Commons Sitting of 5 May 1998

Preamble
The House met at half-past Two o'clock
PRAYERS
[MADAM SPEAKER in the Chair]
Oral Answers to Questions
  ENVIRONMENT, TRANSPORT AND THE REGIONS
  The Secretary of State was asked—
  ENVIRONMENT, TRANSPORT AND THE REGIONS

    Council Tax
    Mr. Keith Simpson: What has been the average change in council tax levels for 1998–99. [39503]
    The Minister for Local Government and Housing (Ms Hilary Armstrong): The increase in council tax for the average household is 96p per week.
    Mr. Simpson: I am grateful to the Minister for that information, which is meaningless to my constituents. Thanks to the Government's first local government finance award, £14 million has been taken out of the budget for Norfolk and the council tax has gone up by 16 per cent. For the people of Norfolk, that means new Labour, new taxes. What hope do the people of Norfolk have that things will get better next year?
    Ms Armstrong: The increases in council tax this year reflect the changes that the previous Administration intended to introduce as part of the rebalancing of central and local taxation. Hon. Members will remember that, to get themselves out of the poll tax, the previous Administration put 2.5p on VAT and centralised local government spending enormously. They recognised that that was a mistake and began to amend it just before the election. We have continued that process and shall continue to set fair and meaningful taxes in our local government settlement next year.
    Mr. Bill O'Brien: My hon. Friend is right when she draws attention to the problems that she and her colleagues inherited from the previous Government. Does she agree that one of the problems inherited from the Tories was the width of the gap between local authority spending and the standard spending assessment allowed by the Government, which increased throughout the 18 years of Tory government? I hope that my hon. Friend will work to correct that error and to narrow—and eventually close—the gap between local government spending and assistance from Government.
    Ms Armstrong: My hon. Friend will know that we are currently consulting on changes to local government
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    finance and trying to make it fairer and better balanced. Local people need to know that they are getting the quality of services that they expect, at the price they are prepared to pay. Our settlement this year has begun to move us in that direction, but we must go further.
    Sir Norman Fowler: Does the hon. Lady remember that, in the previous London elections, the electors of Croydon were promised that Labour would not raise the council tax? I have a copy of the pledge in my hand. Can she therefore explain why, this year, council tax in Croydon under Labour is going up by 11 per cent., and why, over the past four years, it has increased by 30 per cent?
    Ms Armstrong: The right hon. Gentleman will also want to reflect on why his party, with the support of the hon. Member for Croydon, South (Mr. Ottaway), is telling the electorate that education is not a priority this year. The Conservatives are prepared to see the equivalent of two schools close in Croydon rather than allow relative rises in council tax to ensure the very best service provision. The council tax increase in Croydon this year reflects the decision that the Administration of which the right hon. Gentleman was a member made last year.
    Sir Norman Fowler: I think that the phrase the hon. Lady is searching for is, "No, I can't explain it". That being so, can she at least explain why the 20 highest charging councils in England, from Liverpool to Greenwich, are under Labour control? Why does it cost an average of £300 a year more at band D to live under a Labour council in London than under a Conservative council?
    Ms Armstrong: The right hon. Gentleman demonstrates that he has neither ears to hear nor nous to understand. I have explained the changes in Croydon. I do not know where the right hon. Gentleman has looked, but he will find that the top six increases in council tax have occurred in Tory areas.

    Housing Benefit
    Mr. Austin Mitchell: If he will end the system of paying housing benefit for council tenants out of housing revenue accounts. [39504]
    The Parliamentary Under-Secretary of State for the Environment, Transport and the Regions (Mr. Nick Raynsford): Removing the cost of rent rebates for council tenants from housing revenue accounts would cost the taxpayer an extra £1.3 billion this year. We are considering housing finance as part of our comprehensive spending review and we expect to announce conclusions from the review in the summer.
    Mr. Mitchell: I am sure that my hon. Friend agrees that the system of paying the housing benefit of council tenants from housing revenue accounts is inherently and monstrously unfair. It means that the poor are subsidising the poorest, it costs every working council house tenant £1,000 a year and it prevents a reduction in rents, which are higher than they otherwise would, or should, be.

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    I am sure that my hon. Friend—who is a fair man—agrees with me, so why will he not give a date for abolishing that monstrosity?
    Mr. Raynsford: I have answered my hon. Friend's question by saying that we are considering these matters in the context of the comprehensive spending review. I put it to him that a consequence of simply ending the current arrangement would be windfall gains to areas of relatively low need and no help for areas of high need. That is why his proposal is not on. Abolishing the current arrangement would provide a benefit of more than £1,000 per dwelling per year in Guildford, but no benefit whatsoever in Manchester. That cannot be right.
    Mr. Simon Hughes: I support the hon. Member for Great Grimsby (Mr. Mitchell) and stress that this is not a party political matter. Council tenants are furious that the system penalises them and that they must subsidise an unrelated issue: housing benefit. It is not a matter of whether the subsidies differ between authorities; it is whether individuals pay for the services they receive or pay for others to receive services that are unrelated to them.
    Mr. Raynsford: I am rather surprised that the hon. Gentleman has raised that issue because the suggestion made by my hon. Friend the Member for Great Grimsby (Mr. Mitchell)—which the hon. Gentleman supports—would not benefit his tenants in Southwark, but there would be an immediate benefit in Wokingham of £970 a year. That cannot be right or equitable.

    London Government
    Mr. Andrew Dismore: What action he plans to take to encourage Londoners to vote in the referendum on 7 May. [39505]
    4. Ms Karen Buck: If he will make a statement on his Department's role in publicising the arrangements for the London referendum. [39506]
    The Secretary of State for the Environment, Transport and the Regions (Mr. John Prescott): My Department has mounted an extensive public information campaign to ensure that the people of London are fully informed about our proposals for a mayor and assembly for London and to encourage them to vote yes or no on 7 May. This has included posters, radio and newspaper advertisements, a neutral leaflet through every letter box in the capital, an internet site and a telephone helpline, which to date has answered well over 10,000 calls.
    Mr. Dismore: Does my right hon. Friend agree that it is extremely important that as many people as possible vote on Thursday and that they vote yes for a London government committed to looking after London Transport, economic regeneration and the police and fire services in London? Does he also agree that the Conservatives' late support for the plan is a welcome, but tardy conversion to democracy throughout London?
    Mr. Prescott: I agree, and hope that the people will vote yes in the referendum. I welcome the support of
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    hon. Members on both sides of the House for the proposal. We want as many people as possible to vote. I shall not be churlish and criticise yet another U-turn by Conservative Members.
    Ms Buck: Is my right hon. Friend aware that many black and ethnic minority Londoners feel that their situation has worsened considerably in the 12 years since the previous Londonwide authority was abolished? Will he congratulate Operation Black Vote on its work to encourage black Londoners to participate in the referendum on Thursday and send a message to black and ethnic minority Londoners that a mayor and an assembly would strengthen their representation citywide?
    Mr. Prescott: It is important to congratulate those who have encouraged people, especially the ethnic minorities, to vote. We have produced a leaflet that summarises the proposals. Copies had been distributed to 3 million homes across the capital at the end of March. It has played its part, along with advertisements in newspapers and on radio stations. I hope that everyone will vote and that the referendum proposals are endorsed.
    Sir Sydney Chapman: Is the Deputy Prime Minister aware that in my extensive canvassing for the forthcoming London borough elections, few of my constituents have remarked on the referendum? The few who have greatly resent not being asked separate questions on whether they want a Greater London authority and separately elected mayor and the lumping together of those issues in one question, in spite of the warning given by Conservative Members. On reflection, does he think that he is listening to the people of London by putting the omnibus question?
    Mr. Prescott: In my canvassing in London, I have found that Londoners welcome the opportunity to participate in the vote. They are being given a chance, by a Labour Government, at least to have a say in whether they should have local government, which was denied them when the previous Government abolished the Greater London council.
    Mr. Paul Burstow: Does the right hon. Gentleman agree that we need a high turnout and a strong yes vote in the referendum on Thursday to give the new authority the clout to do its job? Will he accept that, by refusing a two-question referendum, the Labour party has stifled debate that would have guaranteed a high turnout? Labour will reap its reward, which will be a feeble result and an enfeebled authority.
    Mr. Prescott: I do not accept that proposition. I hope that as many people as possible will vote in the referendum. In Wales, the turnout in the referendum for a Welsh assembly was 50 per cent., and in Scotland the turnout was 60 per cent. It behoves all of us to get across to as many people as possible, their democratic obligation to participate in the vote.
    Mr. Richard Ottaway: A crucial issue in the referendum is the way in which the parties select their mayoral candidates. We know that the Conservatives are committed to one member, one vote. Can the right hon. Gentleman assure the House that there

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    is no truth in the rumour that the Government are trying to exclude the hon. Member for Brent, East (Mr. Livingstone), who is running as a candidate, and that paid-up members of the Labour party in London will have a free vote on who goes on the shortlist—yes or no?
    Mr. Prescott: I do not know whether that question warrants a yes or no answer. When the people of London have decided on 7 May for the election of a mayor and an assembly, as I hope they will, we shall make the appropriate procedures, which is the proper way to select and elect candidates. The Tory choice of Lord Archer, the Tory answer to Dick Whittington, is not the one they are likely to turn to.

    New Housing
    Mr. Stephen Day: If he will make it his policy to adopt a target of building two thirds of new housing development in brown-field sites. [39508]
    The Secretary of State for the Environment, Transport and the Regions (Mr. John Prescott): I consider our 60 per cent. target both challenging and achievable. To help achieve it, I have established a task force led by Lord Rogers to look at how best to use previously developed land. We shall launch shortly a national land use database to review how many recycled sites exist, or are likely to become available in the near future, and we will expect regional planning conferences, for the first time, to set their own regional targets.
    Mr. Day: Can the Secretary of State advise the House of one green-field site anywhere in Britain that has been saved since he announced his change of policy on green-field sites?
    Mr. Prescott: I am pleased to announce that, under the new system, the review carried out by the west midlands regional planning conference shows that, of the 330,000 houses proposed by 2011, 61 per cent. will be on green-field sites—
    Sir Norman Fowler: Green-field sites?
    Mr. Prescott: I apologise; 61 per cent. will be on recycled land. That shows that the Government's proposal will save many green-field sites. There is considerably more green belt land now than when the Government took office last year.
    Mr. Andrew F. Bennett: Does my right hon. Friend accept that Britain still has the problem that far too many people want their houses to be on green-field sites but want others live on brown-field sites? Will he ensure that we regenerate our cities so that people feel that they are free of crime, have high-quality schools and are places in which they want to live? We shall then have gone a long way towards solving the problem.
    Mr. Prescott: I agree with my hon. Friend. That is precisely the Government's policy. We need to make our cities more attractive so that more and more people want to live in them. That is what our plans are about.
    Mr. Nicholas Soames: Will the right hon. Gentleman understand and accept that in West
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    Sussex—particularly in Mid-Sussex, where people have been outraged by his arbitrary decision to add 12,800 houses to the figure decided upon by his inspector—his policy is considered untenable? Where does he think West Sussex will find brown-field sites to accommodate more than 12,800 houses in addition to the 38,000 that he has already said we have to build there?
    Mr. Prescott: We have made it clear that our new approach is to consider these matters in the regional context, and the West Sussex structure plan will be so considered. That will be helpful. We have yet to start discussions on that. The county council has been granted leave for judicial review of my direction to increase housing provision in line with the regional planning guidance, so I do not wish to comment on the matter at present.

    London Government
    Mr. Clive Efford: Pursuant to chapter 3 of the White Paper on "A Mayor and Assembly for London", if he will make a statement on arrangements for ensuring public accountability of the mayor and assembly. [39509]
    The Minister for London and Construction (Mr. Nick Raynsford): The mayor and assembly will be accountable to Londoners through the ballot box. To strengthen public accountability, the mayor will hold a monthly assembly question time, twice-yearly people's question times and an annual state of London debate. The assembly will hold the mayor to account, hold its meetings in public and publish its papers and reports.
    Mr. Efford: Does my hon. Friend accept that the current situation in London is unacceptable; that too many individuals and quangos are spending public money for which there is no accountability? Does he further accept that the new arrangements for a mayor and an assembly will make such expenditure publicly accountable and make those people directly accountable to the people of London through the democratic process?
    Mr. Raynsford: My hon. Friend is right. The previous Government abolished democratic citywide government in London and replaced it with a raft of unaccountable quangos. We are restoring to the people of London the democratic right to elect their own citywide mayor and authority and ensuring that decisions are taken in an accountable framework and that quangos are brought back within democratic control exactly in line with the principle of accountability my hon. Friend espouses.
    Mr. John Wilkinson: If, as seems likely, a large number of Londoners register on Thursday their lack of confidence in the accountability of the new mayor by not bothering to vote—by a large electoral yawn—will not it be because they do not believe that there will be any sufficient mechanism either to bring the mayor to account or even to replace him or fire him if he is not up to the job? By what means will a corrupt or ineffectual mayor be replaced?
    Mr. Raynsford: The hon. Gentleman gives little credit to the electorate if he believes that the principle of democratic accountability is ultimately flawed. We do not

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    believe that; we believe that the people should decide and that if they are dissatisfied with the mayor they should get rid of the mayor—[HoN. MEMBERS: "How?"] By the ballot box, which is the best and most effective way to achieve accountability. I hope that on Thursday the people of London will give a resounding endorsement to the Government's plans for a mayor and an assembly for London.

    Revenue Support Grant
    Mr. Tim Boswell: What recent representations he has received about the allocation of revenue support grant between local authorities. [39511]
    The Minister for Local Government and Housing (Ms Hilary Armstrong): My Department receives representations almost continually from Members of Parliament, local authorities and their associations and other sources, including the general public. Such representations arise from the local government finance settlement for 1998–99, which was announced to the House on 5 February. In addition, we receive views on what changes might be made for the next financial year and responses to our current review of local government finance.
    Mr. Boswell: Now that the Government have, admittedly under some pressure, made the welcome decision to reinstate the practice of their Conservative predecessors in publishing a rural White Paper, will the Minister undertake to tell the House, either in that document or, even better, now, what their rationale is for taking nearly £100 million a year out of the revenue support grant for shire counties? In addition, why has such a small allocation—only about 1.5 per cent. of the total—been made for shire districts on account of sparsity factors?
    Ms Armstrong: The hon. Gentleman will know that the previous Administration considered sparsity factors but found no means of changing the formula fairly. I have invited authorities to submit further ideas this year on how the formula might better reflect sparsity factors. That will be a matter for discussion and deliberation. It is simply untrue to say that there has been a deliberate attempt to take money from the shires. The hon. Gentleman knows that additional money went to shire districts this year after we had looked at the formula for other areas. If he adds up the amounts for shire counties and for shire districts, he will find a different sum.
    We are trying to redress the enormous unfairness that existed in the formula during the last few years of the previous Administration. We are moving towards a fairer and more fiddle-free agenda.
    Mr. Keith Simpson: So it has been changed.
    Ms Armstrong: Yes, we have changed it. We are making sure that we end the ludicrous practice of doling out money for visitors as if they were residents. That happened in a place not far from here, and the hon. Gentleman knows that that was a fiddle. We have stopped the fiddle.
    Mr. Harry Barnes: In determining areas of need, will the Minister consider
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    improving revenue support grant allocations by taking into account Treasury figures that show the number of people in high income tax brackets? In Derbyshire, for example, only 5 per cent. of the population are in those brackets; in Surrey, the figure is 17.2 per cent. Derbyshire is 41st of the 45 counties according to published prosperity figures, which is a clear indication that there is need in particular areas. I hope that that will be reflected in the review that is taking place.
    Ms Armstrong: We are seeking to reflect need more accurately, but we also seek to make the formula simpler. We want council tax payers to know exactly what they are paying. At the moment, the system is so complex that that is extremely difficult. I do not promise that we will be able to do it in one year; it took the previous Administration 18 years to make the mess and it will take us some time to undo what they did.
    Mr. Andrew Lansley: Does the Minister agree that the Government's changes to standard spending assessment methodology this year have cost London nearly £50 million, which is the equivalent of £17 per household, or more than 2 per cent. on council tax? Will the Minister assure Londoners that the Government's plans for further SSA changes will not mean further cuts in SSA for London next year, after the London elections?
    Ms Armstrong: I welcome the hon. Gentleman to the Front Bench. I am not sure whether his appearance means that the hon. Member for South Suffolk (Mr. Yeo) has disappeared. I shall miss him greatly; I used to enjoy his over-the-topness and the opportunities that that gave us for scoring yet more goals.
    It is interesting that the hon. Gentleman moves back to this issue; at our previous Question Time his Front-Bench colleagues accused us of hitting London hard. [Interruption.] Sorry—they accused us of being overgenerous to London as against the counties. Conservative Members change their minds so often that they confuse even me. The hon. Gentleman demonstrates that the settlement is fairer and fiddle free. If there had not been so many fiddles, some London boroughs would not have had the cushioning that the Conservative Government gave them.
    Ms Diane Abbott: Does the Minister agree that some of us are astonished that the Tories should be so brazen as to come to the Chamber and talk about revenue support grant, because those of us who were in the previous two Parliaments saw how RSG was gerrymandered to pour money into Tory Westminster and Tory Wandsworth? Whether they live in the inner city or in the countryside, where we have unprecedented representation, people are glad to see fairness and common sense return to the allocation of RSG.
    Ms Armstrong: I agree with my hon. Friend. The fact that Conservative Members dare complain about any settlement for London demonstrates just how brazen they are. That does not win support, but being straight with people does. We are being straight. This has been a difficult settlement, but it has been fairer. People in

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    London know that the distribution in London is much fairer this year because we have stopped the incredible fiddle over how visitors were treated.

    Genetically Modified Organisms
    Mr. Norman Baker: What assessment he has made of the extent of Government control to regulate the intrusion into the environment of GMOs. [39512]
    The Parliamentary Under-Secretary of State for the Environment, Transport and the Regions (Angela Eagle): The Government have in place a strict regulatory framework to control the release of genetically modified organisms into the environment. Deliberate release may take place only with the explicit consent of the Secretary of State or if marketing approval has been granted in the European Union. Deliberate release consent will not be given without a rigorous safety assessment on a case-by-case basis.
    Mr. Baker: I thank the Minister for that answer, but is she aware that an article in the New Scientist on 2 May referred to the fact that there is evidence that beneficial insects can be killed by transgenic crops and, in particular, by maize being marketed by Novartis? Does she accept that genetically modified crops can, in some circumstances, pose a major threat to the environment? Will she call on the European Commission immediately to suspend market consent for genetically modified maize?
    Angela Eagle: As part of the rigorous risk assessment that my Department undertakes before any genetically modified organism can be released into the environment, it examines the effects on insect populations, including beneficial insect populations, of any of the modifications. I assure the hon. Gentleman that where there is an effect, permission to release will not be granted.

    Green-field Development
    Mr. Chris Mullin: If he will visit Sunderland to examine the effect of green-field development on the inner city; and if he will make a statement. [39513]
    The Minister for the Regions, Regeneration and Planning (Mr. Richard Caborn): Since my hon. Friend tabled this question, I have had the privilege of visiting Sunderland. On 30 April, I saw the scale of inner-city regeneration, and I understand that the city of Sunderland has allocated some 50 per cent. of proposed development for brown-field sites in its emerging unitary development plan, which is due to be adopted shortly.
    Mr. Mullin: We were very glad to see the Minister in Sunderland the other day, but there were one or two parts that he did not reach. Is he aware that in and near the centre of Sunderland we have acres of listed period property that are sliding towards dereliction, while all around us massive planning permissions are still being granted for housing on green-field sites? If we are serious about reversing this trend—I assume we are—Sunderland would be a good place to start. If the Minister would care to make another visit, I should be glad to give him on-the-spot guidance to the key areas.
    Mr. Caborn: I am sure that my hon. Friend will acknowledge that the policies we are pursuing in drawing
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    up the unitary development plan were put in place by the previous Administration. My hon. Friend's local authority has now made some modifications and two green-field sites have been taken out, which would have been in line with the previous Government's policy had they still been in power. My hon. Friend is absolutely right that the Government's policy is to make our cities and towns places where people like to work and play, unlike the previous Administration, who put everything on green-belt land.

    Cars
    Helen Jones: What measures he proposes to encourage the purchase of more fuel efficient, less polluting cars. [39534]
    The Minister of Transport (Dr. Gavin Strang): We have already announced several fiscal measures to encourage the purchase of cleaner cars, including the fuel duty strategy and the proposed lower rate of vehicle excise duty for the least polluting, most fuel efficient cars. We have also established the cleaner vehicles task force to advise on further action.
    Helen Jones: I thank my right hon. Friend for that reply. Does he agree that, as people will want to use their cars as part of an integrated transport strategy, it is important that those vehicles are less polluting and more fuel efficient than they are now? Does he further agree that the development of alternative fuels, such as compressed natural gas and liquified petroleum gas, will have an important role to play in achieving that end?
    Dr. Strang: Yes, the motor car will continue to have an important role in transport, not least because it is flexible and convenient. My hon. Friend is right that we want an increased take-up of alternative fuels, particularly in congested areas, to help those people, especially asthmatics, who suffer because of poor air quality caused by fuel emissions.
    Mr. Eric Forth: If it made sense to raise the tax on fuel for motor vehicles to have the effect on pollution that the Minister claims, why did it also make sense to reduce the tax on domestic fuel for heating, which causes even greater pollution?
    Dr. Strang: I remind the right hon. Gentleman that the Conservative Government started the automatic increase in fuel duty by more than the rate of inflation. Surely he should welcome the fact that the Chancellor has announced our intention to introduce a new reduced rate—a £100 rate—of vehicle excise duty for the least polluting, most efficient cars.
    Mr. Peter L. Pike: Does not experience show that when we widened the price differential, people were encouraged to use unleaded fuel? Should we not do the same for compressed natural gas and liquid petroleum gas to allow those fuels to be used in an environmentally sensitive way?
    Dr. Strang: Yes, my hon. Friend is right. In two Budgets, the Government froze the rate of duty on liquefied petroleum gas and on compressed natural gas.

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    We believe that those fuels have an enhanced role to play, particularly in congested areas where emissions effect people's health, especially those with asthma and cardiac conditions.
    Mr. Tim Boswell: What plans he has in respect of the future role of the private car. [39535]
    The Secretary of State for the Environment, Transport and the Regions (Mr. John Prescott): We shall shortly publish a White Paper delivering our manifesto commitment to introduce an integrated transport policy to fight congestion and pollution. Our aim will be to extend the transport choices available to the British people. The private car will continue to have an essential role to play, along with a much more effective public transport system, which will encourage people to use their cars less and public transport more. That will protect the environment, strengthen our economy and provide access for all sectors of society.
    Mr. Boswell: I take it from the Secretary of State's response—and from the response of the Minister of Transport to an earlier question—that the Government are at last coming to terms with the reality that a car is a necessity and not a luxury for many millions of drivers and their families, and not only for the affluent or those resident in rural areas. In the light of that reality, will the Secretary of State and his colleagues return to the Chancellor and make representations to him about the implications of a total tax increase of £9 billion on motorists which will extend over the life of this Parliament and have to be paid out of the pockets of ordinary drivers and ordinary families?
    Mr. Prescott: The petrol duty escalator was started by the previous Administration, and has required motorists to pay billions of pounds in tax. This Government have always realised that the car has an important part to play—and I have spoken on transport issues for a long time. The United Kingdom has fewer cars per head than other European countries, but we use our cars an awful lot more?—because those other countries have a better public transport system. We wish to encourage people in the United Kingdom to use their cars less and to use public transport more. We will achieve that goal by making public transport much more effective—by making it a priority, rather than by deregulating it and encouraging competition, which, under the previous Administration, led to a reduction in public transport.
    Mr. Tom Brake: Can the Deputy Prime Minister confirm whether it is the Prime Minister's policy unit or the Department of the Environment, Transport and the Regions that is defining the Government's policy on private cars? Will he also consider his position if, at the end of this Parliament, he has not been able to reduce traffic in terms of his commitment?
    Mr. Prescott: The transport White Paper will be a Government policy document formulated by my Department and influenced by the Prime Minister—who is the Government's main Minister. Those factors will determine the policy, which I believe will be a successful one. Hon. Members will have to wait until I introduce the
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    White Paper to make a judgment on the policy. There will also be a public debate on the policy. I believe that the White Paper will lead not only to a better ordered public transport policy and to less private car use, but—most important—to improvement in our environment and in the health of our people.
    Sir Norman Fowler: If the Prime Minister's own policy unit is concerned about the transport White Paper's anti-motorist stance, should not that be a warning to millions of motorists in the United Kingdom and to thousands of other people who work in the motor industry? Is that stance not the real reason why the transport White Paper has been deliberately delayed until a week or two after the local government elections have been held?
    Mr. Prescott: First—as a matter of history—I am not even aware of the paper mentioned in the press, and I have not seen it. Secondly, we will produce a transport policy that meets the needs of the United Kingdom. As for our policy being hostile to those needs, I tell the right hon. Gentleman—who seems to have been talking an awful lot about private car use—that the previous Administration realised that car use was growing so much that, in 25 years, another 10 million cars will be on the road, requiring us to build 110-lane motorways between London and Leeds. The previous Administration therefore cut the road programme.
    As for tax on motorists—[Interruption.] Yes, tax; the petrol duty escalator was certainly increased. I should like to quote to the right hon. Gentleman something from the 1996 Green Paper on taxation of non-residential parking, which states that there should be
    "a presumption in the favour of introducing legislation. in due course, to enable congestion charging and area licensing to be implemented".
    That was the clear intention of the previous Administration, who seem to have had one policy in government and another in opposition. Perhaps the policy change was announced when the right hon. Gentleman had taken time to be with his family, and he missed it. The way he is currently performing, he will be back with his family and off the Opposition Front Bench.

    Rural Bus Partnership
    30. Mr. Derek Wyatt: If he will make a statement on the distribution of the rural bus partnership fund in England. [39536]
    The Minister of Transport (Dr. Gavin Strang): On 28 April, I announced proposals for distribution to English local authorities of an additional £37.5 million for local bus services. That followed the announcement by my right hon. Friend the Chancellor of the Exchequer, in the Budget, of another £150 million over the next three years to improve rural public transport.
    Mr. Wyatt: Given that one in five people in rural areas do not have a car and that a quarter of parishes in England were denied bus services under Conservative Governments, what guarantees can my right hon. Friend give for safeguarding that new investment, so that it goes towards new and additional bus services rather than existing ones?
    Dr. Strang: I am grateful for that question. We certainly shall issue guidance to local authorities to ensure

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    that we get value for money. As my right hon. Friend the Secretary of State said, we want new bus services to be established. As a result of the previous Administration's policies, no fewer than a quarter of rural parishes in England have no bus services, not even on one day of the week, as my hon. Friend pointed out. In the remaining 75 per cent. of parishes, we want better services, such as the introduction of a seven-day service where there is only a five-day service. We want new services to be established with that huge amount of additional money.
    Mr. Desmond Swayne: Given that every time a motorist fills his tank, according to the Automobile Association, of the £20 that he may spend £16 goes to the Government in tax revenue, surely the motorist will not get a fair deal by being recompensed in the bus services that will be paid for by a mere £50 million spread throughout the kingdom over five years. How much more money can we expect?
    Dr. Strang: I do not think that the hon. Gentleman realises what a quantum change this is in the level of subsidy available for rural bus services. Is he aware that many authorities will receive £1 million extra this year, next year and the year after that? Is he aware that that extra money more than doubles the amount that some local authorities currently have? Of course the car is vital in rural areas, but we want to restore some of the bus services that were lost under the Tories.
    Mr. David Borrow: On Friday night, I attended a meeting of the parish council at Longton to discuss rural transport. One of the issues raised was the difficulty experienced by local residents in attending the hospital in Chorley and the administrative centre in Leyland, where there is a jobcentre and so on. Will my right hon. Friend ensure that, in giving guidance to local authorities, consideration is given not only to the network of public transport, but to access to public facilities such as hospitals and administrative centres, which should be a priority in creating any new bus services?
    Dr. Strang: My hon. Friend makes an important point about precisely the sort of issue that we will be concerned about in setting out guidance. It is important also that there should be bus services to hospitals and other important centres seven days a week in as many areas as possible. I also think it important, particularly for young people, to re-establish Saturday bus services into small towns.

    Railtrack Communication Masts
    Mr. Crispin Blunt: What is his estimate of the number of Railtrack communication masts that are also being used for commercial telecommunications. [39537]
    The Parliamentary Under-Secretary of State for the Environment, Transport and the Regions (Ms Glenda Jackson): I understand from Railtrack that 300 masts, out of a total of 1,000, are used for commercial telecommunications as well as for Railtrack's own needs.
    Mr. Blunt: Is the Minister aware that, nine months ago, Railtrack was able to override the objections of people in
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    Reigate and the local authority by putting up a mast and taking no notice of the requested amelioration of the mast's environmental impact? Is she further aware that, less than nine months later, the local authority has been presented with an application for an Orange mast on the site where the Railtrack mast has been erected? Does her answer indicate that Railtrack is systematically abusing its statutory authority to override the local planning process? Is it time for Railtrack to lose that statutory power to override the objections of local people?
    Ms Jackson: There is no statutory requirement under which Railtrack must obtain planning permission, but any commercial company involved in the use of any Railtrack mast is most certainly required to obtain the necessary planning permission.
    Mrs. Gwyneth Dunwoody: Will my hon. Friend have a short and fairly firm word with Railtrack to point out that, if it intends to develop, including signalling in ways in which it has not done so in the past, it must ensure that those who work for it, whether contractors or direct employees, not only have the relevant qualifications but understand the whole world of safety? There is clear evidence that Railtrack is not insisting on contractors providing proper care, either for its own work force or for those using the railway system.
    Ms Jackson: My understanding is that there are no safety implications—nor any reduction in safety—when there is shared use of a mast. As my hon. Friend will know, there was a very critical Health and Safety Executive report on Railtrack's control of contractors. I understand that Railtrack has introduced new systems for the management of its contractors and for assuring that technical standards are met. The Health and Safety Executive is monitoring those improvements and will not hesitate to take further action to ensure that risks are properly controlled.

    Rolling Stock
    Mr. Austin Mitchell: If he will introduce measures to accelerate the purchase of new rolling stock. [39538]
    The Secretary of State for the Environment, Transport and the Regions (Mr. John Prescott): On 21 January, I asked the rail regulator to conduct a wide-ranging inquiry into the operation of the rolling stock leasing market. One of the issues that I asked him to look at was investment in new rolling stock. The regulator has submitted his report and I am discussing with him whether further action is required in the light of his recommendations.
    Mr. Mitchell: I am very glad to hear my right hon. Friend's news. I hope that he will encourage passenger operators to follow the example of the freight operator in buying new rolling stock to boost the British rolling stock and engine industry, which has been disastrously hard hit by privatisation. Will he do so by pushing the rolling stock companies into buying new rolling stock rather than siphoning off their ill-gotten gains, as if they were lottery

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    profits, as they have been doing? That would be a better way of acquiring new rolling stock than, as Great North Eastern Railway Ltd. wants, extending the franchise.
    Mr. Prescott: I think that the House is aware of how the assets under the three ROSCOs were quite shamelessly undersold, costing the taxpayer about £750 million. It is our concern to get investment in the railway system. I was concerned that a number of operators had found it difficult to make leasing arrangements with the ROSCOs, which was one of the reasons why I asked the regulator to conduct his inquiry. As soon as I have considered his recommendations, I shall report to the House.
    Sir Sydney Chapman: When will the new rolling stock that was promised last year finally appear on the London underground Northern line? What has been the reason for the considerable delay? As the project was financed under the private finance initiative, have financial penalties been imposed on the contractors?
    Mr. Prescott: My hon. Friend the Minister for Transport in London advises me that much of the new rolling stock is being tested. We hope to see that new investment on the line as quickly as possible. For the long term, the question is how much essential investment we can secure to modernise most of the rolling stock on the London underground. If the hon. Gentleman wants, I will find out the exact position and write to him about it.
    Mr. Paul Burstow: Does the right hon. Gentleman agree that the previous Government's failure to write rolling stock replacement programmes into franchise agreements has meant that many of our constituents have to travel on ancient, unsafe and inadequate trains, with no prospect of the franchisees replacing the trains throughout the entire life of the franchise? Will he do something about that to ensure that my constituents do not have to travel on such unsafe and dangerous trains?
    Mr. Prescott: Yes, that is a matter of major concern. Some operators have asked for an extension of their franchise, tied to an intention to introduce new investment, but I thought that the intention was to introduce new investment without the extension of franchises. That was exactly the case for Great North Eastern Railway. It complained that the ROSCOs would not give it sufficient finances during its short franchise. I do not believe that to be so, and have not found it not to be so. Sometimes, pressure is being exerted to extend franchises instead of getting on with introducing new investment. I am addressing myself to that problem.

    Company Car Parking
    Mrs. Cheryl Gillan: What representations he has received on the impact on small businesses of taxes on company car parking space. [39539]
    The Parliamentary Under-Secretary of State for the Environment, Transport and the Regions (Ms Glenda Jackson): Taxing company parking provision was one of the range of options raised in the Government's
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    consultation exercise on developing an integrated transport policy. A number of respondents commented on it, some specifically from the perspective of small businesses.
    Mrs. Gillan: Does the Minister agree that the last thing that our small businesses want is more taxes? Will she take this opportunity to rule out once and for all the leaked proposals for taxation to fall on small businesses, factories, offices and shops? Does she realise that, if she does not rule that out now, the Government will prove themselves to be bad for business?
    Ms Jackson: No final decisions have been taken on legislation to introduce a non-residential parking levy or on the shape that such a levy would take. We have been considering the social and economic implications nationally and individually of, among other things, the coverage of a levy and exemptions for types and sizes of business—those issues need careful consideration. I am told by small businesses that one of their gravest concerns is the seemingly endless congestion on city streets, which not only precludes and delays delivery, but deters people from shopping—pavements are choked with fumes and people take their lives in their hands if they have to cross the road. The Government are committed to ensuring that that is not only curtailed, but improved.
    Mr. Alan Simpson: Before my hon. Friend is deterred from going down that path, will she examine the phenomenal success of the initiative taken by Boots in Nottingham, which pre-empted any Government decision and, of its own volition, shifted its priorities in favour of subsidies to public transport use and to car sharing? Given the initiative's popularity with the public and with the employees, does not it represent a better model to commend to large and small firms alike in any local economy?
    Ms Jackson: My hon. Friend is entirely right. We are commending Boots's model to businesses and industries, both large and small. Boots is by no means the only company that has adopted a green transport plan, which brings enormous benefits not only to the company but to their employees.
    Mr. Christopher Chope: Is the Minister on the side of the teeny-boppers in this argument? Does she accept that a tax on car parking spaces will lead to more red tape, increase the cost of food and give rise to more anti-social on-street parking? Is not it better for cars to be in car parks than to be on the road?
    Ms Jackson: I think that the choice of the word "teeny-bopper" was somewhat unfortunate, given the age of the new leader of the Conservative party—although he has shown few signs of being able to bop anywhere. On additional levies for non-residential parking, an interesting finding by the British Retail Consortium is that its customers are less concerned about car parking costs than about ease of access. The charges levied by the business rates are based on the whole curtilage of the building, whereas it has been assessed that the average cost per annum of a parking space for large retail outlets is about £50. Given the turnover of such businesses, that is a small charge.

    London Minicabs
    Ms Linda Perham: What measures he proposes to ensure the safety of minicab passengers in London. [39541]
    The Minister for Transport in London (Ms Glenda Jackson): The Government intend to introduce legislation for the regulation of London minicabs as soon as parliamentary time permits.
    Ms Perham: I welcome my hon. Friend's reply. Is she aware that there were more than 60 sex attacks on women using minicabs in London last year? Can she confirm that the regulation of minicabs in London, which was promised in Labour's London manifesto, is supported not only by the private hire trade but by the black cab trade—many of whose drivers live in my constituency—the police and the people of London? Will she ensure that legislation will cover checks on a driver's criminal record, health and topographical knowledge, matters that were included in a private Member's Bill that was wrecked by one Conservative Member?
    Ms Jackson: I agree with every word that my hon. Friend uttered. As she knows, it was part of our manifesto commitment to London to introduce such regulation. It is important that both cars and drivers should be subject to checks. It is greatly to be regretted that a Bill originally
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    introduced by a former Conservative Secretary of State for Transport, the right hon. Member for North-West Hampshire (Sir G. Young), has fallen because of the actions of one Conservative Member.

    Roads Programme
    36. Mr. David Ruffley: What representations he has received on the upgrading and maintenance of trunk roads. [39542]
    The Minister of Transport (Dr. Gavin Strang): About 14,000 representations have been received during the roads review. Overall, they showed an acceptance of the need for a new approach that includes proper maintenance, best use of existing roads and investment in specific improvements.
    Mr. Ruffley: In the departmental review, will Ministers give special priority to major strategic trunk roads? Will the A14 be a priority, given that it is one of the major trunk routes between here and continental Europe?
    Dr. Strang: The hon. Gentleman raises an important point about maintenance. He will be aware of the neglect of road maintenance by the previous Administration. We have increased the allocation from £200 million last year to £300 million this year. We must get better use out of the existing road network and maintain it properly.

Economic and Monetary Union
3.30 pm
The Prime Minister (Mr. Tony Blair): With permission, Madam Speaker, I will make a statement about the meeting of European Union Heads of State and Government on economic and monetary union, which I chaired in Brussels on 2 May. My right hon. Friends the Chancellor of the Exchequer and the Foreign Secretary, and my hon. Friend the Economic Secretary, were also present.
The aim of the meeting, and of separate meetings of the Finance Ministers during the weekend, was to take decisions on which countries would participate in the single currency from 1 January 1999; on the nominations for the president, vice-president and members of the executive board of the European central bank; on the bilateral conversion rates that will apply between participating currencies from 1 January; and on fiscal discipline and economic reform. I have placed a copy of the drafts of the resulting documents in the Library.
The Heads of Government had before them a unanimous recommendation from the Finance Ministers on which countries should be in the first wave of economic and monetary union, and a supporting opinion from the European Parliament, which had met that morning to consider the Finance Ministers' recommendation. Heads of Government agreed unanimously that the following 11 countries should join the single currency from next January: Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg, the Netherlands, Portugal and Spain.
We also agreed without difficulty on the following nominations for the executive board of the ECB: as vice-president, to serve for four years, Mr. Noyer; and, as ordinary board members, Mr. Issing, to serve for eight years; Mr. Padio-Schioppa, for seven years; Mr. Domingo, for six years; and Mrs. Hamalainen, for five years.
The Heads of Government also agreed on Saturday night a statement that, in future appointments to the executive board, appropriate weight and consideration would be given, according to a balanced system of rotation, to recommendations for nationals of member states not on the initial slate.
The declaration on fiscal discipline and economic reform, which was adopted by Finance Ministers on Friday evening, is a significant document, building on a United Kingdom presidency initiative at the York informal ECOFIN in March. It emphasises the importance of fiscal consolidation in high-debt countries and of economic reform; both are essential to help to create jobs and to ensure that monetary union is successful.
All those issues were decided with relative ease, but, as is well known, there were very difficult negotiations over the presidency of the European central bank. It is important to set out those negotiations in detail. There was ready agreement that Wim Duisenberg, the current president of the European Monetary Institute, and a highly respected former Dutch Finance Minister and governor of the Dutch central bank, was the best choice as the first president of the ECB. As president of the European Monetary Institute, he has already been in charge of the practical preparations for the euro. As president of the ECB, he will be well placed to continue that role.
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It was also readily agreed that we expected Mr. Duisenberg's successor to be the French nominee—Presisent Chirac made it clear that his nomination would be Jean—Claude Trichet, again an experienced and respected governor of the Banque de France—and that both nominations should be for the full eight-year term. Where there was disagreement was not on the substance of any of that, but on the length and form of Mr. Duisenberg's tenure as president.
Because of the controversy—not least in the European Parliament—it is important to be clear what the precise issue at stake was. Much of the subsequent press reporting has rested on this simple factual inaccuracy: that Mr. Duisenberg intended and wished to serve his full eight years, as opposed to being nominated for that time as under the treaty. [Interruption.] In fact, that was not and has never been the case.
Eighteen months ago, before any French candidate had been suggested, Mr. Duisenberg properly made it clear that he would not want to serve a full eight years, in view of his age. Indeed, he did so publicly. At that time, he was saying that he would not guarantee staying more than two years. Later, he talked of between three and five years—but he did insist on being nominated for eight years.
The issues for us were therefore these. If Mr. Duisenberg would not serve the full term, was it right to appoint him? What was the minimum term we should ask of him? Should there also be a maximum term, given the circumstances? The answer to the first question was: yes, in our view, because, as president of the EMI and a highly respected central banker, he was plainly the right person to launch the euro.
The answer to the second question was again clear: Mr. Duisenberg should at least stay until the euro was launched and all transitional arrangements, particularly the introduction of the notes and coins, were in place. That accorded with Mr. Duisenberg's own wishes that he oversee that process and step down shortly afterwards.
It was over the third question that there was disagreement. Some preferred a fixed date for Mr. Duisenberg to retire, while others argued that that would not be consistent with the treaty. The protracted discussions were essentially over how to resolve that issue. Mr. Duisenberg's view, backed by ourselves, was that although his intention was clear, there could be no question of there being any formal obligatory end to his term.
In the end, it was Mr. Duisenberg's view that prevailed. [Interruption.] At our suggestion, he stated his position personally, in his own words, to the Council. He explained that because he would be 67 in 2002, he did not wish to serve the full term— [Interruption.]
Madam Speaker: Order. The House must come to order. This is totally disgraceful behaviour on the part of Back Benchers.
The Prime Minister: I think that the Opposition have a little difficulty with the facts.
Mr. Duisenberg explained that, because he would be 67 in 2002, he did not wish to serve the full term, but that it was his intention to see through the transitional arrangements for the introduction of euro notes and coins, including the withdrawal of national notes and

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coins. He made it clear that the decision was his and his alone. At the end of the negotiation, the Heads of Government accepted that.
I have no doubt at all that, although the process was very difficult, the decision was clearly right. What is more, as Mr. Duisenberg is under no obligation whatever to retire early, it is entirely consistent with the treaty. Moreover, if the nomination of Jean-Claude Trichet is eventually confirmed, as I expect, that will mean that two highly respected and experienced central bankers, noted for their independent views, will be in charge of the European central bank for a total of 12 years. That is an outcome which ensures long-term stability.
We were told that the financial markets would react badly, and that the pound would go through the roof. In fact, the deutschmark has risen against both the pound and the dollar since Friday. Stock markets in France and Germany are higher than at the close of business last week. British 10-year gilts have not moved since Friday. The markets across Europe and the rest of the world are calm. What they know is what we know—that the fundamentals are right, a good board is in place and the euro will be strong, not weak.
Many people had said that the euro could not be launched on time, or with a wide membership, and that the argument about the presidency could not be resolved satisfactorily. In the end, all those issues were resolved satisfactorily, and the single currency will become a reality on 1 January 1999.
The UK's own position on joining monetary union was made clear by my right hon. Friend the Chancellor of the Exchequer to Parliament on 27 October. It has not changed; but, in or out, it is in Britain's interest that the single currency is successful and strong. The decisions this weekend—whatever the frustrating nature of the process—were in the end the right ones for Europe and for Britain.
The House will nevertheless agree that the biggest challenge for Europe lies ahead. To ensure that the single currency is successful, member states must continue to implement reforms of product, capital and labour markets and to promote employability and job-creating entrepreneurship. That is the way to a genuinely prosperous future for Europe. It is what we shall be pursuing at the European Council in Cardiff.
Mr. William Hague: Does the Prime Minister recall telling the House on 4 June last year that
"the criteria for monetary union should not be fiddled, fudged or botched in any way. If they are, the answer is not to delay—the answer is not to proceed."?—[Official Report, 4 June 1997; Vol. 295, c. 386.]
Where does that bold assertion stand today, now that the Prime Minister has colluded in the launch of a fudged and flawed single currency that could jeopardise jobs and investments throughout Europe? Is it not the case that he has not only broken the promises that he gave the House, but disregarded the terms of an international treaty to which this country is a signatory?
On the fiasco surrounding the appointment of the president of the central bank, does the Prime Minister agree that political horse-trading at the weekend serves as a warning that it is politics, not economics, which is the driving force behind the single currency? Has he seen
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the comments of a member of the Bundesbank council, who said yesterday that the deal was in clear breach of the Maastricht treaty? Has he seen the comments of his own MEP and the leader of the socialists in the European Parliament, who described his deal as "unacceptable shenanigans"?
Given that the Maastricht treaty clearly stipulates that the president of the bank should serve for eight years and that the Prime Minister has caved in to a shorter term, did he actually have a straight face when he said in Brussels that he was
"maintaining entirely the sanctity of the treaty"?
If he was maintaining entirely the sanctity of the treaty, what was the trouble all about? Can he really expect us to believe that it was not a political compromise in conflict with the treaty? If Mr. Duisenberg had such a strong view that he should retire early, why did lunch have to go on until midnight before that became apparent to everybody?
Does the Prime Minister recognise that, whatever the personalities and whatever the timings involved, the really disturbing thing about the row is that it shows a fundamental disagreement between participating countries about the political independence of the central bank? Is it not the case that, behind the argument, lies one way, the German way, which regards the independence of the central bank as sacrosanct, and another way, the French way, which stresses the importance of a politically accountable bank? Now that the Prime Minister has settled for an inadequate, possibly illegal and badly prepared deal, presumably he will call it the third way.
As the Prime Minister has said, it is in the interests of both Britain and Europe that the single currency is strong and stable. However, does he accept that, if it is to have the best chance of success, the criteria set out in the Maastricht treaty should have been strictly adhered to? Has he not now agreed to the creation of a weak and fudged single currency by the inclusion of countries which, by a very wide margin, fail to meet the Maastricht criteria and, in some cases, have national debts that are double the required level? Is that what he means by the fundamentals being right? Does he remember, in response to my question in the House about a month ago, saying that it was his
"duty, as president of the European Union, to ensure that the criteria"—
that is, the Maastricht criteria—
"are properly obeyed."?—[Official Report, 25 March 1998; Vol. 309, c. 492.]
Has he, at any stage in recent months, argued, counselled or voted against the breaking of the criteria? Has he, at any stage, warned against a decision of such immense economic importance being made through a political fix?
Did the Prime Minister see the comments of the chairman of the Bundesbank in the Bundesbank report a month ago, saying that
"serious concern exists in the case of Belgium and Italy. This could be eliminated if additional firm substantive commitments are given"?
Has he done anything in the past four months, as President of the European Council, to seek such commitments? Or did he decide that being all things to all men and trying to please everyone was an easier option than fulfilling the clear duty that he affirmed to the House?

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The Prime Minister claims that the lack of volatile movements on the currency markets means that the City has given EMU a vote of confidence, and that the markets think that the euro is a strong currency. Is he aware that that view is contradicted by many in the City, where some say that they saw the fudge coming and priced it in long ago? Has he read the comments of the chief economist at NatWest, who said:
"where we are is where we expected to be on Friday night. It is a fudged agreement"?
Has he read the comments of the chief European economist at Nikko Europe, who said that the pound has stayed steady only because traders expect the Bundesbank to raise interest rates to shore up confidence in the euro? With which view does he agree, and is he really saying that all is well in the markets on the basis of two days' trading?
At this weekend's summit, all the major decisions about a single currency were fixed and fiddled, but can the Prime Minister tell us what happened behind the scenes that caused such anger among his fellow Heads of Government? How does he respond to the Italian Prime Minister, who said that he was "ill prepared"; or to the Prime Minister of Luxembourg, who, among others, protested that the Prime Minister had not even bothered to brief other leaders properly on the deal; or to the Austrian Chancellor, who complained that
"there were people much more experienced than me who said they had never seen anything like it"?
Has he been taking lessons in diplomacy from the Foreign Secretary? Is this what the Prime Minister means by a new relationship in Europe? After the weekend, is not the verdict on his presidency of the European Council that when he should have spoken up, he remained silent; when he should have led, he followed; when he should have prepared, he did not prepare; and when he should have done his duty, he failed in the duty that he owed this country?
The Prime Minister: With the greatest respect to the right hon. Gentleman, I think that the one group of people we are not entitled to take any lessons from about Europe are the Conservatives. They are split down the middle as to whether they are against the euro; they are split down the middle as to whether they want it launched; and they cannot even tell us whether they are in favour of an independent central bank in respect of the euro. Indeed, I think it was the right hon. Gentleman who said, first, that he was against the single currency in principle, then that he was against it in decades, then that he was against it in 30 years, then that he was against it in 40 years, and then that he was against it in two Parliaments—and now it is not even clear whether he is in favour of it or against it.
The right hon. Gentleman asked a series of questions, and I shall try to explain the answers to him. First, he asked what the trouble was about. I explained that in the statement. The difference was between those who said that Mr. Duisenberg should be obliged to leave on a particular date and that he should give a specific date for his departure, and those who said that that would be inconsistent with the treaty. In the event, no specific date was given, and in respect of Mr. Duisenberg's own
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view, let me quote what Mr. Duisenberg said in November 1996, before any French candidate had been put forward:
"I will still be just under 63 at that time and I will be appointed for a period of 8 years, but I will not give anybody the guarantee that I will stay on for that full period. I do promise, however, that I will not stop after 3 months nor after 2 years, but my guarantee does not go beyond that. One has to be realistic and not forget about one's age."
I assume from what the right hon. Gentleman is saying that he would have blocked Mr. Duisenberg's candidature. Is that right or not? It is very important. The right hon. Gentleman nods; he says that he would have blocked Mr. Duisenberg's candidature. If his candidature had been blocked, it would have been a disaster for Europe and for Britain. On Sunday morning, the right hon. Gentleman and the shadow Chancellor were saying that the pound would go through the roof as a result of the deal—that the markets would be in turmoil. As it happens, the markets are perfectly calm. Why? Because they know that the right decision has been taken. Had we decided to block Mr. Duisenberg's candidature, which the right hon. Gentleman has confirmed would be his policy, it would have been a disaster. Thank heavens the right hon. Gentleman has not been in charge of our negotiating position.
On the criteria, I shall explain why the right hon. Gentleman is wrong in the point that he keeps making. The criteria have not been fudged, botched or fiddled. There are five criteria, on inflation, interest rates, the budget deficit, exchange rate stability and debt. Nine countries reach all five criteria, or very close to them. Two countries, Belgium and Italy, conform with four of the criteria, but exceed the national debt criterion.
The criteria are expressed in such a way that the European Commission and the monetary institute are asked to decide whether the criteria, taken as a whole, mean that there is suitable and sustained convergence between the various countries. Those bodies have given their opinion that there is proper convergence and that sufficient progress is being made on national debt. The right hon. Gentleman says that the treaty does not make any such stipulation. Yes, it does, and he should go back and read it again.
The Commission and the monetary institute have both made their position clear. They believe that there is proper convergence. The right hon. Gentleman's comments in respect of the Bundesbank are wrong. There is agreement across Europe that the euro should be launched with all 11 countries participating. Presumably, if the right hon. Gentleman had been negotiating, he would have tried to block the candidatures of those two countries. A nod would do.
Mr. Hague: Answer the question.
The Prime Minister: If the right hon. Gentleman had been in charge of our negotiating position, he would have blocked the only candidate who was credible for the job, he would have ended up having to try to find a third candidate early on Monday morning, and he would have opposed the launch of the euro altogether, yet he accuses us of causing mayhem in the markets.
I entirely understand why the right hon. Gentleman may want to make debating points, but in the end the result was the right one for Britain and for Europe. If we had

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ended up with stalemate instead of a decision, it would have been a disaster. Once all the debating points are out of the way, I ask him to reflect whether he would have maintained as his negotiating position the position that he has outlined to the House. If he had done so, it would have been a disaster. Fortunately, that disaster was averted.
Mr. Paddy Ashdown: I agree with the Prime Minister that the result was the right one for Europe. One should use the word "historic" sparingly in the House, but this genuinely was an historic event. The first sadness is that Britain, instead of being a part of it, was at best an umpire, but, as the Prime Minister well knows, actually a spectator at the sidelines. Is it not the case that, yet again, we shall in due course join an institution to which we did not belong when it was formed and which we have not effectively shaped?
Is not the second sadness the sad position to which the official Opposition—an increasingly inappropriate term—have sunk? They have locked themselves into a corner, and locked themselves out of mainstream domestic politics and European politics as well. Is it not a sad reflection on the party of Europe, as the Conservatives once called themselves, that, instead of commenting on the big event, they comment on the small compromise? It is a little like treating the news of the victory over the armada with a complaint that Drake did not play a very good game of bowls. It is a preposterous position.
Of course the compromise was messy. Some may even say that that is a specious description of it. However, that will not make the slightest difference to such an historic event. Two questions must be asked about the compromise. First, will the euro have effective government and leadership? The answer is yes, not for 10 years, but for 12. Secondly, do the markets express their confidence in that? The answer is resoundingly yes.
I shall make two further points to the Prime Minister. First, unhappily for his Government, who are more pro-European and could have much more influence in Europe, he is losing that by standing at the side and making the same mistake as the previous Government made, being led on Europe rather than leading on Europe. Secondly, for as long as he does that, Britain will lose trade, investment and influence. Is not the risk for Britain the fact that this weekend there was formed a soft but stable Europe, while we must continue with a high, volatile and unstable pound?
The Prime Minister: On the right hon. Gentleman's latter point, the decision must be taken in our national economic interest. Some people say that we should join the euro no matter what and others say that we should not join as a matter of principle. Both those positions are entirely understandable. The Government's position is that the matter should be decided according to our national economic interest. For reasons that we have set out many times, we do not believe that there is proper convergence between Britain and the economies of France and Germany, in particular, at present.
I do not believe that our position in that respect is the same as that of the previous Government. They could never decide whether there was an insuperable constitutional barrier to the single currency. We have decided that issue. They did not make preparations to
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ensure that Britain was in a position to join the single currency should it wish to do so. We can make that statement and are making those preparations. In the end, even though monetary union cannot be conceived of except politically, it cannot be made to work except economically. The Government believe that the economics must be right.
In respect of the right hon. Gentleman's comments about the euro, I think that it will be a strong currency. Those who claim that it will be weak and that the events of the weekend have damaged it are the same people who said that the euro would never happen, that 11 countries would never join and that it would be postponed. [HoN. MEMBERS: "Who?"] Conservative Members were among the leading proponents of that position—I thank them for reminding me of that.
The fact is that monetary union will happen. As to the compromise, I said in my statement that the media and others have missed a simple fact. Let me repeat it. It is claimed that Mr. Duisenberg wished to stay in his post for the full eight years. He has always made it clear that he did not want to do that, but he was insistent, as were others—including ourselves—that he could not be obligated to stand down. He has always said that he wanted to stand down once the euro was launched, and the question was whether he should be given a specific date for standing down. It is true that the matter was discussed for 10 hours, but it was worth it in order to secure that basic principle. In the end, the decision was basically in his favour.
As for the right hon. Gentleman's remarks about the Opposition, we all agree about that.
Mr. Robert Sheldon: Does my right hon. Friend agree that, before entering the euro, it will be necessary to have a long period of stability, which means effectively shadowing the euro? As the Monetary Policy Committee has been instructed to look at price stability above all other matters, will my right hon. Friend consider giving it fresh instructions so that we may prepare for our entry into the EU monetary system?
The Prime Minister: Price stability is enormously important. That is one of the reasons why there must be a strong euro—I believe that it will be strong, and the early indications are that the market thinks so, too. From our position, it is important that we continue to make preparations. Britain should be in a position to join if we decide to do so.
It is important to emphasise that, in or out, the euro will affect Britain. The idea that we should carry on as we were before 1 May, making no preparations at all, is disastrous. Fortunately, the City of London is now probably better prepared for the euro than any other financial centre in Europe. That is extremely good news. I believe that our preparations are the right ones.
Mr. Peter Brooke: Does the Prime Minister really believe that no harm has been done by the course of events in Brussels this weekend?
The Prime Minister: Yes, I do as a matter of fact. I shall explain why. Real harm would have been done if

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the wrong decision had been taken. If we had done what the Leader of the Opposition suggested and blocked Mr. Duisenberg's candidature—
Mr. Michael Howard: He did not.
The Prime Minister: The Opposition have changed their mind already. [Interruption.] My hon. Friends are being very unfair: that policy lasted for all of 10 minutes. If we had ended up blocking Mr. Duisenberg's candidature, we would have ended up without him and without Mr. Trichet, and we would have had to search for a third candidate in the early hours of Sunday morning, which would have been disastrous.
The right hon. Member for Cities of London and Westminster (Mr. Brooke) knows from his experience in government that European negotiations are often difficult, but it is important that the result is right. This is the right result. We shall have for 12 years highly respected presidents of the central bank who will be tough disciplinarians, which is what the euro needs. Whatever the difficulties, the decision was right, so I do not believe that there was damage.
Mr. Tony Benn: Given that economic and monetary union has always been considered by its architects to be a political policy, is not it absurd to suppose that, with 15 million unemployed in the European Union, the bank will not be subjected to continuing political pressure throughout the life of the euro? Were a group of appointed and unaccountable bankers to hold the levers of economic power in the EU, would not that remove the rights of the electors, of the Parliaments and of the Governments of the countries within the Union and effectively destroy democracy itself?
The Prime Minister: My right hon. Friend criticises the political pressure that has been exerted on the central bank, but that is, as I understand it, the proposition for which he argues. Price stability and the independence of the bank are important, which is why it is better that the Bank of England is independent to set interest rates. In the longer term, that will produce greater stability and ensure that this country does not go back to the days of boom and bust and huge fluctuations of growth followed by recession, which we had under the Conservatives. If we consider the central banks not only of Europe but of the world, independent central banks are better.
Mr. Douglas Hogg: Will the right hon. Gentleman confirm that article 109a of the treaty provides that the term of appointment for the president "shall be eight years"? In view of what Mr. Duisenberg has said, is there not a clear breach of the treaty? Has the right hon. Gentleman lent his name to a fudge? How does he justify that, as he has frequently said that the criteria would not be fudged? Why have we signed up to a French president now? Is that contrary to the replacement procedure contemplated by article 11 of the protocol? Is the truth that neither the right hon. Gentleman nor his friends and colleagues at the summit will pay much heed to the language of the treaty?
The Prime Minister: No. The nomination is for eight years. At the press conference after the summit, I was
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directly asked what would happen if Mr. Duisenberg decided to stay for eight years. The answer is that he would stay for eight years. As I keep trying patiently to point out, he said well before Mr. Trichet' s candidature was even suggested that he did not want to stay beyond the launch of the euro, so we have a situation that is perfectly consistent with the treaty. He has said, "I will at least stay until the euro is properly launched, but I won't stay after that, because I do not wish to." He also made it clear in his statement that there is no obligation; he will choose the time of his leaving, but he thought it right to say to the Council, "If you nominate me for eight years, I will not serve the full eight years." That is perfectly reasonable.
The answer to the right hon. and learned Gentleman's question on the French nomination is no. The nomination process has to be gone through, and the French nomination has to be agreed formally by the Council. Mr. Duisenberg and Mr. Trichet are both highly credible, which is why the deal is a good deal. To have ended up blocking Mr. Duisenberg's candidature would have been a disaster for Europe and for Britain. The right hon. and learned Gentleman should imagine the situation had the markets opened on Monday with no agreement on the central bank. At one point on Saturday, it seemed as if that would be the case.
Mr. Giles Radice: Does my right hon. Friend agree that the weekend summit was an enormously important event—an historic event—marking, as it did, the real start of the single currency, with 11 participating countries, with the agreement on conversion rates and with, yes, a compromise on the presidency of the central bank, brokered by my right hon. Friend, which will ensure that for 12 years the ECB will be led by two highly respected—as I know—central bankers? Do not the critics have to say what the alternative is to the deal brokered by my right hon. Friend at the weekend? Many of us would like the United Kingdom to join EMU as soon as possible.
The Prime Minister: I shall not repeat our position on EMU, because we have already made it clear. My hon. Friend is right to say that the launch of the euro is an historic occasion, and he was right to say what he did about the presidency of the central bank. As I say, the problem is that there is the inconvenient fact that Mr. Duisenberg had made it clear throughout that he did not want to serve his full eight-year term, which all the comment has missed. That is the central fact and that is why the argument would always be not whether he left early, because he was making it clear that he would, but whether he was obliged to do so and would be given a specific date on which to leave, which was the position of some countries, or one country at least, or whether, which was our position and that of many others, and Mr. Duisenberg himself, although he would leave early, he could not be obligated to do so because that would be a breach of the treaty.
Mr. William Cash: Will the Prime Minister explain why he thinks that there is no constitutional barrier in the United Kingdom to going ahead with economic and monetary union, and does he seriously believe that Mr. Duisenberg is telling the truth when he says that he would be perfectly happy to stand down? Is not that just an example of a total sham, which

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illustrates the eternal contradictions, the lies and the entire confusion behind the whole project, of which the British presidency, to our eternal shame, has been the midwife?
The Prime Minister: The problem is that those who adopt the hon. Gentleman's position, which he holds entirely honourably, simply will not accept any facts that get in the way of their arguments.
Let me read again what Mr. Duisenberg said in November 1996. [Interruption.] I shall deal with the hon. Gentleman's other point as well, but he effectively alleged that Mr. Duisenberg was not telling the truth when he said that he wanted to go earlier. In November 1996, before any other candidate was ever raised, Mr. Duisenberg said:
"I will not stop after 3 months nor after 2 years, but my guarantee does not go beyond that. One has to be realistic and not forget about one's age."
Mr. Cash: Why have him as a candidate?
The Prime Minister: The reason is that he is president of the European Monetary Institute—[Interruption.] That is a fact. He is charged with the preparations of the euro. It therefore makes perfect sense, albeit for a shorter time, to have him then oversee the actual mechanics of launching the euro. Although everyone always knew that his candidature would be shorter than the eight-year period because of his own desire to leave earlier, he was, none the less, the right candidate.
When it is then asked why it took 10 hours to reach that position, the answer is that it did not take 10 hours to persuade Mr. Duisenberg to go early. In the very first conversation that I had with him on Saturday, he said again that he would leave before his full term. The reason for the discussion was the insistence of one country that he should be obliged to go early, and that was what was unacceptable.
In relation to monetary union and the constitutional barrier, I say that there is no insuperable constitutional barrier because, although there are constitutional questions of sovereignty, the issue in the end is whether that is an absolute barrier. If it is an absolute barrier, the position of the hon. Gentleman's party—saying, "We might join after 10 years"—is absurd. I know that that is not his position; he is the leader of the other Conservative party. However, it is an absurd position. We must decide first of all whether or not the constitutional question is an insuperable barrier. He says yes; I say no. I say that, in the end, if it is in the interests of British jobs, investment and industry, we do it; if is not, we do not.
Dr. George Turner: Does my right hon. Friend agree that the successful launch of a common currency is in the interests of all the industrialists who have been concerned about the high exchange rate? Does he agree that the actions of the Conservative party seem to be designed to discourage a successful launch of the currency, and are, therefore, against the interests of British industry and the British people? Does he further agree that this country needs to ask whether, although the City of London may be prepared for a common currency, our business and industry are properly prepared? Are we prepared not only for the challenges, but for the opportunities that it will present?
The Prime Minister: My hon. Friend is absolutely right. The problem with Opposition Members is that
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they—or, at least, some of them—want the euro to fail. Had we followed the course that I assume that they must be advocating, it would have been a complete disaster.
Yes, the City is largely prepared, but business and industry have far more preparation to undertake; that is why we are organising that now. They will deal with many companies and trading partners that will be dealing in the euro. Some people in this country will decide to deal in the euro. I have no doubt that people and businesses here will end up taking the euro. It is important that we make proper preparations, and that is precisely what the Chancellor is doing.
Sir Teddy Taylor: Is not the real disaster for Europe the emergency of an army of 18 million unemployed, and the upsurge in the racial filth parties in France and Germany that always seems to go with mass unemployment? Will the Prime Minister remind his colleagues in Europe that when Britain endeavoured to get involved in this kind of thing with the exchange rate mechanism, we had to create an extra half a million unemployed? Will he make a point of reminding his colleagues in Europe that every attempt in the world to form a common currency among a number of countries—as in Scandinavia, Europe, Africa and Asia—has collapsed in massive unemployment and misery? Will he appeal to his colleagues in Europe to think about facts, about people and about the unemployed, instead of going ahead with what, quite honestly, appears to be utter nonsense?
The Prime Minister: Obviously, we shall not agree on the single currency, but I understand that unemployment in Europe is the big challenge. That is why we are putting forward a series of proposals, and making unemployment the main subject of the Cardiff Council. Of course there are countries, some of which propose to be part of the euro, which have low unemployment rates. One should not think that every country that wants to join the euro has high unemployment. It is important for us to have the right investment and education skills, and the necessary flexibility and encouragement of small businesses. We must be at the forefront in all those things.
I must say to the hon. Gentleman and those of his colleagues who are implacably opposed to the euro that it will affect Britain. We cannot put our heads in the sand and pretend that it will not exist. It is going to exist, and it is important that, whatever our view of the euro, we should make strong preparations to put ourselves in a position in which we can deal with its consequences and effects. I have set out the Government's position on the euro, and I do not need to repeat it. What is important is that we make preparations.
Mr. Tam Dalyell: May I support my hon. Friend the Member for North Durham (Mr. Radice) in wanting to go in in the present circumstances, now, as soon as possible? Will the Prime Minister tell us in which year his elusive concept of the proper convergence is likely to occur?
I believe that my right hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon) and I are the only two remaining Labour Members who voted in favour of our European Community entry in October 1971. Along with him, may I ask what is the proposal for shadowing the

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euro in the run-up period? My right hon. Friend has asked the Treasury four times about shadowing the euro; can the Prime Minister clarify the position?
The Prime Minister: In relation to shadowing the euro, as we have made clear, we will run our own exchange rate policy until such time as we decide that we want to change that in accordance with the criteria that we have set down. I am asked to name a year when there may be convergence. I do not think that we can name the year, but it is possible for there to be convergence between different economies. There is a large degree of convergence between France and Germany in terms of economic policy, growth and so on, so it is important that we make a judgment in the round on that. There is no economic convergence between Britain, and France and Germany at present. Therefore, if we join when the economics are wrong, we shall pay a heavy price.
People go back over the exchange rate mechanism experience. Perhaps the right lesson to learn from that is that, whatever the politics of the situation, the economics have to be right. I think that most people felt that that was the problem on the membership of the ERM; its timing was judged politically. Unless the economics are right, there is a problem.
Mr. John Butterfill: I am sure that all hon. Members accept that the euro's success is vital to this country's economy and will wish the euro well, but that makes the issue of the corporate governance of the central bank even more important. The Prime Minister has said that there will be an important principle of rotation of board members, but will he confirm that Mr. Noyer, a Frenchman, will be the vice-president for the first four years, to be followed by Mr. Trichet, another Frenchman, who will be the president for eight years? When the Prime Minister embarked on his marathon lunch with Mr. Kohl and Mr. Chirac, where lunch went on to tea, then to dinner and then to supper, did he realise that they were going to have him for breakfast?
The Prime Minister: I cannot say that there was much lunch as far as I was concerned. Obviously, it is sensible to try to rotate members of the board. Some of the more critical comments that were made by some of the smaller countries were unsurprising because they did not have places on the European central bank board, but the question surely is whether we have the right people for the board. I think that we do because all of them are highly credible, able people. They have credibility in international banking circles. Both Mr. Duisenberg and Mr. Trichet are central bankers of huge repute. I repeat: it would have been far worse if we had blocked Mr. Duisenberg, thrown his appointment out, not had Mr. Trichet and tried to go for someone else. That would have been the wrong thing to do.
Mr. Stuart Bell: Will the Prime Minister note, in response to the question that was put to him by the hon. Member for Rochford and Southend, East (Sir T. Taylor), that unemployment in France fell below 3 million at the weekend and that forecasts coming out this week in Germany will show that unemployment is falling further there? Will he also note, in response to the
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Leader of the Opposition, who said that the markets were waiting for the Bundesbank to raise its rates, that the only rate that has risen today in the Europe Union is that of Denmark which, of course, is not a member?
Does the Prime Minister agree with my hon. Friends the Members for North Durham (Mr. Radice) and for Linlithgow (Mr. Dalyell) that this is a question of political commitment and political will, and that 11 nation states coming together at the weekend to indicate their determination to create a single currency on the back of a single market indicates the political will? The Prime Minister has indicated his own political will, when economic convergence arrives, when there is a referendum and when there is a yes vote. Does he agree that those who believe in the single currency and in the European Union should now begin their campaigns?
The Prime Minister: I am sure that my hon. Friend is right in saying that the single currency and the single market will be launched, and that the political will and commitment exist. He is also right in pointing out that the markets have reacted, contrary to the predictions that were made, with great tranquillity. I also think that it is important, when we talk about unemployment in other countries, even in respect of France and Germany, where there are high unemployment rates—although it is important to consider the fact that there are significant differences between east Germany and west Germany—not to be complacent about our economic position. If we compare the productivity levels of the British economy with those of France and Germany, we realise that this country has to do a lot of work. There is a danger that, because we are at a different stage of the economic cycle, we shall become complacent about our problems. If we consider French or German gross domestic product, we see that we still have a bit of a way to go.
Mr. Ian Taylor: The Prime Minister may not have had his best ever weekend during the past few days, but he may have found it ironic, as some of us did, that by behaving as he did President Chirac was doing what the British media think the British Prime Minister should do during summit meetings. Now that there will be 12 years of leadership in the European central bank under two expert governors, there remain two questions. First, how does the Prime Minister intend to manage the British economy so that we can enter economic and monetary union on the right terms and at an early date? Secondly, how will he influence the other 11 members of the single currency as they take decisions while we are not in it? Regardless of the fudge at the weekend on the Euro X committee, we shall not be party to some of the key decisions that will affect 80 per cent. of our home market in the European Union.
The Prime Minister: On the hon. Gentleman's last point, although we shall be present at the Euro X committee for any decisions that affect all 15 member states, it is right and inevitable that if we are not in the euro, we cannot participate in the decisions of the euro currencies. That fact must be faced.
As for managing the British economy for entry, it is important that we do so in a way that is right for our economy. The advent of monetary union has been a reason for some countries to take action on their budget deficit, public finances and monetary policy. It is worth

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pointing out that some of those countries have made extraordinary progress in trying to meet the monetary union criteria. In Britain's case, it is important that we take these steps in any event. We are dealing with the budget deficit, taking action to squeeze inflation out of the system, and to have a stable and prudent monetary and fiscal policy. I think that our system of management should not change.
The hon. Gentleman referred to the position taken by the French. We could have tied the matter up at 2 o'clock on Saturday afternoon had we agreed to a split term, but we could not agree to that because it was in breach of the treaty. In the end, it was agreed that Mr. Duisenberg would be nominated for eight years. As I keep trying patiently to point out to hon. Members, Mr. Duisenberg had already said that he wanted to go early, and he could not be obligated to go on any particular date. He is free to stay for the eight years, but he has indicated his intention to leave earlier. That point was worth securing, and it was worth waiting for what in European negotiating terms is hardly a very long time.
Mr. Dennis Skinner: Will the Prime Minister give a guarantee that, despite the clamour from Labour Members, from the Liberal Democrats and from a few Tories for Britain to join the euro before the next election, which would be not a compromise but a failure of integrity by the Prime Minister and the Labour party generally, the matter will be resolved after the next election and after a referendum? If he is a betting man, would he like to put some money on whether this fellow Duisenberg, who will have four years, will last longer than the Leader of the Opposition?
The Prime Minister: The Tory party may be looking for a split term. We have set out our position clearly. We do not believe that there will be convergence during this Parliament. There will be a referendum; it will ultimately be the decision of the British people, and that is right. The position of the official Opposition nowadays—if there is such a notion—is that the pound should be lower, which is an odd position for the Conservative party to argue.
Sir Michael Spicer: Whatever the Prime Minister may say, is not the truth about the Duisenberg deal that this is the first time that Ministers have arrogated to themselves powers that are precisely defined in the treaty as resting elsewhere? Does not that bust apart the acquis communautaire?
The Prime Minister: A strange element comes out in the remarks of Members of the European Parliament, of certain people at the Bundesbank and of the hon. Gentleman. It should be made absolutely clear that the decision on the appointment of the head of the central bank and the board is a political one. It is a political appointment. With the greatest respect to Europe's central bankers, it is not their appointment, it is ours, the politicians. Once the appointment has been made, it is a matter for the central bank, and it will have independence. I therefore find odd some of the European Parliament's criticism and questioning of why a political deal is being done. It is a political deal, as that is its very purpose. Power to nominate the members of the central bank has been given to politicians, not to bankers, because it is a
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political deal. I had always thought that people sharing the hon. Gentleman's political perspective argued that that was the right thing, not the wrong thing, to do.
It is important that we say to Europe's central bankers: "You have your place in this system—once nominated, you will serve, and serve independently—but you do not take the decisions on nomination. We take the decisions."
Mr. Rhodri Morgan: Does the Prime Minister agree that this weekend's events were effectively a search for Europe's equivalent of Alan Greenspan, chairman of the Federal Reserve, and for someone who is as committed to fighting inflation as to ensuring full employment? To use the old American phrase: we want sound money, and plenty of it. Will the Prime Minister explain how the weekend's events have moved us forward in finding Europe's Alan Greenspan?
The Prime Minister: The short answer to that question is that it depends on the credibility of the two people who will be running the bank, effectively for 12 years or more. I do not think that anyone doubts that both Mr. Duisenberg and Mr. Trichet are eminently credible people. Therefore, as I said, once we blow away the froth and speculation about the matter, we get down to the fact that, for 12 years, we shall have credible and strongly disciplinarian central bankers.
It is odd that, on various parts of the political spectrum, people are saying that Mr. Duisenberg should have been forced to stay on for the full eight years, as if that would somehow assist the situation. Surely the best situation is one in which the person who has been overseeing the euro's preparations carries through those preparations to their reality, and then—as he has already said that he wishes to do—steps aside for another highly respected central banker, who will perform exactly the type of role performed in the Federal Reserve, as described by my hon. Friend. The euro's credibility will rest on those people's credibility.
Mr. John Swinney: The Prime Minister, in confirming the Government's stance on economic and monetary union, has effectively confirmed conditions that are likely to lead to the pound remaining strong for some considerable time. What consideration do the Government plan to give to the position of manufacturers and exporters—who will have to cope not only with those trading conditions in the next two to three years, but with the difficulties of convergence with the euro at some time in the future? What action will the Government take to ease the burden faced by manufacturers and exporters, to provide realistic and fair trading conditions for important United Kingdom companies?
The Prime Minister: The euro is not the only reason for a strong pound. As events of the past few days have shown, much more than the euro issue is behind the strong pound. It is important that we do not think that a lower pound is the answer to all manufacturers' problems. If the pound becomes unnaturally high at certain points—about which people can argue—it will, of course, cause difficulties. Ultimately, however, the single most important thing is that action is taken on investment and productivity to raise the standard and quality of British industry. As I said, we still have a way to go on that matter.

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The best thing that we can do is not to try to intervene and artificially to devalue the pound—which is the policy currently being advocated by the Conservative party—but to ensure that we do not return to the boom-and-bust instability that resulted, at the end of the 1980s and in the early 1990s, in interest rates of 15 per cent., in the deepest recession that the United Kingdom has had, in record borrowing and in record bankruptcies. That is not a way in which to run the economy.
Mr. David Winnick: Does my right hon. Friend accept that there will be little interest or excitement in the United Kingdom about who heads the central bank, and that that is not the dominant issue in people's minds? The dominant issue is largely whether a single currency will help or hinder jobs, prosperity and growth. Does he accept that that is the really substantial issue, and that—although certainly not at this moment—the British public will have to be persuaded that a single currency would be in the overall economic interests of our country?
The Prime Minister: My hon. Friend is right. The issue, whether Britain is in or out, is whether a single currency is good for British jobs, investment and industry. It is in our interests to have a strong euro, which is why the decisions made at the weekend are right. I doubt whether people are discussing the relative merits of Mr. Duisenberg and Mr. Trichet in the country's clubs and pubs, but they understand that it is important that the euro is strong, and the decisions made at the weekend will strengthen it.
Sir Peter Emery: The right hon. Gentleman said that it is essential for Europe that the euro is a success. If that is the case, ought not the Government to be doing everything possible to make it a success? If that is so, two questions arise. First, would not that success be more quickly achieved if Britain entered sooner—as soon as possible? Secondly, as many European countries have had to impose stringent financial and monetary disciplines to qualify for entry, what specific cost does the Prime Minister think would arise from the changes to Government policy on financial and monetary structures that would be necessary for Britain to enter?
The Prime Minister: I agree with the right hon. Gentleman that we have to try to do everything possible to make the euro a success. That is why I thought that, however messy the process, it was extremely important on Saturday to sort out the ECB and decide on credible people. We can promote economic reform in Europe and place the emphasis on education and skills rather than on over-regulation as the best way in which to produce a competitive market.
The disciplines that Britain would be required to follow are those that we should be following in any event. It is important that we run essentially stable and prudent monetary and fiscal policy. That is why we gave the Bank of England independence over setting interest rates. Interest rates have had to go up—rightly—to squeeze inflation out of the system. It is interesting that long-term interest rates are now below the levels that we inherited
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on 1 May 1997. That is because there is greater credibility in the system. By being financially prudent, we have almost eliminated the country's structural debt. Those are the actions that we would need to take if we wanted to join the euro; my point is that it is worth taking them in any event.
Dr. Lynne Jones: I listened in the previous Parliament to prime ministerial statements after a European Union summit. It is clear that my right hon. Friend's predecessor would have been very pleased to have made this statement announcing decisions that have been greeted in the markets with such calm. Surely everyone agrees that it is vital that the euro is seen as a strong currency. Would not there have been greater confidence in the common currency if Britain had joined in the first wave? How can it be said that the economies of Italy and Belgium are more convergent than that of the United Kingdom with those of Germany, France and the Netherlands?
The Prime Minister: On my hon. Friend's second point, we must make decisions in our national economic interest. The problem with our economy at present is that we are at a different stage of the economic cycle from France and Germany. We have been at the peak of the cycle and they have not, which is precisely why interest rates are far lower in France and Germany than in Britain. We are not convergent in the way we need to be.
Cliffhangers such as those in the negotiations at the weekend happen all the time in Europe. The issue is whether we get the right result in the end. My hon. Friend is right to say that the result is better for Britain and for Europe.
Sir Peter Tapsell: Is the Prime Minister not being disingenuous in pretending that he cannot understand the simple legal and political fact that article 109a of the Maastricht treaty invalidates the appointment of anyone to be president of the European Central Bank who is not intending and hoping to serve an eight-year term?
As on these occasions, Back Benchers are now briefly allowed to quote, may I remind the Prime Minister of what I said to his Treasury Ministers on 23 April?
"Is the Economic Secretary aware of the widely reported horse-trading going on between Germany and France, to the effect that whoever is appointed, whether the French or German nominee, will agree to step down after four years—despite the fact that the Maastricht treaty lays down that it should be an eight-year-term—to make way for the nominee of the other great power? Is that not an augury of the way in which Europe will be run in future; Germany and France will stitch everything up"—[Official Report, 23 April 1998; Vol. 310, c. 962]—
Madam Speaker: Order. The regulations state that quotations must be very brief, but the hon. Gentleman is being very long-winded. Will he please come to his question?
Sir Peter Tapsell: My question is this: is not what I predicted 12 days ago exactly what has happened under the ineffectual presidency of this British Prime Minister?
The Prime Minister: When we as politicians are driven to quoting our previous speeches, there is always

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a bit of a problem. I simply say to the hon. Gentleman that he is wrong about this. The eight years is the period of nomination. There is nothing in the treaty that says that the person is obliged to serve for the full eight years. If he reflects on that for a moment, he will see that that would have been a slightly odd thing to have required. He talks about horse-trading. There was not horse-trading; there was a simple clash. I shall explain it again.
The clash was not about whether Mr. Duisenberg retired early; he had always made it clear that he wanted to do that. The issue was whether he should be obligated—in other words, that we should have a split term, which was what one of the countries was advocating. The issue took 10 hours to resolve because Mr. Duisenberg, backed by the British presidency and by other countries, refused to say that he would step down on a specific date. As a result of the agreement, he does not have to go on a specific date. He has indicated his intention, but he is not tied to any particular date, and it is entirely up to him when he goes.
Dr. Julian Lewis: But what if he changes his mind?
The Prime Minister: The hon. Gentleman shouts out that Mr. Duisenberg could change his mind. That was the very question that I was asked at the press conference after the meeting, and I answered yes. That is so, which is why it is not in breach of the treaty.
The right hon. Member for East Devon (Sir P. Emery) says that politics is involved. I find it odd that he, from a right-wing perspective and others from a left-wing perspective—some in the European Parliament—say, "Isn't it disgraceful that there has been politics in the appointment of the head of the European central bank?" My answer to that is no. Under the treaty, the politicians decide the head of the central bank. Under the treaty, the politicians decide what should be the case. Once appointed, it is for the central bankers to be independent. I make no apology for the politicians having decided this. The politicians should have decided it—and we did.
Mr. Bill Rammell: Does the Prime Minister detect any logic and coherence in a political position that, first, opposes operational independence for the Bank of England, secondly, criticises the appointment procedure for the president of the European central bank on the ground that it will undermine operational independence and, thirdly, opposes the general principle of a single currency because politicians will not have day-to-day control? Do not those policy prescriptions, which, by the way, are those of the Conservative party, show how far from power that Opposition party is on this national and crucial issue? Is not it a travesty and an undermining of
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confidence in the parliamentary process that the Conservative party will use any argument, any time, anywhere to undermine the single currency, regardless of the consequences for this country and the economies of countries throughout Europe?
The Prime Minister: My hon. Friend is quite right. On Sunday morning, the shadow Chancellor was saying that the pound was going to go through the roof. It is simply an indication of how much credibility the Conservatives have left that it did not move an inch on Monday.
Mr. David Curry: The Prime Minister would have come out somewhat better from this inglorious episode if, instead of pretending that everything in the garden was lovely and that an absolutely super weekend was had by everybody, he had acknowledged that horse-trading is at the heart of international organisations—the European Union—and that the job of the presidency is to manage it. Does he agree that what matters is the outcome? If the single currency is successful, no one will care a hoot about its origins five years from now. Will he say whether Mr. Duisenberg's eventual resignation is political, moral, legal or aspirational, and how he intends to manage the Chancellor's five tests?
The Prime Minister: I agree with the right hon. Gentleman on his first point. In fact, I may even agree with him altogether—we shall have to wait and see. I am not saying that the weekend was wonderful. He has been at such negotiations as a Minister, so he knows that they are extremely difficult and protracted. The problem arose precisely because we were not going to say that Mr. Duisenberg had to step down on a particular date. The meeting could have been tied up at 2 o'clock in the afternoon and we could all have gone home—which would have suited me fine—but people were not prepared to give on that basic question of principle. I entirely agree that what matters is a good outcome.
The right hon. Gentleman asked whether Mr. Duisenberg's resignation would be political, moral, aspirational or whatever. The resignation will be personal—if Mr. Duisenberg decides that he wants to go, that is when he goes, as was made very clear in his personal statement, and in what I said as president both in the Council and at the press conference afterwards.
The right hon. Gentleman asked how we would manage the Chancellor's five tests. We shall manage them according to the criteria that we set out. The tests come down to same issue, so the basic question will be whether there is sustainable economic convergence between Britain and the other main countries in Europe. If there is, the tests will be satisfied; if there is not, they will not be satisfied.

Points of Order
4.40 pm
Mr. Douglas Hogg: On a point of order, Madam Speaker. Have you received an application from the Foreign Secretary to make a statement to the House on the allegations that the Foreign Office has been involved in a coup in Sierra Leone? The allegations are serious and the House needs to know what they are. Furthermore, it would be right for the House to express a view on the need for an independent element in the inquiry. This is the third or fourth time that a point of order has been made about the unwillingness of the Foreign Secretary to make statements to the House to account for his doings in office.
Madam Speaker: I was not informed today that the Foreign Office or any other Department wanted to make a statement on the issue raised by the right hon. and learned Gentleman. If there was to be a statement, it would have been on the Annunciator by lunchtime today.
Mr. Malcolm Savidge: On a point of order, Madam Speaker. As I understood it, the Leader of the Opposition said from a sedentary position that he would have blocked Mr. Duisenberg's appointment. As that comment was referred to later, am I correct in thinking that it should be recorded in Hansard?
Madam Speaker: These are matters for argument. Hansard knows perfectly well what it should record—the Editor does not need to be instructed by me.
Mr. Michael Fabricant: On a point of order, Madam Speaker. You were very generous—as was the Prime Minister—in allowing one hour and 10 minutes for the statement, but, as you are aware, a number of people were not called to ask questions. Can you do anything to encourage not only hon. Members to ask brief questions but the Prime Minister not to filibuster with such long, repetitive answers?
Madam Speaker: I do not accept the hon. Gentleman's premise that the Prime Minister filibusters. Answers—and, indeed, questions—are often long on complicated issues such as this. One thing that I do to help is to keep a list of all hon. Members who have stood up throughout. When a similar statement is made, or there is a debate on a similar issue, I always see to it that those hon. Members have priority.
As I am on my feet, let me give some information of which many hon. Members are probably not aware. It is not the custom of the House for the Speaker to keep the Prime Minister, from whichever political party, at the Dispatch Box for longer than an hour. I try to abide by that, but, as the House has observed, I kept the Prime Minister here longer today because of the importance of the statement. I am sorry that I could not call all hon. Members. As I said, I have a list and I know hon. Members' interests. I think that it can be said that I called hon. Members from both sides of the House with very differing views on this issue—they were carefully selected.

Registration of Dogs
4.43 pm
Mr. Richard Allan: I beg to move,
That leave be given to bring in a Bill to establish a scheme for the compulsory registration of dogs; and for connected purposes.
It is now a decade since the registration of dogs was finally abandoned. The scheme that was dropped had been introduced some 200 years ago as a tax for the Navy when we were at war in various conflicts with our current European partners—from the comments that we heard today, I take it that some hon. Members still hark back to those glorious Napoleonic days. The scheme that was abolished had largely fallen into disrepute and had become a bureaucratic burden with little idea of its purpose.
My Bill would not reintroduce a scheme of that nature, but significant advances have been made that would make a new scheme both sensible and timely. In particular, I shall argue for a scheme that combines registration and identification functions, as I believe that only by fulfilling both purposes can the measure be effective.
In introducing the Bill, my arguments will fall into three groups. First, I shall set out the benefits that I believe the measure would bring—in proposing legislation, one must always keep a clear idea of its goals. Secondly, I shall describe the schemes that could usefully form part of the detailed provisions of the Bill. Thirdly, I shall try to allay some of the concerns of those who are not yet convinced of the need for registration.
Arguments for registration fall into three classes: first, that it would benefit the animals; secondly, that it would benefit their owners; and thirdly, that it would benefit the wider public. According to a wide range of opinion, the establishment of a clear legal link between each dog and its owner would add greatly to animal welfare, by encouraging responsibility among owners.
The Royal Society for the Prevention of Cruelty to Animals recently reported an increase in animal cruelty—in 1997, there were 1,092 of cruelty to dogs, an increase of 892 from 1996. One of the greatest causes of frustration is the difficulty in preventing those who have successfully been prosecuted and banned from keeping dogs from so doing. I hope that a comprehensive registration scheme would make it more difficult for a banned owner to keep a dog against the law.
If dogs were registered on a suitable scheme, those involved in accidents could swiftly be traced to their owners and vets. Dog welfare could be promoted by using a database to send owners information on, for example, an alert on diseases in an area or, more generally, on subjects such as neutering.
A further important development would be to eliminate the need for quarantine when animals travel from certain countries. Most people would welcome such a move, which would benefit animals and owners alike. To ensure public confidence in dispensing with our traditional protection against diseases such as rabies, we need far more information about the individual animals that would be exempted from quarantine. A reliable system of animal identification is essential if, as I hope, we are to proceed along those lines.
Registration could also reduce the number of strays that face destruction. That number is estimated to be about 100,000, which represents a terrible indictment on a nation that professes to consist of animal lovers.

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Principal among the benefits of registration to owners would be anything that helped their pets, such as can be seen in voluntary schemes such as PetLog, which is operated jointly by the Kennel Club, the RSPCA and the Scottish Society for the Prevention of Cruelty to Animals. Dogs that are logged on to such a database can be returned to their owners swiftly, minimising the distress that can be caused by a lost pet. Owners may receive added value benefits from information that is held on databases, such as genetic data for breeding or vet bill insurance services.
The advantages to the wider public would be manifest in a number of areas, principally in dealing with the problems of biting, fouling and causing road accidents. Liability needs to be established in all those cases, which can be a major problem under the current unregulated system. It has been estimated that the costs of dealing with problems that result from uncontrolled dogs run into millions of pounds.
The main arguments against registration include cost to the individual, an increase in unnecessary bureaucracy and the fact that irresponsible owners will continue to evade registering. I hope that there will be widespread consultation on costs. To keep registration costs in perspective, they should be set against the total costs of dog ownership. I hope that I shall not put off people from owning pets by referring to RSPCA estimates that total costs are £7,324 for the 12-year life span of a dog—I am certainly making the most of my two cats now that I have seen estimates that they will cost more than £7,000 each during their lifetimes.
Developments in technology mean that the costs may be far lower than expected, and we should be able to avoid problems of unnecessary bureaucracy. Microchipping has proved an effective means of dog identification. A chip the size of a grain of rice is placed beneath the skin and can be scanned on a hand-held device to give an identification code. When I first heard of microchipping, I had visions of people in the dog rescue centre waving dogs across something akin to a supermarket checkout; but cheap hand-held devices are already carried by most dog wardens.
The RSPCA routinely microchips any animals that go through its homes. In an example to the nation, the Blue Peter dog was chipped some years ago, bringing us a long way forward from sticky-back plastic and ordinary household glue solutions. I do not favour making the microchip compulsory and would allow other, appropriate forms of identification, but its widespread use may be a significant factor in keeping costs down as many owners choose it for their own convenience.
For reasons of utility, and with an eye on costs, I would favour a national database, rather than having each local authority set up its own infrastructure. The Kennel Club
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already operates a database of more than 4 million dogs. Set against the total estimated dog population of about 6.5 million, that demonstrates the feasibility of a national scheme.
With today's technology, computerised schemes can be operated far more cheaply and effectively than 10 years ago. In keeping with the times, it may make sense to require dogs to be registered with a scheme approved by the Secretary of State, rather than setting up an entirely new infrastructure in the public sector. Several possible solutions exist within the framework of a national database with local access points.
Some owners are irresponsible, but the problem of evasion does not lead us to abandon the licensing of shotguns or the registration of cars. We are all irritated at the thought of evasion by some who should be paying their dues, but the additional identification functions will make evasion less likely, and a national database system can be used to identify and follow up problems of under-registration.
I would expect wide consultation on the cost, particularly with a view to exemptions for those groups, such as older people and the disabled, who clearly cannot afford to pay. Perhaps animal welfare organisations that offer cheap or free services—neutering, for example—for the pets of people on low incomes could offer procedures such as microchipping as a low-cost registration option.
Public acceptance of registration is demonstrated in opinion polls that show that as many as 90 per cent. of people, including dog owners, are in favour of such a scheme. The examples abroad are legion. Denmark and Sweden already operate schemes that they believe to be a major success.
When we last had a dog registration scheme, it was based on a structure old enough for the fee to be expressed as a pre-decimal sum: 7s 6d, or 37½p. Through the Bill, we may introduce a new identification and registration scheme before its fee has to be valued in euros, whenever that may be.
Question put and agreed to.
Bill ordered to be brought in by Mr. Richard Allan, Jackie Ballard, Mr. Chris Mullin, Mr. Roger Gale, Mr. Edward Davey, Mr. Andrew F. Bennett, Mr. Tim Loughton, Dr. Evan Harris, Mr. Ivor Caplin and Mr. Phil Willis.

REGISTRATION OF DOGS
Mr. Richard Allan accordingly presented a Bill to establish a scheme for the compulsory registration of dogs; and for connected purposes: And the same was read the First time; and ordered to be read a Second time on Friday 3 July, and to be printed [Bill 183].
Orders of the Day

  Magistrates' Courts (Procedure) Bill [Lords]
  As amended (in the Standing Committee), considered. Order for Third Reading read.
  4.53 pm
  The Parliamentary Secretary, Lord Chancellor's Department (Mr. Geoffrey Hoon): I beg to move, That the Bill be now read the Third time.
  The Bill proposes modest changes in the law relating to procedures in magistrates courts. Modest though it may be, it has considerable potential for reducing burdens on the courts and the police, and securing reductions in delay in magistrates courts. It may be helpful if I describe the present procedures and how the Bill may improve them.
  Section 12 of the Magistrates' Courts Act 1980 allows defendants, for certain offences, to submit a guilty plea to the court by post. The majority of such "guilty by post" pleadings are for summary road traffic offences. The magistrates courts deal with about half a million such cases each year. Offenders who are ready to admit their guilt and accept the penalty of the law for their offence may do so quickly and save their own time and that of the court.
  In 1994, an efficiency scrutiny examined ways in which to reduce administrative burdens on operational police officers. It reported the results of one survey showing that 38 per cent. of those summoned under the procedure returned guilty pleas to the court; but the survey also found that almost as many defendants—35 per cent.—made no reply to the summons at all.
  Some people will not respond for innocent reasons, and, for them, the law provides full remedies; but for many defendants ignoring a summons is simply a way of avoiding responsibility and staving off the day of reckoning. At present, when a summons gets no response the only option is to adjourn the case. Further steps are then necessary to bring the defendant to court or to proceed in the defendant's absence if there is still no response.
  The summons includes a statement of facts: a very short summary of the case as recorded by the police. That is sufficient for the defendant to acknowledge guilt by post, but it is not evidence, so when there is no response to the summons the court must presume the innocence of the absent defendant, and the Crown Prosecution Service must take over responsibility for prosecution and will adduce evidence to substantiate the case.
  Evidence may be in written statements meeting the requirements of section 9 of the Criminal Justice Act 1967, or given orally by witnesses at court. All those who want to plead not guilty will have their cases heard in the usual way.
  Each summons ignored puts an extra burden on the police, the prosecution and the courts. The efficiency scrutiny proposed that the police should prepare a witness statement, conforming to section 9, and serve it with each summons. That would ensure that admissible evidence was available at the first listed hearing, whether the defendant responded or not.
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  Clause 1, as originally drafted, provided for that by allowing a defendant to submit a plea of guilty when either statements of fact or section 9 witness statements have been served with the summons. When a statement of facts is served with the summons, the procedure for a guilty plea will be as it is now.
  When a section 9 statement is served with the summons, it may be used as an account of the facts for a plea of guilty by post; if there is no response to the summons, it can be used by the prosecutor to prove the case on the first listed day. In its original form, clause 1 required a witness statement used as an account of the facts to be read in full by the court clerk even though the defendant had clearly stated that he wished to plead guilty.
  Reading a full witness statement takes longer than reading a statement of facts, because it is a full account of what a witness saw, heard and did. Such statements are prepared to prove the case in the event of a not guilty plea, or when the defendant fails to respond. In speeding cases, the statement will often include such detailed information as what a police officer did to check the accuracy of the speedometer in a patrol car. That is included to rebut any suggestion that the equipment is faulty, but the court does not need to hear such detail when the defendant has admitted the offence.
  In a busy court, the cumulative effect of reading each statement in full could reduce the savings in time and costs created by the new procedures. Several practitioners drew the Government's attention to that drawback. The Government accepted that in a guilty plea case a full reading of the statement was not necessary and could lead to court time being wasted.
  Accordingly, the Government made two amendments to clause 1 in Committee. The Bill, as reported, includes those amendments. They stipulate what is read to the court by the clerk in guilty plea cases. When the summons is served with a statement of facts, the court clerk will read that statement, as happens now.
  When the summons is served with a witness statement, the clerk will either read that witness statement aloud or, if the court so directs, give an oral account of the part of the statement that has not been read aloud.
  Mr. David Curry: Does the Minister agree that the sensible place to try speeding offences would be in magistrates courts that lie close to motorways? In that case, is not Ripon ideally suited to deal with driving offences on the A l(M)?
  Mr. Hoon: I have commented to the House before on the right hon. Gentleman's ingenuity in raising matters affecting his constituency. I am sure that, if he adds to the considerable volume of correspondence that arrives on my desk at regular intervals from his constituency, I will be able to answer him in detail at an appropriate stage.
  The court will always control the proceedings, and the clerk may not summarise or give an oral account of what is in the statement without express authority from the court.
  The Bill makes two further modifications to the procedure for dealing with motoring offences, and these were set out in detail in Committee. I hope that the House will be satisfied that we have dealt with the matters in some detail, but I can certainly respond to any questions from right hon. or hon. Members about those matters.

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  The main change in the Bill has been tested. Following the efficiency scrutiny, pilot projects were established in Gloucestershire and Lancashire to test using witness statements in place of statements of fact. These ran from early September 1996 to late March 1997. The statement of facts procedure was replaced by concise witness statements served on the defendant with the summonses. Some 53,000 minor motoring cases were prosecuted using the streamlined procedure. This proved remarkably successful for all the agencies involved. Up to 77 per cent. of cases were finalised—that is, proved and sentenced—at the first hearing, and up to 86 per cent. of cases were proved at that hearing.
  Dramatic reductions in the number of adjournments were achieved. In Gloucestershire, the average number of hearings per case fell from 4.67 to 1.35, and in Lancashire the average fell from 3.15 to 1.22. Significant reductions in the average time taken from the date of the offence to finalisation at court were also achieved. In Gloucestershire, the average time fell from 144 to 95 days, and in Lancashire, it was down from 139 to 84 days.
  All the agencies involved in the pilots have indicated their clear support for the proposals in the Bill. In summary, the Bill is a practical measure, bringing procedural changes which will benefit all participants in the court process. The rights of offenders are preserved, but they will be dealt with more swiftly, reinforcing the connection between the offence and its consequences. The reduced administrative burdens on the agencies will free resources which may be deployed on other work. The Bill has been welcomed by practitioners, has been refined and improved during its passage to date and has proved uncontroversial. I hope that the House will be able to give these measures the same support it has previously given, and which the Bill has received in another place.
  I commend the Bill to the House.
  5.1 pm
  Mr. Edward Gamier: At about 4.53 pm, the Minister said that this was a modest Bill, but it is a short and valuable one whose merits are self-evident.
  The Bill represents the high point of the Lord Chancellor's Department's year. This is the first measure the Department has got through all stages in the House of Commons. There was a little difficulty in Committee when the Minister failed to bring sufficient numbers of his Government team to constitute a majority. Being a good-natured fellow, I, along with the hon. Member for Torridge and West Devon (Mr. Burnett), did not seek to defeat the Government on this mammoth Bill; not least because the measure was invented by my noble Friend Lord Mackay of Clashfern—the previous Lord Chancellor.
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  I congratulate the Minister for two reasons; first, on arriving here mostly unscathed, and secondly, on bringing into law a valuable measure which was designed and drafted in the era of a Tory Government. I do not wish to say any more about the Minister than is good for him because he is easily embarrassed, but I just want to underscore the fact that the Bill represents the high point of his Department's efforts.
  During the progress of the Bill through both Houses over the past few months—and during the times we have watched and listened to the Minister make the same speech that he has just made—we have had to watch him with our other eye as he has tried to justify the Department's reforms of the legal aid system and the introduction of compulsory conditional fee arrangements. If the Bill represents the high point, last week represented the low point of his Department's activities. The Department planted a question that had as its intent the intellectually dishonest purpose of distracting the eyes of the public and the House of Commons from the thrust of the Government's legal aid reforms.
  Mr. Deputy Speaker (Sir Alan Haselhurst): Order. I hope that this will be the widest point of the hon. and learned Gentleman's remarks. He must remember that we are debating the Magistrates' Courts (Procedure) Bill.
  Mr. Gamier: I would describe this as a needle point which goes to the very heart of the policy of the Department. It explains why I welcome the Bill, which represents the high point of the Department's work this year. As I have suggested, the way in which the Department has handled this and other business this year has been breathtaking, and the Minister ought to be congratulated on that. I do not wish to carp because the Minister has had enough trouble this year. May I extend the congratulations of the official Opposition on his safe conduct of the Bill? I trust that it will receive its Royal Assent at the earlier opportunity.
  5.5 pm
  Mr. John Burnett: The Liberal Democrats also support the Bill. In response to points I made in Committee, the Minister has said that the consequences for defendants of not responding to summonses should be clearly and vigorously set out in the documentation, and that is very important. We are still concerned that, in an increasingly mobile and cosmopolitan age, adequate steps should be taken to ensure that, for example, members of the armed forces—who can often be away for months on end—are not unfairly convicted. I hope that the Minister will address that point, but, as I have said, we very much support the Bill.
  Question put and agreed to.
  Bill read the Third time, and passed, with amendments.

  Late Payment of Commercial Debts (Interest) Bill [Lords]
  Order for Second Reading read.
  5.6 pm
  The Minister for Small Firms, Trade and Industry (Mrs. Barbara Roche): I beg to move, That the Bill be now read a Second time.
  I am delighted to bring the Bill to the House today. The Government have made it clear that the Department of Trade and Industry is the Department for all businesses and that everything possible will be done to promote enterprise and assist smaller firms. A healthy, vibrant small business sector creates wealth and employment, generates new ideas and products and is the bedrock of a successful enterprise economy.
  The sector is crucial to UK competitiveness. Small firms lie at the heart of the Government's economic strategy. The Government will do all that we can to deliver the right conditions in which small businesses can thrive and grow. That is why our small firms manifesto, "Growing and Prospering", committed the Government to deliver a right to claim interest on the late payment of commercial debt.
  The Gracious Speech of 16 May 1997 announced that legislation to provide that right would be brought forward in this Session. We have kept that promise. Our commitment to this measure is a mark of our commitment to the small firms sector. Our Green Paper, "Improving the Payment Culture: A Statutory Right to Claim Interest on Late Payment of Commercial Debt", published on 28 July 1997, set out our proposals.
  The Bill is a vital element of a package of measures that will change the payment culture. The Bill will provide businesses with the additional statutory tool many have been asking for to combat the abuse of their trade credit.
  I must note the crusading work of Stan Mendham of the Forum of Private Business. He has championed the need for a statutory right to interest for many years. The last Government may have been indifferent to the needs of the small businesses represented by organisations such as the Forum of Private Business, but I can assure the House that this Government are not.
  Mrs. Cheryl Gillan: I also would like to pay tribute to the Forum of Private Business, which has advised me on the matter. However, could the Minister name all the other business organisations—particularly those representing small businesses —which are completely in favour of the Bill?
  Mrs. Roche: I thank the hon. Lady for her tribute to the forum; I am sure that it will be greatly appreciated. I note her long-standing commitment to the principle of a statutory right to interest: on 22 March 1994, when she was a Back Bencher, she contributed to an early-day motion calling for a statutory right to interest, although, unfortunately, the previous Government, of which she became a member, refused to implement that. Therefore, I am grateful that she is on the Opposition Front Bench today to congratulate us on our action.
  In response to the hon. Lady's question, I can tell her that we consulted all the small business organisations in connection with the Bill. She will know that, in doing so,
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  we have established the better payment practice group, to which all those organisations belong. The small business community and its organisations realise that the Bill is an important part of a package of measures designed to bring an end to late payment. She will also know that all the surveys show overwhelming support among small businesses for a statutory right to interest. That right will be automatic, but the exercise of the right will be voluntary.
  Mrs. Gillan: What the Minister does not realise is that when legislation on statutory interest on debt was examined, many business organisations said that it would not help in respect of the late-payment culture. She will know that the previous Government made great efforts to tackle that culture, many of which were extremely successful. Do the Federation of Small Businesses and the Small Business Bureau fully support all of the proposals contained in the Bill?
  Mrs. Roche: The hon. Lady will know, from past consultation, that there have been some shifts in the attitude of small business organisations: at times, some have supported a statutory right to interest while others have not. We have been successful this time in having consulted small business organisations every inch of the way during the passage of the Bill. We are grateful for the support that those organisations have given.
  I have to take issue with the hon. Lady's remarks about the previous Administration. She will know of the boast of the former Deputy Prime Minister, the right hon. Member for Henley (Mr. Heseltine), of having strung along his creditors and his saying that that was the secret of his business success. I am sure that she would dissociate herself from that comment.
  Mr. Richard Page: Will the Minister give way?
  Mrs. Roche: Of course I shall give way to my predecessor.
  Mr. Page: The Minister is being unfair to my right hon. Friend the former Deputy Prime Minister, who is a person who built up his business. He was explaining what happens when a company gets into a position, not of being unwilling to pay, but of being unable to pay. He was describing the sort of thing that a company will do in order to survive; he was not describing callously stringing the customer along, but stating his understanding of the difficulties facing small businesses. I wish that the hon. Lady, along with her ministerial colleagues, would not misrepresent my right hon. Friend's remarks.
  Mrs. Roche: The hon. Gentleman, with his customary generosity, does a good job defending his right hon. Friend, but those comments did a great deal of harm, set entirely the wrong tone and went down very badly with the small business community.
  In setting out the legal context to the Bill, I should note that the issue of interest is not new. In 1893, Lord Herschell, in the London, Chatham and Dover Railways case, expressed strong sympathy with a claim for interest. However, despite his sympathy for the plaintiff, he found that interest could not be claimed under the existing Civil Procedure Act 1833. Forty-one years later, the legislature

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  passed the Law Reform (Miscellaneous Provisions) Act 1934, which provided a power to include, in any judgment on any debt or damages, interest at a rate thought fit from the time when the cause of action arose to the date of the judgment.
  In 1974, the Lord Chancellor, Lord Elwyn-Jones, asked the Law Commission:
  "To consider the law and practice relating to interest on debt (where interest has not been provided for by contract) and on damages, and to make recommendations".
  On 7 April 1978, the Law Commission made its report to the then Lord Chancellor, including a draft Bill which, had it been adopted as a whole, would have provided a right to claim interest where a debt is paid late, but before or during any proceedings, up to the point when a money judgment is given. In 1982, the then Government saw fit only to give effect to part of that draft Bill. The Administration of Justice Act 1982 amended the Supreme Court Act 1981 to provide the courts with the discretion to award interest where a debt was paid late after proceedings had begun, regardless of whether or not the proceedings concluded in a judgment on the principal debt. Of course, that still left suppliers who were paid late, but before proceedings were issued, unrecompensed for being kept from their money.
  It is 165 years since the Civil Procedure Act 1833 began the development of formal law on the provision of interest on late-paid debts. The Bill returns to the recommendations of the Law Commission in 1978 and finally gives all suppliers, regardless of when they are paid, the right to claim interest on late-paid commercial debts. The evolution of legislative measures to combat late payment shows us that the right we are proposing is a fundamental necessity and long overdue. The Government believe that late payment is wrong, both economically and ethically, and that the time to act and provide the right contained in the Bill is now.
  Late payment, or simply not knowing whether one will be paid on time, damages confidence among small businesses, damages cash flow and acts as a barrier to growth. Uncertain cash flow adds to the cost of borrowing for the smaller business, which discourages investment and adversely affects growth and competitiveness. In some cases, the very future of the small business is threatened. Recovering debts imposes further expense that small businesses can ill afford in terms of both costs and diverted resources, particularly where court action is required. The Government are conscious that small businesses are particularly vulnerable to the harm caused by late payment. Small businesses are often highly geared, relying on short-term loans and overdrafts for working capital, so cash flow problems caused by late payments can have an immediate negative impact on many small businesses.
  Research undertaken by Grant Thornton has shown that, in countries where businesses actually use legislation for statutory interest, there are often shorter payment periods.
  Mrs. Gillan: Given what she has just said, can the Minister explain the position in Spain, where the contractual period is 68 days and payments are made after an average of 74 days? Can she explain that anomaly?
  Mrs. Roche: Yes. The problem is that, in different European countries, there are different legislative systems
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  and different payment periods arising either from contract or common practice. The UK's late payment period is longer than that of the average European Union country.
  Mrs. Gillan: Looking at the Spanish position, does the hon. Lady admit it is possible that a statutory right to interest could extend the contractual period?
  Mrs. Roche: No, not given the way in which we have drafted the Bill. The hon. Lady is right to mention that point—it is one of the issues raised whenever a statutory right to interest is discussed. We looked seriously at the issue and provided for it in the Bill; if I am allowed to make a little progress, I shall explain those provisions.
  The regulatory appraisal published by my Department in December last year demonstrated the extent of the problem. The same appraisal reported studies which related to the harm that late payment causes small business. Let me give one or two examples. In a 1996 Intrum Justitia-sponsored NOP survey on European payment habits, 72 per cent. of respondents showed that overdue debts caused them a problem or serious problem with their cash flow. In the same study, loss of profit as a consequence of late payment was cited by 62 per cent. of respondents as a serious problem.
  I am sure that the House shares the Government's view that late payment is not just a question of economics. There are strong ethical arguments that necessitate action to combat late payment and improve the payment culture.
  Paying late is wrong and unfair. Any business that pays late as a matter of course is effectively saying that it is acceptable to abuse the provision of trade credit and the good faith of its suppliers. It seems not to value its suppliers or care enough about them to foster or maintain good relations. Those who pay late should realise that supplier relations are key to the continued profitability of their own business. When an agreement on payment has been reached, not only is it right and proper to ensure that the agreement is honoured; it is also an act of enlightened self-interest.
  The Government acknowledge that late payment is not always deliberate, with the intention of frustrating the process. It is not always a case of some Goliath stepping on a defenceless David, and there is often no malicious intent. Various reasons may exist for late payment. We listed them in our Green Paper, "Improving the Payment Culture: a Statutory Right to Claim Interest on Late Payment of Commercial Debt." However, we see no good reason why, aside from their own errors, suppliers should have to bear the cost of late payment. We believe that it is right and fair that the cost of late payment should be put back into the hands of those who control it: the customers.
  It has been said—this deals with some of the hon. Lady's comments—that the new right will lead to extensions of credit periods. We have thought of that. Where an agreed credit period amounts to de facto contracting out of the provisions of the legislation, it will be a void term in the contract and the courts will be able to strike it down.
  It has also been said that businesses will be too worried about losing a customer to exercise their right to claim interest. I do not believe that business sees that it makes any commercial sense to drop a supplier simply because the supplier made a claim for interest.

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  Businesses generally understand the value of good suppliers. All our great household names have got where they are because they value and invest in their supply chain. They also know that it is administratively time consuming and expensive to replace good suppliers.
  Mr. Michael Fabricant: As the Minister knows, I was in business before entering the House in 1992. How does she reconcile her comments and the situation of a small supplier, perhaps supplying to a very large corporation—I shall mention GEC, and there are others—which sometimes took up to 120 days to pay small suppliers? That was the case not just with plcs, but with the BBC too, although I believe that it has changed its ways. As a small business man trying to make an inroad into a market, I would not have dared to say, "I am sorry, but I insist that you pay within this particular time," when I knew that other suppliers were not doing that.
  Mrs. Roche: The hon. Gentleman raises an important issue, and I am interested to hear of his experience, which illustrates some of the difficulties. I know from my postbag, which contains letters from hon. Members from all parts of the House, what late payment means to their constituents, especially their business constituents.
  We are giving businesses the right to claim interest, but it is up to the individual business to make the commercial decision whether to enforce it. As part of a package of measures that I shall describe later and which I am sure will interest the hon. Gentleman, that provides an important lever in the hands of a small business. I believe that, rather than drop their supplier, debtors will go for the simple solution, and try to ensure that they pay their bills on time.
  Action to tackle late payment can wait no longer. The Government believe that it is time to provide, in the context of a wider package of measures, a statutory right to claim interest on late-paid commercial debt, aimed at improving the payment culture in the UK now.
  We stated in our Green Paper that, to help small businesses in particular, the statutory right to claim interest will be exercisable, initially, by small businesses against all large enterprises, including the public sector. We envisage that the right will be extended, after a period of two years, for use by small businesses against all enterprises, including the public sector. Finally, we envisage that the right will be extended, after a further period of two years, to all enterprises, including the public sector, to use against all enterprises, including the public sector.
  Responses to the Green Paper showed business support for phasing at 87 per cent., with support for the proposed timetable only slightly lower at 85 per cent.
  The Bill will encourage customers to pay on time, and, in conjunction with the wider package of measures, will help to combat the late payment problem. Part I creates an implied term in contracts, where no explicit remedy for late payment is provided, for a statutory right to claim interest; specifies the contracts and debts to which the term may apply; sets a default credit period and procedures for remission of interest; and provides an order-making power to set the statutory rate of interest.
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  Part II describes the extent to which parties to a contract can exclude or vary the right to statutory interest in relation to a qualifying debt. It will not be possible for parties to contract out of the Bill unless the contract provides a substantial remedy for late payment. Part III provides general and supplementary measures necessary to give effect to the Bill and ensure that it operates effectively. The final clause includes a commencement power to enable the Bill to be brought into force in stages.
  The effect of the Bill will be that the cost of late payment will no longer have to be borne by the supplier. It will instead be borne by the party that can control it: the customer.
  I can reassure the House—this answers the hon. Gentleman's point—that we do not see the legislation as a panacea. It is one important element in a package of measures that the Government are adopting, in partnership with the private sector, to improve the payment culture. The Government have regularly referred to the wider package of measures that can be seen in the annexes to their publications related to the Bill. Those include support for the decision by the Federation of Small Businesses to publish league tables of the payment performance of public companies; support for the development of the national vocational qualification in credit management; ensuring that small businesses can access credit management information and advice through the enterprise zone; and the establishment and co-ordination of the better payment practice group, which is a vital part of the Government's commitment to work in partnership with the business community to promote a better payment culture among British businesses.
  The better payment practice group promotes best payment practice among all businesses and will help to shape both the private and public sectors' measures to tackle late payment. Members of the group include the Forum of Private Business, the Institute of Directors, the Confederation of British Industry, the British chambers of commerce, the National Farmers Union and the Union of Independent Companies. The group has met regularly and has already produced a substantial body of work.
  The Government have recently published a better payment practice guide to credit management jointly with the better payment practice group. The guide benefits from the combined experience and considerable expertise of the group and provides straightforward guidance and advice on how to get paid on time. I thank all the members of the group for their hard work and effort.
  The Government recognise that the public sector must lead by example. We will require all Government Departments, agencies and local authorities to pay on time. Government Departments and agencies must pay all their undisputed invoices for commercial debts within 30 days or other agreed contract terms.
  Mrs. Gillan: I thank the hon. Lady for giving way once again. It is obvious that many of those measures, especially the last one mentioned, were introduced under a Conservative Government. I notice that, since the present Government came to power, there has been no publication of the league tables for payment performance, other than for the year that covered the previous Conservative Government. When will the next table be published, covering the Labour Government's first year in office?
  Mrs. Roche: I shall answer the hon. Lady's first point straight away. I am a little perplexed by her comments.

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  The group to which I referred was established by this Administration and all its meetings have taken place under this Administration. I am rather sorry that the previous Government did not think of establishing it. I am also sorry that they did not support the federation's work in publishing league tables in the private sector. The hon. Lady also asked about league tables, and I am delighted to tell her that I shall publish them before the summer recess.
  Government Departments have adopted the British standard for achieving good payment performance in commercial transactions and the CBI prompt payment code. As I have said, we shall publish tables of the payment performance of central and local government before the summer recess. The Government are fully aware of the link between this Bill and the issue of access to justice. The Department has worked in close consultation with officials of the Lord Chancellor's Department. The Lord Chancellor announced in October that he was pressing ahead with reforms to the civil justice system aimed at reducing cost, delay and complexity.
  We consulted widely on our proposals, and I am grateful to all those who responded. Their comments have been invaluable in improving what is, after all, a Bill dealing with a technical area of law. I am happy to say that all of our proposals have received widespread support. I am particularly pleased that our phasing proposals were so well supported. For example, when the Institute of Directors sought to respond to the Green Paper, it received 1,700 responses to a survey of its members, 69 of which favoured a right to interest.
  I am pleased to say that, when concerns have been raised, we have tried to be as flexible as possible. I believe that we have demonstrated a willingness to reflect and to make changes where they are merited. That has been the case both during consultation and since the introduction of the Bill in another place.
  Mr. Eric Forth: I seek clarification from the Minister. I think that she just said that, out of 1,700 responses to the Institute of Directors survey, just 69 favoured a statutory interest on late payment. Is that figure correct?
  Mrs. Roche: I meant 69 per cent.
  Mr. Forth: I am grateful. Perhaps the Minister could clarify the survey's results for the record.
  Mrs. Roche: Yes, I am happy to do so. The figure is 69 per cent. I also understand that that is one of the largest responses that the Institute of Directors has received to a survey of its members.
  The Bill was introduced with two changes to the original proposals that appeared in our Green Paper. The definition of a small business was, for the sake of simplicity and in order to avoid enforcement difficulties, reduced from the two out of three Companies Act 1985 definition to the simple criterion of 50 or fewer employees. The second change was to the rate of interest. The Green Paper originally proposed a rate of base rate plus 4 per cent. Having noted the concerns voiced during consultation and after taking further advice, we recognised that the interest rate should be sufficient to recompense all businesses for the cost of late payment.
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  Therefore, the legislation proposes a rate of base rate plus 8 per cent., which is the rate at which the weakest businesses are charged for term lending.
  There are issues that the Government believe are central to the Bill. First and foremost is the fact that this Bill is designed to help small business. For that to happen, we believe that the phased implementation of the legislation is necessary. This is a vital Bill whose time has come, and I am very pleased to commend it to the House.
  5.33 pm
  Mrs. Cheryl Gillan: I congratulate the Minister for Small Firms, Trade and Industry on bringing the Bill to the House—not least because, as she said, it has enabled her to keep one of her promises to the electorate. It is a pity that the Secretary of State for Health could not keep his promise to the electorate and that waiting lists have increased by 100,000. Perhaps other Departments could look to the example set by this Minister and improve their records.
  It is sad that the Minister is supported today by a lone Back Bencher. None of her colleagues in the Department of Trade and Industry considers the matter to be important enough to sit alongside her and see her flagship move forward. At least I have good support from my colleagues on Conservative Benches. Unlike the Labour party, the Conservative party has traditionally been the friend of business,
  Mr. Colin Breed: Traditionally.
  Mrs. Gillan: We shall maintain that tradition.
  The road to hell is paved with good intentions, and the Bill before the House epitomises that expression. All hon. Members agree that late payment could be agony for both large and small business. Yet today's Financial Times reveals part of the vision of hell that accompanies the good intentions in the Bill. The article is headed, "Businesses 'not ready' for tough law on debts". It states that a survey has found that fewer than 2 per cent. of company finance directors fully understand the Late Payment of Commercial Debts (Interest) Bill. The article goes on to say that the Bill could force companies in the United Kingdom to pay more than £180,000 a day. Yet again, a burden is placed on business—another piece of red tape—that has no obvious benefits for some who view the legislation.
  Mrs. Roche: I am shocked by the hon. Lady's remarks. Do I take it that she now withdraws the support that she gave in 1994 to a statutory right to interest? I expected congratulations on the legislation, not carping.
  Mrs. Gillan: The Minister has already heard my answer. Upon examination, it was found that other mechanisms would help more. No one supports the late payment of debts, but perhaps there is another way, apart from legislation. I hope that the hon. Lady will be open-minded and listen to some other suggestions.
  If we look to our European neighbours, we can see that the lesson is not clear. As I said by way of intervention, Spain has problems. Companies in Spain and Portugal—which also has legislation in this area—have some of the worst records in Europe. Overall payment performance in the United Kingdom is better than the European Union

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  average by some five days. Moreover, the Bill seeks to phase in the legislation, allowing small businesses to pursue other small businesses only in the final stage in several years. However, 70 per cent. of small businesses trade with other businesses of a similar size.
  The Minister has tried to give the impression that her measures are universally welcome, but that is not strictly true. Her proposals have had a lukewarm reception in some areas, which perhaps explains why the arrival of the legislation in the Chamber was delayed for more than a year. Before the election, the Minister and her colleagues expended phenomenal efforts on trying to woo the business community. The prawn cocktail offensive became an embarrassingly familiar item in journalists' columns. We have seen the outcome of those cocktail parties, with chosen business men from organisations that could afford to donate £1 million to the Labour party getting what appears to be special treatment.
  The spin doctors formulated the message in a desperate attempt to appear business friendly, and the policy was pursued ruthlessly. Labour callously tried to lull business into a false sense of security—and I am afraid that the Bill is part of that charade. Like so much in this Government, it is a thin facade: it is a fig leaf to cover the Government's modesty while they remain as rapacious as ever in their intentions towards business. They attacked business in both Budgets, and I give them notice that the businesses that I talk to are beginning to see through their warm words and their warm champagne and to realise that they are gradually eroding many businesses' competitive edge.
  The raid of £5.4 billion on pensions makes Maxwell look like an amateur. The burdens are piling on, from the windfall tax, which has grabbed £5.2 billion and the road fuel tax, which has grabbed £440 million, to the car registration tax, which takes £60 million and the corporation tax changes, which take £630 million. The strength of the pound is destroying our exporters' business, and on top of that come the social chapter, the national minimum wage and union recognition, which will add to the burdens on business.
  At Question Time today, we heard that the Department of the Environment, Transport and the Regions is considering taxing car parking spaces for shops, factories and offices. Business should not face such burdens. It also faces two other inescapable burdens: the additional costs of the euro and of the millennium computer problem, which will run into billions of pounds and impose financial burdens on businesses that have to maintain their competitive position in an increasingly competitive world. The debacle over the euro this weekend represents not only a national lottery, but an international lottery of giant proportions. It was a rollover weekend, but the people who were rolled over were European and British citizens.
  The measures fall on the negative side of the equation, but the Government hope that the Bill will register on the positive side. In many ways, I hope that it will, but instead of supporting it overwhelmingly, many businesses and organisations representing business do not think that it is necessary. The Federation of Small Businesses said:
  "We shall try to convince the small firms Minister that other issues should he looked at first".
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  The British Chambers of Commerce said:
  "It is an ill-conceived, very short term solution and will hurt businessmen's interests".
  The Confederation of British Industry said:
  "It will not work and according to our members, will make matters worse. It would be very unfortunate if they went ahead with something that most small businesses do not want".
  The small and medium enterprises council of the CBI said that the Bill would not substantially increase the likelihood of small firms being paid on time.
  We do not need to take those organisations' words for it, when we have those of the Minister. She has admitted that her proposals are not popular. In last summer's edition of Network, she said that almost 60 per cent. of lobby groups representing small businesses opposed a statutory right to interest on late payment of debts. What an admission. In other words, she said, "They don't want it, but we're going to do it anyway." The Government consider the Bill to be a headline grabber and will pursue it, irrespective of whether it will change the culture of late payment.
  Mrs. Roche: I thank the hon. Lady for her courtesy in giving way, but does she not accept that every survey of small businesses shows overwhelming support for a statutory right to interest? She supported that not merely by signing the early-day motion, but by being one of the first six sponsors.
  Mrs. Gillan: The hon. Lady has pursued the matter twice. She is highly embarrassed to be quoted as saying that 60 per cent. of small business organisations are opposed to a statutory right to interest. She intends to impose her will on the business community, regardless of what it thinks.
  The Minister should have used her energies to ensure that the Government pay their bills on time, as the previous Government did. More than 50 per cent. of Departments improved their payment records in the last full year under our government, some substantially. In answer to my question on national health service trust payments, the Minister of State, Department of Health said that
  "80 per cent. of payments were made on time."—[Official Report, 30 October 1997; Vol. 299, c. 864.]
  Trusts make more than 3 million payments a quarter, so in any quarter 600,000 bills are paid late, which adds up to slightly under 2.5 million bills a year paid late. Surely the Minister's priority should be to continue to build on the work of the Conservative Government and improve that performance, but we have not even seen the payment performance of Departments under her Government and, as she has admitted, will not see it until the recess.
  Mrs. Roche: On payment performance, will the hon. Lady confirm that when she was a Minister at the Department for Education and Employment, it paid a quarter of its bills late? Will she apologise for that?
  Mrs. Gillan: I have no apology to make. The Paymaster General said in a written answer in Hansard on 27 November, at column 662, that the DFEE's record was 92.2 per cent., which is an improvement, because the Department for Education's payment record was 75.2 per cent. I hope that the Minister will

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  apologise to me, and I shall give way to allow her do so. No, she is not a big enough woman to apologise when she has made a mistake.
  I congratulate the Minister on the better payment priorities group and hope that it will be backed by more than her warm words. She has the arduous burden of making the winding-up speech, because no other Minister has come to support her. Will she say how much money will support the group's proposals? How much will go into the development of the national vocational qualification in credit management? How much will go into the credit management information and advice service? How much will go into business links to support credit management?
  I believe that the Minister, disingenuously, did not mention the Lord Chancellor's review.
  Mrs. Roche indicated dissent.
  Mrs. Gillan: I stand corrected; I must have been distracted when the Minister mentioned it. However, we do not know when the review will be forthcoming. We know that the Government hit the ground reviewing last year, but few reviews have come to fruition, except when a review has become a consultation.
  The sad thing about the Bill is that, despite the massive cull of prawns to sustain the Government's offensive to convert old Labour into new Labour, the Government still do not understand the essential ingredients of a successful business recipe. As soon as they perceive what they regard as a problem, they want to jump in and legislate. In 1994, rather than the previous Government legislating, their consultation on late payment resulted in British standard 7890, the standard for specifying procedures for good payment priorities and credit management, which business supported. Some of our most successful companies are outsourcing, but the hon. Lady does not seem to understand business relationships as they develop.
  Outsourcing builds up mutually beneficial customer-supplier relationships. They depend on long-term arrangements and can result in improvements on both sides. Rather than implementing legislation that interferes with contracts freely entered into by both parties, the Government should encourage that sort of business climate. Where such a relationship does not exist, it is naive to imagine that the development of mutual trust can be fostered by encouraging suppliers to take action against their customers.
  The Government have not yet caught up with the need for good industrial relationships. Perhaps I should not be surprised, as some hon. Members will remember how old Labour defeated Barbara Castle when, as Secretary of State for Employment and Productivity, she produced her White Paper "In Place of Strife".
  Mr. Clive Betts: That is pre-history.
  Mrs. Gillan: The hon. Gentleman says that that is pre-history, but "In Place of Strife" was defeated by Labour. Labour seems to believe that industry should thrive on strife. The Bill has the capacity to multiply that strife. Add to that the imposition of trade unions, the minimum wage and the other burdens that I have mentioned which are coming to haunt business, and we see that nothing has really changed.
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  If the Bill represents new Labour's concept of industrial progress towards international competitiveness as we move towards 2000, it is the Labour party which should be tested to see whether it has caught the millennium bug. That thinking seems to have flipped back to the year 1900.
  This is a soundbite Bill. It sounds good, but it lacks real understanding of business. We shall not oppose it on Second Reading because businesses should pay on time, but we shall seek to probe the detail. We shall consider phasing in and thresholds, the large company's use of the statutory rate against other large companies in the public sector, the default credit period and many other matters. I hope that the Minister will look forward to discussing those matters, and I hope that she will keep an open mind on our suggestions.
  It is important to scrutinise the Bill carefully. In Committee, we shall need to discover whether Labour's thinking on business has any substance beyond the soundbite. I think not.
  5.51 pm
  Mr. Richard Page: No one could deny that the Labour party had a splendid election campaign. It was rumoured that it worked on the 60 per cent. principle—if 60 per cent. of the population was in favour of a policy, it adopted it. We could see that that would run into trouble in the fulness of time because the 60 per cent. in one group would not be the 60 per cent. in another.
  There is no collusion in this, but I had intended to mention the question of taxation and hospital waiting lists as an example of two policies on a collision course. In my constituency, waiting lists have increased by 28.9 per cent. However, it would be wrong to continue listing the Government's broken promises, so I shall move on to the small business sector.
  The Labour party in opposition had a real problem. It was regarded not as the natural friend of the small business man and woman, but as hostile to the small business world. It ran around desperately trying to find a policy that would convince the small business man and woman that it was on their side. It had a difficulty because most of the things were being done. I say that with natural modesty, as is my wont. I have a natural sympathy for the task.
  The Labour party came up with two problems for small businesses, both of which I recognise—one was regulation and the other was late payment. The Labour party promised to control regulation and deregulate like no Government had done before. The Minister referred to my right hon. Friend the Member for Henley (Mr. Heseltine), who set up the deregulation unit. In the two years before the election, about 1,000 regulations were merged or abolished.
  As a matter of interest, in January I put a parliamentary question to the Minister—no doubt life has moved on since then—and I discovered that between 1 May and the date of the answer, the Department had managed to deregulate three items. I shall pursue the Minister on that matter, just as she pursued me with regard to Departments paying on time.
  We all recognise how damaging late payment is for small businesses. It can make or break a business, and in many cases it has broken businesses. We have all had

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  people coming to our surgeries to complain about how late payment has hurt their businesses. All hon. Members will be on the small business man and woman's side, but we must act sensibly and progressively. It is no good uttering honeyed words but not delivering in practice.
  All Governments have considered the matter. The highly respectable accountancy firm, Grant Thornton, studied what was happening in the rest of the EU. In 1995, the United Kingdom was paying within 48 days and, in 1996, within 50 days. We were just slightly ahead of Germany, which took a couple of days more than us. I am told that a report by another organisation gives Germany a shorter period. However, it boils down to the fact that among all the countries with a statutory right to interest, we were right in the middle. The Scandinavian countries paid within about 27 days, and in Italy a company that is paid within 90 days holds a street party to celebrate, and life goes on from there.
  Given those figures, is the statutory right to interest all that it is cracked up to be, or is it more a matter of national culture? That is what it comes down to. Reference has been made to all the surveys that have taken place, and hon. Members will not be surprised to know that such surveys also took place when I had a degree of responsibility. The result of the first survey was 50:50. Two years later, in another survey, 60 per cent. of organisations contacted were against the measure and about 40 per cent. were for it, but it was not conclusive either way. To sum up, we can do no better than to look to the clearing banks. Two of the clearing banks were against the measure and two were in favour of it, but one of those that was for it said that it would not work, but it might help to change the culture. That is a fair summary of the situation.
  The Government commissioned research. The good Professor Wilson of Bradford university—I am sure that the Minister knows all about his work—was brought in. Unsurprisingly, he came forward with the startling news that companies that ran a good credit control department stood more chance of getting their money—a 38 per cent. greater chance. I do not know how he arrived at that figure and I do not intend to defend or explain it.
  Taking all that into account, the Labour party, fighting its campaign, produced the statutory right to interest rather like the philosopher's stone—just rub it on a bit of bad debt or late payment and all will be turned to gold. I am rather worried that this is over-selling the situation, and many small business men and women might be rather disappointed at some of the outcomes. My hon. Friend the Member for Chesham and Amersham (Mrs. Gillan) said that the measure might even make the situation worse and, in certain circumstances, it could. I hope to explain that later.
  I was grateful to my hon. Friend for her support in making Departments pay on time, an initiative which was endorsed by the then Prime Minister. Some Departments were not up to speed, and my hon. Friend was in there like a terrier. She harried and wrote all sorts of unflattering and unkind parliamentary answers. Nevertheless, the message went out, and those Departments came up to speed. I was glad to see that the Department of Trade and Industry managed to achieve
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  98.9 per cent. just before the election. That was a substantial move in the right direction, and an example which Governments and agencies should set.
  There is a great misconception about what was done. When the good Professor Wilson did his research, he also concluded that small businesses were more likely to be sinners than sinned against. I put out a call saying that any small firm that felt it was not being paid on time by any large organisation should write to us. I had, if I remember rightly, 27 responses, of which only two were genuine late payment cases. One concerned late payment by a Department, which "rolled over" immediately, and a second concerned a major organisation, which did the same. However, the other 25 were complaints and queries about the quality of goods and service. That worries me. The position may be exploited by those who want to avoid paying the statutory interest.
  Another thing that we did, which neither of the Ministers has mentioned, was to do away with the iniquitous pay-when-paid regime. We must thank Sir Michael Latham for his work in bringing that about. Some hon. Members may not know of that old system, which is now fading away. It meant that on a construction site, a subcontractor, such as a plasterer who plastered a suite of offices, would not be paid until the main contractor had been paid—and he would be paid only when the architect signed the contract off. Six months ago, a gentleman came to my constituency surgery who had not been paid for more than two years by a London borough because a pay-when-paid regime operated. The borough told me that he would be paid within two or three months. That is clearly unsatisfactory, and a wicked abuse. Everyone can be grateful that it has been done away with.
  We also ensured that large companies included not only their payment policy but their payment practice in their annual accounts. It will—I hope—be up to the many small firms organisations to question those companies if they do not keep to that practice. We all know that small firms do not have the resources or facilities to be able to ride over cash flow problems.
  Much has been made of the launch of the British standard payment code. It has been endorsed by the CBI, which has its own code. What has not been mentioned is that, if a company signs a British standard code but does not adhere to it, trading standards officers can be called in. Firms can be held to account if they fail to adhere to the code that they have signed.
  A great deal has been done to try to help small businesses. What worries me about the statutory right to interest is that it could make the position worse. I have three invoices with me. The first, from Universal, a company which supplies many hon. Members with stationery, has simple payment rules written on it:
  "Except as otherwise agreed with the customer, payment of invoices consolidating separate deliveries shall be due not later than 15 days after the date of the invoice, payment of all other invoices shall be due not later than 30 days after the date of the invoice."
  The second, for the carriage of horses, says:
  "Payment is due within 30 days."
  My third invoice, a vet's bill—I have tried to represent the market as broadly as I can—states:
  "Payment due within 30 days of invoice".

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  I believe that the Minister's heart is in the right place, but there is a misunderstanding of business practice. Nowadays, most companies run a monthly computer account. At the end of the month, there is a shut-off. If someone supplies goods that come in during the first two days of the month, the goods will be passed upward, the accounts clerk will sign them off, a statement will come in after the supplier's monthly shut-off, and it will be checked against the receiving company's remittance advice before the payment goes off perhaps two weeks into the following month. Immediately, six or seven weeks will elapse before the supplier gets the cheque.
  As smart and intelligent people, hon. Members will appreciate that as the month progresses to the 20th, 21st or 22nd, the payment period will drop to about 21 days. However, an item that comes in on the 27th of the month, or the 6th of the following month—perhaps a weekend will intervene—will miss the cut-off. Payment for that item will not be made until perhaps seven or eight weeks later.
  If the supplier company says that it wants the statutory right to interest because 30 days are up, the other company will say, "Stop. We want to negotiate, and to negotiate on the longest possible period that we could be caught for." That is quite legitimate; no one is trying to fiddle, or to short-change anyone. Everyone is operating a perfectly legitimate business practice because computers run with a monthly cut-off. The company will say, "Forget 30 days, we had better make it 56, because we do not want to be hit with interest charges."
  Mr. Breed: Does the hon. Gentleman accept that, although the Bill offers business men an opportunity to claim interest, they do not have to do so, and are not statutorily required to do so? The instrument is available to business men to encourage payment.
  Mr. Page: I appreciate that perfectly, but the teeth to require payment will not be there. Companies will argue, as I have argued, that it may take 56 days to pay. We have the Grant Thornton figures for Europe. We have the statistics of Intrum Justitia, the debt collection organisation, which show a figure of 49 days. I fear that the difficulty for small business will be that the payment period of 56 days—or thereabouts—will become the norm, not the exception. I fear that the 21-day period that currently exists in the middle of the month will start to go out of the window, and that firms will think in terms of two months rather than one.
  I feel that the Bill will not be effective in operation. That is one reason why we did not introduce it ourselves. Anything that is done to try to help small businesses should involve looking more closely at the way in which the courts and the small claims system operate to help—or not to help—the small business man and woman. In particular, we should consider bailiffs and sheriffs. Their operation strikes me as highly arbitrary, and I have grave doubts about its effectiveness. Most people who end up in court are "can't pays" rather than "won't pays".
  Our hearts are with the Minister, but the brains of those of us who have business experience urge a degree of caution. When the Bill goes into Committee in the fulness of time, I hope that we can produce some ideas that will make it more practical, so that it can really help small businesses.
  6.8 pm
  Mr. Tony Colman: Let me first declare an interest as a director of GLE Development Capital Ltd. I chair that company on a pro bono basis, and it has a factoring and invoice-discounting subsidiary. The Bill is part of a package to help small businesses. I praise the work by factoring, invoicing and discounting businesses to help small businesses to deal with their cash-flow problems.
  I was previously the director of the Burton Group. I particularly remember working in the late 1960s, in the early days of Top Shop, the fashion chain, with many small clothing manufacturers, many of whom are international names. It was extremely important, in terms of supporting their development, that they were able to receive seven-day payments. The charge was 5 per cent., but it was extremely important that the clothing manufacturers, the designers, were able to buy the cloth perhaps on a 30-day term, to make up the garments and to receive payment from Top Shop before they had to pay their cloth manufacturers. If we are to support creative industries, it is important that large manufacturers are particularly aware of the need to help start-ups, as occurred at that time.
  It is particularly interesting to follow the hon. Member for South-West Hertfordshire (Mr. Page). He may not know it, but I stood for that seat in 1979 before the by-election that brought him to the House. He gave the example of Italy, where there is a very large clothing manufacturing sector, which we know through household names such as Benetton. I assure him that that firm does not operate on 90-day terms. In fact, it largely pays for the cloth, trimmings and materials on time to ensure that its suppliers are able to stay in business and make a good profit out of Benetton. If we are considering the position in Italy, it is extremely important to remember that the successes of its small and medium enterprise sector are very much related to the fact that, in its payment system, the larger companies support the smaller companies.
  Mr. Tim Boswell: Nevertheless, does the hon. Gentleman agree that the Intrum Justitia figures show that the actual average payment period in Italy was 87 days, compared with the European Community average of 54 days and the UK average of 49 days? That may suggest that, if some are doing as well as Benetton, there must be others that are not complying with the principle.
  Mr. Colman: Obviously, I would not wish to question those figures, but I am trying to point out merely that, in examining why Italy has such a strong small and medium enterprise sector, we find that late payment is not a negative factor there, and that large companies work strongly with small companies to ensure that the small companies are looked after. If the hon. Gentleman visits the area, he will discover that.
  I am obviously pleased that there is cross-party support for the Bill. I was a little concerned to hear the hon. Member for Chesham and Amersham (Mrs. Gillan) perhaps being overly critical, but I note that she supports it and so she should: she has a record of supporting such a measure. I was hoping that she would still be on the Front Bench so that we could perhaps again take up the point that, in opposition, she is one of the hon. Members who support the early-day motion that calls for a statutory right of interest.

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  The residents of Putney who work with and have small firms are extremely concerned that this problem should be dealt with. Business Links in south-west London views this as the major problem in terms of expanding the small-firms sector there.
  Mr. Page: The hon. Gentleman touches on an important point, but does he accept that one of the tasks of Business Links is to ensure that those small companies operate a correct credit procedure, that they vet the people for suitability before they give them credit and that they do not get so carried away that someone has had the wit and brain to place an order with them that they automatically give them the goods straight away?
  Mr. Colman: Business Links in south-west London certainly does that, and I would hope that it is done throughout the UK. The problem is that larger companies do cheat on those small companies—that is what it is: cheating. After payment terms are agreed, payment is not made within the time that has been agreed. It is extremely important to recognise that we are talking about vulnerable companies.
  The hon. Member for Chesham and Amersham talked about contracts that have been freely entered into by both parties. When a large company has a contract with a small company, it cannot be a freely entered into contract. I agree that the small company could choose not to go forward, but, if it refuses, obviously it will not get the business. Contracts are being imposed on it by the larger company.
  The hon. Member for Chesham and Amersham pooh-poohed the figures that have been produced in support of the Bill. As a member of the Institute of Directors, I was particularly pleased that my hon. Friend the Minister pointed out that the statutory right to interest was favoured by 69 per cent. of the respondents to the IOD survey. What she did not say was that 78 per cent. of the respondents said that late payment created problems for their businesses, and that 93 per cent. said that it created problems for British business generally, so the Bill has the institute's support.
  Earlier today, I was in discussion with the CBI. Its briefing states:
  "the Bill represents a sensible way to proceed."
  It is concerned about three items, but, in general, it supports the Bill. One involves the definition of the default credit period. I believe that that is already containable within the Bill. I understand that the matter has been raised in discussions between the Minister and CBI and that it can be dealt with in terms of custom and practice, but she may wish to respond to that in her winding-up speech.
  The other two concerns are somewhat surprising. One is that the planned threshold to define small and large firms is too low. The CBI believes that, in the first phase, the threshold should be not 50 employees, but 100 employees in a firm. It is important for the Bill to bed down with the smaller size of company initially—I am getting nods from Opposition Members—rather than including much larger companies in the first phase. Again, the Minister may wish to respond to that.
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  The last point that was raised by the CBI—I see this as a rather minor proposal; it is important, but it does not in any sense undermine the thrust of the Bill—is that large companies should be able to sue public bodies in the first phase. When I read that, I asked, "Why should they not be able to sue large private bodies as well?" The CBI said, "Oh yes, those too." In my experience—I have moved from the private sector into the public sector—the public sector is a darn sight better at paying on time than the private sector. It is important to recognise that.
  In preparation for this speech, I spoke to the director of finance for the London borough of Wandsworth, who said, interestingly, that, as the Bill was coming forward, he would report every quarter to the relevant council committee on how the council was getting on in terms of achieving the 100 per cent. target; in his knowledge, it was close to it. I mention that primarily to demonstrate that the Bill is necessary in terms of changing the climate. People should receive those reports. If companies have to state their policy in their annual reports, they could also show how they are doing and whether they are delivering that policy. Public bodies locally and nationally should do the same.
  Companies can have recourse to the local government ombudsman if late payment occurs and local government is involved. There is concern about the fall-back position of a small company that does not want to go through the courts when the private sector is involved. It is important for the House to realise that small firms are at the mercy of large firms. I hope that, if the Bill, is enacted we will, in two years' time, consider whether there should be a commercial debt ombudsman, so that recourse to a neutral body would be available. I am concerned that some small businesses would not want to take court action. They would take action if public bodies paid late, because they would not feel that they would be victimised, but I am concerned about what would happen if the private sector were involved.
  The hon. Member for Chesham and Amersham referred to the report in the Financial Times today. I am not surprised that 2 per cent. of the finance directors are not ready to pay within 30 days. They could simply adjust the computer programme to ensure that payments are made.
  Mrs. Gillan: The Financial Times article said that fewer than 2 per cent. of finance directors in large businesses fully understand the Bill. If that is so, there must be a process of education, and it will be interesting to see how the Government embark on that process and how much money they are willing to provide to back up the Bill.
  Mr. Colman: The public sector leads the way, and I had no problem talking to the director of finance of my local council about the Bill: he knew all about its contents and how to implement them. I am sure that the CBI, which is an excellent organisation—although the hon. Lady may not rate it very highly—is continuing this discussion and ensuring that its members fully understand the provisions of the Bill.
  Mr. Page: The hon. Gentleman rather casually referred to 30 days. I have done my best to show that, with

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  computer accounting and monthly cut-offs, the 30 days may have to be increased if the statutory right to interest is to be rigorously applied.
  Mr. Colman: I covered that point earlier in my speech, and it was dealt with in the debate in the other place.
  Mrs. Gillan: I think that I heard the hon. Gentleman correctly when he said that I did not rate the CBI very highly. I should like to pay tribute to the CBI, which sent me a message containing further remarks on the Bill while I was in the Chamber making my speech. I have a very high regard for the CBI, with which I have a good working relationship. I hope that the hon. Gentleman understands that.
  Mr. Colman: I am pleased that the hon. Lady has such a good relationship with the CBI. This morning, when I asked staff at the CBI for a briefing, it had not been prepared. I spoke to them at some length and it was faxed to me. I am pleased that they managed to get it to the hon. Lady this afternoon, and that I was able to help her in that regard.
  Mrs. Gillan: I am not sure where the hon. Gentleman is going with his argument. I have been in conversation with the CBI in the past few weeks on this matter. If the hon. Gentleman is trying to imply that I received a last-minute briefing, perhaps he would like to step outside the Chamber and compare the briefing he received with the up-to-date one that I have received within the hour.
  Mr. Colman: I have obviously prompted a strong response from the hon. Lady. Like many Conservative Members, she is concerned about the fact that they lost the business vote last year and they have not got it back yet. I see confirmation of that from the Opposition Front Bench.
  This is a moral problem: companies that pay late are cheating their suppliers. I do not believe that the Bill is a panacea for all the ills relating to late payment. It is part of a package, and I commend it to the House because it is a major step forward in dealing with this iniquitous problem for small businesses in this country.
  6.25 pm
  Mr. Brian Cotter: I broadly congratulate the Government on this long-overdue legislation. The Liberal Democrats have, for a long time, believed in a statutory right to interest, and we welcome the Bill on behalf of businesses. I run a small business, so I am glad to be part of the statistics in saying that, as a small business person, I approve of the legislation.
  The Conservative Government understood to some extent the problems that late payment of debt caused business, but they produced nothing substantial, which is why I welcome the Bill. The business community was offered the option of voluntary measures to aid good business practice. Hon. Members should note that those voluntary measures dismally failed, and that the commercial debt problem has worsened. Why? Because late payment is often intentional, so late payers must be penalised. A stick as well as a carrot is needed to get companies to pay on time: we need both.
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  Small businesses form the backbone of the United Kingdom and European economies. Small and medium-sized enterprises are not a minority interest, but hold the key to a dynamic, successful and competitive economy in the United Kingdom, in Europe and globally. It is the Government's duty to help SMEs to achieve and succeed in that aim. Improving payment practice will benefit the whole economy.
  In the United Kingdom, it has been estimated that about 50 per cent. of all SME bank borrowing by value is used to fund commercial credit. Late payment is a huge impediment to competitiveness, and threatens the very survival of many firms, particularly small businesses.
  The Liberal Democrats have long realised that late payment is a millstone around the necks of many businesses. It has a crippling effect on SMEs, which are dependent on tight budgeting in order to realise investment projects and consolidate their markets. Denying SMEs ready access to capital has brought many companies to the brink of collapse, if not to actual collapse. It has prevented a large number of promising small firms from realising their economic potential. Our aim should be to create a business environment in which potential can thrive and prosper. The Bill will help in that respect.
  This legislation, in itself, will not solve the late payment problem. Other complementary measures need to be taken through trade organisations and appropriate bodies to ensure that small firms in particular promptly render invoices in a correct form and get paid promptly. If they do not promptly render their invoices, they often lose time.
  In 1978, the Law Commission recommended statutory rights to interest, and, ever since, the campaign for such rights has received overwhelming support from all sectors of business and from business organisations. As a small business man, I have also supported it.
  As the hon. Member for Putney (Mr. Colman) said, 78 per cent. of respondents to a recent Institute of Directors' survey said that late payment created a problem. Moreover, 93 per cent. of respondents said that late payment created a problem for British business generally. Those percentages are obviously very high.
  Only this morning, I was at a meeting of the Institute of Management, where I was told that 75 per cent. of the institute's managers support the Bill.
  Another survey published last summer showed that late payment is threatening the survival of one in four firms employing up to 50 staff and costs millions in reduced profitability for almost 75 per cent. of those businesses.
  The Forum of Private Business—which has been recognised as an ardent campaigner for a statutory right to interest—has already been mentioned in the debate. The forum frequently conducts in-depth research, which has shown that late payment of bills imposes significant costs on both individual businesses and the overall economy. The forum estimates that the average cost of late payment to a business with a £500,000 annual turnover could be as much as £10,000.
  Mr. Page: Can the hon. Gentleman tell us whether the forum has calculated how much such a company has saved by not paying its bills on time?
  Mr. Cotter: As I said, we all agree that all companies have to pay on time. Moreover, small

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  businesses' problems in meeting their bills often arise because they are not paid on time by large businesses. We must be realistic about small businesses' difficulties. The Bill is very important for small businesses, which are sometimes restrained in paying by large businesses.
  Evidence from Europe suggests that effective legislation could reduce the average cost of late payment to £1,000, thereby saving such businesses £9,000. The Bill's opponents should at least bear in mind those facts and figures, and realise that their opposition rides against much information contradicting their opposition.
  Late payment has a domino effect on business, and, undoubtedly, the worst offenders are large companies. A Dun and Bradstreet survey revealed that, as recently as October 1997, fewer than 10 per cent. of large businesses pay their bills on time.
  Mr. Page: I am sorry to keep interrupting the hon. Gentleman's speech, but—as this debate has been coloured by people making grand statements—what does "being paid on time" mean? Is it within 30 days, or perhaps within a computer programme's monthly cut-off date? What does it mean? Are companies really as bad as is suggested by that percentage?
  Mr. Cotter: The Dun and Bradstreet survey stated that only about 6.6 per cent. of companies paid within the agreed terms—which is what we are debating.
  Potential complications have been mentioned, and I agree that there will be difficulties after the Bill is passed. However, over time, some practices in businesses and industry—we all know, for example, about those two or three days at the end of the month—will have to be dealt with. I believe that the problems can be solved.
  Late payment is a vicious circle. Most small firms believe that their large business debtors often pay late to gain. We have heard in the debate of examples of such practice. One company that was mentioned earlier certainly used the practice, which is very bad news, to expand its bank balance.
  For all those reasons, the Liberal Democrats support the legislation. Nevertheless, our support for the Bill does not mean that we are uncritical of it. I urge the Government to reconsider some aspects of it, so that it will operate more effectively and there will be no casualties along the way.
  The first aspect that Ministers should reconsider is the phasing-in periods. The Bill will allow government at all levels to escape from its provisions until the later phases. Although we have already debated the matter today, I should like to propose that, in the first phase, businesses of all sizes should have the right to charge interest on outstanding bills owed by government. Moreover, the Government should be prepared to set an example in the matter.
  The Minister will recall that, on 5 March 1998, I asked her:
  "Does she agree that, often, both local and national government are very bad at paying? I hope that she shares my view that the Government should give a lead in that direction."
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  She replied:
  "I absolutely agree … That is why I intend to provide in the summer a league table of Government Departments, and I have taken the opportunity this week to remind local authorities of their obligations as well."—[Official Report, 5 March 1998; Vol. 307, c. 1178.]
  I ask the Minister only to dwell on that point—which she accepted when I asked my question—and to consider whether there is really any reason why government should not be covered by the legislation's provisions in the first phase. Only today, a colleague told me that he is very concerned that, because of financial strictures, local government is using late payment of debt to increase the amount of money that it has to hand. I ask the Minister urgently to consider that practice.
  The question remains: why is government being exempted from the provisions in the early stages? I welcome the fact that the Minister has promised a league table, and reiterated that promise today. I hope that the table will be considered as an annual commitment, by which the Government may demonstrate how they are improving the payments record.
  It is extremely important that quoted businesses also should have to declare their payment record in their annual accounts. I am sure that the Bill's passage will ensure that such declarations are made.
  Earlier in the debate, the crowing of the right hon. Member for Henley (Mr. Heseltine) of his ability to delay payment was both mentioned and robustly defended. I do not think that the point was made clearly that he was talking about his own practice and not about the general practice of business. I was a member of the public when the comment was made, and thought that, coming from a Minister, it read very badly indeed. It was not a good example.
  The hon. Member for Chesham and Amersham (Mrs. Gillan) has been very keen to promote statistics and to ask for apologies. I remind her of the fact—which she has not dealt with terribly well—that she signed early-day motion 912 1993/94, which stated that
  "the only effective solution to the problem of late payment of business debts is the implementation of a statutory right to interest".
  As we are debating statistics, I should say that that motion was signed by 328 hon. Members—representing a very large part of the House's then membership, and showing the strength of support for the motion, even among Conservative Members. The hon. Lady's support for the motion should be mentioned again, as she did not feel that she needed to apologise.
  Mrs. Gillan: As that matter was mentioned three times earlier in the debate, I think that—by mentioning it yet again—the hon. Gentleman can be accused of boring repetition. Time moves on. When I signed that early-day motion, that was how I thought. However, I examined the problem in more depth, and I examined the Government's action on the matter. I no longer hold that view, although I will approve of any provisions in the Bill that will improve the culture of late payment. Nevertheless, I believe that the Bill is a piece of legislation too far, and that the hon. Gentleman is boring the House to death.
  Mr. Cotter: People often say that when they are not very happy. Although time has moved on, improvement in paying debt has not moved on. We are debating a Bill

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  containing provisions that the hon. Lady strongly supported. Moreover, we are debating the Bill's other provisions, which will deal with the problem even more strongly than the early-day motion suggested.
  The Government think that a four-year phasing-in period is necessary to enable small firms to adjust effectively to the legislation. However, that argument has no bearing on the ability of large firms immediately to charge other large firms. The hon. Member for Putney mentioned large firms' ability immediately to incorporate the legislation. We could at least consider, in the first phasing-in period, allowing large firms to charge against large firms.
  The Bill contains a definition of a small business—which was identified in the other place as a matter of some concern. A small firm is defined as one that employs no more than 50 persons, which implies that a large business is one that employs more than 50 persons. That seems ludicrous when one considers that there may be only one or two people on the payroll and that payrolls can vary. We must be concerned about that issue and consider whether we should have a different definition of a small business. There are many definitions; the European Community uses a different definition from the one used in this country.
  I turn now to the problems, to which other hon. Members have referred, that debtors face when they are taken to court. The small claims courts need to be responsive to the Bill if it is to be effective. At present, the system is very ineffective for several reasons. A survey in a recent CBI brief pointed out that
  "larger firms were more likely to have used the courts than smaller firms."
  The courts system should be accessible, regardless of business size. The courts need more teeth, and judges could do more to encourage defendants to pay up.
  Even if a claimant is prepared to go to all the initial effort and expense of taking a debtor to court, the effort and expense do not end there. The majority of those who win their claim experience extreme difficulty in receiving their payment because the responsibility lies with them, not the court. The claimant has to pay a further fee to make the court try to enforce the judgment. That makes a mockery of the whole system, especially as the powers of the bailiff are very limited, and companies end up throwing good money after bad.
  As hon. Members will know, the Lord Chancellor is reviewing proposals, which were referred to earlier, for the reform of the civil justice system, with a view to reducing delay and costs. That is welcome because court access and the enforcement of judgments are vital to the Bill. I urge the Government to ensure that future legislation on the matter will tie in neatly with the Bill, so that it is worth pursuing a debtor through the courts system. The system must be simple, quick, accessible and effective.
  I have been assured that there should be no problems regarding the Bill's compatibility with European legislation. However, we need a cast-iron guarantee from the Government that the Bill will be compatible with the European directive that is being formulated on this issue.
  Of course, as other hon. Members have said, the Bill will not solve the problem of late payment. It is a cultural problem which requires more than legislation to solve it.
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  There should be published lists of known, regular late payers. The Government seem keen to implement that proposal, which is welcome. If a business appeared on such a register, its credit rating could be affected, which might induce prompt payment. The hon. Member for Putney referred to the possibility of having an ombudsman to support such a requirement. That is a proposal, which I had not thought of, that we might consider.
  Small firms need greatly to improve debt collection and the general running of their financial affairs. Many companies have no systems in place and operate ad hoc. They do not make proper credit checks; delays and errors in invoicing are common; and they do not promptly pursue debtors. Late payment is viewed as a burden, but often as inevitable, so businesses should be educated to realise that that need not be the case. Businesses need to be made aware that it is no good their taking on work if they are unlikely to be paid for it within a sensible time.
  Improved credit management procedures are needed so that the late payment culture dies. Credit checks on potential new customers, credit limits, clearly defined payment terms, account monitoring and prompt action on debtors are some of the many ways in which businesses can improve their financial operation.
  The 1996 Grant Thornton document on good payment practice states:
  "A sale is not a sale until it has been paid for."
  Businesses should bear that motto in mind, and business links should make credit management an absolute priority when advising small firms.
  The Government have broad support from Liberal Democrat Members. I have outlined a few concerns, which I hope the Minister will address, and I look forward to her reply.
  6.44 pm
  Mr. Eric Forth: My only claim to any background or expertise in this matter is that I was a buyer and a credit controller. That was some time ago, but the principles remain substantially the same as when I grappled with them in the private sector before I became a politician.
  What bothers me about the Bill is that, like so many Bills being considered by the House, there is more than a smack of a quick fix and easy solution about it. I completely absolve the Minister from that accusation, because she said that the Bill was no panacea. I am more concerned for those business men who, as has been claimed repeatedly throughout the debate, are asked in surveys, "Wouldn't you like interest to be payable on late payments?" and reply, "Yes, please. That sounds like a very good idea." They would say that, wouldn't they? Most business men do not stop carefully to ponder the contents or implications of surveys. They read them and reply, "Yes, I like the sound of that." That is perfectly understandable.
  It is surely our job to study the proposals and consider whether they are likely to benefit the business community. In that regard, I am always puzzled by the suggestion—particularly if it is alleged to have emanated from the business community—that the law will be helpful. The Conservative party and the Labour party have recently fallen over each other, claiming to be the party of

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  deregulation; yet, time and again, against that claimed background, measures such as the Bill are put before the House. They are clearly regulatory and are always justified as a special case or part of the general scheme. The words must follow the action or the action the words. We cannot get away for much longer with claiming repeatedly to be the party of deregulation while putting our names to measures such as this.
  The key to the matter is the relationship that exists in a trading context between large and small businesses. The suggestion that all or most small businesses are virtuous in that regard and pay their bills on time, and that it is only the large businesses that do not, does not reflect my business experience. Perhaps events have moved on since then and most or all small and medium firms are paragons of virtue in that regard. I wonder how many of them have considered that they, like larger companies, could get caught by the Bill. That is a matter for their judgment.
  Mr. Breed: Does the right hon. Gentleman accept that many small businesses are unable to pay their bills because they have been unable to collect money owed to them? That is a cash flow problem: the fact that many businesses will not pay results in many that cannot pay.
  Mr. Forth: I fully accept the hon. Gentleman's point.
  Reference has repeatedly been made, not least by my hon. Friend the Member for South-West Hertfordshire (Mr. Page), to a change in culture. The assumption in the debate and underlying the legislation has been that the Bill will bring about a change in culture that we all desire and would approve of—businesses paying more promptly.
  My fear is that the Bill will have precisely the opposite effect. There is at least a possibility, perhaps even a probability, that, as a result of the Bill, large firms will seek to change the terms of trade that hitherto have been normal in British business—net 30 days. They will argue that, if they are forced to pay interest on late payments, they will unilaterally change the terms of trade to net 60 days or net 90 days.
  Mrs. Roche: When the right hon. Gentleman reads the Bill carefully, he will realise that we have thought of that important point, which is why we have said that terms in a contract that amount to a de facto contracting out of the provisions of the Bill will be void.
  Mr. Forth: If that is so, I am even more worried about the Bill than I was. If the Minister is saying that she is seeking, by legislation, directly to intervene in freely negotiated terms between businesses in the private sector, the Bill goes much further than I had imagined. That is more than a step too far; it is a gross intervention in what has hitherto been regarded as very much the preserve of private business in the private sector to negotiate terms freely with one another.
  Mrs. Roche: I am sure that the right hon. Gentleman is aware—I know that he has had an interest in these matters—that Acts of Parliament such as the Unfair Contract Terms Act 1977 have a role to play in contracts. The Bill is certainly not new against that legal background.
  Mr. Forth: That is a different point altogether. When the Minister replies, I hope that she will reassure not just the House but the entire private sector that it is not the Government's intention to intervene in terms of trade freely negotiated between commercial businesses and commercial partners. If that is the Government's intention, the Bill is much more iniquitous than even I had imagined.
  Mr. Boswell: Does my right hon. Friend agree that, if the Minister is right in saying that a typical net 30 days contract between a large purchaser and a small supplier would be struck down if the terms were changed to, say, 45 days, the likely recourse of the larger firm as the purchaser would be to find a fresh supplier on 45-day terms, cutting out the original supplier's business altogether?
  Mr. Forth: Indeed; I am grateful to my hon. Friend. That is the result of the process that I was describing. Depending on the extent to which either the legislation or the Government seek directly to intervene in commercial relationships between companies, the change of culture which has been referred to could be adverse—not favourable or helpful. I hope that we would all wish to ponder on that at some length before approving the Bill.
  Another element in the process is an old friend which is referred to in the explanatory memorandum as the supplier performing the obligation—by which I assume is meant meeting the requirements of the contract. Anyone who has been in business, even for a short time, will know that one of the most difficult matters in this regard is agreeing that the quantity delivered is that ordered and that the quality or specification is that required. Everybody will also know that, the more one seeks to intervene in the terms of trade or the mode of operation of companies, the more one drives companies down the route of using queries on delivery about quantity, quality or specification as a means of delaying payment, either legitimately or not. My hon. Friend the Member for Lichfield (Mr. Fabricant) referred to that point in an intervention, and I am sure that he will want to elaborate on it. It is an important point.
  I am simply trying to illustrate that legislation of this kind—no matter how well intentioned or well supported in endless surveys of people who are asked whether they would like life to be better and easier and whether legislation could help that—can achieve the opposite effect of that intended. The Bill is a prime case in point. If my hon. Friends had sought to divide the House—perhaps they still will, if the Minister does not reply adequately—I should have been very happy to oppose the Bill for the reasons that I have given. We shall want at the very least to look in great detail in Committee at the possible effects that I have described—there may be many more—before we give the Bill our support.
  6.53 pm
  Mr. Richard Ottaway: First, may I apologise to the Minister for missing the first few minutes of her speech? I confess that I thought that the Magistrates' Courts (Procedure) Bill would take up more than 13 minutes of the time of the House. I was caught short, as they say.

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  I rise briefly as the hon. Member who, in 1986, introduced the Right to Interest Bill, the private Member's Bill which the House approved. Hon. Members may be interested to know that among those who sponsored the Bill were such moderate politicians as my hon. Friends the Members for Teignbridge (Mr. Nicholls) and for Sevenoaks (Mr. Fallon) and Mr. Michael Forsyth, whose presence in the House we very much miss.
  The history of the Bill is quite interesting. The proposal was first considered by the Government under my right hon. Friend the Member for Old Bexley and Sidcup (Sir E. Heath), who asked the Law Commission to look at the matter. It decided that a statutory right to interest was right and appropriate. During the 1980s, the Government were very interested in the matter and undertook to introduce a Bill if the Confederation of British Industry and the Institute of Directors supported it. There was a time when the CBI supported the proposal, but the IOD did not. Then the IOD supported it, but the CBI did not. Both never supported it at the same time, which is why the matter never came to a head in the mid-1980s.
  After the energetic campaign by the Forum of Private Business, a Bill was mooted in the 1994 Budget. The then President of the Board of Trade, my right hon. Friend the Member for Henley (Mr. Heseltine), was invited, when I was his parliamentary private secretary, to look at the issue by the then Chancellor. We were faced with two piles of submissions: one for a Bill and the other against it. There was, of course, no way in which we could proceed on such division, so there the matter lay.
  There is no argument that there is a problem of late payment of debt: the theme unites all speeches in the debate. The problem lies with the chain. For a large construction project, there will be a main contract, a subcontract and a sub-subcontract. Smaller contractors at the base of the pyramid are without contracts and, therefore, do not have any protection from late payment of debt. The only way in which such subcontractors can obtain interest is to issue a writ with the invoice. That, of course, is no way in which to conduct business. Indeed, if subcontractors tried that, they would not get any more business.
  Some would say that parties are free to negotiate terms and that they live by the sword and die by the sword, but it is not that easy if one is the small man at the end of the chain who wants business. If such people are asked whether they want the work or not, and are told, "Get out there with your camera and take photographs of that building," it is not easy for them to say that they want a contract, which includes a right of interest, before they leave their office. It just does not work that way. When someone writes on an invoice "Payment within 30 days", it is not binding. It is not a term of the contract; the parties did not mutually agree it.
  Many figures and surveys have been referred to in the debate. That is where I share the views of my hon. Friends on the Front Bench. In truth, I have no idea whatever whether the Bill will work and whether it will achieve the results that we hope it might. What makes the Bill worth while is that it will probably result in a change of climate of opinion on the late payment of debt. I do not envisage a flood of litigants going to court when the Bill becomes law. The Bill will make a difference in the way in which
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  people talk to each other and negotiate. It is for that reason that my hon. Friends on the Front Bench are right not to oppose the Bill, which I wish well.
  6.58 pm
  Mr. Michael Fabricant: The hon. Member for Putney (Mr. Colman) said that the Bill would protect small firms that are at the mercy of large firms. I broadly welcome the Bill, but if its objective is to protect small firms from the strictures of larger firms, it will not achieve it—other than, as my hon. Friend the Member for Croydon, South (Mr. Ottaway) said, by changing the climate of opinion.
  Before I entered the House of Commons, I ran a company in what might be called nowadays a sunrise industry. It manufactured electronic equipment for broadcasting companies. Originally, our plan was to build small independent radio stations in the United Kingdom, but, after 10 years, we had expanded and set up radio stations in some 48 countries. Therefore, I have experience of how, in a niche market, a small company trades in its early years and of how it can grow into a reasonably sized company. One thing above all told me that the company would survive in its early days—not its profitability, but its short-term cash flow.
  I broadly welcome the Bill, but I believe that it is flawed. I come from the libertarian wing of the Conservative party and usually share the views of my right hon. Friend the Member for Bromley and Chislehurst (Mr. Forth), but I disagree with him in this instance, as I do not think that the Bill goes far enough. Interestingly, the Bill is flawed from whichever way one considers it, regardless of whether, like my right hon. Friend, one believes that it goes too far, or whether, like me, one believes that it does not go far enough. There is agreement that it will not achieve what was intended.
  I believe the problem is one of culture—how companies behave to one another in the United Kingdom. Far be it from me to introduce the subject of the European Union, but it is interesting to note that there are differences in culture in Europe on how bills are met. The Nordic countries, including Norway, Finland, Sweden, Denmark, Germany, Austria, the Netherlands and the United Kingdom—or what the French would call the Anglo-Saxon countries—pay their bills more or less on time. Further down the list are Ireland, France, Belgium, Spain, Italy and Portugal, with Greece at the bottom—those countries are the worst at paying their bills. There is a cultural gap between the Nordic, Anglo-Saxon countries and the Club Med countries.
  Mr. Boswell: Has my hon. Friend noticed the correlation between the propensity of a country to pay bills on time and the level of public debt incurred by its Government in the context of the Maastricht criteria?
  Mr. Fabricant: My hon. Friend entices me to go where I had not intended to go—so as not to be out of order, I shall be brief in response.
  The Prime Minister said this afternoon that there had been no fudge over the euro, but Helmut Kohl has stated that Belgium and Italy have the worst public debt and should not enter the single currency. It is interesting to note that Belgium and Italy come near the bottom of the list of payment records internally and overseas. Payment

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  is a cultural and educational issue—if the Bill has any effect, it will be to educate people on the importance of paying bills on time.
  Small companies in sunrise businesses need protection. I recall that, when my company was very small, we supplied equipment to firms such as GEC and the BBC. The irony is that Radio Uganda was the most prompt in paying bills, which gives a new slant to the phrase Ugandan relations—my Ugandan relations were very good, as Radio Uganda paid its bills within eight days, whereas the BBC paid its bills over 120 days. If it had not been for the contracts that my company had in east and southern Africa, we should not have been in business for long.
  It would be no bad thing if the Bill encouraged larger corporations such as GEC to pay up on time. The problem is, as I said, that it does not go far enough. Its main strength lies in clause 8, despite which, as the House of Commons Library report said:
  "It will still remain for any business to decide whether it wishes to exercise the right to statutory interest or not, but this decision will be voluntary not coerced."
  The implication is that, once again, large firms will say to small firms, "If you want the contract, you will not exercise your right under the Bill to impose interest charges if payments are not made on time."
  When the Bill is enacted—which, sadly, given the Government's parliamentary majority, it surely will be—nothing will change except, perhaps, the climate of opinion. I give the Minister the benefit of the doubt, as a change in the climate of opinion would be no bad thing in the longer term, and I give the Bill full marks for trying and for good intentions. However, I suspect that, in terms of achievement, it will be more soundbite than sound money.
  7.5 pm
  Mr. Tim Boswell: There are occasions in the House when it is not entirely necessary to be curmudgeonly, and I do not intend to be so now, either by speaking at great length in a debate that has rehearsed the principles thoroughly, or by advising my hon. Friends—unless they are so disposed—to oppose Second Reading. That, of course, will be to some extent contingent on the Minister's reply, but we are doing our best for her.
  Our position of what may be called sceptical acquiescence in the Bill arises from the fact that we are very anxious not to send a signal to the business community that could be interpreted, even inaccurately, as saying that we are in favour of a late-payment culture. We are not in favour of such a culture; we deprecate it as much as the Minister does. My late father, a business man from whom I learned many things on how to conduct my own business, was firm in insisting that bills be paid on time. There may be some who find it difficult, physically or because of the bank, to pay bills on time, but it was always my father's practice to do so, as I am sure it is of hon. Members who have business experience.
  I shall sketch one or two general points before I comment on individual contributions to the debate. As almost all hon. Members said, the Bill is no panacea—I notice that the Minister is nodding in
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  agreement. We need not go round the course again on who said what to whom, or who has changed his or her mind on a particular occasion. As the Minister said, almost 60 per cent. of lobby groups representing smaller businesses are opposed to a statutory right to interest—there is clearly a difference of opinion in the business sector. I do not say that opinions do not change over time. I am sure that business and trade organisations approximate themselves to the way in which the wind is blowing as developments occur—as, indeed, they have done to some extent on the national minimum wage proposals. None the less, the Bill is neither a universal panacea nor universally wanted by the business sector.
  Another general point, which has been implicit in many of the contributions to the debate, is that the problem that businesses identify in the conduct of their business concerns not interest on late payments but late payment itself. Businesses do not want payment to be delayed. There is no question that large, or public sector, customers will not be good for the money sooner or later, but there is irritation when a large and sophisticated organisation cannot pay. In the case of small customers, however, there is a genuine worry about whether the money will be paid at all—that is probably the major concern of many small businesses, which typically deal with other small businesses.
  If the problem is late payment, the provision of statutory interest cannot be a sufficient solution; it may alleviate matters or soften the blow, and it might even help with the cash, albeit rather late in the day, but it does not solve the problem of a late payment culture.
  The choreography of the debate has been interesting. The Minister, commendable as she is, has been on her own throughout. Her four ministerial colleagues in the Commons have not even looked in to see her. She has been supported by one Labour Back Bencher, and broadly supported by one Liberal Democrat Member.
  My hon. Friend the Member for Chesham and Amersham (Mrs. Gillan), by contrast, was supported by both shadow Ministers, as well as others who have looked in on parts of our debate, and four of my Back-Bench colleagues have made weighty contributions. That suggests that, in the "speak your weight to small business" campaign, there may be a certain imbalance between the parties; that will be noted elsewhere.
  I do not mean in any way to criticise the hon. Member for Putney (Mr. Colman), who has had a distinguished, in-depth business career over a long period and spoke interestingly. Predictably—I do not blame him—he supported the Bill. I am pleased that he was in favour of a prompt payment culture. He mentioned factoring, which is an important part of modern business practice—the son of one of my cousins is a distinguished factor—and, in some interesting remarks about the balance of advantage in the Bill, he conceded that there was no panacea.
  Mr. Fabricant: I recognise the valuable work that factoring does in assisting the cash flow of small businesses, but does my hon. Friend accept that sometimes factoring companies can be heavy-handed when small businesses are the ones who owe the money? Sometimes they can be so heavy-handed as to drive into bankruptcy small businesses that could have become large businesses.
  Mr. Boswell: My hon. Friend points up the dilemma precisely.

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  The hon. Member for Weston-super-Mare (Mr. Cotter) did not deal with matters in precise chronological order. He produced some slightly unconvincing evidence in support of the Bill and developed his criticisms of it at some length.
  I speak from the relative safety of possibly not being involved with the Bill in Committee. I may be anticipating, or even sending a message to the Committee of Selection. The Minister knows how much I enjoy Committee work, but it is not possible to split oneself in two and make two speeches simultaneously. That said, I have never come across a Bill that was more requiring of attention in Committee. Hon. Members' concerns need to be properly discussed.
  The Minister will have noticed some variation in emphasis and enthusiasm for the Bill among Conservative Members. My hon. Friend the Member for South-West Hertfordshire (Mr. Page), in a distinguished and fluent contribution, explained the problems and clearly expressed some reservations that I share, when he warned the Government about overselling the measure. He said that it should not be regarded as a philosopher's stone that would automatically remove all business problems, or even the problem of late payment.
  My hon. Friend spoke interestingly about measures taken during his stewardship of these matters to stimulate the private sector to improve its own business practice, and also mentioned the record of improving the Government sector. I remember, from my own time as a Minister, that there was a need for improvement. We began to change the culture, and not before time.
  The House should consider the current Government's record on compensation for confiscated firearms. We debated the matter early in the Government's life, and pointed out to the Minister of State, Home Office, the hon. Member for Cardiff, South and Penarth (Mr. Michael) that the Prime Minister, when in opposition, had committed Departments broadly to payment within 30 days, but that, even in straightforward cases, there had been a delay of up to six months. That is not good enough, and I hope that it will never happen again.
  My right hon. Friend the Member for Bromley and Chislehurst (Mr. Forth) said that, if asked whether they would like to get interest on money owed to them, small businesses "would say that, wouldn't they?" I have been in business, and I would love to have had that interest, which would possibly even have helped once or twice. As ever, these matters are not simple and there may be a price to pay.
  My right hon. Friend rightly asked whether there were limits to the cases in which intervention could deliver the commitments now made by all political parties to deregulation, and went on to say that intervention in contract law could pose as many problems as it sought to solve.
  My hon. Friend the Member for Croydon, South (Mr. Ottaway) and, in his own distinctive way, my hon. Friend the Member for Lichfield (Mr. Fabricant) were perhaps warmer towards the concept of the Bill. The former identified some of the real concerns about late payment, and the latter wondered whether the Bill went far enough. His contribution was very entertaining.
  Conservative Members have some controlled scepticism about whether the Bill will materially redress the problem, which we clearly recognise, without causing
  622
  problems of its own. We are not rubbishing the Bill and will allow it to go to Committee, but we want it to be carefully scrutinised there, so that the problems can be further exposed. There must be a proper process of public education about how the legislation is to work. If it is to work properly—and we wish it well in that sense—it must be understood by the business sector.
  The more I have listened to the debate—and especially to the contribution of my right hon. Friend the Member for Bromley and Chislehurst—the more I have realised that the Bill amounts to an intrusion into contract law. The Minister regards the Bill as very much in the interests of fairness and as building on the Unfair Contract Terms Act 1977, but it goes much wider than that.
  It seems to me that the impact will be rather contingent. It is not clear to me—I am not a lawyer, and the Minister is—whether it is seriously intended that attempts will be made to attack contracts made between parties other than the original supplier and customer, if the customer switches to another supplier. The only possible way in which one could go down that road would be by specifying national contract terms and having a single model contract. I am not sure whether the Minister wants to do that, but if she follows her own logic she may be driven that way.
  A point embedded in the interesting exchange that I had with my hon. Friend the Member for Lichfield was that, while the Minister wants to sell the Bill as a pro-business measure—and one which, by inference, will soften the blow of some of the nasty things that we believe her Department is hatching for business—to help one business by giving it a statutory right to interest is ipso facto to damage another business, which will not be very happy. It is a business-business conflict of interest, rather than a business-labour conflict of interest.
  In seeking to replace the normal commercial practices between broadly consenting, if not entirely happy, parties to an arrangement, the Government may create a differential response. The evidence I have seen suggests that perhaps only half of creditors with a right to statutory interest will press for it, while half will not. That, in' turn, creates another anomaly. I remind the House that there is nothing to stop the parties agreeing on a contract right to interest at the moment. They can write that in.
  Mrs. Roche indicated assent.
  Mr. Boswell: I see that the Minister agrees. It is not clear what defect is to be remedied which would not otherwise be remedied. If there is a problem in enforcement, it is probably a problem of relative size or of market influence, rather than one that would be brokered by some magic change in the law as proposed by the Minister.
  A question that worries me is whether the defects culture will come into the consideration of debts. It would be easy for a firm to say that it did not like what it had received or that the building was unsatisfactory, and that it would not pay until the matter was settled. That may well shift the burden towards yet more litigation on whether or not contracts have been adequately discharged. The Committee must consider whether that chimes in with the statutory right of interest, or whether these matters can be held in the same legislation.
  The question of contracts not expressed in sterling bothers me. There is reference in the Bill to overseas contracts under foreign law, but I noted that, yesterday,

  623
  the President of the Board of Trade was effectively writing virtually a blank cheque for the introduction of the euro as a secondary, supplementary or parallel currency in the UK. I presume that contracts made under English law and expressed in euros between two consenting parties will be testable in the English courts.
  If that is so—if there is a single interest rate which is characteristic of the euro and the new European central bank throughout euroland, and those countries that use the euro as a subsidiary currency—it is likely that that single interest rate will diverge from the rate generally applicable on sterling debt. if that is the case, there is a possibility that there may need to be a second rate for the euro. If so, I wonder how that would be expressed, and whether parties might wish to convert from one to the other at various times. Those matters should be considered by the House, particularly given the DTI's enthusiasm for Europe.
  If one asks small businesses whether they would like interest on late payment of debts, they are likely to say that they would. As so often with what this Government propose, it looks like a good idea at the time, it is easy to say, it sounds good and it is a simple political trick. However, the devil—and the problems for other businesses—will be in the detail. It is right that the detail should be tested thoroughly in Committee.
  We have good will towards the business community, and we hope that the problems—some of which we have outlined tonight—do not transpire. To prevent them from doing so, it is essential that we do not collapse into a warm bath of bonhomie without at least considering that there may be problems, some of which I hope that the Minister can respond to tonight. It is on that basis—and on that basis only—that we do not oppose the Bill this evening.
  7.23 pm
  Mrs. Roche: With the leave of the House, Mr. Deputy Speaker, I shall reply. This has been an interesting debate on an issue of importance to British business—particularly small business. I have listened carefully to the debate, in which a number of issues have been aired; I have agreed with some and disagreed with others, but I can assure the House that I will reflect on the debate when we go to Committee.
  First, I wish to deal with the speech by the hon. Member for Chesham and Amersham (Mrs. Gillan), who referred to burdens on business. The Bill is hardly a burden. It provides a right, not a regulation. We received no response to the Green Paper saying that the Bill would be a burden on business. The only burden is that of late payment itself, which the Bill seeks to address.
  The hon. Lady referred to taxation and the Budget. The last Budget was excellent for small businesses and has been welcomed by small firms' organisations. She asked how much has been spent on the best payment practice group. The Government measure success by what is done and we are pursuing a package of measures. It is sad that the Opposition cannot bring themselves to recognise that. Money is available to bring our objectives to fruition and that is being provided from existing budgets. The hon. Lady mentioned EU comparisons, and I referred to that in my speech.
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  The hon. Member for South-West Hertfordshire (Mr. Page) made the valuable point that we face a problem of culture. He is right, and that, in part, is what the Bill seeks to address. We are seeking to reinforce a culture change—a point made by the hon. Member for Lichfield (Mr. Fabricant), who has some experience of this matter. I was interested to hear his remarks about the sunrise industries, which are so important to the economic future of this country. The hon. Member for Weston-super-Mare (Mr. Cotter), who comes from a small business background, also referred to the payment culture. The Bill can succeed only in parallel with our other measures, which I have outlined.
  Reference was made to the Lord Chancellor's review, which is up and running. It is a vast task, and measures to expedite judgments are expected to be in place by spring next year. I know that the Lord Chancellor will also review enforcement procedures over a longer time scale. That is excellent news for small businesses and is another measure aimed to improve the payment culture.
  The hon. Member for Chesham and Amersham and I had a discussion about late payment by Government Departments. She will be interested to recall that when she was Under-Secretary of State at the Department of Education and Employment in 1995, only 75 per cent. of bills were paid on time. I am sure that she would want to reflect on that.
  Mrs. Gillan: The Minister will be aware that over the time I was a junior Minister at the Department of Education and Employment—as is clear from Hansard—that payment record improved dramatically to more than 92 per cent.
  Mrs. Roche: I am afraid that it had a long way to go. I gave the hon. Lady the opportunity to apologise to small businesses, but she failed to do so. I want to be fair to the hon. Lady, although I was slightly puzzled by her speech. She started by saying that the Bill was almost the road to hell, but then said that she would not divide the House on it. I want to be fair to her. I know the problems that she has. It is reported that she told a freelance reporter who told the Federation of Small Businesses which told The Sunday Times that the last Government had lost the small business vote, and that we would be seeing no new policies in this area from her. Clearly, that was her attitude today.
  We heard an interesting speech from the hon. Member for South-West Hertfordshire, whom I thank for his kind remarks about the part that we both played in Government Departments. I know that the figure has increased for the DTI. It is not the figure that the hon. Gentleman quoted; from memory, I think that it is about 97.5 per cent. I recognise the contribution that he made in that respect. He raised the important matter of net monthly accounting as an example of the legislation in practice. The Bill will allow that to continue instead of having the default period of 30 days, where it exists in the normal course of dealings between the parties. I refer the hon. Gentleman to clause 16(2). It is always better to agree a date for payment expressly within the contract. The point that the hon. Gentleman made about small businesses is not one with which I necessarily agree. It is important that all businesses pay on time. We want to give small businesses time to develop the necessary systems for timely payment, which is why we propose phasing in that case.

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  The comments by my hon. Friend the Member for Putney (Mr. Colman) reflected his years of business experience, mainly in dealing with big business. He rightly referred to the importance of good supply chains. Where businesses have succeeded, they have invested enormous time and effort in their supply chains, not only because it is the right and ethical thing to do, but out of enlightened self-interest—it is in their own interest to have good suppliers. My hon. Friend also referred to phasing and the default period, on which we have been holding discussions.
  The hon. Member for Weston-super-Mare talked about the definition of a small business, and I understand his point, but it is difficult exactly to define a small business. There are several definitions, for example, in company law and according to the European Union. We have tried to pick on a definition that is workable and is readily understood within the business world.
  The hon. Gentleman mentioned phasing: we consulted on the phasing proposals, and 80 per cent. of respondents supported phasing, with about 85 per cent. of those supporting our proposals. It is important that we give the proposals time to bed in, but we shall keep an open mind on the question of the timetable and be responsive to representations from business. He also mentioned the recently published EU directive, which has not yet been discussed by member states, although I understand that it will probably be on the agenda of the Industry Council this week. We have been in discussion with the Commission as it has formulated its proposals.
  Turning to the speech by the right hon. Member for Bromley and Chislehurst (Mr. Forth), it would be ludicrous were the Government to ignore the possibility that businesses might abuse their negotiating strength and force excessive credit periods on suppliers—we live in the real world. The best answer to the right hon. Gentleman's point came from his hon. Friend the Member for Lichfield who has experience of small business. The Labour party is the party of small business and we do not want to stand aside where there is evidence of abuse. As for the example of a customer changing supplier because of 15 extra days credit, the idea is bizarre. Suppliers are chosen for many reasons, but I doubt whether 15 extra days credit would be one of them. Businesses look around for quality and consistency of supplies—that is what influences them.
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  The right hon. Gentleman also spoke about regulation, but the Bill will not impose a burden—it provides a right, not a regulation. It is a matter for the individual supplier to choose whether to make a claim for interest, so I cannot accept the right hon. Gentleman's argument.
  Mr. Page: We are all seekers after the truth in this matter, but is it not a fact that, when a large company supplies a small company, more often than not a direct debit service is involved so that there is immediate payment and there are no credit terms whatsoever? There is a complete imbalance, which the Bill fails to address.
  Mrs. Roche: I agree that there is an imbalance, but the Bill seeks to correct that balance by implying that term into statute, giving small businesses a remedy whereby they can claim interest if—I stress, if—they wish to do so.
  I thank the hon. Member for Croydon, South (Mr. Ottaway) for his remarks and for the role that he has played. He provided a good riposte to the remarks by his right hon. Friend the Member for Bromley and Chislehurst. I welcome his support for the Bill.
  This has been short but interesting debate. The Bill is vital to small businesses, which are the economic backbone of this country. 1 pay tribute to the contribution that they all make and I sincerely hope and believe that the Bill will help them in their important task.
  Question put and agreed to.
  Bill accordingly read a Second time, and committed to a Standing Committee, pursuant to Standing Order No. 63 (Committal of Bills).

  EUROPEAN COMMUNITY DOCUMENTS
  Motion made, and Question put forthwith, pursuant to Standing Order No. 119(9) (European Standing Committees),
  EUROPEAN COMMUNITY DOCUMENTS

    WATER POLICY AND BATHING WATER
    That this House takes note of European Community Documents Nos. 7531/97, a draft Directive establishing a framework for Community action on water policy, and 12929/97, the Commission's proposed amendments to this draft Directive; endorses the Government's proposed approach to negotiations on the proposal in the Council, also takes note of European Community Documents Nos. 6177/94, a draft Directive concerning the quality of bathing water, and 12591/97, an amended draft Directive on the quality of bathing water; and endorses the Government's approach to the proposal.—[Mr. Jamieson.]
    Question agreed to.

Hermitage War Memorial
Motion made, and Question proposed, That this House do now adjourn.—[Mr. Jamieson.]
7.35 pm
Ms Oona King: I recognise that the subject of this debate strikes at the heart of this country's identity and values. The debate has been kept alive by the extraordinary commitment, perseverance and dedication of the Civilians Remembered campaign.
Let us remember those civilians: 60,595 died in this country during the second world war and half of those—29,890—died in London. With those people in mind, let us remember what the debate is about. It is no exaggeration or cliché to say that it is about honour and sacrifice on the one hand versus private interest and profit on the other. Heaven forfend that private interest and profit have no place in our society—they certainly do—but there are times when public interest and national dignity demand precedent, and this is one of them. Surely the matter is one of national significance, for if the second world war is not a matter of national significance, I do not know what is.
Within that national agenda, I should like to place on record the local circumstances. The House will be pleased to learn that, when the London Docklands development corporation withdrew from Wapping earlier this year, it left behind many new opportunities for Londoners. However, as well as those new opportunities, the LDDC left scars, especially in the minds of the original east enders—the residents of Wapping and the Isle of Dogs. The London docks were, and still are, a hard place in which to live and work—if one has work, that is—but they have always been renowned as a proud place, with a community that looked after its members. The ultimate test of that came during the blitz. As we are all aware, Hitler hoped to create panic and civil unrest to stop people going about their war-related jobs, thus knocking Britain out of the war. The strategy did not work, but many of my constituents remember how hard it was to live through those nights. Many lost civilian friends and relatives—for example, at Bethnal Green tube station, 167 civilians died in the panic to escape bombing.
It is those who made sacrifices and those who lost loved ones whom the Civilians Remembered campaign sought to commemorate when it applied for planning permission for a permanent memorial park in honour of civilians who had died in the war. The chosen location was the Hermitage site—the last open space on the riverside in my constituency. In addition, the wharf on the site was itself destroyed by a direct hit from a German land mine. Surely there could be no more fitting place.
My constituents had hoped that the LDDC—a body which had taken away so much of what was familiar, often replacing it with the unfamiliar and unwanted—would hand over the Hermitage site as a fitting location for a memorial park. Unfortunately, in the face of that heartfelt public demand, the LDDC sold the land to a property developer whose only aim was to profit by raising yet another block of luxury apartments on the river bank.
Hon. Members may be aware, having heard me speak in the House previously, that there is a desperate need for housing in my constituency, but we no longer need luxury
628
riverside apartments which local people will never have a hope of living in. As the local planning authority, Tower Hamlets council asked the Department of the Environment, Transport and the Regions to take the decision on the competing planning applications for the site. It was advised that planning applications are called in only
"if planning issues of much more than local importance are involved."
I return to the point: could there be an issue of more significant national importance? I understand that, in deciding to allow the applications to be determined locally, the following factors were taken into account. First, the development proposals are in accordance with the soon-to-be-adopted unitary development plan; and secondly, they are in line with the conclusions and recommendations of the inspector on the previous application.
Although I appreciate that the Minister has a quasi-judicial role in overseeing the enforcement of planning law, which may mean that he is unable to comment on the merits of the planning applications, I should be grateful for his response to my concern at the Government's decision not to decide on the planning application themselves. That decision was taken in the full knowledge that the planning regulations gave Tower Hamlets development sub-committee hardly any option but to pass planning consent to the Berkeley Homes proposals. In fact, councillors on that committee have said that they believed that they might face a surcharge if they did not consent to the Berkeley Homes scheme.
In those circumstances, I wonder whether the Minister would agree that a permanent and fitting—I reiterate, fitting—memorial site to the civilians who died during the war is an issue of national importance and should not be decided at local level. I also draw the Minister's attention to the fact, of which I am sure that he is aware, that on Friday 24 April, at an extraordinary meeting of the Tower Hamlets planning and environmental services committee, the draft unitary development plan was amended to include a designation of metropolitan open space for the Hermitage site.
Moreover, I draw the Minister's attention to the fact that it is unrealistic to squeeze a public memorial into what will, effectively, be a private garden for wealthier residents, living in those luxury apartments. It is not only disingenuous, but an insult to the memory of those who lost their lives that no space can be set aside for quiet contemplation by those who lived through the blitz. We also need a place where younger people—my generation—can consider what happened and why we have some of the freedoms that we have today. They will not be able to do so by staring at a block of luxury apartments. In other words, this is a legacy that we need to bequeath to future generations. I should also add that it is impossible to express the disgust that my constituents feel at this site being given to property interests over and above the interests of the nation.
There are fairly obvious reasons to call in the planning application. There is the national significance, there is the fact that, in Tower Hamlets, we do not have enough green space and there is the fact that we have the greatest overcrowding in Britain. Self-evidently, we need no more luxury apartments. Putting all that to one side, I appreciate that Berkeley Homes is willing to offer 40 per cent. of the

629
land as a memorial park, but I would say that even 60 or 80 per cent. is not enough. British civilians did not give a 40, 60 or 80 per cent. effort; many gave their lives. We must take that into account.
I hope that, even at this late stage, Berkeley Homes will agree to donate the land, or, at the very least, to offer it at cost price. In the circumstances, it is not much to offer.
7.44 pm
Mr. Jim Fitzpatrick: I congratulate my hon. Friend the Member for Bethnal Green and Bow (Ms King) on securing parliamentary time for the debate. In doing so, she represents the sentiments of many people, not only in London, but throughout the country.
I pay tribute to the tireless work of the Civilians Remembered campaign. Civilians Remembered has established itself as a vigorous and committed campaigning group, whose intention is to honour civilians who lost their lives in this country during the second world war. It is composed of ordinary east end people who have demonstrated extraordinary tenaciousness in their efforts. Although local people's thoughts have a special focus on the east London victims of Hitler's bombers, there is no getting away from the fact that people in other parts of the country—indeed, the rest of the country—who lived through the second world war, as well as those who were not alive at the time but who wish to pay their respects, would welcome a permanent and public memorial to represent the nation's collective honouring of the dead.
In picking up the thoughts of my hon. Friend on the Hermitage site, I feel sure that I echo the thoughts of many people in this country who experienced the war at first hand. They need a tangible expression—a physical presence—to demonstrate that we remember.
Those of us who have not had the experience can hardly begin to imagine what it must have been like to have to respond, night after night, to the sound of air-raid sirens; to vacate our homes for the protection of air-raid shelters; to emerge from those shelters to find our homes destroyed, our shops, factories or cinemas—indeed, whole streets—obliterated and, worst of all, to discover that family members, friends, neighbours and colleagues had been killed by the overnight attacks of the Luftwaffe on its latest bombing raid. In the face of Hitler's attempts to bomb the British people into submission, people stood together and made a remarkable contribution to the war effort and the defeat of the Nazis.
That spirit and resolution demand a public memorial, and it is incredible that such a memorial is not already a long-standing reality. The deaths of 60,000 civilians in Britain during the second world war, and the injuries inflicted on 1,000 more, surely deserve serious and enduring recognition.
In recent months, I have attended several memorials to members of the fire services who died in the war. I was a member of the London fire brigade for more than 23 years. Specifically, there have been two ceremonies to commemorate the single largest loss of life of fire brigade and auxiliary fire service members at Old Palace school on 10 May 1941. The memorial services at the school in my constituency and at Beckenham cemetery were very moving, and I should
630
mention the important role of Stephanie Maltman in researching the history of this event as well as the tragedy at Gainsborough school in Plaistow and many others. Indeed, more than 300 members of the London fire service and the AFS who died during the second world war were commemorated only with the unveiling of a statue near St. Paul's cathedral by the Queen Mother in the past decade, but at least their sacrifice now has a physical memorial, and I congratulate all those who were involved in ensuring that that fitting tribute became a reality.
I know also that colleagues in the London borough of Newham, especially Councillor Chris Rackley, are keen to establish a memorial to civilian casualties near the royal docks in the new barrier park. Despite the fact that the events of which we speak occurred more than half a century ago, the memories are still as fresh to the families and friends of those who died as they are to those who survived.
There was some controversy when the nation purchased the Churchill papers for £13 million. Many people questioned whether that was how the people's money should have been spent, and time will tell. I believe that there would be widespread support were a similar decision taken to purchase the Hermitage site for the nation.
Like my hon. Friend, I believe that it would be wrong to penalise the developers, Berkeley Homes, financially. I hope that the company would be prepared to sell the site to the nation. I therefore challenge the idea that the best use for the Hermitage site is the proposed development of luxury apartments for sale, and retail and commercial units, with a memorial park for use only as an amenity space for that development.
A memorial park created under those circumstances will not constitute an acceptable substitute for the creation of a national memorial park to honour civilians nationally. Such a national memorial can never compensate families for the loss of loved ones, but it can at least show a national will and determination to remember them always. That much we can do.
I appeal to the Minister not to close off that prospect. I believe that the Deputy Prime Minister was wrong when he declined to call in the planning application for further review. As my hon. Friend said, we believe this to be a matter of more than local significance. It is still not too late. If we had a London mayor, he or she would find it impossible to resist the pressure to establish such a memorial.
Every November at remembrance services across the country, we conclude with the pledge, "We will remember them." For the civilian casualties of the last war in the United Kingdom in general and in London in particular, but especially for the east end, those words ring hollow and will continue to ring hollow until we have a suitable memorial where people can pay their respects. For many families, there are no graves. This is a matter not of jingoism, but of acknowledging our heritage, paying tribute and learning the lessons of war.
Europe, I believe, has learnt from its past. Our future lies in co-operation. We in the United Kingdom owe a debt to those who are not here. I hope that our Government will accept the strength of our feelings and our arguments. We need a memorial, and only this Government have the power to create one at the Hermitage site.
7.52 pm
The Minister for London and Construction (Mr. Nick Raynsford): I congratulate my hon. Friend the Member for Bethnal Green and Bow (Ms King) on her success in securing the debate, and on her decision to take the opportunity to raise the important and serious matter of the proposed use of the Hermitage riverside site as a memorial for all the residents of London who died in the second world war. Although it is now more than 50 years since the end of the war, it is right that we should continue to remember the sacrifice of all those who gave their lives during the war. The point was well made by my hon. Friend the Member for Poplar and Canning Town (Mr. Fitzpatrick). I say that with considerable feeling, as my own father was killed in the war.
In addition to those killed in action, there were, as we all know, many civilian casualties, not least in the east end of London, as my hon. Friend rightly emphasised. The east end bore the brunt of countless air raids and V-bomb attacks. It is right that there should be an appropriate memorial to their sacrifice. I pay tribute to the work of the Civilians Remembered campaign, which has done a great deal to argue the case for a memorial in the east end of London.
As I am sure my hon. Friends realise, I cannot comment on the merits of the two current proposals for the redevelopment of the site which recently came before the Department, because the Secretary of State has a quasi-judicial role in the planning system. However, I can use this opportunity to explain the town and country planning background that affects the site, the two planning permissions that are now extant on it, and the factors that the Secretary of State took into account when he considered whether to call in the planning applications.
It may help the House if I first clarify that town and country planning is about the use of land, not its ownership. The planning system looks at the suitability of different uses of sites and the compatibility and harmony of those uses with others nearby.
In planning, individual developments are assessed for their suitability and appropriateness against criteria established in a development plan. When that plan is complete, it will have been subjected to thorough public scrutiny and will be a widely known basis on which planning applications can be brought forward. However, even before the plan is complete and formally adopted, it can be taken into account. Indeed the more advanced its state of preparation, the more weight can be given to it, as against its out-of-date predecessor.
A further general point that may make this case more understandable to the House is that the site is not unique in having two live planning permissions for slightly different uses at the same time. Although the majority of sites are shown in authorities' plans as having a single use, some—like the Hermitage site—are for mixed use, and there can therefore be opportunities for different configurations of use to be acceptable at the same time, and for both, or more than two, to be granted planning permission.
The Hermitage site has a long history of planning applications and public inquiries. In Tower Hamlets' adopted plan, which dates back to 1986, the site is designated for housing development. The draft plan that is being prepared to replace it originally showed the
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Hermitage site as being for a mix of residential and commercial uses. I shall touch later on how that has now been changed.
The site first came to our Department's attention in 1991, when the London Docklands development corporation was the local planning authority. An outline application for a mixed-use development of the site generated considerable local opposition. The weight of opinion was that the site should remain undeveloped to provide open space around the existing properties with public access to the river, although, as I understand it, there was no suggestion at that time of the site being used as a memorial park. Later that year, in any case, the development proposals were withdrawn.
In 1995, the year that the Civilians Remembered campaign was initiated, the corporation encouraged development of the area, including open space, and selected five different schemes for public exhibition. After consideration of the responses to the brief, a scheme by Berkeley Homes was chosen. In view of the prominent location of this significant waterfront site on the River Thames, the scheme was called in for the Secretary of State's decision.
A public inquiry was held in October 1996 into two proposals. The first of the two applications was for the erection of buildings for residential use. The second scheme also provided mainly residential accommodation in slightly higher blocks, but it also incorporated a new public garden. There continued a significant lobby for the entire site to be used as open space, with a view to that being an appropriate memorial to the civilian dead of the second world war.
Subsequently, after considering the inspector's report, the Minister at the time refused both applications on the ground that, while both applications broadly accorded with the use of the site set out in the current plan and the draft one, they did not meet the density and design standards applicable to such a significant site. However, he noted that the schemes showed that the site could accommodate a bold development at the eastern end and incorporate a waterfront park and memorial park at the western end, but emphasised that that did not fetter his consideration of future applications.
That brings me to the planning applications that are at the heart of this evening's debate. In May 1997, the corporation's decision to sell the riverside site to Berkeley Homes renewed local opposition to any development on it. At almost the same time, the Civilians Remembered campaign submitted an outline application to Tower Hamlets council for use of the land solely as a memorial park. Two months later, Berkeley Homes submitted a new application for full permission to the council, with a revised proposal that included provision for setting aside approximately 40 per cent. of the site for use as a memorial park, which I understand would be freely accessible and open to the public and maintained in perpetuity by the developer. I understand that Berkeley Homes also offered the council a substantial sum to finance the provision of local affordable housing.
After due consideration, Tower Hamlets—which was by then the corporation's successor as planning authority—proposed to approve both applications. However, although in line with the draft plan, the applications were departures from the adopted borough plan, so they were referred to the Secretary of State for his consideration.

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At that time, my hon. Friend the Member for Bethnal Green and Bow and other hon. Members wrote to express their concerns about the consequences if Tower Hamlets granted planning permission to Berkeley Homes. The Secretary of State took into account all relevant matters, including the representations on planning. As my hon. Friends know, the Government's policy on call-in of planning applications is to be very selective. In almost all cases, the initial decision on whether a development should proceed should be taken by the local planning authority. Applications are called in only if matters of more than local importance are involved, which need to be decided by the Secretary of State.
After careful consideration, the Secretary of State decided that both applications should be determined locally. The applications were in accordance with the shortly to be adopted unitary development plan for Tower Hamlets and were in line with the conclusions and recommendations of the inspector on the previous application by Berkeley Homes. Given that an earlier public inquiry into similar proposals had informed the nature of the Berkeley Homes application and the content of the Tower Hamlets plan, the Secretary of State considered that the proposal raised no more than local issues, which were appropriate for Tower Hamlets to decide—it is the democratically elected local authority, and it is only right that it should make planning decisions. Issues such as the appropriateness of the site for a memorial, the degree of overcrowding in the area and the shortage of local open space are important. However, they are essentially local issues, which the democratically elected local authority is best placed to consider.
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My hon. Friend the Minister for the Regions, Regeneration and Planning wrote to my hon. Friend to explain the Secretary of State's decision on 6 March 1998. I understand that Tower Hamlets subsequently granted planning permission for both schemes, and it is now considering some minor outstanding matters to do with the Berkeley Homes proposal that must be cleared up before building can begin.
I gather also that there is considerable on-going pressure from local residents against the use of the site for anything but open space. In recognition of that, the council changed the designation of the site in the draft plan from "mixed use" to "either mixed use or open space", to allow the use of the site as a park. More recently still, as my hon. Friend said, the council's planning committee decided to modify the draft plan at the adoption stage, to show the Hermitage site as statutorily protected open land. That modification of the plan will have to be advertised, so that proper public consideration can be given to the change. Such a change cannot affect planning permissions that have already been granted, including the ones granted to Berkeley Homes and the Civilians Remembered campaign.
That brings us to the current point in this long story. As I have already stressed—and as I am sure my hon. Friends will understand—I cannot say anything more this evening; nor can I comment on the merits of the case that my hon. Friends the Members for Bethnal Green and Bow and for Poplar and Canning Town have made, because of the quasi-judicial role of the Secretary of State in this and other planning matters.
Question put and agreed to.
Adjourned accordingly at two minutes past Eight o'clock.