Commons Sitting of 18 June 1996

Preamble
The House met at half-past Two o'clock
PRAYERS
[MADAM SPEAKER in the Chair]
PRAYERS
  PRIVATE BUSINESS
    ALLIED IRISH BANKS BILL
    Read the Third time, and passed.
Oral Answers to Questions
  HEALTH

    Travel Vaccines
    Mr. Canavan: To ask the Secretary of State for Health if he will ensure that travel vaccines continue to be made available on the NHS. [31694]
    The Parliamentary Under-Secretary of State for Health (Mr. John Bowls): Yes.
    Mr. Canavan: Is the Minister aware that last year alone 39 million British people made overseas visits, 16 per cent. of them to areas with a high risk of infection? Will he resist any suggestions that vaccination should cease to be available on the NHS? If he does not, many people may not get vaccinated, which would lead to an increase in the number of infected travellers returning to Britain, thereby increasing costs to the national health service and having a detrimental effect on many people's health.
    Mr. Bowis: The hon. Gentleman makes a fair case for the economic health of the nation that enables so many people to travel abroad, and a good point about travellers needing to take precautions. Just as they need to take out travel insurance, they should consider their health protection. I hope that they will read the "Health Information for Overseas Travel" booklet produced by the Government. The position of successive Governments has been that immunisations are free for travellers where there is considered to be a real risk to public health if a disease is brought back to the United Kingdom. That remains the case. I am happy to join him in resisting any change to that.
    Mr. Fabricant: Before my hon. Friend is overcome by generosity, will he bear in mind that many business travellers have their vaccinations paid for by their companies? It is difficult to have sympathy with people who go on exotic holidays to Australia and Thailand who say that they cannot afford to pay for their vaccinations.
    Mr. Bowis: My hon. Friend makes a fair point. That is why there is a balance in the system whereby vaccinations for diseases that would not be a threat to the remainder of the population if someone were to bring them back from abroad are the responsibility of the individual. As he said, they may be paid for by a company, but the cost is small compared with the overall cost of travel abroad, certainly to the remote places that he mentioned. Where there is a potential public health risk, it is right that the NHS system should be able to provide the service through doctors or clinics.

    Purchasing Contracts
    Mr. Touhig: To ask the Secretary of State for Health when he last met the chairmen of NHS trusts to discuss the administrative costs of purchasing contracts. [31695]
    Mr. Bennett: To ask the Secretary of State for Health what representations he has received about administrative costs in the NHS. [31700]
    The Secretary of State for Health (Mr. Stephen Dorrell): I meet NHS trust chairmen regularly. The Government are committed both to the effective management of the NHS and to the reduction of unnecessary bureaucracy.
    Mr. Touhig: While I recognise that an extra £1.4 billion was put into the national health service in 1993–94, every penny of it went on administrative costs. Is that obsession with bureaucracy, as opposed to front-line services, the reason why three quarters of NHS trusts have yet to make a local pay offer to nurses four months after Ministers pledged action on the matter? Is that another broken Tory promise?
    Mr. Dorrell: The Opposition's concern about bureaucracy would be a great deal more convincing if they had not voted against the abolition of the regional health authorities, which was the biggest single element in the £300 million programme for shifting resources out of unnecessary bureaucracy into front-line patient services.
    The Government have made it clear that nurses' pay arrangements are a matter for local agreement between employers and local nurses groups, against the guarantee of a minimum increase of 2 per cent. on a national basis.
    Mr. Bennett: Will the Secretary of State now confirm that there are 20,000 extra NHS managers and 50,000 fewer nurses as a result of the Government's programme? Is that by design on the part of the Government or by accident?
    Mr. Dorrell: The hon. Gentleman persists in deliberately misreading figures, despite repeated explanations of what the figures he quotes mean. He might do well to remember the words of the previous shadow health spokesman, who said:
    "I don't think it's really in question any more that the NHS has been under-managed in the past."
    That is why the Government strengthened NHS management and why the NHS is now delivering more patient care to higher quality more efficiently than it has ever done before.
    Sir Sydney Chapman: Does my right hon. Friend agree that administrative costs in the health service should be kept in proportion? Does he further agree that, if increased administrative costs result in more medically qualified people undertaking less administrative work, and in the more effective targeting of the ever-increasing funding of our national health service for the benefit of patients, they are justified.
    Mr. Dorrell: My hon. Friend is on a very important point. He underlines the interest that every taxpayer and every patient of the NHS has in its efficient management. The question that should be asked of the Opposition Front-Bench team, particularly of the hon. Member for Darlington (Mr. Milburn) in the light of press reports at the weekend, is why the Labour party wishes to disfranchise 6.5 million people who take out private health insurance and prevent them ever playing any part in the management of NHS trusts and health authorities.
    Mr. Thomason: Can my right hon. Friend confirm that the proportion of NHS staff who are involved in the direct care of patients has increased in the past decade?
    Mr. Dorrell: My hon. Friend is on to an important point. We have increased commitment to front-line services, delivering more treatment to more patients than ever before in the history of the NHS. The Labour party is more concerned with dogma. [Interruption.] The hon. Member for Darlington says that I should not believe everything that I read in the newspapers. Perhaps he would like to deny the story in the weekend newspapers, since it appeared in quotation marks, attributed to him.
    Ms Harman: Can the right hon. Gentleman confirm that the bill for bureaucracy for his NHS internal market is an extra £1.5 billion every year? Is he aware that, because of the market, St. Thomas's and Guy's hospitals now have to send out 57,000 invoices every year? How can he justify children being turned away from intensive care and their parents being told, "Sorry, there is no bed"? How can he justify patients waiting for hours on trollies? How can he justify patients being told at the last minute, "Sorry, we are cancelling your operation"? How can he justify any of that while he squanders precious NHS resources on red tape to run the market?
    Mr. Dorrell: Rather than uttering these repetitive soundbites, the hon. Lady might do better to explain to the NHS and to the public what she means when she says that she will abolish the internal market. Her policy document is clear. She retains the purchaser system. She retains the principle that purchasers should be free to place their contracts where their patients' advantage lies. How will she do that while delivering the commitment that she professes to abolish an internal market?
    Mr. Congdon: Does my right hon. Friend agree that one of the benefits of the internal market is that it has enabled health authorities to focus on the real issues of health need and effectiveness of health care? Does he agree that it is nonsense for people to pretend that the NHS can be managed without managers, and managed on a system based on ignorance? Have not the changes led to real improvements in the quality of health care given to the people of this country?
    Mr. Dorrell: My hon. Friend is right. The interest of every patient and every taxpayer is that the health service should be efficiently managed and that health resources should be targeted at real health need. That is the purpose of NHS management. The hon. Member for Peckham (Ms Harman) professes to mean that, but consistently commits herself to undermining the structure that makes it possible.

    Community Care
    Mr. Purchase: To ask the Secretary of State for Health when he last met representatives of local authorities to discuss the provision of care to the elderly people living in the community. [31696]
    Mr. Bowis: I meet them on a wide range of formal and informal occasions and discuss with them an equally wide range of issues.
    Mr. Purchase: Is the Minister aware of the considerable confusion that exists in local authorities and in other agencies, such as Age Concern and widows' associations, and the tremendous anxiety that many older people now feel about their future and about the Government's plans, which seem to be aimed at further commercialising and privatising the health services that older people have a right to rely on, having paid for them all their working lives?
    Mr. Bowis: In that case, I am sure that, if the hon. Gentleman has discerned this concern, he will reassure those people by pointing out that 40 per cent. of NHS health care spending is spent on people over 65, despite the fact that they are only 16 per cent. of the population. I am sure that he will also have reassured them by pointing out that the present Government have enabled social services departments to spend £5.7 billion on their community care needs.
    I am sure that the hon. Gentleman will have noticed—although he does not appear to wish to notice it at this moment—the considerable increase in contact hours for people receiving care in their own home, up 42 per cent. in the past three years. Those are measures of success and care, and show that the Government do care about the future of the increasing numbers of elderly people in this nation—people who can rely on our policies, although, when it comes to the Opposition's policies, they will have to wait for a royal commission.
    Dame Jill Knight: Does my hon. Friend agree that one of the most important things that helps elderly people living in their own homes is the home help service? Is he aware that many local authority social services departments now state that doing the shopping should be top priority for home helps, but that the people they help need a reasonably clean home, whereas neighbours and relatives will often do the shopping? Can he do something about that?
    Mr. Bowis: My hon. Friend is right to suggest that local authorities, which are responsible for arranging social care when that is needed, should listen carefully to the users of those services and their families to discover what type of services they should be purchasing on their behalf. I believe that the Community Care (Direct

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    Payments) Bill, which is passing through the House, will also help people in the coming years as more and more people are able to benefit from that. It does, however, as the Audit Commission pointed out, depend also on the efficient use of the substantial resources that the taxpayer is providing for local government and social services in particular. It is no good, as Liverpool is doing, spending £500 a week on each person in its own care homes compared with the £198 a week that it spends on independent homes, and then wondering why there is not enough for other services.

    General Practitioner Fundholding
    Mr. Chisholm: To ask the Secretary of State for Health what recent monitoring he has undertaken of GP fundholding. [31697]
    The Minister for Health (Mr. Gerald Malone): Throughout the country, general practitioner fundholders are improving services to patients through effective management of resources. Health authorities monitor them monthly, in accordance with the accountability framework; and the national health service executive monitors both health authorities and fundholders through its regional offices.
    Mr. Chisholm: What assessment has the Minister made of the recent Audit Commission report on GP fundholding? Can he confirm that the report vindicates the long-standing criticisms that Labour has made of the scheme, and does he agree that fundholding involves massive duplication of bureaucracy without any significant benefits to patients?
    Mr. Malone: No, of course not. Unlike the hon. Gentleman, I have read the report from beginning to end. It shows that every fundholder has brought benefits to patients. It also says that some, who have not brought as many benefits to patients as others, should be encouraged. I would expect the hon. Gentleman to support that idea.
    This is an investment in patient care which has brought about a better quality of patient care for more than 50 per cent. of the population in England. In the interests of his own constituents, I hope that the hon. Gentleman will ensure that that is emulated in Edinburgh.
    Sir James Hill: Does my hon. Friend agree that the difference between a single GP and a group of fundholding GPs is the collective amount of money available? I already know of several individual GPs in Southampton who have run out of funds long before their group counterparts. Would it be possible to send teams to the new unitary authorities—now in the middle of the reorganisation—to advise GPs and social workers of the benefits of GP fundholding?
    Mr. Malone: It is never very gracious to disagree with a knight of the realm—I congratulate my hon. Friend on that distinction—and in any event I do not disagree with the substance of his question. We certainly expect health authorities to work with fundholders and non-fundholders to build better care for patients. I am sure that that is happening in my hon. Friend's local health authority.
    Mr. Milburn: Does the Minister agree with the Audit Commission's conclusion that GP fundholding has added to management costs in all parts of the NHS? How does he justify wasting £260 million a year on red tape for fundholding when it produces no gains for patients? Will he now accept that the replacement of fundholding by GP commissioning will not only give all family doctors a say in shaping hospital services for their patients but will shift NHS resources from back-line bureaucracy to front-line patient care?
    Mr. Malone: The hon. Gentleman makes exactly the same mistake as his hon. Friend the Member for Edinburgh, Leith (Mr. Chisholm)—not reading the report or understanding its conclusions. The report clearly points out that, for an on-going payment of some two per cent. of total budget, there is a four per cent. gain in patient care efficiency. The hon. Gentleman persistently refuses to understand that that is a benefit for patients. I am glad that he and his hon. Friends have now clearly told the world that that is an advantage that they would abolish—that is their firm policy. The 50 per cent. or so who are GP fundholders will understand that it is the Labour party's intention to abolish them if it ever comes to power, as will the 53 per cent. of the population who benefit from GP fundholding.
    Mr. Anthony Coombs: Contrary to the drivel talked by the Opposition spokesman, is my hon. Friend aware that giving decision-making powers to GPs in my constituency has produced a better standard of primary health care than ever before? Is it not disgraceful that the Labour party should now decide to take away those powers from GPs and give them to the party's own bureaucrats, quangos and councillors? Such a move would be bad for primary care in my constituency.
    Mr. Malone: My hon. Friend is right. The point that he rightly makes is that it is the effective purchasing power of general practitioners which has brought about change. Conservatives welcome the fact that other GPs are becoming involved in the purchasing process, but it has been driven by GP fundholding—the true success story which has brought far better patient care to all constituents, including those of my hon. Friend

    Private Finance
    Mr. Martlew: To ask the Secretary of State for Health what assessment he has made of the progress of schemes costing over £10 million using private finance. [31698]
    Mr. Dorrell: The full potential of the private finance initiative is now being realised. Since the initiative started, seven schemes valued at more than £10 million each have been approved, with a total capital value of £394 million. Another 50 schemes worth between £1 million and £10 million have been approved, with a total capital value of £130 million, and 40 schemes with an estimated capital value of £1.5 billion are currently being tested for private finance.
    Mr. Martlew: The Minister will be aware that we have been waiting for a new hospital in Carlisle for more than 20 years. Is he aware that, for the past two years, the

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    private finance initiative has delayed that hospital? There are currently 556 beds in Carlisle, but the PFI scheme will reduce that number to 274. I understand that AMEC, the only bidder for the scheme, is talking about reducing the number of beds to 400. Will the Minister give us an assurance that 474 beds will be the minimum? Can he confirm that the price of the scheme is still £43 million?
    Mr. Dorrell: The hon. Gentleman understates the extent to which the PFI is bringing forward the hospital. It is not 20 years since the idea was first tabled—it is almost 30 years. The Cumberland infirmary project was first tabled in 1968. It is a source of considerable pride to me that the PFI is making it possible to turn that idea, of almost 30 years standing, into a firm project for the benefit of the hon. Gentleman's constituents. I hoped that the hon. Gentleman would welcome that. As he knows, the project design is the subject of continuing local discussions.
    Mrs. Roe: Is my right hon. Friend aware that the trade union Unison vigorously opposes any use of the private finance initiative in the national health service? Does he believe that there is a link between Unison's continuing financial support for the Labour Front Bench and their attempt to claim that on the PFI they will be able to face both ways?
    Mr. Dorrell: My hon. Friend raises an important point. There is no doubt where Unison stands on this issue—the doubt rests with where the Labour Front Bench stands. The Leader of the Opposition says that the PFI is right in principle and the hon. Member for Peckham (Ms Harman) says that the PFI is a new trick to privatise the health service—both propositions cannot be the Labour party's policy.
    Mr. Barron: Will the Minister confirm the number of hospitals that have been approved and have signed contracts? The people of Norwich and Swindon have consistently had their new hospitals approved, but no contracts have been signed. Earlier this year, the Minister rushed legislation through the House to try to bail out the Government's PFI initiative. Yesterday, in the Financial Times, Martin Laing of the Laing Construction Group attacked the Bill. He said that he wanted more assurances and guarantees from the Government before PFI could go ahead.
    The latest row that besets the Tory ranks is Edgware hospital. The services that will be lost at Edgware hospital should be transferred to Barnett, which has been delayed for the past two years because of the PFI. When will we get some common sense in the debate? When will the Government get proper private and public partnerships that look after the interests of the British people, instead of the dogma that is floating around in the debate?
    Mr. Dorrell: In order to appeal to the hon. Gentleman, I will offer a sotto voce reply. The hon. Gentleman and his hon. Friends simply have to answer the following question: are they in favour of the PFI? Introducing all kinds of questions and red herrings will not get them off the hook. Are they in favour of the Leader of the Opposition's policy or are they in favour of the shadow health spokesman's policy? It is a simple question and the Labour Front Bench has to sort it out.

    South Humber Health Authority
    Mr. Michael Brown: To ask the Secretary of State for Health what is the current number of patients on the waiting list for the South Humber health authority. [31699]
    The Parliamentary Under-Secretary of State for Health (Mr. John Horam): Provisional figures show that at 30 April 1996 there were 6,919 South Humber residents waiting for admission to hospital, all but seven of whom had been waiting for less than 12 months. This is a significant improvement on recent figures
    Mr. Brown: Will my hon. Friend confirm that, in the 1970s, approximately 20 per cent. of the patients were on the waiting list for more than 12 months? Does not his answer indicate that we have made dramatic improvements in South Humber? I refer to one point of concern to local residents: yesterday there was a report that too many operations are being cancelled at the last minute. Will the Minister assure me and my constituents that he will look into this matter, as there is nothing more distressing for a patient than being called to hospital only to have an operation cancelled?
    Mr. Horam: I agree entirely with my hon. Friend's latter comment: there is nothing more distressing than having an operation cancelled at the last minute. There has been a problem in my hon. Friend's area due to the illness of one consultant combined with a sudden increase in the number of emergency admissions. However, all but one of the people whose operations were cancelled were admitted within a month—which is within patients charter standards. Given the excellent performance of South Humberside in reducing its waiting list—my hon. Friend paid tribute to that record—I know that it will make every effort to ensure that it does not happen again.

    Basildon Hospital
    Mr. Amess: To ask the Secretary of State for Health if he will make a statement on his Department's recent inspection of facilities at Basildon hospital. [31701]
    Mr. Malone: There has been no recent departmental inspection but, as my hon. Friend knows, I recently visited Basildon hospital where I was able to see the new Mary Wright unit for general practitioner referrals. I was impressed by the way that the unit speeds up the entry of patients to hospital and reduces the pressure on the accident and emergency department.
    Mr. Amess: Does my hon. Friend agree that the local hospital has been able to develop and enhance services since obtaining trust status? Will he join me in celebrating Hospice Fortnight and in congratulating the staff of St. Luke's hospice in my constituency, of Fair Haven in the constituency of my right hon. Friend the Member for Southend, West (Mr. Channon) and of Little Haven in the constituency of my hon. Friend the Member for Castle Point (Dr. Spink) on their magnificent work?
    Mr. Malone: I am happy to join my hon. Friend in his remarks. The trust in his area has an extremely impressive record. Day case activity has increased by 25.9 per cent. and the trust achieved a maximum wait of 12 months for

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    all day cases and in-patient treatments by the end of March 1996. No patient waits for more than 13 weeks for a routine first out-patient appointment. I also remember visiting the trust when it was awarded a citizens charter mark for excellence in service provision—which is much appreciated by all patients.
    Mr. Mackinlay: Does the Minister visit hospitals prior to their being awarded charter marks or hospitals that are not awarded charter marks? If he did, he might have visited Basildon during the bad times that were endured by my constituents in Thurrock and by the people of Basildon who suffered inordinate waiting times in the accident and emergency department because of the closure of the accident and emergency department at Orsett hospital. The people of Edgware are soon to suffer a similar experience. The fact is that the Minister turns up when there is good news but he is not prepared to face patients during the bad times like those suffered by the people of Thurrock and of Basildon.
    Mr. Malone: I visited the Basildon trust within a few weeks of being appointed Minister in order to see how our policies were affecting it. The hon. Gentleman is quite right: there were bad times. However, the bad times have gone and the good times are here as a result of our policies which the hon. Gentleman has persistently opposed.

    Creutzfeldt-Jakob Disease
    Mrs. Gorman: To ask the Secretary of State for Health if he will make a statement on the reported incidence of CJD worldwide since 1986. [31702]
    Mr. Dorrell: Creutzfeldt-Jakob disease occurs worldwide at an average incidence of up to one case per million people.
    Mrs. Gorman: Given the disgraceful way in which the Opposition—particularly the hon. Member for Peckham (Ms Harman)—sought to exploit the alleged connection between bovine spongiform encephalopathy and CJD, will my right hon. Friend confirm the latest results which show that the new strain of CJD is occurring in countries that are BSE-free, including many European countries? Does he agree with Dr. Paul Brown, the director of the United States Health Authority and a world expert on the subject, who has said that the incidence of three or four cases of the new strain of CJD in Europe will blow out of the water the thesis that the new strain is caused by BSE? The hon. Member for Peckham will then have to apologise.
    Mr. Dorrell: I entirely agree with my hon. Friend about the disreputable behaviour of the hon. Member for Peckham in seeking to feed public fears during the early stages of the argument. As to the incidence of the new strain of CJD, so far there has been one confirmed case outside the United Kingdom in France, although, as my hon. Friend rightly says, it is important that we continue to cast the net widely. That approach was supported by the World Health Organisation in May. The work is being co-ordinated from the British Government CJD surveillance centre in Edinburgh, which is recognised as a world centre of expertise in the matter.
    Mr. Wigley: Does the Secretary of State recall that, when he made his statement on this issue in March, I pressed him about resources for research into CJD? Does he therefore understand my surprise at discovering, when I visited the Western general hospital in Edinburgh a week last Friday, that, although verbal promises have been made about additional resources, it has received nothing in writing and, basically, it has the same team as was working in March; that those doctors still have to carry out their responsibilities without the certainty of additional hands to share the work; and that, in the past fortnight, only advertisements have appeared—produced jointly by the Department for Health and the Medical Research Council—for research to be undertaken by those who are dedicated to the work? Is it not time that we gave priority to that work and made resources available? It is a scandal that, three months on, that is not being done.
    Mr. Dorrell: The hon. Gentleman is absolutely right to say that the people doing the work are leading practitioners in the relevant medical fields. I make no apology for that, since they are best placed to make the necessary judgments to ensure that we understand the issue properly. On resources and the development of the research programme, I announced to the House in March that the Government support such development, and the hon. Gentleman has just reported the fact that that development is going ahead.
    Mr. John Marshall: Will my hon. Friend confirm that the European country that has the highest incidence of CJD is Austria, and that international studies indicate that there is no correlation between the incidence of CJD and behavioural patterns, such as whether one eats beef or meat or is merely a stupid vegan?
    Mr. Dorrell: My hon. Friend expresses his own views about vegans or—possibly—a particular sub-group of vegans. He underlines the fact that any link between beef eating and CJD has not been proven. Indeed, it is some way from being proven.

    Prescriptions
    Mr. Pike: To ask the Secretary of State for Health what percentage of prescriptions issued in the last 12 months were for more than one item. [31703]
    Mr. Bowis: It is estimated that 40 per cent. of prescription forms dispensed in the past 12 months were for more than one item.
    Mr. Pike: Does the Minister recognise that many people on low incomes who have to pay full prescription charges for two items every month have considerable difficulty meeting that cost? They cannot afford to pay for pre-payment certificates and there is a problem. Does he also recognise that there is a particular problem with dual packs, for which people have to pay two prescription charges?
    Mr. Bowis: The hon. Gentleman referred to people on low incomes. If they are on income support, they do not have to pay for prescriptions. I remind him that, when the Labour Government reintroduced prescription charges, exemptions ran at 42 per cent. The rate is now 85 per cent. A further 5 per cent. of people benefit from pre-payment certificates, to which he referred.
    He can set those people's minds at rest. It is true that there are two charges for a combination pack. That is because two drugs are packed together. If it were otherwise, it would be quite unfair on people who pay for multiple prescriptions. Curiously, any change would also be a perverse incentive to manufacturers to package their drugs in combination packs.
    Mr. Bellingham: I am grateful to my hon. Friend for spelling out the exemptions. Will he explain the different categories of people who get free prescriptions?
    Mr. Bowis: Yes, I will. Those who are exempted from prescription charges are men and women aged 60 and over, children under 16, students under 19, a person or partner receiving income support, family credit or disability working allowance, people entitled to full help under the NHS low income scheme, pregnant women and women who have had a child in the previous 12 months, and people who receive a war or Ministry of Defence disablement pension who need medication for that disablement. In addition, some medical conditions carry exemption. A tremendous number of people are exempt. We have one of the most generous exemption systems in Europe, which is why we can say that the vast majority of people who cannot afford to pay are well covered by it.
    Mrs. Mahon: Is it not the case that many students, even those below income support level, do not receive free prescriptions? Would the Minister like to comment on that?
    Mr. Bowis: If the hon. Lady is saying that people below income support level are not receiving free prescriptions, they are entitled to do so. The hon. Lady has only to add up the numbers about which we are talking—[Interruption.] I am sure that she can add up. If the total adds up to the 85 per cent. of British people who are entitled to free prescriptions, and a further 5 per cent. who benefit from the pre-payment certificates, she will see that there is not a problem. She will also see that it is a much more generous system than it was when the Labour Government reintroduced prescription charges.
    Mrs. Mahon: On a point of order, Madam Speaker.
    Madam Speaker: Order. I take points of order after Questions.
    Mrs. Mahon: In view of the unsatisfactory nature of that reply, I give notice that I intend to raise the matter on the Adjournment—
    Madam Speaker: Order. The hon. Lady did not ask the substantive question, so I am afraid that she does not have the opportunity to do that.

    Private Finance Initiative
    >11. Mr. Rowe: To ask the Secretary of State for Health how many private finance initiative projects have been approved in respect of national health service trust hospitals; and how many are awaiting approval. [31704]
    Mr. Horam: Since the launch of the private finance initiative, 41 national health service trust schemes valued at £1 million or above have been approved, with a total capital value of £472 million. Forty more projects, with a total value of approximately £1.5 billion, are testing for private finance as part of the procurement process.
    Mr. Rowe: I thank my hon. Friend for that encouraging reply. Will he undertake to do two things? First, as the experience of his excellent scheme grows, will he make every effort to ensure that the rules governing it become much simpler for trusts and others to understand? Secondly, will he review again the balance between the advantage that the trusts obtain from skilful use of their capital assets and the amount that the central authorities take from those capital assets for their own purposes?
    Mr. Horam: I understand my hon. Friend's points. It is not only a question of making the rules simpler, but of making the contract shorter as well. I am sure that my hon. Friend, with his interest in small companies, will agree that we must make it a process that is as available to them as it is to the large conglomerates. I certainly give him that assurance.
    Mr. Burden: If the Minister thinks that the PFI is as successful as he says, would he care to comment on the position of the Rubery Hollymoor primary health care centre in my constituency? It was promised to local people four years ago, they were told that the money was available from the NHS two years ago, it was trumpeted as a great new project by the then regional health authority, but it has been held up by the PFI and not one stone has yet been laid. Does the hon. Gentleman think it right that the working of the PFI should deny local people the services that the Government promised them?
    Mr. Horam: I do not know the particular scheme to which the hon. Gentleman refers, but I shall look into it. None the less, the PFI is accelerating the process. We are breaking out of the traditional system whereby everyone has to wait for the Treasury—waiting for Godot, one might say. If the scheme is good and provides value for money, and the risk is properly apportioned, it can obtain private sector finance. We are talking about a new era for hospital building in Britain, yet we still do not know what the Opposition think about it.
    Mr. Jacques Arnold: Is my hon. Friend encouraged by the splendid progress being made by the £100 million PFI project for a new hospital at Darenth Park to serve the people of Gravesham and Dartford? Will he do the best he can to sweep out of the way any obstacles that might arise, particularly those that might arise from the scaremongering of the Labour party and the hon. Member for Peckham(Ms Harman)?
    Mr. Horam: Yes, I confirm to my hon. Friend that that is an important scheme, which I am anxious should go ahead and to which I am giving constant attention.

    Dentists
    Mr. Gordon Prentice: To ask the Secretary of State for Health what steps he is taking to increase the number of dentists offering treatment in the national health service. [31705]
    Mr. Malone: There are nearly 16,000 dentists on health authority lists in England—an increase of 500 since 1992 alone. The reforms that I announced in the House last week should provide a further boost to NHS dentistry by removing uncertainty for the dental profession and creating a firm foundation for future development.
    Mr. Prentice: That answer will be cold comfort for my constituents in Barnoldswick. The Minister will recall that, last Wednesday, I told him that there was one NHS dentist in Barnoldswick—a town of 10,000 people. Today, there is not one NHS dentist in that town. Are not the Government's proposals to revitalise NHS dentistry a complete sham? Is it not the case that they are, as I described them last Wednesday, fraudulent?
    Mr. Malone: The hon. Gentleman's point is as absurd today as it was last week because, by implication, he is saying that dentists, who are self-employed practitioners, had been nationalised under a Labour Government and directed to work in certain places where he wished them to work. I have examined the situation in his constituency, and in Barnoldswick. Dental treatment is available in Colne, some five miles away, or in Burnley or Nelson.
    He and his right hon. and hon. Friends say that the service has been destroyed. I must say that they have some argument. We have allegedly killed off NHS dentistry since 1979—by spending 57 per cent. more on it in real terms than was being spent then. We have also increased the number of dentists who provide general dental service by 3,500. If the hon. Gentleman could get such a pledge from his Front Bench about funding the service, he might have a point to make.

  PRIME MINISTER

    Engagements
    Mr. Berry: To ask the Prime Minister if he will list his official engagements for Tuesday 18 June. [31724]
    The Prime Minister (Mr. John Major): This morning I had meetings with ministerial colleagues and others. In addition to my duties in the House I shall be having further meetings later today.
    Mr. Berry: Is the Prime Minister aware that he spoke for the whole nation on Friday when he said that he had had "a bellyful" of the Tory party?
    The Prime Minister: I have to tell the hon. Gentleman that his quotation is inaccurate, but it could certainly be applied to questions such as that.
    Mr. Peter Ainsworth: Is my right hon. Friend aware that more and more people in Germany wish that their economy was run like ours—with low inflation, steady economic growth, flexible labour markets and falling
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    unemployment? Will he take an early opportunity to invite the leaders of the German opposition parties to Britain so that they can see what can be achieved with Conservative policies?
    Mr. Faulds: More, more.
    The Prime Minister: I am glad to see that it evokes such approval on the Opposition Benches.
    It is certainly true that we have at the moment the most competitive economy in western Europe, that we are in a very good position on inflation, and that unemployment is a good deal lower—and we are at the top of the growth league. That, as my hon. Friend says, is an enviable position, and I know that it is envied by many of my European partners.
    Mr. Blair: Will the Prime Minister join me in condemning the appalling outrage of Saturday in Manchester and send our thanks to the emergency services and our sympathy to the victims? Is this not a moment of truth for Sinn Fein? Does it not show the wisdom of demanding a ceasefire before Sinn Fein participates in any talks? Does not the responsibility now lie squarely on it if it is to play any part in the future progress of peace?
    The Prime Minister: I agree entirely with the right hon. Gentleman. Saturday's bomb in Manchester was a callous and inhuman act. It is a miracle that many more people were not injured and that many people were not killed. What is so startling is the total indifference of the people who left that bomb to what could well have happened to many people who have no connection whatever with the disputes in Ireland or the disputes that the IRA may have with the British Government or others.
    The right hon. Gentleman is right. The time has come for Sinn Fein to make up its mind. Either it will be a democratic organisation taking part in democratic politics or it will stay side by side as the reverse side of the coin to the IRA, with intermingled membership, in which case it has no part in democratic politics whatever. I believe that, when the right hon. Gentleman says that the moment of truth is here, it is for Mr. Adams and his colleagues, and everybody wishes to hear precisely what their views are—and let us have no more of the measly nonsense that we have had from them in recent years.
    Mr. Blair: I join with that entirely.
    Does the Prime Minister also agree that there has been progress in Northern Ireland? The British and Irish Governments are agreed on the way forward; all nationalist parties in the Irish Republic and Northern Ireland, apart from Sinn Fein, are agreed on peaceful means to achieve their ends; and the United States and others abroad may have been given a telling lesson on the realities of the IRA. Is not the only course now open to Sinn Fein to ensure that the IRA ceases its violence? If it cannot—or will not—the process should proceed with the democratic parties, and an agreement should be reached and put to a ballot of the people.
    The Prime Minister: It is entirely right that the talks must continue. We have no intention of allowing the search for a political settlement for Northern Ireland to be

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    derailed by the activities of the IRA and Sinn Fein. I hope that all the constitutional parties in Northern Ireland will continue to demonstrate the leadership and courage necessary to make rapid progress, and to show the IRA that it cannot stop the process with bombs in Manchester, London or anywhere else.
    If the IRA and Sinn Fein wish to have any future interest in this process, they will clearly need to declare an unequivocal ceasefire. They will need to declare it immediately. They will also have to show that that ceasefire is credible and lasting, and is not just a tactical device to enable them to enter the talks until such time as it is convenient for them to leave. It is now up to them to demonstrate their credibility; it is not up to us or anyone else. They must demonstrate their credibility—but the talks will continue.
    Mrs. Roe: In the light of falls in unemployment, interest rates and inflation, does my right hon. Friend agree that Britain is now one of the most competitive economies in Europe? Does he accept, however, that much more still needs to be done to raise standards in our schools? Although things are improving, far too many children still leave school without the basic skills.
    The Prime Minister: Both the premise of my hon. Friend's question and her substantive point are important. She knows that the British economy is in very sound shape; we intend to keep it so. As for education and basic standards, the Government have introduced a programme of reforms that is more comprehensive than any that we have seen at any stage in the past, designed to raise standards in schools, build on the national curriculum and ensure regular inspection and the publication of performance information.
    We have made substantial progress in recent years in raising standards, but there is no doubt that there is a great deal more that we wish to do to ensure that the quality of education for all our children is the equal of the quality of education anywhere else in the world. That is our intention, and we will continue to pursue it, despite the failures of so many Labour-controlled education authorities whose records have held back many children in inner London and elsewhere. [HON. MEMBERS: "Seventeen years."] It is no good hon. Members below the Gangway muttering in this fashion, when it is their party, in control in local government, that could act now to improve education, but does not.
    Mr. Livingstone: To ask the Prime Minister if he will list his official engagements for Tuesday 18 June. [31725]
    The Prime Minister: I refer the hon. Member to the answer I gave some moments ago.
    Mr. Livingstone: Given the funds that the Government have made available to the Russian Government and organisations in Russia in recent years to help to establish democracy, has the Prime Minister had time to read today's statement by the Conference on Security and Co-operation in Europe expressing the CSCE's regret and concern at the extensive bias in the coverage of the presidential election? Will the right hon. Gentleman now use his contacts with President Yeltsin to point out to him
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    the value of the British precedent of television and radio providing equal time for candidates, to legitimise this final stage of the Russian election?
    The Prime Minister: I have not yet seen the particular statement to which the hon. Gentleman refers. In view of what he says, I shall certainly consider it, but the very fact of the Russian presidential elections, and the way in which they have been carried, out would have seemed inconceivable just a few years ago. It is a welcome sign that Russia is settling into the normal pattern of democracy, and we must give great credit to President Yeltsin for that. I hope that the second round will be conducted well and that there will be a clear-cut and satisfactory result.
    Mr. Stewart: Does my right hon. Friend the Prime Minister agree that the control of business rates under the Government has been of immense benefit to businesses, large and small, throughout Britain and, therefore, to jobs? Will he ask the relevant Government Departments to analyse the consequences for jobs and for prosperity of taking off these controls and handing decisions back to loony Labour councils, as is advocated by the Labour party?
    The Prime Minister: I will certainly consider any mechanism that tries to restrain on-costs on British business. It is clear that the fact that British business as a whole pays less over and above wages in on-costs is one of the principal reasons why are more citizens are in work in Britain than in any other country of similar size throughout western Europe.
    Mr. Welsh: To ask the Prime Minister if he will list his official engagements for Tuesday 18 June. [31726]
    The Prime Minister: I refer the hon. Gentleman to the answer I gave some moments ago.
    Mr. Welsh: Did the Prime Minister see last night's "Panorama" programme, which catalogued 10 years of evasion and incompetence by the Government on the BSE issue? What does he have to say to Scotland's hill farmers, now awaiting being dragged into the general economic catastrophe created by the Government, while he postures to no effect in Europe?
    The Prime Minister: Of course I did not waste my time watching "Panorama" last night—[Interruption.] I have much more productive things to do with my time than waste it watching nonsense from "Panorama". We have taken account of the scientific advice that we have had throughout this affair, and that is what we will continue to do in the interests of British agriculture and of the British beef consumer.
    Mr. Michael Brown: To ask the Prime Minister if he will list his official engagements for Tuesday 18 June. [31727]
    The Prime Minister: I refer my hon. Friend to the answer I gave some moments ago.
    Mr. Brown: Does my right hon. Friend recall the exchanges that he and I had in the House last October, when I raised the question of closed circuit television for security purposes in our towns and cities? Is he aware that the initiative that he announced last year is one of the most practical ways of dealing with crime and of introducing crime prevention measures? Although he may not be able to confirm to me today whether my constituency of Cleethorpes is to benefit from the forthcoming announcement, will he guarantee that he will have a word with our right hon. and learned Friend the Home Secretary and advise him that we in Cleethorpes are very supportive of that initiative?
    The Prime Minister: Bringing closed circuit television to all corners of the United Kingdom is a practical effort to create a safer Britain in future. We are investing around £50 million, and our target is to fund 10,000 new cameras in the next three years. I am pleased to hear from my hon. Friend about the Cleethorpes bid. Knowing my hon. Friend, I would have been surprised if there had not been a Cleethorpes bid, but he is right—I cannot confirm to him today whether it has been successful, but I hope that announcements will be made before too long.
    Mr. Litherland: The Prime Minister will understand that there are no words to describe the loathing that Manchester people have for the perpetrators of the crime against our city last Saturday, but it has happened and we must now begin to rebuild Manchester. Mancunians are resilient people, but they require help. Will the Prime Minister today give the assurance to the House that the Government will offer every support, including financial aid, for the restoration of businesses, buildings, jobs and homes in Manchester? Sympathy will not pay the bills.
    The Prime Minister: The hon. Gentleman has commented on three matters of importance. I entirely share his initial remarks about Manchester, and I have no doubt about the courage and determination of the people of that city in recovering from last week's incident. Individuals injured by the bomb are eligible to apply for
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    compensation under the criminal injuries compensation scheme. The Government-backed terrorism insurance scheme will ensure that participating insurers can meet claims by companies that purchased full terrorism cover. Businesses that have not done so are likely to receive limited reimbursement and should contact their insurance companies.
    The financial implications for local authorities are not yet clear. I have asked my right hon. Friend the Secretary of State for the Environment to consider carefully any application for assistance by an authority affected by the incident, and he will certainly do so. In Manchester in the past—and I am sure that this will be so in future—an effective partnership between the Government, the private sector and the city council has delivered remarkable regeneration in many parts of the city. That partnership provides an excellent basis for rebuilding, and we look forward to working with the people concerned.
    Sir Michael Neubert: To ask the Prime Minister if he will list his official engagements for Tuesday 18 June. [31728]
    The Prime Minister: I refer my hon. Friend to the answer I gave some moments ago.
    Sir Michael Neubert: Will my right hon. Friend take the opportunity to pay tribute to a great man now gone, the late Sir Fitzroy Maclean? Was there not much to admire in that soldier, diplomat, Conservative Member of Parliament and patriot, who had an enviable ability for getting out of tight corners?
    The Prime Minister: Sir Fitzroy Maclean was a remarkable man with many qualities to admire—from being a founder of the Special Air Services to a Minister of the Crown at this Dispatch Box. In all his many roles, Sir Fitzroy made a remarkable contribution. He also played a crucial role in work with Tito's partisans in the second world war. People will think of Sir Fitzroy Maclean as a man who lived life to the full. From what I know of him, I believe that he would regard that as a satisfactory epitaph.

Point of Order
3.31 pm
Mrs. Ann Clwyd: On a point of order, Madam Speaker. In his statement yesterday on child abuse in Clwyd, the Secretary of State for Wales referred to parliamentary privilege and implied that he did not want further discussion of the matter in Parliament. This morning, Madam Speaker, I conferred with your excellent Clerks and was told that, from this evening, the matter will be sub judice. I appreciate the difficulty of establishing such an inquiry when witnesses are required to give evidence, but I have a copy of the 400-page report and its appendices, and I have read it. I disagree with the Secretary of State's view that it is defamatory. The report should be published. I find it rather odd that, on the day that the report is available in the House, we are to have no further discussion because an inquiry has been established.
Madam Speaker: I am grateful to the hon. Lady for giving me notice of her point of order. It is true that I have power to waive the sub judice resolution, but the House will understand that I am unable to do so in the abstract. I can do so only in respect of some specific proceeding—that is, a debate, motion or Question. If the motion that will come before the House this evening is agreed and if I receive a request to waive the sub judice resolution in relation to a specific proceeding, I shall consider the matter at the time.

Public Order (Amendment)
3.33 pm
Ms Estelle Morris: I beg to move,
That leave be given to bring in a Bill to amend the power of arrest of section 5 of the Public Order Act 1986.
There is general agreement across the House that too many of our constituents' lives are blighted by crime and anti-social behaviour. There is, of course, great concern about serious crime, but many of my constituents express particular concern about an increase in abusive, threatening, disorderly and intimidating behaviour on the streets.
In 1986, Parliament passed section 5 of the Public Order Act, which gave police officers the power to arrest a person if he or she was engaged in offensive behaviour and continued to behave in such a manner after a warning had been issued. That Act tidied up and replaced previous laws that had given police the powers to act in similar circumstances. Indeed, it appears to be one of the few pieces of legislation that gives police the power to arrest in cases of disorderly and intimidating behaviour.
As early as 1987, Professor A. T. Smith, of Reading university, warned that Parliament might have passed a flawed law. As it is written, section 5 of the 1986 Act requires that the police officer who gives the warning must be the same police officer who made the arrest. Almost by definition, scenes of disorder involve many people and are attended by many police officers. It is quite clear that the police officer who gives a verbal warning cannot always be the same police officer who goes on to make the arrest. That clearly is not what Parliament intended.
In October 1993, police were called to a doctor's surgery in Durham, where two men were behaving in a threatening, abusive and insulting manner. They were arrested under the Public Order Act 1986, but were later acquitted of all charges because the officer who gave the warning was not the officer who subsequently made the arrest.
The case went to appeal and was rejected by Lord Justice Kennedy. However, Lord Justice Kennedy said at the time that he was
"unable to discern any Parliamentary purpose in the wording as it presently stands"
and that
"it would merit further Parliamentary consideration at an early date."
Last year in Birmingham, a crowd of youths were involved in a disturbance close by my constituency. They were warned about their behaviour by the duty inspector. When the behaviour persisted, a man was arrested. To the frustration of the police and the public, the Crown Prosecution Service decided not to take the case to court because the arrest had been made under the 1986 Act and was unlikely to stand up in court.
In Hampshire, people involved in scenes of public disorder after a demonstration were taken to court, but the action collapsed because of this flawed legislation. During the recent demonstrations over the Newbury bypass, police again found themselves hampered by the confusion caused by the Act. Manchester police have experienced similar difficulties because of that confusion and have now instructed their officers not to use that section of the Public Order Act 1986 at all.

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It is 10 years since Parliament passed this flawed piece of legislation. It is nine years since warnings were given, and two years since a High Court judge effectively suspended the use of that section and called on Parliament to reconsider it. All that is required is for one word to be changed in section 5(4). That one change is the substance of this ten-minute Bill.
A number of Home Secretaries have failed to take the necessary action. The result is that the police do not have the power to deal with a serious and growing problem.
Defence lawyers inevitably quote Lord Justice Kennedy's High Court judgment as a reason to dismiss future action in the courts. As it stands, the law that we passed gives a licence to those who threaten public order and it fails to protect the public.
Public order offences are not some minor adjunct to criminal offences. Day in and day out, they are a cause of harassment for my constituents, the public and the police. They are the causes of intimidation, disturbance and abuse. They are the incidents of nuisance that make people's lives a misery. They feed the fear of crime that traps people in their homes, because people are too frightened to go out on the streets.
In 1980, one in five crimes resulted in a conviction in the courts or in a caution by the police. By 1994, that figure had slumped to one in 10. Unless we amend the law, the situation will deteriorate even further.
A decade ago, Parliament passed a bad law. Our constituents, the police and the community have a right to expect us to act quickly to put it right. It is our job to close dangerous loopholes that help law-breakers.
With the co-operation of the Home Office and the House, this ten-minute Bill could become law before the recess. We have a long, hot summer ahead of us—a time when, sadly, disorderly and anti-social behaviour often increases. We would be failing our constituents and those we charge with protecting the peace if we lost this opportunity to remedy this flawed piece of legislation. I am grateful to the sponsors of the Bill, who represent both sides of the House, and I hope that it will receive the support of many other hon. Members.
Question put and agreed to.
Bill ordered to be brought in by Ms Estelle Morris, Mr. Terry Davis, Mr. James Pawsey, Dr. Lynne Jones, Mr. Patrick Thompson, Ms Tessa Jowell, Mrs. Ann Winterton, Mr. Richard Burden, Mr. Roy Thomason, Mr. Keith Bradley and Mr. Warren Hawksley.

PUBLIC ORDER (AMENDMENT)
Ms Estelle Morris accordingly presented a Bill to amend the power of arrest of section 5 of the Public Order Act 1986: And the same was read the First time; and ordered to be read a Second time upon Friday 12 July and to be printed. [Bill 154.]
Opposition Day
[15TH ALLOTTED DAY]

Benefit Fraud
Madam Speaker: I have selected the amendment standing in the name of the Prime Minister.
3.40 pm
Mr. Chris Smith: I beg to move,
That this House welcomes the recent report from the Social Security Committee on measures needed to tackle housing benefit fraud; is appalled at the complacency of Her Majesty's Government's response; endorses the proposals made by the Committee; believes that further measures are urgently required to root out organised landlord fraud in the housing benefit system, to step up the number of home visits to claimants, and to clean up the National Insurance number system; and affirms its belief that accuracy and efficiency in the spending of social security funds is vital for those in need and for the taxpayer.
Let us first establish the principle—fraud, wherever perpetrated, in the benefit system or in the tax system, is wrong. In the benefit system, every pound that is defrauded is a pound less for those in real need or for the taxpayer. The accurate spending of the social security pound is good for claimants and for the nation as a whole, and the greater the accuracy that can be achieved, the more we shall be able to restore and maintain confidence and faith in our welfare state.
There should be no dispute on either side of the House about that basic starting point for our discussion. It is when we move on to determining the nature and extent of that fraud and how best a Government can set about tackling it that we start to enter a debate between the parties.
There has been some debate in recent weeks about how much fraud is in the system, and much of that discussion has focused on the extent of housing benefit fraud. In the survey of housing benefit fraud that the Government carried out recently, they estimate that there is £1 billion of fraud. The Select Committee on Social Security heard evidence that it might be twice as much as that. I emphasise the word "might", because the Select Committee was cautious in advancing that figure. It also said that it might be greater than £2 billion. At no stage has the Select Committee or the Opposition said that the amount of housing benefit fraud is £2 billion. We have said that it is likely that the Government's estimate is an underestimate.
Mr. Michael Fabricant: Will the hon. Gentleman give way?
Mr. Smith: I thought that we might get some people up at this point.
Mr. Fabricant: The hon. Gentleman was being so reasonable up to that point. Has not the National Audit Office endorsed the Government's figure? Will the hon. Gentleman be honest enough to go a step further in what he was saying, by pointing out that the Select Committee report was based not on any survey, but simply on the opinions of those who gave evidence to it?
Mr. Smith: First, the National Audit Office has not endorsed the Government's figure; it has commented on

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the Government's survey. Secondly, I shall come in a moment to the hon. Gentleman's point about the so-called assertion that was made to the Select Committee, because it was based on a considerable body of evidence.
The Government are proud of their survey. In their response to the Select Committee, they talked about how rigorous and scientific it was. Their amendment to our motion says that it was "systematic". It was not. The methodology that they used in their housing benefit fraud survey was fundamentally flawed. First, they visited only 5,000 claimants out of a total of 5 million. Secondly, the test that they used to determine the amount of fraud was, in effect, a memory test. If claimants could remember exactly what they had said when they first applied for housing benefit and gave precisely the same answers then as they had previously, the fraud investigator assumed that there was no fraud and that it was an honest, above-board claim.
The Secretary of State for Social Security (Mr. Peter Lilley): May I help the hon. Gentleman to stop digging himself further into a hole? Is he not aware that the investigators required the people they called on in the sample to provide documentary evidence of identity and other facts that related to their claims? The survey was based not on memory but on documentary evidence.
Mr. Smith: The fundamental test was a memory test. The Government continually fail to acknowledge that the determined fraudster, who quite possibly made his original application on the basis of false papers, and certainly of false information, will have been as confident about producing the self-same false documents and information the second time around as he was the first. An approach that takes that as its starting point is flawed.
The evidence to the Select Committee came from one borough. I accept that it is evidence from only one place and that it is not necessarily a scientific analysis of circumstances across the country. However, the Haringey survey, which was reported in great detail to the Select Committee, was comprehensive. Every housing benefit claimant was visited by the fraud investigators. Its emphasis was on the amount of landlord fraud in the housing benefit system. Every landlord with more than 30 properties receiving direct payment of housing benefit was targeted, visited and questioned in detail, and evidence was demanded.
The evidence that resulted from those visits is stark. It was given to the House by my hon. Friend the Member for Birkenhead (Mr. Field), who chairs the Select Committee, in the debate on 11 March. It is worth reflecting briefly on the nature of the evidence. He had asked those who carried out the Haringey survey to provide details of the first 15 landlords they visited and the extent of fraud in each case.
Mr. Alan Duncan: Just so that we know where the hon. Gentleman is coming from, does he think that the estimates of the present level of fraud are overstated or understated?
Mr. Smith: The hon. Gentleman should know, first, that the point that I am coming from is that I do not like
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fraud in the housing benefit system and, secondly, that I have already said that it is extremely likely that the Government's estimate of the extent of fraud is an underestimate. I believe that there is more fraud in the system than the Government assert. I am in the midst of giving the evidence to support that case.
Mr. Eric Pickles: Will the hon. Gentleman give way?
Mr. Smith: I give way to the hon. Gentleman because this is clearly a day for extremely interesting and useful interventions from the Conservative Benches.
Mr. Pickles: I am most grateful to the hon. Gentleman.
So that the House can understand, if the hon. Gentleman feels that the Government's estimate is on the low side, can he explain why Opposition spokesmen have criticised the Government for making too high an estimate of local authority fraud levels? The hon. Member for Manchester, Withington (Mr. Bradley) made just that assertion from that very Bench in 1993.
Mr. Smith: I shall come to that precise point in a moment. The point that my hon. Friend made in 1993 was about the nature of the incentive, or rather disincentive, system that was put in place by the Government, which up to 1993 discouraged local authorities from identifying and rooting out fraud. I shall come back to that in a moment.
Let me return to the compelling evidence from the Haringey survey and the 15 landlords about whom my hon. Friend the Member for Birkenhead spoke on 11 March. In the case of the first landlord, to whom £13,000 a week was paid direct from the local authority in housing benefit, the survey found that 25 per cent. of the money was being fraudulently claimed. In the case of the second landlord, 23 per cent. was fraudulently claimed; the third, 67 per cent.; the fourth, 26 per cent.; the fifth, 16 per cent.; the sixth, 15 per cent.; the seventh, 11 per cent.; the eighth, 33 per cent.; the ninth, 59 per cent.; the 10th, 29 per cent.; and the 11th, 15 per cent. And so the list goes on.
The Haringey survey of landlords with multiple properties, all in direct payment from the local authority of substantial sums week after week, found that the average level of fraud was 20 per cent. That compared with the average level of fraud found by the Government in their survey of somewhere between 6 and 7 per cent.
Mr. Bernard Jenkin: Will the hon. Gentleman give way?
Mr. Robert G. Hughes: Will the hon. Gentleman give way?
Mr. Smith: No, I will not give way because I want to make progress on this point. I will give way later.
Of course I accept that multiple property-owning landlords in one London borough are not typical of landlords across the country as a whole, but the extent of fraud in those cases ought to alarm anyone. One of the things that worries me deeply is that the Government are far too complacent about landlord fraud where multiple direct payments are made.

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The rather arcane argument that the Government and some of their Back Benchers appear to be having about precisely what the level of fraud is—whether it is £1 billion or £2 billion—evades the real problem and the real issue at the heart of the matter. Yes, we need to consider how we can cut down on fraud by claimants, but we also need to ensure that we cut down on fraud by landlords.
Such evidence as exists—the only comprehensive survey in the country is the Haringey survey—shows that the level of landlord fraud is very substantial indeed. The last thing that hon. Members should be is complacent about that.
Mr. Robert G. Hughes: Is it not the hon. Gentleman who is banging on about whether the figure is £1 billion or £2 billion? Of course everyone opposes fraud.
If the hon. Gentleman reads the evidence given to the Select Committee, he will find that, rightly, the decision was taken to survey the worst part of the borough of Haringey first, and that is where the large excess of fraud was found.
This question remains, however: why does the hon. Gentleman seek to prove the higher figure? What is his ulterior agenda? What would he try to do with that figure if he were able to prove it? Are we right to suspect that he wants to say, "Here is a figure; a Labour Government could get that money back easily, so we shall spend it on something else"? In other words, it is the Labour party pretending that it would increase expenditure without there being any pain in doing so.
Mr. Smith: First, I am not banging on about whether it is £1 billion or £2 billion overall—the Government are doing that. The hon. Member for Dover (Mr. Shaw) has written to me about it. The Secretary of State has written to all the local authority associations, asking for the evidence on which the Select Committee based its assertions. We know what the evidence is, we know how the Select Committee reached its conclusions and we are saying that the Government are being far too complacent.
I am surprised that the hon. Member for Harrow, West (Mr. Hughes) asks why we believe that additional measures should be taken to combat fraud, especially landlord fraud. The reasons are simple; we believe that fraud is wrong and we want to do everything possible to eradicate it. We do not believe that the Government are doing enough, and we believe that we could do better. That is our simple agenda. If the hon. Gentleman thinks otherwise, he confirms what I have always thought of him—that he is less intelligent than he looks.
Mr. Bernard Jenkin rose—
Mr. Frank Field rose—
Mr. Smith: I give way to my hon. Friend the Member for Birkenhead.
Mr. Field: Are not the Tories today in danger of doing two things? First, they are in danger of appearing to the public as defending landlords who are ripping off taxpayers. Secondly, in disagreeing with us in our wish to control fraud so that we shall have a larger budget
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available to those who are in genuine need, they appear to be obstructing the wish of the House that money should be spent as taxpayers require, on genuine claimants, not on those who are committed to criminal fraud.
Mr. Smith: My hon. Friend is right. The Department of Social Security budget is £90 billion this year. I want to ensure that every pound of that is wisely and properly spent and goes into the pockets of those who need and deserve it, and are legitimately entitled to it. I want none of that money to go into fraudsters' pockets. I fear, however, that the Government are being complacent.
Mr. Jenkin: Will the hon. Gentleman give way?
Mr. Smith: I will not give way to the hon. Gentleman at the moment because I want to make progress.
In their response to the Select Committee's report, the Government adopted an attitude that seemed to say, "Aren't we doing well as a Government? We have done all these things; we have taken all these steps; we are fighting fraud; we are talking about fraud. Nothing else needs to be done." That is the overwhelming thrust of the Government's response to the Select Committee, even though the Select Committee said, "This problem is urgent. Serious issues are involved. We have evidence that there is massive organised fraud from some"—I emphasise some—"landlords in the private sector." Yet the Government say, "Everything that we are doing is perfectly all right and we have everything under control."
Two passages in the Government's response might repay closer scrutiny. First, the Select Committee had suggested that any landlord receiving direct payments of housing benefit from the local authority should be required to list the other properties for which payments were being made, either in the same borough or in a different one. That is a simple enough procedure; it would enable cross-checks to be made automatically between different properties. What did the Government say to that?
"There is a balance to be struck between imposing undue information burdens on landlords … and requiring them to provide information appropriate to the privilege of receiving money direct from public funds. The recommendation would impose an additional burden, whilst being easily evaded by less scrupulous landlords."
So the real reason why the Government refused that recommendation was that it would impose "an additional burden" on landlords.
Secondly, the Select Committee suggested that each landlord with more than 20 direct payment claims from a local authority should automatically be investigated as a matter of urgency—again, a sensible suggestion. Such landlords, after all, receive the most money, week after week, in direct payments sometimes amounting to thousands of pounds. The Government replied:
"The Government is unable to accept that the Committee's blanket approach to larger landlords would be appropriate at this stage".
Yet these "larger landlords" receive the largest amounts and thus constitute the greatest risk to public funds. This is just sensible targeting at the top of the range where fraud can lose the greatest amount to the public purse. Still, the Government dismissed the idea as a "blanket approach" that they were unable to accept. Well, they ought to accept it and in general they ought to accept more of the Select Committee's proposals.

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We know how landlord fraud operates. We know that landlords create fictitious tenancies; sometimes there are even fictitious properties. We know that sometimes there is collusion between landlords and their supposed tenants. We know that they spread their fraud across local authority boundaries. We know that they sometimes claim that higher rents are being paid than actually are. There is a host of ways in which fraudulent payments of housing benefit can be obtained.
We have proposed a series of detailed steps that we believe should be taken to help to stamp out landlord fraud. They include giving local authorities the right to obtain proof from landlords and managing agents of their right to control a property for which they are claiming direct payment of housing benefit, with the provision that a local authority could refuse payment if it was not satisfied with the information obtained.
We believe that landlords should be required to list other properties in their control for which direct payments are being received. We believe that local authorities and the Benefits Agency should be allowed lists of all redirected mail for claimants from the Post Office. We believe, too, that landlords of multiple-occupation dwellings should be required to have a licence. A self-financing licensing scheme would both help to deter fraud and do much to improve safety standards and maintenance in such houses. However, when my hon. Friend the Member for Greenwich (Mr. Raynsford) proposed such a scheme during the passage of the Housing Bill, the Government rejected it.
We believe that special teams of investigators should be established across all local authorities, not just in London—which the Government, rather grudgingly, have come to accept, and we welcome their conversion. We believe that at least 10 such teams should be established around the country and that they should deliberately target organised landlord fraud. We believe that all landlords who receive 20 or more direct payments should be investigated as a matter of course.
We believe that the finders keepers rule—which encourages competition rather than co-operation between the Benefits Agency and local authority fraud investigators—should end, so that we do not end up with the same investigators chasing the same fraud, thereby duplicating effort. We believe that there should be an automatic link to the tax system, so that information about all direct housing benefit payments made to landlords will automatically be passed by local authorities to the Inland Revenue. That would be a fairly powerful deterrent to landlords claiming housing benefit, which was not genuinely directed at the needs of a tenant.
Mr. Bernard Jenkin rose—
Mr. Smith: Finally, we believe that a proper monitoring system should be in place to ensure that local authorities fulfil their obligations in this respect. I see that the hon. Member for Colchester, North (Mr. Jenkin) has now returned to the Chamber, so I shall give way to him.
Mr. Jenkin: I assure the hon. Gentleman that I did not leave the Chamber and that I was elsewhere in the Chamber. I am interested in the source of his innovative
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ideas, as they are familiar to me—the vast majority of them were put in the Social Security Committee's report by me and other hon. Members, including the hon. Member for Birkenhead (Mr. Field). Why is it that the hon. Member for Islington, South and Finsbury (Mr. Smith) has got all his ideas from the hon. Member for Birkenhead? Should not the hon. Member for Birkenhead be the shadow spokesman on social security? It is obvious that the Labour Front Bench does not have any ideas of its own.
Mr. Smith: I am proud that the Labour party has looked at the Social Security Committee's report, at the evidence that it received and at the sensible recommendations that it made. We want to implement its recommendations. I am surprised that the hon. Gentleman is not leaping to his feet to defend the Select Committee—he is a member—and arguing that the Government ought to be implementing its recommendations, rather than dismissing them as a burden on landlords, or saying that this is a blanket operation that they will not adopt now, or saying that they will set up an inter-departmental ministerial working party to look at fraud. That has been the Government's response to what he and his colleagues have said. Instead of complaining about me picking up the Select Committee's report and running with it, he ought to be complaining loud and clear about the way in which his Government have not done that.
Mr. Jenkin rose—
Mr. Smith: A considerable number of our proposals for cutting down on landlord fraud go further than the Select Committee recommended. If the hon. Gentleman does not know the content of his own Select Committee's report, perhaps he ought to read it.
Mr. Jeff Rooker: My hon. Friend referred to monitoring. We have to address the issue of accountability. No single official at local authority level is responsible for the housing benefit budget. For example, in my local authority the official who was responsible for the operation of the system refused to accept responsibility for the housing benefit payments—£300 million—but accepted responsibility only for the administration. When it all went wrong and the official was moved elsewhere, it was as if no one was responsible for that huge sum.
This issue has to be dealt with—there has to be accountability at the local level, so that there is a proper reporting system from those responsible for administering the system, through to the local auditors, through to the Benefits Agency and then to the Secretary of State. It cannot be left as a paperwork exercise, as it is now.
Mr. Smith: My hon. Friend has made an extremely good point. Clear lines of accountability exist in some of the best local authorities. That is not the case in many local authorities. We should ensure that best practice is disseminated among local authorities so that proper accountability can be achieved. That could be accomplished through the monitoring procedures that we advocate.
Mr. Frank Field: The accounting officer is the chief officer in the agencies. That is the proper procedure which

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I think should be followed in all spheres. For example, the Prime Minister, as First Lord of the Treasury, should be clearly accountable for the Budget and for any fraud. Similarly, the chief executive in local authorities should be the chief accounting officer who should be responsible for the money spent by that authority.
Mr. Smith: My hon. Friend makes a good point.
Mr. David Congdon: It is meaningless.
Mr. Smith: It is not meaningless, because my hon. Friend makes a precise point about accountability. If there is a clear responsibility attached to the most senior officer in the authority, the matter should receive proper attention. That is the key point that the hon. Member for Croydon, North-East (Mr. Congdon) should take into account.
The Government claim in their amendment and in some of their statements to the press in the past week or so that local authorities started taking fraud seriously only when the Government introduced incentives.
The Parliamentary Under-Secretary of State for Social Security (Mr. Oliver Heald): Hear, hear.
Mr. Smith: The Minister chortles about that point, but it is untrue. Up to 1993, there was a specific disincentive in the system—which was put there deliberately by the Government—designed to hinder local authorities in the fight against fraud. In its January 1993 report entitled "Remote Control: the National Administration of Housing Benefit", the Audit Commission said:
"There are other perverse incentives which may place public money at risk. For example, the lower subsidy received for overpaid benefit means that an authority, which believes that it is unlikely to recover an overpayment, is better off if it ignores any evidence of possible overpayment. Since any benefit paid following a fraudulent claim is treated as an overpayment, this creates an incentive to ignore possible fraud."
In 1993, the Audit Commission made that clear analysis of the way in which the Government had created a system that actively discouraged local authorities from following up fraud. The Government then introduced a system of incentives that made the situation better. However, they are now making it worse again. None the less, in 1993 the Government recognised that there was a problem and they decided to improve incentives.
Although a discouragement was built into the system before 1993, local authorities up and down the country had an extremely good and active record of combating fraud. I shall give just three examples. Swansea introduced a separate fraud team in 1987 comprising two anti-fraud officers and clerical back-up. In 1990—three years before the Government woke up to the disincentives problem—it was increased to a team of four plus clerical support. In 1989, the borough of Camden set up a dedicated anti-fraud team of three staff, which was later expanded to four. It also began carrying out many residency checks, with home visits, prior to 1993.
The city of Southampton appointed its first full-time designated housing benefit fraud officer, with clerical support, in July 1991. Before then, it had an inner-city fraud team that examined housing benefit fraud and other fraud issues across the board. In April 1993, it appointed
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two further people to the team. The Government started collecting statistics on fraud, let alone doing anything about it, only in 1986, which was precisely when good authorities such as Swansea were already starting to take practical action to tackle the problem.
If the actions of individual local authorities were not enough, the London boroughs fraud investigators group, which draws together investigators from different London boroughs across the capital city, was set up in 1991. For four years, it called on the Government to set up a Londonwide anti-fraud team. Although it is pleased that the Government have now acceded—rather belatedly—to that request, it does not quite know why the Government took so long to wake up to the need for such a team. So when the Government try to claim, as they do in their amendment, that it is only because of the incentives that they have put in place that local authorities have started to tackle fraud, they are wrong. Local authorities were way ahead of the Government in the actions that they were taking.
Mr. Heald: Does the hon. Gentleman concede that weekly benefit savings have almost trebled since the incentive scheme came in, yet local authority associations, which are dominated by Labour, are saying that our increased targets are too high? Why is that? Will he condemn it?
Mr. Smith: The complaint that the local authorities are making is not that the targets are too high, but that the nature of the incentive system that the Government have put in place takes an incentive up to a certain ceiling and then gives much less of an incentive for local authorities to go beyond it. Local authorities have pointed out the flaws in the incentive mechanisms.
However, a new problem is about to hit us. It lies in the bringing forward of compulsory competitive tendering in housing benefit.
Mr. Pickles: Will the hon. Gentleman give way?
Mr. Smith: I will not give way; I have done so extremely generously, and must make some progress.
The advent of compulsory competitive tendering in housing benefit payments and, perhaps most alarmingly, in fraud investigation in local authorities, was revealed in a written answer to me from the Under-Secretary of State for the Environment, the hon. Member for Croydon, Central (Sir P. Beresford):
"Our proposals for changes to the framework for compulsory competitive tendering for professional services include a proposal to raise the percentage of financial services work which must be exposed to competition from 35 per cent. to 65 per cent., and limit the availability of exemptions from CCT for authorities which cannot meet that requirement without exposing benefits work to competition. The legal definition of financial services work includes benefits work and relevant authorities may well choose to expose this work to competition in order to meet their competition requirements."—[Official Report, 12 June 1996; Vol. 279, c. 163.]
If the Government are intent on forcing local authorities to put out to private tender the payment of housing benefit and council tax benefit, and the work to detect fraud in the receipt of those benefits, any shred of a pretence of having a serious anti-fraud strategy goes out of the

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window. Targeting organised landlord fraud, which is probably the biggest area in housing benefit fraud, takes highly skilled and trained professional investigators.
Mr. Pickles: Will the hon. Gentleman give way?
Mr. Smith: It also requires a bona fide and entirely confidential exchange of information between local authorities and the Government. That is not the sort of activity that should even be considered for privatisation. Conservative Members do not seem to understand the enormous importance of the need to protect, with publicly accountable officers in charge, the confidentiality of information for the general public, while at the same time cracking down on fraud. That need must be paramount. If the Government force CCT on the payment of housing benefit or on fraud investigation, they are opening the gates to inadequate, sloppy procedures in investigation and the destruction of that important principle of confidentiality.
Mr. Pickles: Will the hon. Gentleman give way?
Mr. Smith: I will give way for the last time to the hon. Gentleman, who has been very persistent.
Mr. Pickles: I am grateful to the hon. Gentleman. He is in danger of not fulfilling a promise that he made to me earlier. He promised that he would reconcile the statements made by the hon. Member for Manchester, Withington (Mr. Bradley) in July 1993 and by the hon. Gentleman at the Dispatch Box today. To remind him, three years ago the hon. Member for Withington made two substantive points. His first point was that there was a danger of overestimating the level of fraud—if the hon. Gentleman wants to check, the speech begins at column 1253 of Hansard on 16 July 1993—and his second point was that there was a danger of the incentive figures being set too high. If the hon. Gentleman would care to reconcile those figures, I would be most interested.
Mr. Smith: I gave the hon. Gentleman the answer for which he is looking when I spoke specifically about what the Audit Commission had said back in 1993 about the nature of the disincentives in the system at the time. I also draw the hon. Gentleman's attention to the very fine words of the Minister for Social Security and Disabled People, the hon. Member for Bury, North (Mr. Burt), then the Under-Secretary of State for Social Security, referring precisely to the speech made by my hon. Friend the Member for Manchester, Withington (Mr. Bradley) on 16 July 1993. The hon. Member for Bury, North said:
"The Opposition spokesman has been equally determined to show that the Labour party is as rigorous about fraud and abuse as it is about ensuring that everyone gets his just deserts."—[Official Report, 16 July 1993; Vol. 228, c. 1296.]
My hon. Friend the Member for Withington held that view at the time and he still holds that view.
The second area where the Government need to take some action is in stepping up the number of home visits that are made to claimants. Back in 1979, about 3.5 million home visits were made during the course of a year. In 1994, that figure was down to about 500,000, so the Government had made the situation much worse.
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Now the Government have realised that home visits are quite important, so they are stepping up a little bit the number of home visits that are made. Some 300,000 more home visits are now being made during the course of a year.
However, we believe that the Government should expand substantially the number of home visits that are made. Of course, there should be a dual purpose in visiting at home. There should be a determination to identify where a fraudulent claim is being made or paid, but there should also be a determination to ensure that people are receiving that to which they are properly and legitimately entitled. Accuracy in the spending of social security funds is a two-sided coin. That always used to be the purpose of home visiting under the previous Government, when 3.5 million home visits were made in the course of a year. It should continue to be the purpose of home visiting.
The work that has been done by the National Audit Office demonstrates clearly that, in terms of inaccuracy of payment of income support, the balance of inaccuracy weighs heavily to the current detriment of the Department rather than to its benefit.
We believe that the Benefits Agency can and should organise its home visits much more efficiently. Figures from the Department of Social Security show that the average cost per visit is £54. Yet the most efficient local authorities manage to achieve a far lower cost per visit.
Mrs. Maria Fyfe: Will my hon. Friend comment on the experience of a constituent of mine? A few weeks ago, when a benefits fraud check was carried out in my constituency, two officers knocked on his front door at half-past 7 in the morning, entered and then knocked on his bedroom door until he woke up. This was a person about whom there was no suspicion whatever. He was in fact a perfectly legitimate claimant. Part of the debate should focus on the purpose of home visits, and we must ensure that people are not treated as if some kind of Gestapo was going around.
Mr. Smith: My hon. Friend is right to draw attention to that, and she has written to me about the case.
We must ensure not only that home visits are conducted efficiently—to which I shall return in a moment—but that they are conducted in a manner that respects the liberties of the citizen, and that should be one of the elements of the system that the Department puts in place.
As I said, home visits could be organised more efficiently. The best local authorities have detailed software back-up, which provides all the information to ensure that the most is got out of every single visit: properties are grouped street by street and estate by estate, so that unnecessary travelling is avoided, and so on. That is the way in which they should be organised, and it is possible to achieve greater efficiency in doing so.
Mr. Lilley: Before the hon. Gentleman goes any further, will he confirm the figures given in his document on that subject, in which he says that he expects his fraud investigators to carry out 50 visits a day, which means that they will have eight minutes between ringing the bell on one door, completing the interview and ringing the bell

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on the next? How much time will be spent on benefit advice; how much time will be spent on fraud advice; and how serious does he consider that objective to be?
Mr. Smith: It is an entirely serious objective, because it is precisely what is being achieved by the best local authority officers who currently carry out home visits. Some home visits, of course, will be much shorter than that, but others will take longer. The Department's figures seem to assume that a visiting officer will sit down and talk through the entire life history of the claimant, his or her reading pattern, what films he or she last saw and the network of relationships of every single claimant in great detail over several cups of tea, taking several hours at a time. That is the current performance of investigators from the Department, but the best local authorities do it far more efficiently.
Mr. Heald: Will the hon. Gentleman give way?
Mr. Smith: No, because I have already given way to the hon. Gentleman's boss.
The third area where the Government need to improve their performance is national insurance numbers. The Government have given us different totals at different times of the year, in different debates and different answers, for the precise number of national insurance numbers that are in circulation. We had an interesting answer on 5 March from the Under-Secretary of State, who said that it was all terribly simple. He said that there were two different computers, and that, yes, they had different totals on them. The national insurance recording computer system, which is based on contributions that are paid, contains 63.6 million records. The departmental central index system, which is based on entitlement to claim benefits, contains 77 million numbers.
Thanks to the clarity with which the Under-Secretary of State explained the arrangements to us, we all understand them. What the Government have so far failed to explain, however, is a discrepancy identified by the Select Committee. It relates to national insurance numbers classed as inactive because they belong to deceased persons. Although, by virtue of having existed, a deceased person must surely be listed on both computers, there are nearly 1 million more numbers on one computer than on the other. That is a dramatic disparity.
Even if the Government were able to explain why nearly 1 million numbers are unaccounted for, however, it would still be far too easy to establish a national insurance number and use it for fraudulent purposes. There is a good deal of organised big-time fraud at present: people with portfolios of national insurance numbers are using them to claim benefits to which they are not entitled because their identities are entirely fictitious. The swipe card technology which the Government are now introducing—and which we support—may bear down on the level of error in payments that are made, but it will not tackle the fundamental problem of the fraudulent obtaining of national insurance numbers.
The Government should take a series of steps to cleanse the national insurance number system of numbers that go astray in that way. They include greater vigilance in preventing people from using false identities to apply for national insurance numbers, and more frequent checks by the Contributions Agency to reconcile benefit claims with
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contributions paid. At present, such checks are carried out annually, and do not pick up frauds that intelligent fraudsters perpetrate between checks.
Local fraud investigators should be allowed access—currently denied—to the Contribution Agency's departmental central index. On-line data matching across departments should be introduced, with a timetable for rapid future progress. Special checks should be run on all inactive numbers, and there should be a flagging system to ensure that any number that is inactive for any reason is targeted. There should also be a special unit to co-ordinate the cleansing and investigation of all suspect numbers. The Government are coming up with some bits and pieces, but they are not yet doing enough.
We believe that the Government should deal with another small problem. It is highlighted by the case of Mr. Mark Lee, which was described in The Sunday Telegraph a couple of weeks ago. Mr. Lee, a convicted fraudster, had obtained a mortgage by fraudulent means and was sent to prison as a result, but the income support system continued to pay the interest on his mortgage, even though the mortgage had been fraudulently obtained. The Department of Social Security's answer was, "This is not a matter for us because there is no specific fraud in the claiming of benefit for the interest payment."
Clearly there is a loophole in the law. If the mortgage was obtained fraudulently, surely the taxpayer, via the Department of Social Security, should not be picking up the tab for keeping up the mortgage payments. The Government should urgently consider that matter, to find out how that legal loophole can be tightened.
In the past year or two, the Government have talked a lot about fraud. They have done a little bit about it. Labour Members welcome much of what they have done—the measures are sensible—but the Government are being far too self-congratulatory about what they have done. Their response to the Select Committee report is riddled with complacency. They are going backwards on what they have achieved because of their ideological attachment to compulsory competitive tendering.
The Government should adopt at the least the spread of measures proposed by the Select Committee. They should go further than that and embrace our recent ideas and proposals. There is far more to be done to tackle fraud, and it is a Labour Government who will set about doing it.
4.36 pm
The Secretary of State for Social Security (Mr. Peter Lilley): I beg to move, to leave out from "House" to the end of the Question and to add instead thereof:
'welcomes the priority given by Her Majesty's Government to tackling all aspects of benefit fraud; endorses the Government's successful work in detecting and preventing fraud which has resulted in the benefit savings target of £1.3 billion being exceeded in 1995–96; congratulates the Government on carrying out the first systematic review of the amount and type of Housing Benefit fraud; notes that Housing Benefit administration is the responsibility of local authorities and that local authorities only started tackling fraud seriously once the Government introduced financial incentives for them to do so; welcomes the new fraud strategy which will result in savings of £2.5 billion a year by 1999; deplores the Labour Party's attempt to exaggerate the amount of fraud as a pretext to spend more money; and condemns the Labour Party's continuing half-heartedness in tackling benefit fraud and abuse.'.
No one will be fooled by the cynical speech of the hon. Member for Islington, South and Finsbury (Mr. Smith). He tried to con people that Labour is no longer soft on

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fraud and deliberately exaggerated the amount of fraud, so that Labour can pretend that its spending plans could be painlessly financed by cutting fraud. He wanted to disguise the flimsiness of that claim by peddling a plethora of spurious statistics and dubious detailed policies. His speech shows not the zeal of the convert, but the guile of the con man.
Rooting out fraud and abuse always has been, and remains, my top priority. I am happy to say that that was recognised by the Select Committee on Social Security, which said that the Secretary of State
"has shown himself to be"—
I pass over the kind remarks about my intellect and ability—
"the most determined to counter fraud".
Mr. Frank Field: It was better than that, but the Secretary of State's side toned it down.
Mr. Lilley: No: it responded to my natural modesty.
Since I became Secretary of State, we have saved record amounts on fraud, and we have plans to go on breaking those records year after year. In a moment, I will spell out what we have achieved and what we will achieve, but first I want to dismiss the ridiculous claim of the hon. Member for Islington, South and Finsbury that he and his party are—suddenly—tough on fraud.
The simple truth is that Labour has always been at best indifferent, and at worst hostile, to tackling benefit fraud. Nothing Labour Members have said today should be allowed to conceal that fact. The hon. Member for Sheffield, Brightside (Mr. Blunkett) castigated the Labour party for being
"for too long linked with the freeloader"—
and so it has. The fact that, before this debate, Labour has never initiated a debate on fraud illustrates its sheer indifference to the subject. When we have had such debates, Labour has invariably tried to play down the amount, and the importance of the issue.
I remember the hon. Member for Manchester, Withington (Mr. Bradley) accusing us of overstating the amount of fraud in the system. He argued that, even if our estimates were true, the amount was not significant. His words were:
"We should continually bear in mind the fact that, in the context of the overall budget, even £1 billion is not a large amount".
Today, the Labour Front-Bench team are
"overstating the amount of fraud in the system"
precisely because they now realise that £1 billion is a large amount, and they desperately need to conjure it up from somewhere to cover part of their spending plans.
Stopping housing benefit fraud is the responsibility of local authorities—most of which happen to be Labour. Most of them made little or no effort to tackle fraud—until I set each authority a target, backed by tough penalties and incentives, to galvanise it into action. In the first year, local authorities doubled the amount of fraud they detected, and increased the figure dramatically again the second year—yet members of Labour's Front Bench condemned those targets when I introduced them.
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The hon. Member for Withington, Labour's Front-Bench spokesman at the time, said:
"the recovery targets set for local authorities are unrealistically high. I know that there is a lower level and a higher level, but my investigations across the country convince me that many local authorities will find it extremely difficult to hit even the lower targets … the Government have set the targets unrealistically high".—[Official Report, 16 July 1993; Vol. 228, c. 1254–55.]
Since then, the Opposition have opposed our measures to prevent abuse of housing and other benefits.
In January, we introduced a reform to ensure that taxpayers no longer pay rents in full to any new claimant who chooses to occupy a property with a rent above the average for the type of property suitable for the household in that area—and Labour opposed it. That measure will make collusive deals between landlord and tenant to rip off the taxpayer harder, yet Labour opposed it.
From the autumn, a further reform will ensure that housing benefit does not pay higher rents for unemployed young people than they would normally be able to afford out of work. Labour opposed that reform too, just as it opposed other measures to prevent abuse—such as the objective medical test for incapacity benefit, to stop fit people abusing the system, and the removal of entitlement to housing and other benefits from bogus asylum seekers.
Although Labour said that asylum seekers were mostly genuine and came to the United Kingdom to escape persecution, not to acquire our benefits, the figures tell a different story. Our benefit changes were made in February. The number of people claiming asylum in that month fell 7 per cent. below last year's level. In April, the figure was down a quarter, and in May it was down one half.
Of course it is too early to be certain that trend will be sustained, or whether it will be reinforced when the Asylum and Immigration Bill is enacted—but the first signs that the flow of bogus asylum claims is being stemmed are encouraging. That is good news above all for genuine refugees, as it will be easier to deal speedily with their claims.
The Opposition's indifference and hostility to tackling fraud is in marked contrast to our commitment and success. I have consistently given the issue the priority it deserves. I put in place the organisation to pursue fraud effectively, appointed a senior official with exclusive responsibilities, set up a fraud board and appointed a Minister with specific responsibility for tackling fraud—my excellent hon. Friend the Under-Secretary of State, the Member for North Hertfordshire (Mr. Heald).
I developed for the first time a method of measuring the extent and incidence of fraud in each benefit. I increased funding for the fraud effort, and ring-fenced it against running cost cutbacks. I introduced home visits for new claims. I gave local authorities the incentives to tackle housing benefit fraud to which I have referred, plus extra guidance and help.
All those measure are already showing up in increasing success in detecting and stopping fraud. In each of the last four years, savings have exceeded targets—and targets have been sharply increased.
Mr. Jon Owen Jones: Does the Minister, in his attack on fraud, intend to ensure that his party pays back the money paid to it by the fraudster Asil Nadir?
Mr. Lilley: That is not a responsibility of mine, and nor is it relevant to today's debate. One of my main responsibilities is dealing with the frauds perpetrated by Robert Maxwell—the only Labour Member ever to take a serious interest in occupational pensions.
Total savings for last year as a result of my measures are expected to exceed £1.3 billion, including some £220 million of fraud discovered by local authorities—which, together with the Benefits Agency, discovered about £390 million of housing benefit fraud over the past year. We know how much fraud is detected. The question is, how much at present remains undetected? If one is to plan an effective fraud protection strategy, it is essential to know how much fraud there is, of what kind and what type of fraudster commits it.
In the past, no Government in this country or abroad had succeeded in measuring fraud, but we have developed a reliable method of doing so. It involves taking a representative sample of claimants, examining all available information on each claimant, sending trained investigators to visit claimants at home, carrying out visits unannounced and repeatedly until contact is made or non-residence established, and requiring the claimant to prove his or her identity and facts relevant to the claim.
Mrs. Fyfe: Does the Secretary of State set any parameters for the hours during which home visits should be made or for the conduct of the officials who make them?
Mr. Lilley: I will certainly look into the case that the hon. Lady mentioned earlier, which would not have been a routine visit. They are not made any more—any more than I imagine the hon. Member for Islington, South and Finsbury intends 4 million such visits as part of his unbelievable campaign.
Mrs. Fyfe: I was talking about the spotlight campaign in Glasgow.
Mr. Lilley: The hon. Lady reminds me that she opposed our spotlight campaign in Glasgow. Unlike her, a large number of Glasgow citizens co-operated with that campaign, which succeeded in making considerable savings.
Mrs. Fyfe: On a point of order, Mr. Deputy Speaker. The Secretary of State is in danger of misleading the House. I said that the Government should put as much energy into identifying people who are due benefits but not receiving them.
Mr. Deputy Speaker (Mr. Michael Morris): That matter has absolutely nothing to do with the Chair. The hon. Lady has been in the House long enough to know that there are other means of seeking such redress as she believes is appropriate.
Mr. Lilley: With the co-operation of the citizens of Glasgow, some £2.8 million has already been saved in that city, which means that we are better placed to meet the needs of genuine claimants in that part of the world.
Mr. Chris Smith: In the light of my hon. Friend's point of order, will the Secretary of State withdraw the slur against her views that he just perpetrated?
Mr. Lilley: If I have in any way slurred any hon. Member, of course I withdraw my remarks—but the hon. Lady gave the clear impression that she was not supportive of the spotlight campaign.
The Parliamentary Under-Secretary of State for Social Security (Mr. Roger Evans): She said money should not be spent on that campaign.
Mr. Lilley: My hon. Friend recalls the hon. Lady saying that she thought money should not be spent that way. She may have said that.
Mrs. Fyfe: For the record, when the Secretary of State came to Glasgow specifically to blitz benefit fraud, I commented—and I stand by this—that the right hon. Gentleman would do well to put equal effort into assisting people who have been awarded benefits running into thousands of pounds but have not received them. Of course I do not condone fraud, but it is contemptible to chase people for fraud and do nothing about claimants who are due benefits.
Mr. Lilley: The hon. Lady has done her best to save her reputation from her previous comments.
The systematic surveys undertaken by fraud officers have enabled them to establish the amount and type of fraud. The results show that about 10 per cent. of income support and housing benefit claims are fraudulent.
Criticisms of the survey methodology simply do not hold water. The interview was not a just a memory test, as the hon. Member for Islington, South and Finsbury said. It required documentary proof of identity and other facts. Far from ignoring landlord fraud, the survey was particularly well designed to detect it. The hon. Gentleman should understand enough about landlord fraud to know that it requires either a bogus property or a bogus tenant. Visits established with absolute certainty whether or not the property existed, and with near certainty whether the tenant was genuine. Finally, the methodology was endorsed by the National Audit Office.
I have no incentive to understate the amount of fraud. Indeed, until today, the Opposition have always accused me of exaggerating it. By contrast, Labour now has every incentive to exaggerate. It wants to appear tougher than the Government, so as to con people that it is no longer soft on fraud. Above all, it needs to conjure up imaginary "savings" to offset the real cost of its spending plans. That is why Labour Members leaped uncritically at the suggestion that housing benefit fraud could amount to £2 billion, instead of the £1 billion established by our rigorous and systematic study.
The hon. Member for Islington, South and Finsbury said that those are not the bases for Labour's figures, and that Labour Members do not endorse the £2 billion figure, but the Leader of the Opposition seized on that very figure in his speech in the Southwark cathedral series, which preceded my speech.
The £2 billion figure is, to say the least, flimsy. The figure is mentioned by the Select Committee in its report, but the Committee does not examine it, let alone endorse it. The figure relates to a guesstimate made by the local authority investigative officers group. It is not based on any systematic survey, representative sample or audited methodology.

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LAIOG members are professional investigators, but they are not trained in statistics, sampling or survey methodology. They sensibly target their efforts on areas in which they are most likely to detect fraud. However, they then scaled up the percentage of fraud found on those drives and applied it to the population as a whole. In other words, the LAIOG figures vastly exaggerate the amount of fraud.
For the Opposition to set aside an audited, thorough figure for that type of guesstimate is irresponsible, and demonstrates that they are less interested in truth than in propaganda.
Today the hon. Member for Islington, South and Finsbury placed much weight on a single survey carried out by Haringey into 15 highlighted cases, and mentioned fraud levels of up to 50 per cent. Haringey claims that there is a very high level of fraud in its area, and has increased significantly the amount of fraud it has discovered since I gave it incentives and subjected it to penalties if it failed to do so. But the total amount of fraud it detects and stops is less than 3 per cent. of its housing benefit budget.
Across its budget, Haringey does not seem to have identified, let alone stopped. the levels of fraud suggested by the hon. Member for Islington, South and Finsbury. Perhaps he would care to explain the discrepancy between the figures he gave and the average savings that Haringey is achieving.
Mr. Frank Field rose—
Mr. Lilley: The hon. Member for Birkenhead (Mr. Field) rushes to his aid.
Mr. Field: The Secretary of State realises perfectly well that Haringey has, sensibly, started in those areas in which it will gain the biggest rewards for taxpayers. As he is almost limbering up to attack and to dismiss the Haringey survey, as he did before the Select Committee, would he like to provide us with evidence from other local authorities that have conducted similar surveys on landlords with many claims, and have come up with figures different from Haringey's?
Mr. Lilley: In a moment, I shall mention the figures produced by the London fraud investigators group, which believes that, in total, there is £40 million of landlord fraud in London. That figure is based on figures from its members in London, and it tallies with our figures.
Mr. Field: I am sure that the Secretary of State will quote that figure again shortly, but it does not answer the question that I asked him. Because he was knocking the Haringey survey, I asked him whether he could cite a single survey from elsewhere that deals with the same problem and the same issue—landlords with many housing benefit claims—that disproves Haringey's figures? Can he or can he not do so?
Mr. Lilley: I am not trying to knock the figures provided by Haringey. I am suggesting that its figures relating to a section of its claims—the percentage of fraud discovered—should not be used across all claimants in the
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borough, and even less so for all claimants in the nation. That is the only point that I am making. I have no doubt that there will be subsections of claimants in any borough with a very high level of fraud and abuse, and it is right and proper that fraud officers should target them and make them their first priority.
Mr. Field: I am grateful to the Secretary of State for distancing himself from his Back Benchers by making a clear statement to the House that he thinks that landlords with large numbers of properties are a real problem, and that fraud among that group should not be taken as representative of fraud among all claimants.
Mr. Lilley: Some landlords with many tenants are a problem, but, of course, the landlords with the most tenants are councils and housing associations. There are some very reputable large private landlords, and it is as absurd to lump them all together as it would be to try to blackguard the name of all housing benefit claimants.
The Opposition, having seized on the flimsy figure of an extra £1 billion of fraud, then had to invent even flimsier claims that they could get it back. So they put together three rather tenuous fraud programmes, and plucked savings estimates for each of them out of the air. By an extraordinary coincidence, the savings from those three fraud programmes add up to exactly £1 billion.
Today, it was noticeable that the hon. Member for Islington, South and Finsbury singularly failed to defend or even to mention the detailed savings figures, which, elsewhere, he has proposed are realistic.
He proposes, first, to get back an additional £310 million of landlord fraud. The problem is that, on all the best evidence, in total there is only about £150 million of landlord fraud. That figure emerged from our survey, and, as I mentioned, our survey should be particularly accurate in identifying and estimating the amount of landlord fraud.
As I said, our estimate is also consistent with the estimate of the London fraud investigators group, which believes that there is about £40 million of landlord fraud in London, where it is particularly rife. London accounts for a fifth of all properties; therefore, grossing up—but allowing for a slightly higher rate in London—produces a similar figure. So it is simply impossible for Labour to save an extra £310 million when there is only £150 million of such fraud to be stopped. One cannot get a quart out of a pint pot Labour proposes a programme of 4 million home visits to all benefit claimants. Allegedly that would save an extra £520 million net of the cost of those visits, over and above the savings that we intend to make. But we know from our surveys that about 10 per cent. of claimants are defrauding the system. To visit 100 per cent. of claimants, therefore, means 90 per cent. of visits will be wasted or ineffectual.
We want to target visits so as to catch likely fraudsters, but to minimise ineffective and costly visits. Therefore, I initiated a programme to visit almost a third of all income support claimants each year, including 600,000 visits to check existing claimants. Those visits will be targeted on likely fraud, using the most powerful data matching system in Europe.
Visits need to be thorough to be effective, which takes time and costs money. Our visits take an average of 80 minutes, cover about 80 questions and cost £21 each.

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However, Labour's proposal—which is quite explicit in its document—relies on each investigator doing 50 visits a day, at a cost of £3 each. That means that the investigator will have only eight minutes to move from one address to the next and to carry out the interview. It might be possible for my hon. Friend the Member for Falmouth and Camborne (Mr. Coe), sprinting fast between doors, to achieve that.
I challenge the hon. Member for Islington, South and Finsbury to tell us what identity checks he proposes to undertake in the fewer than eight minutes that will be available. What documentary proof must be found by their breathless investigators? What further proof will be required of other facts in the claim? Will investigators return if no one is in? My understanding is that Haringey counts "no one at home" as an effective visit. Can he confirm that his proposals rest on the same assumption?
Mr. Frank Field rose—
Mr. Lilley: I shall give the hon. Member for Islington, South and Finsbury a chance to gird himself to answer the question.
Mr. Chris Smith: The Secretary of State asks a direct question, so it is perhaps courteous to give him a direct answer. Of course the system used by Haringey and other local authorities—because it groups properties by area, and achieves very great efficiency by doing so—means that some people who are out are not visited again immediately. Then, of course, one goes back to that area and tries again. The important thing is the grouping of property by street and area, so that efficient visiting can take place and the cost to the taxpayer can be reduced. That does not happen now with the DSS, which is grossly inefficient in its organisation, but it does happen in the most efficient local authorities.
Mr. Lilley: I can correct the hon. Gentleman's error. We operate a similar system of grouping—
Mr. Smith: At vastly greater cost.
Mr. Lilley: That is because they take 80 minutes, not eight. That is the big difference. Subsequently, we follow up the work that we have done.
The hon. Member for Islington, South and Finsbury proposes to save an extra £170 million from stopping abuse of national insurance numbers. He implied that there must be national insurance number fraud because there are more NINOs than people in the United Kingdom. We keep the national insurance numbers of dead and emigrated people, not least to prevent fraud.
The reason there are more dead people on the departmental central index computer than on the national insurance records computer is that, as well as including those with national insurance contributions, the DCI computer includes those who make benefit claims but have no national insurance record. It keeps records of them when they are dead. I hope that that sets to rest the hon. Gentleman's spurious point about the difference in the numbers.
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What is more, the records are clearly marked, so that, if someone tries to claim on a dead person's national insurance number, alarm bells ring. We do not pay them benefit unless they happen to be called Lazarus.
Mr. Frank Field: Mr. and Mrs. Lazarus.
Mr. Lilley: I can assure the hon. Gentleman that all our evidence suggests that resurrection is a rare phenomenon in this country at this time.
The hon. Member for Islington, South and Finsbury, who is obviously busy trying to find support for his spurious points, assumes that one national insurance number in 500 is involved in identity fraud. The only justification for that number is to arrive at the hon. Gentleman's spurious savings figure of £1 billion. One United Kingdom citizen in 500 implies some 110,000 people, which would mean that one income support claimant in 50 was using a false national insurance number. There is no evidence that multiple identity fraud is that extensive.
It is not easy to get a new national insurance number. The applicant must first explain why he does not have one already, because virtually every British-born citizen is allocated a number as a consequence of the child benefit system. The fraudster must usually claim to be from abroad. If they claim to be from the European Economic Area or a British citizen brought up abroad, they will now have to pass the habitual residence test.
That route is distinctly unattractive for the multiple identity fraudster, but it would be reopened by the Opposition, who propose to abolish the habitual residence test. [Interruption.] Oh, the hon. Member for Islington, South and Finsbury said that he does not intend to abolish that test.
Mr. Chris Smith: The Secretary of State said that the Opposition have promised to repeal the habitual residence test. When? Where? What is his evidence?
Mr. Lilley: I am prepared to accept the hon. Gentleman sedentary comment, which he did not repeat, that the Opposition now say that they will not repeal it.
Mr. Smith: Give us the evidence.
Mr. Lilley: Quite honestly, I thought that the Opposition had promised to repeal it. I will check in the Official Report to see whether that is so. If the hon. Gentleman is saying that they intend to keep it, that is interesting. If he is saying that they do not know, that is as ineffective and will have much the same effect as his lamentable failure to answer the questions on "Newsnight" the other evening. I suggest that in future, for this sort of debate, he should find out what his party's policies are before criticising ours.
The alternative to claiming to be someone who is subject to the habitual residence test is to claim to be an asylum seeker. There are currently 46,000 asylum seekers claiming benefit, which is far short of the 110,000 people the Opposition claim are involved in national insurance number fraud, even if all of them were fraudsters using multiple identities.
Alternatively, the Opposition's multiple identity fraudsters must be involved in what is called piggy-back fraud, which means that they pretend to be a citizen who

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is not currently claiming benefit. That sort of fraud would have been exposed by the identity checks during our fraud survey. If Labour's estimate of one in 50 claimants was correct, 100 of our 5,000 sample would have been found to be involved in those frauds. In fact, the survey showed that only two were involved in such fraud. There may also have been some in the non-resident category who were involved in multiple identity claims, but they would have been picked up in our estimate of the total of fraud.
En passant, I should mention that, under the type of home visiting proposed by the Opposition, non-resident fraud will not be established, because the visitor will simply note down "not at home" and will not go back. We go back repeatedly until we establish contact with the person or non-residency.
The comprehensive measures to combat this type of fraud, of which tightening up on all aspects of NINO issues is important but only a partial element, will eliminate a large part of the national insurance number fraud that already takes place. Any genuine element within Labour's figures simply represents double counting of the savings for which we are already budgeting.
Since I became Secretary of State, we have been unprecedentedly successful in tackling benefit fraud, but I want to exceed our successes. That is why, last year, I announced a comprehensive fraud strategy for the next five years. We are already implementing that programme with investment and information technology. We are increasing the resources that we devote to fraud. This year, we are making home visits to a third of all income support claimants to reduce the risk of fraud, and we are also spotlighting different parts of the country for intensive fraud efforts. Early returns from Operation Spotlight suggest that it is already having excellent results, not just in Glasgow.
We are investing heavily in state-of-the-art technology. We are setting up a new computer system to enable us to match and verify housing benefit claims in different parts of the country. Last month, I announced the winning consortium to develop the new benefit payment card. That will mean that claimants no longer have to carry valuable order books around with them, and will largely eliminate fraud by people stealing or forging order books and girocheques.
Cumulatively, my new fraud strategy should be saving £2.5 billion a year before the end of the century. That will help to control the cost of the welfare state, and will help us to continue to support the people who need it.
Labour's document on fraud contained the first detailed proposals to emerge from the party's interminable review of social security.
Mr. Chris Smith: Before the Secretary of State finishes dealing with the figures, perhaps he might like to correct what I am sure was an inadvertent error in what he told the House earlier.
He said that Haringey's savings from its work on fraud amounted to only 3 per cent. of its budget. As I understand it, the savings achieved so far—we are not yet at the end of the process—amount to £6.5 million out of an overall housing benefit budget for the borough of £120 million. That means that the figure is more like
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5 per cent. than the 3 per cent. that the Secretary of State gave. I hope that he will seek the leave of the House to correct that information.
Mr. Lilley: I was using the figure for the last full year that has been reported. The hon. Gentleman is correct to say that, in 1995–96, the figure is £6.4 million—not £6.5 million—but the total housing benefit fraud has not yet been reported. It is still only a fraction of the level that he tried to suggest existed. He should apologise to the House for the impression that he has falsely created.
Labour's document on fraud contains the first detailed proposals to emerge from its interminable review of social security. Six months ago, the hon. Gentleman promised that he would think the unthinkable. In his document, he has merely produced the unoriginal, the unworkable and the unscrupulous.
The issues in fraud are simple. We need to understand the amount and type of fraud. We need to provide the right incentives to encourage local authorities to tackle it, and to deploy the Government's anti-fraud resources to give the best value for money. Labour fails on all three counts. It deliberately exaggerates the amount of fraud, ignores the role of local authorities and proposes to squander taxpayer's money on tasks that would have negligible returns. It ducks the real issues and offers quack remedies.
If Labour fails so spectacularly on fraud, where the issues are simple, how can it hope to offer solutions to the more complex challenges of the welfare system, such as helping people off welfare and into work? Indeed, how can a party so incompetent even in opposition possibly claim to offer competence in Government? However, Labour's fraud policies are not just incompetent: they are fraudulent. Bogusly high fraud figures offer bogus finance for all too genuine spending plans. The higher the fraud numbers it claims, the deeper it will have to dig into our pockets when, if it is elected, it has to implement policies that it cannot finance.
Our fraud programme, by contrast, is based on real numbers and real action. Tackling fraud has always been my top priority, and it will go on being my top priority. We have already achieved record savings, and we plan to break those records again. Our fraud programme means that help can be given to the people who need it and that taxpayers can afford to give that help. Our policies aim to keep fraudulent claimants off benefit, and to keep fraudulent politicians out of office.
5.11 pm
Mr. Frank Field: The Secretary of State's response was somewhat uncertain. I am sorry that he was not able to read the original comments that I drafted for the Select Committee report. They were much more favourable to him than those that appeared. The problem is that Conservative members of the Committee always think that the Chairman is up to some plot when such words appear, so they watered down my comments. I am happy to explain that there is no plot and pay him credit because, in respect of tackling fraud, he is the most serious figure to hold his office.
We must understand why the Secretary of State is so anxious about this debate and his response to the Select Committee report. He has a difficult task. It was not merely to wrong-foot him that our first report was on

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housing benefit fraud. We did not intend to make him look soft on fraud or the causes of fraud, although some of the interventions of Conservative Back Benchers in the speech of my hon. Friend the Member for Islington, South and Finsbury (Mr. Smith) suggest that that is the image that is being put over to the country. Rather, the Select Committee was anxious to change the House's image in respect of fraud and to bring it into line with the image that most voters have of fraud.
The report was meant to concentrate minds on the fact that it would be amazing if there were little fraud when the largest single departmental budget—of more than £90 billion—is involved. We suggest that fraud is very large indeed. I do not fall for the Secretary of State's trick question about what I would suggest the level of fraud is. By its nature, we can never know the extent of fraud in a system. Good government requires, as does the defence of freedom, that we should be vigilant all the time and seek new ways to crack down on fraud.
The report said that the country's image of fraud as having a dual nature is correct. An element of serious criminal fraud operates against our budgets, an aspect to which I shall return in a moment. In examining housing benefit fraud, we had, because of its nature, to concentrate on landlords because that benefit is peculiar in that, although it helps claimants, it is often paid direct to the landlords. In doing that, I have no wish to put forward the image that claimants do not commit fraud; they do and that is wrong. We may sympathise more with those who have few funds who commit fraud when compared with those who have large funds who commit it, but fraud is wrong whoever does it.
In case there is any doubt in the House, I shall read a letter that I received today from someone who did not know about today's debate. She wanted to relay her anguish about her experiences and wrote:
"Do you and others at Westminster know the depth of my anger and anguish when I stand in line in the Post Office to pay £2.95 to send a letter by special delivery and at the same time watch a foreigner in front of me collect seven £10 notes and take his mobile phone out of his bag? I am just one of those contributing towards the £70 but could not afford a mobile phone or the cost of the calls. I want to know when anyone is going to do something about all this because I know the people of this country are being destroyed. I write to you although I know Peter Lilley is actually the man in charge".
There is fraud that is committed by determined individuals who should not be claiming such benefits and there are people in gangs who commit fraud against our budget. There is also a third category of people who do small jobs on the side, or who have boyfriends and do not declare them. Most of my firepower is directed at those claimants who deliberately work the system and commit fraud, and at the gangs.
The report aimed to change the image of the House's concern with fraud away from one that was concentrated on individuals towards the serious criminal fraud element that operates against the social security budget. The Secretary of State was careful not to say that the Select Committee was wrong to estimate the figure at £2 billion because no one knows what figure for fraud he will find next year. He was anxious not to knock his feet away in case he is able to say before the general election that £2 billion is the figure involved. Such figures grossly underestimate the element of serious criminal fraud in our system.
I want to dwell on three points that show why I am worried. The Secretary of State has commissioned the most expensive investment programme that any
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Department has introduced so that we can have smartcards in the system. The group that has won the contract gave the Select Committee a seminar about how the process will work. It was at pains to point out that it is responsible for security, once it has been told that somebody should be paid, until the actual payment.
If I am right in saying that the Secretary of State underestimates the extent of organised fraud against our system, the new and expensive smartcard system will be given many instructions to pay benefit to people who should not get it. In other words, taxpayers will pay a massive sum to invest in high technology that will make it easier rather than more difficult for people to commit fraud in claiming benefits to which they are not entitled. It will, we hope, prevent some fraud in stolen giros and impersonations, but it will not deal with fraud committed before that part of the operation. That is the part on which I am concentrating. [Interruption.] The Secretary of State disagrees from a sedentary position. I am happy to give way if he wants to put something officially on the record. Time will tell which of us is right—those who disagree from a sedentary position or those who are on their feet. That is the first issue.
The second issue is our national insurance numbers. I go much further than the careful and cautious remarks that my hon. Friend the Member for Islington, South and Finsbury made to the House today. I believe that our national insurance number system has been overrun. At some stage, the Government will have to face up to that and introduce a new system. They will need identity checks, fingerprinting and DNA testing for such a system. That is how large I believe the overrunning of the system is. It is not the system's fault, for of course it was born in 1948 to serve another purpose than the service that it now carries out, which is both to allot benefits and, in some instances at least, we hope, prevent fraud.
The third issue of concern is the impossibility that the Secretary of State faces in getting any one of those wonderful computers in any one area talking to computers in other areas. He was at pains today to blame Labour councillors for not jumping to and responding more vigorously to the incentives that he now gives to crack down on fraud in the housing benefit system. However, his Government introduced the housing benefit system and allowed the anarchy that we now face to reign.
Some hon. Members may be shocked to know that the Government allowed every local authority to design its own form. So the forms ask different questions in different ways of different claimants. In those circumstances, it is impossible to do a data-matching exercise without incurring massive costs. So, although the Secretary of State wants computers to talk to computers, as he and the House will know, they can do so only in one area—Westminster. The data in that borough are such that the computers can talk to one another; but computers cannot talk across borough boundaries.
The carelessness and casualness of the Government in designing the housing benefit system, the faults which they are trying to blame on other people, are such that it is difficult to crack down on the extent of fraud that we believe exists in the current system.
I end with a challenge. The Secretary of State was kind to the Select Committee report in his comments today. How else could he respond, for there is a Conservative majority on the Committee? Once or twice he had a go at

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us. That was fair enough. He suggested obliquely here and there that perhaps we had not probed our evidence properly or that we had been too simple or trustful in accepting the figures that we put in our report. So let the debate be joined properly.
The Secretary of State is giving challenge money to local authorities to help them improve their fraud prevention techniques. Will he allot some to the Select Committee so that we can undertake some of the surveys that we would have liked to undertake? To take one example that he mentioned, we could find out whether the piggy-backing that he described in the national insurance system is as small a problem as he suggested. I believe that it is much more serious. The Secretary of State was right to say that we did not have the resources to conduct the detailed memory plus other survey that his Department conducted.
I make a plea in the debate tonight that the Select Committee should receive challenge money so that we can more seriously set about our business in defining the true proportions of fraud. The aim of the Select Committee report was to change the debate—hence the unease of the Secretary of State—away from the idea that much fraud is committed by individual claimants. Although the Secretary of State did not suggest that most fraudulent claimants acted in Labour-controlled areas, we know his line of thought. The report showed that there was another side to fraud.
The housing benefit budget is the largest of all Government budgets. It is inconceivable that it is not under attack by serious criminal fraud. We said in the report that it was. We listed four whole pages of recommendations, most of which the Secretary of State says he is still thinking about. The question that taxpayers are asking is: when will the Secretary of State make up his mind?
5.24 pm
Mr. Bernard Jenkin: There is no real disparity of intent or objective between the hon. Member for Birkenhead (Mr. Field) and my right hon. Friend the Secretary of State. Indeed, the principal purpose of the rhetoric adopted by our report was to encourage vigilance and to test assumptions. I make no apology to my right hon. Friend for being part of the exercise to challenge things that are currently accepted as true, to test the validity of arguments and to come up with new ideas.
I wish to point out the place of the figure of £2 billion in that report. It does not appear in any written evidence that we received. Although it features in our findings, it does not appear in the relevant paragraphs to which the summary of findings refers. The figure of £2 billion was not even uttered by the man who gave evidence when it entered the debate.
The figure of £2 billion came from the hon. Member and my former hon. Friend—I use the word "former" in the merely technical sense—the Member for Stratford-on-Avon (Mr. Howarth). On page 56 of the evidence, the hon. Gentleman himself extrapolated the figure from comments made by Mr. Webster of the Local Authority Investigation Officers Group, saying:
"But we are talking here of trivial sums"—
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hon. Members will understand that he was using the term in its ironic sense.
"If your assessment of the scale of fraud is right, the totality of fraud is somewhere nearer £2 billion."
Mr. Webster replied:
"I agree with you."
The figure was introduced into the debate by a Labour Member of Parliament. The witness was led into talking about a possible figure of £2 billion. As my right hon. Friend the Secretary of State rightly says, it is not based on any scientific or methodological survey.
As my right hon. Friend the Secretary of State also said, if one extrapolates to the entire United Kingdom figures from one of the worst boroughs, which is targeting some of the worst properties in London, one might reach such a figure. Until we have harder and firmer evidence, it would be irresponsible to base policy on that extrapolated figure. Yet that is exactly what the hon. Member for Islington, South and Finsbury (Mr. Smith) has done. He has changed his whole policy as a result of that extrapolation by one of his hon. Friends, not even uttered by the witness who was being interviewed at the time.
Mr. Chris Smith: I note that it is in paragraphs 49 to 51 of the Select Committee report that the figure of £2 billion is adumbrated. I have never endorsed that figure as a specific figure, but the hon. Gentleman suggests that I have for the purposes of his argument. I notice in the proceedings of the Committee an item that says:
"Paragraphs 23 to 58 read and agreed to."
The hon. Gentleman agreed to those paragraphs. Why is he now disagreeing with something that he agreed to when the Committee report was accepted?
Mr. Jenkin: The hon. Gentleman's problem is that he cannot see the difference between a speculative guess, used tentatively to highlight the potential for fraud, based on what one witness said, and a hard and fast figure. Although he says that he has never endorsed the figure, he appears to have adjusted his party's policy on the basis that it is gospel. That is nothing short of hypocrisy—if I may use that term.
Mr. David Shaw: Does my hon. Friend accept from me, as a fellow member of the Social Security Select Committee, that what we were trying to do was to come up with an order of magnitude of fraud in relation to total housing benefit of £10 billion? We were considering the possibility that fraud might be higher than the £1 billion that many people were accepting, and whether it could be as high as £2 billion. We were trying to consider all the implications of that in relation to a total figure of about £10 billion, but in my view we never said that it was a hard and fast figure that could be relied upon. We were simply trying to ensure that it was not £3 billion, £4 billion, £5 billion, £6 billion, £7 billion, £8 billion or £9 billion.
Mr. Jenkin: With some qualifications, I agree with my hon. Friend. The important reason for including the figure in the report was to attract attention to the problem of social security fraud, to encourage vigilance and to encourage a questioning and exploratory attitude. My right hon. Friend the Secretary of State has exemplified such an attitude in his quest to deal with the problem of

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social security fraud, and the hon. Member for Birkenhead has given a lead in promoting such an attitude, but that attitude was consistently resisted by Labour Front Benchers until suddenly they recognised that there might be a political opportunity in it. That typifies the way that the so-called new Labour party works; it is all for effect and there is little substance behind it.
Mr. Frank Field: Would it not help us to gather evidence, and thereby help the debate, if the Secretary of State gave the Select Committee some challenge money, so that, for example, we could study the hon. Gentleman's constituency to discover the extent of fraud there, and study my constituency and four others with different characteristics throughout the country? Then we would be in a better position to know whether the problem is localised, as the hon. Gentleman would say, in bad authorities, or whether the bad people are evenly spread throughout the country.
Mr. Jenkin: I think the hon. Gentleman is trying to bribe me with my own Government's money. Of course I very much like the idea of the Select Committee on which I serve becoming an agency of the Government, but that would be contrary to the spirit of independence of Select Committees from the Executive, and it would be a precedent-setting event if such a thing were to occur.
Nevertheless, I very much hope that my right hon. Friend the Secretary of State listened to what the hon. Gentleman said in his speech about the type of survey evidence that is necessary. Surveys are cheap compared to the costs of social security fraud, and I very much hope that, specifically, survey evidence on the security of the national insurance number system might be undertaken, to give confidence in the system if confidence is due and to expose how we might better police the system if that proves necessary. The questions have been asked, and surely it is the Government's duty to ensure that we have either confidence or action.
Mr. Barry Field: My hon. Friend, serving on the Select Committee, has vastly more knowledge of this complicated subject than I do. When the continuing spotlight programme on benefit fraud is introduced to constituencies such as mine, which has finite boundaries, if its results are known, it should surely be possible to extrapolate from those figures a figure per thousand benefit claimants. Surely that would not be a million miles, statistically, from the reality.
Mr. Jenkin: I think that that is right, depending on the nature of the area surveyed. The important thing about my right hon. Friend the Secretary of State's survey of housing benefit fraud, which included 5,000 respondents, was that it was based on a genuinely random sample, not selected from one specific authority. The survey was genuinely investigative; the strings were pulled until the investigators found what was on the end of them. Therefore, it could reasonably be taken to be a fair picture of social security fraud—at least, the fairest concrete picture that is as yet available to us. It produced the figure of £1 billion, on which it is prudent to base policy, not a more inflated figure, which was speculative and was included in our report to promote debate and questioning rather than as a basis for policy and recommendations.
Mr. Barry Field: There does not seem to be, in the Select Committee, or across the Floor of the House, much disagreement about the fact that housing benefit is one of the major areas of fraud and that there has been tremendous growth in the payment of that benefit. Has the Select Committee considered the possibility of making direct payments the norm, on the basis that landlords own fixed assets so they are not transient and do not move around? One might have a starred service for the better landlords, to whom direct payment was made.
Instead, that is currently at the discretion of the local authority. In the Isle of Wight, we had a very good system. Now that we have a unitary authority, it has scrapped it and returned to paying the money to tenants, who are often vulnerable and on the move. That is where a great problem occurs with the type of fraud that I am sure the Select Committee has considered.
Mr. Jenkin: Whether the local authority pays housing benefit direct to the tenant or direct to the landlord, it is obviously essential that there should be an actual building and a real tenant with a genuine national insurance number and a genuine basis for a housing benefit claim, that the amounts claimed should be the amounts that are required and fairly due in rent, and that there should be no skimming off in between.
I do not know whether it is possible or desirable to make it the norm to pay the landlord rather than the tenant, because very often the tenant might pay at a slightly different time from when the landlord expects the rent. I think that that matter should be at the discretion of local authorities, although I am interested to know what my hon. Friend the Under-Secretary of State for Social Security, the hon. Member for North Hertfordshire (Mr. Heald), might say about the suggestion when he replies to the debate.
I was pleased to support the report because it encourages the questioning attitude that I have discussed, but I was especially pleased with the Government's pretty generous response to that report. Of 33 recommendations—I notice the hon. Member for Islington, South and Finsbury sniggering—only six were totally rejected. Eleven were fully accepted, eight were partly accepted and six are still under consideration. That is not a bad record of influence for a Select Committee—certainly not one to be sneered at, or one to suggest that the Government are resistant to many of our suggestions.
One recommendation is vital for combating that type of fraud, or frauds where there are technical breaches or technical impersonation, where the statutory requirements of the payment of benefit are being manufactured. I refer to on-line data matching. The private sector uses vast computer systems to handle vast numbers of transactions. The banking automated transfer system must handle a huge number of transactions; and the credit card companies use a single processing centre located in the constituency of my hon. Friend the Member for Basildon (Mr. Amess).
It should therefore be possible, once it has been decided what to pay and whom to pay it to, to put all the information into a single live database system, so that anyone can look up a national insurance number and see what is coming in and what is going out—including all benefits. That must be the objective. The Secretary of State has kindly accepted it as such, but has refrained from issuing a timetable for its implementation.

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I wish to press the Minister on one point: there should be a target date for putting all receipts of national insurance and all payments of insured and uninsured benefits on one computer system, so that people can see, at the flick of a switch, what is going on in individual accounts. That is why we recommended that people should be sent an account of their national insurance contributions and claims at least once a year—so that they can see for themselves what is being paid in and what they are claiming. If someone who should not be claiming has been claiming, that would quickly become apparent, and we would gain a great deal of information about false claims for insured benefits.
I understand the Government's reticence about pursuing this recommendation. As soon as we start sending people information of this kind, many of them will of course write in for further information, and supplying it will cost the Government a great deal of money. That, however, is not a reason in the long term for not setting up such a system. People increasingly believe that they have a right to such information. They feel a sense of ownership, in terms of what they have contributed to the national insurance system. If we are not prepared to reinforce people's sense of ownership, that will serve merely to underline another fraudulent aspect of the system, which is the fact that people's contributions are really just another form of tax to be distributed by the Government at their own behest, for their own convenience and for their own purposes. All we are really buying in return for our contributions, runs this argument, are the promises of future Governments, which will not necessarily be honoured.
The hon. Member for Birkenhead touched briefly on the wider nature of social security fraud, but the Select Committee dealt extensively with that matter in its report, published on 1 November 1995, on the work of the Department of Social Security and its agencies. The worst fraud perpetrated on beneficiaries of the system lies not in the encouragement to falsify, lie and defraud in a technical sense but in the system's perverse incentives to adjust one's circumstances in such a way that one becomes genuinely eligible for benefits. That is the most corrupting aspect of the system.
It should come as no surprise to find that a state bureaucracy responsible for handing out £90 billion can encounter technical problems. We Conservatives do not believe in the efficacy of the command economy, but that is what the benefits system amounts to at the moment. The system encourages disincentives to work—a fact that the Secretary of State seems to have acknowledged by starting to reduce the advantages that some single mothers appear to derive from the benefits system. Built into the system are some perverse incentives, encouraging the creation of what Charles Murray has termed "an underclass". Its members live a completely different life style; no longer do they have any incentive to look for work or to rely on themselves: they become genuinely state-dependent.
That is the true fraud being perpetrated on so many people. We should applaud and encourage those who climb out of state dependency, and we should look for ways of shaping the future benefits system so as to avoid these detrimental effects. People must have a much more
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genuine stake in what they have invested in the welfare system, thereby giving them more incentives both to save and to work.
Those ideas have been assiduously encouraged by the Adam Smith project on the future of welfare, and would be further encouraged by developing its system of fortune accounts. Every individual would have a fortune account, not the dead letter box that his current national insurance number represents. Such an account would show the money that a person had accumulated over a lifetime, for pensions and for unfortunate eventualities such as disability or permanent illness.
On his recent visit from Chile, Mr. Piniera, the former Social Security Minister of that country, explained how he had introduced such a system there. It would do away with a great deal of fraud and with many of the incentives to fraud and corruption. It would also increase work incentives and improve the economy's savings ratio. That is exactly what we want: a system that does away with fraud by policing it effectively and by creating the right incentives to work.
I hope that the people listening to the debate will not be taken in by the speech made today by the hon. Member for Islington, South and Finsbury—it was the sort of fraud we can do without. What we need is a debate as good as the one between my right hon. Friend the Secretary of State and the Chairman of the Select Committee, the hon. Member for Birkenhead. That would be much better than hearing the ideas that the hon. Gentleman has lent his Front-Bench colleagues to give their arguments a semblance of respectability. Failing that, we shall be destined always to hear a false debate that will lead nowhere—a debate more interested in presentation than substance. Such a debate, if led by Opposition Front-Bench spokesmen, would certainly fail the nation.
5.47 pm
Ms Liz Lynne: I welcome the chance to discuss benefit fraud again, even though we debated it a short while ago. It is a matter of such significance that it warrants another debate.
Benefit fraud undermines confidence in the welfare state. We should not just discuss it; we must take action to prevent it. Housing benefit fraud is a responsibility of local authorities. Whether it amounts to £1 billion or £2 billion, the amount of fraud is still immense. I should like to dwell on the survey done by the Department of Social Security which states that one in five claims is fraudulent or incorrectly based; and that housing benefit errors and frauds are worth £840 million a year. That is immense, even if we take those figures. Fraud was £730 million. As I said, that is bad enough, but when we take into account housing benefit fraud when it is linked to the payment of income support, the figure goes up. The Government have quoted the figure of £1 billion. Of that, £900 million is fraud. As we have heard today, the Social Security Committee said that it could be as high as £2 billion. Whatever the figure, we have to do something to combat that fraud.
Let us look at what local authorities are actually doing. Last month, there was a report—an academic study—by the unit for the study of white collar crime at the Liverpool business school at John Moores university. It sent out survey questionnaires to 360 district, metropolitan and London boroughs. The return rate was

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40 per cent., which I believe was quite good. The report said what the savings were. I would like to blow the trumpet of Liberal Democrat authorities here—Liberal Democrat savings were 2.3 per cent.; the Conservatives' 2.2 per cent.; and Labour's 1.44 per cent.
It was also said in the survey that the fraud investigators in Liberal Democrat authorities actually performed better. The weekly benefit savings were per investigator. In Liberal Democrat authorities, the weekly benefit saving was £209,755; in Labour authorities it was £191,248; and in Conservative authorities it was £179,010. I would like to look at the reasons why this could be the case. One of the main reasons is that Liberal Democrat authorities have employed fraud investigators for longer.
Mr. Bernard Jenkin: It could be that there is less fraud under Conservative authorities. I am not saying that that is any particular credit to Conservative authorities—it could be a reflection on the areas concerned. It could be a reflection on all manner of things. There could be less fraud in Conservative authorities—although I admit that there is only a small number of them at the moment.
Ms Lynne: Yes, there is a very small number of Conservative authorities at the moment—and I am glad that the hon. Gentleman accepts that fact. I was quoting figures for the amount of housing benefit paid within that area. For the Liberal Democrats, it was 2.3 per cent. of the amount of housing benefit paid within that area, and for the Conservatives it was 2.2 per cent—the hon. Member cannot get away with that argument.
Tackling benefit fraud is not just a matter for local authorities; it is a matter for Government Departments as well. I believe that there should be greater co-operation between Government Departments and local authorities. Perhaps if there was greater co-operation, we would get away from the large-scale fraud that we have at the moment. If more fraudsters—I am talking about landlord fraudsters—ended up with convictions, it might be an actual deterrent.
We are not talking about some small-time crime, we are not talking about the individual who defrauds housing benefit—even though that is serious—we are talking about landlords on a large scale who are ripping off the taxpayer by overstating rents, by claiming on empty properties and by creating fictitious tenancies. The book must be thrown at them—and there is little evidence that that is happening.
Prosecution of landlords is often neglected, partly because it would take council staff away from detecting new fraud—because they have to meet Government targets. The only thing that happens to these fraudsters is that the benefits stop, the pay cheques stop. They do not actually get prosecuted. I believe that the lack of prosecutions leads to a climate of acceptance.
I asked a written parliamentary question to the Home Office not so long ago and I got a depressing reply. I asked whether the Home Office looked at the correlation between the number of criminal prosecutions and housing benefit fraud. I also asked whether it looked at the level of housing benefit fraud. I also asked whether there were any joint initiatives between the Home Office and the Department of Social Security. I was told in the reply that it does not know how many offences of housing benefit fraud there have been, and no, it is not working with the Department of Social Security. That is not good enough. We must ensure that fraudsters are prosecuted.
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In the debate in March, we spoke about other fraud—I will not go into the detail of what was said then, except to say that I welcome the home visits being restored. I was worried when the Government cut them, but now they have been reinstated, that will cut down on a lot of benefit fraud.
I now turn to the Child Support Agency and the way that fraud is perpetrated. It is often said that the CSA is effective in detecting benefit fraud. In April, the Chairman of the Social Security Committee, the hon. Member for Birkenhead (Mr. Field), said in The Independent on Sunday:
"By sheer accident we have created a most efficient anti-fraud unit."
I am afraid to say that that is far from the case. The Child Support Agency presented to the Minister a report on "good cause" provisions. The report stated:
"Prior to the setting up of the CSA, the question of maintenance was dealt with as part of the consideration of a benefit claim by the local DSS office. Liable relative officers were charged with the duty to arrange maintenance payments where this was appropriate and possible."
The report went on to say:
"One apparent benefit of their work, often claimed, was the fact that questions were asked about the other parent at a very early stage prior to benefit being awarded, or just after, leading to the deterrence of collusive desertion claims (where couples fraudulently claimed to have split up), or leading to early reconciliations."
The report continued:
"It therefore must be of concern that any part of the claims process which apparently had been effective in deterring some fraudulent claims should not now be used."
Mr. Frank Field: The last time we debated this point, the hon. Lady was being cheered and I was being hissed by campaigners against the Child Support Agency. I accept the validity of the point that she is making. The Government could respond by suggesting that all people begin the CSA proceedings when they make their initial claim for benefits, in which case the questions that were asked in the old days about who the father is and who the husband is would be asked immediately, instead of almost a year down the line. I see the hon. Lady's point but, unlike her, I still support the CSA. The point that she made at the meeting and today is valid. Although the CSA is an agency against fraud, it is not as effective as it could be. This is a reform that we should have.
Ms Lynne: I take the hon. Gentleman's point, but we will obviously disagree on the Child Support Agency. I happen to believe that it ought to be scrapped and replaced with a fair and unified family court system. It could address the problems of fraud that we have here.
Under the current system, it is easy to defraud the system. Prevention is far better than detection. The problem is that, even if fraud is detected, there is such a backlog with the Child Support Agency that it takes months and months for fraudulent claims to be investigated and for questions to be asked.
Mr. Bernard Jenkin: The Social Security Committee was most impressed by—I mean that in a technical sense—the number of single parents who received maintenance application forms and then simply dropped off the benefits system. They ceased to claim because they did not want their circumstances, or the circumstances of

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the absent parent, to be scrutinised. That speaks volumes about the amount of fraud that the Child Support Agency has stopped.
Ms Lynne: A tremendous amount of fraud is occurring at present, and the old liable relatives unit was able to detect fraud better. Fraudulent claims cannot be dealt with because the Child Support Agency has such a backlog. Our argument with the Child Support Agency and our argument today sums up what is wrong with the benefit system generally. Too many people do not look at the facts about benefit fraud and the extent of that fraud both within the Child Support Agency and across the board.
As I said before, people are concentrating too much on detection rather than the prevention of benefit fraud. We owe it to the taxpayers and to the honest claimants to concentrate on detection. There are a tremendous number of honest claimants; they are in the majority and we must not be sidetracked from that fact. Most of those who claim housing benefit do so because they are desperately in need: they do not try to defraud the system. I believe that all hon. Members agree with that. We must tackle benefit fraud in order to save the taxpayer money and to help those who are genuinely in need.
6 pm
Mr. David Porter: This is another Opposition day, so the Opposition have another chance to pick a stick with which to beat the Government. Opposition Members seem to think that benefit fraud is an easy subject to sound tough about and that, by sounding tougher than the Government, they can steal some more Conservative party clothes. I suggest that they are wrong on both counts. Over the years, the Labour party's attitude to spending other people's money, its stress on rights ahead of responsibilities, and its often shameful record on the local government side of benefits, make its claim that it is the taxpayers' friend sound somewhat hollow.
No one has argued—and no one will—that we should not reduce fraud. As has been said, any reduction in benefit fraud has a double benefit: it stops money going to criminals, with the message that that sends in the law and order debate, and it means that more money is available to those who need the safety net of the state.
I serve on the Education and Employment Committee which, among other things, is examining the pilot schemes for the jobseeker's allowance in October. Last week, Committee members visited an Employment Service jobcentre and a Department of Social Security Benefits Agency office in Peckham, which are next door to each other. I drew from that visit the obvious conclusion that we need to merge the administration of employment-related benefits and social security benefits.
When I visit the Benefits Agency office in Lowestoft in my constituency, it seems obvious that the scope for confusion, fraud, error and sheer frustration could be reduced by linking the administration of housing benefit and council tax benefit with social security benefit. In child support cases, when there is a discrepancy between what one parent claims to earn and what the other parent says he or she earns, linking Inland Revenue information with benefit administration would surely
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serve as a disincentive to cheating the system. I believe that going the whole way and integrating the entire tax and benefit system would not necessarily be a bad thing. Such a move would send the right message: benefit fraud is robbery like any other form of theft.
We have laws to stop people robbing banks and each other, but those crimes are still committed. Laws cannot prevent every fraud, but we must make it as hard as we possibly can to commit fraud. With the advent of technology on a large scale and at a reasonable cost, we have a potential weapon against fraud of immense potency. I wonder whether we are harnessing it to the full.
We know already about DSS plans to link local authority and Benefits Agency computers to combat exclusively housing benefit fraud. As my hon. Friend the Member for Colchester, North (Mr. Jenkin) said, multiple claimants can be spotted with any simple package of software. The use of false names, the names of the dead and post office box numbers, and the conniving of householders to help others, are harder to spot, but they are not beyond the realms of current technology.
Smartcard technology and the identification card have been offered by some as a panacea, but we should remember that stolen or forged ID cards would swiftly become valuable items for sale on the black market. We have personal numbers for national insurance, the national health service and the Inland Revenue. A single self-chosen personal identification number might help also. There has been talk about having to amend the Data Protection Act 1984 if dedicated systems freely exchange information. I ask my hon. Friend the Minister to clarify in his winding-up speech whether increased use of technology will mean reform of the Data Protection Act.
Is it not incredible that we can surf the Internet and have a guided tour of the White House for the price of a local telephone call in the United Kingdom, yet my constituents cannot go into the benefits office in Lowestoft and view their Child Support Agency case on a computer screen in front of them? The Child Support Agency situation highlights the need for an integrated system to allow for fairer and more accurate assessments, which would, in turn, encourage compliance.
The need for parents who do not have continuing care—for reasons willing or unwilling—to shape the concept of child support is paramount. The need to assess income so that no one is better off on benefit than supporting his or her children is a separate but related part of the equation. The need for unemployment and training support that does not make it better to receive benefit than to stay in work is also part of the equation. What people earn in employment or through self-employment has a direct bearing on their dealings with the Child Support Agency.
If we had a better system that recognised the need of the absent parent to be in work or training as part of a long-term commitment to the children, that would go a long way towards increasing the credibility of the system. If the system had integrity, that would act as a disincentive to defrauding it willingly. There must also be a little more flexibility. For example, if parents share custody of children regularly during the week on an agreed and working basis, surely child benefit should also be shared on the same agreed and working basis.
My final point relates to the culture of fraud. We know that a downside of the welfare state is that it encourages dependency. Further reform of the welfare state in the next

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decade must increasingly address that problem, but another little noticed consequence is a reluctance to do anything about the problem while getting angry and blaming the Government. I shall give the House an example.
I am sure that all hon. Members have been approached by constituents who are livid because someone near them is working while claiming benefit. We might be given some details of the scam when we ask for them. I was told recently about the existence of a pool of battered, anonymous cars that are shared by a number of people who are fraudulently obtaining benefit while working a night shift at a factory and who return home in a different car every day to throw any observers off the scent.
We often press our constituents for names and for chapter and verse of fraudulent behaviour, but they are reluctant or refuse to give names and addresses—possibly because they are afraid of reprisal. I am told that the Government are to blame, but I am not given the names to report to the fraud department. In my experience, the fraud department and Benefits Agency offices do a good job often with few staff, but they cannot catch the cheats without information.
Mr. Bernard Jenkin: In my experience, when we are given the necessary information, we do not receive any feedback about the results of any investigation. The result is that the fraud continues to be perpetrated, no action is taken and no reason is given, because the Benefits Agency will not discuss individual claims. There must be a more active exchange of information and much better feedback in order to encourage society to police itself and to encourage people to hand over the information so that they can see the results for themselves.
Mr. Porter: My hon. Friend is absolutely right. I understand that there may be difficulties if a fraud investigation is conducted, it proves to be unfounded and a person is identified unnecessarily, but I agree with the thrust of my hon. Friend's comments.
Going one step further, the fraud departments link in with the police, Customs and Excise and with other agencies. I wonder whether there is a case for transferring benefit fraud investigations wholesale to the police in order to strengthen their work. We cannot change overnight the culture of dependency or the view that the benefit system is a legitimate target for theft. I suggest that we need a better run, more integrated, non-overlapping and non-wasteful administrative machine. If that is achieved, the staggering losses resulting from fraud will be cut to a minimum.
I agree with the hon. Member for Rochdale (Ms Lynne) that prison sentences should reflect the seriousness of crimes involving fraud. If we do all of those things, rather than inspire the same feelings as does European bureaucracy—loathing of a monster that is out of control—our system will inspire confidence in the service by, from and to the taxpayer.
6.9 pm
Miss Kate Hoey: I very much agree with the hon. Member for Waveney (Mr. Porter), which shows that there can be—and is—cross-party consensus on this important issue.
As a member of the Select Committee on Social Security, whose report we are debating, I am pleased to have the opportunity to raise once again some of the
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important issues that the Committee uncovered in its investigations into housing benefit fraud. I am also pleased to be able to challenge again the whole attitude to fraud at national and local authority level.
This debate must put to bed for good any lingering doubt that anyone has ever had that attacking benefit fraud is somehow attacking the poor. It is quite clear that such an attitude was held in certain parts of the country by certain people, but that is no longer so. It is clear, certainly to Opposition Members, and generally on both sides of the House, that the people who suffer most from benefit fraud are those in greatest need.
I want to refer to the Select Committee's recommendation on the Data Protection Act 1984. It is important to point out that the evidence that members of the Committee took questioned whether the Act was working in the interests of people who were trying to root out fraud. We took evidence from Andrew Webster of the London boroughs fraud investigators group, who said:
"I have to say that I sometimes wonder who the Data Protection Act is actually protecting, because obviously the genuine honest claimant has nothing to fear. The genuine honest person in this country has nothing to fear. The only people who hide behind the Data Protection Act are the criminals."
I am not interested in protecting the civil liberties of large landlords who are perpetrating housing benefit fraud and I hope that the recommendation on the Data Protection Act is considered seriously.
The Association of Chief Police Officers told the Committee:
"There appears to be no clear authority for police to give Local Authority investigators details of previous criminal activity or other potentially useful intelligence."
It is absolutely certain that there is a need for co-operation between agencies. Indeed, one of the Committee's recommendations says:
"the Department of Social Security and the Data Protection Registrar should review the data protection legislation, and any law and practice on which data protection legislation is based … to ensure that the legislation does not constitute a barrier to counter-fraud work."
Data protection is fine, but it must not be allowed to get in the way of information on fraud coming forward.
Earlier, the Secretary of State challenged the Opposition's assessment that there is £2 billion-worth of fraud, and other hon. Members have said that the figure was an exaggeration. No one can say that the figure is an exaggeration, because no one knows the real extent of fraud in the benefit system. I wonder how many people in Haringey, when asked to put a figure on the extent of benefit fraud before the investigation began there some years ago, would have come near the figure that has emerged from the small pilot study.
I certainly do not have any hidden agenda on exaggerating the amount of fraud, because I happen to represent a borough whose name was, until recently, synonymous with fraud and corruption. I am proud to represent the area that includes the London borough of Lambeth. Indeed, I am even more proud now that the borough is starting to get its act together and beginning to adopt an approach that is in the interests of its residents.
Lambeth has had a history of problems relating to allegations of fraud and corruption, especially in the late 1980s and early 1990s. During the past two years, however, the council has been committed to breaking with

723
the past and tackling the root problems in its management and culture. That commitment was epitomised by the appointment of the new chief executive, Heather Robbatts, in April 1995. With the support of all the political parties on the council—it is, of course, a hung council—she has implemented a programme of sweeping changes in the council's management, personnel and operations. With the support of its members, she is beginning to change the whole culture of the council and its attitude to fraud.
A key part of that approach has been to improve the council's arrangements for dealing with allegations of fraud and corruption, which has involved the reorganisation of the internal agencies, responsibility for the investigation of fraud and corruption and the creation of a corporate anti-fraud team—CAFT—which reports directly to the chief executive.
The effectiveness of the new arrangements was demonstrated in the first few weeks of the establishment of CAFT by something known as Operation Jobson. In April 1995, the council and the Benefits Agency initiated the provision of a complete listing of the council's payroll data on employees for the Benefits Agency. The agency checked every employee against its computer records. No one queried civil liberties there. When the corporate anti-fraud team was set up in October 1995, 120 employees appeared to be fraudulently claiming benefit. By December 1995—only six months ago—the figure was 150.
CAFT took on responsibility for that exercise in October, and a team of hand-picked officers from the council's internal audit department were seconded to investigate and facilitate disciplinary action. That action has continued. Interestingly enough, 59 of the employees identified instantly disappeared from the council's employ—if they ever existed. The lessons learned from the exercise were that effective action required the detailed co-ordination of investigation and management action, and that CAFT, the chief executive and the head of personnel should establish a team that had power to intervene and co-ordinate work across all the council's departments.
There is no doubt that, in some local authorities, for different reasons in different departments, there is a culture of not really wanting to get to the bottom of what is happening. It was crucial to the setting up of the Lambeth team that it reported to the chief executive, was given high status and was seen as permeating the entire council and having everyone's commitment.
An anti-fraud policy statement was drawn up and circulated to every member of the council. The matter was taken very seriously. The matter may seem trivial to some people who think that people would not do anything other than be against fraud. The reality is that because of our attitude towards fraud, some people did not feel that it was their responsibility or had anything to do with them. They perhaps felt that attacking fraud was picking on the poor. Such an attitude had to be changed; a corporate attitude had to be taken.
The council is promoting whistleblowers. Wanting to shop one's mate if he or she is involved in a fraudulent act is no longer seen as something of which to be ashamed. At the end of the day, such people are working against the interests of those whom they have been employed to represent and support.
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CAFT' s duties are to consider not only benefit claimant fraud but contract fraud and educational awards fraud. The latter is another big type of fraud which certainly occurs in inner-city areas. Education grants are sometimes awarded when people do not attend college or use false names. Sometimes, the college for which people have been given grants in my borough has not existed. Employees claiming benefit is also a big type of fraud in local authorities. Other types of fraud include housing improvement grants fraud, private use of council resources, selling of council house keys—unauthorised tenancies—theft and misappropriation of council funds and equipment, and investigation of anonymous allegations.
CAFT brings all those types of fraud together. Fraud does not mean simply benefit fraud. All sorts of other public frauds are taking place and need to be taken on board as part of a partnership approach, which includes building an anti-fraud culture in the council, implementing a programme of fraud awareness seminars and maintaining close liaison with local police and the Benefits Agency.
I welcome what my local authority is doing. In a couple of months' time, when the team is complete, it will be leading the battle against fraud in the country. That is a terrific achievement for a borough that has had such a history. It is crucial that boroughs that accept the faults of the past and start to put them right should not be slated in the newspapers. Newspapers, and those who want to investigate fraud and mismanagement, should start looking at the boroughs.
I am not suggesting to the hon. Member for Colchester, North (Mr. Jenkin) that there is huge fraud in Colchester, but the fact that the borough has not even started to consider the matter makes me question whether it has any real determination to discover whether there is a problem. There is not a single borough in Britain that is not deeply involved in some kind of fraud. It is crucial that those boroughs that do the good work, and those chief executives and council leaders who take the initiative, are given credit for it and not slated by the media.
One matter which I keep raising but on which I do not seem to make much progress concerns child benefit fraud, which the Social Security Select Committee may shortly consider. I have a letter detailing someone's experience in trying to report a possible child benefit fraud to the DSS. It states:
"After obtaining the number of my local DSS office … from directory inquiries I initially rang seven times when the line was engaged. On the eighth occasion I got through and was transferred to the Child Benefit Section which was also engaged for three calls. At 11.30 am (an hour after starting the calls) I was successful in speaking to someone, who then just gave me another telephone number to call in Newcastle upon Tyne. This number was also engaged until 12.50 pm, then no answer at all until 1.05 pm, and then engaged again until 14.00 pm. I finally tried Directory Inquiries again who gave me a freephone number … which was engaged on five attempts.
Just after 14.30 pm I was successful in getting through and explained the nature of my complaints against my neighbours, who have claimed Child Benefit for two years whilst renting out their flat in London and living and working"
abroad. The letter continues:
"I gave the name, address, reference number etc. of the errant claimants and was told that they would be written to, but my name and address were declined. I went on to explain that I did not feel that a letter was a practical way of dealing with the matter, and offered the mother's address in London which was also refused.

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My overriding impression of the whole experience is that my time was completely wasted. I am very surprised that it proved so difficult to report a benefit fraud, and fail to see why the DSS staff in London could not take the details and why I had to pay for all the calls."
The Minister, to whom I have written on the issue of child benefit, responded to me at the end of March. He said:
"I appreciate your concern that a family might continue to receive Child Benefit by Automated Credit Transfer … after they have gone abroad. ACT is currently the cheapest and most secure method of payment.
Child benefit is paid to over seven million families in Great Britain, and in the vast majority of cases there are no changes of circumstances which affect benefit entitlement until a child approaches school leaving age."
Earlier, I had asked for information about Operation Rattle, set up by the DSS to investigate child benefit—the title is rather good, given what it was investigating—so the Minister went on to say:
"I should like to explain a little more about 'Operation Rattle', which was launched in November last year. This followed on from a pilot which showed that there was a loss of funds to the Department when people from abroad who were being paid Child Benefit by ACT returned to their home country and failed to notify the Child Benefit Centre.
The Operation involves close working between Benefits Agency"
and so on. He continued:
"To date, overpayments amounting to £3 million have been identified."
I do not know how big the pilot was, where it took place or how such decisions were reached. The Minister went on to say:
"Payment is stopped immediately when a nil entitlement situation is discovered."
He then quoted some horrendous figures about the money that had already been saved as a result of the pilot, which amounted to about £8 million, even in that short time with such a small number of people.
Every year, recipients of child benefit paid by automated credit transfer receive a form asking whether there are any changes in their circumstances; if there are not, nothing needs to be said or done, so the child benefit continues to be paid into the bank account. One can have a baby in this country, register for child benefit, go off to live wherever and continue to receive the money.
People may say that that involves only a few people, but we do not know. I do not believe it is only a few people. I think that large numbers of people are abusing the child benefit system. They receive child benefit from an early age having had their baby here. They may be travelling business people. The irony is that it is not poor people who are doing this but well organised, quite rich people who are using London as a business place. They go into and out of the country, keep an address here, have a bank account and receive the child benefit.
What happens when the children reach the age of 16? Presumably, because child benefit is a means of obtaining a national insurance number, they can continue to claim benefit for the rest of their lives while living in Spain. It is astonishing that this matter has not been investigated more. Such matters must be investigated and fraud made much more difficult. No one ever checks whether a child exists or what school he or she attends. There are no
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means of making such checks. It is a big area of neglect which should be considered seriously. I hope that the Minister will respond to some of the points I have made.
Having got all that off my chest—I feel strongly about it—I welcome some of the Government's responses to the Select Committee's recommendations. I should like to see them all being put into immediate effect, because anything that the Select Committee has done in the past has come to be seen as received wisdom a few years later.
The Select Committee's work in this area is highly commendable and I hope that the Government will implement its recommendations as quickly as possible. The key message that we must get across is that fraud, whether small, medium or large, is not acceptable. It is an insult to the poor. It affects the poor more than anyone else and the House must be united in its determination to stamp it out.
6.27 pm
Mr. Nick Raynsford: I declare an interest: I act as a consultant to HACAS, the social housing agency. I have also written a book in the past on the subject of housing benefit, although it is now out of print and even if I had received any royalties in the past, which I did not, I certainly would not be getting any now.
This has been an interesting debate on an extremely important issue. We have heard a number of valuable contributions. I think particularly of contributions from members of the Select Committee, including my hon. Friend the Member for Birkenhead (Mr. Field), the Chairman of the Select Committee, and my hon. Friend the Member for Vauxhall (Miss Hoey), who has spoken most recently. They both made eloquent and telling contributions to our debate.
We have heard contributions from Conservative Members, revealing their interest and concern in a number of extremely important issues relating to social security and fraud, but in some cases revealing a certain touch of difficulty, if not ingenuity, in trying to reconcile their support for the Committee's recommendations with their opposition to the Opposition motion which seeks to give effect to a number of the Select Committee's important recommendations.
I also apologise to those hon. Members whose speeches I did not hear in full tonight. Unfortunately, tonight's debate has coincided with the sitting of a Standing Committee of which I am a member, and I was required to attend on three occasions, on all of which, I am pleased to say, the Government were defeated.
Housing benefit fraud is big business. It is also unique for, unlike almost any other big business in late 20th-century Britain, housing benefit and housing benefit fraud are immune to downsizing. While British industry and the British people coped with downsizing and recession—many losing their jobs in the process—housing benefit and housing benefit fraud have been oases of unparalleled growth. Indeed, if our gross domestic product were measured in terms of housing benefit expenditure and housing benefit fraud, we would unquestionably be one of the most successful countries in the world.
The scale of the increase in housing benefit expenditure has been phenomenal. It has almost doubled in real terms during the past six years—from £5.5 billion in 1989–90

727
to £10.8 billion in 1995–96. That has not happened by accident; on the contrary, it has been the direct result of Government policy. There has been an increase in the number of people claiming housing benefit—there were about 600,000 additional claims during that period—which reflects an increase in the number of people who are unemployed and the increase in poverty in the early 1990s recession. But the real reason for the huge increase in housing benefit expenditure, as the Select Committee's report so rightly highlighted, has been the exponential rise in rents as a direct consequence of Government policy.
Between 1988–89 and 1994–95, council rents rose on average from £19 a week to £35.80 a week; housing association rents rose from £23 a week to £43 a week; and private sector rents rose from £29 a week to £69 a week. Those huge increases directly reflected Government decisions to cut subsidies to local authority and housing association homes and to deregulate the private market. Ministers knew full well what the consequences would be. When pressed—we did press them—they repeatedly told us not to worry about rising rents because, in that felicitous phrase,
"housing benefit will take the strain".
What a strain it has been. The average weekly payment of housing benefit rose by 100 per cent. between 1989 and 1994.
Mr. Heald: The hon. Gentleman claims that deregulation was such a bad thing. Is he saying that he would go back to what we had before—the regulated private sector?
Mr. Raynsford: If the Minister will bear with me for a moment, he will hear the full argument about the extent to which deregulation has not just led to a huge increase in expenditure but opened the door to a level of fraud that is a disgrace and that, instead of being used to help people in need, is lining the pockets of people who should not be receiving it. [Interruption.] Later in the debate—if the Secretary of State will contain himself—I shall explain some of the measures that Labour will take to ensure proper safeguards against abuse, and at that point the Minister will be well aware of what action a Labour Government will introduce to deal with the problems. We would not tolerate the extraordinary exponential growth in expenditure, which has been to little public benefit, over which his Government have presided.
In the deregulated private sector, average weekly payments rose from £21.06 in 1989 to £47.28 in 1994a staggering increase of 125 per cent. The combination of that rapid expenditure growth and a deregulated environment provided an ideal framework in which fraud could thrive. Deregulation not only allowed huge increases in the amount of rent that could be charged but removed the previous safeguard that allowed local authorities to require a fair rent to be fixed by a rent officer. To add insult to injury, a significant extension of direct payments to landlords—rather than payments being channelled through claimants—offered even more enticing opportunities for fraudsters to cash in on the bonanza.
I ask the Minister to think about these figures. At the current average level of private rents, a landlord will receive for each tenant £2,458 per annum. The landlords
728
investigated by the London borough of Haringey—those with more than 20 claims—were receiving on average more than £49,000 per year minimum. These are the cases that the Secretary of State does not believe it is reasonable to investigate. He believes that it will be too burdensome on landlords to require them to be subjected to certain checks to see whether public money is going in the right direction. That is the legacy of the Conservative Government.
Mr. Bernard Jenkin: I am sure that the hon. Gentleman and his party are committed to the fight against fraud, but will he demonstrate that commitment by referring to paragraph 59 of the Select Committee's report, which he welcomes in the motion? The paragraph refers to the harassment and the attempts to discredit Mr. Bernard Crofton. Will the hon. Gentleman join me in condeming the Labour councillors who are responsible for that authority, and condemn what they attempted to do to Mr. Crofton? Will he undertake on behalf of his party to do something about their appalling behaviour?
Mr. Raynsford: I am second to none in demanding tough action against fraud and in my support of local authority officers who take effective action against fraud, wherever they are. I have played a considerable role in recent weeks in trying to ensure that the London borough of Haringey responds positively and appropriately to the difficult challenges it faces. I hope that, in exchange, the hon. Gentleman will take a similar view of the behaviour of a member of his party who featured in an article in the South London Press, on Friday 22 March, which said:
"A sobbing former Tory chief has been jailed for 18 months for mortgage and benefit fraud."
I suggest that the hon. Gentleman divert his attention to the failures of members of his own party.
The huge escalation over the years in housing benefit expenditure provided both the opportunity and the cover for a literal explosion in the number and scale of fraudulent claims. Rather than seeing the huge increase in public spending as a problem—which they would undoubtedly have done in any other part of public policy—the Tory Government, perversely, saw it as evidence of success. They claim that it achieved a magical recovery in the private rented sector and that therefore it is justified.
The harsh truth, however, is that the "magical recovery" has been far less dramatic than Tory Ministers would have us believe. Although the explosion in expenditure has been disproportionate, the number of new private lettings has not been. Despite all the assistance offered—not just through housing benefit but the equally lavish spending on the business expansion scheme and by abnormally favourable market conditions because of the depressed home ownership market—the total number of private lettings in England has recovered to a little over 2 million, which is almost exactly the figure the Tories inherited from Labour in 1979. Furthermore, with the ending of the BES subsidy and with long-overdue evidence of recovery in the home ownership market, most commentators expect that the revival in private renting, which was achieved at such huge cost, will not be sustained.
Let me make one thing absolutely clear: Labour wants to see a healthy private rented sector, but it must be economically viable in its own right and be dependent

729
on huge transfers of money through the housing benefit scheme. Reducing dependence on housing benefit makes sense in social and in economic terms. In case Ministers look doubtful, let me quote from their White Paper on housing, published a year ago, entitled "Our Future Homes". It stated quite correctly that
"providing a subsidy to a local authority or housing association to enable them to charge a below market rent can be cheaper over time than paying housing benefit on a market rent for several decades".
In the meantime, we must take tough action to tackle the scandalous and expensive abuse of the housing benefit system that has been allowed in recent years as a result of Government action and Government inaction. Both have been prompted by the Government's ideological obsession with deregulation. Even today, that obsession is still rearing its head, being used as a justification for not taking action to tackle landlord fraud more effectively.
My hon. Friend the Member for Islington, South and Finsbury (Mr. Smith) rightly pointed out that the Government's response to the Select Committee's report was deplorably vacuous and lukewarm in respect of two specific recommendations for tackling landlord abuse more effectively. The Secretary of State is well aware of the evidence, quoted in the Select Committee's report, of extensive fraud perpetrated by landlords who receive a significant number of housing benefit payments in the London borough of Haringey. The study showed that the incidence of fraud among the claims investigated was more than 20 per cent., yet the Government consider it sufficient to undertake an assessment of fraud risk rather than act decisively to clamp down on such abuse.
The final irony—I urge the Secretary of State to listen; he might even enjoy the next passage—is that the landlords who have been the beneficiaries of this extraordinary largesse from the Government over the past few years are not generous with what they have received. They have not produced many new homes, as we have pointed out, and many of the homes that they have produced have been in poor condition. There are still a disproportionate number of squalid and dangerous properties in the private rented sector. To add insult to injury, the beneficiaries of all that public money resent the suggestion that action should be taken to clamp down on benefit fraud.
Mr. Geoffrey Cutting, representing the Small Landlords Association, is quoted in the 17 May edition of Inside Housing magazine—I invite Ministers to listen carefully—as saying:
"the defrauding of landlords by the state far exceeds the defrauding of the state by landlords … When the state defrauds landlords they can expect landlords to respond by defrauding the state".
I should be interested to hear the Secretary of State's response to that thinly veiled incitement to malpractice. Will we hear an unequivocal, unreserved condemnation of that disgraceful statement?
Mr. Lilley: Yes. For the hon. Gentleman's benefit, I unequivocally condemn such a remark. I was only sorry that he did not join the Select Committee in unequivocally condemning attempts to stop the housing officer in Hackney doing his job.
Mr. Raynsford: I remind the Secretary of State that I made it clear, in my response to an earlier intervention, that I thought it absolutely right for local government
730
officers to be able to continue to pursue the fight against fraud in an effective and proper way. I have no doubt that that should be the case regardless of the London borough, or other local authority, in which those officers work. [Interruption.]
Madam Deputy Speaker (Dame Janet Fookes): Order. I remind the House, and Government Front Benchers in particular, that I deplore seated interventions, especially when they are repeated.
Mr. Raynsford: Thank you, Madam Deputy Speaker.
Much can and should be done, as a matter of urgency, to call a halt to the abuse of housing benefit and to ensure tough action against the fraudsters. My hon. Friend the Member for Islington, South and Finsbury mentioned a number of our policy proposals. He spoke of the need to tighten the rules on direct payment of benefit to landlords, and to insist on proof of the landlord's ownership—or the managing agent's control of the property—and disclosure of other addresses to which housing benefit is paid. All those measures will help to stamp out bogus claims from "paper tenancies".
My hon. Friend spoke of the need for checks on redirected mail, which allow benefit to go on being paid long after entitlement has ceased, and the introduction of a self-financing national licensing scheme for multi-occupied houses. Such a scheme would have many benefits apart from stopping fraud: it would help to improve poor conditions, and would save many tenants from risks that are often life-threatening. My hon. Friend also mentioned the importance of targeted investigation and the use of more specialist fraud-busting teams, able to operate—like many of the fraudsters—across local authority boundaries. Labour believes that every area in the country should be covered: there should be no hiding place or soft-touch area for organised fraudsters.
My hon. Friend spoke of achieving better co-ordination between the various agencies involved, including local authorities, the Department of Social Security and the rent officer service. The latter can play a crucial role, as it has a duty to assess whether rents are reasonable for housing benefit subsidy, and considerable knowledge about appropriate rent levels. Astonishingly, the Government appear to be largely unaware of the scope for anti-fraud activity by rent officers. Similarly, co-ordination between local authorities and the Inland Revenue will help to identify landlords who are defrauding the housing benefit system, the Inland Revenue or both.
Ms Lynne: While the hon. Gentleman is referring to the remarks of his hon. Friend the Member for Islington, South and Finsbury (Mr. Smith), can he confirm that current Labour party policy is not to reverse the habitual residence test?
Mr. Raynsford: No, I cannot. The hon. Lady will appreciate that I have approximately one minute left. Moreover, the question should have been addressed to my hon. Friend the Member for Islington, South and Finsbury, the social security spokesman, rather than to me as housing spokesman.
We believe that all those measures are important and necessary, and should be introduced as a matter of urgency. Under a Labour Government, they will be. We

731
will support the sensible recommendations of the Select Committee, as well as other measures that we have ourselves proposed, some of which I have outlined.
The contrast between our commitment to effective action and the Tories' shameful record could not be more revealing. They created an environment in which fraud could thrive; they ignored the warnings about potential abuse of the system, and complacently interpreted the escalation in housing benefit expenditure as evidence of success; and they have been remiss in tackling organised fraud for fear of upsetting landlords, many of whom have been actively engaged in defrauding the social security system on a vast scale. Even now, they remain lukewarm in their commitment to effective action. Their proposal to put housing benefit out to competitive tendering is sending precisely the wrong message.
There could be no clearer sign of the fundamental difference between the parties on the issues that really count. Labour is determined that there should be a social security system that delivers benefits to people in need, not a social security system that is open to fraud on the scale that we have seen.
6.45 pm
The Parliamentary Under-Secretary of State for Social Security (Mr. Oliver Heald): We have had a good debate, featuring distinguished contributions from my hon. Friends the Members for Colchester, North (Mr. Jenkin), for Isle of Wight (Mr. Field) and for Waveney (Mr. Porter) and some interesting comments from Opposition Members—although, in many instances, they may not have been quite as distinguished.
Ms Hilary Armstrong: How graceless.
Mr. Heald: It may seem graceless, but it is accurate none the less. The hon. Member for Greenwich (Mr. Raynsford) sits chortling, but let me begin by quoting from the Select Committee's report on housing benefit. Mr. Bernard Crofton of Hackney council is described as
"an inspiration to those working seriously to tackle fraud."
The Committee goes on to deplore the way in which Hackney councillors have treated Mr. Crofton—the way in which they have tried to discredit him—and refers to "selective leaking" of the council's procedures.
Opposition Members are relying heavily on the Select Committee report tonight. I invite the hon. Member for Greenwich to condemn the councillors who are hounding Mr. Crofton—someone whom the Committee has described as
"an inspiration to those working seriously to tackle fraud."
I now give the hon. Gentleman the opportunity to say those words.
Mr. Raynsford: As the Minister was clearly incapable of listening to what I said, let me repeat it a third time. I give way to no one in my determination to ensure that local government officers, whatever the authority in which they work—Hackney, or any other authority—should be able to pursue their work in rooting out fraud
732
in the most effective way. I expect councillors to give full support to an authority that acts to deal with fraud. As I said earlier in response to an intervention from the hon. Member for Colchester, North (Mr. Jenkin), I have been actively involved in recent months in helping to ensure that the London borough of Hackney does precisely that in the months ahead.
Mr. Heald: Well, the words did not come forth.
Mr. Bernard Jenkin: Should it not be pointed out that the councillors responsible for the conduct of that policy against Mr. Crofton are still full members of the Labour party, and that no action is being taken against them? Does that not speak volumes about what the Labour party still remains—an evil in this land?
Mr. Heald: It is a litmus test, and one that the Labour party has failed tonight. The hon. Member for Greenwich holds up a press cutting about a Conservative who has been disgraced for fraud. I condemn that man; but the hon. Gentleman is not prepared to condemn councillors who are hounding a man who is an inspiration to those working against benefit fraud.
It is all part of a picture. We heard about Lambeth from the hon. Member for Vauxhall (Miss Hoey). Lambeth is now improving its position, after so many years of scandalous neglect when it would never have considered taking fraud seriously. The hon. Lady said that Lambeth—a Labour council—did not want to know when it came to allegations of fraud.
The hon. Member for Islington, South and Finsbury (Mr. Smith) is a Front-Bench spokesman and had so much to say in criticising Conservative Members who, over many years, have tried to stamp out fraud. When he was chairman of Islington housing committee, what did he ever do to clamp down on benefit fraud? Nothing. It is all very well to produce sneering comments about small landlords and to attack what the Government are doing, but tonight I should like to stand up and be counted.
The Conservative Government have revolutionalised—[Interruption.] They have revolution—[Interruption.]—whatever the word is. They have radically improved our measures against benefit fraud, which is largely down to the efforts in recent years of my right hon. Friend the Secretary of State, who introduced tough incentives to force local authorities kicking and screaming into the 21st or the 20th century, so that they would investigate benefit fraud effectively.
Ms Armstrong: Classic.
Mr. Heald: It is.
In 1993–94, weekly benefit savings for local authorities amounted to £92 million; now they amount to more than £200 million. They have almost trebled as a result of our measures.
Some hon. Members said that we did not know how much benefit fraud there was. It is true that, for years, we did not. The figures on fraud that had been detected used to go up year by year and we did not know how much fraud there was, but the benefit reviews, which use the best methodology that could be devised and which are approved by the National Audit Office, have shown us the scale of benefit fraud. It is about 10 per cent. In

733
unemployment benefit, income support and housing benefit. It is shocking, but it has been carefully researched and studied and we know the extent of it.
Having found the extent of fraud, in the second year of his period of tenure, my right hon. Friend the Secretary of State took action. He announced a programme that will, over five years, reduce benefit fraud by 70 per cent. Last August, we launched the barcode scanner, which, since its introduction, has saved more than £200 million in relation to the face value of order books.
We introduced, in September 1995, the pilot freephone hotline; in October 1995, the Post Office reward scheme, which has saved £12 million since it was implemented; in November 1995, Europe's largest data-matching computer system of its type, the new NINO—national insurance number—procedures and tougher verification; and, earlier this year, cross-matching with stolen birth certificates to ensure that we have a better system for national insurance numbers.
On 5 March, the date of the previous debate on these issues, my right hon. Friend announced the spotlight on benefit cheats area campaigns. I have been to 15 areas. Yesterday, I launched the campaign in Cardiff and today I launched it in Plymouth.
Mr. Chris Smith: With Labour authorities.
Mr. Heald: Labour authorities are no doubt co-operating.
I have met benefit investigators working for the Benefits Agency, who are experts in their sector. Every area that I visited last year has achieved record weekly benefit savings, and they are committed to doing even better this year. It is wrong for the Labour Front-Bench spokesman to criticise investigators and to pretend that they could not even—[Interruption.] The hon. Gentleman criticised investigators' professionalism. He said that they could not arrange even a route of visits from one door to the next, in order to do their work, but they do that. What is more, they do data-matching.
Mr. Smith: Let me put the Minister right on one simple point. I am criticising not Benefits Agency staff, but the Government for the way in which they have organised things.
Mr. Heald: I am grateful to the hon. Gentleman for changing his position, but the fact is that he criticised the benefit investigators, who have not only trained local authority officials, but provided them with a manual that sets out the procedures that they should adopt. They are working closely together, with agreements that have been hammered out and that work effectively. For the hon. Gentleman to criticise Benefits Agency staff in that way is wrong and deplorable.
Mr. Frank Field rose—
Mr. Heald: I do not have time. I have six minutes left and a bit more to say.
What has Labour's contribution been to tackling benefit fraud? Its local authorities have had to be dragged into attacking housing benefit fraud. Its Front-Bench spokesmen have been here claiming that there has been
734
£1 billion more housing benefit fraud than we say, but Labour's council leaders tell me that our targets for them are too high and that they cannot—
Ms Armstrong: They are not.
Mr. Heald: The hon. Lady says that they are not. I went to the meeting with the local authority associations on 18 March, when they told me exactly that. My right hon. Friend has been creating a raft of measures against benefit fraud which, rightly, have been praised by the Select Committee, but where was the Labour party? It was not suggesting ideas, that is for sure—it was just complaining. There has never been a constructive contribution.
Mr. Raynsford rose—
Mr. Heald: I do not have time.
Now that the scale of fraud is known and the strategy is in place and working, Labour is trying to jump on the bandwagon and to use a crude overestimation of fraud to sound tough and to explain away its expensive spending plans. It is inventing fraud and announcing half-baked measures to detect it.
Mr. Raynsford rose
Mr. Heald: I am not giving way. I have already given way to the hon. Gentleman.
Labour claims that it would detect an extra £310 million-worth of landlord fraud, but it has not done its homework, as it totals only £150 million. Why did it get it wrong? It wanted to. It does not know anything about fraud detection and it has never had an interest in it. It says that its home visits would save an extra £520 million. It talks about 4 million visits at £3 a go, allowing only eight minutes for each visit. I have asked benefit investigators how they would get on if they had eight minutes between investigations and how they could fit in the 77 minutes that they normally take to interview someone thoroughly to check his documents, to consider his position and perhaps to advise him about what benefits were available to him. One of them told me: "I would need a rocket tied on my back." Another said: "I couldn't do a proper job."
That is just Labour all over. It has not done its homework. Why has it got it wrong? It wanted to and it does not understand fraud detection.
Labour talks about stricter procedures on national insurance numbers, ignoring the fact that such procedures are being put in place. In November 1995, we tightened the registration procedures. In February, the new database for stolen birth certificates was introduced. In October, the new P46 procedure to check new workers' claims against national insurance numbers will be introduced.
My right hon. Friend has revolutionised the battle against benefit fraud, but Labour authorities have had to be dragged into helping. Labour spokesmen have had no ideas—just complaints—and now they are trying, belatedly, to jump on the bandwagon, but without doing their homework.
Ms Armstrong: The Minister has read this before.
Mr. Heald: No, I have not. Labour has had no new ideas.
My hon. Friend the Member for Colchester, North raised a number of important questions about the way in which national insurance number surveys should be conducted in future. Apart from the measures that I mentioned, we should have the detailed strategy for national insurance numbers that we have for benefit fraud generally and housing benefit—which the Government will be announcing. We should also improve the approach to fraud through the spotlight process. My hon. Friend the Member for Isle of Wight referred to the programme in his constituency, where claimants have been given two weeks to get their benefit claims in order. We are about to start active operations and take focused measures.
Every time we launch a new spotlight campaign, we learn something—which is the way in which the Government should approach benefit fraud. Apart from the strategy and measures that we have in place, we must constantly investigate and make improvements. We do not need any lessons from the Labour party, which has done nothing over the years. Opposition Members speak as if they have spent 17 years giving us fantastic new ideas for cracking benefit fraud. Nothing could be further from the truth.
Question put, That the original words stand part of the Question:—
The House divided: Ayes 239, Noes 266.

Division No. 151]

[7.00 pm

AYES

Adams, Mrs Irene

Church, Judith

Ainger, Nick

Clapham, Michael

Ainsworth, Robert (Cov'try NE)

Clark, Dr David (South Shields)

Allen, Graham

Clarke, Tom (Monklands W)

Alton, David

Clelland, David

Anderson, Donald (Swansea E)

Clwyd, Mrs Ann

Anderson, Ms Janet (Ros'dale)

Coffey, Ann

Armstrong, Hilary

Cohen, Harry

Ashdown, Rt Hon Paddy

Connarty, Michael

Barron, Kevin

Cook, Robin (Livingston)

Battle, John

Corbett, Robin

Bayley, Hugh

Corbyn, Jeremy

Beckett, Rt Hon Margaret

Cousins, Jim

Benn, Rt Hon Tony

Cox, Tom

Bennett, Andrew F.

Cunliffe, Lawrence

Benton, Joe

Dafis, Cynog

Bermingham, Gerald

Darling, Alistair

Berry, Roger

Davies, Bryan (Oldham C'tral)

Blair, Rt Hon Tony

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

Blunkett, David

Davies, Rt Hon Denzil (Llanelli)

Boateng, Paul

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

Bradley, Keith

Denham, John

Bray, Dr Jeremy

Dewar, Donald

Brown, Gordon (Dunfermline E)

Dixon, Don

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

Dowd, Jim

Burden, Richard

Dunwoody, Mrs Gwyneth

Byers, Stephen

Eastham, Ken

Callaghan, Jim

Etherington, Bill

Campbell, Mrs Anne (C'bridge)

Fatchett, Derek

Campbell, Menzies (Fife NE)

Faulds, Andrew

Campbell, Ronnie (Blyth V)

Field, Frank (Birkenhead)

Campbell-Savours, D N

Flynn, Paul

Canavan, Dennis

Foster, Rt Hon Derek

Cann, Jamie

Foster, Don (Bath)

Chidgey, David

Fraser, John

Chisholm, Malcolm

Fyfe, Maria

736

Galbraith, Sam

Martlew, Eric

Gapes, Mike

Maxton, John

Garrett, John

Meacher, Michael

Gerrard, Neil

Meale, Alan

Godman, Dr Norman A

Michael, Alun

Godsiff, Roger

Michie, Bill (Sheffield Heeley)

Golding, Mrs Llin

Michie, Mrs Ray (Argyll & Bute)

Gordon, Mildred

Milburn, Alan

Graham, Thomas

Miller, Andrew

Grant, Bernie (Tottenham)

Mitchell, Austin (Gt Grimsby)

Griffiths, Nigel (Edinburgh S)

Moonie, Dr Lewis

Griffiths, Win (Bridgend)

Morgan, Rhodri

Grocott, Bruce

Morley, Elliot

Gunnell, John

Morris, Rt Hon Alfred (Wy'nshawe)

Hain, Peter

Morris, Estelle (B'ham Yardley)

Hanson, David

Morris, Rt Hon John (Aberavon)

Hardy, Peter

Mowlam, Marjorie

Harman, Ms Harriet

Mudie, George

Harvey, Nick

Mullin, Chris

Hattersley, Rt Hon Roy

Murphy, Paul

Hill, Keith (Streatham)

O'Brien, Mike (N W'kshire)

Hinchliffe, David

O'Brien, William (Normanton)

Hodge, Margaret

O'Hara, Edward

Hoey, Kate

Olner, Bill

Hood, Jimmy

O'Neill, Martin

Howarth, Alan (Strat'rd-on-A)

Orme, Rt Hon Stanley

Howarth, George (Knowsley North)

Pickthall, Colin

Howells, Dr Kim (Pontypridd)

Pike, Peter L

Hoyle, Doug

Powell, Sir Ray (Ogmore)

Hughes, Kevin (Doncaster N)

Prentice, Bridget (Lew'm E)

Hughes, Robert (Aberdeen N)

Prentice, Gordon (Pendle)

Hughes, Roy (Newport E)

Prescott, Rt Hon John

Hughes, Simon (Southwark)

Primarolo, Dawn

Ingram, Adam

Purchase, Ken

Jackson, Glenda (H'stead)

Quin, Ms Joyce

Jackson, Helen (Shef'ld, H)

Radice, Giles

Jamieson, David

Randall, Stuart

Janner, Greville

Raynsford, Nick

Jenkins, Brian (SE Staff)

Reid, Dr John

Jones, Ieuan Wyn (Ynys Môn)

Rendel, David

Jones, Jon Owen (Cardiff C)

Robertson, George (Hamilton)

Jones, Lynne (B'ham S O)

Robinson, Geoffrey (Co'try NW)

Jones, Martyn (Clwyd, SW)

Roche, Mrs Barbara

Jones, Nigel (Cheltenham)

Rooker, Jeff

Jowell, Tessa

Rooney, Terry

Kennedy, Charles (Ross,C&S)

Ross, Ernie (Dundee W)

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

Rowlands, Ted

Khabra, Piara S

Salmond, Alex

Kilfoyle, Peter

Sheerman, Barry

Kirkwood, Archy

Shore, Rt Hon Peter

Lestor, Joan (Eccles)

Short, Clare

Lewis, Terry

Simpson, Alan

Liddell, Mrs Helen

Skinner, Dennis

Litherland, Robert

Smith, Andrew (Oxford E)

Livingstone, Ken

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

Lloyd, Tony (Stretford)

Smith, Llew (Blaenau Gwent)

Llwyd, Elfyn

Snape, Peter

Loyden, Eddie

Soley, Clive

Lynne, Ms Liz

Spellar, John

McAllion, John

Squire, Rachel (Dunfermline W)

McAvoy, Thomas

Steel, Rt Hon Sir David

McCartney, Ian

Steinberg, Gerry

McFall, John

Stevenson, George

McKelvey, William

Stott, Roger

Mackinlay, Andrew

Strang, Dr. Gavin

McLeish, Henry

Sutcliffe, Gerry

McNamara, Kevin

Taylor, Matthew (Truro)

MacShane, Denis

Thompson, Jack (Wansbeck)

Madden, Max

Tipping, Paddy

Maddock, Diana

Touhig, Don

Mahon, Alice

Trickett, Jon

Mandelson, Peter

Turner, Dennis

Marek, Dr John

Tyler, Paul

Marshall, David (Shettleston)

Vaz, Keith

Marshall, Jim (Leicester, S)

Walker, Rt Hon Sir Harold

Martin, Michael J (Springburn)

Wallace, James

737

Walley, Joan

Wise, Audrey

Wardell, Gareth (Gower)

Worthington, Tony

Welsh, Andrew

Wray, Jimmy

Wicks, Malcolm

Wright, Dr Tony

Wigley, Dafydd

Young, David Bolton SE

Williams, Rt Hon Alan (Sw'n W)

Williams, Alan W (Carmarthen)

Tellers for the Ayes:

Wilson, Brian

Mr. Greg Pope and Mr. John Cummings.

Winnick, David

NOES

Ainsworth, Peter (East Surrey)

Dover, Den

Aitken, Rt Hon Jonathan

Duncan, Alan

Alexander, Richard

Duncan Smith, Iain

Alison, Rt Hon Michael (Selby)

Dunn, Bob

Allason, Rupert (Torbay)

Durant, Sir Anthony

Amess, David

Dykes, Hugh

Arbuthnot, James

Eggar, Rt Hon Tim

Arnold, Jacques (Gravesham)

Emery, Rt Hon Sir Peter

Atkins, Rt Hon Robert

Evans, David (Welwyn Hatfield)

Atkinson, David (Bour'mouth E)

Evans, Jonathan (Brecon)

Atkinson, Peter (Hexham)

Evans, Nigel (Ribble Valley)

Baker, Nicholas (North Dorset)

Evans, Roger (Monmouth)

Banks, Matthew (Southport)

Evennett, David

Banks, Robert (Harrogate)

Faber, David

Bates, Michael

Fabricant, Michael

Batiste, Spencer

Fenner, Dame Peggy

Bellingham, Henry

Field, Barry (Isle of Wight)

Bendall, Vivian

Fishburn, Dudley

Beresford, Sir Paul

Forman, Nigel

Biffen, Rt Hon John

Forsyth, Rt Hon Michael (Stirling)

Body, Sir Richard

Forsythe, Clifford (S Antrim)

Bonsor, Sir Nicholas

Forth, Eric

Booth, Hartley

Fowler, Rt Hon Sir Norman

Boswell, Tim

Fox, Rt Hon Sir Marcus (Shipley)

Bottomley, Peter (Eltham)

Freeman, Rt Hon Roger

Bottomley, Rt Hon Virginia

Fry, Sir Peter

Bowden, Sir Andrew

Gale, Roger

Bowis, John

Gardiner, Sir George

Boyson, Rt Hon Sir Rhodes

Gare-Jones, Rt Hon Tristan

Brandreth, Gyles

Garnier, Edward

Brazier, Julian

Gill, Christopher

Bright, Sir Graham

Goodlad, Rt Hon Alastair

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)

Butcher, John

Griffiths, Peter (Portsmouth, N)

Butterfill, John

Hague, Rt Hon William

Carlisle, John (Luton North)

Hamilton, Neil (Tatton)

Carrington, Matthew

Hampson, Dr Keith

Carttiss, Michael

Hannam, Sir John

Cash, William

Hargreaves, Andrew

Channon, Rt Hon Paul

Hawkins, Nick

Chapman, Sir Sydney

Hawksley, Warren

Churchill, Mr

Hayes, Jerry

Clappison, James

Heald, Oliver

Clark, Dr Michael (Rochford)

Heath, Rt Hon Sir Edward

Clifton-Brown, Geoffrey

Heathcoat-Amory, Rt Hon David

Coe, Sebastian

Hendry, Charles

Congdon, David

Heseltine, Rt Hon Michael

Conway, Derek

Higgins, Rt Hon Sir Terence

Coombs, Anthony (Wyre For'st)

Hill, Sir James (Southampton Test

Coombs, Simon (Swindon)

Hogg, Rt Hon Douglas (G'tham)

Cope, Rt Hon Sir John

Horam, John

Cormack, Sir Patrick

Hordern, Rt Hon Sir Peter

Couchman, James

Howell, Rt Hon David (G'dford)

Cran, James

Howell, Sir Ralph (N Norfolk)

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

Hughes, Robert G (Harrow W)

Curry, David (Skipton & Ripon)

Hunt, Rt Hon David (Wirral W)

Davis, David (Boothferry)

Hunt, Sir John (Ravensbourne)

Day, Stephen

Hunter, Andrew

Deva, Nirj Joseph

Hurd, Rt Hon Douglas

Devlin, Tim

Jack, Michael

Dorrell, Rt Hon Stephen

Jenkin, Bernard

Douglas-Hamilton, Lord James

Jessel, Toby

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Johnson Smith, Sir Geoffrey

Rumbold, Rt Hon Dame Angela

Jones, Gwilym (Cardiff N)

Ryder, Rt Hon Richard

Jones, Robert B (W Hertfdshr)

Sackville, Tom

Kirkhope, Timothy

Sainsbury, Rt Hon Sir Timothy

Knight, Mrs Angela (Erewash)

Scott, Rt Hon Sir Nicholas

Knight, Rt Hon Greg (Derby N)

Shaw, David (Dover)

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

Shephard, Rt Hon Gillian

Knox, Sir David

Shepherd, Sir Colin (Hereford)

Kynoch, George (Kincardine)

Shepherd, Richard (Aldridge)

Lait, Mrs Jacqui

Sims, Sir Roger

Lamont, Rt Hon Norman

Skeet, Sir Trevor

Lang, Rt Hon Ian

Smith, Sir Dudley (Warwick)

Leigh, Edward

Soames, Nicholas

Lennox-Boyd, Sir Mark

Speed, Sir Keith

Lester, Sir James (Broxtowe)

Spencer, Sir Derek

Lidington, David

Spicer, Sir James (W Dorset)

Lilley, Rt Hon Peter

Spicer, Sir Michael (S Worcs)

Lloyd, Rt Hon Sir Peter (Fareham)

Spink, Dr Robert

Lord, Michael

Spring, Richard

Luff, Peter

Sproat, Iain

MacGregor, Rt Hon John

Squire, Robin (Hornchurch)

MacKay, Andrew

Stanley, Rt Hon Sir John

Maclean, Rt Hon David

Stephen, Michael

McLoughlin, Patrick

Stewart, Allan

McNair-Wilson, Sir Patrick

Streeter, Gary

Maitland, Lady Olga

Sumberg, David

Malone, Gerald

Sweeney, Walter

Marland, Paul

Sykes, John

Marlow, Tony

Tapsell, Sir Peter

Marshall, John (Hendon S)

Taylor, Ian (Esher)

Martin, David (Portsmouth S)

Taylor, John M (Solihull)

Merchant, Piers

Taylor, Sir Teddy (Southend, E)

Mills, Iain

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)

Molyneaux, Rt Hon Sir James

Thornton, Sir Malcolm

Monro, Rt Hon Sir Hector

Thurnham, Peter

Needham, Rt Hon Richard

Townend, John (Bridlington)

Nelson, Anthony

Townsend, Cyril D (Bexl'yh'th)

Neubert, Sir Michael

Trend, Michael

Newton, Rt Hon Tony

Twinn, Dr Ian

Nicholls, Patrick

Vaughan, Sir Gerard

Nicholson, David (Taunton)

Viggers, Peter

Norris, Steve

Waldegrave, Rt Hon William

Onslow, Rt Hon Sir Cranley

Walden, George

Ottaway, Richard

Waller, Gary

Page, Richard

Ward, John

Paice, James

Wardle, Charles (Bexhill)

Patnick, Sir Irvine

Waterson, Nigel

Pattie, Rt Hon Sir Geoffrey

Watts, John

Pawsey, James

Wells, Bowen

Peacock, Mrs Elizabeth

Wheeler, Rt Hon Sir John

Pickles, Eric

Whitney, Ray

Porter, Barry (Wirral S)

Whittingdale, John

Porter, David (Waveney)

Widdecombe, Ann

Portillo, Rt Hon Michael

Wiggin, Sir Jerry

Powell, William (Corby)

Wilkinson, John

Rathbone, Tim

Willetts, David

Redwood, Rt Hon John

Wilshire, David

Renton, Rt Hon Tim

Winterton, Mrs Ann (Congleton)

Richards, Rod

Winterton, Nicholas (Macc'f'ld)

Riddick, Graham

Wolfson, Mark

Rifkind, Rt Hon Malcolm

Wood, Timothy

Robathan, Andrew

Yeo, Tim

Roberts, Rt Hon Sir Wyn

Young, Rt Hon Sir George

Robinson, Mark (Somerton)

Roe, Mrs Marion (Broxbourne)

Tellers for the Noes:

Ross, William (E Londonderry)

Mr. Simon Burns and Dr. Liam Fox.

Rowe, Andrew (Mid Kent)

Question accordingly negatived.
Question, That the proposed words be there added, put forthwith, pursuant to Standing Order No. 30 (Questions on amendments), and agreed to.
MADAM DEPUTY SPEAKER forthwith declared the main Question, as amended, to be agreed to.
Resolved,
That this House welcomes the priority given by Her Majesty's Government to tackling all aspects of benefit fraud; endorses the Government's successful work in detecting and preventing fraud, which has resulted in the benefit savings target of £1.3 billion being exceeded in 1995–96; congratulates the Government on carrying out the first systematic review of the amount and type of Housing Benefit fraud; notes that Housing Benefit administration is the responsibility of local authorities and that local authorities only started tackling fraud seriously once the Government introduced financial incentives for them to do so; welcomes the new fraud strategy which will result in savings of £2.5 billion a year by 1999; deplores the Labour Party's attempt to exaggerate the amount of fraud as a pretext to spend more money; and condemns the Labour Party's continuing half-heartedness in tackling benefit fraud and abuse.

Nuclear Industry (Privatisation)
Madam Deputy Speaker (Dame Janet Fookes): I have to tell the House that Madam Speaker has selected the amendment in the name of the Prime Minister.
7.15 pm
Mrs. Margaret Beckett: I beg to move,
That this House notes that the publication of the Pathfinder prospectus for the sale of British Energy confirms the suspicions of Her Majesty's Opposition that the sale is a bad deal for the taxpayer; further notes that the proceeds are anticipated to be less than the cost of building Sizewell B whilst the other seven reactors are being given away free, that boardroom pay will rise by 40 per cent. whilst one in 20 employees have lost their jobs in the last year, that it has yet to be demonstrated that the sale proceeds will cover the shortfall in the Magnox liabilities, that the bulk of the initial Segregated Fund to pay for British Energy's clean up costs comes in the form of a `dowry' from the balance sheets of the pre-privatisation publicly-owned companies and that the Government has not sufficiently settled issues relating to the ability of a privatised nuclear industry to compete in the electricity generating industry on an equal footing with other private generators; and condemns the privatisation as a reckless and cynical attempt to raise short term cash at the expense of the long term interests of taxpayers.
The context of this debate, like the one that preceded it, is value for public money and an assessment of where the overall public interest lies.
Only a few weeks ago—following a Select Committee report on privatisation of nuclear power stations, and in the absence of any sign that the Government intended to have a debate on the issues raised by that report—Opposition Members took the opportunity of Opposition time, as we do today, to focus on some issues of public policy over which, as is all too evident, the Government would much prefer to draw a veil.
On that previous occasion, we said that this was an extraordinary privatisation, and that it was extraordinarily difficult to justify. That view is not only maintained but enhanced by the lack of answers to the questions raised then, and by the new information that has since emerged, despite the Government's best efforts to conceal it.
In one respect, this privatisation may be unique. Concerns about whether the taxpayer is getting a good deal have often been raised, but with this sale there are also questions about whether the shareholder is getting the full picture. I accept at once that, at first glance, it seems unlikely—it certainly could be argued that it would be difficult—for anyone to construct a deal that is disadvantageous, first, to the taxpayer and, later, to the shareholder. But I suspect that, if anyone can do it, this Government can.
Before the previous debate, the Government said that a response to the concerns raised by the Select Committee would be available, and would be debated within "the normal time scale". However, as we suspected, it seems that the Government did not intend such a debate to precede the sale.
The Minister's basic case in that debate was that all the questions raised either had been dealt with already or would be dealt with in the prospectus, which we now have available. I shall remind the House of some of those questions.
There is first the issue whether liabilities will follow assets into the private sector—an assertion that the Minister of State has made repeatedly—without it ever

741
being made wholly clear whether that really means all rather than part of those liabilities. It is on that basis that, despite the money that taxpayers have to cough up at the front end of the sale, the Minister claims that this sale is to the taxpayer's long-term benefit. Not only many Opposition Members but many analysts argue that there is considerable risk attached to that aspect of the Government's case.
Revenues to meet those liabilities in the long term are intended, at least in part, to be available from the segregated fund. It is now much clearer—even clearer than it was in our previous debate—that, to offset liabilities assessed on an undiscounted basis at £14 billion, it is anticipated that revenue secured for investment in and by the segregated fund will cover only a sum of the order of £4 billion. It seems to be anticipated that the rest of the liabilities will be covered from the operating revenues earned by the company.
So key to the Government's basic case is the assumption about the company's financial performance in the private sector. In fact, the more we study that case, the more it appears that some of those key questions remain unanswered, and that such answers as do exist might give potential shareholders pause for thought.
To begin with, there is obscurity about the issue of the segregated fund itself. The last Red Book shows a cost to the Exchequer in respect of the industry of some £230 million—precisely the sum that has appeared on the balance sheet of British Energy, and will be the dowry it provides to start off the fund.
It is presumably on the basis of the scale of the dowry from public funds that the level of yearly contribution from the privatised company is assessed at a mere £16 million a year, as compared to previous estimates from City analysts that funding would have to be about £30 million to £50 million a year—more than double, at the very least. I say "presumably", because the Government have, up to now, failed to publish or place in the Library of the House the report that they claim provides the justification for such a low contribution, on the spurious grounds that it is not yet completed. However, that does not seem to have prevented the Government from reaching a judgment on the report.
The potential of the revenue stream for the company and what that means for shareholder returns is also key to the value of the sale. Here too, considerable questions remain unanswered. For a start, in our previous debate it was pointed out that the assumptions that underlay the value placed on the company were heavily influenced by the load factor at which it was argued that the stations to be privatised could be run. It was pointed out in that debate that a load factor of 82.5 per cent. had been assumed—a level which, it was argued, had never been attained, and which few analysts believed could ever be attained.
To put the matter in perspective, we can see in the prospectus a method of presentation of the performance of the advanced gas-cooled reactors which gives a figure for best ever performance of 74 per cent. in 1995. In the year to 31 March 1996, those reactors achieved a performance of just 71 per cent. Despite the fact that that assumption must be crucial to assessing either the value of the sale or the assumptions of future revenues and hence future dividends, the Government are saying little or nothing about how they now view those assumptions. I hope that the Secretary of State will remedy that omission today.
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This is particularly relevant because, in the past couple of days, we have learnt of the existence of a legal review of the sale carried out by Clifford Chance, which is said to have been made available to the company and the Government. I hope that the Secretary of State will comment on the matters it raises in this debate, and either publish the legal review or place it in the Library.
I ask that because a document that I have seen, which purports to be a draft of the report, draws attention to two issues that have substantial implications for the commercial aspects of the sale. Discussing design and technical issues, it says:
"Several on-going and major generic technical problems either affecting, or potentially affecting the stations"
to be privatised are identified. It is said that, in the case of carbon deposition, that may affect output. It is said that the problems may have "high commercial penalties".
The review raises issues of staffing levels, and the need to have sufficient qualified and experienced staff. It highlights doubts about whether that can all be provided, especially if there is to be substantial contracting out of work. Again, the quality of the human capital of the company is said in the report to raise issues with considerable commercial consequences. That is probably because of the assessment that some 60 per cent. of incidents causing loss of output are thought to be due to human error.
Those issues are relevant not just to the value of the company but to the revenue stream that can be anticipated. Yet, from the prospectus, it is obvious that that revenue stream is key to the statement that liabilities will follow the assets and will be covered in the private sector.
Let me remind the House that it is now evident that it is anticipated that some £10 billion of the undiscounted liabilities will be expected to be covered by the company's revenues, so questions about the security of the revenues go to the heart of the coverage of liabilities.
The prospectus raises another question about the degree to which liabilities are following assets. On page 73, the prospectus refers to liabilities falling due after the closure of the existing stations and outside the scope of the segregated fund, so not covered directly by the company's revenues. It says that they will have to be covered by further investments to provide funding to meet the payments as required.
I should be grateful if the Secretary of State could shed some light on what that means. Does it mean that a further segregated fund would be set up, and, if so, does that not suggest that the present fund is inadequate to bridge the gap between liabilities and the income to cover them? Does it simply mean that, apart from the revenue stream having to meet the cost of liabilities which fall while the station is operating, it is also expected that revenues will have to cover sums set aside to provide a further long-term income stream when the stations have ceased to operate? What interests us in the context of the sale is the implications of that statement for the prospect of future dividends.
Dr. Robert Spink: The initial endowments of £157 million and £71 million or £79 million from Scottish Nuclear have been called prudent by the independent actuaries. Is the hon. Lady challenging what the independent actuaries have said?
Mrs. Beckett: If the hon. Gentleman has had sight of the report from the independent actuaries, we would like

743
to see it as well, and so would the House. How does he know what the independent actuaries have said? It is not in the Library of the House. Can he cast any light on the matter? Is he claiming to have seen the report?
Dr. Spink: My information comes directly from British Energy.
Mrs. Beckett: I am not sure on what basis, as a Government Back Bencher, the hon. Gentleman has this inside track to British Energy. I am sure that other potential shareholders would be delighted to have the same information. He strengthened the case I was making to the Secretary of State for publishing the report. I am sure that the Secretary of State will be able to tell us that he intends to do so.
The prospectus shows that dividend payments from the privatised company may not be covered by profits after tax for a number of years. That brings me to the question of the return for shareholders.
It is hard to know what to make of the extraordinary decision to announce what first year dividend the company will pay, when the sale has not yet taken place. To announce also that the dividend will be about twice the rate of the most optimistic profits forecast for that year so far raises the question what the company is doing promising dividends on such a scale. What makes the whole thing utterly ludicrous is that the dividend is to be paid before potential investors will have had to cough up a second instalment of the price of their shares.
Harold Macmillan once said that selling off state assets was like selling the family silver. The nuclear industry looks like being almost the last item to go in the Tory car boot sale of state assets. As any hon. Member who has read the words of the prospectus carefully will acknowledge, what is on offer here may not be silver—in fact, it looks remarkably like fool's gold.
Mr. John Redwood: The right hon. Lady seems to be rather pessimistic about prospects for the shares, and seems to be telling people not to buy them. Can she assure us that her investment advice will be better than that of the hon. Member for Birmingham, Ladywood (Mrs. Short), who told people not to buy Railtrack shares on the grounds that they would go down rather than up? Does she have any comment on that?
Mrs. Beckett: If I were a shareholder in either of those industries, I would rather have a longer period over which to judge what might happen to the share price than the right hon. Gentleman seems to be taking into account, which, as has been pointed out, is exactly what the brokers are saying. If the hon. Gentleman is concerned about the advice that we are giving, or believes that the observations that we are making about this potential sale are unsound, I suggest that he takes a further look at what is being said about it in the City.
Dr. Spink: Will the right hon. Lady give way?
Mrs. Beckett: No, not again. I want to get on, and I do not want the hon. Gentleman to incur another disaster, as he did on his previous intervention.
744
The company made a loss last year and warns of making one this year, but it still offers a massive dividend payout that seems to have been financed by a bridging loan from Her Majesty's Treasury.
The prospectus suggests that the company's ability to pay dividends at all in future is by no means certain. The directors say in the prospectus that their dividend policy is "critically dependent" on six assumptions, which I shall paraphrase for the benefit of the House.
It is assumed that the pool price of electricity will not fall substantially and that any price review will not affect British Energy's performance; that there will be no major unanticipated station failures; that British Energy will meet its targets, including both extending the life of some stations—running them longer—and making cost savings; that there will be satisfactory returns from reinvestment; that there will be no wider changes in regulation that will have an adverse impact on British Energy; and that there will be no significant rise in inflation.
Those are hefty caveats. It is evident that the assumptions are not only unlikely to be all fulfilled, but that they are mostly entirely outside the control of the directors. The notion that there is unlikely to be any change in regulation or any adverse outcome from the price review is hardly borne out by what has happened with electricity or gas supply.
The hope that there will be no unanticipated station problems is highly dependent, as the legal review to which I referred earlier shows, on some of the technical issues. The prospectus makes it clear that it is possible that unforeseen events or changes in regulatory standards may require the lifetimes of stations to be reduced, yet the background to the dividend policy talks about half of them having their lives extended.
All the assumptions are most heavily dependent on the position in the trading pool in which the price of electricity is set. At present, nuclear power stations have preferential access to that pool. The regulator has previously acknowledged that, if he were asked—for example, by other generators—to review British Energy's access to the pool, he would have to do so. That may in part account for the statement in the prospectus that the regulator has been asked
"to avoid making any announcement during the offer of the sale—and for three months after commencement of dealings—other than in exceptional and unforeseen circumstances".
The prospectus also makes it clear that other regulators have been asked to avoid saying or doing things that might affect the price of British Energy shares.
The fact remains that assumptions about what will happen in the pool, and about the effect of its operation on the price of electricity, are crucial to the assumptions that are being made about the dividends that are said to be on offer to shareholders. Shareholders who read in the popular press references to the new opportunities that this sale offers to Sid should bear in mind what has happened to the original Sids, which was itself a direct result of changes in Government policy of which Sid was given no inkling when the Government sold him or her their shares in British Gas.
The sale contains wider and more profound risks than simply commercial ones. In the previous debate, we drew attention not only to the inadequacy of the insurance cover that is being required of the industry but to the fact that it was substantially less, even on the most generous

745
estimates, than that frequently required elsewhere in the private sector—in the chemical industry, for example. That point was made to the Select Committee by the CBI.
The Minister's response in our previous debate was to talk about the narrow nature of any potential liabilities for the industry, as if a major accident—that is what the insurance is all about—would not have a significant impact, because of the restricted nature of the industry. That argument is bizarre. I call on the Government again, as does the private sector, to re-examine the provision that is being made on that. As matters stand, it is yet another area of financial uncertainty—certainly for the taxpayer, and probably even for the shareholder.
Our motion describes this privatisation as "reckless and cynical". I believe that any impartial observer would agree that that description was well-merited. I suspect that the level of hostile comment, and the degree of reservation expressed in the financial sector, is as unprecedented as the nature of this privatisation. There are certainly hidden consequences for the taxpayer. There may well be hidden consequences for the shareholders.
The only clear beneficiaries are the directors, whose total remuneration, according to the prospectus, is to rise by 38 per cent. on average; and a Government who are desperate to raise revenues that they hope can be used to justify a short-term tax cut and who are entirely indifferent to the consequences for the shareholder or the taxpayer in the longer term.
To say that the terms of the sale of the industry are unfair would be a gross understatement. The expected sale price, which is now said to be about £1.7 billion, is about half the cost of building Sizewell B alone. The other power stations have been thrown in for free. It is a tenth of the £13 billion that taxpayers have already laid out from their own pockets to build reactors.
This is not a sale. Ministers no doubt hope that potential shareholders will believe that it is a free lunch. Yet the Government tell us constantly that there is no such thing as a free lunch. Whatever the potential benefits of the sale, the potential losses seem increasingly likely to outweigh them. The Government have long ceased to act in the public interest. The sale may be one of the most blatant examples of their indifference and neglect; it is certainly one more reason why they should be driven from office.
7.35 pm
The President of the Board of Trade and Secretary of State for Trade and Industry (Mr. Ian Lang): I beg to move, to leave out from "House" to the end of the Question and to add instead thereof:
`welcomes the publication of the Pathfinder prospectus for the sale of British Energy which confirms that the sale fulfils the Government's commitment to ensuring that liabilities follow assets into the private sector and is a good deal for the taxpayer who will benefit from equity proceeds, debt repayment and the permanent transfer to the private sector of responsibility for almost £4 billion of nuclear liabilities, for British Energy employees who will now have the opportunity to take a real stake in the future of their industry, for Magnox Electric which will be a robust public sector company capable of meeting its liabilities as they fall due; and further notes that the privatisation of British Energy serves the long term interests of the taxpayer, the industry, and consumers; and condemns the persistent attempts by the Opposition to undermine this and other privatisations.'.
Once again, the Opposition are parading their familiar themes of doom and gloom and of misconception. Time and again, we have listened to Labour Members criticise
746
any privatisation proposals. When will they learn that such scaremongering has never proved to be correct? The right hon. Member for Derby, South (Mrs. Beckett) quoted the words "reckless" and "cynical" from her motion. They are a good summary of her attempt to undermine the privatisation.
I invite the House to consider first the general picture. It is worth reminding Labour Members that, in 1979, nationalised industries were costing the taxpayer more than £50 million a week. By contrast, in the past financial year, privatised companies paid about £55 million a week into the Exchequer.
Mr. Brian Wilson rose—
Mr. Lang: I shall give way, although I have barely started.
Mr. Wilson: The fact that the right hon. Gentleman has barely started does not mean that he has not entered the field of inaccuracy. Will he confirm figures from the Library that show that, at least until last year, the electricity industry had never delivered so much in taxation to the Exchequer since privatisation as it used to in profits before privatisation?
The Minister for Industry and Energy (Mr. Tim Eggar)indicated dissent.
Mr. Wilson: The right hon. Gentleman shakes his head, but that is one of the many facts concealed by all this bombast. The Exchequer got more from the profits of the electricity industry before privatisation than it has from taxation since.
Mr. Lang: If the hon. Gentleman wants to examine the history of electricity, I remind him that, under the last Labour Government, the price of electricity went up in cash terms by 2 per cent. every six weeks—4 per cent. a quarter, or 16 per cent. a year. I do not think that I need to trade records with the hon. Gentleman.
Mrs. Beckett rose—
Mr. Lang: I want to make some progress in answering the right hon. Lady's points. However, I shall give way, although it may be more difficult for me to do so later.
Mrs. Beckett: I take that warning, and assume that it means that there are a few rude remarks to come.
Thje right hon. Gentleman has used those figures before, so I have had them checked, but I have not yet been able to stand them up; I shall keep trying. Even assuming that they are accurate, he might bear in mind the fact that, in the mid-1970s, the price of oil increased by four or five times, which is not insignificant in determining the price of electricity. The Government always ignore that.
Mr. Lang: A large amount of electricity was generated by coal, nuclear power and water. The right hon. Lady cannot hide behind that argument. The Labour Government's record was appalling. I have quoted the

747
figures that show the cost to the taxpayer of nationalised industries, and the benefit now that they have been privatised.
I had hoped that the right hon. Lady would set out more clearly her party's policies on energy and privatisation. Sadly, I was disappointed, but I should have realised, that on one of the rare occasions on which her party allows to her appear in public, the last thing she would be permitted to do would be to let us hear her views on those matters.
Does she agree with the last Labour Secretary of State for Energy, the right hon. Member for Chesterfield (Mr. Benn), who is, alas, not here to receive the plaudits of the House? He was the man who said:
"the Government believe that the nuclear component is necessary for the energy policy of the United Kingdom".—[Official Report, 15 May 1978; Vol. 950, c. 177.]
He commissioned Heysham 2 and Torness, and embarked on the pressurised water reactor programme that gave us Sizewell.
Or does the right hon. Lady agree with the hon. Member for Clackmannan (Mr. O'Neill), who I am delighted to see in his place? He said:
"a future Labour Government will not undertake any measures to prolong the workings of those nuclear power stations already contributing to electricity generation"?
Her motion talks of short-termism, but if ever there was a glaring example of short-termism, it is that. How can she have the effrontery to talk of the long-term interests of the taxpayer? What can be more cynical and short-termist than to refuse to extend the life of perfectly useful power stations, as the Labour party's policy proposes to do?
Mr. Andrew Miller: Will the Secretary of State give way?
Mr. Lang: In a moment. I must make a little progress.
The right hon. Lady has made various cynical attempts to undermine the successful privatisation of British Energy, but she has not yet told us what her policy will be next month when the company is sold. Logic dictates that she would want to renationalise it. If so, today provides her and her party with an opportunity to explain her party's position.
The Labour party is often accused of making U-turns. It is true that Labour Members often display a remarkable flexibility of principle. We know, for example, that in government the Labour party set in train a massive programme of building nuclear power stations. In opposition it declares itself against nuclear power and seeks to undermine it with scaremongering. The one thing in which it has been consistent is in opposing every privatisation proposal that the Government have introduced. It is opposed to privatisation, because it is opposed to free enterprise. It does not like freedom, and it does not understand enterprise.
The rest of the world does understand privatisation. Privatisation is one of Britain's biggest export success stories. Germany, Spain, Italy,, eastern Europe, south-east Asia, South America and Africa—all over the world, countries are following Britain's lead and embarking on privatisation in the confident expectation of benefits to the
748
economy and to consumers. The Labour party takes its place along with Cuba and North Korea in the elite group of socialist utopias for which privatisation is still a dirty word.
Mr. Michael Fabricant: It is the privatisation, after all, of gas—controlled by the regulator—which has produced such a windfall for consumers. What estimates has my right hon. Friend made of the windfall, if you like, in terms of lower electricity bills that would result from the privatisation of Nuclear Electric? Come to that, if Nuclear Electric was not privatised, what would be the cost to each household?
Mr. Lang: Sadly, we can only speculate on the Labour party's windfall profits tax policy. The fact is that, if it has a tax-raising policy, windfall taxes seem to be part of it. Our purpose is to look at utilities as a source not of revenue for the taxpayer but of advantage in terms of reduced prices to the consumers. That is the difference between us and the Labour party.
We are now on target to complete electricity privatisation in the United Kingdom. The flotation of British Energy, one of Britain's three largest generating companies, marks the culmination of the Government's privatisation plans for the industry. This final burst of energy will extend the benefits I outlined a few moments ago. It will free the industry to make its own investment decisions. It will encourage improvements in the generators' overall economic efficiency, and enhance their competitiveness. Surely even the Labour party would not seek to deprive industry of the opportunity to serve us better.
Privatisation has helped millions to become shareholders. It has encouraged countless employees to take a stake in their future. It has given real power to the consumer by developing choice and competition. I hate to disappoint the Labour party by reporting that public interest in privatisation issues is undiminished. As of today, more than 1.3 million people, and rising, have registered for the public offer. I am confident that the Government are set for another successful sale. I trust that that puts the record straight about the benefits of privatisation and the level of public interest in our programme.
Now I should like to put the record straight about some of the other misconceptions which have been cast about. One of these—the right hon. Member for Derby, South spent some time on it this evening—is the level of proceeds we expect to receive from the sale. Of course, that is a matter for the market to decide, on the basis of the information in the prospectus. It is clear from some of the statements that Labour Members have made that they are not expert in that area. It may assist them in their understanding if I briefly explain some of the relevant factors.
When calculating the total proceeds from the sale of British Energy, it is important to take account of three components. First, there are the proceeds from selling the shares in the company. That amount will be decided by the market at the time of flotation. That will reflect the value of the assets in their current state, and the competitive market in which they operate. Prospective purchasers look into the future at profit and cash generation. They do not look into the past at the historic cost of the assets.

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Secondly, there are the proceeds from the debt due from British Energy to the Government. That will be realised either by repayment or by selling the debt on to third parties. As a result of the restructuring of the industry, British Energy now owes £600 million to the Government that was not owed before the restructuring. Repayment or sale of that £600 million represents proceeds to Her Majesty's Government.
Mr. Michael Clapham: Is the Secretary of State aware that the total liabilities for the advanced gas-cooled reactors and the one pressurised water reactor are £14.6 billion? Can he tell us whether the total liability will follow the asset?
Mr. Lang: Yes, I can confirm that the total liability is following the asset. I shall come to that important point soon.
Let me emphasise the third of the three components that should be taken into account when calculating the proceeds from the sale of British Energy. The third one, and arguably the most important, is the liability that will now be met by the private sector, but would previously have been met by the taxpayer.
At 31 March this year, British Energy had accrued nuclear liabilities of £3.7 billion. These are calculated using a prudent discount rate of 3 per cent. real and the actual cash payments that they represent will be significantly higher, but spread out over a number of years. It is, however, important not to confuse discounted with undiscounted, as the right hon. Member for Derby, South appeared to do in her speech.
These liabilities have arisen from running the nuclear power stations, and they are predominantly associated with spent nuclear fuel that is awaiting reprocessing. Without privatisation, those liabilities would have been met by the taxpayer. Following privatisation, they will be met by the private sector British Energy.
The total proceeds for the taxpayer, therefore, include £3.7 billion for past liabilities passed to the private sector and £600 million for debt taken on by British Energy, in addition to the proceeds from the share flotation, of course.
Mr. Llew Smith: Will the Secretary of State inform the House whether the plutonium that the Government intend to transfer to private ownership as part of the sell-off of Nuclear Electric and Scottish Nuclear will be listed as an asset or a liability?
Mr. Lang: That is a matter entirely for the company and its advisers. I suggest that the hon. Gentleman has a good look through the prospectus.
Let me develop a little more the question of liabilities. Liabilities are another area in which the Opposition—they demonstrated it again tonight—have difficulties appreciating the true position. I can only repeat yet again that liabilities have followed assets.
As long ago as last May, on publication of the nuclear review White Paper, we made it clear that we expected nuclear liabilities to follow their associated assets into the private sector. Again, when the Government gave evidence to the Trade and Industry Select Committee in November last year, we made it clear that it was a principle of privatisation that liabilities should follow their
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assets. In March 1996, when the nuclear industry was restructured, the principle was again followed: liabilities followed assets.
Let me say again categorically, for the record and for the avoidance of doubt, that British Energy is and will remain responsible for the liabilities associated with its stations.
Mr. Alan W. Williams: The general public find it incredible that the prospectus requires British Energy simply to set aside £16 million a year. Somehow, over 100 years, at the 3 per cent. discounted rate, that is supposed to accumulate to £14 billion. I did my arithmetic this afternoon. Compound interest of 3 per cent. over 100 years requires twentyfold growth. Does anyone believe that, at the end of the next century, Britain will be 20 times richer in terms of gross domestic product? That is the crazy accounting system that the Government have used in arriving at the figure of £16 million.
Mr. Lang: The hon. Gentleman is confusing total liabilities with the decommissioning fund. There will be an initial capitalisation of some £230 million. There will also be an annual contribution of £16 million a year, which will increase in real terms, will be reviewed quinquennially and is calculated on the basis of the best possible actuarial advice, to provide a substantial and good margin for error above the actual anticipated needs. That position will continue in the longer term.
We have established an independent, segregated fund to cover all the longer-term post-closure costs of decommissioning British Energy's nuclear power stations and their sites, with the aim that all licensed nuclear sites will be cleared and returned to other uses. Obviously, it has been necessary to strike a balance between the need to reassure the public that British Energy will meet its liabilities and the need to recognise the company's commercial freedom. I believe that we have the balance right, and I would add that the scope of the fund has been agreed with the nuclear installations inspectorate.
The scope of the fund is not, however, set in stone. If, for example, British Energy changed its decommissioning strategy, the scope of the fund could also be altered to include new on-site activity not currently carried out on the site. I emphasise that any liabilities not covered by the fund remain the responsibility of British Energy. There is no question of any exemption. I say categorically that British Energy is, and will remain, responsible for the liabilities associated with its stations.
Mr. Martin O'Neill: Will the right hon. Gentleman give way?
Mr. Lang: I will, but then I must make progress.
Mr. O'Neill: Does the President of the Board of Trade agree that, if any of the assumptions on the basis of which this contribution to the fund is made prove unfounded—it is generally agreed that £16 million is the lowest possible figure that one can calculate, assuming every optimistic scenario—the result will be either more expensive electricity or a reduction in dividend to the shareholders?
Mr. Lang: The hon. Gentleman may jump to conclusions of that kind. Those figures have been struck

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on the basis of the best possible advice and which will be reviewed quinquennially. Independent trustees are responsible for those matters, and it is the best estimate that those figures will be adequate. As I have said, nothing is set in stone, and they can be reviewed as required, but we are talking about a long-term accumulation of resources.
The final misconception on which I want to put the record straight arises from the stories of a dividend sweetener of £100 million being paid by the taxpayer from a special reserve fund. The first dividend that will be received by investors is an interim dividend in respect of the year ending 31 March 1997. That dividend will be paid by British Energy, using its own cash resources, and there is no question of payment by the taxpayer from a special reserve fund.
Opposition Members have also sought to create fears that the uncovered dividend will be paid for with money needed for long-term liabilities. Again, that is totally untrue. The company is satisfied on cash flow grounds that it will be able to meet all its liabilities. Were there ever to be a question of priorities, of course, liabilities would always come first.
I shall now discuss another benefit arising from this privatisation.
Mr. Ken Purchase: Will the President give way?
Mr. Lang: No; I want to make a little more progress in this short debate.
Opposition Members may have read that the Director General of Electricity Supply announced last week that he expects to be able to announce a reduction in the fossil fuel levy following privatisation from 10 per cent. to 3.7 per cent. That reduction will have been made possible by the nuclear privatisation, because premium payments to Magnox Electric are expected to end at the time of privatisation, except as necessary to recover moneys that were originally due to Magnox but unpaid before privatisation.
The reduction in the levy rate should lead to a reduction in bills of more than 6 per cent. in a full year, or about £15 to £20 in a typical domestic consumer's bill. I look forward to hearing Opposition Members welcome that during the debate.
Mr. John Battle: Can the Secretary of State confirm that that figure is contingent on the performance of the company, and may well not be anywhere near that level, given that the prospectus says that the company does not even intend to make a profit in the first few years?
Mr. Lang: No. The position is clear, as it has been announced by the Director General of Electricity Supply, and the outstanding payments due from Magnox are held over by agreement and are being collected, so there is no uncertainty about that matter.
Mr. Miller: Will the President give way?
Mr. Lang: I want to press on and talk about the reorganisation of the nuclear industry to form British Energy and Magnox Electric, which I believe will bring wider benefits than those associated with privatisation.
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Magnox Electric, which will be staying in the public sector, has been established as a robust independent player in the electricity market. It will be a substantial baseload generator, with about 7 per cent. of electricity output in Great Britain. The objectives we have set require Magnox Electric to operate in a commercial manner, judging any investments by commercial rates of return. We intend that Magnox should be a full competitor in the electricity market, and that this increased competition will be of clear benefit to consumers.
Moreover, focusing management time and expertise on one type of reactor—Magnox—will bring significant benefits in improved efficiency. The Opposition talk only about the downsides of assets and liabilities being left in the public sector, but the Magnox liabilities have always been in the public sector, and that will not change. What has changed as a result of restructuring, however, is that there is now a much clearer focus on Magnox issues, with a renewed enthusiasm at every level of the company.
Magnox Electric is a first-class generator with a proven track record in station decommissioning, and I have every expectation that the creation of an independent Magnox company and its eventual integration with British Nuclear Fuels plc will enable them to build on and further develop that expertise, and will bring significant reductions in costs from greater efficiency in the management of liabilities.
Magnox Electric is a robust public sector entity, which will enhance competition in the electricity market and aims to secure the best possible value for the taxpayer.
Mr. Alan W. Williams: The Minister said that Magnox had a proven track record on station decommissioning. I am astonished by his comment, in view of Trawsfynydd nuclear power station, which closed only a few years ago and will be there for 100 years. Where is this proven track record on station decommissioning?
Mr. Lang: The fact that it takes a long time to decommission a station does not undermine the capacity, skill and efficiency with which decommissioning is undertaken by the company. It has already made enormous progress with Berkeley, at costs substantially less than had been anticipated and provided for.
Mr. Wilson: Will the President give way?
Mr. Lang: I give way to the hon. Gentleman, as this is a matter that concerns his constituency.
Mr. Wilson: Since the possibility of a Hunterston C appears to be precluded by privatisation, it is very important for employment in my constituency to know whether there would be any inhibition to Magnox Electric building on the Hunterston A site, which it will inherit, perhaps for non-nuclear generation. Would be there be any such inhibition?
Mr. Lang: That is not a matter on which I have any decision or any position to announce tonight, when we are debating the privatisation of British Energy. That is a matter for the future. Magnox will remain in the public sector.

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We have seen tonight that not only is the Labour party deeply embedded in the old attitudes of clause IV of its constitution, but Labour Members do not understand what privatisation is about.
Last week, Labour launched another of its great attacks on the Government, which was going to be the greatest assault on this privatisation exercise, called its triple whammy—and it was wrong on every point. First, Labour alleged that the Government would not ensure that Magnox had sufficient assets to cover its nuclear liabilities. That simply is not the case. Secondly, Labour said that the cost of reprocessing British Energy's spent fuel would be left with the Government. It will not. That will be met by British Energy as part of its normal commercial operations.
Thirdly, Labour said that the United Kingdom's insurance arrangements are not in accordance with international conventions on civil nuclear liability. In fact, the United Kingdom's own insurance requirement is many times higher than the minimum required under the Brussels convention, and among the highest of all the signatories to that convention. Each and all of those accusations were wrong: not only wrong but fundamentally ignorant of the basic principles of privatisation—not a triple whammy, but a triple boomerang.
Far from nuclear privatisation being a disaster, as the Opposition would try to have people believe, excellent progress is being made. All the major milestones have been reached successfully and to timetable. The next stage will be the issue of the retail prospectus next week, on 26 June.
I remain confident that the final burst of energy will be as successful as the earlier sales, for the industry, the taxpayer and the consumer. I urge the House to reject the motion and to support the Government's amendment.
7.57 pm
Mr. Martin O'Neill: I welcome the debate. We are in the middle of the nuclear flotation. We have discussed the nuclear industry three times in the past two years—at the time of the nuclear review, on the announcement of the Government's intention to privatise and, recently, following the publication of the Trade and Industry Select Committee report.
Many right hon. and hon. Members were, and are, opposed to the principle of privatisation. My all-party colleagues on the Select Committee expressed their greatest concerns about the taxpayer's interests and were worried that there would be a quick, cut-price sale. Their anxieties centred on the main issues of the valuation of the assets, the definition of the liabilities and the liabilities' subsequent valuation. A distinction must be drawn between what constitutes a liability and what that liability is valued at.
My right hon. Friend the Member for Derby, South (Mrs. Beckett) has already described the doubts that surround the valuation. It seems strange that power stations costing more than £3 billion to construct should be sold for between £1.6 billion and £2.6 billion. At the time of the initial valuation discussions, parallels were drawn with the car leaving the showroom and the change in its value at that time. Of course we all recognise that the price will fall; but when VAT, excise duty and delivery charges do not have to be taken into account, the price will fall very quickly.
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Since the last debate on this subject, and since the announcement of the flotation, a report has been published on the annual segregated fund changes by Professor Sadnicki. The paper was prepared for a local authority pressure group that is opposed to nuclear power. There has never been any secret about the author's concerns about the economics of nuclear power. Nevertheless, he and Dr. Gordon McKerran of Sussex university have been influential in constructing models on which the pricing of nuclear energy has been estimated. It is no secret, either, that their work in large measure informed the Government's nuclear review, in terms of the pricing of units of nuclear energy. It could also be argued that their work was influential in persuading the Government not to proceed with the construction of any more nuclear power stations. It certainly influenced British Energy's intentions not to proceed with any nuclear power station construction in the foreseeable future.
The report cannot be lightly dismissed. I do not agree with everything in it; some of its assumptions are over the top and are not necessarily designed to impress accountants—ultimately it is their view that must be taken into account.
Perhaps the Minister will deal this evening with the point that contributions to the initial transfer of the assets may constitute a subsidy under European law. Would they contravene European legislation? It would indeed be embarrassing for the Government if the money that they used as a sweetener for privatisation were found to be contrary to European policy.
The author of the report takes as his outside limit for such contributions a sum of £208 million a year, which compares with the £16 million that the Government have been talking about. I do not think that a realistic figure. I think that £127 million is rather closer; it is achieved by assuming average economic growth of about 2 per cent. until 2026. I am not altogether confident that the Labour Government who will take office next year will stay in power that long, but the lamentable economic growth record of the past 17 years will not necessarily prove to be the model for what will follow.
Why do not the Government mention long-term items such as post-operation waste charges and post-operation payments for BNFL decommissioning? The report's author doubts whether British Energy's commercial freedom can be squared with reassurances that, where liabilities arise, they will be met. If liabilities fall where the assets are, that may restrict British Energy's ability to perform according to the market's wishes. It is pointed out in the report that any surpluses from the constituent elements of BE will be given not to the taxpayer but to Magnox for its liabilities. No one will have been convinced by the superficial gloss that the Secretary of State put on the question of the Magnox liabilities.
The report also raises the issue of post-operational reprocessing and stage 1 decommissioning of the advanced gas-cooled reactors. There is also the problem of the ability of Sizewell B to make contributions after 2025. The lifespan of Sizewell B cannot be guaranteed, so it would be imprudent to make early financial forecasts on such an optimistic view of its time in service. The point is underlined by questioning of the estimates for decommissioning and waste disposal.
We have been repeatedly told by Ministers that liabilities will follow assets, but the figures in the report suggest that the accounting procedures will not be

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sufficiently transparent. Throughout its history, the nuclear industry has been shrouded in secrecy. To some extent, that was inevitable because the industry's purpose in the early days was the production of nuclear weapons, but when the veil has been lifted, there have always been expressions of false optimism—about the value of certain technologies, the cost of certain projects and the predicted cheapness of units of electricity.
Those shortcomings have been seized on by the industry's detractors, and when combined with the—often wholly unsupported—assertions about safety, the technology has been dismissed out of hand.
I believe that the case for nuclear power can and should be made. However, I have never made any secret of my opposition to privatising nuclear power. I am realistic enough to know, though, that once it has been sold off, it will not, barring a catastrophe, be brought back to the public sector. I hope that the debate will give due warning to those considering investing in the industry that the sums do not add up. Later on, taxpayers will not take kindly to being asked to cough up more so as to subsidise the segregated fund.
If the Government cannot meet their responsibilities, the sooner we get a Government who are prepared to do that, the better. The plain fact is that we do not know with any certainty what the costs will be. The Government have consistently chosen the rosiest scenarios, and the figures on which they have based their expectations have almost always been those that are most trouble free. I am not a Jeremiah when it comes to the nuclear industry—I happen to think that it has performed well in some ways—but I am not prepared to watch the industry being handed over to the private sector with no proper consideration being given to the costs of decommissioning or even to the form of that decommissioning. Neither am I convinced that the quinquennial review will be sensitive enough to deal with the problems as they arise.
Within two or three years, and before the five-year cycle is up, there could be serious financial difficulties which taxpayers, not shareholders, will be called upon to deal with. The industry is of great strategic importance. Consequently, it should not be thrown away, and its problems and disadvantages should not be treated as lightly as the Government have approached them this evening.
8.8 pm
Mr. Piers Merchant: I suppose that these days I should begin by declaring a transient interest, in that my wife and I were taken to the ballet about a year ago by Dr. Robert Hawley and his wife. He, of course, is the former chief executive of Nuclear Electric and the current chief executive of British Energy. I hasten to add that we did not discuss the nuclear industry or its privatisation. I mention that—apart from feeling that I ought to—because I know Bob Hawley well. In fact, I worked with him when he led Northern Engineering Industries, the north-east engineering conglomerate.
I am in a position to make a judgment—which is that this man has a tremendous ability in engineering, as well as great experience in private industry. I believe that he will give great leadership to the industry in the private sector. That is important because the House and the public are right to be concerned about the quality of leadership, particularly in an industry that is obviously sensitive.
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I strongly support the movement of the nuclear industry into the private sector. I have become a great believer in privatisation, based on my judgment of the experience of privatised industries over the past 15 years. I did not come to the subject in any dogmatic sense and, unlike many of my hon. Friends, I did not start with a strong presumption that only the private sector could deliver the quality and efficiency that we now see in the industries that have been transferred from the state. I have applied my judgment and watched as the industries have been transferred. We have seen a watershed in the development of industry in this country. In industry after industry, successes and efficiencies have sprung from competition.
My right hon. Friend the President of the Board of Trade referred to just one statistic week, but it tells a story. Before privatisation, the industries were costing the taxpayer £50 million a week; the taxpayer is now gaining, in terms of tax paid, approximately £55 million a week. That is only one aspect of it. The benefits that have flowed to consumers are tremendous and the opportunities that the industries have been able to develop are significant.
Three areas in the nuclear industry will gain. First, the consumer will gain because the electricity industry will have additional competition, which will produce greater efficiency. We have already heard that the average electricity bill is likely to be reduced by some £20 as a result of the fall in the fossil fuel levy, which has been made possible as a result of the privatisation that is now going into effect. That benefit will be felt by every consumer of electricity.
Secondly, taxpayers will benefit directly from the proceeds of the sale. They will also benefit as a result of the transfer of liabilities. I have done a quick calculation in my head—approximately £4.4 billion-worth of liabilities will be transferred from the taxpayer to the private sector. That is a significant benefit to the taxpayer.
Thirdly, the industry will benefit in a number of ways: it will be able to make its own commercial judgments, to run its affairs free from political interference, to decide on its investment programme and its capital plans, and—perhaps most significant of all—be free to operate competitively in the international market.
That is a significant market, and a market in which British experience excels. More than 30 countries have nuclear plants in operation or are building plants that are yet to be commissioned. The expertise that the British nuclear industry has to offer is tremendous. Significant markets can be grasped and, if the industry is free to do so, it will benefit significantly. Privatisation will enable that to happen.
Understandably, there is bound to be some public concern about this privatisation. There is always public concern about change. The public have always been sceptical, if not hostile, about privatisation—but they have slowly changed their views as they have seen the successes and benefits that it has brought. This is a particularly sensitive industry and it is understandable that people should be concerned and need to be assured about the safety aspects. It is regrettable that the Labour party has, at times, sought to exploit that fear, which it knows is groundless. The subject has been examined in great detail by a number of bodies involved.
Mr. Jack Thompson: Does the hon. Gentleman recognise that there is no such thing as total

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safety? Therefore, we can predict that, some time in the future, there will be safety problems. Is he confident that the insurance arrangements, and the premiums that have to be paid, are sufficient? Chernobyl is often referred to, but it was a different type of power station. I refer also to Three Mile Island in America and to the PWR, which was a forerunner to Sizewell. That is an important element. There is a lack of public confidence in the industry and the only way that it can be restored is by ensuring that there is proper provision to protect the public when an accident happens.
Mr. Merchant: The hon. Gentleman is right: there have been problems relating to safety in the nuclear industry. However, I remind him that it is not the only industry to be affected in that way. We cannot guarantee total safety in any industry or in any walk of life. However, it is particularly important in this industry that the safety measures, and the policing of them, are taken to the highest level possible. I believe that they have been, and I shall return to that point in a moment.
The hon. Gentleman referred specifically to insurance. He is absolutely right: it is important that the industry is properly and fully insured. He asked me whether I believe that it is adequately insured. Yes, I believe that the arrangements that exist for the industry, and the international arrangements that underpin it, are satisfactory and sufficient to ensure proper protection in the unlikely event of something going seriously wrong.
There are nuclear power stations in this and many other countries. It is true that they pose a potential risk. However, if the hon. Gentleman imagines that there is a link between the extent of safety protection involved and the nature of the ownership, I hope that I can convince him that that is not the case. The Trade and Industry Select Committee looked at this issue thoroughly, and it concluded that there was no reason why there should be any greater safety risk under privatised ownership than there had been under state ownership.
The Health and Safety Executive has examined the problem, and it has said that there is no evidence to suggest that there would be any greater risk under privatisation.. The industry has also been examined by the World Association of Nuclear Operators, which has said that there is no evidence to suggest that a privately owned industry carries with it any greater safety risk.
I believe that the reverse is true. The hon. Member for Wansbeck (Mr. Thompson) mentioned the horrific accident at Chernobyl. I remind him that the Russian nuclear industry was not in private hands. Indeed, one could say that the Russian nuclear industry was operating in a society that had taken state control to its ultimate conclusion. The significance of that is that there is a tendency in a command economy for the individuals within the structure not to feel a personal responsibility. Therefore, corners are cut, the buck is passed and the system—in this case, the vital safety system—collapses. That is precisely what happened at Chernobyl.
Mr. Purchase: Will the hon. Gentleman concede that the incident at Three Mile Island occurred while the industry was in private ownership? Is he aware that the costs resulting from that incident have not yet been resolved?
Mr. Merchant: I am aware of those factors, but the worst nuclear accident occurred at Chernobyl. I do not
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intend to divert attention from accidents that have occurred in the private sector, and the hon. Gentleman points correctly to one of them. I do not suggest that privatisation automatically means that there is no risk at all: I am merely rebutting the claims made by some members of the public—egged on by Labour Members—that privatisation in itself brings a greater risk. That is palpably not true.
Lady Olga Maitland: Does my hon. Friend agree that there is a great danger of unfounded scaremongering on that point? The allegations made by the hon. Member for Wolverhampton, North-East (Mr. Purchase) about the Three Mile Island incident are not properly founded in fact, and that point has been well established.
Mr. Merchant: My hon. Friend is correct. I wish to quote the comments of two organisations on the safely issue as I believe that it is important to lay to rest the myths that have been propagated in that area. The leading economic consultants, NERA, recently published a report on the impact on safety of privatisation in a number of industries, including the nuclear industry. It concluded:
"Occupational safety standards have improved in nearly all of the privatised firms and industries. In some cases the extent of improvement"
in safety standards
"has been significantly greater than elsewhere in the economy … the incidence of such injuries"
to members of the general public
"is very low on average across the privatised firms and industries … the performance of privatised companies has improved strongly since privatisation".
My second quotation comes from British Energy. I think that it is important to take account of its view, as it will ultimately be responsible for the industry. Peter Haslam, the director of public affairs, wrote to me in March. He said:
"Whilst the regulatory regime in relation to safety will remain fundamentally unchanged, some people may see the relationship between the NII and the Company as more transparent than whilst both were in the public sector. Safety is paramount and both Nuclear Electric and Scottish Nuclear have a Director with responsibility for safety who reports directly to their respective Chairmen. Each event of any nuclear safety significance is investigated with the utmost rigour and importance is placed upon creating a culture of openness. Moreover, the companies achieved a very real improvement in their safety records from the time of Vesting hand-in-hand with a much improved commercial performance. Profit and safety are not antithetical".
I stress that it is clear that the nuclear industry will maintain safety as paramount. None of the structures that have been set up will be diminished—indeed, they will be enhanced. The independent role of the nuclear installations inspectorate and other agencies responsible for safety will be retained. Those independent bodies will ensure that standards are maintained.
Significantly, the people within the industry will ultimately ensure that high standards are achieved. Within British Energy, we have highly qualified, highly motivated engineers, nuclear scientists and managers who have an absolute interest in safety. They will not compromise their standards, quality or integrity in any way. I have complete faith in them. If their integrity is questioned, they know that they ultimately carry personal

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responsibility within a privatised set-up—far more than in the state sector. If anything goes wrong, there will be no hesitation in pointing the finger at them as individuals. Therefore, they will not take any risks.
If that assurance is not sufficient, we know that they are driven by a commercial motive. They know that, at the end of the day, far from putting profit before safety, the maintenance of the profitability of their company is absolutely dependent on their ensuring that safety is paramount. If anything were to go wrong, the enormous costs incurred would wipe out the company's profit for years to come.
For all those reasons, I believe that a myth has been propagated about safety in a privatised nuclear industry. I believe that the industry will be safer in privatised hands, and that any concerns are misplaced. Above all, I believe that privatisation of the industry will bring enormous benefits to the country, to its people—to the consumer and the taxpayer—and to a great, innovative British industry. For those reasons, I congratulate my right hon. Friend on the verve with which he has pursued the privatisation, and I am delighted that it is virtually in place.
8.25 pm
Mr. Matthew Taylor: I shall keep my remarks fairly short. I have spoken about this matter twice before in the House and I do not intend to restate the issues. Even at this late stage in the Government's plans, I stress that the privatisation is wrong and will prove hugely costly to the British taxpayer. It also carries some risks that I do not believe the people of this country will accept. Therefore, I urge the Government to think again.
The privatisation and the sweeteners that have been offered to the private sector have incurred criticism from the Select Committee on Trade and Industry. The European Commission has launched an investigation into illegal state aid and we have watched the barely concealed warring between British Energy and the Government over the scale of the liabilities that should follow assets into the private sector.
In spite of the Minister's remarks, it now appears that the war has been well and truly won by private sector interests. We have yet to count the costs that the public will pay through job losses and a tax bill that is likely to run into billions of pounds. There have been repeated ministerial pledges that the taxpayer will not lose out, but the recently published prospectus does not back them up. Amid confusion about the detailed figures, one thing is striking: the taxpayer will be significantly worse off after privatisation.
As the motion points out, proceeds from the sale of the nuclear power stations that are up for grabs are likely to be less than the cost of building Sizewell B alone. In a previous debate on the subject, I described the nuclear industry as a white elephant. Although I was taken to task on that occasion by the hon. Member for Ayr (Mr. Gallie), I stand by my words. How can something that is eventually sold for less than it took to build, and which will be a cost to the taxpayer well into the next millennium, be described as anything but a white elephant?
The money that must be paid out will go towards decommissioning the white elephant. Pledges that the private sector would shoulder the cost of cleaning up the
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power stations after privatisation have been quietly and comprehensively ditched. Long-term bills for the seven advanced gas-cooled reactors and the Sizewell B pressurised water reactor—amounting to an estimated £6.9 billion—will fall on the taxpayer. Even taking into account the likely proceeds from the sale, that leaves the public sector at least £1.2 billion poorer after privatisation. Why must the taxpayer cover that huge cost? The answer is simple: the privatisation would be impossible if the private sector took on all liabilities as well as the so-called assets of the nuclear industry.
Sir Michael Grylls: The hon. Gentleman is talking about the costs of an industry or a product. If he were selling his car, its cost would be quite irrelevant. The price that he gets for it is the price in the market. The price at which people who have applied for shares in this privatisation is the price that they are prepared to pay. He must understand that the price has nothing whatever to do with the cost of the industry.
Mr. Taylor: When we sell a car, that should be the last we see of it. The peculiarity of the nuclear industry is that, once the individual who has bought the car has finished with it, the car is returned and we face an even larger cost for scrapping it safely.
We now know that British Energy is to be exempted from at least some of the costs of reprocessing spent fuel—worth £17 billion. We now know that British Energy is paying only £16 million a year into the fund to pay for the cost of the clean-up operation—which is estimated to be a £3.6 billion saving in comparison with a more realistic and appropriate amount. We now know that the long-term fund assumes investment rates that are likely to leave the taxpayer with a lump sum bill of at least £1.6 billion. Whichever way privatisation is viewed, it is difficult to escape the reality that, yet again, the taxpayer is expected by the Government to subsidise shareholders' profits.
As I have said in the House before, the British public have already paid towards decommissioning through the fossil fuel levy on electricity bills, which has raised £1.8 billion. That public money was diverted to building Sizewell B. Given that the taxpayer is being asked to fork out again for decommissioning, will the Government return that money to the British public? Clearly, the answer is no.
Let us not forget that the privatised power stations are not the only nuclear power stations that will, at some point, need to be decommissioned. What of the Magnox stations—the dirtiest nuclear power stations in the world? They are too much of a liability for even the Government to attempt to privatise them. Who is to pay for that decommissioning? The answer, once again, is the taxpayer. Any profits from the advanced gas-cooled reactors should be going into a decommissioning fund that will cover the eventual cost of all the power stations, but instead it will go into the pockets of British Energy shareholders.
I simply do not believe that there is any way in which private sector efficiencies can cover the liabilities, or the loss of the income stream that the Government would have had for meeting those liabilities—an income stream that we know was inadequate because the Government accept that it is unlikely that the privatised industry will

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be building any further nuclear power stations. In other words, it is not worth their while. Profits will simply not cover the real costs of the industry.
At the very least, do the Government agree that proceeds from the privatisation should be specifically designated to help meet Magnox public sector liabilities? The proceeds would probably not cover the cost of decommissioning the Magnox stations, but they would certainly go some way towards doing so. The proceeds should be placed in a segregated fund, and perhaps, the Government could add to them the £228 million gifted by the taxpayer to British Energy in the form of an endowment—a gift that remains totally without justification.
As we have already heard in this debate, this privatisation raises serious questions about safety in the nuclear industry. I do not agree with the hon. Member for Beckenham (Mr. Merchant) that safety issues should be underrated, although I am glad that he accepts that the nuclear industry carries safety risks. Not all Conservative Members would even accept that. I credit him with being honest. After that, we can disagree or not about whether those risks are worth bearing.
When I spoke in a previous debate on the nuclear industry, I was accused by a Labour Member of scaremongering about safety. I do not think that it is scaremongering to remind the Government of the submission made to the Select Committee on Trade and Industry by Captain Killick, the former director of safety and quality at Scottish Nuclear. He sought to remind the Government that a privatised nuclear industry is likely to
"seek to make small erosions into safety margins for commercial gain."
I do not think that that personally criticises individuals. It is simply in the nature of the profit-centred job that they will be carrying out. The hon. Member for Beckenham was over-optimistic on that front. If a former director of safety and quality in the nuclear industry is concerned at the safety implications of privatisation, surely it is not scaremongering to take those concerns seriously.
Leaked internal documents from the Clifford Chance law firm show that the Government have been warned that cuts in manpower are compromising safety. Do the Government accept that advice, or do they dismiss it, too, as scaremongering? We have learnt that vital safety information was omitted from the privatisation prospectus. We have learnt that nuclear inspectors are increasingly concerned about the loss of skills in the industry and the ability to cope with an emergency. Do the Government consider them to be scaremongering too? As more and more details about privatisation are brought into the public domain, this privatisation makes less and less sense.
Standing in the Chamber today, it is difficult not to feel a sense of deja vu. We are debating for the third time what everyone knows, but which the Government in their quest for privatisation and short-term Government revenue at any cost still refuse to admit: the proposed sale of the nuclear industry is an expensive error of judgment that will cost the taxpayer dear. The Government's approach to the privatisation can be described only as deceitful and inept. We have received assurance after assurance from Ministers that liabilities will follow assets into the private sector. Those assurances have been steadily watered down over recent months, as the extent to which Parliament has been misled has been slowly uncovered.
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The Liberal Democrats have not opposed every privatisation that the Government have proposed. We have sought to address them one by one.
Mr. Eggar: I think that I heard the hon. Gentleman say that Parliament had been misled. I am sure that he did not mean to say that; perhaps he could withdraw that comment.
Mr. Taylor: I think that what the Government have said is misleading. For example, in the previous debate on this subject, I said that the Government had gifted £265 million of taxpayers' money to the privatised nuclear industry. Ministers and others argued that it was not taxpayers' money, but the truth is that that money would otherwise rest with the taxpayer. On a number of other issues, the way in which this privatisation has been addressed is misleading. I do not think that that is unparliamentary or inaccurate.
As I said, the Liberal Democrats have not opposed all privatisations. We have been open to some, and criticised others because of concerns about the way in which industry will respond to those who use the privatised industries, especially utilities such as water. I think that we have been proved right on that.
On nuclear privatisation, the error goes more to the heart of the way in which the Government approach such issues. The Liberal Democrats believe that this privatisation is wholly financially mistaken. Since the Government are not stupid, the privatisation must be about getting short-term returns before the general election and the need for short-term tax cuts. In the long run, the proposed privatisation will be a financial disaster for the British public, and the House should put a stop to it.
8.37 pm
Sir Michael Grylls: I should like to follow the remarks of the hon. Member for Truro (Mr. Taylor), but I think that the point I made in my intervention was right. The value of something is its marketplace value, and that is what we should be considering, but we have been around that course. Decommissioning costs, as the hon. Gentleman knows very well, since he has been talking about them, have been dealt with very effectively through the segregated fund. I know that some of my hon. Friends have been very patient and want to speak, so I shall be brief.
Privatisation of the nuclear industry is one more step down the path of the innumerable privatisations that we have successfully launched and seen through during the past 16 years. The hon. Member for Truro said that it is all about money. Governments need money, and taxpayers resent being robbed of too much money, but a much more important reason for privatisation—I say this seriously to the hon. Gentleman—is freeing industry from the dead hand of government. I include our Government in that. I may be able to take the hon. Gentleman with me at least some of the way, because he has just said that his party has not opposed all the privatisations. My recollection is that the Liberal Democrats have not been very enthusiastic about them, but I shall not go down that path.
The real point is that Governments of all complexions have been bad owners of businesses. Business is the real bottom line. Our post-war history shows that to be true. Governments have been bad owners because they have

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not looked at businesses in a commercial or industrial way. Too often we—I include the Labour party, and I am sure that the Conservative party has done this in the past as well—have been tempted by short-term political advantage to freeze prices in the Post Office or, when the Post Office ran telecommunications, to say that it should not put up prices because a general election was coming up, or to tell British Airways, when it was owned by the Government, that although it had plenty of passengers it could not buy any more aircraft because the Government thought that the electorate would be more impressed if they spent money on schools or hospitals.
The argument has only to be put in that way to show how absurd is the ownership of industry by government. We are bad owners. We look at things in the wrong way. We are politicians. Let us be frank: we are concerned with garnering the votes when a general election or a by-election comes along. We would not be here otherwise. Those are the things that guide us; we should not have industries near us with which we can play around.
I remember Sir Ian MacGregor saying, when he was looking after British Coal—he also successfully guided British Steel to privatisation—that when he made decisions they reverberated all the way down the organisation, and the Secretary of State would be on the telephone asking why he was doing what he proposed, was he sure it was the right thing to do and might it not be better to think again because there was to be a question in the House, or the Select Committee wanted everyone up in front of it. Businesses cannot be run in that way.
My first point is that freeing this industry is just one more step down the path of getting industry out of the hands of government—out of state control, freeing it to make its own decisions, get its own investment and recruit its own people. Some of my hon. Friends will remember when some nationalised industries could not recruit, for example, the best finance director for their businesses because they were not allowed by statute to pay them more than a certain sum of money. The Minister was nervous of saying that a finance director should be paid X in case people said that that was a lot of money and he was blamed. Putting it that way shows the absurdity of it all, but that was the world in which we lived before. Changing that world is what privatisation has been about.
If there is change, and people are allowed to run businesses properly and efficiently according to private sector rules and away from politics, in the end—as we have seen with the other privatisations—consumers will benefit. I believe that exactly the same will happen with the nuclear industry. There will be price cuts for the benefit of consumers.
We in the House of Commons should be proud that, in the earlier privatisation of the rest of the electricity industry, we were one of the first countries, including the United States of America, to try—to a large extent we have been successful—to create a competitive market for electricity. That was done not for the Conservative party, not for doctrinaire reasons, not to bring in the money, but for the benefit of consumers. Consumers who gain from a competitive marketplace.
All sorts of clever people can write articles saying that the present electricity market, with a regulator, the pool and all the complications, is not perfect—I am sure that
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they can make some cogent arguments—but we should take some credit from the fact that we have started, and the market will be refined as the years go by. It is right that we should have privatised electricity generation and that we are now successfully introducing privatisation of the nuclear industry.
I grant the hon. Member for Truro that the establishment of the segregated fund is a fudge in a sense, because nuclear is special. His riposte to me was right, but I think that I, too, am right to say that the actual cost has no relationship to the market price. The hon. Gentleman is right to say that it is a fudge, but it is a balancing act between the contribution that the Government rightly feel that taxpayers should pay for decommissioning, and the contribution that the shareholders will pay for decommissioning. We can argue that the figures should be different, that there should be more for one and less for the other, but that again is a judgment that the Government have had to make. That judgment has to be right, or the privatisation will not be successful.
Mr. Matthew Taylor: My problem is that the Government are sacrificing a known income stream. If someone is to take it over, they have to make a profit, so there must be a loss on that. The only way of making that up is by making efficiency gains in the industry, but nobody will be building new privatised nuclear stations—so how can there be a sufficient gain for the shareholders and how can the Government's return make up for the loss of the income stream? The figures do not add up and nothing the Government have published suggest that they do.
Sir Michael Grylls: The hon. Gentleman will have to wait and see what the efficiency gains will be. We cannot prejudge the matter. It would be ridiculous for me to say that they will be X, Y or Z, and it would be equally ridiculous for him to say that they will not be X, Y or Z. We can, however, make a judgement on the basis of experience. There is no doubt in my mind that the Government underestimated the costs that could be taken out of the regional electricity companies. They were even more inefficient than we thought they were when we privatised them, and huge costs have been taken out of them. I do not know whether there will be such a big cost reduction in the nuclear industry. Let us say that it will not be so much, but I am sure that there will be a large cost reduction in getting away from the Government and running the industry efficiently.
We should also knock on the head the question of safety. Of course it is paramount. In a way, that is a ridiculous thing to say. That is true of any industry. There is nothing particularly special about the nuclear industry, except that a disaster such as occurred at Chernobyl is horrific. In an ordinary factory, a few people are hurt, which is terrible, but it is not a massive disaster that affects thousands of people. It is a question of scale, but the principle is the same.
Parliament has laid down, as hon. Members know, in the Health and Safety at Work etc. Act 1974, how industries should be run safely. The Health and Safety Executive has clearly said that it is happy with the arrangement. If it is not, it will tell the company, and the company will make changes. Once an industry is in the private sector, its directors have a clear responsibility for

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safety and, ultimately, they can end up in prison if they neglect their duties. It is a serious business for the people who run companies.
I am sure—I think that the House will agree—that the industry will take the same rigorous approach to safety whether it is in the public or the private sector. It could be argued that it might be even more rigorous in the private sector, because people's personal futures and the shareholders will be involved. I believe that it will be exactly the same. I compliment those who have worked for so long in the British nuclear industry on the very high standards that have been attained, and which I am sure will be maintained in the future—so we need not have any concerns about that. The structure is in place, through health and safety legislation, the Health and Safety Executive, the duties of the directors and the general responsibilities of the nuclear inspectorate. It is a tightly regulated industry, and quite rightly.
I am confident that this privatisation will follow the path of earlier privatisations, and be another success. I hope that it will be. Some hon. Members have always been against the nuclear industry. I do not want in any way to deride them, because we are all entitled to our view, but it is wrong to carry those views forward to an industry that is successful, has a good safety record, and now has the opportunity to proceed into the private sector. I hope that it will do very well.
Perhaps we should compare the nuclear industry with the mining industry, which has now been successfully privatised. Nobody suggests that, in private hands, coal mines are less safe than they were under public ownership. I do not think that anyone has made that claim. Perhaps they did during debates on privatisation of the coal industry, but I do not think that any hon. Member has said since privatisation that they are being run dangerously. The coal industry has applied stringent and strict safety measures, just as the nuclear industry will when it is in the private sector.
I compliment the Government on this privatisation, and believe that the House will see that it is one more successful privatisation, and one more toy taken out of the hands of government and placed where it should be—in the hands of professional managers.
8.52 pm
Mr. Michael Clapham: The hon. Member for North-West Surrey (Sir M. Grylls) recognised the uniqueness of the nuclear industry but failed to develop that point. Had he done so, he would have recognised that that uniqueness marks it out as an industry that should remain in the public sector.
The United Kingdom's nuclear industry is unique in that it is made up of a mix of stations that are peculiarly British in design, with the exception of the pressurised water reactor. Although the industry lacks the uniformity that is found in some countries—for example, France—the stations are linked in most important ways, so it just does not make any economic sense to privatise the advanced gas-cooled reactors and PWRs and separate them from the Magnox stations.
Together, the AGRs and PWRs have massive liabilities. Magnox stations will be the first stations to be decommissioned, and as a PWR station costs some £3 billion and may have a life of some 30 years, it should be part of the public sector so that the income stream that it
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generates can go towards meeting the enormous liabilities that will have to be met. The House may be aware that the Sadnicki report, which was published on 5 June this year, showed that it is likely that the public sector will be left with liabilities of some £6.9 billion as a result of this privatisation.
I must question some of the points that the Minister made, because on this privatisation the Government have been consistently economical with the truth. They know full well that, if they put their cards on the table, they would not attract investors to the industry. Even though they have kept a veil over certain information, they have still had to use at least £100 million to attract investors.
In the nuclear review, the Government said that the full liability would follow the asset. This evening, I heard the President of the Board of Trade confirm that from the Dispatch Box, but there is still much scepticism. I share some of the fears voiced by the hon. Member for Truro (Mr. Taylor), who speaks for the Liberal Democrats. The House will be aware that the Select Committee on Trade and Industry reported after making a thorough study, yet it was, to some degree, sceptical about the breadth of the segregated fund.
The Select Committee made two recommendations in that regard: first, that the Government should establish more reliable arrangements to ensure that long-term liabilities arising after the closure of the stations are discharged; and secondly, that the Government should set out in detail in the prospectus for British Energy their conclusions about the appropriate level of contributions to the segregated fund, and that the level of provision for that fund should be prudent.
As far as I am aware, that detail has not appeared in the prospectus; because it has been light on information, people are sceptical of the Government's motives. Liabilities for both Magnox and the AGRs, with PWRs, are massive. In undiscounted terms, they are £31.6 billion. Those for the AGRs and PWRs are £14.6 billion. If the Government are correct in what they have been telling the House, the whole of that £14.6 billion will follow the asset.
When we examine the position a little more closely, however, we see that there are certain questions to be raised. The Sadnicki report, published on 5 June, claims that liabilities of £6.9 billion will be left in the public sector. The report begins by looking at the segregated fund. The fund provides for British Energy to contribute just £16 million annually, but the report suggests that that sum should be increased by 800 per cent., to £127 million a year, if the liabilities are to be met.
The report also discusses the discounting of liabilities that already rest with British Nuclear Fuels plc, which—in terms of fuel that has been reprocessed by BNFL—is estimated to be worth some £4 billion. Sadnicki's analysis suggests that the Government will reduce that to just £1.7 billion. The report also examines the way in which the Government are applying the interest rate. It considers the 2 per cent. that Government actuaries advise to be insufficient to ensure that the fund will accrue enough to meet all its liabilities.
Let me sum up the report's analysis. It suggests that the public sector will be left with liabilities of £6.9 billion, but that is not the end of the story: the £6.9 billion will be in addition to the £17 billion of liabilities already created by the Magnox stations. In other words, the public

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sector is likely to be left with a massive £23.9 billion of liabilities as a result of privatisation. It would seem to any sensible person that an industry that creates the liabilities created by the nuclear industry must provide the income stream that the newer stations are able to provide in order to meet such liabilities; in this instance, however, the income stream will go into the private sector, and those massive liabilities will fall on the taxpayer.
Much has been said about safety. I do not want to cover ground that has already been covered in our last debate, but I wish to draw attention to the latest report by the law firm Clifford Chance, which was asked to carry out a survey of the industry and report to the Government. In that report, which has been made available, Clifford Chance stresses that the reduction in skilled manpower in the nuclear industry could lead to error. The industry relies on highly skilled manpower, and in an industry such as this mistakes can be disastrous.
None of that information has been published in the prospectus, but Barclays de Zoete Wedd—the company that has been advising the Government—suggests that the industry will be able to make a profit only by increasing the performance of AGRs from its current 72 per cent. to 82.5 per cent., an enormous leap. The AGRs have so far achieved an operating performance of no more than 74 per cent., back in 1985, and 82.5 per cent. does not seem achievable. Those who are using the prospectus as a guide to investment should have had that information, so that they could make a judgment. The Government know full well however that, if the Clifford Chance report were made available to them, they would decide not to invest after one look at it, because there are so many risks.
The last time we debated the issue, I told the House about the informal network in the industry that passes information from station to station and from engineer to engineer. That is particularly important in relation to safety. When those who gave evidence to the Trade and Industry Select Committee were questioned, they said that there would continue to be no such thing as commercial confidentiality to cut across the network. Since then, I have had the opportunity to talk to senior people in the industry, who now believe that commercial confidentiality is likely to reign. That means that an important network, along which a good deal of information about safety is passed, is likely to be cut. Again, that will add to risk in the nuclear industry.
One of the other things to which the Minister has not referred and which was in the Clifford Chance report concerns liabilities in relation to common law damages. I note, for example, that The Guardian today refers to the report on the issue. The Guardian suggests that the 20,000 "radiation workers" who have been close to radiation—workers who are currently in the industry and who have worked in it—face a high cancer risk, and that, by the end of the century, each year, 200 people who have worked in that nuclear industry sector are likely to develop cancer.
At present, the industry has a no-faults common law system, but if settlements amount to £20,000 on average, 200 people a year means £4 million of common law liabilities. None of that information, however, appeared in the prospectus. Why was that information not in the prospectus?
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The nuclear industry is unique and it needs to be linked together because of the enormous liabilities. When one part of it is privatised, especially the part that comprises newer stations that create an income stream, that income stream is no longer available to deal with the liabilities; consequently, the taxpayer must meet those liabilities.
As I have said, those liabilities are enormous. The segregated fund is not sufficient to be able to cater for them, so clearly the taxpayer will be that much worse off from privatisation. The asset's cash value is extremely low and privatisation would not be possible if sweeteners were not available to investors. If privatisation were abandoned, as it should be, the AGRs and PWRs would be kept in the public sector and the revenue stream that they would generate would go towards dealing with the liabilities. In that sense, it would relieve future taxpayers of having to meet the industry's enormous cost.
9.7 pm
Lady Olga Maitland: I have been listening to a litany of hostile speeches by Opposition Members, bashing the nuclear industry and bashing privatisation.
Mr. Battle: Bashing the figures.
Lady Olga Maitland: The Labour party is bashing the figures without any justification. It is sad that, by running down the industry in that way, it does no—
Mr. Clapham: Will the hon. Lady give way?
Lady Olga Maitland: No. I am going to continue, because the hon. Gentleman has had plenty of time to make his remarks.
Mr. Clapham: I want to return to that point.
Lady Olga Maitland: Nevertheless, I am going to continue.
The nuclear industry has been a source of enormous pride to the country. I am delighted by the idea that, at long last, we are going to privatise it, which is marvellous news for customers, for taxpayers and, ultimately, for the nuclear industry.
I first became interested in the industry in the 1960s, a long time ago, when my father was known as Patrick Maitland and was the prospective Member of Parliament for Caithness and Sutherland. I remember going around Dounreay, which was up and running and a thriving show for the future: there was no doubt about it. Ultimately, we will run out of fossil fuels and everyone, everywhere will have to rely on the nuclear industry. I had an opportunity to learn at first hand how it would become part of our everyday lives and how not only we but our children would depend on it. Dounreay meant a great deal for the whole country and brought a tremendous amount of vibrancy to the local economy in terms of jobs and infrastructure.
Moving on from those early days, it is exciting to think what privatisation will do for the industry and the country. Nuclear energy will undoubtedly gain much greater commercial freedom. It is appropriate for the Government to hand over all management decisions to the professionals, who know the business and should control

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investment—so that they no longer have to be influenced by public spending levels or other considerations. The industry should have the freedom to compete for and win business in overseas markets, like any other venture.
The right to manage the industry professionally matters, but so do the industry's customers. We will all benefit from lower electricity bills. Surely there cannot be anything wrong with that prospect. It is absolutely right to support greater competition in the electricity generation market, which will come from greater efficiency, responding to consumer need and lower prices. A typical household electricity bill is set to fall by £20 as a result of nuclear privatisation and will tumble further as time passes. The taxpayer will also benefit. The proceeds of privatisation will go into the public purse, which must be good news, and the company's liabilities will be transferred from the public to the private sector—which will then take responsibility and run the risks.
I acknowledge that safety is paramount, but I intensely dislike Labour's exploitation of that aspect for political purposes, to frighten people when there are no grounds for doing so. Scaremongering about the nuclear industry has been going on a long time and is unacceptable. In the 1980s, the Campaign for Nuclear Disarmament concerned itself with defence issues; but as soon as it started losing that argument, CND turned its attention to the nuclear industry for political purposes and tried to terrorise the public into feeling uncertain and uncomfortable. If such propagandists think that they are winning, they are wrong. The Government have consistently put a high price on safety. There is no reason, just because the industry is to be privatised, for anyone to believe that safety will be jeopardised.
The existing regulatory mechanisms will remain in place. The nuclear installations inspectorate will continue to enforce safety. Other bodies that have offered an opinion are in no doubt that safety will be properly regulated and rigorously applied. The Select Committee on Trade and Industry, after extensive investigation, concluded that the privatisation of British Energy need not result in any reduction in safety.
The World Association of Nuclear Operators said that it is
"aware of no evidence to suggest that the ownership (i. e. public or private) has any bearing on the level of safety and reliability achieved".
As my hon. Friend the Member for Beckenham (Mr. Merchant) pointed out in his speech, the Health and Safety Executive has made clear its support; it has no doubts about the matter.
In the light of all that evidence and that strong support, I am sorry that the right hon. Member for Derby, South (Mrs. Beckett) should, on a quite unfounded basis, turn up the fear factor.
Mr. Battle: She has not.
Lady Olga Maitland: The right hon. Lady issued a press release on 17 November last year, which stated:
"people have all along feared that safety would take second place to the Conservatives' need to raise money for tax cuts".
If that is not blatant scaremongering for political purposes—without any foundation whatsoever—I do not know what is. That quotation tells me and everyone else one thing: Labour is certainly not fit to govern.
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I am delighted with this debate. I am delighted that we have had the opportunity to welcome the privatisation of a very important part of British industry. I have absolutely no doubt that everyone will benefit, that the electorate will feel comfortable about the way in which we are transferring the industry into the private sector and that they will give it their total support.
9.15 pm
Mr. Ken Purchase: It comes ill from the hon. Member for Sutton and Cheam (Lady Olga Maitland) and from Conservative Members generally to complain that Opposition Members have in some way for political purposes raised the spectre of a nuclear incident. It comes very ill from them because the purpose of this privatisation is completely political—to get a few more quid in the jam jar so that the Government can give it away in tax cuts to sweeten the electorate before the next general election. If anyone is playing politics with the nuclear industry, the blame rests fairly and squarely on Conservative Members. There should be no doubt about that in people's minds.
It is interesting that at least two Conservative Members who have spoken in thisdebate—especially the hon. Member for Beckenham (Mr. Merchant)—made the point that, in general, safety records of former Government-owned utilities have improved since privatisation. A report which came out only a few days ago stated that safety records had improved.
In the years between privatisation and now, would it not be amazing if gains had not been made in industry and plant safety and operation? It would have been even more amazing if, in 1945, we had nationalised the coal industry, for example, on the basis that we wanted to improve safety. It would have been even more amazing had real gains in safety not been made.
As technology moves on, men and women work more safely, and processes, efficiency and effectiveness are improved. Those are normal developments in a dynamic technology, and they have occurred in this and in many other industries. It would therefore be quite extraordinary if the claim that safety records have improved could not be substantiated.
The point is that the nuclear industry's safety record should be second to none—a point that Opposition Members have repeatedly proclaimed. The point is that privatisation—or commercialisation—brings to bear unnecessary pressure on workers to cut corners, to increase productivity to meet specific financial targets. That is particularly relevant to safety in the nuclear industry, because, so far as possible, nuclear reactors must continue working without interruption if they are to operate most economically.
Very often—three times recently—we have heard about incidents in which a reactor should have been closed down but was closed down too late or not at all. Fines have been levied for those incidents. We are introducing an unnecessary commercial imperative into the industry. The British nuclear industry has one of the best safety records. It is continuing to make considerable productivity gains and, for as long as the installations remain in commission, it will continue to produce electricity at a lower and lower cost.
Sir Michael Grylls: I am following the hon. Gentleman's argument carefully. He said that the

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pressures on a privatised nuclear industry would make it less safe. If he could point to any of the industries that we have privatised in all these years in which that has happened, his argument might have some strength. I cannot recall any that have become less safe because of commercial pressures in the private sector.
Mr. Purchase: The hon. Gentleman need not exercise his memory any longer. Right now, the level of injuries in the coal industry is rising.
Mr. Eggar indicated dissent.
Mr. Purchase: It is true. The level is much higher than it was under the National Coal Board.
The issue of ownership is now in the political frame for both sides of the House and there is merit in arguing that it is outcome, not process, that is important. The nuclear industry is special, because the inherent dangers of an accident are tumultuous compared to those from any other form of energy generation. Because of that, it is important that it should remain the responsibility of the Government of the day. The Government should not be attempting to get out from under that responsibility.
I mentioned earlier that the incident at Three Mile Island did not involve just a matter of ownership. That nuclear incident almost led to a catastrophe, and to this day, settlements have not been made in the civil courts for those who claim to have suffered injury.
Anyone considering investing in the British nuclear industry, particularly those intending to hold the shares for any length of time—that is another matter—should recognise that the insurable costs that he or she is likely to have to meet will grow year on year as the underwriters and the industry begin to understand that the risks cannot be properly quantified. The message that should go out is that insurance premiums will rise and there is likely to be an increasing liability on the industry in private hands to meet the unquantifiable risks attached to it.
The Secretary of State mentioned the £100 million dividend that will be provided early in the life of this privatisation. He said that it will come about because the industry has a healthy cash flow. It is true that the industry is generating cash, but the Secretary of State will surely recognise that, although the cash flow might appear to be large, it may not necessarily be positive when measured against the company's liabilities either on or off the balance sheet. Cash flow is simply a measure of ability to pay current bills, not past or future bills. In truth, the present liabilities, on a discounted basis or otherwise, are very large. That is why the Government have to make special arrangements to discount at an inappropriate rate.
It is estimated that, by some miracle—Treasury magic—£7 billion has been knocked off the cost of disposing of the liabilities. That has been done very simply. It is not a miracle and is not even a sleight of hand. It is no more than a cheap trick. The Government have changed the discount rate from 2 to 3 per cent. so that the liability is down from £21 billion to £14 billion. One can play that game for ever.
I was privileged to serve on the Committee that considered the Crossrail Bill. The Government became anxious about the liabilities, the costs and the payback on
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the investment and changed the discount rate the other way. They knocked it down from 8 to 6 per cent. to give a better cash flow. That is merely an accountants's manoeuvre—and they will do what they are told in the interest of serving their political masters. There has been jiggery-pokery in determining the liabilities of the industry.
I shall briefly discuss what the brokers have had to say about the privatisation. [Interruption.] I always listen to what they have to say. I like to see how the shares that I have not got would have been doing had I bought any.
Mr. Lang: Does the hon. Gentleman not let the union do it for him?
Mr. Purchase: I do not at all let the union do it for me.
Justin Urquhart-Stewart of Barclays said:
"This is only for certain people because there are obvious risks. The business isn't even profitable yet."
That bears out what I was saying about paying the dividend from cash flow, which is fully committed before a dividend has been paid. He added:
"Please Sids, don't enter this one."
Eric Hathorn of Henderson Crosthwaite expects stags to make a quick profit when trading starts in the middle of next month. That is because everyone is looking at the short term. No one wants to hold the stock for long; people know that the liabilities will catch up with them. It is good for the stags. Mr. Hathorn will not be classifying the stock as high-quality earnings. He says:
"You cannot feel sure that you will get a steady growth in profits. And if anything goes wrong, you have a scare of BSE proportions."
If that is what the broking world says, other people should be careful.
Finally, decommissioning is a muddle. It was never properly explained or dealt with in the House or in Select Committee. It is estimated that decommissioning costs will amount to some £4 billion, according to the utility's estimates. However, the discounted cost, due to compounding, will be only £700 million. That is what the industry says. The Minister said something similar this evening.
Barclays de Zoete Wedd estimates that decommissioning costs will amount to 11 per cent. of nuclear liabilities. The discount is so large because the period in which funds can be compounded is very long—175 years. Put simply, that means that generations as yet unborn will pick up the price tag for the folly of the Government's privatisation plans for the nuclear industry. It is a special industry for which Government, and Government alone, should bear responsibility. There is no way the Government—in the immortal words of the late John Smith, the "Not me guy, Government"—will properly accept their responsibilities.
The typical lifetime of a modern nuclear power station is 40 years, with perhaps one or two extensions. That is followed by 135 years of decommissioning. That second period starts with three years to remove highly radioactive fuel elements, after which the plant must be left to cool for 130 years.
There are two counts to answer. The liabilities of the industry cannot be properly quantified; nor can the insurance risks. Responsibility for the industry lies solely with the Government of the day. Failure to take responsibility will be paid for not at the next general

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election, or even the one after, but by generations as yet unborn. That is the responsibility that the Government bear and the burden that they should consider. It is the reason that they should not press on with what they call the final burst, which, unfortunately, in historic language, may prove to be a final solution.
9.29 pm
Mr. John Battle: My hon. Friend the Member for Wolverhampton, North-East (Mr. Purchase), in an excellent speech, referred to the reaction of some of the City brokers to this sale. I shall begin by quoting a comment that appeared in the Lex column of the Financial Times. It started wonderfully:
"Go to a closing down sale, and you expect to pick up something cheap. Certainly, the final offering of the British government's great privatisation bazaar—British Energy, the nuclear generator—looks a classic bargain in the making. Inevitably, many investors will fall back on yield-based valuations which underrate the company's potential to gear up and churn out cash. Furthermore, daunted by British Energy's vulnerable revenues and heavy long-term liabilities, they may even demand a higher yield than even Railtrack fetched."
It is a disgrace that the House has not had the opportunity to debate this privatisation properly in Government time, as it did the privatisation of Railtrack. It is estimated that this privatisation will, in the short term, perhaps raise as much cash as that privatisation. We last debated nuclear privatisation in Opposition time on 26 March. Since then, our detailed questions on the financial deal and the details have never been properly answered. Indeed, as we have seen since the draft prospectus has been published, those questions are even more pertinent now than when we posed them on 26 March.
We still have not received a proper response from the Government on the Floor of the House to the Trade and Industry Select Committee's report on nuclear privatisation. The Government seem determined to push on with it regardless of the costs and, to some extent, in contempt of consideration in the House. Why? On 8 November 1989, the Government were totally opposed to any sale of the nuclear industry. The nuclear industry was withdrawn from the proposed privatisation of the electricity industry.
The then Minister declared in the House that retaining the nuclear industry in the public sector was
"the best way of ensuring a long-term future for nuclear power in this country."—[Official Report, 8 November 1989; Vol. 159, c.1174.]
Those were the words of the Minister at the Dispatch Box. Now the Government, in a desperate dash for cash, are day by day sacrificing any long-term interests on the altar of the short-term cash fix, in a final bid to buy back what many of us now regard as their irretrievably lost popularity.
Let us recall the history. On 9 November 1989, the then Secretary of State for Energy, now Lord Wakeham, was adamant. He spoke about the unprecedented guarantees that were being sought by the City if privatisation was even mooted. He said:
"I am not willing to underwrite the private sector in this way."— [Official Report, 9 November 1989; Vol. 159, c. 1171.]
Nuclear power stations were originally kept out of electricity privatisation precisely because, if the liabilities were to follow the assets, those power stations would be
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totally unattractive to the market. The power stations would have been unsellable and the Government knew that.
So what did the Government have to do? They realised that they had to make nuclear power stations sellable, and did so by fudging the relationship between the liabilities and the assets and pushing as much as they could on to the public sector.
Ever since 4 March this year, when the marketing programme was launched, we have seen nothing but more and more underwriting, as each week has moved towards the final sell-off. New sweeteners have been revealed week by week to make the industry more acceptable to any prospective buyer. It has been the sweetener deal of the century.
Let us not forget that the Government are not privatising all the nuclear industry. That rather kills off the arguments of Conservative Members who have spoken in eulogistic terms about privatisation in principle. This is the Government who decided to privatise a bit of the nuclear industry. They are privatising the seven modern advanced gas-cooled reactors and the new pressurised water reactor, Sizewell B, which was opened only a few weeks ago. They are leaving the nine aging Magnox stations and BNFL behind, leaving all their liabilities in the public sector.
In other words, the Government are flogging off the current cash-generating end of the business, leaving behind in the public sector a large part of the liabilities for reprocessing spent fuel, decommissioning and shutting down nuclear plants, and the management, treatment and disposal of radioactive waste. All those irradiated liabilities are being left behind effectively in the public sector, yet we have repeatedly been told that yes, liabilities will follow assets.
Our opposition to the privatisation of the nuclear industry has been focused around the financing of the deal.
Mr. Miller: I wanted to put this point to the President of the Board of Trade, but he would not give way. Does my hon. Friend agree that the problem might be even worse than he has described because, in recent years, the Magnox stations have been run at an extremely high output level, thus bringing forward embrittlement problems, benefiting the Exchequer to the disadvantage of the new company? Does he think that the short-term attitude adopted by the company emphasises the way that it has appallingly abused a great asset of the country?
Mr. Battle: My hon. Friend pinpoints in detail the short-termism that is going on. He is absolutely right.
I add as a rider that all that we have seen from the Government and in the prospectus is based on a rosy, most optimistic possible assessment. My hon. Friend the Member for Clackmannan (Mr. O'Neill) said that the assumption of the load of the new industry sector was originally set at 82 per cent. for the seven AGRs and Sizewell B. Never in history has that figure been reached. I gather that the Government have dropped the figure to 75 per cent. now, but the best year's performance was 74 per cent., as my hon. Friend said.
Those are incredibly rosy assessments of what will happen to the privatised bit, but they are based, as my hon. Friend said, on what has been happening to what is

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left behind as a short-term deal to prime the industry for sell-off. In other words, the Government's nuclear sums are skewed in favour of a massively subsidised sweetener deal. That is the reality. Eight power stations are being sold off for less than the price of building one and taxpayers will be left with billions of pounds of nuclear liabilities well into the next century.
Let us look at some nuclear arithmetic. City estimates now say that the sale will raise £1.7 billion. The Government's original estimate was £2.6 billion, yet Sizewell B, the power station that has just been opened, cost £2.964 billion to build in March 1995 prices.
That power station was built from the proceeds of the nuclear levy that was stuck on to everyone's electricity bill, ostensibly to pay for the waste disposal of the liabilities. In other words, electricity consumers paid to build Sizewell B directly, although Parliament was never told about that. The French were, in the deal with the interconnector, but not Parliament.
Then what is revealed to us? On 13 June this year, not in this place but in the House of Lords, the Government conceded that the historic cost of the power station is £9.3 billion. Yes, we do know the difference between market cost and historic cost, but the historic cost does not magically disappear. Even the asset value of British Energy was written down by £1 billion from £6 billion to £5 billion between the publication of last year's accounts and the launch of the prospectus. That £1 billion disappeared from somewhere in the accounts.
In a written reply in May this year, the Minister told his colleague, the hon. Member for Colchester, South and Maldon (Mr. Whittingdale):
"there has been a permanent diminution in the value of certain nuclear fixed assets of about £1.2 billion"
since 31 March 1995. Furthermore, he said:
"the fixed assets will stand in the balance sheet of British Energy at approximately £5 billion."—[Official Report,10 May 1996; Vol. 277, c. 295.]
That was the first time the Government admitted that they had marked down the price by £1 billion at public expense. The liabilities associated with the Magnox stations were valued at £8.5 billion by the Government at the time of the nuclear review, and they were to be met from the £2.6 billion built up from the value of the assets. Now we find that the AGR and PWR sale proceeds will be much less than £2.6 billion, so the shortfall is bound to fall on the general taxpayer.
In that written answer to which I just referred—one of those planted replies that gives us information if we look out for it on a wet Friday afternoon—the Minister said that taxpayers' liabilities would be capped at £3.8 billion—a maximum, not an estimated actual spend. It is reasonable to argue that any gap between the sale proceeds and the amount paid for by taxpayers in this way is a cost to taxpayers—of decommissioning Magnox stations—without the benefits of the revenue stream from the power stations that are being sold off.
I predict that, before many years are out, if the sale proceeds on the terms proposed by the Government, the Public Accounts Committee will find itself exposing a scandal of Pergau dam proportions, as the financial fixing that has gone into preparing British Energy for the market is revealed. My hon. Friend the Member for Barnsley,
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West and Penistone (Mr. Clapham), a member of the Select Committee with great expertise in those matters, used a wonderful parliamentary expression: the best that we can say about the figures, he said, is that the Government are being economical with the truth. My hon. Friend the Member for Wolverhampton, North-East spoke of accountancy manoeuvring. Both expressions accurately reflect what is going on.
Let us consider the liabilities for a moment, not forgetting that the Government are selling off only the more modern half of the industry. The Government promised that a shortfall in the decommissioning of the older Magnox stations would be met by the sale proceeds, not least because the older Magnox stations will lose the income from the newer nuclear generators. As the sale proceeds will be insufficient to cover the decommissioning costs, Ministers have loaded the £3.8 billion back on the taxpayer.
Certainly, the Government have set up a segregated sinking fund to deal with British Energy's liabilities; but while BE puts in £16 million a year, the public sector companies remaining behind will contribute £228 million after privatisation. In other words, British Energy's clean-up costs come in the form of a dowry—the Secretary of State's word. I understand that a dowry is a gift for setting up a new relationship. In this case, the Government will extract it from the balance sheets of the publicly owned nuclear companies.
I want to ask the Minister again for an answer to a question that we have regularly posed. Is he any clearer yet about the financial relationship between BNFL and the Magnox industry? The Government propose a merger, but neither knows what liabilities it will have to pick up. As Mark Baker of Magnox put it in his evidence to the Select Committee, he is still not fully aware of the eventual shape of his balance sheet.
This is a short-term, short-sighted financial fix—aptly advertised as a final burst of energy at the end of the Government's programme. Perhaps it is their last gasp before they disappear completely. The claims that we have heard tonight about cheaper electricity prices are pretty rich coming from the Conservative party, which slapped VAT on electricity bills. If they removed it, there would be much greater savings than there will be under this scheme.
The long-term future of British Energy remains the great unknown. Will the newly privatised entity continue to sell its electricity through the pool to the grid on privileged terms, or will it be asked to compete on an equal footing with other private generators? This week's Utility Week states:
"British Energy faces the prospect of defaulting on a £500 million loan taken out with five banks as part of its leap into the private sector because of changes to rules … This could dent the profitability of the privatised company. Indeed BE's pathfinder prospectus said any Grid Code change having a 'material adverse effect' could be grounds for defaulting on the loan."
I would be interested to hear the Minister's comments on that. What about the dash for gas? It is suggested that British Energy will move away from nuclear energy and move into gas. Everyone is moving into gas, so its prospects as a competitor are being diminished.
No one believes that this is a good long-term investment. Recently, a stockbroker in Yorkshire tried to talk up the prospectus on the radio. He was asked whether

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he would buy shares and he said, "Certainly not in the long term." He was complimented on his honesty. He said that the shares would be of value only in the short term—that people with £300 to spare will buy on day one, but they will sell on day two and pick up a tidy sum on the way out. It is a subsidised sale.
The Government are selling off taxpayers' assets at a massively knocked-down price—they are trying to get as much liquid cash as they can to prime a pre-election tax bribe. This is a desperate last dash for cash. It should be called off because we will all pay for generations to come. Perhaps it is too late for the Government to call this off, but they ought to allow a party with a longer-term vision to put its prospectus before the British people and to call a general election.
9.45 pm
The Minister for Industry and Energy (Mr. Tim Eggar): I congratulate the right hon. and hon. Members who have attended the debate—greater men or women hath made no greater sacrifice than to attend the debate this evening. I have a little reservation about the judgment of the Labour Front Bench in choosing this topic at this time. I think that the Scots are more loyal to the alternative attractions than the English, and I can understand why.
It would have been helpful to the reputation of the hon. Member for Leeds, West (Mr. Battle) and of the House if the hon. Gentleman had made some elementary inquiries before writing his speech. He went on at some length about the absence of accounts for Magnox Electric—yet I have a copy of them in my hand. They were published, and well publicised, at the end of last week. A call to Magnox Electric or to my office would have revealed that, and I would have been delighted to pass them on to the hon. Gentleman.
The main theme of the Labour party's attack—if it can be called that—has been a reprise of the argument that it has used at every privatisation debate. The Labour party has opposed every privatisation over the past 17 years and it has used almost identical arguments every time—although even NERA has come up with a safety analysis that shows that the Labour party's safety scares in relation to privatisation have been ill founded.
We believe that privatisation is good for the customer, good for the company and for the shareholder, and good for the taxpayer. We believe that the privatisation of Nuclear Electric will be as successful as previous privatisations.
I have enjoyed one particular aspect of the debate. The hon. Member for Wolverhampton, North-East (Mr. Purchase) did something quite remarkable: he obviously sat down with the Financial Times and a great mound of brokers' circulars at his side last Sunday night and worked out the best investment opportunities for the Purchase household. He came across selective quotations from particular brokers, on the flotation of British Energy.
I welcome the hon. Gentleman to the capitalist world and to the world of wealth creation. I have a wonderful image of him up there in the north sitting behind his reproduction oak desk. Now that he is a modern new Labour man, perhaps he is linked to the Internet. If the reports were on the screen in front of him, he would not have to look through a great mound of documents. I have obviously impugned the hon. Gentleman, so I shall give way.
Mr. Purchase: I have been involved in wealth creation for almost all my working life. I use the tools of the trade and not the Financial Times. I was the chap who created the production output for the Financial Times to write about.
Mr. Eggar: I am delighted with that rewriting of history. I wish the hon. Gentleman well in his new career as a stock market analyst—I am sure that it will enhance his prospects under new Labour.
Safety was a recurring theme in hon. Members' speeches. I make it absolutely clear that there is no way in which the Government or the company will imperil safety. While I was absent from the Chamber, I understand that the hon. Member for Barnsley, West and Penistone (Mr. Clapham) referred to today's Guardian article. The story was totally predictable—only yesterday afternoon, I guessed that The Guardian would run another nuclear scare story this morning. True to form, it did just that and, true to form, that story proved to be as unfounded as the previous ones.
What I found particularly reprehensible about the article—I understand that the hon. Gentleman referred to this point—was its reference to the national average risk of dying from cancer. It is true that, nationally, the average risk of dying from cancer is one in four. However, in practice and as a matter of fact, it is not the case that nuclear workers are at a greater risk of contracting cancer. Research shows categorically that average cancer rates among workers in the nuclear industry are below the national average. It does the hon. Gentleman no credit to repeat such a scare story.
Mr. Clapham: I raised that statistic in the context of liabilities for common law damages. The article in The Guardian said that, by the end of the century, probably 200 people per year would have a common law claim against the nuclear industry. Therefore, I ask whether there is a no-fault scheme. How do the Government intend to replace that scheme? If we are talking about an average of £20,000 per claim, that amounts to a big liability of about £4 million per year. If that is the case, the information should have been in the prospectus.
Mr. Eggar: The hon. Gentleman is stating, at least implicitly, that cancer is caused by working in the nuclear industry. There is no evidence that that is so. Whatever other debates we may have about the nuclear industry, it does no one any good to promulgate such a scare story.
The hon. Member for Leeds, West referred to statements by my noble Friend Lord Wakeham in November 1989. It is quite true: we decided at that time that it was not in the taxpayers' interest to sell the nuclear industry. It is a great credit to the management and the employees—including the trade unions—in the nuclear industry that they improved the efficiency and the productivity of that industry so that it can now be privatised, with good returns for the taxpayer and benefits for those same employees.
Mr. Wilson: Will the Minister give way?
Mr. Eggar: No, I shall not give way to the hon. Gentleman. He has not been present during the debate except at the very beginning.
Mr. Wilson rose—
Mr. Eggar: I will not give way. The hon. Gentleman did not sit through the debate.

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I must repeat again that liabilities have followed assets in the proposals for the sale of British Energy. We have made it clear in the past that that will happen, and I repeat quite categorically and unreservedly that liabilities will follow assets and that British Energy is responsible and will remain responsible for the liabilities that are associated with its stations.
The right hon. Member for Derby, South (Mrs. Beckett) and the hon. Member for Leeds, West made two particular criticisms. They accused the Government of setting the dividend at too high a level and, almost in the same breath, criticised us for selling British Energy too cheaply. New Labour claims to be the friend of industry and, like the hon. Member for Wolverhampton, North-East, to have learned how financial markets work. It has, however, failed to grasp a very simple point. All other things being equal, a higher dividend being paid by the company increases its value, and in contradistinction, a lower dividend decreases its value. That simple fact means that the Government cannot at the same time be setting too high a dividend, which was one accusation, and simultaneously be selling the company too cheaply. Almost all companies are valued in relation to a multiple of the dividend that is being paid.
The hon. Member for Leeds, West simply does not understand the difference between profits in accounting terms and cash flow. It is up to the directors of the company to decide what they can afford to pay in dividends. As a general rule, from the taxpayers' point of view, the higher the dividend, the higher the proceeds that will be realised. The hon. Gentleman must understand that, by arguing for lower dividends, he is in effect arguing for lower proceeds for the taxpayer. He may not understand that, but it is an irrefutable fact, and it would be welcome if he admitted it.
When I first entered the House back in 1979, the Government owned the gas industry, the electricity industry, the coal industry and, in practice, much of the United Kingdom's rapidly expanding oil industry. As my hon. Friend the Member for North-West Surrey (Sir M. Grylls) said, in effect Ministers decided prices and made investment decisions. Those great utility industries were in practice cynically used as part of micro-economic decision taking by—one regrets to say—Governments of both major parties. As my right hon. Friend the President of the Board of Trade said, under Labour, that system gave us 2 per cent. increases in electricity prices on a six-weekly basis. As he also said, it meant that taxpayers paid £50 million a week in subsidies rather than receiving £55 million a week in taxes as they do now.
In practice, back in 1979, the Government decided what energy we should be provided with in our homes and what we should pay for it. That is all behind us. The sale of British Energy completes the privatisation of the energy sector. The benefits of that privatisation programme for customers are there for all to see. We in Britain have led the world in creating competitive energy markets. This privatisation shows that we are maintaining that lead.
The Opposition have opposed the privatisation of the nuclear industry, just as they have opposed every other privatisation. They said that electricity privatisation would mean that prices would rise. In practice and in fact, prices have fallen. They said that nuclear privatisation would
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saddle the taxpayer with huge liabilities and compromise safety. In fact, liabilities will follow assets into the private sector and everybody has made it clear that safety will continue to be paramount.
Privatisation is good for the company, for shareholders, for employees and for consumers, who will benefit from increased competition and from more downward pressure on prices. Privatisation is good for the taxpayer, who will benefit from significant proceeds and a substantial reduction in the cost of liabilities left in the public sector.
I ask the House to support the Government's amendment.
Question put, That the original words stand part of the Question:—
The House divided: Ayes 235, Noes 266.

Division No. 152]

[10.00 pm

AYES

Adams, Mrs Irene

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

Ainger, Nick

Denham, John

Ainsworth, Robert (Cov'try NE)

Dewar, Donald

Allen, Graham

Dixon, Don

Anderson, Donald (Swansea E)

Dowd, Jim

Armstrong, Hilary

Dunwoody, Mrs Gwyneth

Barron, Kevin

Eastham, Ken

Battle, John

Etherington, Bill

Bayley, Hugh

Fatchett, Derek

Beckett, Rt Hon Margaret

Faulds, Andrew

Benn, Rt Hon Tony

Field, Frank (Birkenhead)

Bennett, Andrew F

Flynn, Paul

Benton, Joe

Forsythe, Clifford (S Antrim)

Bermingham, Gerald

Foster, Rt Hon Derek

Berry, Roger

Foster, Don (Bath)

Blunkett, David

Fraser, John

Boateng, Paul

Fyfe, Maria

Bradley, Keith

Galbraith, Sam

Bray, Dr Jeremy

Gapes, Mike

Brown, Gordon (Dunfermline E)

Garrett, John

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

Gerrard, Neil

Burden, Richard

Godman, Dr Norman A

Byers, Stephen

Godsiff, Roger

Callaghan, Jim

Golding, Mrs Llin

Campbell, Mrs Anne (C'bridge)

Gordon, Mildred

Campbell, Menzies (Fife NE)

Graham, Thomas

Campbell, Ronnie (Blyth V)

Grant, Bernie (Tottenham)

Campbell-Savours, D N

Griffiths, Nigel (Edinburgh S)

Canavan, Dennis

Griffiths, Win (Bridgend)

Cann, Jamie

Grocott, Bruce

Carlile, Alexander (Montgomery)

Gunnell, John

Chidgey, David

Hain, Peter

Chisholm, Malcolm

Hanson, David

Church, Judith

Hardy, Peter

Clapham, Michael

Harman, Ms Harriet

Clark, Dr David (South Shields)

Hattersley, Rt Hon Roy

Clarke, Tom (Monklands W)

Hill, Keith (Streatham)

Clelland, David

Hinchliffe, David

Clwyd, Mrs Ann

Hodge, Margaret

Cohen, Harry

Hood, Jimmy

Connarty, Michael

Howarth, Alan (Strat'rd-on-A)

Corbett, Robin

Howarth, George (Knowsley North)

Corbyn, Jeremy

Howells, Dr Kim (Pontypridd)

Cousins, Jim

Hoyle, Doug

Cox, Tom

Hughes, Kevin (Doncaster N)

Cummings, John

Hughes, Robert (Aberdeen N)

Cunliffe, Lawrence

Hughes, Roy (Newport E)

Dafis, Cynog

Hughes, Simon (Southward)

Dalyell, Tam

Ingram, Adam

Darling, Alistair

Jackson, Glenda (H'stead)

Davies, Bryan (Oldham C'tral)

Jackson, Helen (Shef'ld, H)

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

Jamieson, David

Davies, Rt Hon Denzil (Llanelli)

Janner, Greville

781

Jenkins, Brian (SE Staff)

Pickthall, Colin

Jones, Ieuan Wyn (Ynys Môn)

Pike, Peter L

Jones, Jon Owen (Cardiff C)

Pope, Greg

Jones, Lynne (B'ham S O)

Powell, Sir Ray (Ogmore)

Jones, Martyn (Clwyd, SW)

Prentice, Bridget (Lew'm E)

Jones, Nigel (Cheltenham)

Prentice, Gordon (Pendle)

Jowell, Tessa

Primarolo, Dawn

Kennedy, Charles (Ross,C&S)

Purchase, Ken

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

Quin, Ms Joyce

Khabra, Piara S

Radice, Giles

Kilfoyle, Peter

Randall, Stuart

Lestor, Joan (Eccles)

Raynsford, Nick

Lewis, Terry

Reid, Dr John

Liddell, Mrs Helen

Rendel, David

Litherland, Robert

Robertson, George (Hamilton)

Livingstone, Ken

Robinson, Geoffrey (Co'try NW)

Lloyd, Tony (Stretford)

Roche, Mrs Barbara

Llwyd, Elfyn

Rooker, Jeff

Loyden, Eddie

Rooney, Terry

Lynne, Ms Liz

Ross, Ernie (Dundee W)

McAllion, John

Ross, William (E Londonderry)

McAvoy, Thomas

Rowlands, Ted

McCartney, Ian

Sheerman, Barry

Macdonald, Calum

Shore, Rt Hon Peter

McFall, John

Short, Clare

McKelvey, William

Simpson, Alan

Mackinlay, Andrew

Skinner, Dennis

McLeish, Henry

Smith, Andrew (Oxford E)

Maclennan, Robert

Smith, Llew (Blaenau Gwent)

McNamara, Kevin

Snape, Peter

MacShane, Denis

Soley, Clive

Madden, Max

Spellar, John

Maddock, Diana

Squire, Rachel (Dunfermline W)

Mahon, Alice

Steel, Rt Hon Sir David

Mandelson, Peter

Steinberg, Gerry

Marek, Dr John

Stevenson, George

Marshall, David (Shettleston)

Stott, Roger

Marshall, Jim (Leicester, S)

Strang, Dr. Gavin

Martin, Michael J (Springburn)

Sutcliffe, Gerry

Martlew, Eric

Taylor, Matthew (Truro)

Maxton, John

Thompson, Jack (Wansbeck)

Meacher, Michael

Tipping, Paddy

Meale, Alan

Touhig, Don

Trickett, Jon

Michael, Alun

Turner, Dennis

Michie, Bill (Sheffield Heeley)

Tyler, Paul

Michie, Mrs Ray (Argyll & Bute)

Vaz, Keith

Milburn, Alan

Walker, Rt Hon Sir Harold

Miller, Andrew

Wallace, James

Mitchell, Austin (Gt Grimsby)

Walley, Joan

Moonie, Dr Lewis

Wardell, Gareth (Gower)

Morgan, Rhodri

Welsh, Andrew

Morley, Elliot

Wicks, Malcolm

Morris, Rt Hon Alfred (Wy'nshawe)

Wigley, Dafydd

Morris, Estelle (B'ham Yardley)

Williams, Rt Hon Alan (Sw'n W)

Morris, Rt Hon John (Aberavon)

Williams, Alan W (Carmarthen)

Mowlam, Marjorie

Wilson, Brian

Mudie, George

Winnick, David

Mullin, Chris

Wise, Audrey

Murphy, Paul

Worthington, Tony

O'Brien, Mike (N W'kshire)

Wray, Jimmy

O'Brien, William (Normanton)

Wright, Dr Tony

O'Hara, Edward

Young, David (Bolton SE)

Olner, Bill

O'Neill, Martin

Tellers for the Ayes:

Orme, Rt Hon Stanley

Ms Ann Coffey and Ms Janet Anderson.

Parry, Robert

NOES

Ainsworth, Peter (East Surrey)

Arnold, Jacques (Gravesham)

Aitken, Rt Hon Jonathan

Atkins, Rt Hon Robert

Alexander, Richard

Atkinson, David (Bour'mouth E)

Atkinson, Peter (Hexham)

Alison, Rt Hon Michael (Selby)

Baker, Nicholas (North Dorset)

Allason, Rupert (Torbay)

Baldry, Tony

Amess, David

Banks, Matthew (Southport)

Arbuthnot, James

Banks, Robert (Harrogate)

782

Bates, Michael

Freeman, Rt Hon Roger

Batiste, Spencer

Fry, Sir Peter

Bellingham, Henry

Gale, Roger

Bendall, Vivian

Gardiner, Sir George

Beresford, Sir Paul

Garel-Jones, Rt Hon Tristan

Biffen, Rt Hon John

Garnier, Edward

Body, Sir Richard

Gill, Christopher

Bonsor, Sir Nicholas

Goodlad, Rt Hon Alastair

Booth, Hartley

Goodson-Wickes, Dr Charles

Boswell, Tim

Gorman, Mrs Teresa

Bottomley, Peter (Eltham)

Gorst, Sir John

Bottomley, Rt Hon Virginia

Grant, Sir A (SW Cambs)

Bowden, Sir Andrew

Greenway, Harry (Ealing N)

Bowis, John

Griffiths, Peter (Portsmouth, N)

Boyson, Rt Hon Sir Rhodes

Grylls, Sir Michael

Brandreth, Gyles

Gummer, Rt Hon John

Brazier, Julian

Hague, Rt Hon William

Bright, Sir Graham

Hamilton, Neil (Tatton)

Brooke, Rt Hon Peter

Hampson, Dr Keith

Brown, M (Brigg & Cl'thorpes)

Hannam, Sir John

Browning, Mrs Angela

Hargreaves, Andrew

Bruce, Ian (South Dorset)

Hawkins, Nick

Butcher, John

Hawksley, Warren

Butler, Peter

Hayes, Jerry

Butterfill, John

Heald, Oliver

Carlisle, John (Luton North)

Heathcoat-Amory, Rt Hon David

Carrington, Matthew

Hendry, Charles

Carttiss, Michael

Heseltine, Rt Hon Michael

Cash, William

Higgins, Rt Hon Sir Terence

Channon, Rt Hon Paul

Hill, Sir James (Southampton Test)

Chapman, Sir Sydney

Hogg, Rt Hon Douglas (G'tham)

Churchill, Mr

Horam, John

Clappison, James

Hordern, Rt Hon Sir Peter

Clark, Dr Michael (Rochford)

Howell, Rt Hon David (G'dford)

Clifton-Brown, Geoffrey

Howell, Sir Ralph (N Norfolk)

Coe, Sebastian

Hughes, Robert G (Harrow W)

Congdon, David

Hunt, Rt Hon David (Wirral W)

Conway, Derek

Hunt, Sir John (Ravensbourne)

Coombs, Anthony (Wyre For'st)

Hunter, Andrew

Coombs, Simon (Swindon)

Hurd, Rt Hon Douglas

Cope, Rt Hon Sir John

Jack, Michael

Cormack, Sir Patrick

Jenkin, Bernard

Couchman, James

Jessel, Toby

Cran, James

Johnson Smith, Sir Geoffrey

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

Jones, Gwilym (Cardiff N)

Curry, David (Skipton & Ripon)

Jones, Robert B (W Hertfdshr)

Davis, David (Boothferry)

Kirkhope, Timothy

Day, Stephen

Knight, Mrs Angela (Erewash)

Deva, Nirj Joseph

Knight, Rt Hon Greg (Derby N)

Devlin, Tim

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

Dorrell, Rt Hon Stephen

Knox, Sir David

Douglas-Hamilton, Lord James

Kynoch, George (Kincardine)

Dover, Den

Lait, Mrs Jacqui

Duncan, Alan

Lang, Rt Hon Ian

Duncan Smith, Iain

Leigh, Edward

Dunn, Bob

Lennox-Boyd, Sir Mark

Durant, Sir Anthony

Lester, Sir James (Broxtowe)

Dykes, Hugh

Lidington, David

Eggar, Rt Hon Tim

Lloyd, Rt Hon Sir Peter (Fareham)

Emery, Rt Hon Sir Peter

Lord, Michael

Evans, David (Welwyn Hatfield)

Luff, Peter

Evans, Jonathan (Brecon)

MacGregor, Rt Hon John

Evans, Nigel (Ribble Valley)

MacKay, Andrew

Evans, Roger (Monmouth)

Maclean, Rt Hon David

Evennett, David

McLoughlin, Patrick

Faber, David

McNair-Wilson, Sir Patrick

Fabricant, Michael

Maitland, Lady Olga

Fenner, Dame Peggy

Major, Rt Hon John

Field, Barry (Isle of Wight)

Malone, Gerald

Fishburn, Dudley

Marland, Paul

Forman, Nigel

Marlow, Tony

Forsyth, Rt Hon Michael (Stirling)

Marshall, John (Hendon S)

Forth, Eric

Martin, David (Portsmouth S)

Fowler, Rt Hon Sir Norman

Merchant, Piers

Fox, Dr Liam (Woodspring)

Mills, Iain

Fox, Rt Hon Sir Marcus (Shipley)

Mitchell, Andrew (Gedling)

783

Mitchell, Sir David (NW Hants)

Spink, Dr Robert

Moate, Sir Roger

Spring, Richard

Monro, Rt Hon Sir Hector

Sproat, Iain

Needham, Rt Hon Richard

Squire, Robin (Hornchurch)

Nelson, Anthony

Stanley, Rt Hon Sir John

Neubert, Sir Michael

Stephen, Michael

Newton, Rt Hon Tony

Stewart, Allan

Nicholls, Patrick

Streeter, Gary

Nicholson, David (Taunton)

Sumberg, David

Norris, Steve

Sweeney, Walter

Onslow, Rt Hon Sir Cranley

Sykes, John

Oppenheim, Phillip

Tapsell, Sir Peter

Ottaway, Richard

Taylor, Ian (Esher)

Page, Richard

Taylor, John M (Solihull)

Paice, James

Taylor, Sir Teddy (Southend, E)

Patnick, Sir Irvine

Temple-Morris, Peter

Pattie, Rt Hon Sir Geoffrey

Thomason, Roy

Pawsey, James

Thompson, Sir Donald (C'er V)

Peacock, Mrs Elizabeth

Thompson, Patrick (Norwich N)

Pickles, Eric

Thornton, Sir Malcolm

Porter, Barry (Wirral S)

Thurnham, Peter

Porter, David (Waveney)

Townend, John (Bridlington)

Portillo, Rt Hon Michael

Townsend, Cyril D (Bexl'yh'th)

Powell, William (Corby)

Tredinnick, David

Rathbone, Tim

Trend, Michael

Redwood, Rt Hon John

Twinn, Dr Ian

Renton, Rt Hon Tim

Vaughan, Sir Gerard

Viggers, Peter

Richards, Rod

Walden, George

Riddick, Graham

Waller, Gary

Rifkind, Rt Hon Malcolm

Ward, John

Robathan, Andrew

Wardle, Charles (Bexhill)

Robert, Rt Hon Sir Wyn

Waterson, Nigel

Robinson, Mark (Somerton)

Watts, John

Roe, Mrs Marion (Broxbourne)

Wells, Bowen

Rowe, Andrew (Mid Kent)

Wheeler, Rt Hon Sir John

Rumbold, Rt Hon Dame Angela

Whitney, Ray

Sackville, Tom

Whittingdale, John

Sainsbury, Rt Hon Sir Timothy

Widdecombe, Ann

Scott, Rt Hon Sir Nicholas

Wiggin, Sir Jerry

Shaw, David (Dover)

Wilkinson, John

Shephard, Rt Hon Gillian

Willetts, David

Shepherd, Sir Colin (Hereford)

Wilshire, David

Shepherd, Richard (Aldridge)

Winterton, Mrs Ann (Congleton)

Sims, Sir Roger

Winterton, Nicholas (Macc'fld)

Skeet, Sir Trevor

Wolfson, Mark

Smith, Sir Dudley (Warwick)

Yeo, Tim

Soames, Nicholas

Young, Rt Hon Sir George

Speed, Sir Keith

Spencer, Sir Derek

Tellers for the Noes:

Spicer, Sir James (W Dorset)

Mr. Timothy Wood and Mr. Simon Burns.

Spicer, Sir Michael (S Worcs)

Question accordingly negatived.
Question, That the proposed words be there added, put forthwith, pursuant to Standing Order No. 30 (Questions on amendments), and agreed to.
MR. DEPUTY SPEAKER forthwith declared the main Question, as amended, to be agreed to.
Resolved,
That this House welcomes the publication of the Pathfinder prospectus for the sale of British Energy which confirms that the sale fulfils the Government's commitment to ensuring that liabilities follow assets into the private sector and is a good deal for the taxpayer who will benefit from equity proceeds, debt repayment and the permanent transfer to the private sector of responsibility for almost £4 billion of nuclear liabilities, for British Energy employees who will now have the opportunity to take a real stake in the future of their industry, for Magnox Electric which will be a robust public sector company capable of meeting its liabilities as they fall due; and further notes that the privatisation of British Energy serves the long term interests of the taxpayer, the industry, and consumers; and condemns the persistent attempts by the Opposition to undermine this and other privatisations.

TRIBUNALS OF INQUIRY (EVIDENCE) ACT 1921
Motion made, and Question put,
That it is expedient that a Tribunal be established for inquiring into a definite matter of urgent public importance, that is to say, the abuse of children in care in the former County Council areas of Gwynedd and Clwyd.—[Dr. Liam Fox.]
Hon. Members: Object.
Mr. Deputy Speaker (Sir Geoffrey Lofthouse): As there is no Business of the House motion, the debate cannot continue if hon. Members object. The motion must be tabled on a later date.

ESTIMATES
Motion made, and Question put forthwith, pursuant to Standing Order No. 131(2) (Liaison Committee),
That this House agrees with the Report [11th June] of the Liaison Committee.—[Dr. Liam Fox.]
Question agreed to.

DELEGATED LEGISLATION
Motion made, and Question put forthwith, pursuant to Standing Order No. 101(6) (Standing Committees on Delegated Legislation),

CIVIL AVIATION
That the draft Stansted Airport Aircraft Movement Limit (Amendment) Order 1996, which was laid before this House on 20th May, be approved.—[Wr. Liam Fox.]
Question agreed to.

Orders of the Day

  TRUSTS OF LAND AND APPOINTMENT OF TRUSTEES BILL [LORDS]
  Order for Second Reading read.
  Motion made, and Question put forthwith, pursuant to Standing Order No. 90(6) (Second Reading Committees), That the Bill be now read a Second time.
  Question agreed to.
  Bill accordingly read a Second time, and committed to a Standing Committee, pursuant to Standing Order No. 61 (Committal of Bills).

  EUROPEAN COMMUNITY DOCUMENTS
  Motion made, and Question put forthwith, pursuant to Standing Order No. 102(9) (European Standing Committees),

  CONSERVATION OF WETLANDS
  That this House takes note of European Community Document No. 8564/95, relating to the wise use and conservation of wetlands; welcomes the call for a Community strategy on the conservation and wise use of wetlands; supports the Ramsar Convention's definition of sustainable use as 'human use of a wetland so that it may yield the greatest continuous benefit to present generations while maintaining its potential to meet the needs and aspirations of future generations'; shares the Government's concern to avoid duplication of existing national and international provisions; and shares the Government's view that the planned Demonstration Programme on coastal management will be a helpful and important means of providing information on broader issues of co-ordination.—[Dr. Liam Fox.]
  Question agreed to.

  LOCAL GOVERNMENT FINANCE (SCOTLAND)
  Ordered,
  That the Order [11th June] that the Special Grant Report on Community Care Special Grant and Supplementary Mismatch Scheme Grant for 1996–97 be referred to the Scottish Grand Committee be discharged and that the instrument shall stand referred to a Standing Committee on Delegated Legislation.—[Dr. Liam Fox.]

  Mr. R. Massey (Blight Compensation)
  Motion made, and Question proposed, That this House do now adjourn.[Dr. Liam Fox.]
  10.14 pm
  Sir Peter Fry: I have introduced this matter for consideration only after protracted correspondence between my constituent Mr. Massey and myself, and between myself and the Highways Agency and the Ministers responsible for roads and for local government. There has also been correspondence between Mr. Massey and a host of public servants. The failure to make any impact, stretching back well into 1994, necessitated my bringing the case to public attention.
  The Higham Ferrers and Rushden A6 bypass was dreamed up before the war, was thought to have died and was forgotten, only to be resurrected in recent years—a welcome, if somewhat unexpected, resurrection. There was such little faith in it ever being built that, when my constituent Mr. Massey bought his house in Elizabeth way, Higham Ferrers, in 1970, he tells me that his solicitor did not bother to tell him that the road was a possibility. The local council built some bungalows for the retired, which will be well within 100 yd of the new road.
  I do not want, however, to spend time arguing the road's merits. It is broadly welcomed as being needed, and I am grateful to my hon. Friend the Minister for Transport in London for his help in ensuring that it is to be part of the private finance initiative, and moves are being made to seek tenders. Like all such projects, however, some people have suffered. One of them is Mr. Massey.
  There are three main concerns. The first is road blight generally. It has increased as a result of the slowdown in new road construction. Uncertainty as to if, as well as when, a project is to be built has grown. Secondly, the guidelines for discretionary purchase under section 246(2A) of the Highways Act 1980 have never been especially generous, but, as amended after the Owen case, they have become much less generous. The statutory and other preconditions seem to ensure that the minimum number of houses will be included in the scheme. Thirdly, as it stands in law, the assessment system for council tax purposes has no mechanism to reflect severe reductions in value resulting from road blight.
  I will take those points in turn and relate them to Mr. Massey's case.
  Road blight can have the most disastrous effects on an individual's finances. Mr. Massey says that, even with the general drop in market values, his house should be worth nearly £80,000 on independent estimates, but an agent puts its current value at £65,000. That is a serious matter for my constituent. There is no guarantee that he could sell even at £65,000 before the road is built, which, at best, is still two years or more away. Made redundant more than five years ago, he wished to sell his house to invest the capital in a new business. He is now in his 60s, but will receive no pension until he reaches the age of 65, so he has been living off his savings.
  In the normal course of events, Mr. Massey could have sold his house, moved and invested, but the bypass plans, together with the legislation on discretionary purchase, have produced the present unfortunate position. Even if

  787
  the date for building the road is fixed, his loss is established, as it will take property prices some time to recover. By then, Mr. Massey, like all of us, will be a few years older.
  There is a need to assess possible purchase guidelines on a more sympathetic premise than currently exists. Mr. Massey's first application for his house to be bought met the condition regarding the closeness of the new road of less than 100 m from his home and the hardship criterion, and it was tacitly accepted that he also met the requirement of not being able to sell his property.
  At that time, the one criterion that Mr. Massey did not quite meet was the estimated level of traffic noise by the year 2013, which was calculated at 63 dB to the human ear. The level set by the Highways Agency at which noise has a serious effect is 68 dB. The agency quotes 62.5 dB as the level at which communication starts becoming difficult, and 70 dB as reflecting the noise made by a passenger vehicle travelling at 60 km per hour at 7 m, yet Mr. Massey—like all of us—is supposed to accept a higher level in his home.
  We are all aware of homes in which communication becomes difficult, but I never realised that it had to meet a standard set by the Department before compensation for road noise became applicable. It could provide an excuse for all sorts of silences in all kinds of families. Even a noise level of 63 dB is clearly an inconvenience.
  Mr. Massey has pointed out in a number of letters that the estimated noise level is based on traffic flows and density 17 years ahead, in 2013. The Department's forecasting record is not encouraging. From my years on the Transport Select Committee, I know that previous forecasts by Ministers, before my hon. Friend began his tenure in office, have been dismally wrong—well on the low side.
  The figure given for 2013 must be a guess, and is probably a poor one at that. The Department has admitted the possibility of a 20 per cent. error either way in some of its other traffic forecasts. In Mr. Massey's case, that would mean that he could suffer noise levels well above those estimated—even approaching that of a modern twin-engine jet—by the year 2013, which is so far away that such an estimate is realistic in view of Mr. Massey's present problems.
  No wonder my constituent feels that the rules or guidelines are made to ensure the minimum number of purchases. My opinion is that the guidelines have been drawn too tightly. If one meets all the criteria, bar one that depends on an unprovable forecast, one does not qualify for purchase consideration. That seems extremely hard law.
  It is obvious from all the communications that the Highways Agency has considerable sympathy with my constituent. In a letter dated 9 February 1995, the agency's Mr. Keith McKenzie wrote:
  "I am sorry to have to give you a disappointing decision after so lengthy an exchange of correspondence. However, there is a slight possibility that this decision may be subject to review now that the Highways Agency's application for leave to appeal to the House of Lords in the Lt Col Owen case has been rejected. New guidelines are being prepared, but I am unable to say when they will be introduced, or exactly what they will contain. However, the main effect of the changes will be that the Highways Agency will need to take into account loss in value of the property attributable to a
  788
  proposed scheme when assessing whether its enjoyment is seriously affected, and therefore whether it falls to be considered for discretionary blight. Your case will be reconsidered when the new guidelines are introduced."
  A change was necessary—as quoted—because the Highways Agency lost its case against Colonel Owen of Gloucestershire.
  What in fact happened? When the new guidelines were issued, there were some sweet-sounding phrases, such as
  "each application for discretionary purchase will be considered on its merits".
  Further on in the document, after listing three major factors constituting "severe effects", it states:
  "The factors listed in these guidelines are not exhaustive. Other factors or combination of factors may cause serious effects and this Agency will take these into account when considering your application".
  The net result of the changes, however, was that they were not helpful. Instead of an applicant having to show that no offer for the property was received within 5 per cent. of the unaffected market value, as under the old guidelines, the figure was raised to 15 per cent. So much for the hints of a promise to Mr. Massey that a change might help him.
  I believe that the whole basis of discretionary purchase needs to be re-examined. There seems to be a case for special consideration in cases of exceptional financial hardship, such as Mr. Massey's. Perhaps it should not be necessary to meet all the criteria to be considered for purchase.
  As for council tax valuation, Mr. Massey's local council and the district valuation officer have been sympathetic, but say that they have no power to do anything. I realise that my hon. Friend the Minister is not responsible for this part of Government policy, but I hope that he will pass on my concerns to his colleagues at the Department of the Environment. It is bad enough to see the value of one's house falling because of market forces, but to see it fall much further because of road blight, to have no redress and still to have no chance of even a lower council tax valuation and banding only adds insult to injury.
  I see my constituent's case as follows. He has been injured because he became redundant, because he is prevented from helping himself, and because of the operation of the law as it is now interpreted. The insult is that the Highways Agency gave him hope that the change in the guidelines might be beneficial. In fact, it made matters worse.
  My constituent and those in a similar position deserve consideration. They deserve another look at the guidelines, and they deserve better.
  I hope that I have shown that Mr. Massey has a real problem and a justified sense of injustice. My purpose in raising this matter is my belief that it illustrates a very real issue for very many people. Governments, whether local or national, take decisions—to build roads, to alter the lines of roads and to improve roads—which impinge greatly on the lives and finances of families.
  To my mind, we have not yet shown, under any Government, the necessary concern or taken the necessary action to help many of those families. I believe that fact is a challenge for my hon. Friend the Minister and for his Department and its policy in the future.
  10.27 pm
  The Minister for Transport in London (Mr. Steve Norris): I congratulate my hon. Friend the Member for Wellingborough (Sir P. Fry) on securing this opportunity to discuss this case, which, as he rightly says, is of wider interest to many hon. Members, precisely because people such as Mr. Massey have been affected.
  It is important to start by setting out the principles on which the Department will compensate those who are affected by schemes introduced by the Highways Agency. Similar arrangements exist for schemes introduced by local authorities, but it might be more appropriate to concentrate in this case on matters relevant to my Department.
  The general principle, as my hon. Friend has rightly said, is that, where properties are required for a scheme and where the property falls within the line that the road scheme will take, the property will be acquired at value. A compulsory purchase order mechanism exists to ensure that a scheme can proceed once it has achieved the necessary powers. Clearly, there will be those" who have properties which are not on the line of route but are adjacent to it, and that is what we are concerned about tonight.
  Parliament quite properly recognised that there needed to be a system that would compensate such people for loss in value. However, I do not believe that it is unreasonable to accept the proposition that it will never be possible to compensate every owner whose property might be affected to a slight degree by a new scheme. Were we to attempt to do so, we would rapidly enter a world in which government would be wholly unworkable, and in which the cost of new pieces of infrastructure would be unaffordable.
  The general principle is clear, and is contained in part I of the Land Compensation Act 1973. It establishes that, a year after a scheme is opened—a year after a road has been built—a property owner, subject to certain qualifications about being in residence and so on, who can establish that there has been a diminution in value will be compensated for that diminution.
  In the direct context of Mr. Massey and the Higham Ferrers and Rushden bypass, let me make one thing clear. A year after the opening of the scheme, Mr. Massey would have an unequivocal right to compensation under part I of the Land Compensation Act.
  If that is so, we turn to the proposition that, in addition to those powers, discretionary powers should be available to the Secretary of State. The circumstances about which we are concerned are those where, essentially, the individual cannot wait. I say that because I suspect that, quite frequently, the nature of discretionary purchase is not as well understood as it might be. I can understand why that is so, because emotions can run high in such matters.
  If we are to have a scheme that advances the claim that Mr. Massey would be able to make under the Land Compensation Act, we need to establish certain things. First, we need to establish that Mr. Massey had no foreknowledge of the scheme when he purchased his property. Secondly, we need to prove that the scheme will have an effect, which it is not possible to determine exactly, because the road has not yet been built.
  My hon. Friend talked about how one calculates the effect of noise. If he will allow me, I must tell him, gently, that I disagree with his view on that. Having established
  790
  that there is a loss of value, a further test needs to be applied, and that is the test of a pressing need to sell. It is the pressing need to sell that ultimately determines that it is right in equity for Parliament and the Department to authorise the purchase of an individual's property in advance of the scheme even being built.
  Let me deal with the calculation of loss of value. As my hon. Friend said, following the reassessment of the guidelines in the wake of the Owen judgment, two elements remain to be proven. One is the effect of noise on the scheme. He said that calculations that predict noise levels many years ahead may be inaccurate. I do not think that I do him any injustice by recalling that he said that they may be wildly inaccurate. That is true, but I remind him that the purpose of using a predictive, rather than an actual, calculation is twofold.
  First, because the scheme has not been built, all calculations of noise level must necessarily be predictive. Secondly, it would be unfair to the occupier of a property to assess noise only at the point at which the scheme was first opened. A date many years in the future is picked precisely because traffic builds up over time.
  Although I admit that such predictive science is inexact, I know that my hon. Friend, with his experience, will acknowledge that the officials who make such calculations do so as objectively as they are able. The test is good for the people concerned, because they get the benefit of the doubt in respect of the growth of traffic on a piece of road, even though it is unlikely to happen for many years.
  In the case of Mr. Massey, much depends on the assessment both of noise and of diminution in value. On noise, I believe that there is no disagreement between Mr. Massey, his agent and the Department on the proposition that the predicted noise is unlikely to reach the levels that are generally considered to trigger the threshold for discretionary purchase.
  On diminution in value, the position is more marginal. I can put some figures on the case that my hon. Friend made. The district valuer, whose opinion is the important one in such cases, assesses the unaffected value of Mr. Massey's property at £70,000, and the affected value at £60,000. He thus calculates a diminution in value of 14 per cent. While 14 per cent. is a material difference, it is less than the figure of 15 per cent. that my hon. Friend mentioned, which was in turn drawn from paragraph 3(a) of the new guidelines.
  My hon. Friend said that 15 per cent. is rather higher than 5 per cent. He is right, but in calculating serious effect and diminution in value, it is necessary to establish that the diminution in value is significant. He will accept that, if one asks for a valuation from any three private valuers, there will be a margin of difference of about 10 per cent. That sort of fluctuation can be tested any day, in any town, anywhere.
  So the figure of 15 per cent. is designed to indicate the figure at which there has been beyond doubt not merely a difference in valuation but an undoubted diminution in value arising from the prospect, if not the reality, of a scheme. That said, the difference in this particular case is 14 per cent. Taking account both of the fact that the noise calculations would appear to indicate that Mr. Massey's particular property will not suffer to the extent of the increase in noise normally taken into account in schemes such as this, and that the value of his property will not be

  791
  diminished by more than 14 per cent. according to the district valuer's calculations, the Highways Agency has concluded that Mr. Massey's claim cannot be met. Let me be clear that it cannot be met on the grounds that he has not passed the tests of serious effect by way of noise or diminution in value.
  I appreciate that the decision will come as a disappointment to Mr. Massey. I understand that he has suffered the loss of his job and that he seeks to use the proceeds of the sale of his property perhaps to re-establish himself in some business for the future. I am therefore concerned that my hon. Friend should be given every opportunity to prosecute his case.
  Although I have not so far been made aware of any exceptional circumstances which would enable me to change my opinion in this case, if my hon. Friend believes that there are exceptional factors which have not been made known to the agency or to me or given adequate consideration, I invite my hon. Friend to write to me about them, and he and I will discuss the matter further.
  I am, of course, concerned that, if it is agreed that the affected value of Mr. Massey's property should be £60,000 if he markets the property properly with a view
  792
  to sale, he ought to be able to receive that figure. If, after he has properly marketed it, the indications are that he is not able to receive that sort of consideration, I should certainly wish to look at the case again.
  I am extremely grateful to my hon. Friend for, as he rightly says, raising an extremely important subject, which is of interest to every Member of the House of Commons. I hope that he will accept that, having wrestled with such difficult cases for several years, I know that we will never be in a position to satisfy all those who feel aggrieved by the existence of a scheme—particularly one which, as he has every right to say, has a long history of not becoming a reality. Nothing is more frustrating.
  In this case, I am satisfied that the guidelines have been properly applied, and, with regret, I concur with the officials, including Mr. McKenzie, who have been in touch with Mr. Massey. I fear that I cannot at this stage exercise discretion on his behalf. I simply underline the fact that, if circumstances prove not to be as predicted or assumed, I should be very happy to go on discussing the matter with my hon. Friend.
  Question put and agreed to.
  Adjourned accordingly at seventeen minutes to Eleven o'clock.