious problems about the shortfall in revenues, which has led to this PSBR overshoot. Some parts of the shortfall can be attributed to the weakness of the economy. The low income tax receipts are perhaps unsurprising given the increase in part-time work and the stubbornly low wages that are a trademark of the post-recession period. The poor corporation tax returns are indicative of weaknesses in the corporate sector—another sign of the painfully slow recovery. The real mystery is what has happened to VAT. Why were last year's VAT returns 2 per cent. lower than projected, creating a significant and worrying £900 million hole in the finances which the Government are unable to explain? I urge the Chief Secretary to ensure that more is done to find out what has happened to that tax revenue.
  Customs and Excise should be asked to carry out a sector-by-sector—firm-by-firm if necessary—survey of companies, comparing last year with the year before to establish just what has happened to VAT, which had been expected but has not materialised, and which of the many possible explanations are correct. We need to know what has gone wrong. The Government do not know, and they need to find out.
  Lower VAT receipts contributed to the higher than expected PSBR, but one aspect of the borrowing forecast which puzzled me was the relationship between the PSBR and the general Government financial deficit—the alternative measure of the same thing—the significance of which is that it is the measure on which we shall be judged for the Maastricht criteria next year, the target being that the GGFD should be below 3 per cent. in the next calendar year.
  The Chancellor has told the Treasury Committee that it is touch and go whether we shall be within the Maastricht limit. I hope that we shall be, so that if we choose to join the single currency at the outset we shall be in a position to do so, but it requires an optimistic reading of the "Summer Economic Forecast" to believe that it will still be possible to do so.
  What is puzzling is that the forecast shows the GGFD to be £4 billion more than the PSBR last year and almost £4 billion more this year, but next year, suddenly, the
  1228
  GGFD is forecast to fall below the PSBR and so, miraculously, to scrape just within the Maastricht ceiling. I find that just a little implausible.
  It is an irony that, in November, the Chancellor will face the decision about tax cuts in order to please his Back Benchers, knowing that if he goes ahead with them he will almost certainly make it impossible to achieve the Maastricht 3 per cent. deficit criterion.
  I urge the Chancellor to do the right thing rather than yield to the siren calls—of which we have heard so many today from Conservative Members—to cut taxes irrespective of the damage to public finances and public well-being which will result. The reality behind the figures in the forecast is that the problems of the young, long-term unemployed in areas such as Brixton and my constituency are not being addressed and we will continue to pay a high price until they are.
  9.6 pm
  Mr. Bernard Jenkin: I am grateful for the opportunity to catch your eye, Mr. Deputy Speaker, at this late stage of the debate, particularly as I have not had the privilege of being present in its early stages due to my duties elsewhere in the House, in particular on the Select Committee on Social Security.
  I am mystified when I hear Opposition Members urge the Government to achieve the Maastricht deficit criteria, as if there was anything less relevant to the real lives and anxieties of business men and individuals throughout the country. Nothing is more calculated to destroy the credibility of public policy than imposing those artificial debt criteria on the economies of Europe when it is entirely inappropriate.
  A more appropriate subject for discussion is what business men in my constituency raise with me when I discuss the current business climate. They talk about a steady increase in business confidence and a steady improvement in the business climate, which is borne out by their experience and by the unemployment in my constituency. Since unemployment peaked in December 1992, unemployment in my constituency has fallen by 43 per cent.
  If there is one measure that is a testament to the success of Government policy in recent times, it is that dramatic fall in the rate of unemployment. We know that unemployment in the United Kingdom is now substantially below the average of our European competitors. That is strong testament to the success of Government policy in recent years.
  I want to relate to the House one brief anecdote from the run-up to last year's Budget. We had a presentation in my constituency by a Midland bank economist. He said, "Ladies and gentlemen, when you hear the Chancellor of the Exchequer telling you that we have the most benign economic circumstances for a generation, I am terribly sorry to tell you he is telling the truth." That not only gave me great comfort, but as the message went around the country, it gave great confidence to British business.
  The opportunity that we now have, as we consider the "Summer Economic Forecast" and the run-up to the next Budget, is not as fraught with difficulty as some would have us believe. The deficit that the Government must fund is certainly a matter of concern, but while deficits have to be funded, the overall economy must be the

  1229
  priority. We would do well to learn from what Ronald Reagan achieved for the American economy in the 1980s. The fact is that Reaganomics works. It got a bad reputation because Congress refused to cut public expenditure in the light of President Reagan's defence expenditure priorities.
  The key element of Reaganomics was that tax reform led to substantial improvement of Government revenues. That is the opportunity that we should grasp. If we have the courage to reform taxation by, for example, reducing substantially the rates of inheritance tax and capital gains tax, we will reap the benefit of extra tax yields and be able to reduce the Government's deficit accordingly. Timidity and the conventional economic forecasts that tend to be produced by the kids in the Treasury are not a reliable guide to the likely outturn of such reforms. I congratulate my right hon. and learned Friend the Chancellor on showing suitable cynicism about what some of his officials produce. He should show the same sort of cynicism to their traditional view of cuts in the rate of capital gains tax. Such cuts will not reduce revenues, but increase them.
  We must bear in mind the threats to the benign economic circumstances that we enjoy today. I despair when Opposition spokesmen talk about what they believe to be the frittering away of oil revenues and privatisation proceeds. They demonstrate a fourth-form understanding of economic dynamics in a modern, industrial economy. The proceeds of privatisation and oil revenues have been put to good use not only in increasing the rate of investment but in substantially restructuring the economy so that industries which had previously been a great burden on the British taxpayer and a drag on economic growth have become part of the dynamic of the British economy. They add not only to economic growth, but to the Government's revenues. We used to pay more than £50 million a week in subsidies to the industries that we privatised. Now, they yield £50 million a week for the Government in dividends and tax revenues. We should celebrate such a turnround, but the Opposition do not understand it. Such fourth-form economics is a threat to our future.
  The Opposition do not appreciate other threats, such as the growth of social security expenditure, which the Government have been struggling to control. As a member of the Social Security Committee, I am well aware of its growth under the Government. However, in recent years, we have had an excellent Secretary of State and successive Chief Secretaries to the Treasury who have fought to control the rate of its growth so that it is now below the rate of economic growth. That is the key point. Social security expenditure is now growing at a lower rate than the trend rate of economic growth.
  The Labour party criticises the Government for the growth in social security expenditure, but that opposition should be juxtaposed with the fact that it has opposed every measure that we have proposed. Perhaps the Opposition were relieved to lose the Division earlier this week on the restoration of benefits to bogus asylum seekers. The amount may have been insignificant—it was £300 million and growing—but nothing better demonstrates the Opposition's unfitness to govern than
  1230
  their failure to understand that such measures are absolutely necessary to control social security expenditure.
  I want to refer to the research conducted by my hon. Friend the Member for Dover (Mr. Shaw) into unfunded liabilities, which are another threat to the United Kingdom's economic growth. It is most important that we continue to fund the future liabilities that we have taken on as a Government for future pensions. The progressive capitalisation of the state earnings-related pension scheme by opting out, and perhaps the progressive capitalisation of occupational pension schemes, but most particularly the rigorous control of that pension liability, is important and compares extremely favourably with our continental competitors. Their unfunded pension liabilities represent significant proportions of their future gross domestic product, and a considerable threat to the stability of any future single currency. Perhaps they represent the strongest argument for Britain not to participate in a single currency.
  Germany's, unfunded pension liabilities, discounted to a present day price, represent 122 per cent. of its GDP. It is ridiculous that Britain should merge its currency with Germany to share that liability when we have gone so far to structure our economy so that our liability is properly funded. The danger of pursuing blindly the Maastricht criteria and the instincts continually exhibited by the Opposition demonstrates the key threats to our economy.
  The key question that we must keep asking is what are the real measures that we need to take to increase the trend rate of economic growth in our economy? They are not ones that would deliver higher public expenditure or mean sticking to particular economic criteria that might be laid down in a particular document. We must pursue measures that are designed to allow us to remain competitive, flexible and continue a downward pressure on public expenditure. We must also have an adventurous outlook on tax reform to maximise tax revenues. That is how we will get the deficit down and continue to secure the progress that we have enjoyed in recent years.
  9.17 pm
  Mr. Denis MacShane: In the two and a half minutes left to me, I have something to say.
  The Chancellor made a vigorous speech, but I think he will go down in history as the Chancellor of decline, because no index which places our nation in comparison with others shows that we have moved up under his stewardship. He is also the Chancellor of incompetence, because of his absurd handling of the public sector borrowing requirement—an impossible concept to get over to the person in the street—which is now utterly out of control. If he had been the financial director of any plc he would have been dismissed months ago.
  He is also the Chancellor of mediocrity, because of his failure to reform our tax system, which is not appropriate to the needs of our economy in the modern world. No new serious ideas have been proposed, except to increase the burden of taxation on the British people. Conservative Members may have seen the report published last week, which showed that the Government take a greater part of the pay of salaried employees than their counterparts in France or Germany. The 22 new taxes imposed since 1992 have had their impact.
  My main complaint against the Chancellor is based on the fact of my being the Member of Parliament for Rotherham in South Yorkshire, a part of the country

  1231
  completely ignored under the Chancellor's economic stewardship. As I pointed out to him earlier, the Deputy Prime Minister was in Wakefield yesterday, to make a long list of complaints about low investment, poor economic performance, poor-quality managers and low-performing firms, all of which contribute to Yorkshire's poor performance. After 17 years of Tory stewardship, the Deputy Prime Minister might have accepted some responsibility for that.
  Instead we have had this bravura performance today, in which the Chancellor said that we are living in the best of all possible worlds. It will not wash in Yorkshire, it will not wash in the country, and, as every Conservative Member well knows, it will not wash in the general election. I wish them well in their private sector retirement.
  9.20 pm
  Mr. Andrew Smith: The Chancellor is settling into a pattern with these debates. Each time, he blusters his way through a load of nonsense about Labour having no policies, hurls some harmless abuse at my right hon. Friend the Member for Dunfermline, East (Mr. Brown), refuses to answer my right hon. Friend's questions, ducks and weaves his way through selective statistics to avoid explaining why his own promises have come unstuck, then makes those same promises again, in the hope that the electorate will judge him on his prospectus, not his record. As my hon. Friend the Member for Rotherham (Mr. MacShane) said, it will not wash with the electorate.
  The Chancellor painted a rosy picture of the economy tonight, but my right hon. Friend the Member for Ashtonunder-Lyne (Mr. Sheldon) put it well when he said that the Chancellor's optimism was
  "wholly out of line with … previous experience".
  Labour Members reject the Chancellor's complacency about the condition of the British economy. We argue for the policies that we have set out—for macro-economic stability, for promoting long-term productive and profitable investment, for raising education standards and skills, for energising public-private partnership, for getting people off welfare and into work, for sticking to the golden rule on borrowing, and for sensible and constructive involvement in Europe.
  We argue for the policies necessary to get Britain pulling together for economic success, in the knowledge that economic strength and fairness go hand in hand, and that a Government cannot simply leave everything to the market if every individual is to make the most of their potential.
  That is Labour's approach, in place of the complacency and failure of the Government—a Government whose summer forecast shows higher borrowing, lower investment and weaker growth than they promised, more than 2 million people still unemployed, a million households in negative equity, inflation above the Chancellor's target and long-term interest rates one quarter higher than those of our competitors. And the Chancellor tells us that all is well with the economy.
  In last year's summer forecast debate, the Chancellor boasted of the performance on output, inflation, exports and unemployment. Let us consider what happened subsequently. The summer forecast tells us that output growth halved to 2 per cent. in 1995. Underlying inflation
  1232
  increased from 2.3 per cent. in 1994 to 2.9 per cent. last year. Exports slowed, as did the fall in unemployment. The summer forecast admits:
  "rising employment accounts for very little of the fall in unemployment".
  Across the 17 years of this Tory Government, output growth has averaged 1.9 per cent., even with the oil, compared with 2.4 per cent. for the G7. Inflation has averaged 5.8 per cent., compared with 4.3 per cent. for the G7 countries. Export growth here has averaged 3.5 per cent., compared with 5 per cent. for the G7. Unemployment has averaged 8.5. per cent., compared with 6.6 per cent. for the G7. Britain has the worst record of job generation of the major European economies, and the worst record of investment. We have fallen from 13th to 18th in the world prosperity league.
  As my hon. Friend the Member for Coventry, North-West (Mr. Robinson) said, these Tories are acquiescing in a disgraceful national decline. No wonder the kids in the Treasury now see Britain falling behind Brazil, Indonesia and Thailand.
  Mr. Robert -G. Hughes: The shadow Chancellor spent a lot of time on what have been called the kids in the Treasury. If he and his party are so against the idea of privatising, as he would put it, any of the welfare services—particularly pensions—can the hon. Gentleman explain his view of people who go to Singapore, which has a private pension scheme, and then return here and praise that scheme as one that has much to offer this country?
  Mr. Smith: The hon. Gentleman gives the game away. It is clear that the document is right, and that the Tories want to privatise the state pension and the welfare state.
  Mr. Hughes: The hon. Gentleman deliberately seeks to avoid answering the question. The state pension system in Singapore is private, as everyone knows. [HON. MEMBERS: "Wrong."] It is publicly invested, but it is a private system run by private companies. The Leader of the Opposition and the shadow Social Security Secretary have praised that scheme and, to some extent, the Chilean scheme. Does the Labour party want to emulate it?
  Mr. Smith: The hon. Gentleman has not been here for most of the debate, and to judge by the ignorance displayed in what he has just said, that is a good thing. He clearly does not understand the difference between first tier pensions—we have all made it clear that the state pension remains the foundation for security in retirement—and second tier pensions. The hon. Gentleman has given the game away: the Tories are interested in privatising the whole welfare state and the pension system.
  To return to investment: the Chancellor today said next to nothing about it—and I am not surprised. Total gross domestic fixed capital formation actually fell last year. As my right hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon) pointed out, business investment rose by only 1.5 per cent., compared with the 10.75 per cent. forecast in the November 1994 Budget.
  Such statistics would be worrying at any time, but at this stage of the economic cycle they are as alarming as they are unprecedented. At this stage of the 1970s cycle,

  1233
  investment was 26 percentage points above its level in the depth of that recession. In the 1980s cycle, it was 30 percentage points up. Now, it is only 5.8 percentage points higher.
  In the absence of sufficient productive and profitable investment, the danger remains, as the Government engineer their pre-election consumer boom, that weaknesses in capacity may result in unsustainable pressures on the balance of trade, on inflation, or on both.
  Mr. David Congdon rose—
  Mr. Smith: What is happening in particular sectors also contradicts the Chancellor's complacency. Manufacturing industry has moved into recession—a serious signal of economic weakness. As the Hongkong and Shanhai Banking Corporation put it in its economic prospects report last month:
  "The speed with which the industrial outlook has deteriorated over the past few months is frightening. Only an implausibly rapid rebound in the United Kingdom's key markets in continental Europe can now prevent 1996 becoming a year of stagnant output, struggling exports and lost jobs."
  The picture is no brighter in the construction industry, which has seen real output fall in four of the past five quarters. Large and small construction firms are being hit by the weakness in public and private capital investment, and by the fact that the PH has failed to match the Government' rhetoric.
  A number of my hon. Friends, including my right hon. Friend the Member for Llanelli (Mr. Davies) and my hon. Friends the Members for Brent, East (Mr. Livingstone) and for Newham, North-East (Mr. Timms), pointed out that, on public borrowing, we have seen the Chancellor's most abject failure to hold to his Budget promises.
  In his Budget speech, he said:
  "We have … got the public finances under control.
  I have therefore been cautious and prudent … in setting out the latest projections from the PSBR …
  The ratio of public spending to national income will be below 40 per cent. from 1997–98 onwards."—[Official Report, 28 November 1995; Vol. 267, c. 1057, 1063.]
  Although those were the Chancellor's words just eight months ago, they are contradicted by the "Summer Economic Forecast" before us tonight. Public finances are not under control and, as my hon. Friend the Member for Motherwell, South (Dr. Bray) pointed out, not only are the forecasts wrong—that might be understandable—but they are all wrong in the same direction.
  The Government's borrowing is set to exceed the borrowing they promised at the last general election by no less than £65 billion cumulatively. Last year's borrowing has been revised up by £10 billion; this year's borrowing has been revised up by £4 billion; and next year's has been revised up by £8 billion.
  We now learn that the ratio of public spending to national income will stay above 40 per cent. next year. Whereas in 1993 the Chancellor promised to eliminate the current public sector deficit by 1997–98, he now foresees a deficit of no less than £15 billion. The ratio of debts to GDP will have risen from 36 per cent. in 1991 to 56 per cent. by 1998.
  1234
  It is alarming that, even as the Government continually revise their borrowing upwards, they cut their capital investment. Net public capital investment at the time of the Budget was thought to be 14 per cent. lower than at the last general election. That is bad enough, but the figures in the "Summer Economic Forecast" now show that that has been revised to a 25 per cent. cut. Moreover, the forecast now projects net capital investment for the three years 1995–98 at 11 per cent., or £3.5 billion less in real terms than in the Budget.
  As the CBI warned yesterday, the PHI will not compensate for the scale of reduction in conventional capital spending. The "Summer Economic Forecast" shows that, at today's prices, public net capital spending in the three years since the PFI was launched was £4.9 billion less than in the previous three years, and the most recent estimate shows that private capital made up only £1.2 billion of the gap.
  Under this Government, borrowing will increasingly meet the current expenditure deficit. The Conservatives have not only broken the golden rule of public finances throughout the cycle, but they have replaced it with Clarke's leaden rule, that investment must be cut to enable borrowing to cover day-to-day running costs.
  The Chancellor keeps promising fiscal balance, but when will it come? He says that it will come in the medium term. He says that public expenditure as a share of national income will go down to below 40 per cent. in the medium term. He says that he will cut income tax to 20p in the medium term. The trouble with the Chancellor is that the medium term never comes.
  The Tories are borrowing like there is no tomorrow, perhaps in recognition of the fact that, for their Government, there will be no tomorrow. But the British people pick up the tab for their borrowing. It already costs £1,000 per household to service the national debt—nearly double the amount in the second half of the 1990s that it cost in the first half. What order of priorities is it for the Government to spend, as they do, more on servicing the national debt than on the whole of further and higher education put together? That shows the real cost that the people of this country pay for the grotesque financial mismanagement by the Chancellor.
  Whom does the Chancellor blame? He says it is not his fault: the boffins in the Treasury are to blame. On "Breakfast with Frost", he said:
  "My boffins got their estimates wrong."
  [Interruption.] Those were his words, and that is far worse than admitting that the Government's fiscal strategy is off course. He shamefully abdicated the responsibilities of his office, because it is contemptible for Ministers to blame civil servants, who cannot answer back, for the Government's failures.
  The Chancellor's stance put me in mind of the Rudyard Kipling poem, "Tommy", and a new verse could be affixed to the Treasury notice board:
  "It's Chancellor this and Chancellor that, when there's credit to be claimed,
  But it's all the fault of boffins when the forecasts can be blamed;
  It's boffins this and boffins that, and anything you please,
  But the public are not fools, you know, you bet the public sees."
  Mr. Kenneth Clarke: That is the best composition so far. The Opposition are having great fun spoofing the

  1235
  British press with the document that they claim contains our policy. The hon. Gentleman has now said that have blamed other people for problems with the public finances. I have been a Member for 20-odd years, and no Government have ever failed to alter their forecasts. A Labour Government would alter their forecasts, and that is why Parliament wants forecasts every six months.
  The Labour party is bereft of policy and criticism, and has built a ridiculous pyramid of claims that I blamed someone else for a crisis. That is complete nonsense. Can we hear a policy from the Government? [Interruption.] I mean the Opposition. Would they implement any different policies that might contribute to the situation that they have described?
  Mr. Smith: Yes, we would act for a strong economy; yes, we would increase productive investment; yes, we would get people back to work; and yes, we would bring borrowing down. During what must surely be the weakest intervention the Chancellor has ever made, I saw the right hon. Member for Wokingham (Mr. Redwood) smiling as he saw his prospective opponent for the Tory leadership handle so poorly my attacks on his borrowing record.
  Mr. Redwood indicated dissent.
  Mr. Smith: The Chancellor showed how defensive he is by intervening about the leaked document.
  Mr. Clarke: It is not a Treasury document.
  Mr. Smith: It is a Treasury document. The Chancellor blamed officials, but he got the forecasts wrong, and they are produced in his name. He answers the parliamentary questions, and it is not good enough for the Government to blame the boffins, any more than it is good enough for the Chancellor to blame the kids in the Treasury for something for which he should take responsibility. If the Government do not intend to privatise the welfare state, why set up a meeting with leading insurance companies to discuss privatising the welfare state? Why did that meeting take place today?
  We are not surprised when the Chancellor takes no responsibility for the fact that the country has its lowest share of world trade this century. We are not surprised when the Chancellor accepts no responsibility for the disgraceful levels of youth and long-term unemployment, and has no new ideas to do anything about that. But if the Chancellor will not accept responsibility for the documents being produced in his Treasury, that replicate pamphlets pumped out by his party's No Turning Back group, he should resign, and take the Government with him.
  People want a Government whom they can trust; they want a Government who will deliver on the action for investment, skills, welfare to work and fairness, which is needed for sustainable growth, sound public finances and quality services. That is what people want in the place of the confidence tricks, wishful thinking, buck passing and broken promises of the Chancellor and his discredited and divided party.
  Within 10 months, the people of Britain will have the chance to start anew and to have a better economic future with Labour. The Conservative party, with its record of broken promises, has nothing to offer this country but a
  1236
  campaign of fear and half-baked ideas from the American right. The British people will have none of it. They want a strong economy, a welfare state to be proud of, and fairness. With Labour, that is what they will get. I commend our amendment to the House.
  9.40 pm
  The Chief Secretary to the Treasury (Mr. William Waldegrave): It is difficult for me to comment on the speech of the right hon. Member for Dunfermline, East (Mr. Brown), because I cannot find anything to comment on. He referred to the great conspiracy of the insurance industry—as far as I can make out, we are searching for this great conspiracy everywhere, and we have not yet found it.
  The meeting that took place today was one of a series of meetings between the Department of Trade and Industry and the six big insurance companies—they have been taking place for years. The meetings were initiated by the Deputy Prime Minister when he was the President of the Board of Trade. They talk about the competitiveness of the insurance industry, which is a sensible thing for them to talk about.
  We published a Green Paper about this—perhaps the right hon. Gentleman did not read it—and about our plans for partnership schemes for long-term care. That is a sensible thing for us to talk to the insurance industry about. That issue took up about nine tenths of the right hon. Gentleman's long speech, and his argument in that regard falls.
  It is a pleasure to listen to the hon. Member for Brent, East (Mr. Livingstone) in his new mode. He talked about the serious contribution of the international bond markets—he never talked like that in the old days. However, he made one mistake in relation to business investment and Britain's performance on business investment—a mistake that was repeated by several Labour Members. Since 1979, the United Kingdom's ratio of business investment to gross domestic product has been marginally higher than that of Germany, France and Italy—the other European states in the G7. Of the G7 countries, only Japan has had a higher ratio than the United Kingdom since 1979, which is something to be proud of.
  The right hon. Member for Dunfermline, East actually made a policy statement—albeit a small policy statement—and it was the first policy statement that we have ever heard from him. He endorsed my right hon. and learned Friend's cut of ¼ per cent. in interest rates. It is the first time that he has made any comment whatsoever on these matters. It was a small policy, but it was the best that he could do. However, it is not entirely clear whether the right hon. Gentleman endorsed all the other interest rate cuts that led up to it.
  The right hon. Gentleman was not in the Chamber when his hon. Friend the Member for Dudley, West (Mr. Pearson) said that there was a grave danger of inflation, and that, if anything, interest rates should go up. This ¼ per cent. policy is already the source of a Labour split.
  I move from the not so grand contributions of Labour Members to the debate, to the contributions of Government Members.
  Mr. Pearson: Will the Minister give way?
  Mr. Waldegrave: No, the hon. Member has already made his speech. The debate should return to the realities of the economy.

  1237
  As has been said, unemployment has fallen today by 14,300, bringing it to the lowest rate for five years. My hon. Friends the Members for Colchester, North (Mr. Jenkin) and for Bosworth (Mr. Tredinnick) said that the unemployment rate is falling to a satisfactory level, especially among younger workers. According to the European Union standard basis, unemployment in Britain is 8.3 per cent. It is 8.9 per cent. in Germany, 11.6 per cent. in France, and 12.1 per cent. in Italy. The European Union average is 10.8 per cent., and we are well below that. We have seen a fall of about 830,000 in claimant unemployment since December 1992. Earnings growth fell today to 3.5 per cent., demonstrating once again the underlying strength of our economy.
  Mr. MacShane: Will the Minister give way?
  Mr. Waldegrave: No. The hon. Gentleman made a short and eccentric speech, and that is enough for now.
  I pay tribute to the hon. Member for Motherwell, South (Dr. Bray), who said, sadly, that it was his last contribution to the annual debate. He made a characteristically thoughtful and interesting speech about forecasting, which is his perennial expertise. I shall draw the attention of my right hon. and learned Friend to the interesting points he raised.
  The second fundamental of the economy is inflation. Retail prices index inflation in the year to June was 2.1 per cent.—a decrease from 2.2 per cent. in May. Producer input prices fell by 2 per cent. over the same period, and producer output prices rose by about 2.6 per cent, giving us another month of the best inflation performance for about 50 years.
  We are below the European Union average for unemployment, and we are now also below its average for inflation. According to the EU comparative measure, it averages 2.8 per cent, and our performance is below that at 2.7 per cent. I do not think that there have been many years—it certainly did not occur under the last Labour Government—when we beat the European averages for both unemployment and inflation. We should be proud of that achievement. The hon. Member for York (Mr. Bayley) referred to inflation under the last Labour Government, which averaged 15.9 per cent. That was higher than the European Union average for the same period.
  The third fundamental of the economy is growth. It was 4 per cent. in 1994, 2½ per cent. in 1995 and 2½ per cent. again this year, and it is projected to be 3.25 per cent. next year. The panel of independent forecasters believes that gross domestic product growth is liable to be close to 3 per cent. next year, and others think that it may be higher. Over the cycle, we have the ritual 1.9 per cent. average growth rate since 1979. Everyone knows that that is the wrong measure. When we measure cycle to cycle, we find that only Japan beats us on growth rate.
  The fourth fundamental of the economy is the household sector. It is understood that living standards are rising. Real personal disposable income rose by 2½ per cent. this year, and it will be about 3 per cent. next year. My hon. Friend the Member for Wyre Forest (Mr. Coombs) referred to several powerful independent voices, and reminded us how well the economic
  1238
  fundamentals are performing. He quoted George Simpson, who is a very good industrialist, and I agree with his comments.
  My hon. Friends the Members for Bury St. Edmunds (Mr. Spring) and for Milton Keynes, South-West (Mr. Legg) referred to the recovery in the housing market and its effect on negative equity. There was welcome news from the Woolwich today, which announced that negative equity fell by about 40 per cent in the second quarter of this year. That means that it has fallen by half in the last two quarters. They are very good figures. Its economist, Mr. Ellis, said that the steadily improving confidence, underpinned by stronger disposable earnings growth, lower interest rates and highly affordable housing, should ensure that the housing market recovery is sustainable. That is welcome news.
  We are performing better than the EU average on inflation and unemployment. Our current account deficit is entirely sustainable, as my hon. Friends the Members for Wycombe (Mr. Whitney) and for Beaconsfield (Mr. Smith), the latter in a characteristically excellent speech, said.
  That fact is recognised also by Labour supporters. Lord Desai, writing in The New Statesman in March, said:
  "Inflation is not only low by the standards of the past 30 years, but is going down."
  He was proved right. He also said that unemployment is falling, and continued:
  "Come election time, the economy may very well not be the strong card that Labour thought it would be".
  When those remarks were drawn to the attention of the right hon. Member for Dunfermline, East on the "Today" programme, his only response was to attack poor Lord Desai for being a Lord. That is not entirely his fault, as the Labour party made him a Lord. So, in the circumstances, that seemed a rather unfair ad hominem argument.
  The principles that underlie these very good performances in the economy do not come by accident; they come because of the performance, competitiveness and flexibility of the labour markets that the Government's measures have introduced over the years. My hon. Friend the Member for Carshalton and Wallington (Mr. Forman) said, "Think globally." He is right. In terms of the global economy, it is hard to find a mature economy that is more competitive than Britain now in terms of flexibility of labour markets and competitiveness.
  Mr. MacShane: The right hon. Gentleman lavished praise on all the Conservative Back Benchers who have spoken, but was scornful about me—[HON. MEMBERS: "Ah."]. Given that most Conservative Back Benchers who spoke praised excessively the speech of the shadow leader of the future Opposition, the right hon. Member for Wokingham (Mr. Redwood), can we have the Chief Secretary's comments on the contribution of the right hon. Member for Wokingham, who is in favour of the Treasury kids?
  Mr. Waldegrave: It never occurred to me that the hon. Gentleman needed any help from me in blowing his own trumpet, but I am quite happy to say that his short—eccentric, but short—speech was remarkable.

  1239
  I will indeed come to the point about my right hon. Friend the Member for Wokingham. My right hon. Friend made a number of extremely helpful suggestions, and I have to tell the Labour party that those suggestions will be useful to me in my job as Chief Secretary. Some of them I had already, with his help, and some of them—he will give me credit for—I might have spotted myself. But in saying that we shall return to the subject of public expenditure seriously this year, he is right, and we shall do that. I am grateful for his support, but I am also grateful for the support of everybody on the Conservative Benches.
  My hon. Friends the Members for Wyre Forest and for Bury St. Edmunds spoke about the outstanding performance of the economy in attracting inward investment. I think it was my hon. Friend the Member for Wyre Forest who referred to my friend, Professor Bhattacharyya, who, quite rightly, says that the investment that is coming here now may give the lie to the rather cheap line that Opposition Members try to put, that it is sweatshop investment. It is not. It is high-quality, high-tech investment. People come here because they know that we have highly skilled people, that we have a competitive market, that we believe in liberal free trade, and that we welcome them, unlike some other countries that are not so welcoming. We shall continue to do that.
  The CBI today, in a useful report, made those points, and said:
  "We have a leaner and more competitive industrial base both in manufacturing and in service sectors … Our Labour markets have become more flexible and responsive."
  The report reiterated the hostility of business to European social policies. It said that business wants our opt-out from the social chapter to remain, as it will, and argued:
  "Business opposes a national minimum wage, which would undermine flexibility and is a poor way to tackle poverty."
  That is what the CBI said today. Those are the policies that have produced the flexibility and good results that we have seen coming through.
  Mr. Paul Flynn: On the minimum wage, will the Chief Secretary explain why, two years ago, a British semi-conductor plant, which was on the site adjacent to where 6,000 Korean semi-conductor jobs are to come in my constituency, left to go to two countries—it is still prosperous and still producing semi-conductorsthat— have the social chapter and the minimum wage? Why was that?
  Mr. Waldegrave: For its long-term development, it seems to have been a strange decision. I suspect that it would have done better to have stayed in the hon. Gentleman's constituency.
  The right hon. Member for Sedgefield (Mr. Blair), the Leader of the Opposition, is, as always, beginning to get cold feet. He likes to give the feeling of the smack of firm government, but he caves in under pressure. That is an interesting point about him. He has already caved under the pressure of my right hon. Friend the Secretary of State for Scotland on devolution. He caved on the pensions pledge, which caused the formidable Lady Castle to say that she will come and haunt him. I suspect that being haunted by Lady Castle may cause him to do another U-turn on that matter.
  1240
  I understand that he has done a U-turn on the tube strike today. Interestingly, he is trying to signal to business that he is going to do a U-turn on the social chapter, but he has made such a pig's ear of it that it is clear once again that he does not understand the social chapter—and most of it goes through under qualified majority voting, which he has pledged to expand. I do not think that that attempted mini-U-turn will cut much ice.
  Labour is clear on only one thing—that it will reverse the policies that have led to our competitiveness. It will reverse them through the minimum wage, the social chapter and the restoration of the trade union power that has been properly limited by law in this country. To obtain testimony to that, and to the strength of the underlying changes that we have made and their connection to inward investment and job creation, it is best—as it often is—to seek an independent observer from abroad. People often see this country more clearly from abroad.
  Here are some quotations.
  "Excessively high German labour costs are costing more and more German jobs … There is really no call for a minimum wage in our economic system."
  "In Tony Blair's home country, unemployment has dropped in absolute terms by 20 per cent. since its peak in the eighties. In West Germany it has risen by 10 per cent."
  Those are not my words, but the words of Hans-Olaf Henkel, president of the German BDI, who—helpfully—spoke to Tony Blair when he went, as the Daily Mail said, to cuddle up to Mr. Kohl.
  On public spending, the president of the BDI said:
  "One of the Governments"—
  he meant the United Kingdom Government—
  "has steadily reduced state influence. The other"—
  Germany—
  "has done no such thing.
  In Germany, the ratio of public spending to GNP has risen to 50 per cent. In Great Britain, it has fallen to 42.2 per cent.
  In Germany, average taxes on retained profits are 64.9 per cent. In Great Britain the figure is 33 per cent."
  In all those claims, the president of the BDI was right. That is proof that the stereotype suggesting that Germans have no sense of humour is false—although I know it to be false anyway. The fact that Mr. Henkel teased the Leader of the Opposition with that speech—to the point at which, I understand, he made his excuses and left—shows that Mr. Henkel not only knows the truth but has a sense of humour.
  Mr. Henkel ended by saying that the Leader of the Opposition
  "knows one thing too: Great Britain has become the most attractive location in Europe. Although the German market is twice the size of Britain's, foreigners have invested ten times more in Great Britain than in Germany since 1985. I am sure he does not want to alter this."
  In their hearts, Labour Members know that the economy is in good shape. The Leader of the Opposition clearly knows that his policies were damaging, which is why, characteristically, he is beginning to equivocate about them again. In his latest policy document—which the Independent on Sunday described as a mighty whimper at his enemies—he began to try to obfuscate them further. That is why Labour Members have not talked about the economy today, but have shifted to an attack on public spending, debt and tax.

  1241
  Here we need no lessons from Labour Members. They argue to the spending lobbies that they will increase spending. I do not have time to quote from the piles of material that I could produce—[HON. MEMBERS: "Go on."] All right, I shall quote from just a few.
  "The first action I would take would be to refuse to abolish the community action programme".
  That was said by the right hon. Member for Dunfermline, East.
  "Why don't you"—
  that is, the Secretary of State for Health—
  "fight to restore NHS dentistry. Because that's what Labour will do".
  That was said by the right hon. Member for Derby, South (Mrs. Beckett). The Home Secretary must
  "continue compensation under the Criminal Injuries Compensation Scheme as it operated before 1 April 1994".
  That was said by the hon. Member for Blackburn (Mr. Straw). And so on, and so on. Hundreds of clear spending pledges have been made.
  Then the Labour party says that taxes are too high. It put up a sign at Piccadilly Circus saying that Tories tax too much. First it says that spending must be higher; then it says that our taxes are too high; then it says that our borrowing is too high. It is not possible to believe all three propositions at the same time.
  We know perfectly well—and, to be fair, so do the Liberal Democrats—which pledge the Labour party would break. It would spend more, and tax more. To be fair to the Liberal Democrats, they are nearly brave enough to say, "We accept that, and we would put taxes up." They do not cost their programme properly, but they are willing to engage in the argument. The official Opposition are simply not brave enough to do that. They are fairly criticised for that.
  Borrowing and taxing would rise again under Labour. On average, borrowing under the Labour Government ran at 7 per cent. of GDP. In their best year, it was about 3.5 per cent., which we achieved last year. In their worst year, which is far more typical, it was 10 per cent. That is what Labour would achieve again if the country ever entrusted the national finances to it.
  Question put, That the amendment be made:—
  The House divided: Ayes 262, Noes 297.

  Division No. 205]

  [9.59 pm

  AYES

  Abbott, Ms Diane

  Benn, Rt Hon Tony

  Adams, Mrs Irene

  Bennett, Andrew F

  Ainger, Nick

  Benton, Joe

  Ainsworth, Robert (Cov'try NE)

  Bermingham, Gerald

  Allen, Graham

  Berry, Roger

  Anderson, Donald (Swansea E)

  Betts, Clive

  Anderson, Ms Janet (Ros'dale)

  Blunkett, David

  Armstrong, Hilary

  Boateng, Paul

  Ashdown, Rt Hon Paddy

  Bradley, Keith

  Ashton, Joe

  Bray, Dr Jeremy

  Austin-Walker, John

  Brown, Gordon (Dunfermline E)

  Banks, Tony (Newham NW)

  Brown, N (N'c'tle upon Tyne E)

  Barnes, Harry

  Bruce, Malcolm (Gordon)

  Barron, Kevin

  Byers, Stephen

  Battle, John

  Caborn, Richard

  Bayley, Hugh

  Calaghan, Jim

  Beckett, Rt Hon Margaret

  Campbell, Mrs Anne (C'bridge)

  1242

  Campbell, Menzies (Fife NE)

  Hill, Keith (Streatham)

  Campbell, Ronnie (Blyth V)

  Hinchliffe, David

  Campbell-Savours, D N

  Hodge, Margaret

  Canavan, Dennis

  Hoey, Kate

  Cann, Jamie

  Hogg, Norman (Cumbernauld)

  Carlile, Alexander (Montgomery)

  Home Robertson, John

  Chidgey, David

  Hood, Jimmy

  Chisholm, Malcolm

  Hoon, Geoffrey

  Church, Judith

  Howarth, George (Knowsley North)

  Clapham, Michael

  Howelles, Dr Kim (Pontypridd)

  Clark, Dr David (South Shields)

  Hoyle, Doug

  Clarke, Tom (Monklands W)

  Hughes, Kevin (Doncaster N)

  Clelland, David

  Hughes, Robert (Aberdeen N)

  Clwyd, Mrs Ann

  Hughes, Roy (Newport E)

  Coffey, Ann

  Hughes, Simon (Southwark)

  Connarty, Michael

  Hutton John

  Cook, Frank (Stockton N)

  Illsley, Eric

  Cook, Robin (Livingston)

  Ingram, Adam

  Corbyn, Jeremy

  Jackson, Glenda (H'stead)

  Corston, Jean

  Jackson, Helen (Shef'ld, H)

  Cousins, Jim

  Jamieson, David

  Cox, Tom

  Janner, Greville

  Cunningham, Jim (Covy SE)

  Jenkins, Brian (SE Staff)

  Cunningham, Rt Hon Dr John

  Johnston, Sir Russell

  Dafis, Cynog

  Jones, Barry (Alyn and D'side)

  Dalyell, Tam

  Jones, Jon Owen (Cardiff C)

  Darling, Alistair

  Jones, Lynne (B'ham S O)

  Davidson, Ian

  Jones, Martyn (Clwyd, SW)

  Davies, Bryan (Oldham C'tral)

  Jowel, Tessa

  Davies, Chris (L'Boro & S'worth)

  Keen, Alan

  Davies, Rt Hon Denzil (Lianelli)

  Kennedy, Charles (Ross,C&S)

  Davies, Ron (Caerphilly)

  Kennedy, Jane (L'pool Br'dg'n)

  Davis, Terry (B'ham, H'dge H'l)

  Khabra, Piara S

  Denham, John

  Kilfoyle, Peter

  Dewar, Donald

  Lestor, Joan (Eccles)

  Dixon, Don

  Lewis, Terry

  Dobson, Frank

  Liddell, Mrs Helen

  Dowd, Jim

  Livingstone, Ken

  Dunwoody, Mrs Gwyneth

  Lloyd, Tony (Stretford)

  Eagle, Ms Angela

  Liwyd, Elfyn

  Eastham, Ken

  Loyden, Eddie

  Etherington, Bill

  Lynne, Ms Liz

  Evans, John (St Helens N)

  McAllion, John

  Ewing, Mrs Margaret

  McAvoy, Thomas

  Fatchett, Derek

  McCartney, Ian

  Faulds, Andrew

  Macdonald, Calum

  Field, Frank (Birkenhead)

  McFall, John

  Fisher, Mark

  McKelvey, William

  Flynn, Paul

  Mackinlay, Andrew

  Foster, Don (Bath)

  McLeish, Henry

  Foulkes, George

  Maclennan, Robert

  Fraser, John

  McMaster, Gordon

  Fyfe, Maria

  McNamara, Kevin

  Galoway, George

  MacShane, Denis

  Gapes, Mike

  McWilliam, John

  Garrett, John

  Madden, Max

  George, Bruce

  Maddock, Diana

  Garrard, Neil

  Mahon, Alice

  Gilbert, Rt Hon Dr John

  Marek,DrJohn

  Godman, Dr Norman A

  Marshall, David (Shettleston)

  Godsiff, Roger

  Martin, Michael J (Springburn)

  Golding, Mrs Llin

  Marttew, Eric

  Gordon, Mildred

  Maxton, John

  Graham, Thomas

  Meacher, Michael

  Grant, Bernie (Tottenham)

  Meale, Alan

  Griffiths, Nigel (Edinburgh S)

  Michael, Alun

  Griffiths, Win (Bridgend)

  Michie, Bill (Sheffield Heeley)

  Grocott, Bruce

  Michie, Mrs Ray (Argyll & Bute)

  Gunnell, John

  Mitchell, Austin (Gt Grimsby)

  Hall, Mike

  Moonie, Dr Lewis

  Hanson, David

  Morley, Elliot

  Hardy, Peter

  Morris, Rt Hon Alfred (Wy'nshawe)

  Harman, Ms Harriet

  Morris, Estelle (B'ham Yardley)

  Harvey, Nick

  Morris, Rt Hon John (Aberavon)

  Henderson, Doug

  Mowlam, Marjorie

  Hepped, John

  Mudie, George

  1243

  Mullin, Chris

  Snape, Peter

  Murphy, Paul

  Soley, Clive

  Nicholson, Emma (Devon West)

  Spearing, Nigel

  Oakes, Rt Hon Gordon

  Spellar, John

  O'Brien, William (Normanton)

  Squire, Rachel (Dunfermline W)

  O'Hara, Edward

  Steel, Rt Hon Sir David

  Olner, Bill

  Steinberg, Gerry

  O'Neill, Martin

  Stevenson, George

  Orme, Rt Hon Stanley

  Stott, Roger

  Parry, Robert

  Strang, Dr. Gavin

  Pearson, Ian

  Straw, Jack

  Pendry, Tom

  Sutcliffe, Gerry

  Pickthall, Colin

  Taylor, Mrs Ann (Dewsbury)

  Pike, Peter L

  Taylor, Matthew (Truro)

  Pope, Greg

  Thompson, Jack (Wansbeck)

  Powell, Sir Ray (Ogmore)

  Timms, Stephen

  Prentice, Bridget (Lew'm E)

  Touhig, Don

  Prescott, Rt Hon John

  Trickett, Jon

  Primarolo, Dawn

  Turner, Dennis

  Purchase, Ken

  Tyler, Paul

  Radice, Giles

  Vaz, Keith

  Raynsford, Nick

  Walker, Rt Hon Sir Harold

  Reid, Dr John

  Walley, Joan

  Rendel, David

  Wardell, Gareth (Gower)

  Robertson, George (Hamilton)

  Wareing, Robert N

  Robinson, Geoffrey (Co'try NW)

  Watson, Mike

  Roche, Mrs Barbara

  Wicks, Malcolm

  Rooney, Terry

  Wigley, Dafydd

  Ross, Ernie (Dundee W)

  Williams, Rt Hon Alan (Sw'n W)

  Rowlands, Ted

  Williams, Alan W (Carmarthen)

  Sedgemore, Brian

  Winnick, David

  Sheerman, Barry

  Wise, Audrey

  Sheldon, Rt Hon Robert

  Worthington, Tony

  Shore, Rt Hon Peter

  Wray, Jimmy

  Short, Clare

  Wright, Dr Tony

  Simpson, Alan

  Young, David (Bolton SE)

  Skinner, Dennis

  Smith, Andrew (Oxford E)

  Tellers for the Ayes:

  Smith, Chris (Isl'ton S & F'sbury)

  Mr. Eric Clarke and Mr. John Cummings.

  Smith, Llew (Blaenau Gwent)

  NOES

  Ainsworth, Peter (East Surrey)

  Brown, M (Brigg & Cl'thorpes)

  Alison, Rt Hon Michael (Selby)

  Browning, Mrs Angela

  Allason, Rupert (Torbay)

  Bruce, Ian (South Dorset)

  Amess, David

  Budgen, Nicholas

  Arbuthnot, James

  Burt, Alistair

  Arnold, Jacques (Gravesham)

  Butcher, John

  Ashby, David

  Butler, Peter

  Atkins, Rt Hon Robert

  Butterfill, John

  Atkinson, Peter (Hexham)

  Carlisle, John (Luton North)

  Baker, Rt Hon Kenneth (Mole V)

  Carlisle, Sir Kenneth (Lincoln)

  Baker, Nicholas (North Dorset)

  Carrington, Matthew

  Baldry, Tony

  Carttiss, Michael

  Banks, Matthew (Southport)

  Cash, William

  Banks, Robert (Harrogate)

  Channon, Rt Hon Paul

  Bates, Michael

  Chapman, Sir Sydney

  Batiste, Spencer

  Churchill, Mr

  Beggs, Roy

  Clappison, James

  Bellingham, Henry

  Clark, Dr Michael (Rochford)

  Bendall, Vivian

  Clarke, Rt Hon Kenneth (Ru'clif)

  Beresford, Sir Paul

  Clifton-Brown, Geoffrey

  Biffen, Rt Hon John

  Coe, Sebastian

  Body, Sir Richard

  Colvin, Michael

  Bonsor, Sir Nicholas

  Congdon, David

  Booth, Hartley

  Coombs, Anthony (Wyre For'st)

  Boswell, Tim

  Coombs, Simon (Swindon)

  Bottomley, Peter (Eltham)

  Cope, Rt Hon Sir John

  Bottomley, Rt Hon Virginia

  Cormack, Sir Patrick

  Bowden, Sir Andrew

  Couchman, James

  Bowis, John

  Cran, James

  Boyson, Rt Hon Sir Rhodes

  Currie, Mrs Edwina (S D'by'ire)

  Brandreth, Gyles

  Curry, David (Skipton & Ripon)

  Brazier, Julian

  Davies, Quentin (Stamford)

  Bright, Sir Graham

  Davis, David (Boothferry)

  Brooke, Rt Hon Peter

  Day, Stephen

  1244

  Deva, Nirj Joseph

  Jackson, Robert (Wantage)

  Devlin, Tim

  Jenkin, Bernard

  Dorrell, Rt Hon Stephen

  Jessel, Toby

  Douglas-Hamilton, Lord James

  Johnson Smith, Sir Geoffrey

  Dover, Den

  Jones, Gwilym (Cardiff N)

  Duncan, Alan

  Jones, Robert B (W Hertfdshr)

  Duncan Smith, Iain

  Key, Robert

  Dunn, Bob

  King, Rt Hon Tom

  Durant, Sir Anthony

  Kirkhope, Timothy

  Dykes, Hugh

  Knapman, Roger

  Eggar, Rt Hon Tim

  Knight, Mrs Angela (Erewash)

  Elletson, Harold

  Knight, Rt Hon Greg (Derby N)

  Emery, Rt Hon Sir Peter

  Knight, Dame Jill (Bir'm E'st'n)

  Evans, David (Welwyn Hatfield)

  Knox, Sir David

  Evans, Jonathan (Brecon)

  Kynoch, George (Kincardine)

  Evans, Nigel (Ribble Valley)

  Lait, Mrs Jacqui

  Evans, Roger (Monmouth)

  Lamont, Rt Hon Norman

  Evennett David

  Lang, Rt Hon Ian

  Faber, David

  Lawrence, Sir Ivan

  Fabricant, Michael

  Legg, Barry

  Fenner, Dame Peggy

  Lennox-Boyd, Sir Mark

  Field, Barry (Isle of Wight)

  Lester, Sir James (Broxtowe)

  Fishburn, Dudley

  Lidington, David

  Forman, Nigel

  Lilley, Rt Hon Peter

  Forsyth, Rt Hon Michael (Stirling)

  Lloyd, Rt Hon Sir Peter (Fareham)

  Forth, Eric

  Lord, Michael

  Fowler, Rt Hon Sir Norman

  Lyell, Rt Hon Sir Nicholas

  Fox, Dr Liam (Woodspring)

  MacGregor, Rt Hon John

  Fox, Rt Hon Sir Marcus (Shipley)

  MacKay, Andrew

  Freeman, Rt Hon Roger

  Maclean, Rt Hon David

  French, Douglas

  McLoughlin, Patrick

  Fry, Sir Peter

  McNair-Wilson, Sir Patrick

  Gale, Roger

  Maitland, Lady Olga

  Gallie, Phil

  Malone, Gerald

  Gardiner, Sir George

  Mans, Keith

  Garnier, Edward

  Marland, Paul

  Gill, Christopher

  Marlow, Tony

  Gillan, Cheryl

  Marshall, John (Hendon S)

  Goodlad, Rt Hon Alastair

  Marshall, Sir Michael (Arundel)

  Goodson-Wickes, Dr Charles

  Martin, David (Portsmouth S)

  Gorman, Mrs Teresa

  Mates, Michael

  Gorst, Sir John

  Mawhinney, Rt Hon Dr Brian

  Grant, Sir A (SW Cambs)

  Mayhew, Rt Hon Sir Patrick

  Greenway, Harry (Ealing N)

  Mellor, Rt Hon David

  Greenway, John (Ryedale)

  Merchant, Piers

  Griffiths, Peter (Portsmouth, N)

  Mills, Iain

  Grylls, Sir Michael

  Mitchell, Andrew (Gedling)

  Hague, Rt Hon William

  Mitchell, Sr David (NW Hants)

  Hamilton, Rt Hon Sir Archibald

  Moate, Sir Roger

  Hamilton, Neil (Tatton)

  Molyneaux, Rt Hon Sir James

  Hampson, Dr Keith

  Monro, Rt Hon Sir Hector

  Hanley, Rt Hon Jeremy

  Montgomery, Sir Fergus

  Hannam, Sir John

  Needham, Rt Hon Richard

  Hargreaves, Andrew

  Nelson, Anthony

  Haselhurst, Sir Alan

  Neubert, Sir Michael

  Hawkins, Nick

  Newton, Rt Hon Tony

  Hawksley, Warren

  Niecholls, Patrick

  Hayes, Jerry

  Nicholson, David (Taunton)

  Heald, Oliver

  Norris, Steve

  Heathcoat-Amory, Rt Hon David

  Oppenheim, Phillip

  Hendry, Charles

  Ottaway, Richard

  Hicks, Sir Robert

  Page, Richard

  Higgins, Rt Hon Sir Terence

  Paice, James

  Hill, Sir James (Southampton Test)

  Patnick, Sir Irvine

  Hogg, Rt Hon Douglas (G'tham)

  Patten, Rt Hon John

  Horam, John

  Pattie, Rt Hon Sir Geoffrey

  Hordern, Rt Hon Sir Peter

  Pawsey, James

  Howard, Rt Hon Michael

  Peacock, Mrs Elizabeth

  Howell, Rt Hon Davit (G'dford)

  Pickles, Eric

  Howell, Sir Ralph (N Norfolk)

  Porter, Barry (Wirral S)

  Hughes, Robert G (Harrow W)

  Porter, David (Waveney)

  Hunt Rt Hon David (Wirral W)

  Portillo, Rt Hon Michael

  Hunt, Sir John (Ravensbourne)

  Powell, William (Corby)

  Hunter, Andrew

  Rathbone, Tim

  Hurd, Rt Hon Douglas

  Redwood, Rt Hon John

  Jack, Michael

  Richards, Rod

  1245

  Riddick, Graham

  Taylor, John M (Solihull)

  Rifkind, Rt Hon Malcolm

  Temple-Morris, Peter

  Robathan, Andrew

  Thomason, Roy

  Roberts, Rt Hon Sir Wyn

  Thompson, Sir Donald (C'er V)

  Robertson, Raymond (Ab'd'n S)

  Thompson, Patrick (Norwich N)

  Robinson, Mark (Somerton)

  Thornton, Sir Malcolm

  Roe, Mrs Marion (Broxbourne)

  Thurnham, Peter

  Rowe, Andrew (Mid Kent)

  Townend, John (Bridlington)

  Rumbold, Rt Hon Dame Angela

  Townesnd, Cyril D (Bexl'yh'th)

  Sackville, Tom

  Tracey, Richard

  Sainsbury, Rt Hon Sir Timothy

  Tredinnick, David

  Scott, Rt Hon Sir Nicholas

  Trend, Michael

  Shaw, David (Dover)

  Trotter, Nevile

  Shaw, Sir Giles (Pudsey)

  Twinn, Dr Ian

  Shephard, Rt Hon Gillian

  Vaughan, Sir Gerard

  Shepherd, Sir Colin (Hereford)

  Viggers, Peter

  Shersby, Sir Michael

  Waldegrave, Rt Hon William

  Sims, Sir Roger

  Walden, George

  Skeet, Sir Trevor

  Walker, Bill (N Tayside)

  Smith, Tim (Beaconsfield)

  Waller, Gary

  Soames, Nicholas

  Ward, John

  Speed, Sir Keith

  Wardle, Charles (Bexhill)

  Spencer, Sir Derek

  Waterson, Nigel

  Spicer, Sir James (W Dorset)

  Watts, John

  Spicer, Sir Michael (S Worcs)

  Wells, Bowen

  Spink, Dr Robert

  Whitney, Ray

  Whittingdale, John

  Spring, Richard

  Widdecombe, Ann

  Sproat, Iain

  Wilkinson, John

  Squire, Robin (Hornchurch)

  Willetts, David

  Stanley, Rt Hon Sir John

  Wilshire, David

  Steen, Anthony

  Winterton, Mrs Ann (Congleton)

  Stephen, Michael

  Winterton, Nicholas (Macc'f'ld)

  Stern, Michael

  Wolfson, Mark

  Stewart, Allan

  Wood, Timothy

  Streeter, Gary

  Yeo, Tim

  Sumberg, David

  Young, Rt Hon Sir George

  Sweeney, Walter

  Sykes, John

  Tellers for the Noes:

  Tapsell, Sir Peter

  Mr. Derek Conway and Mr. Simon Burns.

  Taylor, Ian (Esher)

  Amendment accordingly negatived.
  Main Question put and agreed to.
  Resolved,
  That this House welcomes the publication of the Government's latest forecast, which shows growth strengthening, prosperity rising, inflation falling to within the Government's target of 2½ per cent. or less, and a further decline in Government borrowing; notes that the United Kingdom has a lower unemployment rate, a higher proportion of its people in work and a lower burden of tax and public spending than any other major European country; and recognises that the favourable economic outlook reflects the success of the Government's policies to promote a modem, deregulated, dynamic and more competitive economy.

  BUSINESS OF THE HOUSE
  Motion made, and Question put forthwith, pursuant to Standing Order No. 14 (Exempted business),
  That, at this day's sitting, consideration of the Lords Amendments to the Nursery Education and Grant-Maintained Schools Bill may be proceeded with, though opposed, until any hour.—[Mr. McLoughlin.]
  Question agreed to.

Orders of the Day

  Nursery Education and Grant-maintained Schools Bill
  Lords amendments considered.
  10.15 pm
  Mr. Nigel Spearing: Before we enter upon the next business, Mr. Deputy Speaker, may I raise a point of order relating to it on which I seek your guidance?
  As you know, the main debate today will be on a motion to disagree with Lords amendment No. 2 relating to the evaluation of the nursery schools scheme.
  By a letter which came into my possession, I have a copy of a letter written on 5 July to "Dear Colleague" from the Minister of State, Department for Education and Employment, on House of Commons paper, and not written, therefore, in his capacity as a Minister, which relates to methods of evaluation which the Government already have in hand relating to the nursery schools scheme.
  I shall not go into detail, but the evaluation is already in hand and two of the documents have been placed in the Library, one some days ago and the other only today. Subject to correction from the Minister or the Secretary of State, I believe that the letter was sent to only a certain number of hon. Members, so it is purely by chance that some of us have become aware of the letter, the information that it contains and the presence of the documents in the Library which relate heavily to the matter of evaluation.
  The question that I put to you, Mr. Deputy Speaker, is this. Irrespective of it being strictly in order for these matters now to be debated, is it the practice of the House for Ministers of the Crown to distribute information relating to documents in the Library which are highly germane to the merits of a motion to be moved tonight without informing all hon. Members concerned, whether or not they were members of the Standing Committee?
  That is surely, at least in spirit, contrary to the way in which we should debate these matters if we are to have full information and make a sensible decision. I ask you to rule on that and to determine whether the matter should be cleared up, either on a point of order or on a motion for the Adjournment before we start the debate itself.
  Mr. Deputy Speaker (Mr. Michael Morris): I am grateful to the hon. Gentleman for giving me notice of his point of order. I have carefully considered the points that he has raised, but nothing that he has said calls for the intervention of the Chair. Nevertheless, all that he has said would be entirely relevant to the debate which I understand is about to take place on Lords amendment No. 2. I therefore suggest that we proceed and if he rises he will doubtless catch my eye.
  Lords amendment No. 1 agreed to.

Clause 1

  GRANTS IN RESPECT OF NURSERY EDUCATION
  Lords amendment: No. 2, in page 1, line 14, at end insert
  ("(2A) No arrangements may be made under subsection (1) above in respect of grants payable under this Act on or after 1 April 1997 before the Secretary of State has laid before Parliament an evaluation of the operation over a period of twelve months of any grants for nursery education in the area of any local education authority made during the financial year 1996/7.")
  The Secretary of State for Education and Employment (Mrs. Gillian Shephard): I beg to niove, That this House doth disagree with the Lords in the said amendment.
  Mr. Deputy Speaker: I inform the House that this amendment involves privilege.
  Mrs. Shephard: During the passage of the Bill, we listened carefully to the arguments made in debate. As a result, several amendments have been made, relating particularly to children with special educational needs, to what should be specified in regulations, and to admissions. They are all useful improvements to the Bill. The effect of the amendment before us, however, would be to delay the introduction of full implementation of the nursery education voucher scheme by requiring an evaluation of the first year of the first phase. Such a delay would be both unnecessary and damaging.
  Our policy for nursery education is based on increasing parental choice of the setting for the pre-school education of their children, rigorous quality standards through the desirable learning outcomes that the School Curriculum and Assessment Authority developed last autumn, a new education inspection regime, and the injection of substantial amounts of new money—£165 million per year, £390 million over the first three years.
  Extending parental choice is vital. Parents know what is best for their four year-old children—not local authorities, and certainly not Whitehall. That is why the voucher scheme puts parental choice at its centre. It allows parents to choose pre-school education in the maintained sector, the private sector and the voluntary sector. We have set in place new means to make sure that the quality is good. I will briefly remind the House of them.
  First, the sorts of provider that can enter the scheme are limited to maintained schools, independent schools, and private and voluntary sector institutions registered under the Children Act 1989. Secondly, all providers must work towards the set of desirable learning outcomes developed by the SCAA, which cover the six main areas of learning for children. Thirdly, all providers must give information to parents about what they do to enable parents to make informed choices. Fourthly, all providers must submit to inspection. In the case of the private and voluntary sectors, this will be a new inspection regime, under the control of the chief inspector of schools, and it will look specifically at national educational standards.
  We have ensured that there are particular safeguards for children with special educational needs. The requirement for all providers to have regard to the SEN code of practice has been universally welcomed.
  1248
  The popularity of the scheme is clear. More than 106,000 copies of the Department's "Next Steps" document have been issued. The help line has taken more than 43,000 calls. The scheme has been warmly welcomed. Roselyn Donovan, the head teacher of Riversdale primary school in Wandsworth, said:
  "If private nurseries are providing a better quality of education and my parents are looking to go out there, then I want to see what they are providing, and improve my position. That's what it's about. That's what education is about."
  Clare Harris, principal of the Phoenix Montessori nursery school, Kings Lynn, said:
  "Parents have reacted to the scheme with delight. In poorer rural areas many struggle to send their children for a few sessions each week and to find they can now come for five is a huge bonus".
  Margaret Lochrie, chief executive of the Pre-School Learning Alliance, said:
  "vouchers rectify the unfairness which has prevailed up to now, that parents using schools get provision free, where others do not."
  Mr. Gerry Steinberg: Will the voucher scheme allow parents who live in a local authority that does not have nursery provision to choose a place in a local authority school if they want one? That, too, would be choice.
  Mrs. Shephard: Over time, parents will have a choice of a place in the setting that they wish for their four-year-old. That is the point of the scheme.
  The Pre-School Learning Alliance has surveyed its member playgroups to find how parents in phase 1 are benefiting from the scheme. Eighty per cent. of them think that parents value vouchers and 27 per cent. of them had increased the number of sessions that they offer, even in the first term of operation.
  Mr. David Blunkett: Will the right hon. Lady tell us how that squares with the Pre-School Learning Alliance evaluation survey of 6 June in her county of Norfolk? It stated:
  "While some pre-schools have been able to increase the number of sessions, very few if any new places for four-year-olds have been created … funding for premises was identified as being necessary if new places are to be created."
  Should we not listen to the people on the ground rather than to the administering organisations?
  Mrs. Shephard: I should be happy to let the hon. Gentleman have some letters from people on the ground, also in Norfolk, who are providing precisely pre-school education. For example, those at the Watlington pre-school said:
  "To summarise our whole playgroup"—
  these are people on the ground—
  "feels that we have gained a great deal from the scheme and that the standard of education is already beginning to increase, it has opened our eyes as to what is or what will be missed out on if the scheme fails to go nationwide."
  That failure is the hon. Gentleman's aim.
  Mr. Julian Brazier: Does my right hon. Friend agree that it is the quality of the education provided and not the fixed facilities that matter? Does she share the relief of a playgroup at Whitstable that was nearly closed because of a shortage of lavatories, despite offering

  1249
  excellent facilities for children for nine years, but which has now fortunately been saved as a result of a helpful departmental circular?
  Mrs. Shephard: I am delighted to have that encouraging example from my hon. Friend. The quality of teaching and of provision are obviously of key importance.
  The amendment claims to be about the need for evaluation, but that claim is bogus. Opposition Members know that the Government believe that the scheme should be evaluated. We have said so consistently as the Bill has made its passage through both Houses.
  Mr. John Greenway: I am most grateful to my right hon. Friend for giving way again. There is no doubt that the provision of vouchers is the most challenging initiative in the education of young people for many years. I am sure that all hon. Members have taken stock of the situation in their own area. We clearly will not be able to please everybody because there are many schools that are concerned about vouchers, but equally, as my right hon. Friend has said, the Pre-School Learning Alliance and pre-school playgroups welcome their advent. The crunch is that if we accept the Lords amendment, parents of four-year-old children next year will not have the opportunity of a place and that choice and opportunity will be lost for ever for those children.
  Mrs. Shephard: That is perfectly right, of course, and that point was clearly perceived by members of the Pre-School Learning Alliance, both those at the top of that organisation and those who provide service at the grass roots, as mentioned by the hon. Member for Sheffield, Brightside (Mr. Blunkett).
  Mr. Don Foster: On a number of occasions the right hon. Lady has prayed in aid the Pre-School Learning Alliance. Is she therefore aware of the view of the Kensington and Chelsea branch of that organisation about the need for evaluation? Its branch secretary recently wrote:
  "As we have only had 4 months of the pilot scheme it is far too early to be thinking of making any plans. We believe the monitoring should continue for over a year."
  Does the right hon. Lady agree with that view?
  Mrs. Shephard: I would say that Mrs. Margaret Lochrie, the chief executive of the Pre-School Learning Alliance, does not agree with it. She has said that if the House of Commons
  "vote to uphold this amendment it will vote to deprive at least 200,000 four-year-olds of free pre-school education."
  Is that the hon. Gentleman's intention?
  The evaluation has already begun. Some results are already available, and lessons are already learnt for phase 2.
  We have commissioned a survey of parents in the four phase 1 areas. The results were placed in the Library 10 days ago. That survey was commissioned as a result of questions asked by Conservative Members. We had no need to place the results in the Library, but we did so.
  1250
  The hon. Member for Brightside, who knew about the existence of the survey because he asked a parliamentary question about it, may want to claim that the survey shows that all is not well in phase 1. He might say that parents do not know enough about the scheme. It is true that six in 10 parents wanted to know more—hardly surprising in the early stages of a new scheme, but we responded to that by making more information available through providers, where parents said that they wanted to find it.
  10.30 pm
  The findings of the survey are as follows. Sixty per cent. of the parents interviewed rated the scheme positively—more than two and a half times as many as were against. That is consistent with the findings of the Pre-School Learning Alliance, which were that playgroups thought that 80 per cent. of the parents valued the scheme. In Norfolk, where the survey found that parents were most likely to know the key facts about the scheme, 87 per cent. of parents rated it "quite good" or "very good", which suggests to me that, when unclouded by misinformation, parents can see the benefits of the scheme.
  Mr. Iain Mills: Will my right hon. Friend qualify what she just said as it relates to councils which are high providers, such as Solihull, and the views of the National Association of Head Teachers? Is it true that good providers were not included in the survey that she talks about?
  Mrs. Shephard: I hoped that I had made it clear that the survey took place in pilot areas. I hope that that clarifies the matter for my hon. Friend. We are, of course, aware of the views of his local authority, of which he has told the House many times. I reassure him yet again that, where there is excellent provision, parents are likely to choose it. I have seen the provision in his local authority. As he knows, it is of high quality, and I have no doubt that, when the scheme rolls out, parents will wish to choose it. The point is that as a result of the scheme they will have the right to choose: an institutional choice will not be imposed.
  Mr. Ian Bruce: My right hon. Friend knows that parents in Dorset were keen for Dorset, which was a very low provider, to provide more nursery places. They were very angry that, last year, the Liberal Democrats on Dorset county council prevented them from getting the scheme in, and I am afraid that they will be very angry with the Government if we do not overturn this Lords amendment so as to ensure that we get the scheme in for them next year.
  Mrs. Shephard: I know that there is enthusiasm in Dorset for the scheme. My hon. Friend told me that coachloads of Dorset people are to visit Norfolk to see how the scheme is working there.
  Parents have not had difficulty with the applications: 72 per cent. found the forms "very easy to complete"—so much for the bureaucratic nightmare that parents were supposed to suffer.
  As I said, many parents wanted more information about the scheme. We revised the material and we made certain that it was available through the providers.

  1251
  We commissioned a survey of providers in the same areas. The report was placed in the Library today. The providers found registration easy—60 per cent. found the administration "very easy" or "quite easy". Three quarters found voucher redemption "very easy" or "fairly easy" and a similar proportion found the self-assessment schedule helpful.
  The report raises other points. Some providers found the administration rather time consuming, and we will consider that in making the arrangements for phase 2.
  Sir Donald Thompson: As my right hon. Friend knows, because we have discussed it often, my area is a high provider and for 20 years has provided nursery education of the type that has only now been made available in more tardy authorities. However, the administration will cost money. Can some of the £1,100 that must be remitted be kept by my local authority to contribute to administration?
  Mrs. Shephard: I know that my hon. Friend is proud of the nursery provision in his area, and I can give him the same reassurance as I gave my hon. Friend the Member for Meriden (Mr. Mills). Obviously, since parents are so satisfied with provision in his area, they will continue to wish to choose that provision. Administration costs are met centrally, of course.
  Thirdly, we are analysing the issue of vouchers to parents and their redemption. Overall, 91 per cent. of the estimated number of parents have applied for vouchers. In Norfolk, that figure is 97 per cent., and in Wandsworth 96 per cent; 83 per cent. of voucher parts have been redeemed so far. We shall continue to collect and analyse data, with the results from the first two terms being collated in the autumn. They will be reviewed by the project team already in place, which will implement phase 2 with the help of an implementation advisory group drawn from local authorities, the private and voluntary sectors, grant-maintained schools and independent schools.
  Mr. Win Griffiths: Is the Secretary of State aware that there are no pilot schemes in Wales, and that it would cost the Government less than the money they are putting into the voucher scheme to provide 100 per cent. coverage in Wales because there are so few four-year-olds who do not already have pre-school provision? Is she not wasting money by introducing the scheme in Wales?
  Mrs. Shephard: The hon. Gentleman knows better than I that there are several differences between Wales and England. There is also higher provision in the former, which accounts for the slightly different arrangements.
  Information on evaluation will also be taken from the Audit Commission, the National Audit Office, the National Children's Bureau, and so on. The first inspection reports will be available in October, and the chief inspector will give us an overview in the new year.
  We already know a lot about the operation of the scheme from solid data taken from surveys of parents and providers who have experience of how the scheme is working. The picture is positive. Parents are actively playing their pan. There is already some expansion. In other words, it is crystal clear that there is no need to prolong the evaluation.
  1252
  In any case, the amendment is not about evaluation: it is about delay, because Opposition Members do not want parents to have the choice and diversity offered by the scheme. Why should they change the habits of 17 years? Since 1979 they have voted against every measure to increase choice and diversity, and under the guise of this amendment that is what they are seeking to do now. That speaks volumes about where the Opposition's priorities lie. Delay will have an impact on many families, particularly those who currently use pre-schools. No wonder the Pre-school Learning Alliance said of the amendment:
  "The Lords have got it wrong".
  The Clackclose pre-school in Norfolk spoke for all parents and their children when it wrote to me on 1 July:
  "All in all, parents want as we do, a good start in life for their children. After all it is the children that benefit from this scheme overall".
  There could be no better argument for overturning this amendment. The evidence shows that the scheme is working. Delay is both unnecessary and harmful. I therefore urge the House to disagree with the Lords in the said amendment.
  Mr. Blunkett: Tonight we ask the Commons to support and retain the Lords amendment. We believe that grandparents and parents in the House of Lords have shown more sense than Conservative Members of the Commons, who clearly have no idea of the impact of a market-driven voucher scheme.
  It is not pieces of paper that people are applauding in Norfolk; it is the opportunity of an early-years place—the opportunity not made available by the voucher scheme but by the allocation of new money. That is why, in low-providing authority areas, parents naturally want something which they believe to be better than nothing.
  Did not the Government previously promise nothing, whereas good local education authorities of all political parties promised something? Did not the Secretary of State, 18 months ago, write to her colleagues who have been saying "Hear, hear" to her drive for nursery education tonight, telling them that they should monitor their authorities to stop them spending money on nursery education? Is it not hypocrisy at its worst when the Government seek to delude parents into believing that there is only one option—a voucher or nothing—when there is no such single option? The option is to spend all the new money—£185 million—on creating real nursery places for real children, not bits of paper circulated in a pseudo-artificial market.
  Mr. Steinberg: Is not the position even worse than my hon. Friend describes? The hon. Members for Meriden (Mr. Mills) and for Calder Valley (Sir D. Thompson) said that their local authorities, like mine in Durham, are high nursery providers. If the nursery scheme is successful and goes through this evening, authorities like theirs and mine will lose money—[HON. MEMBERS: "No, they will not."] My local authority will lose £2 million when the scheme is introduced, which means that nursery places in Durham will be lost, not gained.
  Mr. Blunkett: The hon. Members for Calder Valley (Sir D. Thompson) and for Meriden (Mr. Mills) are entirely right, because they represent areas that have been

  1253
  investing in nursery education. And my hon. Friend is right to say that money will be lost. The first three months of the voucher scheme in the so-called pilot authorities have shown that that is so. Almost £1 million—£980,000—has been allocated to manipulate the position, otherwise those pilot authorities would have found themselves without adequate resources to cover the number of four-year-olds because of the changes in the four-year-old population that have already taken place. I want the Under-Secretary of State to deny that fact when he replies to the debate. The Government are spending £74 per four-year-old on publicity in the four pilot authorities. If that is extended to a nationwide scheme, they will spend £47 million on publicity alone.
  The Parliamentary Under-Secretary of State for Education and Employment (Mr. Robin Squire): I do not want to save all my answers for the summing up. The hon. Gentleman knows, because we have exchanged questions and answers on the matter, that in practice the publicity during phase 1 has extended significantly into phase 2 areas at the request of parents and providers.
  Mr. Blunkett: Research among parents and providers, the results of which came out late last night, shows that, despite the fact that £74 per head has been spent on publicity, many parents in the pilot programme do not know about the scheme and need more information. They seek more information because, despite the fact that the Government have spent £1.2 million on publicity in those four authorities, they are still confused. That is why Conservative Members have raised perfectly legitimate issues. On Report, the hon. Member for Bury, South (Mr. Sumberg) said:
  "can my hon. Friend assure me that the pilot scheme is genuine? I told my head teachers that it was".—[Official Report, 19 March 1996; Vol. 274, c. 225.]
  Somebody had better tell him that they are not, because the Government have decided that they are no longer pilot schemes; they are phase 1 schemes instead.
  Why were there four pilot schemes if they are not pilots? Who was navigating when the idea was first presented to the House? Who suddenly decided that the scheme would not be implemented in a big bang like the poll tax, but that phase 1 would be called a pilot scheme? Who decided that the pilots would be evaluated for only three months, before inspections start, early next year, or before the Office for Standards in Education has had a chance to evaluate them? By that time, the local authorities will have had their standard spending assessments manipulated. Money will have been removed from high providers and transferred to local providers, not for provision, but through the voucher scheme.
  On Report, the hon. Member for Carshalton and Wallington (Mr. Forman) said about the pilot schemes:
  "if they are genuine pilot projects, it would be greatly preferable if we could take a bit longer to build up the empirical evidence to find out whether or not it is a good idea."—[Official Report, 19 March 1996: Vol. 274, c. 220.]
  He is right, like the hon. Member for Meriden (Mr. Mills). They both know that if there is a pilot scheme, it is sensible to evaluate it.
  1254
  If £185 million will be spent on new places that do not exist, people will welcome it. If parents are promised £1,100 instead of nothing, there is a fair chance that some of them will think that that is better than before, because before they had nothing.
  10.45 pm
  Mr. Graham Riddick: If the Labour party were elected to government some time next year and the nursery voucher scheme had already been introduced, would a Labour Government abolish the scheme?
  Mr. Blunkett: I shall give the hon. Gentleman a straight answer. We have made it clear that the millions of pounds that will be spent on bureaucratic administration of the scheme will instead be spent on proper, professionally provided nursery places for children, including Kirklees in the hon. Gentleman's constituency of Colne Valley, which has an excellent record of developing coherent and integrated early-years policies that make sense and do not rely on the market. Yes, we will replace the vouchers with a free entitlement to a place for all four-year-olds and we will set targets to provide places for three-year-olds. Those early-years places will be provided with a qualified teacher in charge of the class, proper inspection and proper facilities.
  We will ensure that, instead of money being spent on inventing ways to waste essential resources on bureaucracy, the children who need places will get them. We will not spend money on a tendering process to find firms to administer the scheme. Those firms include Securicor, Group 4, CSL, Z-Yen—whatever that might be—Handling Solutions Ltd. and SIA Ltd. or Social Research Consultancies. None is in the business of education. They are all, rightly from their point of view, in the business of making money. They will not make money from providing nursery places, but from administering the scheme. The £20 million that has been earmarked for that exercise will not be adequate.
  I will tell the hon. Member for Colne Valley (Mr. Riddick) something else. The next Labour Government will have to pick up the pieces and sort out the mess that the Government have created. We will have to tell parents that if there are no places, they cannot redeem the vouchers. We will have to translate the Government's mythological paper promise into a practical reality. Within 18 months of taking office, we will ensure that the pledge is redeemed and all four-year-olds will have a place.
  Mr. John Sykes: The hon. Gentleman mentioned Kirklees. Does he remember the former chairman of the Kirklees education authority describing parental choice as a piddling technicality?
  Mr. Blunkett: I presume that the former chairman used that wonderful language when no choice was available. Where there is no place, there is no choice; where there is no multiplicity of places, there is no choice. If children want a nursery education place, they will have it. The majority of people in the playgroup movement are deeply opposed to vouchers, but they want genuine co-operation and they want to join together as voluntary organisations with private and statutory bodies to develop plans to provide a pluralistic approach to early years provision—

  1255
  and we will co-operate with them. We will ensure that development plans and forums are provided at the local level so that no one is excluded.
  Regardless of what the leadership of the Preschool Learning Alliance says, the Labour party's proposals to spend all the money on providing nursery places will not deny any child in any authority a decent and properly provided nursery place. If parents wish to place their child in one provision rather than another, they will have that choice—but that choice will exist only if there is a plan to ensure that nursery teachers and nurses are available and that the facilities are provided.
  Sir Donald Thompson: Will the hon. Gentleman give way?
  Mr. Blunkett: No, I shall not give way because I wish to make some progress. Perhaps the Minister will tell us whether the facilities that are being provided in the pilot schemes will be provided in the general schemes. For example, the pilots are receiving well over £200,000 in extra administrative costs and extra credit approvals are being granted over the next two years to allow the authorities to invest in capital for the facilities.
  I have already referred to the extra resources for publicity and to the way in which authorities have had to change the scheme from the one that was placed before the House. The criteria of no voucher, no place has been overridden because authorities have discovered that if they apply it they exclude the most vulnerable children from entering nursery education.
  How are the Government going to deal with the situation when they have not had the opportunity to evaluate the scheme? Research for parents and providers has thrown up considerable doubts—more than 50 per cent. of parents in Westminster and Wandsworth are opposed to the scheme, and they are getting a better deal than the people in Norfolk. People want to know why the Government are not prepared to delay the scheme for one term next year so that an evaluation can take place.
  There can be only one answer to that question—in fact, there are two answers. I will show that numeracy reached me when I was at school—even though it is falling short under the Conservative Government. First, the Government are afraid of what a proper evaluation of the scheme would reveal. Secondly, they are determined to get the vouchers out before the general election and to pretend to literally millions of parents that if they receive a piece of paper they will be provided with a nursery place.
  I say to the Preschool Learning Alliance that if, for a term, people are prepared to sell their souls for a mess of pottage, they will regret it and we will regret it. We will have to sort out the administrative chaos confronting us. Under the standard spending assessment, we will have to redistribute money to authorities that are high providers and allocate the new money to those who need it. We will have to sort out the bureaucratic nightmare and explain to parents why they are unable to redeem a voucher that the Conservatives promised would provide a nursery place. The scheme is deeply dishonest and deeply flawed. We should support the Lords amendment tonight because it allows time for thought, time for evaluation and time for common sense to prevail.
  Mr. Mills: Thank you for calling me, Mr. Deputy Speaker. I find it very difficult—and rather sad—to speak
  1256
  opposing my right hon. Friend, but she and others know my views. My dilemma could be resolved quite simply if high-achieving councils were excluded from the scheme. I am in real despair about why the Government—who are committed, as I am, to the market—cannot accept what parents, teachers and others involved in education in my constituency of Meriden, which is part of Solihull, want.
  The Government are forcing us to join the scheme. We are high achievers; we provide the example to which others look. The Government have recognised that my borough is the best provider of nursery education. I have spoken to parents in my constituency who have children aged three and a half in reception classes. I have talked to my hon. Friend the Minister and to my right hon. Friend time and again about the issue, and I shall continue to do so. Why do the Government not allow us to do our own thing? Why are a Conservative Government forcing us into a straightjacket, along with the rest of the country?
  I accept that some local education authorities do not provide the correct sort of nursery education and must be forced to do so. That is fine. The four pilots have been running for only a short time, but I have lots of information about them. I could quote various sources chapter and verse, as my right hon. Friend did, but I shall refer to only one or two. My right hon. Friend said that the take-up in Westminster was 90 per cent., but my figures say 60 per cent. I do not accept the Government's figures which show that the pilots are successful.
  Why the rush? My constituents say to me, "OK, if the Government are determined to go ahead, we understand the reasons. But why proceed so quickly?" I understand the reasons too, but I do not understand why the deadline is April 1997. Why is it not later?
  How will the vouchers reach those already enjoying good nursery provision in Solihull and Meriden? It will be like issuing tickets for a garden fete. How will it happen? It is unbelievable to expect the local education authority to produce something that is already being produced, is working and is satisfactory—the Secretary of State has recognised that fact. Little bits of paper will be put into envelopes and sent to parents. Will they go to the right people? Will those who have places for their children in reception classes receive the bits of paper?
  The Government's recent record in calculating standard spending assessments does not provide any grounds for believing that, if we had the number of four-year-olds required to subtract the £1,100 from the SSAs, leaving the council to top up the rest, that would be the end of the matter. That has never happened. On Solihull local education authority, my right hon. Friend the Secretary of State will argue that this year it has been quite good; I do not disagree that it was bad, but in the past couple of years it has been an absolute disaster.
  I am aware that I should not take up too much time of the House, but perhaps the passion in my voice will show how strongly my constituents feel about this matter. I am not against a national voucher scheme, but what I am totally beside myself about is not exempting those who have demonstrated that they can do it. They have a good scheme. Why not leave it at that?
  11 pm
  Mr. Spearing: The hon. Member for Meriden (Mr. Mills) demonstrated perfectly that this issue should not be a party political matter. Fifty-two years go, R. A. Butler and all the parties agreed on the need for nursery education, and I have presented a petition signed by 106,000 people, so how the Secretary of State can say that Opposition Members are not in favour of nursery education and want to stop it is almost beyond belief. But she is right, up to a point.
  The Secretary of State is careful not to use the words "nursery education" in her speeches, because she knows too much. She has used the word "settings". What the voucher will buy might be what we understand by the words "nursery education"—properly housed and properly taught by people who are properly qualified—but it might not. That is the answer to the hon. Member for Calder Valley (Sir D. Thompson). It will not necessarily be—
  Sir Donald Thompson rose—
  Mr. Spearing: Time is very short.
  The voucher will not necessarily buy what the hon. Gentleman thinks it will, and what the Government and the Prime Minister have said time and again that it will buy.
  Sir Donald Thompson: Will the hon. Gentleman give way?
  Mr. Spearing: Well, I did mention the hon. Gentleman.
  Sir Donald Thompson: The hon. Gentleman pointed to me and to my hon. Friends the Members for Meriden (Mr. Mills) and for City of Durham (Mr. Steinberg), whose local authorities are high providers. The only reason why the money has to be given in a voucher is so that it can be ring-fenced. Every local authority has received enough money from the Government over the past 20 years to be in the same position as Durham and Calder Valley, but they have chosen to spend it on other priorities.
  Mr. Spearing: I was not referring solely to Calder Valley. It might be able to retain nursery education, as might Solihull and Meriden, but the point is that the rest of the country might not necessarily purchase it, because it will not be available as it is today.
  In my earlier point of order, I referred to a letter that the Minister of State had written. As far as I can tell, it was sent to his hon. Friends who were worried, and it tried to tell them that the evaluation would be all right and was already showing some success. I shall not quote the letter, but the evaluation of parents claimed that general awareness of the scheme was high, with three out of four parents claiming to have heard of "a new government scheme". When prompted, 94 per cent. were aware of nursery education vouchers.
  The quality of the survey by the Central Office of Information, which was farmed out to contractors, is, I suggest, very much in question, as is the one that appeared in the Library this very day, which relates to a survey of
  1258
  providers. It is the only one that relates to the quality of education. Surely the quality of education is inherent in the word "evaluation". Paragraph 9.1 says:
  "Four in ten providers agreed that quality of nursery education would improve in their LEA."
  That means that six in ten did not. This is the evaluation that the Minister is commending to his hon. Friends, who might send it to questioning parents, one of whom wrote to me. I think that it was an attempt by the Minister to reassure his friends, but the content of the papers suggests the opposite. Ultimately, it will be up to him to reply.
  As my hon. Friend the Member for Sheffield, Brightside (Mr. Blunkett) said, the delay referred to by the Secretary of State amounts to only a term; but if it were two terms, or even a year, what would that be in comparison with the three or four years for which the Prime Minister and his friends have been bickering about the issue? What would it be in comparison with the 17 years for which the Conservative party has been in office, not implementing the genuine nursery scheme that was introduced by Lady Thatcher in a White Paper shortly after she became Secretary of State for Education? What have the Government been doing all that time?
  Lady Thatcher introduced another novel scheme, which was her downfall. She tried a pilot scheme for the poll tax in Scotland. She did great damage to her party, and even more to herself, by not understanding the impact of that pilot scheme when it was introduced in other parts of the country. Conservative Members voted for a scheme involving contractual provision, with providers and purchasers, in the health service. We know what is happening to that. The Government were begged to organise a pilot scheme to see whether the system worked. Who were the victims? The elderly and the sick.
  We are now confronted with an opportunity to provide for a proper evaluation after a proper period. This is not a proper evaluation, but a proper period could be available for the youngest of our children. The Government are risking their future, and the education of those children. I put it to Conservative Members—because persuasion is the basis of this place—that, if they reject the Lords amendment, they will pose a risk to our young people that they will have to bear on their consciences regardless of whether they are Members of Parliament in the next few years.
  Mr. Nigel Forman: The House will know of my lingering doubts about the scheme, because I expressed them on Third Reading. I base my remarks on the assumption that Conservative Members will still be on the Government Benches after the next general election, and that we will inherit the consequences of the decisions on which we are now embarking.
  I was pleased by what my right hon. Friend the Secretary of State said about further empirical evidence suggesting that the pilot scheme has proved acceptable to the great majority of people in the limited number of areas where it has taken place. I should like to hear from the Under-Secretary of State whether the representative bodies of parents of rising five children have been consulted about the experiment, whether the governors' representative bodies have been consulted, whether the unions and others representing nursery school teachers have been consulted and, briefly, what has been their response. Those bodies' views are relevant.

  1259
  I also want to be reassured that there are precedents for a consultation as limited as this—limited in terms both of scope and of time. By the standards of Government consultation, it strikes the layman as being rather brief. I would be reassured if my hon. Friend the Under-Secretary could give examples of similar educational procedures.
  Bearing in mind what I have said about the assumption that the Conservative party will be in government after the next general election, I hope that my right hon. Friend the Secretary of State, who I trust will remain in her post, where she is doing such a good job, will keep the scheme under review beyond the period that she has in mind, because it will need revisiting to ensure that our confident assumptions are borne out in practice.
  My final point goes back to one of my first speeches in the House more than 20 years ago. I hope that it is no part of the Government's policy for the scheme to be regarded as the thin end of the wedge in the further application of the voucher principle in the statutory education age range—from five to 16. That, I have always thought, is a bad idea in principle—I do not have time to go into the reasons why tonight. I would welcome the reassurance from my hon. Friend the Under-Secretary that our policy is not the harbinger of the wider application of vouchers in the statutory age range.
  Mr. Don Foster: I think that the whole House, having heard the speech of the hon. Member for Carshalton and Wallington (Mr. Forman), will feel considerable sympathy for the Minister who, if he is to give the hon. Gentleman the assurances that he seeks, will have to pull off a number of tricks that he is not capable of.
  I note the hon. Gentleman's opening premise. I hope that the opening premise of the hon. Member for Meriden (Mr. Mills) was not that he is the only Conservative Member, or Conservative, who opposes certain aspects of the voucher scheme. If that was his premise, he is mistaken. Many Conservatives, both in Parliament and outside, strongly oppose the voucher scheme. They certainly oppose its rapid implementation without proper evaluation. Only this evening, my hon. Friend the Member for Cheltenham (Mr. Jones) passed to me a fax that he received from Gloucestershire county council. At its council meeting this evening, it passed a resolution stating:
  "That this Council welcomes the amendment to the Nursery Education and Grant Maintained Schools Bill passed with all-party support by the House of Lords on 17 June which requires an evaluation of the current pilot nursery vouchers scheme before the full scheme is started."
  The hon. Member for Meriden may especially wish to know that none other than Mr. Richard Izett, leader of the council's Conservative group, was among the signatories to that resolution. I shall be relatively brief because my opposition, and that of my party, to the nursery voucher scheme is well known. It is equally well known, I hope, that we favour a significant expansion of high-quality early-years education for all three and four-year-olds whose parents want it for their children.
  Mr. Barry Field: The hon. Gentleman says that his party favours the expansion of early-years education. Could he please tell me how he squares that with the policy of his party's councillors who want independence for the Isle of Wight because such a move
  1260
  would take it out of the national education system and mean that vouchers would not be available to anyone there? To ensure that vouchers are not extended to my constituents is the most spiteful reason for introducing independence to the Isle of Wight.
  Mr. Foster: The House has greatly enjoyed the hon. Gentleman's interventions this evening. Unfortunately, so many of my hon. Friends were giving me advice as to the variety of responses that I could give him that the full force of his arguments passed me by, but he will be aware of the fact that, whatever course the Isle of Wight takes, the Liberal Democrat party, wherever it may be, will have high-quality early-years education as a high priority. Whatever happens to his constituency, which will no doubt become a Liberal Democrat constituency, high-quality early-years education will be available for three and four-year-olds there.
  I was trying to make the important point that I am in favour of the expansion of high-quality early-years education. It is important that that is done through a mixture of provision in the local education authority, voluntary and private sectors. My party's policy proposals have been fully costed. We have said what the cost will be and where the money will come from to pay for it.
  Mr. Ian Bruce: The hon. Gentleman is very proud of the fact that the Liberal Democrats have taken over in a number of county councils in the south-west. To my knowledge, not one additional nursery place has been found by the Liberal Democrat county council in Dorset or, I suspect, in any of the rest of the south-west.
  Mr. Foster: The hon. Gentleman is not going to get away with that sort of comment. He is well aware that 80 per cent. of the funding for local education authorities comes from central Government. It is the Government's failure to make available the money to allow authorities such as his to expand the provision of high-quality early-years education—
  Mr. Deputy Speaker: Order. Can we get back to the Lords amendment?
  11.15 pm
  Mr. Foster: I should be delighted to do so, Mr. Deputy Speaker.
  We are in favour of high-quality early-years education, but opposed to the voucher scheme because we believe it to be highly bureaucratic and cumbersome. If it had been proposed by Brussels, I have no doubt that it would have caused Conservative Members to scream hell fire. It is a cumbersome scheme and a complete scam. In reality, it is a cash-for-votes bribe.
  If the Government have their way tonight, and the amendment passed in another place is defeated here, vouchers will be delivered through letter boxes throughout the land just before a general election, yet after that election many people in many parts of the country will find that there is nowhere to cash them in. It is a pre-election bribe at least as staggering as tax cuts in the forthcoming Budget would be.
  No doubt some right hon. and hon. Members will conclude that my opposition to the Government's proposal is purely to help ensure that the evil day of

  1261
  nursery vouchers is at least postponed. Hon. Members who believe that are absolutely right. I believe that I am not alone. Today, my hon. Friend the Member for Southwark and Bermondsey (Mr. Hughes) talked to a group of teachers from St. James's Church of England voluntary aided primary school in his constituency. They explained their opposition to the nursery voucher scheme.
  Many other organisations are opposed to the scheme. Many of them believe that, if it is to go ahead, it should do so only after a thorough and proper evaluation. That will be difficult to achieve in a short time, given the Government's failure to get a large sample for any evaluation. Only four local education authorities have agreed to it.
  There is a need for a proper evaluation—the Secretary of State agrees with that proposition. She will recall that, when the scheme was first announced in July 1995, the press pack that went out with it said:
  "Phase 1 will ensure that we have the details of the policy right before implementing them across the country."
  More recently, the Secretary of State promised in the Chamber—in column 32 of the Hansard of 22 January—that phase one would be "a thorough test".
  There cannot be a thorough test unless it takes place over a reasonable period of time, which is what the Lords amendment proposes. It cannot be a thorough test if it is conducted in a short period of time and in a small area. It cannot be a thorough test when all the evidence to date suggests that the scheme is nowhere near as successful as the Government would have us believe.
  The scheme cannot be successful when that evidence suggests that approximately 10 per cent. of people did not even collect their vouchers, despite all the publicity. It cannot be a success when there is no evidence that there has been any increase in choice. All the evidence shows that people made exactly the same decisions about where to send their children as they had made in previous years.
  If this scheme is to go ahead, it deserves a thorough evaluation. That is what has been proposed in another place, and that is what the House should support. We should oppose the Government's attempt to railroad through in a scandalous manner a scheme that the country does not want, that has not been thoroughly evaluated and that will not work.
  Mr. Tim Rathbone: The hon. Member for Bath (Mr. Foster) let the cat out of the bag when he said that he was completely opposed to the voucher scheme, and everything that he said in support of Lords amendment No. 2 should be taken in that context. I believe that the House can discount all his arguments—every single one of them—for extending the phase 1 period and for the measurement of it.
  It was a great pity that more education authorities did not apply for phase 1 of the scheme. The Liberal Democrat-controlled East Sussex education authority, for example, did not apply, and it is quite a high provider. It is not a very high provider, but it is quite a high provider. That authority showed a disinclination to improve on the performance that it has established over the years by ducking the possibility of applying for the scheme.
  As you pointed out to the hon. Member for Bath, Mr. Deputy Speaker, the speeches in this debate have gone fairly wide of the mark—the Lords amendment.
  1262
  What the amendment is in fact saying is: do not judge on the basis of the knowledge to date, judge on the basis of the knowledge that could be accumulated in a 12-month period of the scheme's operation.
  I do not believe that much more useful information can be gathered to make a more sophisticated evaluation or business application of phase 1 so that extension to phase 2 is made that much better. Therefore, I believe that the House should support the Government in overturning Lords amendment No. 2.
  I add only two provisos to that. In opening this debate, the Secretary of State said that we "must work towards" quality thresholds. I have been concerned about this scheme because of a worry—which I believe is shared by many other people—about the quality of nursery education that will be on offer. I believe that working towards quality thresholds is pushing off too far into the future the establishment of good quality nursery education for our young people. I hope, as my hon. Friend the Member for Carshalton and Wallington (Mr. Forman) said earlier, that there will be continuing monitoring and policing of this scheme to ensure that quality is being delivered.
  My second proviso rides on that monitoring process, so that the necessary places will be established in those areas of the country—particularly in impoverished urban areas—where there is less parental push for this type of nursery education, so that people who want to use the vouchers will have the opportunity to do so. With those two provisos, I urge support for the Government in the Division
  Mr. Peter Snape: It is interesting that with the exception the hon. Member for Lewes (Mr. Rathbone)—whom I shall charitably pass over—the previous two speeches by Conservative Members have been, to say the least, less than enthusiastic in their support for the Government's objective.
  The hon. Member for Carshalton and Wallington (Mr. Forman) varied between gloom and hopeless optimism in his speech. The greatest speech by a Conservative Member, however, was made by the hon. Member for Meriden (Mr. Mills), who pointed out the damage that is likely to be caused to the authority in Solihull, which has traditionally provided good nursery education. I remind the House that, until this April, Solihull was the last metropolitan borough in the United Kingdom to be controlled by the Conservative party. It was not without some courage that the hon. Gentleman made the speech that he did. I hope that he will follow through the logic of what he said by voting for the amendment passed in the other place.
  I speak briefly against the background of a constituency in the borough of Sandwell which, in the Government's league tables, is second in the country in its nursery provision. That is a record of which we are justly proud and not one that I want to see menaced by what the Government propose in their voucher scheme. In the context of Sandwell's wide-ranging provision, the voucher scheme is of no benefit to my constituents.
  Sandwell sees the development of a part-time nursery place for every child in the borough as a key element in its education strategy. The council's policy is also to ensure—something which I hope that the Secretary of State applauds—that nursery provision is an education

  1263
  provision by having a teacher in every nursery class. The borough's policy for early-years education is additionally supported by admitting children to reception classes at the beginning of the academic year in which their fifth birthday takes place.
  The Government have a straight dilemma which they can resolve this evening. They can tell us where the money is coming from for their voucher scheme. Either it is to be new money or it is to come from education resources currently allocated throughout the country. There is nowhere else. The Under-Secretary may well tell us that it is new money. There might be yet another bunch of kids, to quote the Chancellor of the Exchequer today, busy at this moment in the Treasury, tapping away on a word processor producing a new policy, but I doubt it.
  We all know that the money is coming from the money allocated to education provision in the borough of Sandwell, in the constituencies of Meriden, Calder Valley, City of Durham and all the others, largely represented by my hon. Friends, where over years nursery provision has been given the importance that it merits.
  I for one am fed up with seeing resources being transferred from a deprived town such as West Bromwich and heaped on favoured Tory flagship boroughs such as Westminster. Equally, when resources and services are taken from towns such as Wednesbury and given to Wandsworth,;it is long past the time when the regional media in Britain should stop pursing the same silly agenda as their national counterparts and start reporting what is happening with regard to local government finance.
  The voucher scheme is yet another attempt by the Government to rig local government finance in a deplorable way. We all know who the sufferers will be from the scheme. In Sandwell, 97.8 per cent. of children now have access to and enjoy nursery education. To quote the Secretary of State, how is that for parental choice? We will surely not stand idly by and see that nursery provision diluted with this barmy piece of ideology which is intended to bribe electors in areas where there has been no such provision for many years.
  The House of Commons has a duty today to uphold the decision of the other place if it is to protect nursery provision for the nation's children.
  Ms Estelle Morris: The debate was a chance for the Government to try to explain why there should not be a full and proper evaluation of phase 1 of the nursery voucher scheme before phase 2 is implemented. Nothing that has been said from the Front or the Back Benches will convince parents or providers that they have got it right.
  The argument for proper evaluation is unanswerable. It is simply that the nation cannot afford for the Government to get it wrong. There is too much at stake. There is the money that might be wasted and the providers that might be damaged. Most important of all, there are more than 500,000 four-year-olds in England and Wales who should not be made guinea pigs for an untested and untried scheme. Any arguments that the Government have made in the past against full evaluation must have been completely discredited in the light of the problems that are emerging from phase 1 of the pilot scheme.
  We have heard tonight of the confusion, the administrative chaos and the problems with capital spending. Only 110 new places have been created. Almost
  1264
  more important than that are the big questions of substance that still hang over the nursery voucher scheme that have not been answered. Where are the answers to the big questions?
  11.30 pm
  The Government cannot say how vouchers have affected the pattern of admissions to primary schools in phase 1 of the scheme. They gave no evidence of how the scheme affects the crucial issue of special needs provision. They have not said how many new providers have emerged or commented on whether the value of voucher is right. They remain silent on the hidden administrative costs. No account has been taken of how existing providers have been affected.
  It is no good the Secretary of State reading out snippets from letters from individuals, important though they may be. That is not proper evaluation or evidence on which we should decide future nursery provision for our children. The Government cannot answer the crucial questions because they do not have the information to do so. The inspection of individual providers does not even start until the autumn term and the Government's evaluation has not yet been completed.
  We are left to ask: why bother with pilots if the Government will not take the time to evaluate them? It is plain that the Government's idea of evaluation is to fiddle with the edges and look at the mechanics. They have no intention—and never had any—of evaluating the scheme itself. The hon. Member for Carshalton and Wallington (Mr. Forman) must be fully aware of that before he decides how to vote tonight because I know that he has been concerned about that for many a month.
  If that is the Government's idea of evaluation, so be it. But it is now clear that hon. Members on both sides of the House who have sought assurance over the past few months that the scheme would be properly evaluated must realise that it cannot be given if the Lords amendment is overturned. There are too many examples of the waste and upheaval that have been caused by the Government's failure to pilot their policies properly: the poll tax, the health service reforms, the national curriculum, testing, and teacher training. The lessons should have been learnt.Let us face it, the Government invariably get it wrong, but they get it even more wrong if they do not pilot and evaluate before implementation. That is not a point for or against vouchers; it is common sense.
  Let us be honest. The Minister made it quite clear why he does not want a proper and full evaluation. In Committee—this has been confirmed by the Secretary of State tonight—the Minister said that he did not want a full evaluation because it
  "would delay the scheme's introduction."—[Official Report, Standing Committee F, 1 February 1996; c. 64.]
  That is a bit rich coming from the Government. His concern about delay is unbelievable.
  Where was the Minister last year when his colleagues were telling local authorities to cut nursery education to pay for the teacher's salary increase? Where have the Government been for the past 17 years? As far as nursery education is concerned, they invented the word "delay". They have delayed and deferred nursery education for almost two decades and now they have the cheek to tell the House that it cannot be delayed for one term for proper

  1265
  evaluation. That has more to do with the electoral needs of the Conservative party than with the needs of the children about whom we should be concerned.
  The nursery voucher scheme is administratively expensive, deeply flawed and damaging to existing provision. Whether or not Conservative Members agree about that, there can be no doubt that the scheme is unproven and untested. Early years education is too important to gamble with.
  Good provision in the maintained, voluntary and private sectors has been built up over 17 years, despite the lack of Government support. Let us not put all that at risk for the sake of a full and proper evaluation. Most important of all, do not let down the millions of parents and children who look to the House to get it right. I believe that we are in danger of getting it very wrong. That is why we should support the Lords amendment for proper and full evaluation and reject the Government motion.
  The Parliamentary Under-Secretary of State for Education and Employment (Mr. Robin Squire): I begin by emphasising that the Bill is about reinforcing three strong strands of Government education policy—increasing parental choice, increasing the diversity of provision and promoting good quality education. The amendment is partly about evaluation and partly, as we have heard from several Opposition Members, about the Opposition's hatred for enhancing parental choice.
  Even though the scheme has only just begun, parents are welcoming it, as my right hon. Friend the Secretary of State has already pointed out. The vouchers enable parents to choose between the maintained, the private and the voluntary sectors, depending on what is best for them and their child. We have already heard how the scheme is enabling some four-year-olds to have a pre-school place for longer than before. That should be welcomed by right hon. and hon. Members in all parts of the House.
  We have seen, too, how 27 per cent. of pre-schools are extending the number of sessions that they offer. The maintained sector has expanded due to the new recurrent funding that the voucher scheme offers. That, too, should be welcomed. The new quality control regime is coming into play, and will deliver for the first time a national standard for the education of four-year-olds.
  Mr. Harry Greenway: My hon. Friend has referred to Opposition Members' denial of choice. Will he confirm that no local authority will lose money that is currently going into nursery education provided that it offers the same number of places as it offers now? There will be absolutely no loss of cash, and for the Opposition to say that there will is nonsense.
  Mr. Squire: Not only is my hon. Friend absolutely correct, but that is the answer to the hon. Member for City of Durham (Mr. Steinberg), who sought to suggest the reverse.
  Those children without a place in the maintained sector are, for the most part, already provided for in the private or voluntary sectors. They are not, however, always attending a pre-school group for five sessions a week or for three full terms before compulsory school age. Those children will particularly benefit from the scheme because
  1266
  it is inclusive. The standards of provision will be inspected, voucher funding will be provided to promote training and quality will increase over time.
  The hon. Member for Sheffield, Brightside (Mr. Blunkett) spoke about figure work and implied, wrongly in one case, that publicity expenditure equated to £74 per pupil. We have had that exchange before and he knows that if he takes the total publicity expenditure so far and divides it only by pupils in the phase 1 area, despite significant publicity costs in phase 2 areas, he will end up with a silly answer. In due course, that is exactly what he did.
  Secondly, the hon. Gentleman implied that there was some underhand funding of the four phase 1 areas. Not true. I remind him and the House that the four phase 1 areas had a short time to prepare for the implementation of the scheme—a full year less than local education authorities in phase 2. That has meant that they have incurred greater costs than they otherwise might, particularly because they were working closely with my Department and with the voucher agency to finalise details of the full scheme.
  Mr. Blunkett: Given the time constraint, I am grateful to the Minister for giving way. Perhaps he will tell us therefore what expenditure in the current year, without voucher income, all the remaining authorities not in the pilot phase will be expected to expend in preparing for the introduction of the scheme? What other services will they have to cut to implement it?
  Mr. Squire: It is easy to answer the hon. Gentleman, because he has been told this before. By the time phase 2 starts, the contractor selected to administer the scheme will be undertaking almost all the administrative work. There will be no significant additional burden on local education authorities or schools. I have the following to say to the hon. Gentleman and to those who are pursuing a similar line: if their LEA is now complaining about what may happen in phase 2, why did it not volunteer to be in phase 1? If those LEAs had done so, they could have helped to shape the scheme at that stage.
  My hon. Friend the Member for Carshalton and Wallington (Mr. Forman) made some excellent points. I assure him that we have consulted, and are continuing to consult, widely on several aspects of the scheme, and the organisations consulted include governors' bodies. My officials have had very many discussions with, for instance, the Early Childhood Education Forum, which includes about 40 representative bodies, including the National Confederation of Parent-Teacher Associations and the teachers' unions. Those discussions continue.
  I emphasise that the principal people at the heart of this measure are the parents, and evaluations show that the majority of parents welcome the scheme.
  Mr. Steinberg rose—
  Mr. Squire: I have given way, and I believe that the House wishes to move to a Division shortly.
  I assure my hon. Friends the Members for Carshalton and Wallington and for Lewes (Mr. Rathbone) and the House that we will keep these matters under review. We will do so not least because we wish to discover how

  1267
  academic results at key stages 1 and 2 improve in the years to come as a result of this reform. I say to my hon. Friend the Member for Carshalton and Wallington that this scheme stands alone. It is separate from any consideration of vouchers for any other age—good, bad or indifferent. This scheme is about vouchers for under-fives, and it is an excellent scheme.
  What struck me most forcefully in the speech by the hon. Member for Bath (Mr. Foster) was his comment, which one or two of my colleagues noted, that this measure may sway many people to vote Conservative. I am sure that my right hon. and hon. Friends will bear that uncovenanted benefit with due modesty tonight and look forward to that thought being devoutly recognised and realised at the next general election.
  I pay tribute to the long-standing advocacy of nursery education by my hon. Friend the Member for Lewes. I wholeheartedly share his regret that more LEAs did not volunteer for phase 1. That would have been in their interests, and in the interests of the parents of four-year-olds this year. I am grateful for his support tonight.
  The hon. Member for West Bromwich, East (Mr. Snape) made a speech—an approximation anyway—in which he got it fundamentally wrong on funding. Because of the lateness of the hour, let me simply say to him that an extra £165 million will be injected next year, which is not money taken from his borough, and is money that will provide additional places in his borough.
  Mr. Steinberg rose—
  Mr. Squire: I will not give way; we are seeking to move to a finish.
  We have shown that the benefits are already accruing. They are accruing to parents now, and evaluation is under way. The only consequence of not agreeing with their Lordships tonight would be to deny many benefits to many parents and children next year.
  Mr. Steinberg: On a point of order, Mr. Deputy Speaker. Will you inform the House whether this is a timed debate or whether it can go on until any hour?
  Mr. Deputy Speaker: Any hour.
  Mr. Steinberg: Will the Minister give way?
  Mr. Squire: No.
  The hon. Member for Brightside said that, should his party come to power at the next election, it would stop vouchers going to parents. His words will be transmitted by my right hon. and hon. Friends up and down the streets of this country. We shall ensure, beyond argument, that parents know that that is what would happen if there were a Labour Government. That will guarantee, as much as any other single action on its part, that Labour stays in opposition after the next election. I urge the House to disagree with the Lords amendment.
  Question put:
  The House divided: Ayes: 275, Noes 251.

  Division No. 206]

  [11.44 pm

  AYES

  Ainsworth, Peter (East Surrey)

  Dykes, Hugh

  Alison, Fit Hon Michael (Selby)

  Eggar, Rt Hon Tim

  Allason, Rupert (Torbay)

  Elletson, Harold

  Amess, David

  Emery, Rt Hon Sir Peter

  Arbuthnot, James

  Evans, David (Welwyn Hatfield)

  Arnold, Jacques (Gravesham)

  Evans, Jonathan (Brecon)

  Ashby, David

  Evans, Nigel (Ribble Valley)

  Atkins, Rt Hon Robert

  Evans, Roger (Monmouth)

  Atkinson, Peter (Hexham)

  Evennett, David

  Baker, Nicholas (North Dorset)

  Faber, David

  Baldry, Tony

  Fabricant, Michael

  Banks, Matthew (Southport)

  Field, Barry (Isle of Wight)

  Bates, Michael

  Fishburn, Dudley

  Batiste, Spencer

  Forman, Nigel

  Bellingham, Henry

  Forth, Eric

  Bendall, Vivian

  Fowler, Rt Hon Sir Norman

  Beresford, Sir Paul

  Fox, Dr Liam (Woodspring)

  Biffen, Rt Hon John

  Fox, Rt Hon Sir Marcus (Shipley)

  Bonsor, Sir Nicholas

  Freeman, Rt Hon Roger

  Booth, Hartley

  French, Douglas

  Boswell, Tim

  Fry, Sir Peter

  Bottomley, Peter (Eltham)

  Gale, Roger

  Bottomley, Rt Hon Virginia

  Gallie, Phil

  Bowden, Sir Andrew

  Gardiner, Sir George

  Bowis, John

  Garnier, Edward

  Boyson, Rt Hon Sir Rhodes

  Gill, Christopher

  Brandreth, Gyles

  Gillan, Cheryl

  Brazier, Julian

  Goodlad, Rt Hon Alastair

  Bright, Sir Graham

  Goodson-Wickes, Dr Charles

  Brooke, Rt Hon Peter

  Gorman, Mrs Teresa

  Brown, M (Brigg & Cl'thorpes)

  Gorst, Sir John

  Browning, Mrs Angela

  Grant, Sir A (SW Cambs)

  Bruce, Ian (South Dorset)

  Greenway, Harry (Ealing N)

  Budgen, Nicholas

  Greenway, John (Ryedale)

  Burns, Simon

  Griffiths, Peter (Portsmouth, N)

  Burt, Alistair

  Grylls, Sir Michael

  Butcher, John

  Hague, Rt Hon William

  Butler, Peter

  Hamilton, Rt Hon Sir Archibald

  Butterfill, John

  Hamilton, Neil (Tatton)

  Carlisle, John (Luton North)

  Hampson, Dr Keith

  Carrington, Matthew

  Hanley, Rt Hon Jeremy

  Carttiss, Michael

  Hannam, Sir John

  Cash, William

  Hargreaves, Andrew

  Channon, Rt Hon Paul

  Haselhurst, Sir Alan

  Chapman, Sir Sydney

  Hawkins, Nick

  Churchill, Mr

  Hawksley, Warren

  Clappison, James

  Hayes, Jerry

  Clark, Dr Michael (Rochford)

  Heald, Oliver

  Clarke, Rt Hon Kenneth (Ru'clif)

  Heathcoat-Amory, Rt Hon David

  Clifton-Brown, Geoffrey

  Hendry, Charles

  Coe, Sebastian

  Hicks, Sir Robert

  Colvin, Michael

  Higgins, Rt Hon Sir Terence

  Congdon, David

  Horam, John

  Conway, Derek

  Howard, Rt Hon Michael

  Coombs, Anthony (Wyre For'st)

  Howell, Rt Hon David (G'dford)

  Coombs, Simon (Swindon)

  Hughes, Robert G (Harrow W)

  Cope, Rt Hon Sir John

  Hunt, Rt Hon David (Wirral W)

  Couchman, James

  Hurd, Rt Hon Douglas

  Cran, James

  Jack, Michael

  Currie, Mrs Edwina (S D'by'ire)

  Jackson, Robert (Wantage)

  Curry, David (Skipton & Ripon)

  Jenkin, Bernard

  Davies, Quentin (Stamford)

  Jessel, Toby

  Davis, David (Boothferry)

  Johnson Smith, Sir Geoffrey

  Day, Stephen

  Jones, Gwilym (Cardiff N)

  Deva, Nirj Joseph

  Jones, Robert B (W Hertfdshr)

  Devlin, Tim

  Key, Robert

  Dorrell, Rt Hon Stephen

  King, Rt Hon Tom

  Douglas-Hamilton, Lord James

  Kirkhope, Timothy

  Dover, Den

  Knight, Mrs Angela (Erewash)

  Duncan, Alan

  Knight, Rt Hon Greg (Derby N)

  Duncan Smith, Iain

  Knight, Dame Jill (Bir'm E'st'n)

  Dunn, Bob

  Knox, Sir David

  Durant, Sir Anthony

  Kynoch, George (Kincardine)

  1269

  Lait, Mrs Jacqui

  Sainsbury, Rt Hon Sir Timothy

  Lamont, Rt Hon Norman

  Scott, Rt Hon Sir Nicholas

  Lang, Rt Hon Ian

  Shaw, David (Dover)

  Lawrence, Sir Ivan

  Shaw, Sr Giles (Pudsey)

  Legg, Barry

  Shephard, Rt Hon Gillian

  Lennox-Boyd, Sir Mark

  Shepherd, Sir Colin (Hereford)

  Lester, Sir James (Broxtowe)

  Shersby, Sir Michael

  Lidington, David

  Sims, Sir Roger

  Lilley, Rt Hon Peter

  Smith, Tim (Beaconsfield)

  Lloyd, Rt Hon Sir Peter (Fareham)

  Soames, Nicholas

  Lord, Michael

  Spencer, Sir Derek

  Lyell, Rt Hon Sir Nicholas

  Spicer, Sir James (W Dorset)

  MacGregor, Rt Hon John

  Spicer, Sr Michael (S Worcs)

  MacKay, Andrew

  Spink, Dr Robert

  Maclean, Rt Hon David

  Spring, Richard

  McLoughlin, Patrick

  Sproat, Iain

  McNair-Wilson, Sir Patrick

  Squire, Robin (Hornchurch)

  Maitland. Lady Olga

  Stanley, Rt Hon Sir John

  Malone, Gerald

  Steen, Anthony

  Mans, Keith

  Stephen, Michael

  Marland, Paul

  Stewart, Allan

  Marlow, Tony

  Streeter, Gary

  Marshall, John (Hendon S)

  Sumberg, David

  Marshall, Sir Michael (Arundel)

  Sweeney, Walter

  Martin, David (Portsmouth S)

  Sykes, John

  Mates, Michael

  Tapsell, Sir Peter

  Mawhinney, Rt Hon Dr Brian

  Taylor, Ian (Esher)

  Mellor, Rt Hon David

  Taylor, John M (Solihull)

  Merchant, Piers

  Temple-Morris, Peter

  Mitchell, Andrew (Gedling)

  Thomason, Roy

  Mitchell, Sir David (NW Hants)

  Thompson, Sir Donald (C'er V)

  Moate, Sir Roger

  Thompson, Patrick (Norwich N)

  Monro, Rt Hon Sir Hector

  Thornton, Sir Malcolm

  Montgomery, Sir Fergus

  Thurnham, Peter

  Needham, Rt Hon Richard

  Townend, John (Bridlington)

  Nelson, Anthony

  Townsend, Cyril D (Bexl'yh'th)

  Neubert, Sir Michael

  Tracey, Richard

  Newton, Rt Hon Tony

  Tredinnick, David

  Nicholls, Patrick

  Trend, Michael

  Nicholson, David (Taunton)

  Trotter, Neville

  Norris, Steve

  Twinn, Dr Ian

  Oppenheim, Phillip

  Vaughan, Sir Gerard

  Ottaway, Richard

  Viggers, Peter

  Waldegrave, Rt Hon William

  Page, Richard

  Walden, George

  Paice, James

  Walker, Bill (N Tayside)

  Patnick, Sir Irvine

  Waller, Gary

  Patten, Rt Hon John

  Ward, John

  Pattie, Rt Hon Sir Geoffrey

  Wardle, Charles (Bexhill)

  Pawsey, James

  Waterson, Nigel

  Pickles, Eric

  Watts, John

  Porter, David (Waveney)

  Whitney, Ray

  Portillo, Rt Hon Michael

  Whittingdale, John

  Powell, William (Corby)

  Widdecombe, Ann

  Rathbone, Tim

  Wilkinson, John

  Redwood, Rt Hon John

  Willetts, David

  Richards, Rod

  Wilshire, David

  Riddick, Graham

  Winterton, Mrs Ann (Congleton)

  Rifkind, Rt Hon Malcolm

  Winterton, Nicholas (Macc'fld)

  Robathan, Andrew

  Wolfson, Mark

  Roberts, Rt Hon Sir Wyn

  Wood, Timothy

  Robertson, Raymond (Ab'd'n S)

  Yeo, Tim

  Robinson, Mark (Somerton)

  Young, Rt Hon Sir George

  Roe, Mrs Marion (Broxbourne)

  Rowe, Andrew (Mid Kent)

  Tellers for the Ayes:

  Rumbold, Rt Hon Dame Angela

  Mr. Bowen Wells and Mr. Roger Knapman.

  Sackville, Tom

  NOES

  Abbott, Ms Diane

  Ashton, Joe

  Adams, Mrs Irene

  Austin-Walker, John

  Ainger, Nick

  Banks, Tony (Newham NW)

  Ainsworth, Robert (Cov'try NE)

  Barnes, Harry

  Barron, Kevin

  Allen, Graham

  Battle, John

  Armstrong, Hilary

  Bayley, Hugh

  Ashdown, Rt Hon Paddy

  Beckett, Rt Hon Margaret

  1270

  Beggs, Roy

  Gerrard, Neil

  Benn, Rt Hon Tony

  Gilbert, Rt Hon Dr John

  Bennett, Andrew F

  Godman, Dr Norman A

  Bermingham, Gerald

  Godsiff, Roger

  Berry, Roger

  Golding, Mrs Llin

  Betts, Clive

  Gordon, Mildred

  Blunkett, David

  Graham, Thomas

  Boateng, Paul

  Grant, Bernie (Tottenham)

  Bradley, Keith

  Griffiths, Nigel (Edinburgh S)

  Brown, Gordon (Dunfermline E)

  Griffiths, Win (Bridgend)

  Brown, N (N'ctle upon Tyne E)

  Grocott, Bruce

  Bruce, Malcolm (Gordon)

  Gunnell, John

  Byers, Stephen

  Hall, Mike

  Caborn, Richard

  Hanson, David

  Callaghan, Jim

  Hardy, Peter

  Campbell, Mrs Anne (C'bridge)

  Harman, Ms Harriet

  Campbell, Menzies (Fife NE)

  Harvey, Nick

  Campbell, Ronnie (Blyth V)

  Hattersley, Rt Hon Roy

  Campbell-Savours, D N

  Heppell, John

  Canavan, Dennis

  Hid, Keith (Streatham)

  Cann, Jamie

  Hinchliffe, David

  Carlile, Alexander (Montgomery)

  Hodge, Margaret

  Chidgey, David

  Hoey, Kate

  Chisholm, Malcolm

  Hogg, Norman (Cumbernauld)

  Church, Judith

  Home Robertson, John

  Clapham, Michael

  Hoon, Geoffrey

  Clark, Dr David (South Shields)

  Howarth, George (Knowsley North)

  Clarke, Eric (Midlothian)

  Howells, Dr Kim (Pontypridd)

  Clarke, Tom (Monklands W)

  Hoyle, Doug

  Clelland, David

  Hughes, Kevin (Doncaster N)

  Clwyd, Mrs Ann

  Hughes, Robert (Aberdeen N)

  Coffey, Ann

  Hughes, Simon (Southwark)

  Connarty, Michael

  Hutton, John

  Cook, Frank (Stockton N)

  Illsley, Eric

  Cook, Robin (Livingston)

  Ingram, Adam

  Corbyn, Jeremy

  Jackson, Glenda (H'stead)

  Corston, Jean

  Jackson, Helen (Shef'ld, H)

  Cousins, Jim

  Jamieson, David

  Cox, Tom

  Jenkins, Brian (SE Staff)

  Cummings, John

  Johnston, Sir Russell

  Cunningham, Jim (Covy SE)

  Jones, Barry (Alyn and D'side)

  Cunningham, Rt Hon Dr John

  Jones, Jon Owen (Cardiff C)

  Dafis, Cynog

  Jones, Lynne (B'ham S O)

  Dalyell, Tam

  Jones, Martyn (Clwyd, SW)

  Darling, Alistair

  Jones, Nigel (Cheltenham)

  Davidson, Ian

  Jowell, Tessa

  Davies, Bryan (Oldham C'tral)

  Keen, Alan

  Davies, Chris (L'Boro & S'worth)

  Kennedy, Charles (Ross,C&S)

  Davies, Rt Hon Denzil (Llanelli)

  Kennedy, Jane (L'pooi Br'dg'n)

  Davies, Ron (Caerphilly)

  Khabra, Piara S

  Davis, Terry (B'ham, H'dge H'l)

  Kilfoyle, Peter

  Denham, John

  Kirkwood, Archy

  Dewar, Donald

  Lewis, Terry

  Dixon, Don

  Liddell, Mrs Helen

  Dobson, Frank

  Livingstone, Ken

  Dowd, Jim

  Lloyd, Tony (Stretford)

  Dunwoody, Mrs Gwyneth

  Llwyd, Etfyn

  Eagle, Ms Angela

  Loyden, Eddie

  Eastham, Ken

  Lynne, Ms Liz

  Etherington, Bill

  McAllion, John

  Evans, John (St Helens N)

  McCartney, Ian

  Ewing, Mrs Margaret

  Macdonald, Calum

  Fatchett, Derek

  McKelvey, William

  Faulds, Andrew

  Mackinlay, Andrew

  Field, Frank (Birkenhead)

  McLeish, Henry

  Fisher, Mark

  Maclennan, Robert

  Flynn, Paul

  McMaster, Gordon

  Foster, Don (Bath)

  McNamara, Kevin

  Foulkes, George

  MacShane, Denis

  Fraser, John

  McWilliam, John

  Fyfe, Maria

  Madden, Max

  Galbraith, Sam

  Maddock, Diana

  Galloway, George

  Mahon, Alice

  Gapes, Mike

  Marek, Dr John

  Garrett, John

  Marshall, David (Shettleston)

  George, Bruce

  Martin, Michael J (Springburn)

  1271

  Martlew, Eric

  Raynsford, Nick

  Maxton, John

  Reid, Dr John

  Meacher, Michael

  Rendel, David

  Meale, Alan

  Robertson, George (Hamilton)

  Michael, Alun

  Robinson, Geoffrey (Co'try NW)

  Michie, Bill (Sheffield Heeley)

  Robinson, Peter (Belfast E)

  Michie, Mrs Ray (Argyll & Bute)

  Roche, Mrs Barbara

  Mills, Iain

  Rooney, Terry

  Moonie, Dr Lewis

  Ross, Ernie (Dundee W)

  Morley, Elliot

  Rowlands, Ted

  Morris, Estelle (B'ham Yardley)

  Salmond, Alex

  Morris, Rt Hon John (Aberavon)

  Sedgemore, Brian

  Mowlam, Marjorie

  Sheerman, Barry

  Mudie, George

  Shore, Rt Hon Peter

  Mullin, Chris

  Short, Clare

  Murphy, Paul

  Simpson, Alan

  Nicholson, Emma (Devon West)

  Skinner, Dennis

  O'Brien, William (Normanton)

  Smith, Andrew (Oxford E)

  O'Hara, Edward

  Smith, Chris (Isl'ton S & F'sbury)

  Olner, Bill

  Smith, Llew (Blaenau Gwent)

  O'Neill, Martin

  Snape, Peter

  Pearson, Ian

  Soley, Clive

  Pendry, Tom

  Spearing, Nigel

  Pickthall, Colin

  Spellar, John

  Pike, Peter L

  Squire, Rachel (Dunfermline W)

  Pope, Greg

  Steel, Rt Hon Sir David

  Prentice, Bridget (Lew'm E)

  Steinberg, Gerry

  Prescott Rt Hon John

  Stevenson, George

  Primaroto, Dawn

  Stott, Roger

  Purchase, Ken

  Strang, Dr. Gavin

  Radice, Giles

  Straw, Jack

  1272

  Sutcliffe, Gerry

  Wicks, Malcolm

  Taylor, Mrs Ann (Dewsbury)

  Wigley, Dafydd

  Taylor, Matthew (Truro)

  Williams, Rt Hon Alan (Sw'n W)

  Thompson, Jack (Wansbeck)

  Williams, Alan W (Carmarthen)

  Timms, Stephen

  Winnick, David

  Touhig, Don

  Wise, Audrey

  Trickett, Jon

  Worthington, Tony

  Turner, Dennis

  Wray, Jimmy

  Tyler, Paul

  Wright Dr Tony

  Vaz, Keith

  Young, David (Bolton SE)

  Walley, Joan

  Wardell, Gareth (Gower)

  Tellers for the Noes:

  Wareing, Robert N

  Mr. Joe Benton and Ms Janet Anderson.

  Watson, Mike

  Question accordingly agreed to.
  Lords amendment disagreed to.
  Lords amendments Nos. 3 to 6 agreed to.
  Committee appointed to draw up a Reason to be assigned to the Lords for disagreeing to their amendment No. 2: Mr. Anthony Coombs, Mr. David Blunkett, Mr. Richard Ottaway, Ms Estelle Morris and Mr. Robin Squire; Three to be the quorum of the Committee.—[Mr. Richard Ottaway.]
  To withdraw immediately.
  Reason for disagreeing to Lords amendment No. 2 reported, and agreed to; to be communicated to the Lords.

PETITIONS

  Education Vouchers
  11.59 pm
  Mrs. Alice Mahon: I wish to present a petition from the Calderdale Schools Against Vouchers in Education. The petition contains 10,000 signatures from the people of Halifax and the Calder Valley. The petitioners urge the Prime Minister and the Secretary of State for Education and Employment to exempt them from nursery vouchers because, in their opinion, Calderdale is already a high provider of good quality nursery and reception education. They believe that it would be more appropriate to concentrate on supplying adequately provided state nursery and reception places for all children.
  To lie upon the Table.

  Rail Freight
  12 midnight
  Mr. Tim Smith: The petition of the residents of the Beaconsfield constituency, particularly the residents of the village of Denham, declares that they totally oppose the proposed freight railway system planned by Central Railway plc. The objectors, who number almost 4,500 and who live in the vicinity, declare that the proposal is unacceptable because it will cause environmental damage far outweighing any claimed benefits. The fact that so many people in my constituency have signified their resolute opposition to the proposals is a clear sign to the House of Commons that it should reject them when they are debated and voted on next week. The petitioners therefore request that the House of Commons rejects Central Railway's application for an order under the Transport and Works Act 1992.
  To lie upon the Table.

  War Memorial (East End)
  12.1 am
  Ms Mildred Gordon: I present a petition signed by almost 4,000 Londoners, most of whom live in the east end, in support of the efforts of the group known as Civilians Remembered to obtain a suitable memorial for civilians who died during the last war and to commemorate the bravery of those who kept the London docks open throughout the blitz. The petition showeth that the most fitting and appropriate site to honour the suffering of east end civilians during the last war would be a memorial in a park setting, to provide a much-needed amenity for contemplation, education and recreation and access to the river for their surviving families and future generations. The petitioners pray that the House recognises that the bravery of east end civilians during the last war should be honoured by a memorial to be erected in a park setting on the last remaining open land fronting the Thames in Wapping, known as the Hermitage riverside close to Tower bridge, which was the entrance to the London docks.
  To lie upon the Table.

  Mentally Ill People (Blaenau Gwent)
  Motion made, and Question proposed, That this House do now adjourn.—[Mr. Bates.]
  12.2 am
  Mr. Llew Smith: At a recent meeting to discuss the changed provisions for patients suffering from mental health problems in Abertillery and district, the wife of one of the patients said:
  "You might be thinking that this does not affect you, well you are wrong. Mental illness can affect anyone, no matter how fit you are, or whatever age and it does it without warning. Anything can spark it off-a family death, birth of a baby, loss of your job, money worries, health problems, family problems. Your illness may be short term, or last for months, even years. As the Lottery says, it could be you."
  She is right. The people who suffer from mental illness are among the most vulnerable in the community. Because of their mental state, they often find it difficult to stand up for their rights and they often require their family, friends and local community to provide support for them.
  The Gwent community health trust obviously recognised that vulnerability, so the provisions for mental health care were changed without consultation and introduced without notice. The changes are opposed by me, the patients and their families, the local general practitioner, the county borough council, the community council, a representative of the community health council and by the non-executive director of Gwent area health authority, Peter Law. The senior employee of the health authority in the area admitted that the patients were "casualties of the reorganisation".
  The chief executive officer of the community health trust, Bob Hudson, has admitted that there was no consultation. He said that, even with consultation, the conclusion would almost certainly be the same. That would not be consultation, but a cheap publicity gimmick—an insult to the consultation process. Page 2 of the patients charter issued by the Welsh Office in 1996 states that it is the duty of the authority to:
  "Discuss and help to decide the care and treatment that's right for you."
  Mr. Hudson has apologised for the lack of consultation and for the pain and trauma that the changes have caused the patients and their families. However, the patients are not interested in apologies or in sympathy: they want to revert to the first-class service that was provided until a few months ago. The chief executive officer of Gwent community health trust responded to that demand by saying:
  "Well folks, you have lost out."
  How callous and uncaring can a person be? What are the proposals? The changes to in-patient treatment involve transferring patients from the Dan-y-bryn hospital in Ebbw Vale to Talygam in another county borough.
  The Minister may wonder what the problem is. First, there is the difficulty of travelling from Blaenau Gwent to Talygam. Mr. Hudson argues that, as the crow flies, there is not much difference in the distance. However, Julie Pitcher, the wife of one patient, responded by saying, "Mr. Hudson, we are not crows". Mr. Hudson fails to realise—I assume because he is the equivalent of a member of the Flat Earth Society—that we live in valleys that are separated by mountains. Gordon Caldecott, a

  1275
  journalist with the Gwent Gazette, highlighted that fact when he calculated that a return journey would require six bus changes and take approximately four hours.
  It is not simply a question of time and inconvenience. A patient explained at a recent meeting that travel can be a terrifying experience for some patients with particular mental health problems and the cause of great agitation. The Minister may ask: why not go by car? The same problems apply, but the statistics show—the Minister has access to them in the Welsh Office—that Blaenau Gwent has one of the lowest levels of car ownership of any valley community in south Wales. That is obviously a reflection of deprivation in the area.
  The travel difficulties with bus changes will affect the patients, their families, friends and anyone else who cares to visit them. However, they are not the only problems confronting patients. When they arrive at the hospital, they will be faced with a new nursing staff and different consultants. If a patient has a fractured ankle, he can cope with a change of staff. However, we are discussing not fractured ankles, but people who suffer severe mental health problems. It often takes years for them to build up faith, trust and confidence in the nursing staff with whom they deal. It will take a long time to gain the trust and confidence of the new staff and consultants.
  Secondly, we have the problems that relate to out-patient treatment. The original plans involved changes to many of the community nurses who make home visits. Thanks to the stand taken by the patients, their families and the local community, the number who would have experienced such changes has, thankfully, been reduced. Yet, if we are one of the minority forced to change nursing staff, for us the problem is just as big.
  To placate the patients and the families, the trust decided to set up a clinic in Abertillery for four hours a month, which inevitably means a long waiting period before an appointment. That is a complete waste of time, considering that Blaenau Gwent has the highest level of mental illness of any part of Gwent. That being so, I should have though that the community health trust would have brought the service to the clients. But no. Because we are unable to fit into its grand plan for Gwent, patients must now go to the service, and damn the consequences.
  Indeed, Mr. Hudson admitted that the problem has arisen because of the grand plan for Gwent. For this to happen anywhere is sad, but for it to happen in Blaenau Gwent, the birthplace of the national health service, is a tragedy. The patients and their families feel that they have been treated with much disdain and that the human element has not even been considered.
  It is interesting to note that one of the two people who drew up the plans admitted, in a recent meeting, that he knew nothing about the area when contemplating the changes. At least he was honest, although his honesty has had tragic consequences for patients.
  I have already quoted from the patients charter regarding consultation, but let me quote further from some of the passages that are relevant to these changes. On page 2, the charter commits itself to treatment
  "with care, consideration and respect"
  Further on, it states that we must have
  "the right service at the right time and place".
  These changes will mean that the service is neither at the right time nor in the right place.
  1276
  Page 11 states:
  "If you have a serious mental health problem, you will be encouraged to work with a carer of your choice and your local community health team, to agree a plan to help you get the care and support you need."
  The trust, by not consulting, has taken away that choice. All this has been ignored, and patients are experiencing much pain as a result. That has been well illustrated in the meetings that we have had, where some patients break down and cry because they fear the consequences of isolation.
  It seems to me that the Minister has two choices: first, to show that the promises in the patients charter are not just words on a page or some cheap gimmick and instruct Bob Hudson, chief executive officer of the community trust, to scrap the plans and return to the provision that had prevailed; or, secondly, to admit that it was a publicity stunt and, like the chief executive, say, "Well, folks, you have lost out".
  I have argued that people with mental health problems are vulnerable and often unable to stand up for themselves. Yet the patients and their families have been magnificent. They have stood up to the bullies in the community health trust, and the message that they want me to pass on to the Minister is that they are standing firm and will not be shoved around any more. Everyone else recognises their courage, knowing what is best for them. That is why I—as is everyone else in the community—am giving them 100 per cent. support.
  I finish by quoting from Julie Pitcher, the wife of one of the patients, who handed in a petition to the Under-Secretary of State, the hon. Member for Brecon and Radnor (Mr. Evans), on behalf of the patients. She wrote:
  "Since the changes, patients' lives have become a jigsaw, always trying to fit the pieces together and we are worried that for some time the jigsaw is beginning to fall apart".
  That is what it is all about. That is why we expect and demand of the Minister that he respond to the plight of these people.
  12.14 am
  The Parliamentary Under-Secretary of State for Wales (Mr. Gwilym Jones): As I said in Welsh Questions on Monday, I am pleased that the hon. Member for Blaenau Gwent (Mr. Smith) has managed to raise this important issue. I shall try to respond to all the important points that he made.
  If the hon. Gentleman looks at the provision of mental health care for those living within the Gwent health authority region—including those living within Blaenau Gwent—he will, I hope, acknowledge the greatly improved level of care that is now provided. Over the past eight years, a comprehensive network of local facilities has been steadily built up to replace the outdated and relatively distant institution at Pen-y-Fal in Abergavenny. There are now eight multi-agency mental health teams based in the community. For adults, there is an ambitious range of purpose-built local in-patient, out-patient and day hospitals at Blackwood, Ebbw Vale and Pontypool, which are more convenient and in a homely environment. For the first time, a new liaison psychiatry facility has been established at Nevill Hall hospital. It provides special support when required for patients who are in the general hospital. That benefits Blaenau Gwent, and fills a significant gap.

  1277
  There has also been considerable investment for elderly mentally ill patients. We now have a new purpose-built hospital, which is the first phase of Ebbw Vale community hospital. It provides continuing care, respite care and a day hospital for Blaenau Gwent.
  Among the achievements in the Gwent health authority region is the fact that the specialist psychiatry facility for old age now includes five community mental health teams to meet the needs of older people as close as possible to their own homes. Each team is made up of a consultant psychiatrist, clinical psychologists, community psychiatric nurses and therapists who specialise in working with those with mental health problems. Each team also has active input from key social workers and voluntary organisations. A strong network of volunteers, including carer support groups for patients with dementia and their relatives, has also been developed. All those new provisions improve access and patients are treated more effectively, with an obvious improvement in the quality of care on offer.
  As one would expect, as new developments are brought about catchment areas may need to change. In recent months, health and local authority boundaries and responsibilities have changed. That, and some acknowledged anomalies in catchment areas, prompted a view of existing configuration. The aim was to ensure that a greater consistency with local authorities, social services and general practices was achieved, thereby making liaison and continuity more effective.
  Mr. Smith: The Minister says that more continuity has been achieved in relation to local authorities. I am not talking about that, however, and nor are the patients. If there were such continuity, patients would continue to be treated in Dan-y-Bryn hospital in Ebbw Vale, but, as the Minister knows, they are forced to cross the valley to Torfaen. If we are to have the debate that we want, let us make sure that we get the facts right.
  Mr. Jones: I do not deny what the hon. Gentleman has said. I am trying to present all the facts.
  I imagine that the hon. Gentleman is aware of the Audit Commission's report. It defined a framework for comprehensive, community-based mental health care. The lack of coterminous boundaries, and poor access to local in-patient provision, gave rise to specific criticism of Gwent health authority's abilities. Gwent Community NHS trust has attempted to reconcile the differences, and to respond positively to demands from local people and the agencies involved.
  Mr. Smith: Will the Minister give way?
  Mr. Jones: Will the hon. Gentleman pause for a while and listen? As I have said, I am trying to establish the facts.
  Mr. Smith rose—
  Mr. Jones: I do not wish to be discourteous.
  Mr. Smith: We must get the facts right. The Minister said that the trust was responding because of pressures
  1278
  from local agencies and people. I challenge him to name one individual, organisation or local agency that has not only pushed for the changes but supported them. The Minister made his point; now he must explain it.
  Mr. Jones: As the hon. Gentleman will find, I am trying to establish what the position is.
  Patients living in Pontllanfraith, Blackwood and Newbridge now have a local community mental health team and can go to a new in-patient unit, Ty Sirhowy, situated in Blackwood. Previously, they had to make a nine-mile journey to Pontypool. Residents in Abersychan and surrounding areas are now able to access new purpose-built, in-patient facilities at Pontypool and those from Tredegar and Sirhowy are now served by new in-patient facilities at Ebbw Vale.
  In all cases, there is considerably less need to travel and improvements in liaison and quality, together with greater liaison and co-operation between community mental health teams and GP practices. The key to improving health care lies in enhancing the role of the primary sector. GPs and fundholders are and will continue to be central to this.
  GP fundholders have a significant role to play in community-based arrangements, as they are responsible for commissioning mental health care for their patients. I expect the new health authorities to pay particular attention to the role of primary care so that we might achieve yet further improvements in the NHS.
  Mr. Llew Smith rose—
  Mr. Jones: If the hon. Gentleman listens to what I am going to say, it will deal with his point.
  People living in south Blaenau Gwent will also benefit as a result of these changes, although I accept that, for a small number, there appears to be a disadvantage. They will now have to travel to a different hospital for in-patient care and, for some, there will be a change of consultant.
  That does not mean that the care that those people receive will be less good simply because the in-patient facility will be situated at Pontypool. The new unit offers a first-class environment for the treatment of the mentally ill. A wide range of health care will be available at Ebbw Vale and the unit is only marginally further away. It is certainly more convenient than the old institution in Abergavenny and, on past experience, it is expected that there will be less than one admission a week from the south Blaenau Gwent area.
  Mr. Llew Smith: I spent 15 years with the Workers Educational Association. A significant amount of that time was spent working in the mental health sector with mentally ill and mentally handicapped people, in all the hospitals and day centres that the Minister has mentioned and in many more, but one does not need to be an authority on mental health to know that a patient who has, say, a nervous background has gone through a traumatic experience. It often takes years. Indeed, one of the patients in the meeting that I mentioned referred to his severe mental state some 14 years ago, but he said, "As a result of the treatment and of developing relationships with the staff, I am here today." That is a major step forward.

  1279
  I am not criticising people in Talygarn hospital. I am sure that the nurses and consultants there are first class. I am not criticising the building. I know the region well, but patients will have to start from the word go. They will have to go through all the traumatic experiences that resulted in their mental illness. Those will inevitably be dug up again and discussed with the staff and consultants. One does not need to be an authority on mental illness to know that that will happen.
  Mr. Deputy Speaker (Mr. Michael Morris): Order. The hon. Gentleman has already made a speech.
  Mr. Jones: I acknowledge that there is agreement between us, but the hon. Gentleman is, in part at least, exaggerating the position.
  I want to explain two points. First, the changes were motivated by clinical considerations and were developed by clinicians and patients before they were carried into full effect. Secondly, when it became clear—I think that this is what the hon. Gentleman was referring to—that a small number of people would be inconvenienced, the trust sought to discuss the issue openly and publicly and to make improvements to meet the most pressing concerns.
  Increased out-patient and day hospital places have been provided locally and the Gwent Community Health trust has considered assisting relatives and friends to visit patients in hospitals. This is not the action of an uninterested and unresponsive organisation.
  Mr. Smith: I do not know who wrote that speech, but his or her knowledge of the community is equivalent to that of the people who drew up the plans for the Abertillery and district area.
  The Minister stated that the patients were involved and consulted. The chief executive officer, Mr. Bob Hudson, has apologised and admitted that there was no consultation, not only with the patients and families, but general practitioners, the local council, Uncle Tom Cobbleigh and all. So let us stick to the facts.
  Mr. Jones: Naturally, my officials have been in touch with the Gwent Community Health trust and obtained information. As I said, when it became clear that there were problems, consultations were opened. I think that I know what the hon Gentleman means and I hope that he knows what I mean.
  Considerable thought has been given to the effect on an average patient in the south Blaenau Gwent area. Previously, patients travelled to Ebbw Vale or Blaina for out-patient sessions. They now travel shorter distances to new, more convenient out-patient sessions closer to Abertillery.
  Gwent Community Health tells me that by the end of the summer, only those who need first appointments will be required to travel outside the south-east of Blaenau Gwent. Furthermore, Gwent Community Health aims to provide complete local provision in due course. That is no mean target for what are, after all, very specialised functions.
  Some 1,000 out-patient appointments a year are involved and that represents a considerable improvement in access for those living in the surrounding areas, as well as in the quality of health care.
  1280
  Furthermore, patients travelling to Ebbw Vale quite often saw not their consultant but an associate. The new arrangements will result in an increased number of out-patients being seen by their own consultant.
  Continuity of care is essential and even more so for individuals with a mental health problem. In recognition of that, the community psychiatric nurses involved with those living in the south of Blaenau Gwent are to remain with their patients, thus retaining their links.
  In addition, parallel clinical sessions by community psychiatric nurses will supplement out-patient consultant sessions at Abertillery. All community psychiatric nurses will now be linked to GP practices and liaison between the two should be greatly simplified and enhanced.
  I am not aware of any change or proposed change that is not firmly based on the intention to improve patient care. I stress that the changes have not been driven by a management agenda to reduce costs or make savings at the expense of mental health patients.
  The changes represent a genuine attempt by the trust to improve health care in the south-east of the hon. Gentleman's constituency and they seek to demonstrate that the process is continuing. I want to see a determination to listen to the views of those whom they seek to serve.
  I hope that I might have the hon. Gentleman's agreement that, in general, we have a good track record in Wales for developing health care that responds to individuals' needs and preferences. I very much want to ensure that the essential partnerships between health and local authorities will be strengthened as a result of the changes.
  I am aware of the concerns locally about the transfer of some provision from Ebbw Vale to Torfaen. A decision to consult on that issue is a matter for the health authority and the national health service trust in discussion with local interests. At the end of the day, the determination of the precise pattern and level of health care provision for mental illness must be a matter for those involved locally and will always need to be considered within the context of available resources and competing priorities.
  Health care will change from time to time and, in looking at the needs of one locality, the needs of the health authority's region as a whole must be taken into account if maximum benefits are to be achieved.
  I regret any inconvenience that some people might face as the changes take place. Even if clinical standards are improved, as in this case, have no wish to see vulnerable people, their families and friends put to avoidable inconvenience. I give the hon. Gentleman my assurance that I will be watching the situation as it develops.
  In acknowledging that the hon. Gentleman has raised a number of important issues relating to the south of his constituency, I think it fair to try to put them in the context of the considerable advances made under this Government for those suffering with a mental illness. Those advances can be seen both nationally and locally, throughout Wales and in the hon. Gentleman's constituency.
  We should not forget that, for the past 100 years, mental health care throughout Wales has been primarily provided within isolated, large psychiatric institutions, typically the old Victorian institutions, and there is the widest agreement that those are no longer suitable for the

  1281
  mentally ill. Often, they meant for many people that they were removed from their local communities and that links with their families and friends were destroyed.
  We remain firmly committed to our policy. We want to see that those who suffer from a mental illness have the right care and the support that they need. It is a continuing challenge. Individuals cannot be slotted into a standard model of care.
  In Wales, we have been at pains to ensure that appropriate community care is provided before hospital beds are withdrawn. Our aim is to have a range of facilities to meet all the varied clinical needs. We must strive to meet reasonable needs and to keep individuals in contact with their families, friends and colleagues. Helping them remain in their own homes and surroundings remains the cornerstone of our policy.
  Clearly there has been significant progress in Wales. We now have some 50 community mental health teams across Wales. They work in partnership with a host of other agencies, sharing dedicated bases and aiming to provide local and accessible care to those with severe mental illness.
  Mr. Llew Smith: On a point of order, Mr. Deputy Speaker. Will you confirm that this debate is about mental health provision in Blaenau Gwent as opposed to Wales? The Minister said, in his own words, "From now on, I shall discuss provisions for the rest of Wales."
  Mr. Deputy Speaker: As far as I am aware, Blaenau Gwent is in Wales. Therefore, the Minister's remarks are in context.
  Mr. Jones: I have sought to describe the situation in Gwent because I thought that I had agreed with the hon. Member for Blaenau Gwent that it was important to put the facts on the record. I specifically discussed the situation surrounding the problems to which he has drawn attention, and I acknowledge that there are some problems. I have sought to assure him that, as he has drawn the problems to my attention, I mean to continue to watch the position.
  1282
  This is essentially a local matter. I should hope that the hon. Member for Blaenau Gwent will use his best offices in continuing to represent this matter with the Gwent Community Health trust and with the Gwent community health authority. I should tell him, however, that I do not think that he is doing the greatest service for his constituents with the manner in which he is behaving in this debate. I think that a more considered and constructive approach towards a matter of this nature would secure a much greater gain and response from those who need to listen to him. I, for one, am listening to him, and I shall continue to listen to him.
  Mr. Llew Smith: It is arrogant and condescending to say that I should involve myself in discussions with the health authority and with the trust, and that I should be a part of the consultation process. The point that we are trying to make is that there has been no consultation in recent weeks because of pressures from the families and friends of those involved. There have been meetings. I am not the only one making this argument, because GPs, local authorities, social services and everyone else is opposed to the plans. That should lead the Minister and the health trust to arrive at the conclusion that, perhaps, they have it wrong.
  Mr. Jones: Of course there must be discussions at every possible level. As a constituency Member of Parliament, I know that I participate in such discussions, and I am sure that the hon. Member for Blaenau Gwent participates in such discussions. However, I think that I am entitled to tell him that the manner in which he has behaved today does not endear his case to me—although, from what I have heard and from my investigations, I understand that there is substance in the points that he has made. But when he goes overboard—in a particular manner—in making those points, he undermines the importance of his case. I must tell him that there is constructive discussion and there is destructive discussion.
  The motion having been made after Ten o'clock, and the debate having continued for half an hour, MR. DEPUTY SPEAKER adjourned the House without Question put, pursuant to the Standing Order.
  Adjourned accordingly at twenty-eight minutes to One o'clock.