Commons Sitting of 26 October 1998

Preamble
The House met at half-past Two o'clock
PRAYERS
[MADAM SPEAKER in the Chair]
Oral Answers to Questions
  HOME DEPARTMENT
  The Secretary of State was asked—
  HOME DEPARTMENT

    Hillsborough
    Maria Eagle: If all material held by South Yorkshire police in respect of the Hillsborough disaster which he ordered to be placed in the Library has now been deposited. [53506]
    The Secretary of State for the Home Department(Mr. Jack Straw): As much of the evidence as possible considered by Lord Justice Stuart-Smith in his Hillsborough scrutiny, including that held by South Yorkshire police, has been placed in the Library. That includes copies of the police statements, both in their original and amended form, and copies of other material considered by Lord Justice Stuart-Smith not already in the public domain.
    I am aware that the Hillsborough family support group has queried whether there are any further statements outstanding and that is being followed up by South Yorkshire police.
    Maria Eagle: I thank my right hon. Friend for that reply. I shall write to him in due course about the matter,
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    as I believe that there is documentation that he said should be put in the Library, but which is not yet there. I shall give specific examples when I write to my right hon. Friend.
    The question that arises in my mind is why that documentation is still held by the South Yorkshire police. It was not formed or prepared by the police force, which was a party that was severely criticised in Lord Chief Justice Taylor's inquiry report. One of the problems the families have had in obtaining that documentation is the fact that South Yorkshire police have been unwilling to give it up. Can my right hon. Friend the Home Secretary tell the House why the police have custody of it?
    Mr. Straw: The arrangements for the retention of those documents by the South Yorkshire police are the standard ones that apply in any police area: it is the responsibility of the police force concerned. A huge number of documents have been held and properly archived by the South Yorkshire police. We are transferring all those documents that are relevant to the Library of the House. I am aware of my hon. Friend's concerns and, once she has sent me details, I shall look into the matter.
    Mr. Michael Fabricant: We look forward to the Home Secretary finally reaching his conclusions regarding the Hillsborough disaster, having taken into account the new information now coming from survivors and relatives of those who were killed. Does the right hon. Gentleman agree that there are lessons to be learnt regarding crowd control, not only in football stadiums, but for other large events, such as the funeral of the Princess of Wales? What steps is he taking to ensure that the lessons learnt from the Hillsborough disaster are transmitted to other such events?
    Mr. Straw: A great many lessons were drawn from what happened at Hillsborough and, more particularly, from the excellent report of the inquiry conducted by Lord Taylor, later Lord Chief Justice. The police service and many others who have responsibility for crowd control have taken proper cognisance of the lessons to be learnt.

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    I have to say that I believe that the Metropolitan police service dealt with the policing of the funeral of the Princess of Wales with exemplary intelligence and skill.
    Mr. Frank Field: Is my right hon. Friend the Home Secretary aware that a large number of people in Merseyside who lost relatives at Hillsborough would like directly to look at the documentary material? Would he consider making that material available in Liverpool library?
    Mr. Straw: I agree with my right hon. Friend that the information should be made available. I understand, although I am not absolutely certain, that the information is either currently being transferred to, or already held at, the central library in Liverpool. If that is not so, I shall certainly do my best to make arrangements to ensure that it is.

    Police (Early Retirement)
    Judy Mallaber: What plans he has to reduce the proportion of early retirements from the police. [53508]
    The Minister of State, Home Office (Mr. Alun Michael): Earlier this year, we published a consultation document on police pension arrangements, which highlighted the need for more efficient management of ill-health retirement. Work is in hand on detailed proposals and we shall support good management practice, with changes to the police pensions regulations where necessary. Any proposals will be published in good time to allow for full consultation with the interested parties.
    Judy Mallaber: I am pleased that my hon. Friend is taking the issue seriously because, in Derbyshire constabulary last year, 65 per cent. of officers retiring did so on grounds of ill health. Has he seen the report on the Derbyshire constabulary published this month by Her Majesty's inspectorate? The constabulary is praised for having Investors in People accreditation and a Government charter mark, but attention is drawn to the problem of early retirement on medical and sickness grounds. Is my right hon. Friend aware that the inspectorate has previously expressed concern about underfunding of the Derbyshire police; and can he confirm that the Government will in future give the police adequate resources to enable them to play their part in tackling crime and to limit the stress on police officers?
    Mr. Michael: My hon. Friend is right to draw attention to the problem and to the need to control medical retirements, because the pensions being paid out of police resources mean a reduction in the resources available to that police force. The variations are extremely large: in 1996–97, 16 per cent. of all police retirements in Wiltshire were on medical grounds, whereas the figure in Merseyside was 77 per cent. Merseyside has reduced that figure by 23 per cent. in the intervening period, so it is clear that police forces can manage the problem and increase their own resources by doing so.
    Mr. Eric Forth: Has the Home Secretary received any requests for early retirement
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    on the ground of stress from the police officers involved in arresting Senator Pinochet, as it appears that the Foreign and Commonwealth Office had welcomed the gentleman to Britain through the VIP lounge but officers responsible to the Home Secretary were asked to arrest him?
    Mr. Michael: The answer to the substantive question is no.
    Dr. Brian Iddon: Is my hon. Friend aware that, last week, the Greater Manchester police announced substantial reductions in its work force? Would he be prepared to enter into consultation with the force to make sure that my constituents are not affected by reductions in the work of the police?
    Mr. Michael: In recent years, the number of officers available for front-line policing has not kept pace with the number of officers available overall. We are encouraging police forces to use their resources—particularly the men and women who serve them—on the front line in the community rather than in support services. Each report of the inspectorate has demonstrated that there are still savings to be made which can improve the quality of the service to the public.
    Sir Sydney Chapman: Does the Minister recognise that in the Metropolitan police force the problem is not only that too many officers are retiring early, but that too many are seeking transfer to other police authorities? Will he consider that problem when he reviews Metropolitan police pay and conditions of service?
    Mr. Michael: That is a complex issue for the Commissioner. Many people come from outside London to serve in the Metropolitan police and many officers later seek to transfer to other forces, so transfers work in both directions. For example, many serving at the highest levels in the Metropolitan police have spent time, perhaps at chief constable level, in another force. That is a management issue which needs to be treated with care.

    Financial Regulation
    Mr. Austin Mitchell: When he expects the inquiry into financial regulation in the Channel Islands and the Isle of Man to report. [53509]
    The Secretary of State for the Home Department (Mr. Jack Straw): Mr. Andrew Edwards, who conducted the inquiry, delivered his report last week. It is being prepared for printing and will be published, in its entirety, for the House and the other place next month.
    Mr. Mitchell: I welcome that speedy delivery. Will the Home Secretary also opt for speedy implementation of the Edwards report—by consent, if possible, but if necessary, by imposition—to clean up the financial acts in the Crown dependencies, particularly Jersey and Guernsey? The Edwards report found that regulators are promoting the development of financial services and business is being conducted in maximum secrecy with those involved repelling outside inquiries, as in the case of the Bank of Credit and Commerce International. There is no separation of powers on the islands, so those who benefit

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    from financial services also have influence over the Executive, the legislature and the judicial and regulatory structures. Does the Home Secretary agree that such arrangements are totally unsuitable?
    Mr. Straw: I understand my hon. Friend's strong views. He will appreciate that, as I read the report only late last night, I am not in a position to discuss its individual recommendations, and it would be wrong to do so before the report is presented to the House. Once the report is published in its entirety, there will be every opportunity for its contents to be discussed by Members of Parliament and responsible individuals in the islands.
    Mr. Nick Hawkins: The Home Secretary is aware of my concern about the way in which the inquiry was launched because he and I have corresponded about that. I am grateful to him for stating that his ministerial colleague in another place will meet me and the hon. Member for Tooting (Mr. Cox) to discuss the fact that, at the time of the inquiry's launch, the legislatures in the Channel Islands and the Isle of Man were considerably upset. Will he confirm that the concerns that I have raised with him in writing will be dealt with and that we will never again present the legislatures in overseas territories such as the Channel Islands and the Isle of Man with emergency announcements that completely bypass the normal structures and lead to their holding emergency debates on the possibility of secession?
    Mr. Straw: We endeavour to maintain good relations with the islands, and I pay tribute to my noble and learned friend Lord Williams of Mostyn for the way in which he conducts those relations, day by day and week by week. The constitutional relationship between the islands and the Parliament of the United Kingdom was set out very clearly in the Kilbrandon report in the early 1970s. The action that I took in announcing and establishing the inquiry was fully consistent with the deliberations and conclusions about that relationship set out in Kilbrandon.

    Prison Sentences
    Mr. Tim Loughton: How many offenders were given prison sentences of four months or more but less than eight months in the most recent year for which figures are available. [53510]
    The Parliamentary Under-Secretary of State for the Home Department (Mr. George Howarth): There were 16,132 during 1997.
    Mr. Loughton: I am grateful for that short answer. Will the Minister confirm that, under the home detention curfew scheme, a criminal who received a sentence of six months would spend only six weeks in prison? Is that correct?
    Mr. Howarth: Home detention curfews will be introduced on 28 January 1999. All prisoners will have to satisfy a risk assessment that will be carried out by the Prison Service, and we expect that about 50 per cent. of those who are eligible will qualify for the scheme.
    The length of the curfew—which is the point of the hon. Gentleman's question—will be determined by the length of the sentence. In order to avoid unfair anomalies,
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    section 99 of the relevant Act sets out a sliding scale. [Interruption.] I am answering the question that the hon. Gentleman asked. If Opposition Members do not like my answer, I suggest that the hon. Gentleman asks a different question. The sliding scale ensures two things: first, that as much time is spent in custody as under curfew; and, secondly, that at least 14 days are spent under curfew. If the hon. Gentleman examines the statistics and the facts of the matter, he will discover that he is actually arguing about two weeks.
    Mr. Ken Maginnis: Specific to the length of prison sentences, will the Minister tell the House what penalties were imposed by the courts in the five cases of serious social security fraud cited in the Government publication of July 1998 entitled "Beating Fraud is Everyone's Business—Securing the Future"? Will the Minister remind the House of the sums involved and will he reassure the public that, in the context of crime prevention, the punishment meted out by the courts must be worthy of the crime?
    Mr. Howarth: Obviously, the courts will determine what sentences to impose in any set of circumstances. As I did not receive notice of his question, it would be invidious for me to comment on the cases to which the hon. Gentleman referred. However, I am sure that all hon. Members agree that prison sentences and other punishments must be available to the courts in the case of social security fraud. In some circumstances, they are quite appropriate punishments.
    Mr. Martin Linton: Does my hon. Friend agree that, although short sentences of fewer than eight months might have a deterrent effect, they have very little rehabilitative or training content and leave many people with no alternative means of earning a living on their release from prison? Does my hon. Friend agree that, in most cases, it would be better to concentrate on electronic tagging or community sentences or on what the Home Affairs Select Committee prefers to call "criminal work orders" when dealing with such offenders? That would release resources wherever possible and ensure that those who are imprisoned for short periods receive the rehabilitation and training that will enable them to take up other careers when they leave prison.
    Mr. Howarth: My hon. Friend makes a good point in that part of the purpose of a prison sentence is to equip people with skills so that they can lead an honest life when they complete their sentences. That is very important. As to home detention curfews, which have much exercised the minds of Opposition Members, perhaps they should ask the hon. Members for Surrey Heath (Mr. Hawkins), for Aldershot (Mr. Howarth) and for Woking (Mr. Malins) for their views on the matter. They supported the Home Affairs Select Committee, which backed precisely this scheme, so I am sure that there is unanimity in all corners of the House.
    Mr. John Greenway: I believe that the answer to the question asked by my hon. Friend the Member for East Worthing and Shoreham (Mr. Loughton) is that, in many cases, six months will indeed mean six weeks. Of the 16,000 prisoners that the Minister mentioned, how many were burglars? How can anyone

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    have confidence in the Prime Minister's promise of a blitz on burglars when, under the home curfew detention scheme, burglars may be let out on the streets? Or perhaps the Minister will tell us that burglars will not be included. We would love that; we would prefer that the Government implemented section 3 of the Crime (Sentences) Act 1997.
    Mr. Howarth: It would be tempting to assume that, instead of being on the brink of being out of office for the next 20 years, Conservative Members had been out of office for the past 20 years. I believe that it has escaped the hon. Gentleman's attention that the arrangements that the previous Conservative Government had in place led to a doubling of crime and to fewer than one in 50 crimes resulting in a conviction. We shall listen to what the hon. Gentleman and his friends say when they can point to a more convincing record of their own; I do not believe that they can.
    We are proposing something that we believe will work. It has the support of the Select Committee on Home Affairs, of which at least three of the hon. Gentleman's hon. Friends are members. It is about time that the hon. Gentleman started thinking about these things instead of sounding off about them.

    Fire and Police Services (Pensions)
    Mr. Geraint Davies: What plans he has to change fire and police service pension arrangements. [53512]
    The Parliamentary Under-Secretary of State for the Home Department (Mr. George Howarth): We published consultation documents on the police and fire service pension schemes in March 1998 and will take careful account of the responses that we receive. We shall consult fully on any specific changes that we propose to the pension arrangements for new entrants or to medical retirement procedures.
    Mr. Davies: What consideration has my hon. Friend given to those cases of premature retirement due to sickness or ill health where the person subsequently—sometimes immediately—takes up an alternative form of employment?
    Mr. Howarth: That is obviously a matter for concern. In each case, one would have to inquire into the nature of the subsequent employment—for example, whether it required a different level of physical activity from the job of being a serving police or fire officer. Obviously, concerns such as those to which my hon. Friend just alluded form part of the considerations that have taken place, and such concerns will be taken into account when we consider the results of the consultation.
    Mr. Geoffrey Clifton-Brown: The Minister will be aware that, over the past year, Gloucestershire constabulary has suffered an actual cut in its budget of £1.5 million. That has resulted in the loss of front-line policemen. In no small measure is that due to the increased pension contributions that the Gloucestershire constabulary has had to make, directly as a result of the Government's changes in advance corporation tax relief. What will the Government do to
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    fund those pension contributions fully so that rural areas, in particular, do not suffer a cut in their front-line police and fire services?
    Mr. Howarth: First, the settlement that the Gloucestershire police authority received was precisely the one that it would have received, had the Conservative party still been in government.
    Regarding the second part of the hon. Gentleman's question, the problem with these schemes is that they are not funded. If they were funded, we would not be in this position. I add that, except for setting up endless reviews into these problems, the previous Government did absolutely nothing about them—indeed, did not even publish the results of their reviews. We have had the courage to publish those reviews, and to consult on them. I suggest that the hon. Gentleman exercises his uncharacteristic patience a little longer, until we find out what is in the reviews and precisely what we propose to do about the matter.

    Crime and Disorder
    Dr. George Turner: If he will make a statement on progress in implementing his Department's measures relating to crime and disorder. [53513]
    The Secretary of State for the Home Department (Mr. Jack Straw): The Crime and Disorder Act 1998 received Royal Assent on 31 July this year. Of the 121 sections in the Act, 87 have now been brought into force, some of those on a pilot basis. Sex offender orders will come into force on 1 December and anti-social behaviour orders will come into force on 1 April next year.
    Considerable effort is being put into publicity about the Act's provisions. That includes a regional tour which I undertook in September, national conferences, written publications and a site on the internet, which I am told is proving very popular. Going around the country, I am struck by the huge enthusiasm shown by the police, local authorities and the public for the provisions of the Act.
    Dr. Turner: I assure my right hon. Friend that there is considerable enthusiasm for making a fast start in North-West Norfolk. In the distribution of pilots, will proper attention be paid to the needs of rural constituencies such as mine? If the pilots are to tackle hot spots, may I remind my right hon. Friend that King's Lynn, the market town in my constituency, has 30 per cent. more crime than the average metropolitan area, and twice the county average? Is that not just the sort of problem that the pilots should be tackling? May I assure my constituents that their needs are being considered in my right hon. Friend's Department?
    Mr. Straw: I can certainly give that assurance to my hon. Friend. As he knows, I paid an interesting visit to his constituency, looked at some of the problem areas and also spoke to a meeting in King's Lynn on a wet Friday evening, at which 700 good citizens of King's Lynn turned up to hear me—[Interruption.]—and they stayed to the end.

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    With regard to piloting in rural areas, we have sought to distribute the pilots around rural areas, as well as urban areas and inner-city areas. Pilots are taking place on various subjects in Devon, Gloucestershire, Northamptonshire and in north Staffordshire.
    Mr. A. J. Beith: Does the Home Secretary believe that further measures will be needed to deal with offenders who are deemed to be extremely violent because of mental illness or personality disorder, but whom psychiatrists diagnose as not likely to respond to treatment? Is he aware that this concern has arisen not simply following the conviction of Michael Stone for those two brutal and horrible murders, but because there has been a tendency in recent years for psychiatrists to diagnose a number of violent people as not likely to respond to treatment?
    Mr. Straw: Yes, I entirely agree with the right hon. Gentleman that there must be changes in law and practice in that area. We are urgently considering the matter with my right hon. and hon. Friends in the Department of Health. Sir Louis Blom-Cooper, who has a distinguished record in this field, said on the radio on Sunday that one of the problems that has arisen is a change in the practice of the psychiatric profession which, 20 years ago, adopted what I would call a common-sense approach to serious and dangerous persistent offenders, but these days goes for a much narrower interpretation of the law. Quite extraordinarily for a medical profession, the psychiatric profession has said that it will take on only patients whom it regards as treatable. If that philosophy applied anywhere else in medicine, no progress would be made in medicine. It is time that the psychiatric profession seriously examined its own practices and tried to modernise them in a way that it has so far failed to do.
    Miss Melanie Johnson: On Saturday, I was out visiting constituents and met a group of my more elderly constituents who are having problems with minor vandalism in their area, which leads to them feeling unable to use some of their front rooms and concerned about general safety in their neighbourhood. Will my right hon. Friend comment on the role of community police officers under the Crime and Disorder Act 1998 in tackling such community disorder, which is of great concern to people in Welwyn Hatfield?
    Mr. Straw: I have spoken to many community beat officers about their frustrations in dealing with criminal anti-social behaviour such as my hon. Friend describes. One of the reasons that we have created in the Crime and Disorder Act 1998 the new injunctive powers for anti-social behaviour orders is to ensure that community beat officers, their commanding officers and superintendents in the operational command units in the police service can seek effective action by the courts to crack down on such behaviour. I believe that, once the order comes into force next April, it will be extremely effective in dealing with such disorder in my hon. Friend's constituency and in every other constituency across the country.
    Mr. James Clappison: The Home Secretary will know that one of the main provisions of the Crime and Disorder Act 1998, which has already come
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    into place, is for local authorities to make child curfew orders. Does the right hon. Gentleman accept that many people find it strange that local child curfews will apply to youngsters under 10 but not to those aged 10 or over, who many of us think are more likely to cause serious trouble on estates and neighbourhoods than the under-10s? Is it a sensible use of police time for the police to have to sort out the under-10s from the over-10s? Will the right hon. Gentleman be as bold as his rhetoric and tell us how many local child curfews he thinks we shall hear about on the internet, in hot spots or anywhere else? Or is the prospect of a wet night in King's Lynn more forbidding?
    Mr. Straw: No. Having done one wet night in King's Lynn, I am game for any number of them.
    I find it rather odd that, under the Conservative party, which was in power for 18 years, the juvenile justice system was allowed thoroughly to decay. It became worse and worse. When we proposed that there should be trialled area curfews for under-10s, Opposition Front Benchers could come forward only with derision.
    Of course I understand that there is a problem, too, with children who are over 10 who are racketing around unsupervised in local areas, but the most serious problem arises in respect of those who are under 10, who are under the age of criminal responsibility. That is why we have introduced a specific power.
    As for the over-10s, anti-social behaviour orders will be available for any child. We made it clear when considering the Crime and Disorder Bill in Committee, and I made it clear in Blackpool—another wet evening—only three weeks ago, that if a strong case emerges for raising the age of the curfews we shall, of course, consider it.
    Ms Debra Shipley: Does my right hon. Friend agree with me that sector policing in my constituency, and especially in the Lye area, has been a great success, and that has been due in no small part to the partnerships evolving within the community, with the police reaching out to leaders and to young people and disaffected groups within the community, and liaising directly with them?
    Mr. Straw: I accept what my hon. Friend says. There is no doubt that the very good experience of local authorities and of the West Mercia police in my hon. Friend's area shows to other local authorities and police forces, which might not have been in the vanguard, the importance and value of reducing crime and disorder in their areas. This arises from statutory partnerships, which we have established under the Crime and Disorder Act 1998.

    Prisoners (Television)
    Mr. James Gray: What plans he has to increase the number of televisions available to prisoners. [53514]
    The Parliamentary Under-Secretary of State for the Home Department (Mr. George Howarth): We have made arrangements to extend the pilot in-cell television schemes introduced by the previous Administration in the

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    light of the Woolf report. Televisions will be installed in 80 establishments over the next three months as part of the Prison Service's incentives and earned privileges scheme.
    Mr. Gray: I thank the Minister for that answer, although the House and the country will be disturbed to hear it. Does the Minister agree that television in cells should be earned as a privilege as a result of good behaviour and should not be provided as of right? Will the hon. Gentleman tell the House how much the new scheme is costing? Would it be better to use the money not for in-cell television but for out-of-cell activities such as education and training?
    Mr. Howarth: I think that the hon. Gentleman does not understand the scheme. The answer to the second part of his question is that the scheme will be broadly self-financing. Prisoners will be expected to pay towards the cost of the televisions.
    As for the first part of the hon. Gentleman's question, the scheme was advocated by Lord Justice Woolf and it was piloted under at least three Home Secretaries under a Conservative Government. Indeed, they did not see any reason to suspend those pilots, and we have taken that process to its logical conclusion.
    I wonder whether the hon. Gentleman would agree with the hon. Member for Ryedale (Mr. Greenway), who sits on the Opposition Front Bench? On 27 March 1997, the hon. Gentleman said:
    "What we are saying is that television cells should not be an automatic right but should be something earned by good behaviour."
    That is precisely what we are doing, so perhaps the hon. Member for North Wiltshire (Mr. Gray) thinks that it is a sensible scheme after all.

    Police (Communications)
    Mr. Hugh Bayley: What assistance his Department is giving to enable police forces to acquire new communications systems. [53515]
    The Parliamentary Under-Secretary of State for the Home Department (Kate Hoey): The Police Information Technology Organisation, a Home Office non-departmental public body, is managing the public safety radio communications project. This is a major public-private partnership project designed to replace the police service's existing radiocommunications infrastructure with a modern one.
    PITO is also working with the police service to implement an enhanced police national network to modernise telecommunications
    Mr. Bayley: May I congratulate my hon. Friend on her appointment as a Minister and welcome her to her place on the Front Bench? Is she aware that the police radios currently in use in North Yorkshire do not communicate with many parts of the county—not just isolated valleys in the dales and moors, but stores in the centre of York? Does she realise that North Yorkshire police urgently need new radios? Will she either consider extending to North Yorkshire the trial for the public safety radio communications project in Lancashire, or make some other proposal to speed up the purchase of new radios for North Yorkshire?
    Kate Hoey: I thank my hon. Friend for his congratulations. We all recognise the difficulties that
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    North Yorkshire police have with their current radio system, which is why the force is scheduled to be among the first to be provided with the new service.
    Mr. Peter Viggers: Are the present communications systems sufficient to enable the Home Office to maintain contact with the Chilean aircraft waiting at RAF Brize Norton?
    Kate Hoey: I am sure that, if it wished to, it could.
    Mr. Bill O'Brien: Will my hon. Friend assure the House that the police will have the resources necessary to ensure that they have proper communications equipment? Earlier this year, I had cause to write to the Home Secretary about the position in West Yorkshire. Because of the change in the valuation of the band D rating, the West Yorkshire coffers contained £6 million less than had been budgeted for. It is essential that police forces, particularly West Yorkshire, are assured of the resources necessary to purchase equipment to combat crime in the county.
    Kate Hoey: My hon. Friend will be aware that the additional funding available to police in England and Wales in the next three years should be sufficient, given efficiency improvements and the reinvestment of savings, to help meet extra spending pressures that may arise.

    New Deal
    Mr. John Healey: What steps his Department is taking (a) to recruit young unemployed people under the new deal and (b) to encourage agencies for which the Department is responsible and suppliers to the Department to do the same. [53517]
    The Parliamentary Under-Secretary of State for the Home Department (Mr. George Howarth): The Home Office formally signed up to the new deal programme on 18 September and, with its agencies, is actively seeking to employ new deal participants. We cannot answer for the employment practices of independent suppliers, but we hope that, like other employers, they will participate in the new deal.
    The Secretary of State, ministerial colleagues and I stand ready to take on new deal applicants in our private offices. We hope that that sends out a strong signal to other parts of the Home Office and its agencies.
    Mr. Healey: The formal new deal commitment is encouraging, as is the advertising of specific vacancies on the Floor of the House. I look forward to the near future when the Department will take on new deal recruits. Does my hon. Friend agree that the opportunity to work can be crucial in helping youngsters to break out of a life of crime? What steps is the Department taking to ensure that such young people have access to the new deal?
    Mr. Howarth: I thank my hon. Friend for the first part of his question, and agree entirely with the point that he makes in the second part. The probation service, the Prison Service and others are well linked into the new deal. If young people are to avoid a life of crime, it is important that they have gainful employment,

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    proper training and access to proper education. That is an integral part of our strategy for dealing with young offenders and those who may become young offenders. It is vital that we all accept the importance of that.
    Mr. Nigel Evans: Will the Minister do all that he can to encourage young unemployed people not only to go through the new deal, perhaps into the police force—I should be interested in what he has to say about any applications—but to go into the specials? He will know of the tremendous contribution that the specials make towards our police force throughout the country. Will he encourage young unemployed people to offer the spare time that they obviously have, to give back their commitment and contribution to society through the specials? They might also gain some of the training and sense of civic responsibility which would help them to get into full-time employment elsewhere.
    Mr. Howarth: I thank the hon. Gentleman for that constructive question. In respect of the police and the fire service, consideration has been given to whether the special constables and retained firefighters could be a route by which the new deal could travel. Discussions are on-going. The hon. Gentleman's point is well made, and I shall consider it further.

    Closed Circuit Television
    Mr. Keith Vaz: What plans he has to make closed circuit television more widely available. [53518]
    The Minister of State, Home Office (Mr. Alun Michael): We shall be funding 175 closed circuit television schemes this financial year. By the end of March, more than 580 schemes will have benefited from the successive rounds of the challenge competitions. We will certainly encourage the lessons from those schemes to be applied to problems elsewhere.
    Mr. Vaz: May I welcome the Government's commitment to the extension of CCTV and invite the Minister to visit my constituency to compare two estates: Northfields, which was visited by the Home Secretary last year, where there has been a massive reduction in crime because of CCTV; and Thurnby Lodge, where there is tremendous demand from local people for such services? Does my hon. Friend agree that this is one area of policy that can foster, in a most dramatic way, public and private partnerships?
    Mr. Michael: My hon. Friend failed to mention that it was raining when my right hon. Friend visited that estate. We have to be careful in relation to cause and effect: was it the CCTV or the visit of my right hon. Friend that led to the reduction in crime? To come to my hon. Friend's serious point, I should of course be happy to consider the comparison with him. It is important that, where success has been gained, it is learned from in other areas. The police, the local authority and the private sector in the area should look at opportunities to transfer the lessons learned in one place by considering financing schemes in the other estate.
    Mr. Edward Garnier: On his way to Leicester, East, will the Minister please call in at Market
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    Harborough, where he will find that, thanks to the Conservative Government, a good CCTV scheme is in action which has already directly caused a reduction in crime in that town? On his way from Market Harborough to Leicester, East, will he call in on the borough of Oadby and Wigston, which is run by the Liberal Democrats? Despite my encouragements—and, no doubt, encouragements from his right hon. and hon. Friends—the inane Liberal Democrat council refuses to apply to the Home Office for funding for CCTV, which is greatly needed. Will he make a point, even if he does not come to Market Harborough or to Leicester, of going to Oadby and Wigston and shaking that council?
    Mr. Michael: If we allow these questions to go on much longer, I shall be making a tour of the whole country.
    The hon. and learned Gentleman makes his point; may I make a serious one? CCTV is at its most effective when it is linked in with other measures to cut crime. The partnership approach, which my right hon. Friend has introduced in the Crime and Disorder Act 1998, will give the context for the reduction of crime in every area and consideration of whether CCTV is appropriate to fit in with that local partnership approach. It is appropriate for all areas to consider that point. The answer may be local, based on the local facts of crime.

    Gordon Warren Case
    Mr. Tom Brake: If he will make a statement on the Home Office and Metropolitan police's policy towards the Gordon Warren case. [53519]
    The Parliamentary Under-Secretary of State for the Home Department (Kate Hoey): This case is essentially a personnel issue for the Metropolitan police. As police authority, we have approved the ex-gratia payment of £85,000 which is on offer to Mr. Warren. I believe that this figure represents a fair settlement to Mr. Warren. We all agree that he was unfairly treated and unlawfully retired from the Metropolitan police.
    Mr. Brake: I thank the Minister for that response. Attempts began in 1982 to get Mr. Warren retired from the police force on mental health grounds because he refused to go to a blue movies party that was organised during staff time. Those attempts continued for five years. Attempts were also made to get him to retire on ill-health grounds, on the basis of an ailment that he did not suffer.
    Madam Speaker: A question, please.
    Mr. Brake: Does the Minister agree that £85,000 for 16 years of suffering at the hands of the Metropolitan police—to cover his legal costs, and the loss of his salary and pension rights—is a derisory sum? Does she also agree that she needs to act now to ensure that this matter is resolved to the satisfaction of Mr. Warren without further prevarication or procrastination?
    Kate Hoey: I agree with the hon. Gentleman that this case has taken a long time. I believe that the settlement

    15
    of £85,000 is fair and reasonable. If that is finally agreed, there will be an independent assessment of the sum once the other elements of the settlement package are agreed.

    police Spending
    Mr. John Randall: By how much in real terms police spending will increase in each of the next three years. [53520]
    The Minister of State, Home Office (Mr. AlunMichael): The outcome of the comprehensive spending review for the Home Office provides for a real-terms year-on-year increase in police funding of £3 million in 1999–2000, £23 million in 2000–01 and £107 million in 2001–02. In actual terms, that represents a total of £1.24 billion over the three-year period.
    Mr. Randall: I thank the Minister for his reply. What guarantees can the Minister offer outer-London boroughs that they will get their fair share of any increases?
    Mr. Michael: The whole point of the needs-based system, which was introduced by the previous Government, is to ensure that the allocation to police forces is based on need rather than on whim, on what has gone before or on any other criteria. Some outer-London areas will be affected by boundary changes. I met the representative of the outer-London police committee last week to discuss the issues. We shall make every effort to be fair to every part of the police service, and to take account of the effect of the changes on individual forces, particularly the three that will be affected by the boundary changes.
    Angela Smith: Does the Minister agree that, although the increased funding is greatly welcomed across the country, serious issues of inefficiency in the police force still have to be tackled to ensure that we have the best use of existing and new resources? What action will he take to ensure that we see such greater efficiency?
    Mr. Michael: My hon. Friend is right. I agree with the remarks of the Chairman of the Public Accounts Committee, who said that there is an enormous variation in the performance of police forces, and that it is extraordinarily difficult to hold anyone publicly accountable. Senior police officers and police authorities now recognise this problem. We shall do all that we can to encourage the most efficient use of the resources available to the police service.
    Sir Norman Fowler: Does the Minister agree that, under the last Conservative Government, the strength of the police service increased by 15,000, and spending in real terms went up by 70 per cent? Does he expect there to be more police or less police at the end of his period of office?
    Mr. Michael: I must correct the right hon. Gentleman in both fact and grammar. If there were any reduction, there would be fewer, not less, police. His political inexactitude is as great. Between 1992 and 1997, the number of police officers went down, despite the fact that the Government whom he supported promised an increase of 2,000. They failed to deliver what they promised.
    Sir Norman Fowler: Let me correct the Minister on the facts. Does he deny that, over the period of the last
    16
    Conservative Government, police numbers went up by 15,000? Is it not a fact that the Police Federation, the Police Superintendents Association and chief constables all see the inevitable result of his policies as smaller police forces? How can the Prime Minister boast of zero tolerance policing at the same time as police numbers are falling?
    Mr. Michael: It is all right to get artificially angry, but the right hon. Gentleman should look at the remarks of Lord Baker, a former Home Secretary, who said:
    "There was impatience, if not anger, that although we"—
    the Conservative Government—
    "had spent 87 per cent. more in real terms, and had increased police numbers by 27,000, there had still been a substantial rise in crime. 'Where is the value for money' asked my colleagues?"
    The previous Government managed to more than double crime—they put resources into policing and did little about efficiency.

    Police Dog Handlers
    Mr. Gordon Prentice: What criteria are used to determine the employment of a police officer as a dog handler. [53521]
    The Parliamentary Under-Secretary of State for the Home Department (Kate Hoey): It is the responsibility of each chief officer of police to determine the criteria for the selection of police dog handlers.
    In July 1996, the Home Office issued a manual identifying best practice and offering guidance on the training and care of police dogs. The manual includes a section on the selection criteria for handlers. A copy has been placed in the Library.
    Mr. Prentice: How did that Home Office manual help WPC Thomas, who desperately wanted to become a dog handler but could not lift an 80 lb weight above her head, as was required, and could do only nine of the 23 press-ups that were required? Surely such tests are ludicrous: they tell us nothing about a woman's capability to control a dog.
    Only this morning, I was speaking to my researcher, Ruth Wilkinson. She has an enormous great dog, and controls it just by looking at it.
    Kate Hoey: My hon. Friend is right. The case of WPC Michelle Thomas ensured that the Metropolitan police accepted that the test did not conform to best practice, and it was withdrawn as soon as concern was expressed. We are clear about the fact that there should be no artificial barriers, and that each job should involve standards that are equal for men and women.
    Mr. Alan Clark: Would the hon. Lady like to tell the House about her attitude, and her Department's attitude, to the implementation of those guidelines by Essex police? Will she admit that the conduct of Essex police—the brutality with which they conduct their exercises—-has lowered the esteem in which the police are held in general, as well as prompting disgust and a general loss of confidence in the Essex force?
    Kate Hoey: The right hon. Gentleman is clearly referring to a case on which the Home Office cannot

    17
    possibly comment in any detail until the court action is over. Obviously, we would never condone cruelty to dogs, and, once the court case is finished, we will work with the police to make any necessary changes in training standards.

    Police (Retirement)
    Mr. Alan W. Williams: What percentage of police officers currently retire aged (a) under 55, (b) 55 to 60 and (c) 60 to 65 years. [53523]
    The Minister of State, Home Office (Mr. Alun Michael): The most recent study examined police officers who left forces in the United Kingdom in 1991, through ordinary retirement, medical retirement or resignation. According to that study, 86.1 per cent. of officers who retired in 1991 were under 55; 13.5 per cent. were between 55 and 60; and 0.4 per cent. were between 61 and 65. Those figures include both ordinary and medical retirements.
    Mr. Williams: We all sympathise with anyone who has to retire early for health reasons, but does my hon. Friend agree that there is far too much early retirement in British society, among teachers, local government officers and, certainly, the police? We are losing people with experience and valuable skills. In the current consultation exercise, will my hon. Friend specifically state that he would like the proportion of early retirements to be reduced?
    Mr. Michael: My hon. Friend has made some good points. In the case of early and ill-health retirement, the burden falls on the finances available for policing generally, because this is not a funded scheme.
    Policing can be dangerous. It involves shift working in all weathers, often featuring high levels of stress and physical activity. There are reasons for the large number of early retirements; but the variations in the proportion of, in particular, ill-health retirements across the country show no correlation with the size and nature of the force. There are serious questions about the quality of management in some police forces, and we shall be considering them continually over the coming years.
    Mr. John Bercow: Does the Minister agree that no police officer, of whatever age, who is under criminal investigation should be allowed to retire from the force on grounds of ill health and still claim a full pension?
    Mr. Michael: The hon. Gentleman is right. In the past, it has sometimes been too easy to make such a back door available. We must be careful to look at the precise circumstances of any individual application, but, in general, the management of such issues, and the way in which complaints and disciplinary matters are dealt with, needs to be much speedier and more concentrated.

    Asylum Seekers
    Mr. Jeremy Corbyn: How many asylum seekers are currently detained under immigration laws. [53524]
    The Parliamentary Under-Secretary of State for the Home Department (Mr. Mike O'Brien): As at 30 September 1998, the most recent date for which information is available, a total of 760 persons who had sought asylum at any time were recorded as being detained solely under Immigration Act 1988 powers. No one is detained merely because he or she is an asylum seeker. Many of the detainees are asylum seekers who have been through the process and have been refused; they are being held for removal. No one recognised as a refugee under the United Nations convention is detained.
    Mr. Corbyn: Does the Minister agree that that is a very large figure—much larger than that of most European countries for people in detention under immigration law? Will he take a serious look at the conditions under which many people are held, the state of depression that many of them are suffering and the lack of adequate medical facilities that many of them experience while in detention? Does he not think that this is an expensive and ineffective way in which to assist people, many of whom are deeply traumatised by the experience of seeking asylum in the first place?
    Mr. O'Brien: Her Majesty's chief inspector of prisons has done a number of reports on detention. Following the publication of the White Paper in July, the Government said that they would introduce an element of judicial oversight to detention decisions in the form of an automatic bail hearing within a week of initial detention, followed by a second hearing for those not granted bail at the first. Detainees will also be given written reasons for their detention.
    Following the reports into detention centres by the inspector, examinations and improvements are taking place in detention centres to ensure that those detainees who, regrettably, do have to be held are held in conditions that are satisfactory.
    Sir Norman Fowler: On that White Paper, will the Minister guarantee that, in relation to the 30,000 applicants being considered under the special schemes that were announced by the Home Secretary, only genuine political refugees will be granted permission to stay in this country?
    Mr. O'Brien: The previous Government left tens of thousands of asylum seekers in a backlog for six or more years, many of them on benefit, without the Home Office taking a decision on whether they were refugees. The Tory record was shameful. We are now clearly trying to tidy up the mess that we inherited from the Tories. The Government are opposed to any amnesty—it would be a reward for law breakers. Instead, we have set up two units to consider exceptional leave to remain for the 10,000 in the backlog from before 1993, whose cases have been denied justice through delay, and the 20,000 cases between 1993 and 1995. None of them has ever had his or her asylum case rejected. There is no amnesty. We will process those cases quickly and then consider the post-1995 asylum cases. Instead of scoring mere party political points, perhaps the right hon. Gentleman would apologise for his Government's shameful failure to deal with those issues.
    Mr. David Winnick: Is it not important that asylum seekers who have suffered

    19
    degrading treatment and torture should receive priority—people such as those who suffered terrible tortures day after day in Chile under Pinochet? Is it not interesting that, today and on previous days, Tory politicians have shown far more sympathy for Pinochet than for his many victims? Does that not say a lot about the modern Tory party?
    Mr. O'Brien: The modern Tory party is a matter of great concern to many members of the modern Tory party, never mind hon. Members. I suspect that Conservative Members have all sorts of views on all sorts of issues, including Mr. Pinochet.

    Metropolitan Police
    Dr. Vincent Cable: What plans he has to provide additional resources to the Metropolitan police. [53526]
    The Parliamentary Under-Secretary of State for the Home Department (Kate Hoey): No final decisions have been taken about the allocation of funding to the Metropolitan police or other forces for 1999–2000. We expect to announce provisional allocations towards the end of this year.
    Dr. Cable: Will the Minister acknowledge that there are extreme recruitment difficulties in the Metropolitan police, in large part because, on current salaries, young police officers simply cannot afford to pay the cost of housing? Will she explain what response she has given to the approaches of the Commissioner of Police of the Metropolis to deal specifically with that problem?
    Kate Hoey: That particular problem is always under consideration and will be examined very carefully when we consider the settlement for the coming year.
    Mr. Crispin Blunt: Following the very welcome proposal and initiative to align the Metropolitan police boundaries with those of the Greater London Authority, what formula does the Minister expect to use to govern the transfer of resources from the Metropolitan police to the constabularies—including Surrey's—that will be affected? Will the formula be made public after it is determined by the Government?
    Kate Hoey: That matter, too, is being considered very carefully. The boundary changes will lead to some
    20
    redistribution of resources, and the matter is being examined carefully and discussed with all the affected police forces. Allocation of police grant will be based on a formula reflecting the relative policing needs of different areas.

    Child Prostitution
    Ms Beverley Hughes: What action he is taking to prevent child prostitution and to assist those young people already drawn into prostitution. [53528]
    The Minister of State, Home Office (Mr. Alun Michael): In the past, child prostitution has often been tolerated or ignored. This Government are making it clear that child prostitution must be dealt with as a vicious and sordid part of the abuse of children, which is a continuing national disgrace. New guidance to be issued by the Department of Health and the Home Office will stress the need to use the full weight of the criminal law against those who abuse children and the pimps who profit from that abuse.
    Ms Hughes: I thank my hon. Friend for his reply. Many people think it incredible that so many children and young people have been allowed to live on the streets of so many of our cities and will welcome his assurance that the Government will deal with that situation. Will he assure the House that the full weight of the criminal law will be speedily and fully brought to bear on those who are exploiting children and young people for sex and for money, so that they are not only deterred but convicted?
    Mr. Michael: I take my hon. Friend's point very much to heart. We very much want to make it more possible for children, and other vulnerable witnesses, to give their best evidence in court, to secure the prosecutions that she mentioned. For far too long, it has been possible for people to turn their eyes from that type of abuse at home and abroad. Earlier this month, we hosted a conference of European and Asian countries, at which I was able to announce the Government's intention to follow the recommendations of the Stockholm conference by formulating a national plan to combat child abuse. Several of the building blocks of that plan are now in place.

Points of Order
3.32 pm
Mr. Michael Howard: On a point of order, Madam Speaker. Have the Government told you whether they intend to make a statement either on the current crisis—with all its attendant confusion—in our relations with Chile or on the outcome of the European summit in Austria? The Government are reported to have agreed at that meeting to a massive spending increase, to the harmonisation of taxes and to the integration of Europe's defences. However, there has been no communiquè and no press release on those agreements. Is not the House entitled to some information about what went on in Austria this weekend? Is it not a disgrace that Parliament is once again being treated with utter contempt by the Government?
Madam Speaker: I have not been informed by the Government that they are seeking at this stage to make a statement on either of those issues. As we shall today have a debate on the economy, perhaps the right hon. and learned Gentleman will ask some of his questions during that debate—on which we are about to embark.
Mr. David Winnick: Further to that point of order, Madam Speaker.
Madam Speaker: No, I shall take no further points of order on that matter. I have dealt with it.
Mr. Andrew Stunell: On a point of order, Madam Speaker. This morning, the Department of the Environment, Transport and the Regions held a press conference at which it launched the important document on the response to climate change. However, there is not to be a statement on that response. I attempted to make arrangements for a member of our press department to attend the conference but was told that only journalists could attend. Therefore, not only will a statement not be made to the House, but we were not able to attend the conference to listen to the document being launched. Could we have your ruling and views on the matter, Madam Speaker?
Madam Speaker: Yes, certainly. Although it is not for me to decide who is invited to press conferences, I can tell the hon. Gentleman that a written question on the matter was answered on Thursday, stating that the document was a consultative one—which is absolutely correct—and that it would be available in the Vote Office today. It is in the Vote Office today. I am quite satisfied that the Department has carried out all the correct procedures in dealing with a document that has the status of a consultation document.

BUSINESS OF THE HOUSE
Ordered,
That, at this day's sitting, paragraph (2) of Standing Order No. 31 (Questions on amendments) shall apply to proceedings on the Motions in the name of Mr. Paddy Ashdown as if this day were one of the Opposition Days allotted under paragraph (2) of Standing Order No. 14 (Arrangement of public business).[Mr. Hall.]

Economy
Madam Speaker: I must inform the House that I have selected the amendment in the name of the Prime Minister.
3.34 pm
Mr. Malcolm Bruce: I beg to move,
That this House notes that the macro-economic policies of this Government have led to an uncompetitive and unstable pound, high real short-term interest rates and an unbalanced economy, that as a consequence of these problems, and the recent global economic slowdown, economic growth forecasts for the UK for 1999 are being revised downwards and unemployment forecasts are being revised upwards, that jobs in manufacturing industry are already being lost at the rate of over 300 per day and that agricultural employment is also declining sharply; and calls upon the Chancellor of the Exchequer to resist pressures and temptations to compromise the operational independence of the Bank of England, recognise the role of fiscal policy in stabilising economic growth in order to avoid excessive reliance on interest rates for such a purpose, make an early Declaration of Intent of the Government's commitment to join the European Single Currency, agree and establish a joint Six-Monthly Report on Convergence by the Treasury and the Bank of England to the Treasury Committee, take further actions to tackle skills shortages, and maintain the recent plans for additional investment in key public services such as the NHS and schools.
I begin by warmly welcoming the Chief Secretary and the Economic Secretary to their new responsibilities. The House is looking forward to the debate and to what they have to say. However, I hope that they will not take it badly or personally if I say that many of us would have preferred it had the Chancellor himself been able to appear before the House. He is, after all, the Chancellor who has given some five Budget-type statements in less than 18 months and who seems to have spent the entire summer travelling around the world, making statements to anyone, anywhere, who would listen to his solution to the world's economic problems. He has lost no opportunity to explain the need to bring down interest rates, apparently unabashed by the fact that he is the Finance Minister of the country that has the highest real interest rates in the western world. Nevertheless, we look forward to the participation, for the first time, of the two newly appointed Ministers.
It is three months since the House had an economic debate. They have been three months of turbulence and uncertainty during which the global financial markets have been in turmoil and our economy has been suffering. Today, many people risk losing, or are losing, their livelihood and their income. They are looking not for excuses from the Government and not just for opportunistic soundbites masquerading as strategy from the official Opposition, but for answers from, and action by, the Government.
Economic commentators are debating whether our economy will grow by 2, 1 or 0 per cent. next year. Whatever the academic theory, we are experiencing serious economic problems in our manufacturing and farming industries.
Maria Eagle: I am grateful to the hon. Gentleman for giving way so early in his contribution. Has he seen the figures published at the weekend by the Office for National Statistics, which show that all sectors of the economy, including manufacturing industry, grew more than expected in the third quarter?
Mr. Bruce: The hon. Lady is right to say that the overall economy is not in recession. We do not wish to

23
have a recession and are trying to ensure that the Government deal with the existing difficulties in manufacturing and farming in order to ensure that the economy does not move into recession. The people who have lost their jobs, or who face the threat of losing their jobs today or next week, will not be impressed by complacent general statistics. The reality is that, in net terms, we are losing 300 manufacturing jobs a day. The farming industry faces a 50 per cent. drop in incomes, and employment is declining rapidly, too.
I represent a rural constituency in north-east Scotland that is dependent on the oil industry and is suffering from the lowest oil prices since North sea oil exploration began. It is also dependent on a paper industry that is struggling with the consequences of the exchange rate, and on a farming industry devastated by the consequences of bovine spongiform encephalopathy, the collapse of the pig market, poor sheep prices and a poor harvest with depressed grain prices. Whatever is happening to the economy in general, the Government must deal with the problems facing those sectors.
In private, the Government seem to recognise the problems. A report in this week's Sunday Business quoted a "frank" Treasury source as saying:
"Gordon's view"—
clearly, the source is someone very close to the Chancellor—
"is that the Tories have got the attack on us wrong. They are hitting us on … the public finances … but if they were brighter they would talk about the economy, where we are arguably on shakier ground."
It is absolutely true that the Government are on shakier ground with regard to the economy, and we Liberal Democrats intend to talk about the economy.
Instead of addressing the economic problems that we face, the Chancellor has been attempting to play the blame game. He has argued that our economic problems can be blamed on the world economic slowdown and on incompetent and unproductive businesses and workers. Nobody but a fool would argue that the problems in some developing countries will have no effect on our exporters, but the Chancellor is seriously exaggerating those effects so far.
We should consider that 75 per cent. of our exports go to western Europe and north American where there is no recession and where growth in the past year has been quite robust. The United Kingdom exports more to the Netherlands each year than to Russia, Japan, Hong Kong, South Korea, Thailand, Indonesia, Malaysia, Brazil and Argentina together. So let us address the reality and not the theory.
What about the Government's second favourite target—low productivity? We have had many debates on the subject and we all know that productivity in British industry has been a problem for years. However, a sudden change in productivity does not explain the present difficulties in manufacturing industry and farming. Nobody is suggesting that productivity should not be addressed, but it is not a sudden problem that has caused job losses.
The Government recently had the unpleasant experience of discovering that economic statistics are sometimes seriously inaccurate. There were substantial
24
revisions to the earnings data and the inaccuracies in those earnings data arguably led to an unnecessary increase in interest rates. Will the Chief Secretary address the following question? Given the work recently carried out by economists at the London business school arguing that manufacturing productivity has recently been significantly understated, will the Government undertake to establish an inquiry into whether the productivity figures on which they are basing their analysis are accurate? It is important that, before they consider spending public money on programmes to address the problem, they are sure that they have the correct analysis. My hon. Friend the Member for Kingston and Surbiton (Mr. Davey) will return to that later in the debate.
The causes of our present economic problems are not a mystery. They are clearly and simply an uncompetitive and unstable pound and high real interest rates. The pound rose by 37 per cent. against the deutschmark from peak to trough between 1996 and 1998. The Library has calculated that, in real terms, the pound was higher against the deutschmark in the first half of 1998 than at any time since 1985, including during the 1990 recession, when we were in the exchange rate mechanism.
Mr. Dennis Skinner: It has gone down.
Mr. Bruce: As the hon. Gentleman says from a sedentary position, it has gone down but, despite the recent fall in the pound, we are only back to the 1990 level against the deutschmark and are probably about 20 pfennigs above a fair and sustainable value.
We are also suffering from real short-term interest rates that are the highest in western Europe. Although our nominal interest rates seem relatively low, that is the consequence of low inflation. Our real interest rate—the rate that people are paying on the base rate today—is 5 per cent. and that is higher than the 2 per cent. experienced during the 1990 recession and the 2 per cent. that now prevails across the euro-zone. Therefore, the two problems of high interest rates and a high exchange rate are intimately connected.
Mr. Geraint Davies: Does the hon. Gentleman accept that the reason why the exchange rate has been so high—it is now lower than when we came to office—is the international confidence in the management of the British economy? In an uncertain world with problems in Asia and indeed in Europe and elsewhere, the only way to bring down the exchange rate would be to bring about a complete loss of confidence in the British economy by voting in the Liberals.
Mr. Bruce: The hon. Gentleman was obviously so eager to intervene that he did not listen to a word I was saying. I was about to suggest that a 5 per cent. real interest rate against a 2 per cent. real interest rate was an incentive to hold sterling and is the reason why, in the short term, sterling's value has been forced up. If the hon. Gentleman does not believe that, he knows nothing about international financial markets and, as he claims to support the Government, perhaps they should be wary of that kind of support.
Labour cannot pass the buck on the current high exchange rates and high interest rates, because they are the consequence of Government economic policies.

25
They did too little to cool the consumer sector and have created a seriously unbalanced economy in which the means of slowing growth—the high pound and interest rates—are bearing down on those sectors that least need restraining.
Mr. Davies rose—
Maria Eagle rose—
Mr. Bruce: I have already given way to both hon. Members.
The Chancellor is not now acknowledging the problem. He has got his acolytes to come along today and has not turned up himself. However, he acknowledged the problem publicly in his first Budget. He said:
"Britain cannot afford a recurrence of the all-too-familiar pattern of previous recoveries"
He went on to explain:
"there is now an imbalance between strong growth in the consumer and service sector and weak growth in the manufacturing and exporting sector… My goal, therefore, is to ease inflationary pressures without damage to industrial and exporting prospects. … In this way, we can moderate the upward pressure on interest rates and on the exchange rate".—[Official Report, 2 July 1997; Vol. 297, c. 304–05.]
The Chancellor had the analysis right. He had the right diagnosis, but prescribed the wrong cure—extra taxes on businesses and savers. As a consequence, the pound rose to a new high within days and interest rates went up again. I should hate to have the Chancellor as my surgeon, because he acts as though, if he treated someone with a hernia, he would give that person a heart bypass.
The imbalance in the economy, which the Chancellor analysed correctly, has got worse. It was exacerbated by the decision to go on dithering on the single currency and to rule out membership in this Parliament. The Chancellor has talked tough about ending boom and bust—he talks of little else. He has done many good things that we have supported, such as giving operational independence to the Bank of England.
Mr. Skinner: I do not agree with that.
Mr. Bruce: Sometimes constructive opposition crosses the Floor.
However, the Chancellor has failed to address the instability created for our economy and for our exporters by a high and volatile pound—it has been up and down and nobody knows where it is going to settle—and by high real interest rates. The failure to address our economic problems, combined with a deteriorating global economy, threatens growth prospects next year. No doubt we shall hear evidence of that in the Chancellor's statement in the next week or so. It is clear that the Chancellor will have to revise his borrowing forecasts upwards when he presents his pre-Budget report next week.
However, we should keep matters in perspective. Our objective ought to be avoiding recession. Labour Members should agree with that. Last week's gross domestic product figures show that the economy, particularly the service sector, is continuing to grow. I acknowledge the points that have been made in interventions on that. Inflation is low and we have a tight
26
inflation target. We support that. It should be possible to ease monetary policy and to lean against recessionary forces. That is common ground.
Recessions usually occur when high inflation prevents policy from being eased in that way, so there are optimistic signs. Growth this year is likely to come in above the Chancellor's most recent forecast, leading to lower-than-expected borrowing this year. With a moderate slowdown in growth, all the signs are that the golden rule could still be met.
The key for the public finances—before Labour Members get too complacent—is to avoid an outright recession and to rebalance the economy. If we fail to do that, the golden rule could come under pressure.
Mr. John Bercow: The hon. Gentleman is weaving a tangled web for himself. He referred fleetingly to the effect of additional business taxation, but then regrettably changed the subject almost immediately. Given that the Liberal Democrat motion refers—cryptically and, I fear, euphemistically—to the role of fiscal policy in stabilising economic growth, will the hon. Gentleman tell the House by how much he would like to increase taxation, above the increases for which the Government have already provided, over the course of this Parliament?
Mr. Bruce: I shall certainly deal with that—if the hon. Gentleman will allow me—in the appropriate context.
There is no room for complacency because, general recession or not, there are already serious problems in manufacturing and farming, as I have described. It is not overstating the case to say that there is a crisis in those sectors. If the economy suffers a full-blown recession, they will bear the brunt of the losses. Manufacturing is already losing more than 300 jobs net a day. Leading indicators of industrial prospects suggest that things will get very much worse next year.
We face a serious recession in manufacturing. The House of Commons Library forecasts that that will destroy 420,000 jobs over two years. That is very similar to the prediction made only today by Ernst and Young of 500,000 job losses. Ernst and Young identify the problem as the
"fundamental mismatch between monetary and fiscal policy…which has led to unnaturally high interest rates unfairly penalising manufacturers at the expense of booming service industries."
The forecasted job losses would reduce manufacturing employment—this is a startling figure—to levels not seen in Britain for 150 years. [Interruption.] I am astonished that Labour Members think that that is funny. The forecasted job losses would mean cutting into industrial muscle, not just fat; this is not just a shake-out. My hon. Friend the Member for Ross, Skye and Inverness, West (Mr. Kennedy) will speak later about the situation in farming, which is perhaps even more serious. If job losses continue at the recent rate, more than 50,000 more farming jobs will be gone before the end of the century. Job losses in the two sectors alone could amount to more than 500,000. That is why we need action.
What should we do? In taking account of the intervention of the hon. Member for Buckingham (Mr. Bercow), I would prefer to resist the temptation to pay too much attention to the official Opposition's pronouncements on those matters. What an utter shambles

27
they have become. [HON. MEMBERS: "Hear, hear."] At least I have some support from those on the Labour Benches. The official Opposition have had 18 months to think of something to say, but they are still clueless. They cannot even decide who should set interest rates—let alone at what level they should be set. They blame recession on a minimum wage and spending rises without appearing to realise that such policies have not even been implemented yet. They accuse the Government of profligacy yet, in power, they increased current spending at twice the rate that this Government have planned. Indeed, the Chancellor of the Exchequer is boasting of the fact that he is holding down spending more than the Tories ever did. The Tories say that they would cut spending in general, and pledge only to raise it in the particular.
The Tories accuse the Government of fiscal laxity yet, according to the House of Commons Library, they broke the golden rule by an absolutely staggering £147.7 billion in the previous Parliament alone. They have in fact just one economic policy: to be twice as undecided as the Government on the single currency. That is not any kind of alternative. The shadow Treasury team sounds like the only group of politicians that could be trusted to make an even bigger mess of the Indonesian economy.
Our alternative would be to focus on four key areas. [Interruption.] I say to Labour Members that, however much I believe in the long term, the crisis is now and action is required today. First, my hon. Friend the Member for Ross, Skye and Inverness, West, who will be called later to move the second motion, will set out in some detail proposed help for the farming industry. Secondly, we need a strategy to bring down interest rates, and that does not mean bullying the Bank of England—something that Bank officials who were quoted in the Financial Times on 7 October suggested took place before the previous Monetary Policy Committee meeting. Nor should that be achieved by reversing the operational independence of the Bank. To bring down interest rates, we need to ensure that fiscal policy helps, rather than hinders, the process of cutting interest rates. It would be far better if the next Budget were followed by lower interest rates than if it contained lower consumer taxes. If that means delaying the much-trailed 10p tax rate, so be it.
The third priority must be an early commitment to single currency membership. Anticipating the arguments that I already hear from Conservative Members, I ask hon. Members to consider the article in today's Financial Times, which says that the car industry warns of a bleak future if the United Kingdom fails to join the European single currency. That almost exactly echoes the words said by the President of the Board of Trade only a week last Sunday.
A strategy to cut interest rates would mean a strategy to bring them down to the European level of 3 per cent. That is one of the reasons why we have argued for the establishment of a joint report on convergence by the Treasury and the Bank of England, to be presented twice a year to the Select Committee on the Treasury. Such an explicit process would lead to a more deliberate policy of harmonising fiscal and monetary policy and a strategy of reducing our interest rates. Surely, both would be good for business and exports.
Helen Jones: What the hon. Gentleman suggests—bringing interest rates down to the
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European level—would cost between £30 billion and £60 billion. That means 20p on the basic rate of taxation. Is that what he is proposing?
Mr. Bruce: The hon. Lady appears not only to have surfed the internet, but to have headed off into the galaxy with that information. That is preposterous.
In the course of a debate in the House, I have no problem with people trying to undermine the Liberal Democrat argument. However, it is not only our view, but the view of an increasing number of commentators outside the House, that there is an imbalance in the economy. The Chancellor of the Exchequer says that he wants Britain to join the euro and that he accepts that that requires convergence of inflation rates, interest rates and exchange rates; yet, for the past 18 months, he has been pursuing a strategy that has widened the gap on all three. He clearly cannot be serious about his endgame, if he is not prepared to apply himself to the policy that would get him there. We are setting out exactly how he might achieve that end.
When they came to power, the Government promised an end to boom and bust. They assured us that things could only get better. However, for a large part of our economy, the Government's macro-economic policy has produced a severe bust, and things are getting far worse. Instead of playing the blame game, let us now hear what the Government propose to do to turn the situation around and save jobs, secure investment and promote growth.
In the three months since the House last met, the Chancellor of the Exchequer has been to the International Monetary Fund, to the Economic and Finance Council and to most of the capitals of the world—he has hardly had time to come home and wash a shirt. He has embarked on a campaign to suggest that we need a dramatic reduction in interest rates. I should have thought that there would be resounding applause for such a strategy from hon. Members on both sides of the House. Will the Chief Secretary tell us how and when the Chancellor, instead of lecturing the rest of the world, is going to implement domestic policies that will deliver lower real interest rates, a competitive pound and an end to the threat of losing half a million manufacturing jobs in the next two years? We await an answer.
3.58 pm
The Chief Secretary to the Treasury (Mr. Stephen Byers): I beg to move, To leave out from "House" to the end of the Question, and to add instead thereof:
"notes that the Government inherited an economy in which public sector net borrowing was £28 billion, inflation was set to rise sharply above target because of the failure of the previous Government to take the necessary action on interest rates; recalls that the previous Government presided over a boom and bust economy where interest rates reached 15 per cent. and inflation reached 10 per cent., doubled the national debt in the 1990s, worsened inequality and failed to tackle the weaknesses in the British economy; commends the actions of this Government which is steering a course of stability in an uncertain and unstable world, has established a credible framework for monetary policy that has led to the lowest long-term interest rates in 35 years, and inflation hitting its 2.5 per cent. target, and has taken tough action to cut government borrowing by £20 billion; and welcomes the increase in employment of 400,000 since the election, the launch of the New Deal, reform of the tax and benefit system to tackle unemployment and poverty traps, support for British business through cuts in corporation tax and small business tax to their lowest levels ever, and the extra investment of £40 billion in education and health over the next three years."

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On behalf of the Economic Secretary and myself, I thank the hon. Member for Gordon (Mr. Bruce) for his kind remarks on our appointment and our fresh responsibilities, which we intend to discharge in the interests of the country.
As we debate the state of our economy, there is a responsibility on all of us to strike the right balance. We must ensure that we do not talk down our economy and that we recognise the challenges that we face as a result of the worldwide slowdown in economic growth. I therefore want to make an honest, realistic assessment of the state of our economy, which acknowledges rather than runs away from the fact that, within sectors, certain areas are suffering hardship.
We must recognise also the underlying strengths in our economy, which were reflected just last Friday in the gross domestic product figures for the third quarter of this year, which revealed that there had been growth across all sectors. That demonstrates that, as a result of the Government's policies, we are able to steer a course of stability in an increasingly unstable and uncertain world.
At the beginning of this debate, it is worth considering for a few minutes the position that we inherited on 1 May last year.
Ms Diane Abbott: Does my right hon. Friend agree that it is important to strike a balance between not talking down the economy and not being seen to deny the fears of people in the manufacturing sector who are losing their jobs? There are also fears in areas such as my constituency, which has one of the highest unemployment rates in the country, where people know that without real growth and a cut in unemployment, they have no chance of getting back to work.
Mr. Byers: My hon. Friend will be aware that, in her constituency in the east end of London and in my constituency in the north-east of England, there are now more people in work than there were on 1 May last year. I am sure that she will join me in congratulating the Government on that fact.
Ms Abbott: I accept what my right hon. Friend says, but does he share my concern that, although 1,808 people in Hackney have passed through the new deal programme, which is one of the Government's key strategies for getting people in areas such as Hackney back to work, fewer than 170 of them are now in jobs? The new deal cannot work in a recession, when there is an absence of growth.
Mr. Byers: I am sure that the 170 people in Hackney who have gained work and high-quality training as a result of the new deal are pleased that we implemented that policy. I say to my hon. Friend that manufacturing will benefit only if we take a long-term view of our economic prospects and do not take short-term measures, which may grab a headline today, but do not provide lasting growth for the future.
The short-termist approach of the Conservative Government meant that we inherited not a golden legacy, but an economy with serious fundamental weaknesses. Inflation was set to rise; there was chronic under-investment; consumer spending was growing at an
30
unsustainable rate; and productivity was low. We had a weak skills base and the value of sterling was artificially high. In addition, our public finances were running out of control. The national debt had doubled under the previous Government to £400 billion and public sector net borrowing was £28 billion.
Mr. Andrew Tyrie: Will the right hon. Gentleman give way?
Mr. Byers: In a moment.
During the 18 years that the Conservative party was in government, Britain had lower growth than any other major industrialised country and suffered two major recessions. We do not need to look back 18 years to examine the Tory legacy. We could turn the clock back just eight years to when the shadow Chancellor, the right hon. Member for Horsham (Mr. Maude), was a Treasury Minister. I regret that he is not here this afternoon. [HON. MEMBERS: "Neither is the Chancellor."] The shadow Chancellor does not have to prepare a pre-Budget report—the Chancellor does.
What is our golden legacy from the shadow Chancellor's time as a Treasury Minister eight years ago? Let us turn back the clock. Interest rates were at 15 per cent.; inflation was at 10 per cent.; 1 million manufacturing jobs were lost as output in manufacturing fell by over 7 per cent.; unemployment rose by more than 1 million; and 1 million people suffered the misery of negative equity. That is hardly a glittering record for the shadow Chancellor. There was no surprise, therefore, at the verdict of the electors of Warwickshire, North who voted the right hon. Gentleman out of office.
Mr. Tyrie: The Chief Secretary has repeated the mantra of how debt as a proportion of gross domestic product increased under the previous Government. Is he aware that the level of debt as a proportion of GDP has fallen since 1980—in other words, in the course of the previous Conservative Administration—and that Britain is almost the only country in the Organisation for Economic Co-operation and Development that succeeded in reducing its debt as a proportion of GDP?
Mr. Byers: I am afraid that that intervention reveals a degree of complacency among Conservative Members that was reflected by the previous Conservative Government. I do not find it acceptable that we spend more in this country repaying debt interest than we spend on our schools. The previous Government were prepared to accept that situation, but this Government are not. That is why we have set about reducing the public finance deficit.
When this Government came to office in May last year, we faced an economy set to repeat the same old cycle of boom and bust. There was no golden legacy, but the worst effects of 18 years of short-termism: playing party politics with interest rates; borrowing today and hoping that tomorrow would never arrive; and failing to address the skills gap and the need to improve productivity.
Mr. Barry Jones: I do not cavil at my right hon. Friend's speech, or at his Government's policies. However, today I visited the large Kimberly-Clark factory in my constituency which is to close. There

31
will also be 200 redundancies at the modern optical fibres factory in my constituency and promulgated steel redundancies at Shotton steelworks. May I meet my right hon. Friend to tell him of my constituents' concerns and about the £400 million proposed investment in Deeside that was announced just this year? I would be grateful for a meeting with the Chief Secretary so that I may highlight the concerns of those who are about to lose their jobs.
Mr. Byers: I would be more than pleased to meet my hon. Friend and discuss the situation in his constituency that he has outlined. As I said in my introduction, it reflects the fact that certain areas within sectors are facing hardship. I recognise that fact and I do not run away from it. This Government will not turn their back on my hon. Friend's constituents, but will want to work with local employers to find a way forward and a means of offering new jobs and opportunities to those who are affected by the changes that my hon. Friend has outlined.
When Labour took office, we had to take tough action to tackle the difficulties that our economy faced. In the light of unsustainable growth, rising inflationary pressure and high public borrowing, we have put in place a platform of stability on which to build an economy that is capable of sustained and steady growth. We established a new and more credible framework for monetary policy by giving independence to the Bank of England in setting interest rates. Interest rate decisions are now taken in line with the long-term needs of the British economy rather than the short-term political considerations of a particular political party. As a result, inflation is at its target of 21 per cent. and Britain now has the lowest long-term interest rates for 35 years.
However, the independence that we have given to the Bank of England in setting interest rates has caused confusion among Conservative Members. The Leader of the Opposition declared that he opposed independence, and said:
"They have given up control of interest rates when they should have kept hold of them."
That view is shared by the shadow Trade and Industry Secretary. However, the deputy Leader of the Opposition has said that no knee-jerk decisions should be taken regarding the independence of the Bank of England. That reflected the views of the shadow Chancellor a few weeks ago, who said that taking back control over interest rates was
"not a decision to rush into."
However, last week, the shadow Chancellor said that he, too, opposed Bank of England independence. He said:
"We would not have given up control of interest rates in the first place".
So there is a degree of confusion on the part of the shadow Chancellor.
Dr. Vincent Cable: I welcome the Minister's strong, robust reaffirmation of the Government's decision to make the Bank of England independent, but will he explain why, given that independence, the Chancellor of the Exchequer feels it necessary to give the Bank unsolicited advice on interest rates?
Mr. Byers: I draw the hon. Gentleman's attention to the evidence that the Governor of the Bank of England,
32
Eddie George, gave the Treasury Select Committee a few days ago, when he said clearly on the record that he did not feel under any pressure from the Chancellor of the Exchequer over his decision making on interest rates.
Ms Abbott: My right hon. Friend will accept, though, that the fact that the redoubtable Eddie George does not feel under any pressure does not mean that pressure was not applied.
Mr. Byers: My hon. Friend knows that Eddie George is a robust character. Occasionally, he may feel under pressure, but, last week, he said clearly that it did not affect his decision making. That is the important point in this context. It is to be expected that, at times, the Chancellor of the Exchequer will express views about these important matters. However, the important point is that the decision-making process no longer rests with party politicians, whether it be the Chancellor of the Exchequer or the House; it now rests with the Bank of England and its Monetary Policy Committee.
In addition to tackling the issue of interest rates, we have had to tackle the difficulties that we found regarding public finances. In our first year in office, we reduced borrowing by £20 billion. In the first six months of this year, borrowing was reduced by a further £10 billion. We have also set out our spending plans for the next three years. A central feature of our new spending regime is the fact that we have built in margins to cover uncertainties, including the risk of slower growth and its effect on revenues.
As a result of our prudent management of public finances—including last year's £20 billion cut in the deficit—we are on track to meet our strict fiscal rules, while maintaining our commitment to an additional £40 billion for improvements in health and education over the next three years.
Mr. David Ruffley: Given the recent downward revisions to gross domestic product forecasts, can the Chief Secretary tell the House by how much his forecast for public borrowing will increase, compared with the Red Book, in the years 1999, 2000 and 2001?
Mr. Byers: As the hon. Gentleman knows, a week tomorrow, the Chancellor will produce his pre-Budget report, and that will be the time for our new forecast for growth to be revealed. However, I can tell the hon. Gentleman, because he has asked an important question, that the margins that we built into our spending programmes at the time of the comprehensive spending review will be sufficient to cover our commitment of £40 billion extra spending for health and education.
Mr. Tyrierose—
Mr. Byers: Just a second.
Labour Members need to know whether the Conservative party opposes the £40 billion for health and education. The Leader of the Opposition says that it is "reckless". The shadow Chancellor says that it is foolish. However, the shadow—
Mr. Tyrierose—
Mr. Byers: I want to make this point. The shadow Education Minister, the hon. Member for Havant

33
(Mr. Willetts), says that it is not enough. The shadow Health Secretary, the right hon. Member for Maidstone and The Weald (Miss Widdecombe), says that it is not
"a generous settlement for our health service",
but
"a let down."
The Opposition must state their policies clearly. Is it reckless spending, or is it under-investment in health and education? The Opposition have refused consistently to say whether they are in favour of the additional spending or not. The Leader of the Opposition says that he is against it, and that it is reckless.
Mr. Oliver Heald: What about welfare?
Mr. Dale Campbell-Savours: The answer just came from a sedentary position, from the shadow Treasury Bench. Is not the truth that the Tories want to cut pensions and benefits, but that they are not prepared to go on television and tell the people that?
Mr. Byers: My hon. Friend is right. When hon. Members have a chance to look at the spending on welfare, they will see clearly that three specific areas receive the bulk of the increase that was outlined in the comprehensive spending review. The increase is targeted at pensioners, the sick and disabled, and children. The Opposition must come clean and say for which of those three categories they would cut the increase.
Mr. Tyrierose—
Mr. Byers: No, I have taken seven interventions already and I want to make progress.
We must ensure that the money that we spend is targeted on the areas that need it. The shadow Chancellor may say that the extra spending is reckless, and that it is foolish, but he should try telling that to parents whose six-year-old son or daughter is in a class of 40, or to pensioners who have been told that they will have to endure another two years of agony before they can have the benefits of a hip replacement operation.
Parents and patients do not regard our extra £40 billion spending on schools and hospitals as foolish. They see it as an investment—a reflection of the Government's priorities—which is essential to building a modern Britain and a decent society.
Mr. Tyrie: Will the Chief Secretary give way?
Mr. Byers: I want to make progress.
No debate on our economy at present can ignore the world situation. With one quarter of the world now in recession, including Japan—the world's second largest economy—no country is immune from the effects of the current instability in the global economy.
The International Monetary Fund has revised down its forecast for world growth next year from nearly 4 to 2.5 per cent. It expects world trade growth to fall by two thirds this year. Britain's export markets are set to grow more slowly.
Mr. Tim Loughton: Will the Chief Secretary give way?
Mr. Byers: I want to make progress. I shall give way in a few minutes.
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We have experienced the opportunities that flow from the new age of globalisation. We have benefited from the accelerating integration of the international economy. Now we must manage it through more difficult times. Our shared commitment to open trade and orderly progress among the G7 nations has been a driving force for growth, even in countries that not so long ago seemed likely to be permanently left behind.
Now that trend is stalled, and in some places reversed, but I believe that it is only a temporary setback, not a permanent condition. I believe that the essential answer to the problems of the moment is not less globalization—not new national structures to separate and isolate economies—but stronger international structures to make globalisation work in harder times as well as in good times. Our urgent need is for closer co-operation, continuing dialogue and an unwavering commitment to open commerce. We must not let temporary instability put global progress at risk.
Mr. Loughton rose—
Mr. Tyrie rose—
Mr. Byers: No, I still want to make some more progress.
As the economic weather turns, as a storm in one region threatens to spread, there are easy but dangerous shelters: a return to protectionism, the breakdown of co-operation and the rise of beggar-thy-neighbour policies—but that will only make matters worse and will not lead to renewed growth.
Protectionism anywhere is a threat to prosperity everywhere. Closing off national economies only increases national and international instability. In Asia, across the world and in the United Kingdom, it is the poorest and the most vulnerable members of society who suffer most from financial crisis and stagnation.
We make no apology for taking the lead in seeking to achieve the objectives that will lead to great co-operation and sustainable world growth. It is vital to do that to ensure that employment opportunities continue to grow.
Mr. Loughtonrose—
Mr. Bercowrose—
Mr. Tyrierose—
Mr. Byers: I have a wonderful selection. I shall go for piggy in the middle.
Mr. Bercow: That was an extremely courteous description. I congratulate the Chief Secretary on his well-deserved promotion to the Cabinet. He will be aware that, in Labour's business manifesto published in April 1997, his right hon. Friend the current Chancellor stated:
"We will not impose burdensome regulations on business, because we understand that successful businesses must keep costs down."
How does the right hon. Gentleman square that ringing declaration with the evidence in the report just published by the accountants Chantrey Vellacott, which estimates

35
that regulatory costs to business by May 1999 will be at least £5 billion or 17.3 per cent. higher than when Labour took office?
Mr. Byers: I do not know how much that report cost the hon. Gentleman, but we know that accountants come up with these reports at regular intervals.
Mr. Bercow: I was given it.
Mr. Byers: The report was given to the hon. Gentleman. He should know better than to quote with authority freebies that might be handed out to him. The reality is that the Government have costed the introduction of a variety of measures. I know that Opposition Members disagree with some of them. However, we believe that it is in the long-term interest that some of these provisions are introduced into our economy. I shall talk later about some of the possible solutions to our difficulties that are being put forward by Opposition Members. Before I do that, and before the Treasury and the Government have costed the implications of such solutions, I must say that there is no relationship between our figures and the fantasy figures that have been quoted by Opposition Members.
Mr. Loughton: Will the Minister give way?
Mr. Byers: No. I want to make some progress. I shall give way in a minute or two.
I want to talk about the employment that has been created. We are talking of 400,000 extra jobs since May 1997. I recognise that there have been some high-profile job losses. Many companies have cited current difficulties in the world economy, and those alone, for closures that might have been experienced. However, whatever the reasons for job losses, whether they be in the constituency of my hon. Friend the Member for Alyn and Deeside (Mr. Jones), my constituency or elsewhere in the country, we on the Government Benches recognise that they are a personal tragedy for the individuals concerned, for their families and for their communities.
That is why the Government, unlike our Tory predecessors, will act positively to do what we can. There will be no turning our backs on people who become the victims of decisions that result in job losses. That is why we shall provide practical help at a local level, with training opportunities, advice on self-employment and payment of the costs of travelling to job interviews.
During the election campaign, we said that we would govern for the many and not for the few. In particular, we wanted both the young unemployed and the long-term unemployed to feel that they had a place and a role within our society. That is why we launched our new deal—the biggest employment programme for a generation. It was launched in the teeth of opposition from the Conservative party. Already, more than 140,000 young people have been helped into work and high-quality training opportunities. Although the Liberals spoke warm words about the new deal, they opposed our windfall tax which made it possible. We shall take that as a further £5 billion spending commitment from the Liberals. It is another one to add to the list.
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The hon. Member for Gordon, in moving the Liberal Democrat motion, raised the question of productivity. Any honest and realistic assessment of our economy will show that there are a number of fundamental weaknesses that have held it back for too long, and one of those is our low level of productivity. I take the point that the hon. Gentleman made about figures from the London business school. Next week, with the pre-Budget report, my right hon. Friend the Chancellor of the Exchequer will specifically address issues related to productivity. We are confident that our figures, which show that we are falling behind our major competitors on productivity, are accurate. However, we shall examine the figures to which the hon. Member for Gordon has referred to ascertain whether, in the light of them, we need to revise our forecast. I have to say that given the work that has been done so far, our figures reveal an unacceptable productivity gap between us and our major competitors.
Mr. Malcolm Bruce: I am grateful to the right hon. Gentleman for what he has just said. I am sure that he would agree that, if the Government have it in mind to put money into schemes to boost productivity, we must be sure that we have the facts right. We all acknowledge the productivity gap, but it has not suddenly become worse, and that is really the problem. Will the right hon. Gentleman address how long British manufacturing industry must continue with an interest rate that is 3 per cent. higher in real terms than that of our continental competitors? Can he give any indication of when convergence might be achieved, and how?
Mr. Byers: I am happy to discuss productivity. Long-term interest rates are at their lowest level for 35 years. We hope that interest rates have peaked at 7½ per cent. and that they are on their way down. Announcements from the Bank of England have shown that the balance of risks has now changed in respect of inflation. I hope that significant decisions will be made in the next few weeks. I am guarded in what I say because, if I say something, it will be regarded as putting pressure on the Governor of the Bank of England and I would not want to do that.
The Government's productivity agenda must be seen as a fundamental part of modernising our economy. It is not about working harder, but about working better—working with world-class investment, technology, skills and management. That is why we have established a new investing in Britain fund, which will nearly double net public capital investment in this country in the next three years, and a root-and-branch reform of our education system to drive up standards.
None the less, it is not just how much we invest, but what we do with investment that is vital. Ultimately, it is business, not Government, that will close the productivity gaps, although the Government have a central role. That role includes getting the competitive framework right, underpinning the effective workings of capital markets and providing the right education and training to enable business to deliver a world-class performance. It also includes pulling down unnecessary barriers that hold Britain's companies back. Next week's pre-Budget report will take that agenda forward and build on work to strengthen the country's productivity potential.
It is instructive that, faced with world turmoil and global downturn, the Opposition's response has been to resurrect tired old Tory policies, clinging on to them like

37
a comfort blanket. They include rejection of the national minimum wage and, in the process, condemning 2 million people to continued poverty pay; opposition to the social chapter, which provides a minimum entitlement in the work place; and objection to the working time directive. With a quarter of the world in recession, is that a serious response?
In the past few weeks, the Conservative party has gone much further in policy development. The former Chancellor, the right hon. and learned Member for Rushcliffe (Mr. Clarke), warned politicians about commitments made on a wet night in Dudley. I know that we have had some pretty bad weather recently, but that advice has clearly not been heeded by the shadow Chancellor, the shadow Trade and Industry Secretary or the shadow Social Security Secretary. Between them, those three have committed the Tory party against the working families tax credit, which will make work pay for up to 1.5 million families with children. They would not spend £40 billion over three years on schools and hospitals. The new deal would be scrapped, denying hope to tens of thousands of young and long-term unemployed people. They would also take away the Bank of England's independence and play politics with interest rates.
What we have witnessed in the past few weeks has not been a coherent and thought-out response, but political positioning to be the new darling of the right. It has been about personal ambition, and nothing to do with the national interest. The result is a significant lurch to the right. The Tory party is now the party that likes to say no—no to the social chapter, to the working time directive, to the national minimum wage, to independence for the Bank of England, to the working families tax credit, to the new deal for the unemployed and to an extra £40 billion for schools and hospitals. As a result, it is a party with no chance of winning the next general election.
The Labour Government have put in place a comprehensive economic strategy to ensure that we can steer a course of stability in an uncertain and unstable world. The questions that we face are complex and difficult, but in all our debates and policy making, we must never forget that they are also human questions. They involve people's living standards as well as the level of financial transactions. They involve not only the value of capital, trade or investment, but the deepest values of our society.
We must make markets work, in tough as well as easy times. That is the burden and responsibility of all in the Government. It is a responsibility that we intend to discharge so that, together, our country and our people can meet the challenges that lie ahead.
4.29 pm
Mr. David Heathcoat-Amory: This is the first time that the new Chief Secretary has come to the Dispatch Box, and I join others in congratulating him on taking up his new post.
The Chief Secretary's job is important in any Government, and I look forward to debating economic matters with the right hon. Gentleman on many occasions, but his speech was a gigantic missed opportunity. He said nothing that we had not already heard from the previous Chief Secretary, and he should have used the debate at least to say something about what has happened to this
38
economy and others in the past three months, and what sorely needed policy changes we can expect.
The Chief Secretary started hopefully by saying that he was about to make an honest and realistic assessment of the economy, but then immediately started to rewrite history and deny the existence of the golden economic legacy that he was bequeathed by the previous Government. We know—it is a matter of record, not of opinion—that we left the incoming Government with steady growth, falling unemployment and low inflation. All those achievements are now at risk or are in reverse.
The Chief Secretary asserted that the previous Administration left him with a deteriorating inflation target. That is not true; we met our target of 2.5 per cent. or less by the end of the Parliament. The policy mistakes committed last year, in the Government's first Budget, reversed that inflation record and gave the whole burden of controlling inflation to the Bank of England, which put up interest rates and caused a lot of other problems in turn.
I do not believe that the novelty of the Chief Secretary's position or his unfamiliarity with the brief produced such a shallow and unconvincing speech. Rather, the Government's whole economic strategy has become unsustainable. It was based on a growth forecast of at least 2 per cent. in this and every future year. All their spending commitments and borrowing forecasts were based on that growth prediction.
Today, no one believes that that growth will occur, and the Government do not believe that that will happen. Three weeks ago, the Chancellor told the International Monetary Fund in Washington that British growth forecasts are too optimistic. We know that the IMF has a special place in Labour hearts—it bailed out the previous Labour Government—but it is a scandal that the Chancellor of the Exchequer chose a meeting with the IMF in America to inform it about the British economy when he will not come to this House to tell us what is happening. He should tell us how the forecasts on which the Budget and the expenditure commitments were based have become largely fictitious.
Instead of a statement, a debate or some information from the Chief Secretary today, we have been given unattributable press briefings from the unofficial press spokesmen at the Treasury. In the City and throughout the private sector it is illegal for a firm to give selective briefings about price-sensitive information in its possession to third parties, but that is what the Treasury unofficial press spokesmen have been doing all through the recess up to today's debate.
All this secrecy and the dribbling out of little bits of news here and there come from a Government who came into office committed, so we were told, to openness and accountability. We remember all that waffle they cited in opposition about a Labour Government who would give the public all the information to which they had a right. The Government produced a White Paper last December entitled "Your Right to Know", but that has been quietly forgotten.
Even more recently, "The Code for Fiscal Stability", which was published last March, said that the Government would not withhold information on the conduct of fiscal policy and the state of the public finances except if substantial harm would benefit. What harm can possibly

39
follow from the Government giving to the rest of the world information and internal Treasury forecasts already in their possession?
Mr. Geraint Davies: On the issue of disclosure, would the right hon. Gentleman disclose what the official Conservative position is on the expenditure of £40 billion on health and education? Would expenditure on welfare be cut? If so, where? What is the Conservative party's position on the Bank of England? Would interest rates be left in the hands of the Government? Why has the shadow Chancellor taken so long to attend the debate? Has he been in Asda?
Mr. Heathcoat-Amory: The hon. Gentleman has obviously already forgotten that we voted against the Bank of England Bill on Second and Third Reading. We also argued against its provisions in Standing Committee. If the hon. Gentleman wants the answer to one of his questions, he should refer to the record.
Mr. Malcolm Bruce: This is an important issue, because the Bill to make the Bank of England independent is now an Act, and is a matter of law. Is the Conservative party committed to taking the Bank of England back under political control—yes or no.
Mr. Heathcoat-Amory: It was the Government who broke their election promise. The Chancellor of the Exchequer said that he would not give interest rate decisions to the Bank of England until it had established a proven track record, but, within days of taking office, he broke that promise and introduced a Bill that we voted against. I would have preferred it if the Liberal Democrats had assisted us in holding the Government to their election promise. I will tell the House what we will do at the next election when the Government tell us when they will keep the promises that they made at the election.
Mr. Campbell-Savours: Why cannot we get a straight answer to this question? We keep seeing Tory spokesmen on television being asked that simple question. Will the Tories take the Bank of England back under political control? That is all we need to know. Can we have a clear answer of yes or no, and put an end to all the waffling at the Dispatch Box?
Mr. Heathcoat-Amory: We will give the hon. Gentleman some of the answers he seeks when he apologises for deceiving the electors in his constituency. He stood on a manifesto and a promise not to give independence to the Bank of England, but within days of taking his seat in the current Parliament he broke that promise. When will the hon. Gentleman apologise for that?
At the time of the comprehensive spending review in July, we said that it was reckless to lock the economy into a three-year spending commitment with annual increases of more than 3 per cent. a year in real terms.
Maria Eagle rose—
Mr. Heathcoat-Amory: Events have shown that we were right. We also pointed out that the extravagance of
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the expenditure forecasts were due to another central failing by the Government: their failure to reform social security expenditure. It is significant that the Chief Secretary, in his speech, was already sliding on that commitment. We used to have it from the Government—indeed, from the Prime Minister—that welfare reform was right on moral grounds to end dependency on the state. It was also essential, so the Prime Minister assured us, to find the extra money to spend on health and education from a reduction in the welfare budget. It is significant that all the Chief Secretary spoke about were the problems, and the fact that that would not be possible after all.
That is why we called the overall expenditure commitment up to three years hence irresponsible and unsustainable, and we were right to do so. Since then, growth has more than halved.
Mr. Nigel Beard: Will the right hon. Gentleman give way?
Mr. Heathcoat-Amory: I will give way one last time.
Mr. Beard: The right hon. Gentleman made much of the possibility of a recession, but went on to outline a policy of cutting Government spending, and thus cutting demand even further. If a recession is pending, such action will make it worse. My right hon. Friend the Chief Secretary proposes that we continue spending, to boost demand and counter the recession. The Opposition policy will deepen any recession, not cure it.
Mr. Heathcoat-Amory: I gave way to the hon. Gentleman because I had seen him on one or two Finance Bill Standing Committees, and thought that I would hear a more informed intervention. Once more, I was disappointed.
The hon. Gentleman is entirely wrong. If the Government had listened to what we were saying about unsustainable spending commitments, and if they had reformed welfare as a precondition of all their other expenditure ambitions, the Bank of England would not have had to go on raising interest rates. Industry, business and the economy generally are now paying for earlier mistakes that we pointed out. The hon. Gentleman is wrong to suppose that anything that I would have done, then or now, would make the recession worse.
We would not be where we are today under the Conservatives. We would not have had the last two Budgets. During the debates on those Budgets, we warned of the dangers that the Government were risking. That is why there is now a serious possibility of a £36 billion increase in borrowing over the next three years—and that is by no means the most gloomy forecast: some recently published independent predictions speak of zero growth for next year. The £36 billion could represent the lower end of the estimates.
The Chief Secretary referred to some mythical margin of prudence built into the expenditure review. I know that the right hon. Gentleman has been in his job for only about three months, but he need only read "The Code for Fiscal Stability", and the other documents that were published at the time of the comprehensive spending review, to realise that no margin has been built in. I refer the right hon. Gentleman to page 43 of "Stability and

41
Investment for the long term". Over the coming years, borrowing is already set to rise by at least £4 billion every year. That is extremely serious when considered alongside the new black hole that is opening up in the form of £36 billion of extra borrowing—or more, according to some scenarios.
Mr. Tyrie: May I make a point about the alleged margins built into the spending plans? The Chief Secretary seemed to be completely unaware that his Government had announced the lowest level of reserves as a proportion of gross domestic product that had ever been announced, certainly in living memory. The margin, in as much as it exists, was dangerously small even before the growth forecast was drastically altered a few weeks ago.
Mr. Heathcoat-Amory: My hon. Friend is right. The comprehensive spending review was already risky, and, with the halving—at least—of the growth forecast, it has gone into the danger zone.
Maria Eagle: I Will the right hon. Gentleman give way?
Mr. Heathcoat-Amory: I will give way in a moment.
It is no good saying, as the Chief Secretary did, that all will be revealed in the pre-Budget statement. We had a pre-Budget statement last year, and there was nothing worth while in that. Meanwhile, savers and borrowers want to know what will happen to Government debt. Businesses need to plan. Will all the growth in the economy be pre-empted by the public sector? Will the Government have to go on putting up taxes on businesses? People want answers to those questions today. The figures exist in the Treasury; why are they not being given to the House of Commons?
Maria Eagle rose—
Mr. Heathcoat-Amory: Perhaps the hon. Lady has an answer.
Maria Eagle: It is not my responsibility, but I am grateful to the right hon. Gentleman for giving way to me at long last. Perhaps that represents the triumph of persistence.
Given his concern about excessive commitments to public spending, can the right hon. Gentleman explain just what the Opposition would cut?
Mr. Heathcoat-Amory: I have made that clear to the hon. Lady, but she need not take it from me; she can read the record. Back in July, we were saying that locking into a three-year commitment of that magnitude was irresponsible, given the Government's abject and continuing failure to deliver on their promise to reform the welfare state.
I am not asking the Government to do anything that we did not do. Over the past four years, social security expenditure has been stable, under the Conservatives and in relation to the expenditure forecasts that we left behind. During those four years, it rose by a total of only 1.5 per cent. in real terms. All the Government had to do was continue what we were achieving; instead, in their own comprehensive spending review, they have committed themselves to an annual real-terms increase of
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3.3 per cent. in the social security budget. That, when added to all the other expenditure commitments, is reckless and unsustainable. We said so at the time, and we have been proved right.
What does the Chief Secretary do? He does not give us any new figures; he has no plan to sort the matter out. Instead, he simply blames business for everything. Meanwhile, job losses mount. Productivity is the new problem. It used to be the Asians who were at fault; then it was the Russians; then it was the banking system. The new problems are all caused by greedy management and lazy workers. Meanwhile, on the shop floor in our constituencies, in businesses and workplaces, job losses mount. I believe that the hon. Member for Gordon (Mr. Bruce) mentioned the Ernst and Young report, which predicts half a million extra job losses over the next two years.
Mr. Campbell-Savours: Will the right hon. Gentleman give way?
Mr. Heathcoat-Amory: I have already give way to the hon. Gentleman. I hope that he will forgive me if I do not prolong my speech by taking more interventions from him.
The Prime Minister's remarks last week were nothing short of scandalous. He dismissed all talk of job losses or the possibility of a recession as "idiotic hysteria". That was itself an interesting commentary on the Bank of England's own Monetary Policy Committee, which had said in its minutes for the month before that the chances of a United Kingdom recession had increased.
It is not only the Bank of England that has said that. In a circular sent out a few days ago, Goldman Sachs said:
"There is a rising risk of recession as evidenced by the continuing collapse in business confidence… On our projections the government will fail to meet its fiscal rules".
Chase Manhattan says that a
"UK recession is now very likely in 1999".
NTC, the independent research group, says that, according to its figures, there is a
"strong likelihood of recession in the second half of 1999."
Mr. Bercow: Will my right hon. Friend give way?
Mr. Heathcoat-Amory: Yes, for the last time.
Mr. Bercow: Does my right hon. Friend agree—especially in the light of the reports from which he has just quoted—that the Chief Secretary was guilty of gut-wrenching complacency in respect of the increased regulatory burden that British business will undoubtedly face in the lifetime of this Parliament? Was it not extraordinary that, in a 30-minute oration, the Chief Secretary failed even to refer to the European Commission's prediction that the country would slump to the bottom of the European growth table next year?
Mr. Heathcoat-Amory: My hon. Friend is right. All the warnings and all the independent research are dismissed as idiotic hysteria by the Prime Minister.
My hon. Friend is also right in saying that this concentration on failures of productivity shows a breathtaking hypocrisy. We have this from a party that

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opposed, with its allies, the Liberal Democrats, every one of the industrial and trade union reforms and privatisations that transformed our economy during 18 years of the Conservative Government. Those policies are being copied throughout the world, yet that same Labour Government are at it again. They lecture British industry about competitiveness and productivity and then bring in the job-destroying measures to which my hon. Friend has referred. As promised, they believe in the three Rs, which we are rapidly learning stands for regulation, regulation and regulation.
To take just one, on the Government's own figures, the working time directive will add some £2 billion a year to business costs. Everyone knows that distribution and freight charges are an important component in the cost of a manufactured item. We have among the highest distribution costs in Europe. Why? It has nothing to do with failures of industry, or the haulage industry in particular. The Government have ratcheted up fuel duties in both their Budgets and they are singling out diesel duty for yet more, higher increases.
According to Library figures, the extra costs of motoring, over and above what we calculated in our forecast, will amount to £9 billion in this Parliament, yet the Government have the nerve to tell industry to sharpen its act. The Government are piling on such extra costs and extra taxes every day.
The only consolation to the Government is that, possibly, they have the Liberal Democrats on their side. Here, I refer briefly to the weasel-worded Liberal Democrat motion, which recognises
"the role of fiscal policy in stabilising economic growth in order to avoid excessive reliance on interest rates".
Is that some bizarre code? Can the Liberal Democrats now talk to the Government in coded language only? Have all relations broken down? Are we to suppose, therefore, that those words have within them some coded support for the Government's high-tax policies and the £20 billion-plus extra business taxes that the Government are loading on to industry in this Parliament?
Helen Jones: Given his concern about taxation, perhaps the right hon. Gentleman could explain how it is that his party voted for amendments to the last Finance Bill that would have given us £6 billion—worth of extra spending? Which taxes would he have raised to pay for that?
Mr. Heathcoat-Amory: The hon. Lady is wrong. I do not believe that she attended all the debates—[Interruption.] If she was there, no one noticed it. She might have missed the fact that on the Finance Bill we were proud to oppose the extra taxes that the Government and their Liberal Democrat allies tried to load on to individuals and businesses.
Mr. Loughton: Will my right hon. Friend give way?
Mr. Heathcoat-Amory: I hope that my hon. Friend will forgive me. I must make progress.
I want to mention interest rates because they have been mentioned by Labour Members. They are higher than they need to be precisely because of the Government's
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persistent and continuing failure to bring their tax and spending policies into line with their monetary objectives. The best example of that was the attack on savings in their first Budget, the notorious £5 billion-a-year raid on pension funds. That was the last thing that the economy needed at that time. It meant that the entire burden of controlling inflation was transferred from fiscal policy to the Bank of England.
Of course, at the time, the Chancellor said that it was nothing to do with him—all those nasty interest rises were due to the Bank of England; he could not control the Bank. However, last month, he was going around the world—but not this country—telling everyone else that we needed a co-ordinated cut in interest rates. Frankly, he has to decide: does he control interest rates and, if he is urging all these lower interest rates, why has he signed up in principle to joining the European central bank in Frankfurt? If that happens, it will be illegal even to seek to influence the level of European interest rates ever again.
Last week in the Chamber, we had the hilarious spectacle of Labour Back Benchers complaining about the Governor of the Bank of England. They wanted him to be sacked because he had pointed out that the United Kingdom was a single currency zone, so interest rates for the north of England were set in accordance with conditions in the country as a whole. Those same hon. Members, however, want to join a single European currency, in which case it would not be British conditions that determined the interest rate, but conditions in continental countries, which would be very different. Matters would be 10 times worse if we did that.
Mr. Malcolm Bruce: European Union interest rates are 3 per cent. lower.
Mr. Heathcoat-Amory: That was a sedentary intervention from the Liberal Democrats, who, as usual, have forgotten nothing and learnt nothing. When we were in the exchange rate mechanism, we were told by the hon. Gentleman and others that it was going to mean lower interest rates. By the time we came out, it was the reason why we could not lower interest rates.
In the economic cycle, interest rates go up and down and the need for them goes up and down, but if we were party to a single European currency the requirements would be set not by British conditions, but by continental ones. Perhaps that realisation is beginning to dawn on those on the Labour Benches, but clearly it is not dawning on those on the Liberal Democrat Benches.
Mr. Malcolm Bruce: Will the right hon. Gentleman give way?
Mr. Heathcoat-Amory: I hope that the hon. Gentleman will forgive me, but I must raise another point.
The Economic Secretary to the Treasury, who is answering this debate, will have an opportunity to clarify—because we need clarification—what went on at last weekend's European summit in Austria. That summit produced a proposal for a £200 billion spending programme. The jobs crisis in the European Union has produced a left-wing response at EU level.
The Prime Minister may not want to be left wing, but he certainly wants to bolster his European credentials by going along with that proposal, so we face not only a £36 billion black hole in our domestic expenditure, but a £200 billion black hole at EU level.

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We want to know what Treasury Ministers think about that. How will it all be paid for? Again, some people who attended that summit have an answer for that as well. They want an EU-wide direct tax to be levied on businesses or individuals in member states. It would bypass national Governments. That is the new proposal, so can we have a definitive statement about it before the end of this debate? Can the Chief Secretary or Ministers speaking for him assure the House that the Government will veto any such increase in the EU's taxation powers? Can we have a clear, unequivocal response to what is, after all, a straightforward question?
The problems that the Government have with unemployment, economic growth and borrowing are not sudden or unexpected. They were warned about them at the start of the summer. They fit into a pattern of mistakes and broken promises that go back to May last year. The Government broke their promises on taxes; they put them up 17 times last year. They attacked savings in their first Budget at the precise moment when they should have been encouraging them. They continue to put up business costs by introducing regulations and more taxes, and then blame the managers for being greedy and the workers for being lazy. The Government have also not only failed to reform social security but made reckless spending commitments.
Ministers blame everyone but themselves, and they fail to come clean with the House. The country is now paying for the Government whom it elected last year.
4.59 pm
Mr. Christopher Leslie: In my short time in the House, I have not seen such a good example of the bad practice that politicians have adopted over the years—of being asked to answer a question but failing to do so—as that provided by the right hon. Member for Wells (Mr. Heathcoat-Amory). When asked a simple question about what the Conservative party would do about Bank of England independence, he told us, "We will answer you only when you answer this, that and the other question." Does the right hon. Gentleman realise how ridiculous he looked today? His speech was pathetic.
If Conservative Members are able to take decisions so quickly on matters such as the single currency, why on earth cannot they take a decision on whether to reverse Bank of England independence? They really have to answer that question. The right hon. Gentleman was asked other questions, which he ignored completely. He tried, pathetically, to duck giving any answer.
As my hon. Friend the Member for Warrington, North (Helen Jones) said, during the passage of the most recent Finance Bill, Conservative Members proposed removing £8.7 billion of funding for public services. If they want to reduce public spending by such an amount, they should tell us which services they would cut. We know that they would remove the working families tax credit. We know also that they are not worried about the poverty trap or structural unemployment, because they think that people affected by those issues can go to the wall. Do Conservative Members realise that £8.7 billion—an astronomical sum—is more than is spent annually on fighting crime in the United Kingdom?
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Conservative Members have also mentioned welfare and social security. They must therefore be thinking about what they would do with pensions and child benefit.
Mr. Ruffley: Will the hon. Gentleman give way?
Mr. Leslie: Of course I will give way; I should like some answers.
Mr. Ruffley: Is the hon. Gentleman aware that, on 10 April 1997, the Prime Minister said that he wanted to
"start reducing the very high welfare and benefits bills we pay in this country"?
Nevertheless, it has been clearly demonstrated that, between now and the end of this Parliament, there will be an average annual spending increase of 3.3 per cent. Why did the Labour party deceive the British people on welfare?
Mr. Leslie: As the hon. Gentleman knows, in the Labour party manifesto, we talked about shifting our priorities from paying the costs of social and economic failure, such as paying the jobseeker's allowance, and placing greater emphasis on education and health. Making such a shift is our policy, and that is what we are doing. We are spending an extra £40 billion on health and education, although Conservative Members oppose that increase.
I should love to hear a Conservative politician come clean, for a change, and just spit out what is at the bottom of his heart. We know that the right hon. Member for Wells is against the euro and against the independence of the Bank of England. What spending cuts would he make?
Mr. Loughton: Perhaps the hon. Gentlemen will take a stab at answering this question. Will he commit himself and the Labour party to retaining the independence of the Bank of England after the next general election, or will that independence have been abdicated to the central European bank by then?
Mr. Leslie: The hon. Gentleman has a funny way of answering a question about whether the Conservative party would reverse the Bank of England's independence. Labour Members made the Bank independent, and independence is working well. Interest rates have reached their peak and are now on a downward slope. We feel that independence is the best policy for managing the British economy and monetary policy.
The House wants to know the risk—the clear and present danger—presented by Conservative Members to the British economy. Would they recklessly return monetary policy to the control of politicians, who might tinker around with that policy for their own benefit? How would Conservative Members go about things? The fact is that they offer fiscal and monetary policies that would be disastrous for the British economy.
Conservative Members talk about the need to cut and slash public services, but disregard the infrastructure that is necessary across the country and the vital public services—health and education services—that people cherish.
Curiously, although Conservative Members talk about an economic downturn, they talk also about reining in public expenditure. Surely such spending cuts would

47
simply amplify any possible economic problems and—as the Financial Times said today—push things in the wrong direction?
Mr. Tony McWalter: My hon. Friend is very eloquently making his case. Opposition spokesmen say that our spending plans on education and health are irresponsible, reckless and unsustainable, which implies that they would not propose such plans. I should like to confirm that, as my hon. Friend said, Conservative Members would like to rein in those plans. They should make their intentions very clear.
Mr. Leslie: As my hon. Friend says, Conservative Members face in two directions on those issues. Although they like to talk about more public expenditure on this, that and the other, they try simultaneously to appease their own right-wing instincts by saying, "We must rein in all public expenditure, regardless of the value that it provides to the economy and the nation."
Mr. Loughton: The hon. Gentleman has expressed his great confidence in the ability of the Bank of England to do a better job of running the economy than his colleagues are able to do. Does he therefore agree with the hon. Member for Rotherham (Mr. MacShane), who recently called for the resignation or sacking of the Governor of the Bank of England and claimed that the Governor and his colleagues were sacrificing manufacturing jobs in the north for the sake of protecting the south? Does the hon. Gentleman think that the Governor is doing a good job?
Mr. Leslie: I think that interest rates should be left to the experts—those who are expert in monetary policy. I do not think that politicians, such as the hon. Gentleman and I, are capable of dealing with the daily technical issues of monetary policy—which is why the Government, correctly, gave the Bank independence and created the new monetary policy framework. Although it is open to all hon. Members to make suggestions on monetary policy and on what course the Bank should take, ultimately the decision rests with the Monetary Policy Committee—which is where the decision should be made.
I accept that world economic conditions will undoubtedly have an impact on the British economy. Events in Japan have ricocheted around Russia and Latin America, and problems such as the crisis in Long Term Capital Management and other financial institutions have caused significant problems that are likely to have an impact on Britain. Perhaps other problems are to come. I am extremely proud that the Prime Minister and the Chancellor have shown such strong leadership on the world financial and political stage. They are showing the way forward, urging greater transparency among financial sectors, pushing for better supervision and regulation—particularly of wide-scale speculation—and ensuring that they create a framework and show the leadership that are necessary to avert significant global recession which could affect Britain in the long term.
We should consider current events in Britain in the wider context. Although we might prefer it if some things did not happen, many good things are happening. Britain is having many economic successes. As Labour Members have said, economic growth—currently at 2.5 per cent.
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annually—is still very robust. Moreover—much as Conservative Members would love there to be, so that they could rub their hands in glee and poke fun—there is no recession in manufacturing.
Labour Members will try our best to keep growth on a sustainable course in the long term. Interest rates have peaked, and homeowners and businesses will be helped in coming months as rates decrease. The pound is now lower against the deutschmark than it was when Labour was elected. A survey of corporate management by Energis, reported in yesterday's Financial Times, stated that 70 per cent. of corporations believe that profits will be higher over the next 12 months. It says that two thirds of companies are predicting higher sales. In fact, it shows that exporters are among the most optimistic firms, so it is not all doom and gloom as the Opposition love to suggest.
We know why Opposition parties call for debates such as this. They like to rub their hands in glee whenever there is a hint of any bad news so that they can take a dig at the Government and try to grasp some scrap of political advantage. Unfortunately, it rings rather hollow when they have absolutely no solutions or suggestions of any substance as to what they would put in the place of our policies.
Let us consider the Liberal Democrats for a moment, as Opposition day debates provide us with a great opportunity to scrutinise Opposition parties' policies. At the heart of their recent document entitled "Moving Ahead", which was published at their party conference, was a policy to increase the personal income tax allowance from £4,195, as it is now, to £10,000. The Library has calculated for me—I am happy to share the information with the House—that the cost to the Exchequer of that policy would be more than £30 billion.
Mr. Malcolm Bruce: It would be £29 billion.
Mr. Leslie: What is the odd £1 billion to the Liberal Democrats? Whatever the figure, it is still an awful lot of money. In fact, it is more than is spent on trade and industry, crime fighting and defence combined. The hon. Member for Gordon (Mr. Bruce) likes to combine statistics—let us see how he likes them apples. He should realise the implications of his policy—£30 billion is nearly half this country's income tax take. He talks about fiscal policy having an impact on the wider economy, but we want to know specifically how he would find a substitute for that £30 billion.
The Liberal Democrats' solution is to
"phase out ill-judged reliefs and allowances",
as it says in their policy document. Would they phase out tax relief for occupational pension schemes to raise £9.3 billion? Would they phase out tax relief on redundancy payments? That would raise only £1.1 billion. The hon. Member for Gordon has been talking about phasing out mortgage interest relief at source all together, which would raise £2.7 billion. Even if the Liberal Democrats phased out all of those, they would still have a heck of a long way to go to find that £29 billion or £30 billion.
The Liberal Democrats say that they want an extra 1 p on income tax, but that would raise less than £2 billion. They want a new 50 per cent. tax on salaries of more than £100,000, but that would raise only £2 billion. I shall give way to the hon. Member for Gordon if he can

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clarify how the black hole is to be filled. I see that he is not rising to his feet, so I give way to my hon. Friend the Member for Liverpool, Garston (Maria Eagle).
Maria Eagle: Did my hon. Friend, like me, obtain a copy of the Liberal Democrats' document from the internet? If so, did he notice the name under which it was filed, namely "FINECON"? Having read it, I thought it was a fine con. Does my hon. Friend agree that the document is packed with uncosted and unfunded spending commitments, and that it would be impossible for the Liberal Democrats to pay for any of them?
Mr. Leslie: My hon. Friend is entirely correct. It is a fine con that the Liberal Democrats are trying to pull. They would create a £30 billion or £29 billion gaping black hole, and I hope that they will specify how they are planning to fill it.
Mr. Edward Davey: I am more than happy to deal with the hon. Gentleman's point. We said at the conference that there should be energy taxes—I believe that that appears in the document. We also said that some reliefs should be phased out. How is the hon. Gentleman's party going to pay for the 10p rate that it has set as its long-term tax target? I ask the hon. Gentleman that as his party is in government.
Mr. Leslie: That is very revealing. We know that the carbon tax, or whatever the Liberal Democrats call it, means that petrol would have to triple in price. [HON. MEMBERS: "No."] Oh, so it is not quite as clear as we thought. I shall have to read Hansard to see exactly what was said.
Mr. John Swinney: As the hon. Gentleman is talking about the cost of fuel, is he aware that the fuel duty escalator that the Government have applied to above-inflation increases in the cost of fuel means that, by 2002, the cost of a gallon of petrol in Scotland will be nearly £5?
Mr. Leslie: That would be a matter for the Chancellor to review every year in his Budget. I do not know how the hon. Gentleman arrived at that figure, but he knows that it was the Conservative party that introduced the fuel tax escalator, and we are continuing it. That is entirely realistic.
Mr. Bercow rose—
Mr. Leslie: I must make some progress, as I wanted to make a concise contribution.
Let us consider what the Liberal Democrat party and the Conservative party are saying. One wants to slash public expenditure but fails to say where it would make the cuts. The other wants more spending on everything, not only on services but on reducing interest rates. As usual, they have no solutions and do not accept responsibility for the consequences of their pronouncements. They spit out proposals, but they must follow through and take responsibility for them.
The Government are pursuing the right course. Instead of falling off to the right or taking the Liberal way, they are pursuing a course of prudent and stable fiscal policy,
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aiming to increase productivity and long-term investment and making sure that the economy is put on a very firm footing. The Opposition parties present risks, but we know that the way forward is the Labour way forward.
5.16 pm
Mr. Andrew Tyrie: As we are discussing a Liberal Democrat motion, I shall pay some attention to Liberal Democrat policy.
We know the problem: it is that a recession is looming. We have higher interest rates than we would like and the exchange rate is higher than we would like—and it is the Government's policies that have brought much of that about. The Liberal Democrats are at least consistent—their response is to join economic and monetary union. That was their policy 18 months ago, as well as three years ago. In every situation, their response is to say that we must join EMU. They believe that it will solve whatever the short-term problem might be at any moment. I want to knock that idea on the head completely before I concentrate on other matters.
Britain's economic ills certainly cannot be solved by joining EMU now. Of course, joining EMU would deliver lower interest rates, but it would make the short-term problems even worse. The differential in interest rates between Britain and Germany did not happen by accident; it reflects the fact that the markets believe that there is a long-run inflation performance differential between this country and the average of the euro Eleven. In other words, if Britain joined EMU, something would have to be done to squeeze out that differential. Nominal wage rises would have to come down to European levels, as would private consumption. Forecasts of those two measures reveal a 1 or 2 per cent. differential, so the economy would have to be squeezed over a period of years to enable interest rates to stay at the lower level.
What exactly would the Government have to do to achieve that? They would have to do one of two things—there are only two things that they could do. One is to tighten fiscal policy, which would mean higher taxes all around on a pretty big scale. At one point, I thought that we were going to hear commitments to higher taxes from the Liberal Democrats, but they seemed to change their mind.
The other option is to enter EMU at a higher exchange rate than we have now, but that policy would be even more disastrous. However, it is what the Irish have decided to do. In the spring of this year, they revalued the Irish punt against the basket of euro currencies as a prelude to entering EMU.
Apart from the Liberals, I do not think that anybody seriously believes that joining EMU now offers a short-term solution to Britain's current economic problems. It would give the British economy a far worse headache. It seems to me that the Liberals will remain isolated on that issue. Without a policy on EMU, their entire economic strategy starts to look extremely shaky.
The hon. Member for Gordon (Mr. Bruce) hinted at a tightening of fiscal policy with a rise in tax rates. Unfortunately, however, when pressed on the issue, he was able to tell us merely that the commitment to a lop rate should be abandoned. That seems to be an abdication of both fiscal and monetary policy on the part of the Liberal party.
Mr. Edward Davey: The hon. Gentleman seems to think that Liberal Democrat policy is immediate entry into

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EMU. Of course that would be neither practical nor feasible. It would take at least two or three years. Does the hon. Gentleman think that the interest rate differential could be closed over that period—yes or no?
Mr. Tyrie: The hon. Gentleman has just changed Liberal party policy quite dramatically. We are now told that the Liberals would not consider joining EMU for two to three years. I have no doubt that, if they analyse the position a little more closely, they will conclude that EMU should wait four or five years. Conservative policy is that we shall return to the issue in seven or eight years' time. Labour policy seems to be pretty elastic. Just after the election, there were rumours that there would be a snap referendum and we would be in in a jiffy. Given relations between No.10 and No.11 on the issue, it now appears that entry will be many years hence, if ever. So there is movement towards a marriage of minds between the Liberals and Labour on the issue.
I should say a few words about Labour policy. This is the first debate in which we can reasonably say that the Government should be held responsible for the performance of the economy. Eighteen months have elapsed since the election—certainly enough time to see whether monetary and fiscal policy have been handled well. On the supply side, the Government may be benefiting from some of our reforms. In any case, the economy does not generally respond instantly to supply side changes and there tends to be a long lag before the damage to the supply side caused by increased regulation becomes apparent.
Labour has made something of a mess of monetary policy. In an effort to give the impression that the golden economic legacy which the Government were bequeathed—and which they tried to pretend did not exist—was not so golden after all, the Chancellor produced an emergency Budget in July 1997 in which he said that we were on the brink of an unsustainable boom. Rather than sort it out himself, however, he decided to hand responsibility to the Bank of England. In my view, he botched the job as he did not make the Bank of England fully independent, but created a halfway house. He gave most of the members of the Monetary Policy Committee three-year terms and, as a result, they have been over-anxious to bare their monetary teeth and prove their anti-inflationary credentials. So interest rates have been higher than they would have been.
Mr. James Plaskitt: On interest rates, does the hon. Gentleman not accept that the Bank of England, operating independently, has taken the inflationary pressures that we inherited from the previous Government out of the economy by taking rates to 7.5 per cent? Does that not compare favourably with the record of the previous Administration who, on three separate occasions when interest rates were under political control, took interest rates to 14 per cent.—twice the level that has now succeeded in dampening inflationary pressure?
Mr. Tyrie: I would like to be able to share the hon. Gentleman's optimism that interest rates have peaked. I note that Labour Members seem to take that absolutely for granted. We do not know that. Indeed, most Ministers appear to have no idea whether we are in an upswing or
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a downswing. When I asked the former Chief Secretary to the Treasury that very question, he was unable to tell me the answer. I expect that he has noticed by now that we are probably in a downswing. We cannot be sure. Nor can we be sure that interest rates have peaked. Of course they were set at the level required to get inflation down. We did bring down inflation to meet our target. At the election, inflation was below 2.5 per cent., as promised by the Conservative Government. I am trying to recall what interest rates peaked at to deal with Labour's inflation in the mid-1970s, but the figures elude me. No doubt someone will be able to tell me. [Interruption.] I understand that it was 15 per cent.
Now we have the result of the initial decision to give the Bank of England independence in a form that led it to tighten monetary policy. There has been a rapid slowdown in the economy, a rise in sterling, the collapse of manufacturing, as well as falls in exports and increases in unemployment. All that was under way before the far east crisis and the Russian crisis. Now, 18 months later, the Chancellor is begging the Governor of the Bank of England to take his foot off the brake. The Chancellor's acolytes are on to the press to persuade the Bank to cut interest rates sharply and there are calls for the resignation of the Governor from a number of Labour Members.
One minute the newly independent Bank of England was the most visible symbol of new Labour and the next minute it is a stumbling block to Downing street's preferred economic policy. First, we were told that monetary policy was too loose; then we were told that it was too tight. First, we were told that the Governor of the Bank of England should be left to sort it out; now we have been told that the Chancellor should be and is leaning over his shoulder. Nobody would consider that to be a good record on monetary policy. It may be short of a disaster, but it is certainly in a mess.
Let me now deal with fiscal policy. Initially, the Labour Government got it roughly right, but that is hardly surprising, because they were implementing Conservative spending plans, even down to the level of each departmental spending head. However, a few months ago, the Chancellor turned all that on its head and let spending rip. Now we have a massive and almost certainly unsustainable increase in spending.
The Chief Secretary talked about margins to his spending plans, suggesting that we do not need to worry about the growth forecast having been cut, but he seemed completely unaware that the Government's most recent Budget provided smaller reserves as a proportion of gross domestic product than any Budget that I can remember. I do not have the exact figures to hand, but I think they are less than half the average reserves in every Budget presented by the Conservative Government. That is very worrying and should be taken extremely seriously. I am pleased to see that someone has gone to check the figures with the Treasury officials. That is very prudent. The Government will no doubt wish that they had had higher reserves. The most recent Budget took a gamble on spending. In my view, that risk should not have been taken and we will find out soon enough whether the Government will need to backtrack on that.
There have also been massive hikes in taxation, albeit cleverly concealed from the taxpayers who will have to stump up the money. Tax increases have not been easy to spot, but they have been to the tune of at least £20 billion on business alone. Although I do not think that borrowing

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will rise much in the current financial year, in two years' time we will realise how fast it has been rising. Whatever figure the Chancellor announces in a few days' time, I predict that, although it may not happen in the first year, in future the borrowing outturn will be higher than the figure that he announces.
Let us put fiscal and monetary policy together. How does Labour want to see the combined picture? The Government want us to believe—I have heard this again today—that their policy will put an end to boom and bust. It is astonishing that they are prepared to continue that argument. There will be no more stop-go, they say, just nice, smooth economic performance. Sometimes I feel that their rhetoric consists of saying that there is no longer a business cycle. As I said a moment ago, the previous Chief Secretary was unable to tell me what he meant by boom and bust. They give us mere rhetoric and soundbite economics.
I should like to say a few words about the supply side of the economy. We have had some discussion about the regulatory burdens imposed on business. All those measures taken together amount to a furring up of the arteries of the whole economy. It will take a long time for the effects to come through and we are only at the early stages. I shall not catalogue them all, because some may find it tedious, particularly if others refer to the same points. However, agreeing to the social chapter was a huge blunder, as were the changes to employment protection and the introduction of the minimum wage. The supply side of the economy has been damaged since the election.
Should anyone doubt that, I invite Labour Members to ask groups of business men in their constituencies a few simple questions, such as whether they sincerely believe that the burden of taxation on business will be lower in two years' time, whether borrowing will be lower and whether there will be fewer burdens on business. I do not think that they will find any takers in the business community. They should try it—I have.
Ms Margaret Moran: I have spoken to many businesses in my constituency. Will the hon. Gentleman concede that the Government's introduction of the lowest ever rate of corporation tax is an excellent boon to business, as those in my constituency told me during the recess?
Mr. Tyrie: I am afraid that that intervention betrays ignorance about the total burden of business taxation. The total burden has risen substantially. That is how the Government have succeeded in surreptitiously obtaining far more revenue than they implied they would before the election. That is one reason why business performance in the medium term will be poorer than it would have been had the measures not been introduced.
The Labour Government were elected not to implement an alternative economic strategy, but because they had convinced the electorate that they were capable of running the policy that they inherited. The Chief Secretary's comments this afternoon about the importance of markets and how they must be made to work were in language that very few Labour spokesmen would have been prepared even to consider only a few years ago. That is one reason why Labour was elected.
In the past 18 months, the economic legacy that the Government were bequeathed—it is a remarkable legacy; compare Britain 20 years ago with Britain today—has
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been put at risk. Monetary policy has pointed in two directions, almost at once. Risks have been taken with the public finances, particularly on the spending side, and heavy burdens have been placed on business. We do not need to look into a crystal ball to know what will happen if those policies continue—we can read the book. We know what happens with such policies. They are being implemented less vigorously than in the 1970s, but the genre of policy is the same in many ways, despite the new Labour rhetoric concealing the fact.
When the electorate come to judge, they will realise how damaging many of the Government's policies are. They thought that they had elected a Labour Government who would broadly continue Conservative economic policies, but they will realise that that was a terrible mistake and that, to continue with the economic policies that brought prosperity to Britain, they should return a Conservative Government.
5.35 pm
Jacqui Smith: I am pleased to be able to contribute to the debate. Of all the constituencies in the Hereford and Worcester area, mine is the most reliant on manufacturing industry. The west midlands is the engineering centre of the country. I shall not take any lectures from the Conservative or Liberal Democrat Opposition on the need to maintain manufacturing jobs or on the record of the present Government.
Several hon. Members have mentioned our inheritance from the previous Government. When we talk about manufacturing jobs, perhaps it is worth thinking about that inheritance. If anyone is an expert on manufacturing job losses, Conservative Members should be. We shall not forget the early 1980s, when manufacturing output fell by 15 per cent. and investment fell by 17.5 per cent. Nor shall we forget the second Conservative recession, in the early 1990s, when manufacturing employment fell by 10 per cent. and investment fell by 16 per cent. We shall not take lectures on manufacturing jobs from the Conservative Opposition.
We shall also take no lectures from the Liberal Democrats, who have called today's debate. Their opportunistic approach to economic policy is truly breathtaking. Their response to the announcements of increased Government spending for public services in the past 18 months has invariably been to shout, "Higher, higher!" while refusing to explain how they would support their calls for higher spending. Indeed, they have voted against policies such as the windfall tax, which have been necessary to support the measures that the Government have been willing to take to improve the country's skills base.
Mr. Bercow: Given that the hon. Lady wants to continue with substantial increases in public expenditure, the economic downturn notwithstanding, will she take this opportunity to confirm her belief that taxation at the end of this Parliament will be higher than it was at the beginning?
Jacqui Smith: I will confirm that the Government have taken the necessary tough decisions on public spending in the first part of the Parliament, enabling us to put into operation the spending increases on education and health that were part of our manifesto. I shall come back to the Conservative approach to fiscal policy.

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We can add to the Liberal Democrats' previous inconsistencies the argument that fiscal policy should be tightened so significantly that short-term interest rates could be halved for early entry into the European single currency. Presumably, that means another increase in taxation. At least they are ambitious. Last year, they were calling for an extra 1p on income tax; they have now boosted that to at least an extra 20p on the basic rate and a rate of 50 per cent. for those on £25,000 or more.
Manufacturing in my constituency most certainly does not need the political opportunism that we have heard today. It needs a Government who are willing not only to take decisions for the long term in the macro-economy but to put renewed vigour into dealing with long-term structural improvements in productivity.
Ms Abbott: If it is important for the Government to take decisions on the macro-economy, why have we given away the ability to make decisions on monetary policy to the Bank of England?
Jacqui Smith: I was about to come to that point. The Government have the fundamentals of macro-economic policy right. As I suggested, the Government took the necessary action in the first part of this Parliament to cut borrowing—part of the previous Government's golden economic inheritance—and to find the extra £40 billion for education and hospitals that the country so badly needs. We have seen today further evidence of the disarray in the Conservative Opposition's approach to fiscal policy. The shadow Chancellor says that we should spend less on public services; shadow health and education spokespeople say that we should spend more; and the Leader of the Opposition claims not to have heard what they have said.
Mr. Tyrie: I really do not think that the nation believes that the Conservatives will find it impossible to control public spending. After all, Labour spent years telling us that we were at it too vigorously. As for where we shall find savings, one need look only at the fact that social security spending was growing at a lesser rate than the economy as a whole under the previous Government. It is now growing at a far greater rate. That is an area in which the Conservatives will be able to find some savings when we return to power.
Jacqui Smith: The hon. Gentleman describes precisely the problem that we inherited. The previous Conservative Government were not at it vigorously enough when it came to ensuring that social security spending went on providing opportunities for people as opposed to keeping them on the dole. Through the introduction of the new deal, this Government have ensured that that happens.
Mr. Ruffley: Does the hon. Lady believe that the Prime Minister said on 10 April 1997 that he wanted to cut the social security benefit bill? Did he say that—yes or no? If so, why are the Government not doing so?
Jacqui Smith: We have already done so. I reiterate that there is a significant difference between the expenditure on economic and social failure that we inherited from the
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previous Conservative Government and spending on the new deal, which is providing opportunities for people to work, using money to good effect as opposed to keeping people on the dole. The Government have turned such spending around.
If the Government had not granted the Bank of England independence in setting interest rates, we would still be facing a political-risk premium on long-term interest rates instead of their being at their lowest for 35 years. On that issue, we once again see contradictions in the Conservative Opposition's policy. As I understood his comments, the shadow Chief Secretary suggested earlier that the Conservatives would reverse the policy. We certainly need clarification from the Opposition on that.
High exchange rates have undoubtedly caused concerns for exporters but, as a Redditch manufacturer told me this month,
"I can't build my business on hoping the pound will fall. I've got to get out and sell and build the quality of my products".
That is, of course, the crucial lesson for the Government.
International competitiveness, business success and jobs cannot be built solidly on calls for constant devaluation. It can be built only on improved competitiveness and productivity. Furthermore, only by dealing with improving productivity can we get rid of the sort of bottlenecks that were responsible for the boom and bust and the instability from which the economy suffered under the previous Government. By getting rid of such bottlenecks and improving productivity, we remove the inflationary pressures that were so obvious under the previous Government.
I welcome the measures that the Government have already taken on corporate taxation, research and development, science, reform of the tax and benefits system and transport. Even so, we in the west midlands face a major challenge in skills shortages. I urge the Government to work even harder on improving training opportunities and skills levels. My local chamber of commerce reports that 59 per cent. of manufacturers have attempted to recruit in the past three months but that 75 per cent. of them have had difficulty, particularly in the recruitment of skilled manual and technical employees. There are several reasons for that. Employers, for example, report that young people are unaware of opportunities in engineering and manufacturing and still tend to view such jobs as dirty, badly paid and of low status. The main answer to that lies with employers. I am therefore pleased that representatives of the Redditch Manufacturers Association are already considering how they can communicate the positive benefits of manufacturing and engineering work to young people.
The Government also have a role in boosting positive contact between young people and employers. That is recognised in initiatives to break down the academic and vocational split in education and to ensure that young people take part in imaginative and on-going work experience projects, such as those that have been introduced in parts of Worcestershire by the Hereford and Worcester chamber of commerce, training and enterprise. It is also important to boost training for people who are already in employment. I welcome the opportunities provided by the introduction of individual learning accounts to boost skills levels, especially in areas such as information technology. We must push that forward to broaden the scope of such training if we are properly to deal with the skills shortages that we in the west midlands face.

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Some employers express concern to me about the mechanics of implementing the individual learning accounts, tracking the training provided and ensuring that work force development can be facilitated through training funds. Redditch manufacturers, for example, have plans for a training centre that is linked to setting skills, for which there is great demand locally. Through imaginative use of training and enterprise council funds and new training finance, we should be able to promote projects that respond to positive local initiatives in order to build productivity. I hope that the Government continue to make that area a priority. They have shown a commitment to building the skills base and the provision of opportunities through the new deal in order to tackle unemployment and skills shortages. That must be carried forward—despite warm words but a lack of political support from the Liberal Democrats and a lack of any support from the Conservative Opposition.
I look forward to the Chancellor's statement next week. The Government have taken important decisions on the fundamentals of the economy that will enable the country to steer through difficult economic times. We must also look forward to the Chancellor spelling out further measures for improving productivity, because only with such a dual approach, which I believe that the Government are adopting, will we offer real hope for manufacturers in my constituency and the economy as a whole.
5.48 pm
Mr. David Chidgey: Although I have no wish to talk down our economy—on the contrary, I have the greatest belief in the strength of this country and its work force—running at the heart of this debate, when we can pull the Government on to the subject, is a concern that many parts of our manufacturing industry are in the midst of a life-or-death struggle. That struggle for survival has not been helped over the past couple of decades by a Government who basically allowed manufacturing to lapse into neglect. In fact, that Government treated the industry with contempt and left much of it ill prepared and ill equipped to face the demands of the cut-throat global market.
Most Labour Members present today, whether or not they were Members of Parliament at the time, will remember that the previous Government made no secret of their contempt for industry. The 3 million jobs that were lost while they were in power were described as
"The jobs we do not want".
Well, the Conservatives might not have wanted those jobs, but it is a racing certainty that those who lost them did want them. We had a right to expect something better after almost 3.5 million voters turned their backs on the Conservatives and turned them out of office. For our industry, we had the right to expect better than a reliance on market forces to kill or cure its ills. We had a right to expect better than low productivity being blamed on lazy workers.
The House will recall that the Secretary of State for Trade and Industry is a man of many talents, but on the Sunday before last he revealed what one might describe as an almost endearing talent for honesty. On "Breakfast with Frost", he said that Britain's refusal to join the single European currency was starting to damage our trade prospects. That is honesty. He went on to say that,
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by failing to join the single currency, we could not be at the heart of Europe. That is more honesty. That being so, the Secretary of State added, the USA might now think twice about investment in Britain, because it was not just Britain that the Americans were worried about, but access to Europe. That is a key point.
Hon. Members might like to reflect that, for more than 15 years, the USA has been the largest inward investor in Britain, accounting for more than 40 per cent. of total inward investment from 1984 to 1994, and nearly 60 per cent. in 1995. The Secretary of State might have added that failing to make, at the very least, a statement of commitment on the single currency, failing to stabilise the economy, failing to bring down interest rates and failing to bring down sterling quickly enough is crippling what remains of Britain's manufacturing industry.
Mr. Bercow: Will the hon. Gentleman give way?
Mr. Chidgey: Ah, it is the hon. Member for Buckingham (Mr. Bercow), whose new nickname politeness forbids me to use.
Mr. Bercow: The hon. Gentleman's politeness is unequalled in the House, as we all know. Given his enthusiasm for joining the European single currency as soon as is feasible and, therefore, his acceptance of the running of interest rate policy by the European central bank, would he support in principle the idea that the European central bank should also run our direct taxation policy—yes or no?
Mr. Chidgey: I appreciate the hon. Gentleman's kind words, although whether my politeness is known in every corner of the House is a matter for debate. However, as he well knows, the two issues he raises are quite separate and unrelated.
Mr. Bercow: Answer.
Mr. Chidgey: No, because they are not related.
Mr. Bercow: Answer.
Mr. Chidgey: The hon. Gentleman is clearly a little hard of hearing today. The answer is: no.
To return to the subject of the performance of the Secretary of State for Trade and Industry over the past week or so, I should like to point out that, on Wednesday's "Today" programme, his response to the crisis facing the 16,000 workers at Longbridge and the 45,000 other workers linked to that business was that
"Rover should sharpen up its act".
Between Sunday and Wednesday, the message changed from a failure of Government policy to a failure on the part of lazy workers and poor managers. We know that the Secretary of State is famous for his ability to spin, but to spin a complete U-turn in only three days must be a record even for him.
The Government have been quick to point out that, although Rover is in severe difficulty, other car manufacturers are committing large investments to their UK operations. I welcome that, but it is not surprising, given that Britain attracts far more inward investment than any other country in the world, with the exceptions of the

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USA and China. Records show that, over the past decade, the UK has attracted about 40 per cent. of all inward investment into the European Union, far outstripping any other country. However, the key question is: why? A recent Government survey shows that almost three quarters of the investors in this country's industry—our inward investors—invested because they needed a British or European base. Only 10 per cent. were attracted by labour skills and only 6 per cent. by labour costs. It is clear that most investment could readily divert to other European Union countries and my concern is that such will be the trend if the economy becomes unstable and if interest rates and the value of sterling do not fall to sustainable levels.
In spite of improvements in productivity, Britain still lags far behind our competitors in modern management, capital investment and, most critically, in skills. That is not new—the evidence has been clear for decades. The Government can shrug off any responsibility for the past, but the figures from the House of Commons Library tell a depressing and continuing story for which the Government must take some responsibility. Between the 1970s and the mid-1990s, manufacturing as a share of gross domestic product has fallen from more than 30 per cent. to slightly more than 20 per cent. That is a fairly common message across the industrialised world. Employment in manufacturing has fallen from 7 million to 4 million.
However, it is interesting to note that, in the same period, productivity in this country has almost doubled. That is a relatively good performance compared with that of many of our competitors, but it is not good enough. In 1995, United Kingdom labour productivity still lagged 14 per cent. behind France, 18 per cent. behind Germany and 30 per cent. behind the United States. It is hardly surprising to learn that Britain, having been the first nation to industrialise, is now de-industrialising faster and deeper than any other country.
The rot is set to continue. As my hon. Friend the Member for Gordon (Mr. Bruce) said, industry suffers a net loss of 300 jobs every day. The House of Commons Library, using the Treasury model, forecasts that, in the next two years, a further 420,000 jobs will be lost. Those jobs will be lost for ever: the records show that jobs shed when industry is in recession do not return when the economy improves. The losers end up in dead-end jobs, with lower wages and even lower prospects. Under-investment in improving productivity, skills and competitiveness has the inevitable outcome of dumbing down the economy.
Maria Eagle: Will the hon. Gentleman give way?
Mr. Chidgey: Ah, I see that the Millbank mafia are still twitching over their pagers. If the hon. Lady has something to contribute, I should welcome it, but I greatly doubt that she has.
Maria Eagle: If the hon. Gentleman gives way, he will hear my contribution. I agree with much of his lengthy analysis, especially his comments about skills shortages
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and productivity, but will he fill in the details of the motion being debated? It makes passing reference to taking
"further actions to tackle skills shortages".
Can the hon. Gentleman tell us what he would do and how he would pay for it?
Mr. Chidgey: I am delighted to learn that I have managed to hold the hon. Lady's rapt attention for so much of my speech—she is obviously itching to hear my conclusions. If she has just a little more patience and there are fewer interruptions, I promise that all will be revealed towards the end of my speech.
We are all too familiar with Conservative policies: strip out regulation of business and commerce, leave everything to market forces and let the fittest survive. The Conservatives appear to think that any form of employment protection adds an unbearable burden to business, but it might surprise them to learn that France and Germany—the most regulated countries in Europe—outstrip Britain in productivity by 14 per cent. and 18 per cent. respectively.
There is no doubt that, at its best, British industry is a world-class performer. Our aerospace and pharmaceutical industries are world leaders, as is our film industry. Hon. Members might be surprised to learn that the local shipbuilders in my constituency of Eastleigh are still winning contracts worldwide. An award-winning local firm involved in the optics industry has slashed the cost of contact lenses through advanced technology and, in just five years, has grown from having 60 to having 600 employees—that is a success record of which we are proud.
However, we cannot rely on market forces and the survival of the fittest. Government policies have to ensure the success of the able. The new driving force in our economy, as many of us recognise, is made up of small and medium enterprises. They are the dynamic job creators that need an environment in which they can flourish—they need less bureaucracy, easier access to affordable capital and, most of all, a steady flow of well-trained, highly skilled workers.
Helen Jones: Will the hon. Gentleman give way?
Mr. Chidgey: I shall make progress. The hon. Lady can have nothing to contribute to what I have heard before.
While industry and commerce wait in vain for clear, efficient policies from their Government to attract and maintain inward investment, three Ministers have their fingers in the pie. The Deputy Prime Minister, who is responsible for regional development agencies, is tasked with promoting business in the English regions and providing better support for SMEs. The Secretary of State for Education and Employment is responsible for training and enterprise councils, which have a long way to go before they will have any impact on bridging the skills gap. The Secretary of State for Trade and Industry is anxious to shift the emphasis away from regional agencies with a new regional industrial policy aimed at getting industry clusters to collaborate across the country. Three Ministers, with an annual spend of around £5 billion, are each pursuing their own agenda.
If we are to maintain the high levels of inward investment that we currently attract, Government Departments must develop a more co-ordinated approach

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to strategic business support. The White Paper on competitiveness, which we await with bated breath, and the Committee stage of the Regional Development Agencies Bill give the Government opportunities to strip away the bureaucracy in the system. They could provide opportunities to end the scramble for inward investment and start to target resources on the areas of greatest potential for the long-term benefit of our economy. Simply targeting new jobs at areas with the longest dole queues does little for the country's long-term economic stability.
Inward investment must be a lever for developing skills, retraining and upskilling. Poor productivity results more from low skills than from lazy workers. Germany's high productivity owes far more to skills than to sweated assets. It is interesting that, throughout the 1980s and 1990s, the proportion of skilled and qualified technicians in the German work force has consistently been three times that in Britain.
This may be the last chance for any Government to bridge the skills gap in our industry and create a well-trained, flexible, highly skilled work force, which is attractive not only to overseas companies looking to invest but to successful British firms eager to expand. It is a chance that the Government must not be allowed to miss.
6.2 pm
Ms Diane Abbott: I am grateful to have the chance to take part in this important debate on the economy.
There has been a great deal of party political point scoring, but beyond these Benches is a real economy. My hon. Friends are right to say that, overall, the economy is not in recession, but there are sectors that are anxious about the future. People in the north-east, who saw the traditional smokestack industries, in which they were brought up to believe they would find work, collapse under them, did the right thing and retrained and reskilled. They went into high-tech industries, such as the new car industry in the north-east which was created by inward investment. That is now collapsing under them.
People in north Hackney, which has one of the highest unemployment rates in the south-east, are locked into structural unemployment. After 18 long years, they look to a Labour Government to implement the economic policies that will create a return to full employment. Only full employment will float my constituents back on to the job market.
The problem for Conservative Members in attacking the Government's economic policy is that so much of it is their own policy. In its survey of the British economy earlier this year, the Organisation for Economic Co-operation and Development remarked that the Government are largely following the market-orientated policies of the previous Government. That is why the Tories are twisting themselves into knots, making spurious claims and descending into their internal obsession with Europe.
I want to make a few brief points not about what is going wrong, but about issues that need to be considered if my constituents, who have waited for so long for a Labour Government to put them back to work, are to have their hopes for themselves and their children fulfilled.
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I was surprised, last week, to hear my colleagues abusing the redoubtable Governor of the Bank of England, Eddie George, who is well able to look after himself. Eddie George's views on inflation were well known; his background and history were well known; the likelihood that, given control of monetary policy, he would subordinate to the City the interests of manufacturing in the north was well known; and the history of the Bank of England in relation to interest rate policy up to 1945 was well known. My hon. Friends are raising their hands in horror because Eddie George has expressed opinions that he was well known to hold when he was given control of monetary policy. Their criticisms might better be directed at those who gave him those powers.
My colleagues hailed the handing over of monetary policy to the Governor and the Monetary Policy Committee as the greatest political act since Moses parted the Red sea. They will know that I have consistently criticised that policy. One did not have to look into a crystal ball to know what would happen if one gave the Bank of England untrammelled control of monetary policy; one simply had to read the book. It was always the case that handing over monetary policy would have the deflationary effects that we are now witnessing.
To be fair, Liberal Democrat Members have been consistent on this matter, and have consistently pushed the policy today. However, it surprises me that my colleagues are criticising Eddie George for expressing views that it was well known he held when he was given those powers.
Sir Michael Spicer: The hon. Lady is making an interesting speech and I do not want to interrupt her, but she has not dealt with the fact that the Bank of England is constrained not so much by the personality of the Governor or by the MPC, as by the laws that the Government have laid down for 2.5 per cent. inflation. That is what the hon. Lady should be attacking.
Ms Abbott: I shall come to that.
Far from being a great forward leap, the Government's early step to return monetary policy to the Bank of England was a reversion to the system that obtained until 1945. It has not been much remarked on in the House or the media, but part of the Government's problems with monetary policy is the way in which they implemented the handing over of the policy to the Bank. That was done not by an announcement on the Floor of the House, but by administrative diktat at a press conference outside the House.
As a member of the Labour party's national executive committee, I can tell the House that giving monetary policy to the Bank of England has never been party policy and was never specifically debated by the party at the NEC or any other level. I put it to colleagues on the Treasury Bench that, if the policy had been properly discussed inside the party and in the House before implementation, we might have arrived at a better framework for the Bank.
I am opposed in principle to giving the Monetary Policy Committee power over monetary policy, but if the Government had allowed a debate in the House before implementing the change, better legislation might have resulted. The Governor is constrained, which is why I am surprised that he is criticised by my colleagues. He is dealing with the narrow target of inflation rates, and he does not have to take into account jobs and growth.

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One of the problems that arises from the lack of debate, in the party and in the House, on the change in monetary policy is that many people do not seem to understand it. I was against handing monetary policy to the Governor of the Bank of England because the decision is not reversible. It is absurd for colleagues to say, "Let's drop hints and put pressure on the Governor." The decision is not reversible, and it is quite wrong for the Government to attempt to put covert pressure on the Governor by way of Charlie Whelan's briefings to journalists. If I were the Governor of the Bank of England, I would be a little irritated by that. Either we have given the Bank genuine independence or we have not. According to colleagues on the Treasury Bench, Eddie George said that did not feel under pressure. However, that is not the same as saying that he was not subject to pressure—indirect and direct, implicit and explicit.
In due course, it might be possible for the House to reframe the legislation and the terms under which the Bank operates. However, a policy of spinning and leaking and covert pressure will make that much more difficult. It will also increase the price that we shall have to pay on the markets for refraining the policy.
My colleagues on the Treasury Bench have two or three soundbites about monetary policy that they repeat constantly as a substitute for expressing a view. The first is, "No return to boom and bust" and the second is, "We have taken the politics out of interest rates". Whether the Government like it or not, interest rates are a political matter in this country at this time. We cannot tell the public that the price that they must pay for their mortgages—people are likely to lose jobs because of climbing interest rates and an overvalued pound—is not political. Colleagues must not think that, by handing monetary policy to the Governor in the ill-advised manner that I have described, they will escape the political responsibility if monetary policy is seen to be going badly wrong.
I do not want to dwell on this topic, but many of my hon. Friends refer constantly to Germany. The circumstances are very different in Germany: the German people have fixed-rate mortgages and companies have long-term investments. The German political class has long been inured to the consequences of high interest rates in a way that politics in this country is not.
My colleagues on the Treasury Bench also frequently repeat the soundbite, "There is no trade-off between interest rates and employment." There is no absolute trade-off, but it is a fact that, in certain sectors of the economy—particularly manufacturing and sectors that export—and at certain points in the cycle, there is obviously a trade-off between rates of interest and job growth and prospects. If, as Ministers insist, there is no trade-off whatsoever, why do people set interest rates? Why do we not just program a computer to set them? I repeat: if, in nine months or a year, monetary policy is seen to have gone badly wrong, Ministers will not be able to escape their responsibility.
However, it is a done deal: we handed control of monetary policy to Eddie and his committee, and the consequences were totally predictable. However, the Government could have taken further action. They could have examined other aspects of macro-economic policy in
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order to offset the very obvious and predictable deflationary consequences of giving monetary policy to Threadneedle street. One of those aspects is fiscal policy.
When Liberal Democrat Members spoke earlier this evening, some of my colleagues said, sotto voce, "What are they saying? Are they saying that we should put up taxes?" Taxation, in itself, is morally neutral. We seem to have reached a position in the Labour party where taxation is viewed as an absolute evil. Taxation is simply another instrument of macro-economic management. The issue for the Government is not whether taxation is good or bad but whether taxation—
Jacqui Smith: Will my hon. Friend give way?
Ms Abbott: I am sorry, but I must make progress as the Economic Secretary wishes to respond in a few minutes.
The issue for the Government is not whether taxation is good or evil, but what is in the interests of the British people. There are times when taxation and fiscal policy are important. The Government could have used taxation policy to help bear down on inflation. Taxation is a key instrument for redistributing wealth. We do not hear that from Ministers any more, but I come from one of the poorest constituencies in the country and I assure them that redistribution of wealth is still dear to my heart. Taxation is also a very important instrument when it comes to raising revenue.
Hon. Members have talked about taking the big decisions about macro-economic policy. However, within weeks of attaining office, Labour handed over monetary policy to the Bank of England without bothering to debate the decision on the Floor of the House. The Government have adopted an attitude to fiscal policy that is not pragmatic or economic, but political and entirely doctrinaire. Taxation is an ill—the Mondeo owner in middle England will not wear it—so, regardless of the consequences for the economy or the problems inherent in trying to bear down on inflation using monetary policy alone, the Government will not consider using fiscal policy as an instrument. If there are three major instruments of macro-economic policy—monetary policy, fiscal policy and public expenditure—the Government have already ruled out two of them.
I turn, therefore, to the third major lever of macro-economic policy: public expenditure. What can we say about this Government and public expenditure? The Government boast that, overall, they will have tighter control on public expenditure than the Tories had. I served in the last Parliament and I remember how the right hon. and learned Member for Rushcliffe (Mr. Clarke) did not even believe in these public expenditure limits when he brought them before the House. Now I must sit behind Ministers who boast that they will have tighter public expenditure controls overall than the Tories.
The rise in expenditure to which Ministers refer—luckily, the Tories are also talking it up—is contingent on growth. I am sorry to say that many forecasts suggest that certainly the growth prospects to which the Chancellor referred at the beginning of the summer are now remote and that we may have less than 0.4 per cent. growth. Expenditure is contingent on growth but, apart from that, the Government have tighter controls than the Tories.
How do the Government respond when not just Labour voters, but electors around the country ask: from where will the investment in public services come? Ministers

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talk about the public finance initiative. I do not wish to examine that mechanism in detail, but I put it to the House that, although PFI sounds like some sort of magic wand, in truth, it is a glorified form of hire purchase. We shall face all sorts of problems regarding the long-term effects of PFI on public expenditure. PFI is fine when used to build a toll bridge, but it is a very dangerous and dubious instrument to use in the health service. If colleagues believe that PFI will get them out of their public expenditure fix, they are very much mistaken. I refer them to the many excellent reports produced on this subject by the Treasury Select Committee in the last Parliament.
There are many theories about why people voted in such huge numbers against the previous Conservative Government in May last year. However, few would deny that the public wanted to see more investment in the public sector; they wanted to see public sector standards rise. There is no question but that the Government have introduced a series of initiatives, held launches and conferences and conducted other consciousness-raising exercises concerning the public sector. I say to Treasury Ministers—I will have cause to return to this theme—that, if they want to raise standards in the health service, they will have to pay the nurses. The single most important thing for a person who is admitted to hospital is the quality of care that he or she is offered by nurses.
I read the Government's submission to the pay review body regarding the nurses, and every other sentence read, "We want an affordable settlement." In this context, I take it that an "affordable settlement" is a settlement on the low side—after all, the Government can afford what they wish to afford. The situation is the same with teachers and education. In those areas of the public sector, everything turns on the people who deliver the service. Ministers are deluding themselves if they believe that standards can be raised if there is no willingness to raise the basic rate of pay for some of these people.
It is no good talking about super-nurses. Ordinary people will be nursed by ordinary nurses, and those nurses should have decent pay. Which one of us in the House would want to teach in schools in the inner city, given the pressure that those teachers are under, their difficulties in finding accommodation, and the social problems that they must deal with among the children in their schools, and who can expect them to work for the salaries that they are offered?
There are three major levers of macro-economic policy: monetary policy we have handed to the Bank; fiscal policy we forswear; and our proud boast on public expenditure is that we are bearing down on it more heavily than the Tories did.
In the early months of this Administration, the Government have said a lot of things that the nation has waited a long time to hear. A tremendous responsibility rests on the Government's shoulders to fulfil the aspirations and life chances of people like my constituents in Hackney, but I put it to the Government that, within the broad framework of Tory macro-economic policy, it will not prove possible to fulfil the aspirations that we were elected in May 1997 to fulfil.
People may mock tonight, but I believe that, as this Administration wear on, and as we see the full nature of the slowdown that we are presented with, we shall return, as a party, to this subject. It is all very well to give people soundbites and to refer to the pledge card, but we know
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in our hearts what people expect of the Labour Government, not this week, next week or next year, but in the long term—and how can we fulfil those genuine hopes and aspirations within what is, as I speak, broadly a Tory macro-economic framework?
6.20 pm
Mr. John Swinney: Mr. Deputy Speaker, thank you for the opportunity to speak in the debate.
Several Labour contributions to the debate showed complacency. However, the hon. Member for Hackney, North and Stoke Newington (Ms Abbott) spoke about real, live economic conditions, such as those that are familiar to me from my constituency. I should have thought that, as this is the second week since Parliament reconvened after the recess, we might all be more aware of the realities of life in our constituencies, but the several Labour contributions that I have heard do not strike a chord with me when 1 consider the conditions that I found, and the experiences that I learned about, in my constituency during the summer.
I listened with care to what the hon. Member for Redditch (Jacqui Smith) said about productivity. She said that the value of sterling was a side issue to the issue of productivity and the challenge that it sets our economy. During the summer, in my constituency, I visited many highly productive and very effective companies which, although they demonstrated to me that they had made 30 to 35 per cent. productivity gains in their activities, were crippled in their export activities by the value of sterling. However much productivity improves, if the pound is valued above an acceptable trading level, it will create trading difficulties for companies in our constituencies.
This debate takes place at an appropriate time in the economic cycle, in the light of some of the information that has been traded across the Floor of the House about the difficulties that are faced. In addition, we are all aware of the succession of job loss announcements that were made during the summer, throughout the country. The Chancellor's announcement of a change in his growth target makes this debate very appropriate. Obviously, we await with anticipation the publication of the pre-Budget report next Tuesday, but I sympathise with the concern that was expressed in the House today at the Chancellor's absence from a major debate after the end of the summer recess.
The debate also takes place against the background of the European Commission's conclusion that the United Kingdom will have the slowest growth in the European Union area in 1999, and against the background of other survey information. I quote two surveys whose findings reached me in the past few days. The Bank of Scotland survey of Scottish businesses shows that, in August and September, output and employment fell in the manufacturing and service sectors in Scotland. It shows that the manufacturing decline in Scotland is in accord with the United Kingdom pattern, but that service sector activity has suffered a sharper slowdown in Scotland than in other parts of the United Kingdom. A Business Strategies survey of consumer confidence in Scotland has shown an index fall from 29 to 26 in the space of one quarter—the largest quarterly fall since 1992. In that consumer survey, confidence about employment was at its lowest for four years.

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Since the general election in May 1997, nearly 9,000 jobs have been lost in companies in Scotland. During the summer, several high-profile announcements were made. Yesterday, there was a major demonstration—at which many hon. Members were present—in the borders town of Galashiels, in connection with the severe job losses that have affected several sectors there, such as textiles, agriculture and electronics.
The agricultural sector predominates in my rural constituency. One learns—from visits to markets, individual farmers or estates, from lobbying organisations and from council events held to represent the interests of the agricultural sector—that every aspect of the industry records difficult economic conditions. In the House, against the background of those difficult economic conditions, whether in the manufacturing sector, the service sector or the agricultural sector, we must guard against the complacency that was more than amply shown by what the Government said tonight.
That brings me to the influences on Government policy. It is no wonder if the ears of the Governor of the Bank of England are warm this afternoon, given the way that he was referred to in the House. Let me continue those references. The Governor has said that, to cope with over-heating in the south of England economy, it is necessary for a price to be paid in other parts of the United Kingdom. He told us—from Washington—that the Monetary Policy Committee had engineered a slowdown in the UK economy to dampen down inflation. Interest rates have been used as the device for controlling the unsustainable growth in the economy.
If we are to be grateful to the Governor of the Bank of England for one thing—or if I am to be grateful to him for one thing—it is for the fact that he has confirmed a suspicion that I and my party colleagues have long peddled in the House: that economic policies were pursued to address economic conditions in the south of England, and that, as a consequence, other parts of the United Kingdom where those economic conditions did not exist would pay a price that did not need to be paid.
In many respects—this is where I very much agree with the hon. Member for Hackney, North and Stoke Newington—the Government have absented themselves from setting an effective fiscal policy that could counterbalance the pursuit of that monetary policy by the Bank of England. The indications of what the Government are prepared to do, and what they were prepared to do when they came to office, to address any aspects of economic management have been compromised by the Government's unwillingness to address fiscal issues, and by their willingness to hand power to an independent Bank of England.
There is a contradiction in the arguments that have been advanced on that subject. We are constantly told that we cannot have monetary policy that is directed toward the economic conditions of different parts of the United Kingdom. I contend that there is no overheating in the Scottish economy, so we do not need interest rates to be at the present level. However, by dint of the Governor's admission that interest rates are used to address overheating in the south of England economy, we now know that one part of the United Kingdom is predominating in decisions on economic policy.
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During the passage of the Bank of England Act 1997, an attempt was made, in this House and in the House of Lords, to secure broader representation on the Monetary Policy Committee to guarantee that opinions from different component parts of the United Kingdom could be brought to bear on the discussions of that committee. Those representations met Government refusal, but I noticed that, in the weekend press, a growing number of commentators on the Scottish economy were recognising that the case was continually becoming stronger for broader representation on the Monetary Policy Committee, to enable that committee to come up with a more representative set of actions in relation to economic conditions in various parts of the country. The difficulty will be the framework within which the Monetary Policy Committee operates.
Mr. Bercow: I am following the hon. Gentleman's argument with close interest. He objects to the fact that the Bank of England takes interest rate decisions without regard to the interests of particular parts of the United Kingdom. Given that that is his criticism, why are he and his party in favour of permanently giving power to set interest rates for the whole of Europe, and not for the interests of Scotland, to the European central bank?
Mr. Swinney: The answer is simple: so that we do not make the same mistake in the constitution of that project that has been made in the constitution of the Bank of England project. That will guarantee that interest rates set by a European central bank are based on a broader assessment of economic conditions than is the case in the United Kingdom.
It is essential that we establish a balance between monetary and fiscal policy, to create the trading conditions that are appropriate in different parts of the United Kingdom. From what the Government have done so far, and from what we have heard from the Government Benches this evening, there is no recognition of the existing economic conditions in our community.
At a time when we are clearly moving towards greater economic difficulties, the Government are reducing the resources available for economic development in the Scottish economy. Real cuts in the Scottish Enterprise budget over the next financial year will compound the cuts that were made in two successive years under the Conservatives. That instrument could assist in counterbalancing the dominating effect in UK monetary policy of the overheating of the economy in the south-east of England. By giving appropriate economic development assistance to parts of the United Kingdom that face challenges in their economic development, we could address some of those economic imbalances, but the Government have not been prepared to do that.
As the debate winds to a conclusion, I hope that we shall hear from the Government clear and definitive answers to some of the questions that have been left hanging. The Chancellor appeared on television a few weeks ago to tell us that, despite revising his growth targets, borrowing, taxes and spending would remain unchanged. One does not need to be a member of the Monetary Policy Committee of the Bank of England to work out that something has to give in all that. Like many other hon. Members, I was surprised to hear of the elastic margins of the financial settlement produced in the comprehensive spending review, in the previous Budget and in other documents.

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The Government must give us an answer on what is going to give in the relationship between borrowing, taxes and spending. We need a balanced economic policy which reflects monetary and fiscal considerations. Most important of all, UK monetary policy should be designed to allow us to counter the present difficult global trading conditions, not to walk straight into them.
6.32 pm
Mr. Edward Davey: I begin by adding my welcome to the new Ministers on the Treasury Bench. We look forward to future debates with them. I hope that the former Education Minister turned guardian of the nation's purse will be as keen as we are that the spending review's settlement for schools is not just delivered in full, but is exceeded in the next three years.
I pay tribute to the former Member of Parliament for Wolverhampton, South-West, Mr. Nick Budgen, whose death was announced today. I know that he brought incisive intelligence and a dogged determination to debates on the economy. We on the Liberal Democrat Benches rarely agreed with him, but he certainly made a contribution.
Tonight's debate has been a long time coming. Over the summer recess it sometimes seemed that every day brought another shock to our nation's economy—job losses at home, storm clouds abroad and forecasts of worse to come. Now we have heard from the Chief Secretary and Labour Members that the picture is far rosier than has been made out.
During the debate, there has been the usual ping-pong of statistics across the Floor, quote and counter-quote, but no one has sought to argue with the fundamental point that the United Kingdom is fast decelerating. No one has challenged our basic premise that manufacturing and agriculture are in great difficulties. Indeed, the Chief Secretary acknowledged that. I cannot recall any hon. Member arguing this evening that the economic prospects, especially for industry, are anything less than serious, with a distinct possibility of a significant loss of manufacturing jobs over the next few months.
There has undoubtedly been disagreement over the causes of the downturn. As my hon. Friend the Member for Gordon (Mr. Bruce) predicted, the Minister tried to play the blame game. He said that it was not the Government's fault and he tried to blame the previous Government. He said that it was the fault of the right hon. and learned Member for Rushcliffe (Mr. Clarke). He blamed the crisis in the far east, and unproductive and inefficient businesses. However, as my hon. Friend the Member for Gordon pointed out, the facts do not bear out that story.
The mistakes made by the Chancellor, particularly those in his first Budget, are now all too apparent, with the economy unbalanced by a growing services sector and shrinking manufactures, caused by the misguided mix of monetary and fiscal policies in the Government's first 18 months.
The Chief Secretary's speech was full of good stuff. We could all agree with much of what he said, but he did not deal with the fundamental point. It is a pity that the Chancellor has not participated in the debate, to take this early opportunity provided for him by the Liberal Democrats to answer the rising criticism in the country.
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In the Chancellor's absence, what has the Minister said in his defence? How do the Government try to argue that the current situation is nothing to do with them, and that all their policies have, despite evidence to the contrary, been successful? Unfortunately, they have used little more than the usual stale and unconvincing mantras, which we have heard in every debate since the election and in every "Today" programme interview.
Mr. Geraint Davies: Will the hon. Gentleman give way?
Mr. Davey: I want to make progress. I shall take interventions later.
The Chief Secretary said that the Government's policies were designed to end the cycle of boom and bust. In the parrot-like fashion to which we have become accustomed, he said that stability and prudence were the thing, for the long term. Those are good objectives. We all agree with them. Like motherhood and apple pie, even John Humphrys could not disagree with the sentiment. However, the continual incantation of such choruses does not put the words into action. That is the key part of our charge tonight.
The Government's oft-recited rhetoric of long-termism is not sufficiently followed in their practice of economic management. That is why the pound has been so unstable, real interest rates are so high and the economy is so unbalanced. Those are the results of bad economic judgments made in Downing street.
Unlike many hon. Members who have spoken tonight, we do not blame the Bank of England for the high interest rates. The Chancellor gave the Monetary Policy Committee little choice but to raise interest rates when he refused to use taxation to curb the consumer boom in his first Budget. As my right hon. Friend the Member for Yeovil (Mr. Ashdown) said in reply to the Chancellor back in July last year, instead of shackling businesses, the Chancellor should restrain the consumer in order to prevent high interest rates.
Of course Liberal Democrats support the independence of the Bank of England. That policy, borrowed from our manifesto, is essential. [Interruption.] Labour Members laugh, but the hon. Member for Hackney, North and Stoke Newington (Ms Abbott) said so herself. That policy is essential to tackle the boom and bust that has been endemic in the British post-war economy. The problem is that the Chancellor has failed to understand his newly acquired policy. In his recent comments urging the case for reduced interest rates—
Mr. Plaskitt rose—
Mr. Davey: No, I must press on.
However correct thatcase is, the Chancellor has done much to undermine the policy of independence for the Bank. As our motion states, it is important that the Chancellor resist such pressures and temptations.
The pressure that the Chancellor put on the MPC from the International Monetary Fund to cut rates was not the first time that he has meddled. In autumn 1997, Treasury sources were reported as saying that the Bank was not

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putting rates up fast enough—"Stick 'em up, Eddie, one season; drop 'em, Eddie, the next." That is not the stuff of long-termism.
Mr. Barry Gardiner: Will the hon. Gentleman give way?
Mr. Davey: No. That is not the stuff of long-termism. It does not contribute to ending boom and bust. Why cannot the Chancellor practise what he preaches? This is not an academic point. Whatever the governor told the Treasury Select Committee last week, if the markets begin to perceive that the Bank does not have the independence that the Chancellor promised, its credibility will be hit.
Mr. Gardiner: Will the hon. Gentleman give way?
Mr. Davey: The low long-term rates that the Government rightly crow about could start to rise. The Government's meddling with the Bank's independence could have even worse effects. The Bank may feel the need to reassert itself to prove its independence. Short-term rates will fall more slowly than they would otherwise have done. There will be higher short-term rates and long-term rates merely because of the ill-discipline of the Chancellor and his Charlie on the mobile.
It is not only with the Bank's independence that the Government are failing to practise long-termism. Their lack of policy on exchange rates shows their complete failure to set a clear and stable lead. In less than three months—
Mr. Plaskitt: Will the hon. Gentleman give way?
Mr. Davey: I will not give way because I need to make some progress.
In less than three months, 11 of our partners in the European Union will grasp a new opportunity for prosperity—the euro. Our Government still have not made up their mind. Apparently the single currency is a good thing in principle—no doubt like central bank independence and manufacturing industry. However, in practice, the Government dither, dodge and duck.
We on the Liberal Democrat Benches are absolutely clear where the United Kingdom's long-term interest lies. That is where currency stability for hard-pressed manufacturers and farmers can be found and not in the let's-not-take-a-decision economics of the Labour party. Look at the gyrations of the pound over the past year. It is
Mr. Plaskitt: Will the hon. Gentleman give way?
Mr. Deputy Speaker (Mr. Michael J. Martin): Order. The hon. Member for Kingston and Surbiton (Mr. Davey) has made it clear that he will not give way.
Mr. Davey: Labour Members should consider the gyrations of the pound over the past year. It soared to DM3.10 to the pound before falling to a still rather high DM2.80. That is how unstable the Government's current
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policy is. The Chancellor's bungie jumping policy on sterling is a return to the Tories' boom-bust economics, not an end of them.
That brings me to the third part of the Government's macro-economic policy, which we are told has been set for the long term, for stability, but which Ministers look ready to fudge if the going gets tough. That is fiscal policy. It is our old friend prudence.
The problem is that prudence has been put in a straitjacket. Unwilling to admit that their election promise not to raise rates of direct taxation was irresponsible, the Government have tied their hands behind their backs. That is why the economy is now so unbalanced. It is the result of the Government's disavowal of a proactive role for fiscal policy. That is something that the occupants of the Government Front Bench share with the Tories. In a world where Governments struggle against global economics it is pure madness to deny oneself weapons such as direct taxation.
When Liberal Democrats argued for an independent Bank, we did not say that the Government should give up all responsibility for macro-economic management. Fiscal policy has to support monetary policy. In some situations—classically in that of an unbalanced economy, where services and manufacturing are growing at different rates—fiscal policy can be used far more effectively than monetary policy. That is why we argued when considering the Budget of July 1997 that taxation should have been increased.
Mr. Bercow: By how much?
Mr. Davey: We said at the time and it is on record.
A Chancellor truly concerned with the long term would be prepared to take the political flak for raising personal taxation, when needed.
The Government are culpable in this economic situation because their actions have not met their words. They are meddling with the Bank, when they said that it should be free. They are dithering over the exchange rate, which they say in principle should be joined to the euro. Worst of all, they are unwilling to use the weapon of fiscal policy, making their target a starting rate for income tax of 10p in the pound.
In the minutes that remain, I shall move on to a key, issue that has been raised by Ministers before and during the debate—the productivity performance of British manufacturing industry. This is relevant because Ministers are saying that poor productivity is a cause of our problems. Why this should suddenly be the case is not clear, but that is the ministerial charge. The Government are right to be concerned about the productivity gap. However, I hope that Ministers will examine the charge made by some people, who believe that the productivity performance of British industry is much better than the official statistics suggest. This is crucial because it bears directly on the interest rate decisions of the Monetary Policy Committee. Productivity figures are relevant because they tell us about the inflationary implications of wage rises of 4 and 5 per cent. It is possible for firms to meet such wage demands without a knock-on effect if healthy productivity increases accompany those wage rises.
Yet we are told by the Office for National Statistics that wage increases in recent years have been accompanied by very low increases in manufacturing productivity,

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seeming to add new cost-push pressures to inflation. We are told that worries about wage inflation have been a major factor in the decisions of the MPC to keep interest rates high. However, I wonder whether Ministers have seen a recent paper produced by two academics, Paul Robson and Neil Blake, in the "August Economic Outlook" of the London business school. The paper questions the reliability of the official statistics for manufacturing productivity. It argues that the dramatic slowdown recorded in these figures since 1994 has not actually happened. Using other evidence, the two academics to whom I have referred find that productivity could have risen by as much as 4 per cent. per annum rather than the tiny 0.7 per cent. in the official data. That is a dramatic difference.
Coupled with the Government's concerns about the reliability of the statistics on average earnings growth—concerns that prompted the Chancellor to launch an inquiry into that dataset—it is quite possible that the MPC has been making decisions not only in the dark but with the wrong information. If average earnings are growing more slowly than the data have been telling us and if manufacturing productivity has been much higher than we previously believed, the danger of inflation has been completely overstated. Against that background, interest rates should be moving to lower levels, converging with European levels. This analysis backs up our long-held view that the problem in today's economy is not manufacturing but an overheated service sector and that interest rates and an over-valued pound are exactly the wrong policies to be applying.
I hope that the Chief Secretary will, as he promised in his earlier remarks, reflect on the argument that I have outlined. It is fairly fundamental. The right hon. Gentleman said that he would do so. If the data of the Office for National Statistics have significantly affected policy making, as they appear from the minutes of the MPC to have done, it is the Government's responsibility to act fast.
The motion calls for some significant changes in economic policy. It sets out how to operate a truly independent Bank and refers to exchange rate and fiscal policies. All our policies are consistent with what the Government claim they want to introduce—a long-term approach to macro-economic management and a more stable economy. With manufacturing jobs being lost in their hundreds of thousands and with farming on its knees, it is time that the Government listened to our arguments and acted. Liberal Democrats provide the Government this evening with the opportunity to act and they should take it.
6.47 pm
The Economic Secretary to the Treasury (Ms Patricia Hewitt): I thank the hon. Member for Gordon (Mr. Bruce) and his colleagues for initiating the debate and for the welcome that they gave to my right hon. Friend the Chief Secretary and to me. It has been a pleasure for me, as the new Economic Secretary, to listen to the debate. It has been a particular pleasure to hear so many thoughtful and well-informed contributions from my hon. Friends. I say with some regret that we heard very little by way of policies from the Liberal Democrats, and even less from Conservative Members by way of answers to the questions which remain on what their policies really are.
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The right hon. Member for Wells (Mr. Heathcoat-Amory) spoke of the golden legacy which the Government have supposedly inherited from the previous Administration. He suggested that we needed only to continue what the previous Administration were doing. That would mean continuing to let inflation get out of control and excessive borrowing. Indeed, borrowing in the public sector reached £50 billion in the early 1990s. If we continued with what the Conservative Government were doing, it would mean continuing to fail to invest in education and health. It would mean also continuing with one in five of working-age households having nobody in work. It would mean continuing to ignore the productivity gap between us and our competitors.
My hon. Friend the Member for Shipley (Mr. Leslie) rightly stressed in his very fine contribution that the official Opposition were once again talking down the British economy. He stressed that we need to recognise the successes that, despite the difficult conditions that we face in the rest of the world, we are still achieving at home. The output figures published last Friday—those are real figures, not surveys or predictions—show that output in the third quarter of this year rose by 0.5 per cent. on the previous quarter, and by 2.5 per cent. on the previous year.
Mr. Nick Gibb: I thank the Minister for giving way, as it gives me an opportunity to congratulate her on her appointment. What growth figure do the Government forecast for 1999?
Ms Hewitt: I thank the hon. Gentleman and in turn congratulate him on his promotion to the Opposition Front Bench. As my right hon. Friend the Chief Secretary said at the beginning of the debate, and as the hon. Gentleman well knows, our revised forecast for growth and for the public sector will be published in the normal way in the pre-Budget report next week.
The hon. Member for Chichester (Mr. Tyrie) spent some time pointing out, and rightly so, that there was a black hole in Liberal Democrat policy, although he fell into the hole himself in respect of Conservative policy on EMU. He tried to argue that the Government's monetary and fiscal policies were working against each other. Mervyn King, Deputy Governor of the Bank of England, said at the Bank's press conference on the August inflation report that
"the idea that in some sense fiscal policy is being wildly expansionary I think is completely off the mark. Fiscal policy is absolutely in line with the golden rule and on a stable, sustainable path."
The hon. Gentleman also suggested that our public spending plans were unsustainable. Let me stress, as the Chief Secretary did, that, unlike our predecessors, this Government have consistently taken a prudent and cautious approach to managing the public finances.
Mr. Ruffley: Will hon. Lady explain why the Prime Minister said in April 1997 that he would reduce welfare spending, when the Government are now increasing it?
Ms Hewitt: The Prime Minister said then and on many other occasions that we would reduce the bills on failure and invest in the conditions for success. That is precisely what we are doing. We said, as a result of the comprehensive spending review, that we would invest an

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additional £40 billion over the next three years in health and education, and we shall do so. We are able to do so, despite the difficult conditions that we face in the world economy, because we took a more cautious view of the trend rate of growth in the economy and tested our public spending and investment plans against the risk that there might be lower growth than we were then forecasting. We built in margins to cover uncertainties, so we shall stick to the £40 billion investment.
Mr. Gibb: Will the Economic Secretary spell out to the House precisely what those margins are?
Ms Hewitt: I have just done so. We built into our forecasts a lower rate of trend growth in the economy than the Conservative Government did.
Mr. Gibb: Read the document.
Ms Hewitt: The hon. Gentleman will see it there.
Mr. Loughton: How much by?
Ms Hewitt: By 0.25 per cent. We also tested our public sector spending plans against the possibility of lower than expected growth. The hon. Member for Bognor Regis and Littlehampton (Mr. Gibb) will have to wait for detailed figures, which will appear in next week's pre Budget report.
Mr. Loughton: Will the hon. Lady give way?
Ms Hewitt: I have already given way several times—[Interruption.]
Mr. Deputy Speaker: Order. We cannot have the hon. Member for Buckingham (Mr. Bercow) interrupting all the time. He must calm himself.
Ms Hewitt: We shall stick to our £40 billion of planned additional spending on health and education, which the hon. Member for Bognor Regis and Littlehampton and other Conservative Members do not want us to spend. We favour additional spending on health and education, whereas Conservatives are against it. That is one of the biggest differences between us and the modern Conservative party—[Interruption.]
Mr. Deputy Speaker: Order. The hon. Member for Bury St. Edmunds (Mr. Ruffley) must behave himself.
Ms Hewitt: Thank you, Mr. Deputy Speaker.
Mr. Tyrie: The hon. Lady mentioned me in her speech. Can she explain what those margins are? For example, what percentage of each spending total are they, and how are they built into each part of departmental budgets? Such margins are a novelty in the history of public accounts, as they are not separately identified in the general reserve, which the Government halved.
Ms Hewitt: I have already dealt with that point twice.
76
My hon. Friend the Member for Redditch (Jacqui Smith) spoke for manufacturing industry in her constituency and the rest of the country. She made an extremely important point about the need to raise the level of training and skills. She said that employers in her constituency are, like some in my constituency, finding it impossible to recruit people with the required skills. She will welcome, as I have, the Government's investment in the new deal, a programme that not only has individual learning accounts but establishes a university for industry. We shall hear more about productivity and improving skills and training in next week's pre-Budget report.
The hon. Member for Eastleigh (Mr. Chidgey) was rightly concerned about the health of manufacturing industry after 18 years of Conservative Government. The real disaster for manufacturers in his constituency and throughout the country would be a return to the Conservative policies that gave us interest rates of 15 per cent. and a devastating loss of jobs in manufacturing industry.
My hon. Friend the Member for Hackney, North and Stoke Newington (Ms Abbott) made a particularly robust contribution to the debate. She seemed to conclude that there was no difference between the present Government and the previous Administration. Let me remind her and the House of some of the differences. By giving the Bank of England operational independence we have achieved the lowest long-term interest rates for 35 years. We have brought down corporation tax to the lowest rate for 30 years. We shall introduce a minimum wage to protect millions of the lowest paid people. We have introduced the new deal for young and long-term unemployed people, lone parents and people with disabilities. Moreover, we shall make work pay, particularly with the introduction of the working families tax credit.
The hon. Member for North Tayside (Mr. Swinney) was concerned about the impact of economic policies on the Scottish economy. I remind him that, in the year to the third quarter of 1998, employment in Scotland increased by 13,000 and unemployment fell by 26,000, and employment in Scotland has risen by 52,000 since the general election. Thanks to the work done, particularly by Locate in Scotland and the Scottish Office, we have helped to attract to Scotland 87 inward investment projects involving planned investment of more than £1 billion and we expect the creation or safeguarding of nearly 18,000 jobs. Those measures will be as welcome to the hon. Gentleman and his colleagues as they are to me and mine.
The hon. Member for Kingston and Surbiton (Mr.Davey) appeared unable to say whether we had given too much or too little independence to the Bank of England. He repeated a concern raised by other hon. Members that my right hon. Friend the Chancellor had somehow put undue pressure on the Bank of England. Just a week or so ago, the Governor of the Bank of England said:
"It is… entirely legitimate for the Treasury, the Chancellor, to make plain what their perception of the future of the economy is, and indeed rather proper that they should, when they see a significant change of this kind, so I have absolutely no complaints about that".
As I hope the hon. Gentleman would agree, an independent central bank is the best way to ensure the long-term credibility of this country's monetary policy.

77
The hon. Member for Kingston and Surbiton referred to the arcane dispute about productivity between the London business school and the Office for National Statistics, but what he failed to say about that interesting article from the London business school was that it accepts that the revised figures—the revised methodology—produce more accurate and reliable estimates of level of output and of employment in the economy.
Mr. Malcolm Bruce: Will the Minister acknowledge that the true problem facing manufacturing industry is real interest rates of 5 per cent. compared with 2 per cent. in Europe and an exchange rate that is higher than that achieved in the previous recession? When will the Government address those issues?
Ms Hewitt: The exchange rate against the deutschmark is now back where it was when we were elected last year; long-term interest rates are the lowest they have been for 35 years; and the problem that manufacturing industry needs to address, and which we are helping it to tackle, is the productivity gap between us and our competitors.
We inherited from the previous Government an economy that was heading for another Conservative boom and bust. We have taken the tough decisions necessary to get the economy on a long-term, stable course. Thanks to the tough decisions that we have made, especially on public finances, we are able to invest an additional £40 billion over the next three years in education and in health.
Of course the United Kingdom is not immune to what is going on in the rest of the world economy. We will announce next week our own predictions for growth; that will still be growth in line with other forecasts for next year. We have put in effect measures to strengthen the economy for the long term—the new deal, the minimum wage and cuts in corporation tax.
We are making the decisions that are needed for the long-term strength of the economy and to make provisions that will enable everyone in the community to fulfil his or her potential. That is why the United Kingdom economy is steering a course of stability in an increasingly unstable world. I commend the amendment in the Prime Minister's name to my hon. Friends and to the House.
Question put, That the original words stand part of the Question:—
The House divided: Ayes 43, Noes 330.

Division No. 365]

[7.1 pm

AYES

Allan, Richard

Davey, Edward (Kingston)

Ashdown, Rt Hon Paddy

Ewing, Mrs Margaret

Baker, Norman

Fearn, Ronnie

Ballard, Jackie

Foster, Don (Bath)

Beith, Rt Hon A J

Hancock, Mike

Brake, Tom

Harris, Dr Evan

Brand, Dr Peter

Heath, David (Somerton & Frome)

Breed, Colin

Hughes, Simon (Southwark N)

Bruce, Malcolm (Gordon)

Jones, Nigel (Cheltenham)

Burnett, John

Keetch, Paul

Burstow, Paul

Kennedy, Charles (Ross Skye)

Cable, Dr Vincent

Kirkwood, Archy

Campbell, Menzies (NE Fife)

Livsey, Richard

Chidgey, David

Maclennan, Rt Hon Robert

Cotter, Brian

Michie, Mrs Ray (Argyll & Bute)

Dafis, Cynog

Moore, Michael

78

Oaten, Mark

Tonge, Dr Jenny

Öpik, Lembit

Tyler, Paul

Rendel David

Webb, Steve

Willis, Phil

Russell, Bob (Colchester)

Smith, Sir Robert (WAb'd'ns)

Tellers for the Ayes:

Swinney, John

Mr. Andrew Stunell and

Taylor, Matthew (Truro)

Mr. Adrian Sanders.

NOES

Abbott, Ms Diane

Cook, Frank (Stockton N)

Ainger, Nick

Cooper, Yvette

Ainsworth, Robert (Cov'try NE)

Corbett, Robin

Alexander, Douglas

Corbyn, Jeremy

Allen, Graham

Cousins, Jim

Anderson, Janet (Rossendale)

Crausby, David

Armstrong, Ms Hilary

Cryer, Mrs Ann (Keighley)

Ashton, Joe

Cryer, John (Hornchurch)

Atkins, Charlotte

Cummings, John

Austin, John

Cunliffe, Lawrence

Banks, Tony

Cunningham, Rt Hon Dr Jack (Copeland)

Barnes, Harry

Battle, John

Cunningham, Jim (Cov'try S)

Bayley, Hugh

Darling, Rt Hon Alistair

Beard, Nigel

Darvill, Keith

Beckett, Rt Hon Mrs Margaret

Davey, Valerie (Bristol W)

Begg, Miss Anne

Davidson, Ian

Bell, Martin (Tatton)

Davies, Rt Hon Denzil (Llanelli)

Bell, Stuart (Middlesbrough)

Davies, Geraint (Croydon C)

Benn, Rt Hon Tony

Davis, Terry (B'ham Hodge H)

Benton, Joe

Dawson, Hilton

Bermingham, Gerald

Dean, Mrs Janet

Berry, Roger

Denham, John

Best, Harold

Dismore, Andrew

Blair, Rt Hon Tony

Dobbin, Jim

Blears, Ms Hazel

Donohoe, Brian H

Blizzard, Bob

Doran, Frank

Blunkett, Rt Hon David

Dowd, Jim

Bradley, Keith (Withington)

Drew, David

Bradley, Peter (The Wrekin)

Drown, Ms Julia

Bradshaw, Ben

Eagle, Angela (Wallasey)

Brinton, Mrs Helen

Eagle, Maria (L'pool Garston)

Brown, Rt Hon Gordon (Dunfermline E)

Edwards, Huw

Efford, Clive

Brown, Rt Hon Nick (Newcastle E)

Ennis, Jeff

Buck, Ms Karen

Field, Rt Hon Frank

Burden, Richard

Fitzpatrick, Jim

Burgon, Colin

Fitzsimons, Lorna

Butler, Mrs Christine

Flint, Caroline

Byers, Rt Hon Stephen

Follett, Barbara

Caborn, Richard

Foster, Rt Hon Derek

Campbell, Alan (Tynemouth)

Foster, Michael Jabez (Hastings)

Campbell, Mrs Anne (C'bridge)

Foster, Michael J (Worcester)

Campbell, Ronnie (Blyth V)

Foulkes, George

Campbell-Savours, Dale

Galloway, George

Canavan, Dennis

Gapes, Mike

Cann, Jamie

Gardiner, Barry

Caplin, Ivor

George, Bruce (Walsall S)

Casale, Roger

Gerrard, Neil

Chapman, Ben (Wirral S)

Gibson, Dr Ian

Chisholm, Malcolm

Gilroy, Mrs Linda

Clapham, Michael

Godsiff, Roger

Clark, Rt Hon Dr David (S Shields)

Goggins, Paul

Clark, Dr Lynda (Edinburgh Pentlands)

Golding, Mrs Llin

Gordon, Mrs Eileen

Clark, Paul (Gillingham)

Griffiths, Jane (Reading E)

Clarke, Eric (Midlothian)

Griffiths, Nigel (Edinburgh S)

Clarke, Rt Hon Tom (Coatbridge)

Griffiths, Win (Bridgend)

Clarke, Tony (Northampton S)

Grocott, Bruce

Clelland, David

Grogan, John

Clwyd, Ann

Gunnell, John

Coaker, Vernon

Hain, Peter

Coffey, Ms Ann

Hall, Mike (Weaver Vale)

Cohen, Harry

Hall, Patrick (Bedford)

Coleman, Iain

Hamilton, Fabian (Leeds NE)

Colman, Tony

Hanson, David

79

Heal, Mrs Sylvia

Mallaber, Judy

Healey, John

Marsden, Gordon (Blackpool S)

Henderson, Doug (Newcastle N)

Marsden, Paul (Shrewsbury)

Henderson, Ivan (Harwich)

Marshall, Jim (Leicester S)

Hepburn, Stephen

Marshall-Andrews, Robert

Heppell, John

Martlew, Eric

Hesford, Stephen

Maxton, John

Hewitt, Ms Patricia

Meacher, Rt Hon Michael

Hill, Keith

Meale, Alan

Hinchliffe, David

Merron, Gillian

Hodge, Ms Margaret

Michael, Alun

Hood, Jimmy

Michie, Bill (Shef'ld Heeley)

Hope, Phil

Milburn, Alan

Hopkins, Kelvin

Miller, Andrew

Howarth, Alan (Newport E)

Mitchell, Austin

Howarth, George (Knowsley N)

Moffatt, Laura

Howells, Dr Kim

Moonie, Dr Lewis

Hoyle, Lindsay

Moran, Ms Margaret

Hughes, Ms Beverley (Stretford)

Morgan, Rhodri (Cardiff W)

Hughes, Kevin (Doncaster N)

Morris, Ms Estelle (B'ham Yardley)

Humble, Mrs Joan

Mountford, Kali

Hurst, Alan

Mudie, George

Hutton, John

Mullin, Chris

Iddon, Dr Brian

Murphy, Denis (Wansbeck)

Illsley, Eric

Naysmith, Dr Doug

Jackson, Helen (Hillsborough)

Norris, Dan

Jenkins, Brian

O'Brien, Bill (Normanton)

Johnson, Alan (Hull W& Hessle)

O'Brien, Mike (N Warks)

Johnson, Miss Melanie (Welwyn Hatfield)

O'Hara, Eddie

Olner, Bill

Jones, Barry (Alyn & Deeside)

O'Neill, Martin

Jones, Mrs Fiona (Newark)

Osborne, Ms Sandra

Jones, Helen (Warrington N)

Palmer, Dr Nick

Jones, Ms Jenny (Wolverh'ton SW)

Pearson, Ian

Pendry, Tom

Jones, Jon Owen (Cardiff C)

Perham, Ms Linda

Jones, Dr Lynne (Selly Oak)

Pickthall, Colin

Jowell, Ms Tessa

Pike, Peter L

Kaufman, Rt Hon Gerald

Plaskitt, James

Keeble, Ms Sally

Pollard, Kerry

Keen, Alan (Feltham & Heston)

Pope, Greg

Kelly, Ms Ruth

Pound, Stephen

Kennedy, Jane (Wavertree)

Powell, Sir Raymond

Khabra, Piara S

Prentice, Ms Bridget (Lewisham E)

Kidney, David

Prentice, Gordon (Pendle)

Kilfoyle, Peter

Prescott, Rt Hon John

King, Ms Oona (Bethnal Green)

Primarolo, Dawn

Kingham, Ms Tess

Prosser, Gwyn

Ladyman, Dr Stephen

Purchase, Ken

Laxton, Bob

Quinn, Lawrie

Leslie, Christopher

Radice, Giles

Levitt, Tom

Rammell, Bill

Lewis, Ivan (Bury S)

Rapson, Syd

Lewis, Terry (Worsley)

Raynsford, Nick

Linton, Martin

Reid, Rt Hon Dr John (Hamilton N)

Livingstone, Ken

Robertson, Rt Hon George (Hamilton S)

Lock, David

Love, Andrew

Robinson, Geoffrey (Cov'try NW)

McAllion, John

Roche, Mrs Barbara

McAvoy, Thomas

Rogers, Allan

McCartney, Ian (Makerfield)

Rooker, Jeff

McDonagh, Siobhain

Rooney, Terry

Macdonald, Calum

Ross, Ernie (Dundee W)

McDonnell, John

Roy, Frank

McGuire, Mrs Anne

Ruane, Chris

McIsaac, Shona

Ruddock, Ms Joan

Mackinlay, Andrew

McNulty, Tony

MacShane, Denis

Mactaggart, Fiona

McWalter, Tony

Mahon, Mrs Alice

80

Russell, Ms Christine (Chester)

Temple-Morris, Peter

Ryan, Ms Joan

Thomas, Gareth R (Harrow W)

Salter, Martin

Timms, Stephen

Savidge, Malcolm

Tipping, Paddy

Sawford, Phil

Todd, Mark

Sedgemore, Brian

Touhig, Don

Shaw, Jonathan

Trickett, Jon

Sheldon, Rt Hon Robert

Truswell, Paul

Shipley, Ms Debra

Turner, Dennis (Wolverh'ton SE)

Short, Rt Hon Clare

Turner, Dr Desmond (Kemptown)

Singh, Marsha

Turner, Dr George (NW Norfolk)

Skinner, Dennis

Twigg, Derek (Halton)

Smith, Angela (Basildon)

Twigg, Stephen (Enfield)

Smith, Miss Geraldine (Morecambe & Lunesdale)

Vaz, Keith

Vis, Dr Rudi

Smith, Jacqui (Redditch)

Walley, Ms Joan

Smith, John (Glamorgan)

Wareing, Robert N

Smith, Llew (Blaenau Gwent)

Watts, David

Soley, Clive

White, Brian

Southworth, Ms Helen

Whitehead, Dr Alan

Spellar, John

Wicks, Malcolm

Squire, Ms Rachel

Williams, Rt Hon Alan (Swansea W)

Starkey, Dr Phyllis

Williams, Alan W (E Carmarthen)

Steinberg, Gerry

Winnick, David

Stevenson, George

Winterton, Ms Rosie (Doncaster C)

Stewart, Ian (Eccles)

Wise, Audrey

Stinchcombe, Paul

Wood, Mike

Stoate, Dr Howard

Woolas, Phil

Straw, Rt Hon Jack

Worthington, Tony

Stringer, Graham

Wray, James

Stuart, Ms Gisela

Wright, Anthony D (Gt Yarmouth)

Sutcliffe, Gerry

Wyatt, Derek

Taylor, Rt Hon Mrs Ann (Dewsbury)

Tellers for the Noes:

Taylor, Ms Dari (Stockton S)

Mr. Clive Betts and

Taylor, David (NW Leics)

Mr. David Jamieson.

Question accordingly negatived.
Question, That the proposed words be there added, put forthwith, pursuant to the Order [this day], and agreed to.
MR. DEPUTY SPEAKER forthwith declared the main Question, as amended, to be agreed to.
Resolved,
That this House notes that the Government inherited an economy in which public sector net borrowing was £28 billion, inflation was set to rise sharply above target because of the failure of the previous Government to take the necessary action on interest rates; recalls that the previous Government presided over a boom and bust economy where interest rates reached 15 per cent. and inflation reached 10 per cent., doubled the national debt in the 1990s, worsened inequality and failed to tackle the weaknesses in the British economy; commends the actions of this Government which is steering a course of stability in an uncertain and unstable world, has established a credible framework for monetary policy that has led to the lowest long-term interest rates in 35 years, and inflation hitting its 2.5 per cent. target, and has taken tough action to cut government borrowing by £20 billion; and welcomes the increase in employment of 400,000 since the election, the launch of the New Deal, reform of the tax and benefit system to tackle unemployment and poverty traps, support for British business through cuts in corporation tax and small business tax to their lowest levels ever, and the extra investment of £40 billion in education and health over the next three years.

Farming and Food
Mr. Deputy Speaker (Mr. Michael J. Martin): We now come to the debate on farming and the food industry. I wish to announce that Madam Speaker has selected the amendment in the name of the Prime Minister.
7.16 pm
Mr. Charles Kennedy: I beg to move,
That this House welcomes moves made by Her Majesty's Government in recent weeks to address some of the problems facing the British agricultural industry but believes these problems would be more successfully addressed by measures such as accessing agri-monetary compensation funds, ensuring that animal welfare standards are enforced uniformly across the EU and that UK standards are applied to imports, encouraging supermarkets to support British farming in their buying policies and addressing the imbalance in the bargaining power between producers and the supermarkets, implementing a 'Buy British' policy in central government and its agencies and encouraging local government to do likewise wherever possible, retaining the Calf Processing Scheme, reducing inspection charges on farmers, ensuring that payments to farmers are made promptly, stabilising exchange rates by making an early declaration of intent of the Government's commitment to join the European Single Currency, implementing longer-term measures that are also needed to secure the future of British farming, including the clear labelling of products including imports, and ensuring that CAP reform does not discriminate against British farmers and any uptake of an early retirement scheme does not lead to compulsory amalgamation of holdings; further believes that confidence in the safety and quality of British food will only be restored when a fully independent and authoritative Food Standards Agency is established; and regrets any delay in its creation.
This is one of our two half-day debates being held shortly after the resumption of the parliamentary Session. This motion, together with the question that my party leader, my right hon. Friend the Member for Yeovil (Mr. Ashdown), asked the Prime Minister last week at the first Prime Minister's questions since the recess, underscores the fundamental importance that the Liberal Democrats attach to the crisis in British agriculture, and to the knock-on ramifications for the food chain and for wider rural policy.
Before I turn to the Government and to the new Minister of Agriculture, Fisheries and Food, I must express my surprise at the Order Paper. Given the countryside march and the high priority that the leader of the Conservative party has placed on these matters in recent months, it was astonishing to see that the Conservatives either agree lock, stock and barrel with Liberal Democrat policy—if so, I am delighted—and do not feel the need to table their own amendment, or have nothing new or original to say on these matters, which I suspect is the case.
I further gather from my friends in the Tory party—the few that are left—that they are on a one-line Whip. Given that they have been making such a song and dance in the House about these issues, one wonders why they are not on a three-line Whip and joining us in trying to put the Government under constructive pressure. They cannot all be having tea with General Pinochet—even genetically modified tea.
Mr. James Gray: Is the hon. Gentleman aware of early-day motion 1688 about
82
beef-on-the-bone regulations? It is signed by 34 members of the Conservative party, but not one Liberal Democrat has signed it.
Mr. Kennedy: The hon. Gentleman may not recall the occasion on which the Liberal Democrats tabled a motion opposing those regulations, and I well imagine why he may not wish to do so. The Conservatives, to be fair, were happy enough to support us on that occasion, the reason being that our position is established in terms of the progress of legislation.
As I pointed out to the hon. Gentleman generously on the occasion to which I refer—for the benefit of those who were not present then, I will share it with him again—I always welcome interventions of that kind from him, because he was my defeated Conservative opponent in 1992.
The Conservatives seem to be removing themselves from the field of battle in this regard. That is no wonder, given what happened at their party conference. The party has an unreal attitude to Europe and, in particular, to European monetary union. That means that, in the long term, in respect of the broad parameters of agricultural policy and reform of the common agricultural policy—and, as we all know, the big decisions will be made in that context—the Conservatives have nothing to say for the next eight years.
I am glad that the Conservatives have clarified that, because it means that it is possible for a debate to take place this evening between the Government and Liberal Democrats. In speaking to the motion, I am mindful of the fact that the post of agriculture spokesman is a rather sticky wicket in all the parties. We are on our second Minister, and I wish him well. We are on our third Conservative party spokesman: one has diversified; one, presumably, has been "set aside"; and I wish the third well in his debut performance.
Wisely and carefully, we drafted our motion to encompass more than just farming. We have referred to the food industry in general, and there is a reason for that. In agriculture debates, we may all at times overlook the value to the United Kingdom economy of not just agriculture, but agriculture and the entire food-and-drink sector, in the context of the manufacturing base that we debated earlier.
The gross value added of UK food manufacturing is about £16 billion. It is a huge sector, and the food-and-drink sector's share of employment in manufacturing is about 11 per cent. That accounts for about half a million employees. No fewer than 1 million farmers, farm workers and food industry workers are employed in farming and food manufacturing. It is therefore appropriate for us to consider the issues on a slightly wider basis than that of agriculture, although I want to focus on the problems afflicting farming.
Over the summer, there have been repeated leaks, hints, press reports and speculation about legislation on the Food Standards Agency, culminating in a recent speech by the Minister in Yorkshire. Those of us who represent agricultural seats, and have participated in debates such as this over the years, know how opinion has moved in agriculture. I remember when I first stood for Parliament in 1983. I stood up in front of my constituency branch of the National Farmers Union, and argued that its interests would be better served by the hiving-off of the

83
consumer-food safety side of the Ministry of Agriculture, Fisheries and Food to a free-standing agency—that was what the alliance then supported—with the Ministry looking after only the production side. The response to that was pretty hostile.
Nowadays—largely as a result of the disasters that have been visited on agriculture and the food chain—those who talk to farmers throughout the country will find that they are as anxious as anyone else for the Government to proceed with all due haste. They know that the signal that will send to the consumer is profoundly important to the industry. The issue is wider than it might have been even a few years ago. The Government have rightly committed themselves to the introduction of an independent Food Standards Agency. If that is not in the Queen's Speech in a few weeks' time, not only will they have slipped in terms of their manifesto commitments; it will be damaging to the interests of both the UK agriculture sector and the UK consumer. It will be doubly damaging. I hope that the Minister will reassure us that the Government are not back-pedalling or stalling on their commitment, because, if they are, it will be a great setback.
In that context, let me say a word about supermarkets, which, in recent weeks and months, have been the subject of observations in various Select Committee reports. I hope that the Minister will be able to meet representatives of the retail sector soon: that is vital. When he does, he should—as well as bearing in mind one or two items on which I shall touch—have a constructive dialogue with the supermarkets, which are in an immensely privileged, powerful and monopolistic position. He must make it clear that they must play their part in encouraging consumer purchasing habits that will benefit UK agriculture.
Mr. Oliver Letwin: Is it not regrettable that the Monopolies and Mergers Commission is not looking at the wholesale as well as the retail side of the market?
Mr. Kennedy: I think that a broader analysis would have been better, but at least an analysis is being made in response to Select Committee reports—and, indeed, to the excellent report of my hon. Friend the Member for South-East Cornwall (Mr. Breed) about the activities of supermarkets in this respect. However, I agree that the canvas could have been broader.
A dialogue between the Minister and the retail sector is essential. We urge him to do more to ensure that UK content means legitimate UK content, as opposed to content that is cut up, packaged and dispensed in this country but reared elsewhere; but, much as we want him to take such action, we cannot divorce that important facet from the Government's abysmal behaviour since they came to office in regard to the accessing of European Community funds.
The country is in a cycle of insanity. The United Kingdom taxpayer is paying into EU funds; those funds are being accessed by nearly every other member state to help its farmers—farmers who, frequently, are employing lower animal husbandry and other standards than are imposed on our farmers. Their products are then imported
84
into this country, packaged and labelled as UK content, and sold, cut-price, to the UK consumer. In the process, our farmers are being put out of business. The Minister will have to address that issue with alacrity. He cannot, in all integrity, engage in the necessary dialogue with the supermarkets while his Government preside over such a policy.
Throughout the country, we see the dreadful state of British agriculture. It is said that farmers often complain—that whatever is right in one sector is not right in another, that if the weather is right for one part of the country it is not right for another, and so forth. The current crisis was summed up very well by a Yorkshireman who remarked to me, in typically ebullient fashion, "You know how bad things are, lad, when even the guys who won't pay stop ordering." That—put, albeit, in fairly rumbustious fashion—reflects the extent of the difficulty.
Hill farmers in Wales are probably suffering more than farmers in any other part of the United Kingdom, but there is no part of the United Kingdom that is not suffering. There is no sector that is not experiencing a drastic drop in prices and a bad harvest, as well as all the knock-on effects of BSE and the madness of the ban on beef on the bone. I was encouraged to note that the Minister was anxious to do something about that; perhaps he will reassure us further tonight. There is also the continuing difficulty caused by our failure to take a sufficiently positive approach at a European level.
In Scotland, if I may say a word in regard of my country, there is a disastrous ministerial regime under Lord Sewel. Given his recent defeats in another place, it is high time that he were allowed to concentrate all his energies on devolution and to pass to the Under-Secretary of State for Scotland, the hon. Member for Western Isles (Mr. Macdonald), interim responsibility for agricultural matters. I say "interim" because I hope that, after next May, we will have a Scottish Liberal Democrat in charge of Scottish farming policy and dealing with the difficulties in the Scottish Office, which have not been witnessed south of the border, with regard to arable payments.
The Secretary of State for Scotland has made a great headline announcement, saying that arable payments will be available to help the current income crisis, but such are the bureaucracy and failings in the system that those payments are not, in large measure, getting in time to the people whom they need to hit. These are serious issues with which government in all parts of the United Kingdom should deal.
Mr. John Swinney: Is the hon. Gentleman aware that, in relation to arable aid payments, there is still a hangover from the previous financial year for a number of farmers because of mapping difficulties and the flow of information to the Scottish Office?
Mr. Kennedy: The hon. Gentleman is correct. Those farmers face a double whammy because, as he rightly says, there is the hangover from the previous year, as well as difficulties with the present set of payments. When a Minister makes a great announcement about some additional help—remember, this additional help is targeted only at the short-term income crisis; it does not deal with the longer-term strategic crisis of UK agriculture—and even that help does not come forward in

85
time and is not delivered where and in the way it is supposed to be delivered, it has a doubly depressing effect on those who are left in the agriculture sector, given the collapsed state of morale in the sector.
The Parliamentary Under-Secretary of State for Scotland (Mr. Calum Macdonald)rose—
Mr. Kennedy: Having perhaps destroyed the hon. Gentleman's career by praising him as the possible Minister with responsibility for agriculture in Scotland, the least I can do is allow him to make his debut.
Mr. Macdonald: The hon. Gentleman's remarks are a little beneath him. His arguments would be better balanced if he would reflect that support to the farming community of Scotland is at its highest level ever—£500 million a year—and that, in this current year, that support has been further increased by an extra £50 million, a 10 per cent. increase. It would be better if he took that on board when he assessed the Government's help to farmers in Scotland.
Mr. Kennedy: As the hon. Gentleman knows, I always listen to him with respect and affection. I do not think that these arguments are beneath me or anyone else because, to a greater extent than any other Minister with responsibility for agriculture in any of the four nations of the UK, it is Lord Sewel who has tramped the country using the demon word "restructuring".
What does restructuring suggest to an agricultural community that is already in the depths of crisis? It suggests what the steelworkers, the coal miners and shipbuilders all experienced under Thatcherism. It means that this Government's mindset is to allow a significant proportion of traditional family farming throughout the UK to disappear. If they allow it to go to the wall, the great irony is that, when people retreat from the land, when the family farms are sold, when there are more amalgamations and more agri-businesses, when we do not have the families there who, for generation on generation, have looked after these areas, be it Cornwall, Devon, Somerset, the highlands or rural Wales, the very objectives on which there is all-party consensus in terms of CAP reform—that more funds should go into rural development, diversification, conservation, management of the habitat—will not be met and we will not be able to develop the post-CAP reform, Agenda 2000 approach to which the Government pay lip service.
Mr. Richard Livsey: Does my hon. Friend agree that what is needed is an immediate package to rescue the industry, and that one of the most important things for family farms in upland areas is to have hill livestock compensatory allowances jacked up to the 1992 level, plus inflation? It is the Tories who cut the allowances and it is Labour who should restore them. We would support Labour if it did that.
Mr. Kennedy: I agree with my hon. Friend, who has made a notable contribution, both professionally and in his membership of the Select Committee on Welsh Affairs, to matters agricultural. He is right to say that, for hill and upland farmers, particularly in less-favoured
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areas, HLCAs are the most immediate, most targeted and most responsive assistance that any Government can come forward with.
Mr. Michael Jack rose—
Mr. Derek Foster rose—
Mr. Kennedy: I had better give way to the last but one shadow Minister.
Mr. Jack: Will the hon. Gentleman confirm just one fact? When we left office, hill livestock compensatory allowances were £160 million; currently, they are £125 million.
Mr. Kennedy: The point that. my hon. Friend the Member for Brecon and Radnorshire (Mr. Livsey) has made deals with that adequately. We do not support this Government's approach towards HLCAs. It must be remembered that the freezing took place in 1992, so the right hon. Gentleman cannot, as Conservatives are all too prone to do, believe that all the problems that we are discussing in this and other debates began at the stroke of midnight on 2 May a year and a half ago. Many of them are deep-rooted and, in part at least, the legacy of the previous overlong Conservative Administration.
Mr. Foster: I was going to compliment the hon. Gentleman on his powerful speech, but I should point out, before he leaves HLCAs, that he did not manage to cover my constituency, which includes Teesdale. I have 600 sheep farmers there, 400 of whom depend on HLCAs. It is the worst crisis that I remember in 20 years as their Member of Parliament. Clearly, the most effective thing that my Government can do is to increase HLCAs substantially.
Mr. Kennedy: I hope that one of the positive signals that can emerge in the direction of the Treasury Bench and the Minister tonight is that, the more all-party support we can have behind the continuance and upgrading of HLCAs in coming weeks and months, the better it will be. The Government can make a difference there and it is something that is well worth them responding to positively, if not tonight, at some later stage. I reflect only on the fact that I do not know which career has been more damaged—that of my friend the Under-Secretary of State for Scotland by my praising him, or mine by the distinguished right hon. Gentleman praising me.
The essential difficulty in terms of what we outline in our motion is that, the immediate crisis apart, and I do not think that there is any serious doubt that "crisis" is the appropriate word in this context, we now have a society—I have been interested by what the Minister has been saying in recent weeks in this respect—where there is perhaps too much polarity between urban and rural Britain.
The Minister and I are of a generation where we can recall our parents telling us how, in the last world war, children were sent out of urban conurbations to farms, parts of the country that they would not, otherwise, have seen or experienced. That is not happening these days. Even with greater social mobility, there is not the same

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fundamental understanding of the rural economy, and of agriculture in particular, that was a feature of that particular generation.
Therefore, it is incumbent on the Government and on the House as a whole to do more to support our agricultural base, to recognise that one of the important ways of so doing is to ensure the highest standards in the food safety chain, and to give reassurance and realistic positive support where it is so desperately needed. That is the clarion call that the Liberal Democrats express on behalf of the UK agriculture sector. It is one to which I hope that the House in general and the Government in particular can respond positively.
7.38 pm
The Minister of State, Ministry of Agriculture, Fisheries and Food (Mr. Jeff Rooker): I beg to move, To leave out from "House" to the end of the Question, and to add instead thereof:
"welcomes the Government's strong commitment to the UK farming industry and to the wider rural economy; welcomes in particular the steps which the Government has taken since May 1997 to support the beef and sheep industry via EU agri-monetary compensation and relief from charges; acknowledges the steps taken specifically to help the sheep, pig and cereal sectors with targeted EU measures; and endorses the Government's intention to bring about a secure and viable future for the UK farming and food industries through a market-orientated reform of the Common Agricultural Policy."
I am grateful to the hon. Member for Ross, Skye and Inverness, West (Mr. Kennedy) for the content of his speech, with much of which—particularly his concern for the rural economy—we can agree. We are particularly at one on the comments that he made in the final part of his speech.
The hon. Gentleman said that he would curtail his comments so that as many hon. Members as possible would be able to speak in this debate. He therefore could not deal in his speech with every item listed in the Liberal Democrats' motion on today's Order Paper. I do not criticise him for that brevity. Although I shall not respond to every item in the motion, I shall try to deal with some of the key issues that he raised. I should be happy to try to deal with all the issues, but, in a short debate, that would only cause complaints.
I welcome the hon. Member for South Suffolk (Mr. Yeo) to his new position in the shadow Cabinet. However, he is not the third shadow agriculture spokesman that the Government have faced in the past 18 months but the fourth. One of his predecessors as agriculture spokesman held the post for a little while, in May 1997, until changes were made. There has been—I do not criticise it—a high turnover in the position.
I know that the House expects me to deal with the much-needed support that is going to agriculture. Although no one makes any complaint about that support, at the end of an agriculture debate, one should never try to leave the impression, or make a public pronouncement, to the effect that the sector is devoid of support from the taxpayer, because it is not. Public support for agriculture amounts to billions of pounds. Although I shall not deal with the catalogue of issues affecting the sector, I shall deal with the main ones, because they are extremely serious.
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I accept the comments made by the hon. Member for Ross, Skye and Inverness, West at the beginning of his speech, and agree that, for the first time ever, many factors have come together simultaneously to affect agriculture. We have examined the ups and downs of the various sectors of the industry, and confirmed that, although all the sectors have never flourished at the same time, there has never before been a time when almost every sector has, for different reasons, been attacked and undermined as almost every sector is being attacked and undermined at present. The assault on all those sectors has had a cumulative effect on many farmers and food producers. We shall seek to make as much progress as we can in our negotiations on the package that we shall put together to meet the immediacy of farmers' and food producers' demands.
Mr. Barry Jones: May I emphasise the severity of the crisis on the hillsides in Wales, and tell my hon. Friend of the problems faced by sheepmeat and beef producers, even on the lower pastures and in the dairy industry? The National Farmers Union county delegate, Mr. Terrig Morgan at Fferm Carreg y Llech, Mr. Idris Roberts of Pwll farm, Trevddyn, and Mr. Clive Swann of Ffrith farm have told me of the real difficulties faced by their members. They hope very much that urgent action will he taken. The good news is that the Under-Secretary of State for Wales, my hon. Friend the Member for Cardiff, Central (Mr. Jones), has agreed to meet my Trevddyn and Llanfynydd members—who I am sure will receive a favourable reply.
Mr. Rooker: I am grateful to my hon. Friend for mentioning those locations, as it saves me having to do so. I am grateful also for the presence in the Chamber of my hon. Friends who are Ministers in the Welsh Office and the Scottish Office, as agriculture is an issue that affects people across the United Kingdom.
I should mention some aspects of the financial assistance available from taxpayers. Although I know that it annoys some people when we mention it, the fact is that, so far, £2.5 billion has been spent on BSE-related measures, some of which are market-support measures. The situation today would be far worse than it is if we did not spend that money provided by taxpayers. Moreover, beef producers are receiving annually in normal beef subsidy payments approximately £500 million. Furthermore, in 1996–97, some £450 million in ewe premium payments were paid to sheep producers. Although slightly less was paid in the subsequent year, several hundreds of millions of pounds were paid.
Sir Robert Smith: Will the Minister give way?
Mr. Rooker: I shall be happy to give way to the hon. Gentleman after I have made a little progress in my speech.
Should sheep prices remain low this year, producers will benefit from the higher ewe premium. Moreover, in response to currently low lamb prices, we have successfully urged the European Commission to grant private storage aid for sheepmeat in the United Kingdom. The Commission has very promptly responded to our

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request, providing private storage aid for a maximum of 2,400 tonnes. Early indications are that, because of the storage, significant quantities of lamb will be removed from the market.
The Government have also just agreed to an increase in advances payable under the beef special premium and the suckler cow premium scheme, from 60 to 80 per cent. The increase in the level of advance payments will, in the very near future, bring to the industry some £100 million, which would otherwise not have been available until spring 1999.
We have also persuaded the Commission to extend beef intervention coverage in Northern Ireland for the last four tenders in 1998 and to provide for an increase in the maximum carcase weight of animals purchased.
Although the hon. Member for Ross, Skye and Inverness, West did not mention some matters in his speech, they are part of the Liberal Democrats' motion, and I shall deal with them. Some matters are more important than others, because they are more pressing.
One such matter is the calf processing scheme. During the summer recess, we announced our decision on the statutory implications of that scheme, which will end on 30 November. As of today, that is still the position. [HoN. MEMBERS: "Oh."] No, nothing has been ruled in or ruled out. The Ministry is seriously considering a range of options, and we are genuinely considering all the points that have been made to us over the summer recess. To do anything other than that would be a derogation of our responsibility as Ministers to the House. We are genuinely considering all the points that have been made to us.
I have not said that there has been any change in the scheme. As of today, the scheme will end as we have announced that it would. The statutory scheme ends on 30 November. However, as I said, we are genuinely considering all requests that have been made to us over the summer recess. Although that matter was dealt with in the Liberal Democrats' motion, I cannot say any more about it now. I had hoped to deal with the matter in such a manner that I would not have to deal with it at greater length, but perhaps I will have to.
Mr. David Curry rose—
Mr. Kennedy: The Minister is trying to be very upfront about the matter. Perhaps the way in which he is expressing himself—using double negatives—is almost making him sound disingenuous. Is he saying that the Government are considering extending the scheme, which is what we are asking for?
Mr. Rooker: No. I said that the scheme would close. However, we are considering each and every request that has been made to us over the summer recess by the farming and livestock communities. That is the current position. I cannot go beyond that.
Mr. Curry rose—
Mr. Rooker: I shall give way to one of the other former shadow agriculture spokesmen.
Mr. Curry: This one is lying fallow.
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Does the hon. Gentleman agree that, unless the scheme is continued or something that has equivalent effect is introduced, there will be a real welfare problem, and that farmers simply will not pay £2.50 for a tag for a worthless calf? Does he agree also that much poor-quality beef from the dairy herd will be reared and hang over the beef market, ultimately costing the Government much more than if they had produced a scheme to take that beef out of the marketplace?
Mr. Rooker: That may be true. However, I tell the right hon. Gentleman that, although dairy farmers in particular have pressed for continuing the scheme, the animal welfare lobby and abattoir operators have welcomed the decision to end it. The matter is not clear cut, and there is no uniform support in the industry for one particular option one way or the other. It is not correct to say that there is such uniform support. It is also quite clear that it would be a considerable time—into 2000—before the effect of ending the scheme was felt in the beef industry.
I am simply trying, as concisely as possible, to tell the House that we are seriously and genuinely considering all the requests that were made over the summer recess to me, my right hon. Friend the Minister of Agriculture and other Ministers. I am not in a position to announce any decisions. Therefore, the position must today remain as we announced it in the summer. I do not want to give anyone a false impression.
Mr. Christopher Gill: Will the Minister give way?
Mr. Rooker: Not now, although I shall give way to the hon. Gentleman in a moment. I should like to deal with the points made by my hon. Friend the Member for Alyn and Deeside (Mr. Jones) and the hon. Member for Ross, Skye and Inverness, West.
I accept that hill farmers are facing considerable difficulties. I know that from personal experience, having visited several over the recess, professionally—as a Minister—and as a tourist in the hills. I have gone out of my way to listen to as many as possible. Nevertheless, the fact is that £600 million of subsidies will this year be distributed to hill farmers alone, so the Government's commitment to support farming in the hills is in no doubt. I make it absolutely clear that we fully intend to continue supporting it.
The autumn review of economic conditions in the uplands is well under way. The hon. Member for Ross, Skye and Inverness, West referred to the hill livestock compensatory allowance rates. These are, of course, a structural measure. It is our intention to replace the scheme with one that will deliver support more effectively to hill farmers to meet social and environmental concerns, the very points that the hon. Gentleman made, albeit in a different form of words. However, the scheme is being considered in the context of Agenda 2000, which envisages a switch from headage payments to an area-based scheme.

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The hon. Member for Ross, Skye and Inverness, West was a little unfair on Lord Sewel. Everyone understands that change is never easy, but we plan to consult fully on options for a new scheme later this year.
Sir Robert Smith: Will the Minister give way?
Mr. Rooker: Yes, I promised that I would give way to the hon. Gentleman.
Sir Robert Smith: Does the Minister not understand the frustration felt by the farming community as it faces the crisis now? Lord Sewel talks about the future but wants to implement the scheme in the United Kingdom before it is implemented in the rest of the European Union. Farmers in this country are operating in an open single market and, unless the Government operate by the same rules as the rest of the EU, our farmers will be made to fight the crisis with one hand tied behind their back. There will be reform, but it must involve the whole of the EU, not just the United Kingdom unilaterally.
Mr. Rooker: It is no part of Government policy that the restructuring of agriculture within the EU should be on the back of a vanguard move by farmers in this country. That would be utterly unfair, and it is not something that we would support. However, the fact is that we have to discuss the restructuring of the industry without sending the wrong signals.
Mr. Gill rose—
Mr. John Greenway rose—
Mr. Rooker: With respect, I want to make progress. It is not possible to take too many interventions.
The hon. Member for Ross, Skye and Inverness, West referred to the beef ban. We understand that it is a symbolic issue for many people. Progress is being made in Northern Ireland. Movement so far has been small—I understand that 60 tonnes have so far been exported, which is a drop in the ocean. It will take time to rebuild markets, but it is a top priority for the Ministry to get the ban lifted as quickly as possible.
Mr. Gill: Will the Minister give way?
Mr. Curry: Will the Minister give way?
Mr. Rooker: No, not at the moment.
The date-based export scheme proposed by the Commission is one that we are actively negotiating in Brussels, virtually on a daily basis. The Commission has undertaken inspections in this country in recent months, which have been positive and helpful. We have a problem—
Mr. Curry: Will the Minister give way?
Mr. Rooker: No. There are problems with some of its demands in respect of bone-out beef, but we are seeking to overcome them.
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The hon. Member for Ross, Skye and Inverness, West also referred to the ban of beef on the bone. No one ever claimed or demanded that it was for ever. I said as much in February when I put the relevant regulations to the House. It is self-evident that, as time goes by, different considerations prevail. The Spongiform Encephalopathy Advisory Committee and the chief medical officer will look into the problem. Everyone can count 30 months from August 1996.
We have to be careful. We do not yet have the experimental results in respect of bone marrow, so we are not yet in a position to make an announcement. However, British people know that we are taking massive safety precautions to make sure that British beef is safe. What we are doing goes far beyond anything being done elsewhere in Europe, so consumption of British beef by British people has gone up again this year—it now accounts for around 79 per cent. of our beef consumption, compared with 72 per cent. last year. People know that the checks that we have put in place ensure that British beef is safe, and confidence is returning. We are not going to take a hasty decision, but the ban was not intended to be for all time. We never hinted that it would be so, and we want it lifted as quickly as possible.
Mr. Paul Tyler: The Minister has just said something that all hon. Members believe, which is that the controls on British beef are much greater and more effective than those that exist anywhere else in Europe. Will he assure the House that substandard imports of beef from other EU states and, indeed, from other parts of the world, will now be controlled, so that he can give a perfectly straightforward guarantee to the British people that they can eat British beef with safety and that they will not be subjected to substandard beef from other sources?
Mr. Rooker: I shall give the hon. Gentleman an example of something that crossed my desk only the other day. Substandard beef is a constant problem in a single market. In some ways, the European Union is the inspector of third-country imports. Recently, Australia was the subject of an EU inspection in respect of its meat industry and the processing side of it—the abattoirs and cutting plants. The EU inspectors were not satisfied with what they found, and Australia has been given six months to put its house in order. If it does not, there will be serious repercussions for its exports to the EU. That is something that happened only recently. It is a matter of public knowledge, although it did not make the headlines.
Inspections of third countries are taking place, and we do not intend to allow substandard food into this country or, indeed, into the EU as a whole. There are also problems relating to, for example, welfare conditions, with which I shall deal later.
The hon. Member for Ross, Skye and Inverness, West did not mention this, but another example of support for the industry—especially the beef sector—from the taxpayer and the Government is the start-up of the cattle movement service on 28 September. The reason why I have heard nothing about this service, either inside or outside Government, is that it is working. It works as a very successful information technology project, and I pay tribute to MAFF staff, our consultants and, of course, the industry. We have been working hand in glove for 18 months to get the system up and running.

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The service's capital start-up costs and the first year's running costs represent an investment of some £35 million of taxpayers' money in the cattle industry. It could not have been done without massive co-operation. The service now has 200-plus new staff and, in the first four weeks, it issued 193,000 passports, processed 80,000 cattle movement notifications and handled some 30,000 calls from farmers. It will add credibility to our negotiations in Brussels in respect of the lifting of the ban, although it is not a requirement for it. We are well ahead of the European Union requirement for a computerised cattle tracing system, which is an EU requirement for every country by December 1999.
Mr. Lembit Öpik: Does the Minister accept that the scheme will in effect be a tax on British farming if the Government do not enforce the same standards for imports, as mentioned by my hon. Friend the Member for North Cornwall (Mr. Tyler)? Will he confirm that he recognises that it is not only beef farmers who are affected, but those who produce pigs and lamb?
Mr. Rooker: I shall deal with pig farming. I take the hon. Gentleman's point. We imposed unilateral controls on the removal of specified risk materials on beef imported into this country. My right hon. Friend the Member for Copeland (Dr. Cunningham), the former Minister of Agriculture, Fisheries and Food, told the House that he would do it if the EU did not get its act together, and we did it. We said that we would not have that beef in this country. We are not allowed to carry out random checks because of the single market, but we check the paperwork and have advance notification of the paperwork at the ports of entry. I understand that more than one load has been sent back because the paperwork was not in order. Vigorous attention is being paid to the import of beef into this country.
Mr. Letwin rose—
Mr. Rooker: I shall not give way. I must move on.
The hon. Member for Ross, Skye and Inverness, West mentioned the "Buy British" policy. That suggestion comes from the Liberal Democrats who would, by and large, have had this country in the EC before 1972 without any negotiation. A "Buy British" campaign is contrary to our obligations under the treaty of Rome and would be outlawed straight away—[Interruption.] I am referring to the motion, which states that there should be such a policy
"in central government and its agencies".
As the hon. Gentleman knows full well, we are unable to do that. It is always the point, in opposition, to ask the Government to do something that they cannot do, but that does not mean that we are taking no action. Consumers and importers of food into the United Kingdom can operate a "Buy British" policy without falling foul of the treaty of Rome, but the Government cannot, as we act for a member state.
We persuaded the Commission to make intervention beef stocks available to the Ministry of Defence. The MOD hopes that all its requirements for beef for forces serving in the United Kingdom can now be met with products of UK origin. It is also considering whether it can source some of its requirements for lamb from the
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UK, but that is more difficult. First, there are no intervention stocks and, secondly, frozen lamb from overseas is competitively priced and there is a problem in respect of ordering contractors to purchase from a particular area.
We will go as close to the wire as we legally can on the treaty of Rome in encouraging our importers and producers to buy British. We cannot cross the wire. We have put it to our lawyers and legal advisers that we want to go as close as we possibly can. However, as the hon. Gentleman well knows, we cannot order people to buy British.
Mr. Livsey: Will the Minister note that the National Farmers Union, the Farmers Union of Wales and the Young Farmers Clubs visited the MOD in Bath? We tried to persuade the Ministry that the British forces should eat British lamb. At present, no one serving in the Army, Navy or Air Force eats British lamb. I was informed in answer to a parliamentary question that 52 per cent. of lamb consumed by the forces comes from New Zealand and 48 per cent. comes from Uruguay. Surely that is quite wrong.
Mr. Rooker: I have just explained the position regarding lamb, to which intervention stocks do not apply. We have acted where there are intervention stocks.
The hon. Member for Ross, Skye and Inverness, West also mentioned the major problems in the pigmeat industry because the EU pigmeat regime is very light. When one gets through the jargon, that means that, by and large, pigmeat producers are not on the receiving end of what can be described in shorthand as Common Market subsidies. They have operated in what is very much an open market over the years and, as a result, they have done better than beef and lamb producers. However, over-production causes difficulties with the pricing structure, which was also badly affected by the massive fire in Northern Ireland which created catastrophic problems. It is a vital sector of the industry. Total annual production is 1.3 million tonnes, worth more than £1 billion at the farm gate. The sector is very much reliant on the market, so scope for Government action is extremely limited.
The UK supported a Commission proposal for a scheme providing aid to private storage which came into effect on 28 September. It will allow payment for storage for four to six months, although rates may vary according to the length of storage and the cut. I hope that that will have a steadying effect on the market. We need an orderly pattern because of the massive disruption caused by the economic problems in Russia. Most people do not make the connection between events in Russia in recent months and the effect on European producers. I did not know until the issues were raised and we asked questions about them that the biggest purchaser of lamb skins from the United Kingdom was Russia, which has been completely wiped out as a market because of the catastrophic problems there. Of course that has caused difficulties for our producers.
The motion refers to prompt payment to farmers. I repeat that we are making excellent progress and I can confirm that advance payments under the beef subsidy scheme will begin early next week. The second advances under the sheep annual premium will follow shortly after that.

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As I said earlier, we have agreed with other member states that the advance payments on the beef premium schemes will bring an increase of –100 million six months earlier than would otherwise have been the case. We have also made a prompt start on this year's arable area payments—98 per cent. of the advance oilseed payments were made by the end of September. The main arable payments started last week and are due for completion by the end of December. By the end of October, 40 per cent. of the payments will have been made. We are making massive progress in trying to speed up the payments of those subsidies to our farming communities. I understand that cash flow is extremely important.
The hon. Member for Ross, Skye and Inverness, West—joined by the Conservatives—made his usual attack on agrimonetary compensation, not a penny of which was ever paid by the Conservative Government. For the avoidance of any doubt, there is no agrimonetary compensation in the kitty for sheep farming; at present it applies only to beef and cereals, so we must not give the impression that demanding the payment of agrimonetary compensation will help the sheep sector.
Mr. Gill: In respect of agrimonetary compensation, does the Minister recognise that the present crisis in agriculture is far more serious than it was under the Conservative Government? If the objection to paying agrimonetary compensation is based on the fact that the Treasury has to pay 71p for every £1 that is paid to the industry, does he recognise that, notwithstanding the fact that 71 per cent. has to come from the Treasury, every £1 going into the industry counts at this time of crisis? Inevitably, every £1 going into the industry finds its way back into the general economy and is good for jobs and services in the rest of the economy and, inevitably, the Treasury gets some of that money back in taxation.
Mr. Rooker: How can the hon. Gentleman dismiss with a flight the fact that 71 per cent. of the money comes from the British taxpayer because 100 per cent. goes into the sector? I have to say to the hon. Gentleman, whom I respect enormously for his contributions to debates, not least the number of his Adjournment debates that I have answered, that the Government cannot ignore that. Neither the Treasury nor any other Ministry can ignore the fact that 71 per cent. of the money will be paid by the British taxpayer. Hon. Members should remember that we paid £85 million of agrimonetary compensation to the livestock sector earlier this year in recognition of the exceptional circumstances. We recognise the current difficulties and we are keeping the situation under review. We shall continue to meet farming unions and other interested organisations and we are keenly aware of their case. I make no bones about it, as I said in my opening remarks.
Let me say a few words about producer negotiating power. I make no attempt to be a spokesperson or defender of the supermarkets. Far from it—they are more able to speak for themselves and have more money than my Ministry. Producers have to be able to deal effectively with major buyers in a global market. The UK has a historical and cultural problem in that the agricultural sector has been slower than others to respond. There is sometimes embarrassment when I ask farmers about getting together and working as producers. The fact that,
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for whatever reason, they have not done so in the past has allowed them to be the victim of a pincer movement by the supermarkets. The Ministry gives every encouragement—as it did under the previous Government—to any initiatives within the farming interest to encourage producers to get together and not to be isolated and picked off by those who have control of our food chain.
Mr. Paddy Tipping: Do not supermarket chains have enormous power? It must be right that British meat, which is of the highest quality, produced with good animal welfare standards, should be promoted and sold in our supermarkets. The reductions in prices at the farm gate should be passed on to consumers. Will my hon. Friend talk strongly with supermarkets to ensure that British farmers and British consumers get a fair deal?
Mr. Rooker: I can certainly answer yes to my hon. Friend's main question. My right hon. Friend the Minister of Agriculture and I are meeting representatives of the British Retail Consortium next week. We have been discussing the issue throughout the summer because of the apparent mismatch and some of the media stories. We have looked for evidence. The Ministry has neither the expertise nor the power to demand information about prices at different points in the chain, between animals leaving the farm and the meat arriving on our supermarket shelves. There has been great suspicion in the media that some of the practices of some retailers are not helpful to our farming industry—that is a polite way of putting it.
We welcome the efforts made by many retailers to ensure that their sourcing practices meet or exceed consumer expectations. I was talking to one of the supermarkets last week. I shall not name it—it is not one of the big four, but it is the fifth one; small in terms of food, but big in the high street. I was told that from 1 January it will require its suppliers of any imported pigmeat—be it bacon or Parma ham—to meet the same welfare standards as British producers. If those standards are not met, the supermarket will not import the meat. That is a fair point. The supermarket does not need the force of the Government—we have no legal authority in that area—but it is right and proper that that is being done. In due course, the supermarket will make known its policy to give it a competitive edge and to show what it is doing to help British industry. The message is: "We are interested in animal welfare; we want standards to be driven up; and we will use our purchasing power to do that." That is what that chain has said openly to me. I encourage all others to follow that example.
We have to be very careful or we shall end up pushing down the road to price controls and a fixed market. We know that that leads to empty shelves in shops. That is the reality that we have seen from the siege economies of the Soviet countries.
Mr. Norman Baker: Will the Minister look at the labelling laws, which allow imported chicken from Thailand to be labelled as British because it is processed in this country, even though it was reared under conditions vastly inferior to those in this country?
Mr. Rooker: Under the beef labelling scheme, beef must be reared, slaughtered and packaged in this country to be called British. The same rules do not apply to

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poultry, but we are making moves in the European Union to rectify that. People must not be misled by labelling. The words "Packaged in the EU" do not mean that a product was produced by a European Union farmer or food producer. People have to look at labels carefully. We want more progress on making labels meaningful. We do not want them to give a false impression that produce was nurtured by European Union farmers. The hon. Gentleman is right to make that point. Some of the issues can be dealt with on a voluntary basis, but there are difficulties with labelling. As a member of the European Union, we have to ensure that we get EU-wide agreement, otherwise it is nonsense for our farmers.
Mr. Michael Colvin rose—
Mr. Rooker: This is the last time that I shall give way.
Mr. Colvin: I should like to declare an interest, as a farmer. The Minister mentioned supermarkets earlier and talked about price regulation. He is no doubt aware of the Office of Fair Trading report that suggested that the big four supermarkets were operating a cartel. How soon will the Monopolies and Mergers Commission report be available, so that we can know whether a free market is operating among the supermarket chains?
Mr. Rooker: I cannot tell the hon. Gentleman. I have not referred to that because I cannot cover every point. There is an inquiry going on. The Welsh Affairs Committee produced an important report earlier in the year. It is right and proper that some of the concerns that were highlighted should be investigated by the competition authorities as soon as possible. However, I have no information on that and we cannot interfere during the inquiry.
The first point that the hon. Member for Ross, Skye and Inverness, West raised was on the Food Standards Agency. It is one of the most popular promises in the Labour party manifesto. I do not remember any of the 1,100 submissions that we received on the White Paper earlier this year opposing the establishment of an agency. Obviously, there are different views about its powers, structure and charging. Last Friday, I was at a one-day conference in York organised by the Food Advisory Committee—the Ministry's most important committee on the subject—on that and related issues. The whole food production chain was represented and every speaker was in favour of the concept of an agency. I cannot pre-empt the contents of the Queen's Speech on 24 November. The Government are determined to take the Food Standards Agency project forward. I cannot say whether there will be a slot for the Bill in the next parliamentary Session, but my right hon. Friend the Minister of Agriculture will outline immediately after the Queen's Speech how we shall proceed. We have a manifesto commitment to deliver a Food Standards Agency. However, I cannot go into greater detail because of the nearness of the Queen's Speech.
There have been unfounded press reports on the subject. There has been no back-door or front-door attempt in the Ministry to neuter the Food Standards Agency. I have heard no suggestion of that and neither have my civil servants. There have been arguments about nutrition, but everyone accepted the compromise reached
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in the White Paper "The Food Standards Agency: A Force for Change". There has been no backtracking on that. Our commitments remain as they were earlier in the year.
Mr. Charles Kennedy: I appreciate that the Minister cannot anticipate the contents of the Queen's Speech, although if the commitment was one of the most popular in the Labour manifesto, as he says, it would be perverse in the extreme if it did not appear in the first two Queen's Speeches of the Parliament.
The restructuring of the Ministry of Agriculture, Fisheries and Food is a related issue. What will be the relationship with the Department of the Environment, Transport and the Regions on planning, and with the Department of Health on health issues? Even if legislation does not come forward immediately, thinking about the Food Standards Agency must be pretty well advanced. What is envisaged for the future of the Ministry? Will we have a Ministry for the countryside? If so, will it have a planning remit?
Mr. Rooker: That goes much wider than the Food Standards Agency. I could take another 10 minutes on that, but I want to conclude. The key area is the relationship of the Ministry with the Department of Health. The joint food standards and safety group is a unified group across both Departments, headed by one civil servant reporting to Ministers in both Departments. All key decisions on food standards and safety are taken jointly by MAFF and the Department of Health. There is no unilateral action. The joint group consists of 300 civil servants, of whom 250-odd are from MAFF and the rest are from the Department of Health. It is headed by a civil servant of great seniority—a Department of Health civil servant who was already on secondment to MAFF. It operates as a unified structure across both Departments and is working very well. As I heard last Friday in York, all the outsiders who have contact with it speak with great respect about how they are treated. The future of the Ministry and our relations with the Department of the Environment, Transport and the Regions are matters for the Prime Minister and go well beyond this debate.
Agriculture is intrinsic to the rural economy. We grow our food in the countryside. Some 70 per cent. of the country is used for food production—a very different situation from that in Canada or the United States, as my right hon. Friend the Minister of Agriculture and I said last week to the House of Lords Select Committee investigating genetic modification. It is clear—-there is no secret—from what my right hon. Friend has been saying on the record recently that we shall be making an announcement as quickly as possible on our decisions on the requirements of agriculture and the food production industry in this extremely difficult period. Prospects for the immediate future do not look good. I regret that I had to say that a year ago, too.
We are looking at a package of measures. We must ask ourselves what the package is for. It must meet short-term needs and not destroy the industry or grow like Topsy and make long-term restructuring more complicated. That would not serve anybody's purposes. That is one of the reasons why we are moving as quickly as we can towards bringing forward payments. We understand the urgency of the situation and will make our conclusions known to the House as quickly as possible.
8.20pm
Mr. Tim Yeo: I warmly welcome the fact that the House is debating agriculture. I congratulate the Liberal Democrats on choosing the subject for this half-day debate. Alas, I am not able to congratulate the hon. Member for Ross, Skye and Inverness, West (Mr. Kennedy) on the way in which he opened the debate. The first quarter of his speech was devoted to an extraordinarily trivial series of party political points. When he reads Hansard tomorrow, even he will be ashamed of the way in which he opened the debate. Even the deplorably low standards of the Liberal Democrats were plumbed to a new low.
The Conservative party believes that the crisis in agriculture is far more important than scoring party political points. [Interruption.] That seems to be a matter of mirth on the Government Benches. The Conservatives had decided that half of the first Opposition day available to us following the summer recess would be devoted to this very subject. The seriousness with which we take the issue is reflected by the presence of not only my hon. Friends the Members for Cambridgeshire, South-East (Mr. Paice) and for Teignbridge (Mr. Nicholls) but my two predecessors, my right hon. Friends the Members for Skipton and Ripon (Mr. Curry) and for Fylde (Mr. Jack). I am delighted that they continue to take an interest in the subject.
I shall turn in a moment to the comments of the Minister of State, Ministry of Agriculture, Fisheries and Food, the hon. Member for Birmingham, Perry Barr (Mr. Rooker), but must first say that I had expected by now to be responding to a speech from the Minister of Agriculture. I am amazed that he did not choose to speak in this debate. He has been in the job for 13 weeks—is that not long enough? He said on television yesterday that he knew that agriculture was going through difficult times, but does he understand just how difficult? At this very moment, farmers who are on the verge of quitting a way of life that has sustained them, their parents, their grandparents and, in some cases, many generations before that are waiting to hear from him. Their decisions may depend on whether hints of a rescue package, which have been so tantalisingly dropped over the past few days, turn out to be true or false.
The Minister has spent much of the past 13 weeks trying to show that he is different from his predecessor. I grant that he has had some success—although the standard by which he has been judged is not a very demanding one. This evening, that hard-won progress has been thrown away. For as long as the Minister occupies his new office, on which his predecessor lavished so many hundreds of thousands of pounds just when he was cutting help for Britain's poorest farmers, he will be known as the Minister who refused the chance to debate the worst crisis to hit agriculture for half a century.
After a two-and-a-half month parliamentary recess, during which conditions in farming have steadily worsened, the Minister has nothing to say. His silence today confirms what we all knew: new Labour does not care about the countryside. As far as the Government are concerned, farmers can go bust. Perhaps there is a reason for the Minister's silence; perhaps he does not know what to say. On this issue, as on so many other countryside issues over the past year and a half, Ministers have moved
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from denying that there is a problem, through panic at discovering that there is a problem, to confusion about how to tackle that problem.
Last week, the spin doctors were hard at work. On Saturday, we read that a package of help was to be unveiled by the Minister after the Prime Minister—no less—had intervened. On television on Sunday, 24 hours later, the Minister denied that. On Sunday morning, the newspapers said that the Prime Minister had asked the Minister to investigate supermarket prices. Then, on television, the Minister denied that as well. Just what is going on? Who is in charge of agricultural policy? Is it the Minister, No. 10 or the spin doctors? Those issues are too important to be trifled with in such a misleading way. I hope that, when the Minister eventually has something to say, he will say it in the House and not try to leak it to the newspapers through spin doctors, as he and his colleagues have clearly been doing over the past few weeks. The situation is too serious for that.
As the president of the National Farmers Union, Ben Gill, pointed out yesterday, farm incomes this year will probably be less than a fifth of those two years ago. In case anyone thinks that that is just like a few City dealers losing their Christmas bonus, I remind the House that average farm incomes in Wales last year were less than £160 a week and less than half that this year. That is an insulting reward for a demanding job. I notice that the issue is not one about which Labour Members have much to say at the moment. Many farmers are working for pay below the minimum wage. Indeed, it is hard to find a price of any commodity that is not lower than it was in May last year.
This crisis will destroy many farmers. Businesses that have provided a living for two or three people for generations are disappearing. Closure of a microchip factory in the north-east may make the headlines, but the trauma for the men and women who are being forced off the land every week by a Government who do not care is just as great. The crisis is not just hurting farmers and their families; it is hitting the entire rural economy.
Mr. Öpik: Does the hon. Gentleman agree that the crisis to which he refers is most particularly hitting smallholdings and family farms, which have existed for generations but could be pushed entirely out of the industry?
Mr. Yeo: The hon. Gentleman is quite right; I fear that that is exactly what is happening.
The Secretary of State for Trade and Industry would probably say that the idea of helping farmers was pretty gut-wrenching, but if farmers—large or small—do not survive, many other businesses in other industries will be threatened, too. The effects of the agricultural depression which is only just around the corner will not be confined to the economy. Soon, the entire fabric of our countryside will deteriorate. Those beautiful landscapes, which are cherished even by urban dwellers, and those precious green fields—if, indeed, any survive the Deputy Prime Minister's attempt to cover them with houses—will suffer neglect.
I do not suggest that all the problems in agriculture started on 1 May last year. Some of them are clearly long-term difficulties. The tragedy is that, faced with such problems, the Government do things that time and again

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make matters worse. The average strength of the pound over the past 18 months of Labour Government has been a serious problem for many farmers. That is the direct result of Government policy. If a Government choose to tax savings and investment and announce spending increases without knowing how they will be paid for, inevitably, financial markets worry, interest rates are forced up and the pound starts to rise. The level of the pound is nothing to do with what the Bank of England has done and everything to do with what the Government have done.
Let us take the problems of the beef industry. Instead of trying to boost confidence in British beef, the Government ban beef on the bone.
Sir Robert Smith: Given what the hon. Gentleman has said about the fault not being the Bank of England's, does he support the independence of the Bank of England, now that he is happy with the way in which it is behaving?
Mr. Yeo: The hon. Gentleman does not appear to have followed my argument. The point is that, if the Government give the Bank of England a remit but then follow policies such that the only way that the Bank can achieve that remit is by raising interest rates, it is the actions of the Government, not those of the Bank, that have led to higher interest rates.
Mr. Bob Blizzard: If the hon. Gentleman is so concerned about the effect of exchange rates on the farming industry, why does his party show no interest in what the National Farmers Union wants—early entry into the European single currency—and instead rule that out for 10 years? How can the Conservative party be the farmers' friend when it would deny farmers what they want for the next 10 years?
Mr. Yeo: How farmers react depends entirely on the level at which we enter the single currency and on the relationship between sterling and the euro. The single currency solves no problems for farmers if, at the point of entry, the relationship between sterling and the euro is the wrong one.
Beef is a more immediate issue for farmers. Instead of trying to boost confidence in British beef, the Government chose to introduce the ban on beef on the bone. The previous Minister of Agriculture said that banning beef on the bone would help to get the European Union to lift the export ban, but it has totally failed to do so. Indeed, the ban on beef on the bone now appears to have become part of the problem. Lifting that ban would not cost consumers, taxpayers or farmers a single penny and it should be lifted today. If the Government do not lift it, there is a risk that the EU will try to make it permanent. What an extraordinarily disgraceful outcome that would be—a gratuitous act against British farmers committed by the Labour Government.
Mr. Gordon Prentice: Is it not true that the controls in abattoirs that we were promised by Conservative Ministers were not rigorously enforced? The Labour Government have to deal with that problem, which was created by the Conservatives.
Mr. Yeo: The hon. Gentleman might be aware that the ban was described by the Selkirk sheriff court as
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"a manifest absurdity". It was described by the Institute of Trading Standards as "unenforceable". That underlines how ludicrous it is to attempt to introduce a ban to reduce an almost unmeasurably small risk. There is more risk of being killed by a lightning strike than by eating beef on the bone.
Mr. Rooker: The ban on beef on the bone was introduced on the advice of the Spongiform Encephalopathy Advisory Committee and the chief medical officer. If we had not introduced the ban, we would have been the first Government knowingly to allow BSE—at whatever level—into the food chain. We are not yet aware of the results of the experiments on bone marrow, and for the hon. Gentleman to advance his arguments on the very day that the families are before the BSE inquiry is quite despicable.
Mr. Yeo: I do not think that the ban was justified when it was introduced; I do not think that is has been justified at any stage since its introduction; and I certainly do not think that it is justified today. I maintain that the ban on beef on the bone should be lifted forthwith.
Mrs. Angela Browning: Does my hon. Friend recall that, when the Minister banned beef on the bone and we debated the subject in the House, I put it to him that, if he were genuinely concerned about human health, he would ban those bovine bones, classify them as specified bovine material and have them properly disposed of? However, it is the only part of the bovine carcase for which advice has been given stating that it should not enter the human food chain that is not properly disposed of. That shows how bogus the Minister's argument is.
Mr. Yeo: My hon. Friend speaks with great expertise and passion on the subject and she is absolutely right.
Mr. Curry: Would not my hon. Friend be more convinced by the Government's argument in respect of beef on the bone if there were any consistency in the Government's treatment of green-top milk? Why is green-top milk apparently unsafe for Scots to drink, but safe for the English to drink? Actuarially speaking, is not the risk from such milk far greater than that from beef on the bone?
Mr. Yeo: My right hon. Friend is absolutely right, and I hope that the Minister will address that point when he winds up the debate.
I welcome the signs of a rethink on the end to the calf processing aid scheme, although it appears that, on this subject as well, the Government are in a state of confusion. The Minister said that he was not thinking of extending the scheme, but that he was reconsidering the present position. I hope that he will sort out his views on the subject as soon as possible.
I realise that the Minister might encounter difficulty with the Treasury, which has been no great friend to the Ministry of Agriculture, Fisheries and Food—MAFF was one of the Departments that did particularly badly under the terms of the comprehensive spending review. Presumably, the Treasury is one of the reasons why the Minister will not access further agrimonetary

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compensation, although that might also remain in the balance—the Minister was not absolutely clear on that point.
Still on the subject of money, I come to the hill livestock compensatory allowance. The Secretary of State for Wales let the cat out of the bag when he said, in the context of the hill farming review, that there was no money available. Will the Minister confirm that? A fat lot of good the consultation process will be if the decisions have already been set in concrete, but the public has not been told.
While the Minister tries to persuade his colleagues that farming is in crisis, may I suggest five things he could do instead, none of which involves public spending? Although one or two might require him and his colleagues to stick up for British interests in Europe to a greater extent than they have been willing to do so far, all five would help to secure a fair deal for British farmers—a chance to compete on equal terms.
Mr. Hilton Dawson: Would the hon. Gentleman care to remind us exactly who got us into such a dreadful mess over the beef export ban and the subsequent debacle affecting British agriculture?
Mr. Yeo: The hon. Gentleman has just illustrated more eloquently than I could why we are in such a mess. If Labour Members do not understand that the situation affecting farming is infinitely more serious today than it was two years ago, there is little hope that Ministers will be persuaded to take the action that is needed.
Mr. Dawson: Will the hon. Gentleman give way?
Mr. Yeo: No, not again. The hon. Gentleman has demonstrated such ignorance of the issue, it is not worth wasting the House's time.
The first part of the fair deal is that we want farmers to have a fair deal when competing against imports. Pig farmers are now producing under conditions that, quite rightly, are more demanding than in the past. Their competitors abroad will not have to meet those conditions for several years, yet when bacon appears on the supermarket shelf, how is the shopper to tell whether or not it comes from a humanely reared British pig? Is it right for consumers to be offered pigmeat products produced under conditions that are not allowed in this country, without their being warned that that is the case?
Against a background of rising bankruptcies in the pig fanning sector, will the Government encourage retailers to ensure that consumers know whether or not the pig from which the product on the shelf has come was reared in Britain? If the Government will not give that encouragement, every pig farmer in Britain will know that the Labour Government are not on his side. Every consumer in Britain will know that the Minister is happy to deny him or her a chance to support a home industry that is leading the way towards higher animal welfare standards.
Mr. Tyler: I am delighted to hear that the hon. Gentleman now supports the policy that we urged the previous Conservative Government to adopt. Can he
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explain why he has undergone such an amazing transformation? Is it a case of the swine going over the cliff?
Mr. Yeo: I am amazed to learn that, even after the interventions from Labour Members, the hon. Gentleman has not spotted that there has been a sea change in the extent of the problems facing farmers. The situation facing pig farmers today could not be more different than the one facing them when the Conservative Government were still in power. If the hon. Gentleman has not bothered to go out and talk to enough farmers to discover that for himself, what hope is there for the Liberal party?
Mr. Colvin: My hon. Friend referred earlier to 1 May last year. It might be of interest to hon. Members to hear from a working farmer whose family normally benefits from about a 1 to 2 per cent. return on capital invested in our farm. On 1 May last year, we had profits almost equalling my salary as a Member of Parliament—about £45,000. Over the past year, under the Labour Administration—I do not blame them entirely—that profit, which was fairly regular, has turned into a loss of £60,000. That is a graphic illustration of what my hon. Friend is telling the House. There has been a drastic collapse of farming across the country, not only in hill areas.
In Hampshire, where I farm—it is probably one of the most innovative and successful counties in the country—every sector of farming is being hit. Admittedly, the smaller farms are coming off worse, but the whole industry and the rural economy are being drastically hit.
Mr. Yeo: My hon. Friend clearly points out how severe are the difficulties that farmers now face. In view of the extent of those difficulties, it is right for the Conservative party to state that new responses are needed to deal with a wholly new position.
The second part of the fair deal for farmers is to cut the burden of regulation. As we are running short of time, I shall give only one example. Four weeks ago today, the Meat (Hygiene and Inspection) (Charges) Regulations 1998 came into force. That involves a massive increase in the supervision of abattoirs by official veterinary surgeons and meat inspectors. A small abattoir in Norfolk now faces the prospect of having two slaughtermen overseen by four supervisors. Does the Minister believe that the same degree of regulation will be applied evenly across the European Union? What is the cost of implementing those regulations? In view of his party's commitment to open government, will he release the so-called reasoned opinion document in which the European Union attempts to justify that interpretation of the regulations? If he is unable to answer those questions tonight, will he write to me and place a copy of his letter in the Library?
The third part of the fair deal for farmers concerns the Government's purchasing policies. The Minister explained that he cannot have a "Buy British" policy, but it seems that the spin doctors have been at work here. They are keen to suggest that Ministers are trying to encourage the buying of more British food.
Six weeks ago, I wrote to the Secretaries of State for Health, for Education and Employment and for Defence and the Home Secretary to ask about the policies followed for buying food in hospitals, schools, prisons and the

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armed services. So far, not one of those four Ministers has replied to my letter. It does not seem that helping the British farmer ranks very high in their priorities, but it so easily could. Will the Minister tell the House what discussions he is having with his colleagues? Will he ask them to answer my letter before another six weeks go by?
The fourth part of the fair deal for farmers concerns supermarkets, which are a popular target at the moment. Many retailers in Britain are highly efficient because they have responded to consumer tastes. They exercise great power, especially in relation to farmers, and that power carries responsibility. Supermarkets have some explaining to do about why falling farmgate prices are not reflected on the supermarket shelf. It is not in their interests or those of the consumer for large numbers of British suppliers to go out of business. Imported alternatives may not always be cheaper. I am glad that supermarkets such as Asda have responded to public opinion about lamb. I hope that they will show the same sensitivity over prices. The catering trade might also think about how it can help British farmers.
The fifth and final point about the fair deal for farmers concerns the wider issue of the Government's attitude to the countryside. Rural communities whose incomes are falling face serious challenges. Their morale and, therefore, their ability to cope with those challenges are greatly weakened by a series of Government attacks on the rural way of life, including the threat of a law giving an unrestricted right to roam, the attempt by Labour Members to ban traditional country sports and the cut in cash support for councils in rural areas. When will the Government abandon those attacks on the countryside?
Does the Minister realise that the first sign of whether the Government have had a change of heart will come when the Deputy Prime Minister announces the distribution of the revenue support grant—the cash support for councils for 1999–2000? That announcement is only five weeks away. Will the £100 million taken from the rural councils by Labour last year be given back this year? Has the Minister pleaded the cause of the countryside with the Deputy Prime Minister? Does he realise that the decision will be a litmus test of whether the Government's hostility to the countryside continues?
Those five issues form the core of the Conservative party's fair deal for farmers. They will not cost a penny of public money. They do not need European Union approval. All could be achieved right away. Of course the list is not exhaustive; there are plenty of other measures, such as improving cash flow by accelerating integrated control and administration system payments. Time does not allow me to deal with all the important issues; there will be other opportunities to do so.
The subject of the debate is crucial. Many questions have been asked and not many have been answered. The Minister must understand that the delay in responding to the crisis in agriculture will not only be a political embarrassment but damage the industry, hurt thousands of small businesses and weaken the morale of men and women across rural Britain. The Opposition are ready to support any measures proposed by the Government that will deal with the crisis, but we suggest that the Minister makes a start by accepting our proposals for a fair deal for British farmers.
8.45 pm
Mr. Huw Edwards: I rise to speak in this debate as a member of the Select Committee on Welsh Affairs, which in the past few months has produced a detailed report on the crisis in livestock in Wales and recommended that the role of supermarkets should be referred to the Office of Fair Trading. We await the outcome of that investigation.
I speak also as a Member who represents a constituency where agriculture is the dominant industry. Nobody can deny that it is an industry in crisis. Six or nine months ago, farmers in my constituency who were affected by the beef ban were saying, "At least the price of lamb is holding up." I am afraid that, over the summer, the price of lamb has plummeted, which has affected farmers throughout my constituency and throughout Wales.
On top of that, this weekend we had some of the most severe floods that south Wales has experienced for 20 years. I shall never forget witnessing the distressing sight of dozens of drowned sheep at a farm near Abergavenny, or hearing stories of cattle floating down the River Usk being rescued by farmers. As if there has not been enough of a crisis for farmers, they had to experience those traumas. I take this opportunity to pay tribute to all those involved in helping during the aftermath of the floods: the police, the fire services, public servants, local authority workers and all the volunteers, such as councillors, who assisted my constituents and those of other hon. Members.
There is undoubtedly a crisis. It is estimated that 15 per cent. of farmers may go out of business in the next two years. In Abergavenny market a few weeks ago, lambs were selling for £1 per head.
Mr. Öpik: Is the hon. Gentleman aware that that is also common in Welshpool and mid-Wales? Only this morning, a farmer received, after commission had been subtracted, a net income of £8.69 for 44 cull ewes. That is even worse than the price quoted by the hon. Gentleman.
Mr. Edwards: The hon. Gentleman has a strong interest in the matter, and I do not deny the figure that he quoted.
There is a crisis in farming which needs to be referred to the social exclusion unit. We have never sufficiently applied the concepts of social inequality and poverty to people in rural areas, and now is the time to do so.
I welcome my right hon. Friend the Minister of Agriculture, Fisheries and Food to his post and I congratulate him on having the guts to face the farmers who attended the rally at Blackpool football club at the beginning of the Labour party conference.
Mr. John Hayes: Will the hon. Gentleman give way?
Mr. Edwards: Not now.
That must have been the biggest crowd that Blackpool football club had seen since the great days of Stanley Matthews. People were not there to watch Labour Members beating the press in a football match earlier that morning. I do not underestimate the significance of that rally—8,000 farmers attended, as did I and other Labour Members.

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The new Minister showed that he has an understanding of and an empathy with the farming community and its crisis. He showed farmers that there is a commitment to getting the beef export ban lifted by Christmas and that a package of short-term measures will be introduced as soon as possible. He demonstrated that he will consider agrimonetary compensation and consider extending the calf processing scheme, and that he will make progress on the date-based export scheme. He will also consider the early retirement scheme. I understand that some 8,000 farmers in Ireland have taken early retirement, and I hope that such a facility will be made available to farmers in Britain also.
Mr. Hayes: I am grateful to the hon. Gentleman for giving way. I acknowledge his comments about the new Secretary of State. Is he not as disappointed as I am—and as all the farmers of Britain will be—that the Secretary of State is not present for tonight's debate? What signal does that send to rural Britain and to the farmers who have been so badly hit?
Mr. Edwards: My right hon. Friend has attended the debate, but I shall continue with my speech. Wherever the Secretary of State may be, I hope that he is working in the interests of British farmers.
I think that macro-economic policy can make a greater contribution. I looked through the quarterly bulletins of the Bank of England and I found no recognition of the rural economy. There is information about manufacturing prices and factory gate prices, but there is nothing in macro-economic discussion and deliberations about farm gate prices and the impact of interest rate policy on the farming community.
The Governor of the Bank of England has been in trouble in the past week as a result of certain comments that he is alleged to have made. I suggest that the Monetary Policy Committee should meet not just in Threadneedle street, but in the community. Perhaps it should start in the north and explain what the Governor meant to say last week. The committee could visit Wales, Northern Ireland and the regions of the United Kingdom, and see the impact that its deliberations have on our rural communities. I suggest that the committee visits Abergavenny on a Tuesday afternoon following market day to see the impact of its policies and deliberations on the farmers in my constituency.
I also urge the Treasury to look in more detail at the social and economic costs of a recession in fanning. There is little discussion of that topic. When there is a crisis in manufacturing, there is considerable public debate about the problem. However, there is hardly any public debate about the crisis in the rural economy and hardly any consideration of the social, economic and financial costs to the rest of the community.
Mr. Jack: Will the hon. Gentleman give way?
Mr. Edwards: No, I will not. The right hon. Gentleman may wish to speak in the debate so I shall draw my comments to a close as quickly as possible.
We clearly need a new long-term strategy, which includes the overhaul of the common agricultural policy. This country cannot be paralysed by Europe. Like the
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Irish Government, the British Government must have more scope for determining agriculture policy. We have received some good news in Wales in the past few days as it is likely that we shall be eligible for objective 1 status. However, I make one suggestion about the use of those funds should they be secured by Wales.
The Welsh Grand Committee recommended that there be support for the construction in this country of a large-scale freezer facility for lamb. Apparently there is no such facility in the whole of the United Kingdom. I hope that the Government will consider using objective 1 funding to construct such a facility, to construct more and better slaughtering facilities, to improve infrastructure throughout Wales and to improve transport.
We have seen in Wales the amalgamation of the Welsh Development Agency and the Development Board for Rural Wales. My area of Wales was never within the sphere of the DBRW, but it will now be covered by the new, revised Welsh Development Agency. I hope that the agency will consider how it may invest in agriculture and in agricultural infrastructure in the same way that it has invested successfully in manufacturing in Wales.
Our universities and further education and agricultural colleges can clearly play a greater role in agriculture. People in the farming industry do not have the opportunities for retraining that are available in other areas of business. Our agricultural and further education colleges and business schools could do more to assist farmers in improving their basic skills and gaining business skills.
There is no doubt that farming is in crisis as a result of a combination of world market conditions, the substantial costs of the BSE crisis, the control of the supermarkets and the failure of long-term policy throughout the whole post-war period—apart from the immediate post-war period when there was a British agricultural policy. Governments of both political persuasions must take some of the blame for the lack of a long-term policy. The Government recently conducted a strategic defence review and they should establish a strategic agricultural review as well.
Farmers produce the food that makes our people healthy and they tend the beautiful countryside. However, they receive scant rewards for their efforts at present. Our farming community deserves a better deal and I urge the Government to do all in their power to respond to its great needs.
8.54 pm
Mr. Michael Jack: I listened to the speech by the hon. Member for Monmouth (Mr. Edwards), but I am afraid that I did not hear him denounce the independence of the Bank of England, which led to the interest rate policy that has forced up sterling. That lies at the heart of the rural crisis on which this debate has touched so far. I did not hear the hon. Member for Lancaster and Wyre (Mr. Dawson) denounce that self-same policy in his intervention. I did not hear either of those hon. Gentlemen denounce the ban on beef on the bone. Labour Members are long on the rhetoric of denunciation when it comes to the previous Government's policies, but short on doing something tangible to benefit the farming communities whom they purport to represent.

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I turn initially to the bizarre speech by the hon. Member for Ross, Skye and Inverness, West (Mr. Kennedy). He is so interested in the debate that he has left the Chamber and is not here to face the music.
Mr. Tyler: Will the right hon. Gentleman give way?
Mr. Jack: I shall make this point and then give way with pleasure to the hon. Gentleman.
The hon. Member for Ross, Skye and Inverness must think that he is still on the "Any Questions?" programme last week when he did his usual humorous turn. It appears that he forgot to switch off when he entered this Chamber to contribute to the debate. I listened carefully to his speech in the hope of hearing coherent Liberal Democrat policies on pigs, poultry, livestock prices, the Government interest rate policy, the issue of farm suicide, tertiary industries in agriculture, the calf processing aid scheme and the strength of sterling. However, the hon. Gentleman set out no such policies.
Mr. Tyler: I was going to point out that many of the right hon. Gentleman's colleagues left the Chamber when he rose to speak, but that would be uncharitable. I have two questions for the right hon. Gentleman. First, does he recall that the previous Conservative Minister of Agriculture, the right hon. and learned Member for Sleaford and North Hykeham (Mr. Hogg), supported the beef on the bone ban? Secondly, in view of the fact that the right hon. Gentleman appears to support our motion, will he give an undertaking to vote with us in the Lobby tonight?
Mr. Jack: The hon. Gentleman has illustrated how some hon. Members chose to oppose—as we did—the ban on beef on the bone. Other hon. Members talked at length about their support for farmers, but were short on acting to do something about it.
There was no constructive content in the speech by the hon. Member for Ross, Skye and Inverness and I repeat my comment that I am disappointed that he is not present to listen to the rest of the debate. I believe that we are entitled to know the Liberal Democrats' views. If the motion is the product of constructive opposition, every constituency represented by a Liberal Democrat Member of Parliament knows that it has won absolutely nothing for its agricultural communities by voting Liberal Democrat.
There could be no finer illustration of that fact than a glance at the latest piece of paper produced by the Ministry of Agriculture, Fisheries and Food. In my mail today, I received a piece of paper that purported to come from the Minister of Agriculture, Fisheries and Food, headed "Agriculture Latest". It is so late that I have not received a copy until edition No. 12. It purports to come from the Minister, but is signed by his special adviser. In it we see a list—totalling some £145 million—of the aids that are supposed to have gone to farming.
It is remarkable how the Government put spin on everything. They forget the fact that they did not maintain HLCAs at the £160 million figure at which we left them, and they forget that that cost farming £35 million. They have completely forgotten the fact that, even now, when a quarter of a point has been taken off interest rates, farmers must pay very substantially more for their
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ever-increasing amounts of working capital, which wipes out, at a stroke, whatever help the Minister of State listed in his remarks.
There is even a difference between Labour Front-Bench and Back-Bench Members. I pay tribute to the hon. Member for Monmouth. He was honest when he said that there was a crisis in agriculture, but I remind him of the way that Ministers describe it in the document "Agriculture Latest":
"Farmers are facing considerable difficulties".
That is the way in which the Ministry of Agriculture describes it—"considerable difficulties".
Ministers have variations on that theme. I wondered whether, during this period of learning and consulting with the farming industry, MAFF had come up with any constructive ideas. I looked at the titles of the MAFF October press releases. What do we find that Ministers are busy doing during this period of considerable difficulty? They are issuing press releases on "Changes to Licensing Arrangements for Killing or Taking of Bullfinches". It may be very important to bullfinches, but it is not exactly relevant to the crisis in British agriculture.
A MAFF study was published, which confirms that wild boar are in the countryside. Judging by the Minister of State's boring speech, I think that some have penetrated into the House of Commons tonight, because I find the way in which the Government are playing fast and loose with farmers' expectations totally unacceptable. When I read headlines like the one in Farmers Guardian for Friday 16 October—"Brown Gives Hint of Extra Aid for the Industry"—I realise that it is a case of fiddling while Rome burns. It appears that the Government completely fail to understand that, by and large, over the decades, politicians have formed the marketplace in which agriculture now exists. It is hardly surprising, therefore, that farmers turn to politicians for help when the going gets tough.
The detail is interesting. Earlier, the noble Lord Sewel was cited in debate. When there were difficulties in the pig industry in Scotland, he found £150,000 to help with marketing initiatives. The Minister of State has been silent tonight on whether pig producers in the rest of the United Kingdom can hope for help in any form. Likewise, he has been silent on the question whether, if the beef ban is lifted, there will be any help to rebuild markets. He talks about the need for it, but he offers farmers no substantial help.
The Minister of Agriculture, Fisheries and Food could do three things that would be of particular help to farmers. The Ministry used to run the marketing development scheme—a small, low-cost scheme, providing small-scale but much-needed help to improve the marketing of British-produced products. The Government removed it. My first suggestion is that the Minister should consider setting up such schemes. They do not cost much, but they boost farmers' confidence, and they represent something that the Minister could do now.
Secondly, not every farmer can afford an agronomist to help him farm better. The Minister might inquire into the possibility of small-scale consultancy schemes to help those who run smaller and medium-sized farms—the family farmers, the backbone of British farming—to find ways in which to farm better, and perhaps to farm their way out of some of the trouble.

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Thirdly, I suggest an idea that would cost nothing. The Minister says that he will meet and talk to the British Retail Consortium, which is good, but why not bring all branches of the food industry around the same table? The Ministry is the sponsoring Ministry for agriculture, fisheries and food in this country. Why does not the Minister create a council or forum in which these matters can be thrashed out across the table to improve the understanding, communication and sense of partnership between British farming and the supermarkets? He could have done so already; yet, in August, the Minister of Agriculture, Fisheries and Food disappeared completely from the scene, on so-called Foreign Office-arranged business. Perhaps he was visiting Chile—I know not why. Whatever he was doing, he was not here, and ever since then, he has tried to use that "Let me put my arm around the farmers and buy them a pint" approach, thinking to himself, "That will buy them off for another week, then another week, then another week"—and the situation in agriculture gets worse by the week.
There has been no new initiative since the new Minister took up his post. I am glad that he is listening—he may be getting the message. Even on the one token—totem, perhaps—of the state of British agriculture, the lifting of the beef ban, we seem to be getting further away from our objective than when the previous incumbent, the Minister for the Cabinet Office, the right hon. Member for Copeland (Dr. Cunningham), was in the job. If the beef ban were lifted, it would do a great deal psychologically to assist British farming.
Mr. Hayes: Will my right hon. Friend give way?
Mr. Jack: I must bring my remarks to a conclusion, as I know that other right hon. and hon. Members want to speak in the debate.
The Secretary of State for International Development encourages the consumption of fair trade coffee through her messages to commercial Britain. Perhaps the Minister should consider that.
I shall speak briefly about the situation relating to pigs. I wrote to every Secretary of State and Minister in the Cabinet asking what his or her Department was doing to help the consumption of British pigmeat. I received a telling letter signed "Yours sincerely, Nick" from the Minister of Agriculture. In that letter, he refers to the 14 MAFF canteens, which are all run by contracted caterers. The letter tells me that those are all profit-making companies—would not farmers like to be profit-making companies? The Minister states:
"it would be wrong for us to interfere in their profit making decisions."
Many farmers would like to make profit-making decisions. The letter continues:
"We cannot therefore specify to them how to source their products."
Nowhere does the Minister state in his letter that he has written to the companies and told them about the quality assured pork or British charter quality bacon and ham, or that he has written to draw their attention to the welfare issues that are vital to Britain's pork producers. There was no initiative in the Minister's letter on that subject. The situation is worse in the world of Labour-controlled local authorities.
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I ask the Minister to look at part II of the Local Government Act 1988, section 17(5)(c). I discovered that that legislation effectively inhibits any local authority from intervening with its own suppliers of products such as pork, to help and guide them on all the arguments that we have deployed in the House about welfare standards and the quality of British pork, and other products. I hope that the Minister will have discussions with his right hon. and hon. Friends in the Department of the Environment, Transport and the Regions to see what can be done.
Farming is in a state of crisis. The Government look as though, like Nero, they are fiddling while Rome burns. I appeal to the Minister not to leave it too late before he acts.
9.7 pm
Mr. John Grogan: One of the most significant remarks during the debate was made by the hon. Member for South Suffolk (Mr. Yeo) when he was responding to an intervention from the hon. Member for Waveney (Mr. Blizzard) about the effect on farm incomes of Britain joining EMU. He seemed to say that the effect on farming incomes would depend entirely on the rate at which we joined the single currency. It surprises me that the Opposition rule out joining the single currency over the next 10 years, if that depends entirely on the rate.
On the day of the first countryside rally, I was invited by a group of my local farmers in Selby to present the prizes at the first annual Selby horse ploughing competition. They said that it would be a unique experience for a politician to contemplate ploughing a straight furrow for a whole afternoon. There was plenty of time for contemplation that afternoon. One of the many attractions of horse ploughing as a spectator sport is that it makes indoor bowls, for example, look like a form of rapid activity.
As I was contemplating the state of British agriculture that afternoon, one of the local farmers showed me with some glee The Daily Telegraph of that day, which reported on its front page that my constituency, Selby, was one of the four most rural Labour marginal seats. Indeed it is. There are 5,000 people in my constituency who depend on farming, part-time or full-time. There are many more who supply the agriculture industry, or who run village shops and depend largely for their income on the wealth of farmers and their families. That community in my constituency and elsewhere—we have heard about Wales, for example—is going through extremely hard times. We have heard many reasons for that. My hon. Friend the Minister of State mentioned Russia. Perhaps it is not the most crucial factor, but it is one of the most immediate. We are not talking about skins alone, because a third of European Union pigmeat went to Russia before the collapse of the economy. Much of that meat is now being diverted to the British market, especially Danish bacon.
There is a Chinese proverb that says that unless someone lives in the countryside he cannot really appreciate what hard times are. Perhaps that is pushing it a bit in the modern British economy, but the hard times that farmers are facing are different—not better or worse—from those that miners and steelworkers have faced in the past decade. At least miners and steelworkers have the strength of community that comes from living in a pit village or a steel town. Many farmers face their

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individual hard times very much individually. They have to shoot their own stock. If necessary, they themselves have to go bankrupt.
The figures are stark. Net farming income only a couple of years ago was about £4 billion. The best estimates this year tell us that that income is about £1 billion. Net farming borrowing is up to £6.2 billion this year, which is a 10 per cent. increase. Pigmeat, to take one example, was selling for about £1.40 a kilo a couple of years ago at Selby market. The best price to be obtained tomorrow would be, perhaps, 60p.
Mr. Hayes: Judging from the tone of the hon. Gentleman's speech, I am sure that he will try to make a positive response to my intervention. We have heard much about Russia, China and many other places. We have heard also about cultural and long-term problems. What proportion of the blame for the crisis does the hon. Gentleman lay at the Government's door? As an honourable man, he must surely acknowledge that the Government have some responsibility. The Minister of State acknowledged none. What proportion does the hon. Gentleman acknowledge?
Mr. Grogan: I think that the Government are doing an extremely good job. I shall come on to various things that I think the Government should do, if the House will bear with me.
I shall quote a farmer who wrote to me only last week. He is one of my constituents, and a typical family farmer. He works with his son and employs one person on his mixed arable farm. He wrote to me as follows:
"Ours is a typical family farm and has been successful over many years. Last year, however, saw the start of our troubles as our profits plummeted to 36 per cent. of those of the previous year … This year so far has been a complete and utter disaster. Our barley harvest is showing a loss of £93 per acre … As for pigs, we are currently losing over £1,000 per week … I am now in the situation of seeing my life savings swiftly slipping away— £28,000 on pigs alone since April, according to my accounts … Please can you help? I spend long nights awake trying to find ways of keeping this business solvent but to no avail. I am faced with the prospect of putting a loyal worker and good friend on the dole, slaughtering all my stock and being unable to pass on a viable business to my son and his family."
That farmer is doing what many other farmers are doing and running down his savings. However, we must recognise that the mid-1990s were good years for farmers for many reasons, which were largely to do with the green pound. Deloitte and Touche found in its survey that the net incomes of arable farmers increased from £146 a hectare in 1990 to a peak of £354 in 1995. It fell to £129 in 1997.
In response to the hon. Member for South Holland and The Deepings (Mr. Hayes), I think that there are four areas of hope for the farmer in my constituency whose letter I have quoted, and for others like him. First, we have heard much about supermarkets. The referral of British supermarkets to the Office of Fair Trading will be welcomed by those in the countryside, including farmers in my constituency. There seems a prima facie case that supermarkets are not passing on the fall in commodity and agricultural prices to the consumer.
British supermarkets make a third more in profits than their counterparts in Europe and America. A recent OECD survey, based on a common basket of groceries, revealed
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that British supermarket prices were near the top of the league in OECD countries. There are three supermarkets in Selby and supermarket staff have raised the issue of prices with me. They refer to the sourcing and pricing policies of their employers. They recognise that times have changed and that we now live in a stakeholder economy. Supermarkets cannot afford to opt merely for short-term profits for their shareholders; they are part of the wider community.
Mr. David Drew: My hon. Friend is introducing a valuable summary of how we feel that supermarkets could make more of an effort. Does he agree that they could tell the consumer about welfare standards? They could insist that the welfare standards that we are introducing in the United Kingdom should be the same, if they are to sell imports, in exporting countries.
Mr. Grogan: I entirely agree with my hon. Friend. One of the great aspects of British agriculture is its high welfare standards. We should make more of that.
The second reason why British farmers have cause for hope is the development in tone and style of British agricultural policy since my right hon. Friend the Member for Newcastle upon Tyne, East and Wall send (Mr. Brown) took over as Minister of Agriculture. It is easy to mock such things, but they are important. He has shown a greater capacity to listen than any Minister of Agriculture in the past 20 years. That is much appreciated in the countryside. Although it has sometimes been a case of listening not to strong words softly spoken but to strong words strongly spoken and repeated, it has been valuable.
It is worth remembering that we put more money into agricultural support than into the rest of British industry. However, further steps are necessary to resolve the problems of hardship that British farmers face. For example, under the traceability scheme it was good that the capital and revenue costs were funded for the first year, but we must now start to think about the second year. I am glad that my right hon. Friend the Minister is putting the case for more agrimonetary compensation to Cabinet Ministers. It is not easy, as there are many competing demands on resources. The community in Selby and I trust him to put that case forcefully in Cabinet.
The third reason for hope is the reform of the common agricultural policy and Agenda 2000. Any short-term extra help that we give farmers should not conflict with that aim, because that will be the salvation of British farming in the medium term. Agricultural support should be concentrated on paying farmers for countryside and environmental management. British agriculture at its most efficient is well able to compete in a more open and free market with its European Union competitors.
The fourth and final reason for hope is the attitude of farmers themselves. They realise that they must rebuild the bond of trust between themselves and the rest of the community—consumers and so on—because it has been weakened in recent years. British agriculture has high standards in terms of animal welfare and the environment, and must be marketed more aggressively.
Mr. Öpik: Does the hon. Gentleman agree that that bond of trust has been broken largely by the Government's statements and their efforts to imply that

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producers are to blame? To that extent, does he agree that rebuilding that bond of trust requires investment by the Government as well as a charm offensive by farmers?
Mr. Grogan: There are many partners in rebuilding the bond of trust and the Government have a crucial role to play.
There are 5,000 farmers in my constituency. I do not know how many voted for me. By examining the number of posters on trees in farms at the election, I could see that I would certainly have lost if trees had the vote.
Ironically, previous Labour Governments have delivered for farmers far more than Conservative Governments, right back to the days of Attlee and the agricultural legislation of the 1940s, which was never challenged until we joined the European Union. I am sure that, once again, the Labour Government will do well by the British farming community.
9.17 pm
Mrs. Angela Browning: First, I wish to focus on my constituency. It is a large, rural constituency which covers most of the Mid Devon district council area and a large chunk of east Devon. It comprises some 90 parishes, and farming and related industries are extremely important.
During the summer, two pieces of work have been done in the south-west which clearly identify the problems that farmers in my constituency and the rest of Devon face. The first was a study done by PROSPER, the Devon and Cornwall training and enterprise council, which has assessed the present position and reported how it sees the future for farmers in my area. It said:
"What makes this agricultural 'crisis' unique in modern times is that every sector has been affected."
In respect of our mixed farms, of which we have a lot in Devon, one sector may have been affected in previous crises, but cheques from another helped to balance the cash flow. Today, all sectors are affected. The industry's net income this year is forecast to be no more than£700 million, compared with £4.1 billion in 1996, and major banks suggest that about 70 per cent. of all farms in the south-west will make a loss this year.
In addition, a study by the university of Exeter makes startling reading. Its forecasts for the current financial year, which have been commissioned by the Ministry of Agriculture, Fisheries and Food, put the average net farming income for lowland livestock farmers in the south-west at £100—down 99 per cent. on last year. The average dairy farming net income is estimated at £10,300—down 65 per cent. Hill farming incomes are estimated at £7,800—down 59 per cent. Arable farming incomes are down to £12,000 a year—a fall of 56 per cent. We have small arable farms; they are not like the large arable plains of East Anglia.
Those are statistics, but individuals are behind them. Already, they are coming to my surgery, asking, "How long have we got to hang on at these rates of income before we can see some light at the end of the tunnel?" That is the problem which the Government must now address.
I welcome the fact that the Minister said that he is considering a short-term package of help, because such measures are clearly needed urgently. As I went around
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my constituency during the summer recess, I noticed more and more farm sales. More and more farmers have decided that they cannot hang on and that they will not wait for the inevitable—they are putting their farms on the market.
At the moment, land prices in Devon are holding up. So long as they do so, I believe that the banks will continue to support the farming industry, but land prices will drop the moment that a glut of farms comes on to the market. That will affect not only those people whose farms are on the market at any given time, but those who want to stay in agriculture and continue farming. Land prices will drop, however, and collateral value against borrowings will become more vulnerable. Although banks in my area are hanging in there at the moment, that cannot be guaranteed for the longer term.
That is why I will support and welcome any short-term measures that the Minister can find to help the industry today and in the short term. The Ministry must look to the medium and long term, however, because the current crisis will not be brief.
I must declare an interest as a vice-president of the Devon young farmers, although some people might be surprised that I have been called a young farmer. [HON. MEMBERS: "Spring chicken."] Hon. Members are too kind. There is hope among the young farmers. They accept change, perhaps more readily than an older generation who have been used to a method of farming that clearly will not be sustained for ever. If those young people are to have a future, a long-term policy must be introduced.
I want to pick up on an issue that was mentioned by hon. Members on both sides of the House and was touched on briefly, although somewhat acerbically, by the hon. Member for Ross, Skye and Inverness, West (Mr. Kennedy), who mentioned the steel and coal industries during what he described as the Thatcher years. Should a number of farmers and farms go out of business, there will be a related fallout for other industries and jobs. If the medium to long-term fallout in the country or even in specific sectors of farming is comparable to that experienced by other industries in the 1980s, I hope that the Labour Government will follow the Conservative Government's example and recognise that they need to help certain communities, either by region or by sector. [Interruption.] Hon. Gentlemen are jeering, but the record speaks for itself. Money went to the iron and coal communities, and rightly so.
The hon. Member for Monmouth (Mr. Edwards), in his excellent speech, referred to the social exclusion unit. The Minister should take that recommendation seriously. Although farmers are not an organised group, they none the less represent an industry. If many small farmers in my constituency sell their farms or go bankrupt in the next four to five years, I shall put a strong case to the Minister, because that is a genuine example of an industry and of a geographic area that deserves to be considered for support, as other geographic areas were supported in the past.
The motion refers to sourcing British food. In the public sector, that is subject to competitive tendering. The Liberal Democrats are urging the Government to use their efforts to source British food. I hope that the Liberal Democrats, where they have responsibility, will show us that they are prepared to translate their words into action.

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A month ago, I was informed by local butchers and farmers that, in the county of Devon, children who eat beef as part of their school meal no longer eat British beef. Under the new contract given to Devon Direct Services—the in-house contractor of Devon county council—a large catering company supplies Devon schools with Irish beef. In a letter to me last week, the chief education officer of Devon county council informed me that the majority of beef used in school meals in Devon is either
"minced or diced in a frozen free flow form"
and that
"the supply is of Irish origin."
I have written to the Liberal Democrat leader of Devon county council to ask him, in the light of his colleagues' wording of the motion before the House, to ensure that the council does all it can to restore to Devon farmers the opportunity to provide beef for schools in Devon, as they did just a few months ago. I particularly hope that Liberal Democrat Members who represent Devon constituencies, and who have some influence with Devon county council, will support that move.
9.27 pm
Mr. Hilton Dawson: Thank you, Mr. Deputy Speaker, for the opportunity to take part in this exceptionally important debate. We hear many protestations from the Conservative party about its commitment to the countryside. In my meetings with local farmers, I am often complimented on the fact that their Member of Parliament has deigned to speak to them. That shows that the Labour party is listening and is working in the countryside to address a monumentally serious problem. Let us make no bones about it: we have an appalling situation in the countryside.
That was recently brought home to me when I went to meet one farmer at his farm and found 12 farmers there: small farmers, sheep farmers, mixed farmers and dairy farmers. I met contractors and people who had been involved in agricultural contracting for many years. I saw despair at that meeting. I saw the faces of people who were confronted with the break-up of farms that had been farmed by their family for generations. I saw people who wanted to retire: they were tired and exhausted by the daily round of farming. They wanted and needed to get out of farming but were unable to do so. I heard stories about the basic animal husbandry of the countryside not being done on small farms. I heard stories about the basic environmental work of the countryside not being done.
Mr. Lindsay Hoyle: Will my hon. Friend give way?
Mr. Dawson: I will.
Mr. Hoyle: I thank my hon. Friend. I do not think that every hon. Member who wished to speak will be able to do so, owing to the length of some of the speeches that have been made.
Does my hon. Friend agree that the north-west has suffered more than any other region, except one? I feel that there should be a special intervention to support farmers in the north-west.
Is my hon. Friend aware that, although some £25 billion is spent on catering in this country, only 50 per cent. of the product is produced by British farmers? Think of that:
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only 50 per cent. of all the food that we buy in restaurants throughout the country is provided by the British farmer. Here is a golden opportunity for people who are involved in hotel and restaurant chains to play their part by supporting British farmers—along with the supermarkets, which also neglect our farmers.
Mr. Dawson: I endorse my hon. Friend's north-west "patriotism".
The people about whom I am talking need help now. I do not accept the criticisms of the Government's policies that we have heard tonight. The Government have clearly aimed to secure extra help for hill farmers, and, indeed, to secure extra help for agriculture across the board, but more help is needed. We need a retirement package. We need support enabling farmers to diversify. We need support for local purchasing schemes. We need support for co-operatives. We need a new way of approaching work in the countryside.
We also need to put pressure on the supermarkets. Producers are in an intensely vulnerable position: their prices are being driven down. That is not reflected in the supermarkets. I see, hear and feel the frustration of my constituents who, having been to the markets, go into the major supermarkets in the towns and see the price of basic commodities rising, despite the prices that the producers are receiving.
Mr. Drew: May I return to my hon. Friend's earlier point? Does he agree that tenant farmers are especially vulnerable at present? One measure that would help them is a reduction in the price of land, which was mentioned by the hon. Member for Tiverton and Honiton (Mrs. Browning); but it is particularly important to tenants that farm rents should not increase. Indeed, they could be lowered, to ensure that those tenants continue to produce.
Mr. Dawson: My hon. Friend is entirely right. My constituency contains a large proportion of tenant farmers, who, even during the best times, have operated on the margins of viability. They are clearly being hit very hard. I think that large landowners have a big responsibility, in terms not just of rents but of helping diversification, and helping to alter the way in which the rural economy operates.
I do not intend to take any more of the House's time. We have a monumentally serious situation on our hands, and we need the package that is, I hope, on its way. We need that package very quickly. Some farmers face destruction. The word "suicide" comes to mind: some farmers are extremely low.
This is a human issue. We have heard what happened to mining and steel communities in the 1980s. I know that there are hon. Members who will do everything possible to ensure that the communities we represent will never be in the same state.
9.34 pm
Mr. John Burnett: I am happy to declare an interest. I am no longer directly concerned in agriculture, but I am a landlord of agricultural property.
Time and again in the debate, the Minister has been told by both sides of the House of the catastrophe that is visited on UK agriculture. Each of the agriculture sectors

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is on its knees. South-west agriculture, and agriculture generally, is greatly indebted to the PROSPER report, to which the hon. Member for Tiverton and Honiton (Mrs. Browning) referred: "The Hopes and Fears of South West Farmers".
That was published by PROSPER and the National Farmers Union two weeks ago. It was the result of a survey of NFU members throughout Devon, Cornwall, Somerset and Dorset. Ten thousand questionnaires were sent out and 2,854 replies were given.
I am happy to pay tribute to the Western Morning News and its agriculture editor, Carol Trewin, who asked PROSPER and the NFU to undertake that comprehensive survey. It was conducted from June to mid-August this year. I have a copy of the survey for the Minister. It makes bleak and depressing reading.
Morale is at rock bottom. Farmers are working longer hours for decreasing returns, coping with increasing red tape and regulations. The report highlights the dreadful state of agriculture, where last year net farm incomes dropped by 50 per cent. It is estimated that, this year, they will fall by a further 70 per cent.
As the House will know, the problem does not stop there. Agriculture is the prime industry of the rural economy and this agricultural recession has a domino effect on allied trades and services such as machinery, transport and livestock markets.
The sources of the immediate problem have been BSE, an over-valued currency and high interest rates. There are signs that the latter two problems are correcting themselves, but the industry has been knocked so hard that there must be some short-term relief to protect viable farm businesses from insolvency.
Mr. Patrick Nicholls: In view of the point that the hon. Gentleman is making—I entirely accept the sincerity with which he is doing it—will he make representations to the Liberal Democrat leader of Devon county council, urging a rethink on the points that my hon. Friend the Member for Tiverton and Honiton (Mrs. Browning) was making?
Mr. Burnett: I am grateful to the hon. Member for raising that point. I was going to address it in my speech, but I make it clear that British beef is best and that there is no reason why it cannot be fed to British schoolchildren.
Mr. Nicholls: Will the hon. Gentleman make representations?
Mr. Burnett: Of course I shall.
Some Ministers are inclined to preface any discussion about agriculture support by invoking the costs that the Treasury has to bear towards eradicating BSE. I must make it clear that that is not support. It is part-compensation—I emphasise, part-compensation—for gross negligence in the 1980s; it nowhere compensates for the loss.
The indictment that I make against this Government and the previous Government is that, other than the £85 million drawn down last December, both
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Governments have failed to draw down agrimoney compensation. As a result, UK agriculture has lost about £700 million.
It is not for this Government or their predecessor to plead the Fontainebleau problem and the clawback. The UK has saved hundreds of millions of pounds in its contributions to the European Union by virtue of the strength of sterling. UK taxpayers have subsidised and are subsidising agrimoney compensation drawn down by other EU countries. The House should be aware that all other EU countries that qualify draw down that compensation. Our industry should be treated fairly and put on the same footing as other competitor countries.
Because the money has not been claimed by the Government and the previous Government, the compensation is now worth only about £160 million. As I have said, we have lost £700 million. I hope that the Government will draw that remaining money down without delay. The Treasury should also allow a one-off opportunity to average farm incomes for income tax purposes over the past five years. That would go some way towards making good the immediate cash flow crisis for many farmers. The Minister will recall that it was a Labour Government in 1978 who introduced tax averaging over two years.
Others in the debate have highlighted unfair competition and what appears to be a cartel of the superstore operators. Will the Minister explain, for example, why, in the pigmeat sector in September 1995, the supermarkets' retail price was 242 per cent. above the producers' price, whereas by September this year it had risen to 462 per cent?
There was a report in yesterday's newspapers that an inquiry is about to be ordered into why the market is not allowed to operate in the meat sector. The price paid to farmers has plummeted, whereas the price paid by the consumer has remained the same. Will an inquiry be constituted into that extraordinary anomaly?
It seems that progress is being made in lifting the beef ban. I hope that the Minister will remind our European Union partners, first, that there was a ban on meat and bonemeal and that traceability was in place by 1 August 1996; and, secondly, that no bullock over 30 months can be sold for human consumption in the United Kingdom. There can therefore be no reason for any ban after 31 January 1999.
Although we all realise that there has to be a long-term strategy for agriculture, the crisis is now. We await the Government's response to it.
9.40 pm
Ms Sally Keeble: I do not represent an agricultural constituency, and had planned to speak in this debate primarily about the food safety aspect of farming and the food industry. However, after listening to the debate, I feel compelled to examine some of the other issues in agriculture.
If I have one disagreement with my hon. Friend the Minister of State it is that he has been far too gentle in this debate in responding to Liberal Democrat Members. I am sure that he would not be quite so gentle in dealing with Conservative Members or with their failure to deal with the issues.
There can be no real doubt about the problem, which we have all witnessed. Although, as I said, I do not represent a farming community, I have spent much of the

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summer going around farms and speaking with farmers; I also saw parts of the food industry and spoke with food producers. There can no doubt about the problem facing farmers and food producers. Nevertheless, in this debate, we have not heard a possible solution from Opposition Members—[Interruption.] No, we have not. Although we heard much from Conservative Members about a fair deal for farmers, they seem to be caught in a real Conservative dilemma of advocating spending ever more money while not wanting to be the party of public spending.
Conservative Members have produced no options to deal with the long-term structural problems facing British agriculture which have been building up for a long time and which have now been compounded by a series of specific issues affecting crops and food prices. Conservative Members said nothing about problems of over-production, world prices or economies of scale in farming. However, we did hear a suggestion that the preservation of hunting might be part of the solution.
Liberal Democrat Members talked about solving farmers' problems by increasing agrimonetary compensation funds. Ministers have explained that they have targeted a series of measures, to the tune of £255 million, to deal with specific problems. It is especially ridiculous for Liberal Democrat Members—who belong to a party that everyone respects as being pro-European—to talk about agrimonetary compensation, as they really support, or say that they support, restructuring the common agricultural policy to change the way in which funds are provided to support farming.
Liberal Democrat Members have said also that CAP reform must not discriminate against British farmers. They overlook the point that the British Government, above all others, have been leading the argument for CAP reform. The issue is not whether we will get sufficient reform but whether we will get even the very diluted proposals being considered by Europe.
We have heard a great deal in this debate about the crisis in farming, which is being hit by the worst slump in prices since the 1930s. We have heard also various comments about the beef on the bone ban, which the Government are not only tackling but making great progress in resolving. It must be recognised that consumers also have an interest in farm prices and that measures that change the way in which CAP works have to be transparent to the public—they must not simply provide support for farmers in a discredited way.
It is understood that much remains to be done, and the Government have set out their proposals. Huge amounts of advice have been given to the Government, and my advice to them is to keep their nerve and to make sure that, in pursuing the interests of the farming community, we do not end up with short-term measures that do away with any real hope of providing a secure, long-term future for British farming and the British food industry.
9.45 pm
Mr. Paul Tyler: Liberal Democrat Members represent agricultural and livestock communities from Shetland to the Isles of Scilly, so it is entirely appropriate that a Scotsman should open the debate and that a Cornishman should wind up for the Liberal Democrats.
We face a national and a nationwide crisis. I was impressed by contributions from all parts of the House which clearly showed that the recess has been put to good
122
use. I especially praise the contributions of the hon. Members for Selby (Mr. Grogan), who made an excellent speech, and for Lancaster and Wyre (Mr. Dawson). It was also a relief to hear a sober and careful analysis of the crisis from the hon. Member for Tiverton and Honiton (Mrs. Browning), in contrast to the absurd histrionics that we heard from another former Minister.
I am extremely grateful to my hon. Friend the Member for Torridge and West Devon (Mr. Burnett) for referring to the excellent report produced by the Western Morning News and based on a survey undertaken by PROSPER and the National Farmers Union, to which I shall refer again.
Two facts are unchallengeable. The first is that every sector of agriculture is now under severe threat. The old country saying, "Horn up, corn down; corn up, horn down" has been swept away in the 1990s. Secondly, everyone has to agree, even if it cannot be admitted in public, that the crisis did not begin on 2 May 1997.
There may have been a severe deterioration after the general election, but the situation was already deteriorating fast. Because they plan long and because they have long memories, farmers know perfectly well that that is the case. No farmer whom I have met in any part of the United Kingdom believes that the disastrous slide started as a result of the political change. The devastation built up over several months before the election and has continued since.
Both facts were eloquently underlined in the report to which I referred which was published by the Western Morning News. It emphasised the conclusions reflected in many speeches that we heard this evening. It states:
"What makes this agricultural crisis unique in modern times is that every sector has been affected. The industry's net income this year is forecast to be no more than around £700 million, compared with £4.1 billion in 1996."
If one bears in mind the fact that many large agricultural businesses will still be profitable, it is clear that the average is going to be much worse. That means that many medium and smaller agricultural businesses will be firmly in the red. The Western Morning News also reports banks as saying that around 70 per cent. of all farms in the south-west will make a loss this year. That brings me to the second fact.
In a continuing series, the Western Morning News published an extremely interesting graph—I wish that I could use visual aids to greater effect in the House. The graph shows the difference between farmgate prices and the retail prices index. From 1987 to 1995, there was a steady rise in both. By 1995, the overall RPI had risen by nearly 50 per cent. and the food RPI by about 33 per cent. Farmgate prices has risen much less dramatically—they were up by 25 per cent.
In contrast to the views of the hon. Member for South Suffolk (Mr. Yeo), the collapse started in 1996—before the general election—not 1997. The collapse began when the total RPI went on increasing to nearly 60 per cent. last year and then levelled off. However, food prices collapsed back to 10 per cent. One has only to look at this graph, which I think the Minister can see, to realise that the deterioration started in 1996. By 1998, farm incomes will have fallen to below what they were a decade ago, while the cost of living will have increased by 70 per cent. or more.
The emergency package, to which we refer in our motion, to which the National Farmers Union referred and which was hinted at by the Minister of State, is extremely

123
urgent. We need that rescue package now. Hon. Members on both sides of the House have reflected not just the consternation but the growing anger in the farming community at the discrepancy between farmgate prices and the prices in the shops. The fury that successive Governments have been so cowardly in the face of profiteering by the middle men is now all too apparent.
Last weekend, I spoke to about 80 farm households in my constituency. One farmer's wife told me that, in a week when they had sold a steer for less than it had cost them to produce it, the price of beef in the supermarket was simply beyond the means of her household. Farmers cannot afford supermarket prices for the very products that they are selling.
During the last Parliament, I urged on successive Agriculture Ministers the need to investigate the growing disparity between farmgate prices and the retail food prices. As has already been said, my hon. Friend the Member for South-East Cornwall (Mr. Breed) produced an excellent report on the supermarkets and we welcome the fact that, not before time, the Government have now initiated an inquiry into their profitability and the way in which they have been treating producers.
The Independent today points out that the market share of the big four has increased from 25 per cent. in 1987 to more than 50 per cent. in 1997, yet the Conservative Government did nothing about the growing monopolistic tendencies during that period.
Mr. Nicholls: Will the hon. Gentleman give way?
Mr. Tyler: No.
Given the extent to which the supermarkets and the food processing giants have screwed down the prices that they pay to primary producers, we should not be surprised that the Conservative party has now appointed to central office the managing director of one of the largest supermarkets. The supermarkets and the giant food processors have bucked all the trends of the recession and have banked record profits.
The agriculture industry is in serious decline. There has also been a deterioration in public confidence in the quality and safety of British food. Therefore, it is essential that we proceed as fast possible to the Food Standards Agency that was promised in the Government's manifesto. I notice hon. Members on both sides of the House nodding in agreement. I hope that the Minister will take a leaf out of his predecessor's book and stand up to his colleagues in Cabinet and say that it is something that the British people are entitled to expect and that the consumer and the farmer need such a powerful weapon to ensure that, in future, the middle men do not dominate the market to the extent that they have in the recent past.
We need more transparency in food pricing to make sure that farmers get a fair crack of the whip and we need an end to the cosy relationship between some of the big boys of the food processing and retail industry and the Ministry.
Last week, it was said that the permanent secretary at MAFF had an unusually cosy relationship with Tesco's director of corporate affairs. That is scarcely surprising, because they are married to one another, so it should not be a matter for conjecture or criticism, but it highlights
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the fact that, at a time when serious issues are raised, the sensitivity of the relationship between MAFF and the industry is under the spotlight. The Government must take courage and bring forward the Bill as soon as possible.
The Minister may not have noticed that the Modernisation Committee has provided him with a weapon to take a short cut through the normal legislative jungle to ensure that the Bill reaches the statute book. Farmers and consumers now demand that there should be greater confidence in the way in which British food is produced and sold. We need the Food Standards Agency. We must give the British people back the confidence in their food that they should have, used to have and need to have again.
9.54 pm
Mr. Rooker rose—
Mr. Hayes: On a point of order, Madam Speaker. I understand that it is the normal protocol and courtesy of this House for the Secretary of State of the relevant Department to sum up in a debate of this kind when he is present.
Madam Speaker: It does not concern me which Minister is summing up. Does the House give leave to the Minister to speak again?
Hon. Members: Aye.
Mr. Rooker: I was about to ask the leave of the House to speak again. I am grateful for the opportunity to do so in the short time available. We have had an interesting debate. In many ways, it has been predictable, but I make no complaint about that. The comments of hon. Members on both sides, particularly Labour Members, have been useful for Ministers in our consideration of the points made by the food industry.
I have to disabuse the hon. Member for North Cornwall (Mr. Tyler) of a notion. I have found no evidence in the past 18 months of a cosy relationship between MAFF and the big supermarkets. There is no evidence of that in the functioning or attitudes of the Ministry. That does not mean that the difficulties of old MAFF are all out of the way; they are not. We have tried desperately in the past 18 months to change the culture of MAFF so that we put the consumer first and are not simply seen as the producers' Ministry. However, we are responsible for sponsoring the food industry and, until the Food Standards Agency is established, we are also responsible for the consumer side.
Criticism has been made of one of the first points that I made. I repeat, the cost of dealing with BSE—not all of it; I did not claim that—represents a contribution by the taxpayer to market support. There is no doubt about that. Under the over-30-months scheme, 2.5 million cattle—none with BSE—have been taken out of the food chain and slaughtered. Some 350,000 tonnes of meat and bonemeal are stored around the country as a result of the scheme, occupying more than 500,000 cu m. To give an idea of the volume, that is the equivalent of 44 Big Ben towers, all of which has to be burnt at public expense to destroy it under the terms of the Florence agreement. Removing 2.5 million cattle in that way has to be a contribution to market support.

125
I am grateful to my hon. Friend the Member for Monmouth (Mr. Edwards) for his speech—the first speech from the Back Benches. He put the position very well for his constituents and those whom he had met at the market. My hon. Friends the Members for Selby (Mr. Grogan) and for Lancaster and Wyre (Mr. Dawson) also put the case. My hon. Friend the Member for Northampton, North (Ms Keeble) seemed to go out of her way to cause the Liberal Democrats to press for a Division. Nevertheless, as a member of the Select Committee, her comments have to be respected. I agree with the hon. Member for North Cornwall that the hon. Member for Tiverton and Honiton (Mrs. Browning), who is a former Minister, made a positive contribution, unlike some of her colleagues.
No one underestimates the current difficulties of the livestock industry. For the first time, all the difficulties that one could imagine have been brought together. It is a catastrophe for many who have been in the industry for a lifetime. It causes further problems for young people entering the industry. I have asked some of those at agricultural college why they are contemplating going into the industry. The reasons include the force of community, heritage and responsibility to the family and what has been left to them by parents and grandparents. They are full of foreboding for the future. However, to their credit, some young people are still seeking to enter the industry. We have to ensure that the conditions for the future are positive. Initially, we have to consider emergency, short-term aid, but that must not interfere with long-term plans in this country and the European Union for restructuring the food industry.
As I said, my right hon. Friend the Minister will meet representatives of the food industry, supermarkets and the British Retail Consortium next week. We cannot order them to do anything, but we shall put it to them in the strongest possible terms that there is a moral obligation not to impose conditions on British farmers then seek to buy abroad where those conditions are not applied. As I said, we know that some supermarkets are taking a wholly positive view in sourcing only from the same type of suppliers as in this country. We will report to the House as quickly as possible on the results of our consultation with industry and colleagues in government.
Question put, That the original words stand part of the Question:—
The House divided: Ayes 45, Noes 340.

Division No. 366]

[10 pm

AYES

Allan, Richard

Fearn, Ronnie

Ashdown, Rt Hon Paddy

Foster, Don (Bath)

Baker, Norman

Hancock, Mike

Ballard, Jackie

Harris, Dr Evan

Beith, Rt Hon A J

Harvey, Nick

Brake, Tom

Heath, David (Somerton & Frome)

Brand, Dr Peter

Hughes, Simon (Southwark N)

Breed, Colin

Jones, Nigel (Cheltenham)

Bruce, Malcolm (Gordon)

Keetch, Paul

Burnett, John

Kennedy, Charles (Ross Skye)

Burstow, Paul

Kirkwood, Archy

Cable, Dr Vincent

Livsey, Richard

Campbell, Menzies (NE Fife)

Maclennan, Rt Hon Robert

Chidgey, David

Michie, Mrs Ray (Argyll & Bute)

Cotter, Brian

Moore, Michael

Dafis, Cynog

Oaten, Mark

Davey, Edward (Kingston)

Öpik, Lembit

Ewing, Mrs Margaret

Rendel, David

126

Russell, Bob (Colchester)

Wallace, James

Smith, Sir Robert (W Ab'd'ns)

Webb, Steve

Swinney, John

Willis, Phil

Taylor, Matthew (Truro)

Tellers for the Ayes:

Tonge, Dr Jenny

Mr. Andrew Stunell and

Tyler, Paul

Mr. Adrian Sanders.

NOES

Abbott, Ms Diane

Cooper, Yvette

Adams, Mrs Irene (Paisley N)

Corbett, Robin

Ainger, Nick

Corbyn, Jeremy

Ainsworth, Robert (Cov'try NE)

Cousins, Jim

Alexander, Douglas

Crausby, David

Allen, Graham

Cryer, Mrs Ann (Keighley)

Anderson, Janet (Rossendale)

Cryer, John (Hornchurch)

Armstrong, Ms Hilary

Cummings, John

Ashton, Joe

Cunliffe, Lawrence

Atkins, Charlotte

Cunningham, Rt Hon Dr Jack (Copeland)

Austin, John

Banks, Tony

Cunningham, Jim (Cov'try S)

Barnes, Harry

Darling, Rt Hon Alistair

Battle, John

Darvill, Keith

Bayley, Hugh

Davey, Valerie (Bristol W)

Beard, Nigel

Davidson, Ian

Beckett, Rt Hon Mrs Margaret

Davies, Rt Hon Denzil (Llanelli)

Begg, Miss Anne

Davies, Geraint (Croydon C)

Bell, Stuart (Middlesbrough)

Davis, Terry (B'ham Hodge H)

Benn, Rt Hon Tony

Dawson, Hilton

Benton, Joe

Dean, Mrs Janet

Bermingham, Gerald

Denham, John

Berry, Roger

Dismore, Andrew

Best, Harold

Dobbin, Jim

Betts, Clive

Dobson, Rt Hon Frank

Blears, Ms Hazel

Donohoe, Brian H

Blizzard, Bob

Doran, Frank

Blunkett, Rt Hon David

Dowd, Jim

Boateng, Paul

Drew, David

Bradley, Keith (Withington)

Drown, Ms Julia

Bradley, Peter (The Wrekin)

Eagle, Angela (Wallasey)

Bradshaw, Ben

Eagle, Maria (L'pool Garston)

Brinton, Mrs Helen

Edwards, Huw

Brown, Rt Hon Nick (Newcastle E)

Efford, Clive

Buck, Ms Karen

Ennis, Jeff

Burden, Richard

Field, Rt Hon Frank

Burgon, Colin

Fitzpatrick, Jim

Butler, Mrs Christine

Fitzsimons, Lorna

Byers, Rt Hon Stephen

Flint, Caroline

Caborn, Richard

Follett, Barbara

Campbell, Alan (Tynemouth)

Foster, Rt Hon Derek

Campbell, Mrs Anne (C'bridge)

Foster, Michael Jabez (Hastings)

Campbell, Ronnie (Blyth V)

Foster, Michael J (Worcester)

Campbell-Savours, Dale

Foulkes, George

Canavan, Dennis

Galloway, George

Cann, Jamie

Gapes, Mike

Caplin, Ivor

Gardiner, Barry

Casale, Roger

George, Bruce (Walsall S)

Chapman, Ben (Wirral S)

Gerrard, Neil

Chisholm, Malcolm

Gibson, Dr Ian

Clapham, Michael

Gilroy, Mrs Linda

Clark, Rt Hon Dr David (S Shields)

Godsiff, Roger

Clark, Dr Lynda (Edinburgh Pentlands)

Goggins, Paul

Golding, Mrs Llin

Clark, Paul (Gillingham)

Gordon, Mrs Eileen

Clarke, Eric (Midlothian)

Griffiths, Jane (Reading E)

Clarke, Rt Hon Tom (Coatbridge)

Griffiths, Nigel (Edinburgh S)

Clarke, Tony (Northampton S)

Griffiths, Win (Bridgend)

Clelland, David

Grocott, Bruce

Clwyd, Ann

Grogan, John

Coaker, Vernon

Gunnell, John

Coffey, Ms Ann

Hain, Peter

Cohen, Harry

Hall, Patrick (Bedford)

Coleman, Iain

Hamilton, Fabian (Leeds NE)

Colman, Tony

Heal, Mrs Sylvia

Connarty, Michael

Healey, John

Cook, Frank (Stockton N)

Henderson, Doug (Newcastle N)

127

Henderson, Ivan (Harwich)

McDonagh, Siobhain

Hepburn, Stephen

Macdonald, Calum

Heppell, John

McDonnell, John

Hesford, Stephen

McGuire, Mrs Anne

Hill, Keith

McIsaac, Shona

Hinchliffe, David

Mackinlay, Andrew

Hodge, Ms Margaret

McNamara, Kevin

Hoey, Kate

McNulty, Tony

Hood, Jimmy

MacShane, Denis

Hoon, Geoffrey

Mactaggart, Fiona

Hope, Phil

McWalter, Tony

Hopkins, Kelvin

Mahon, Mrs Alice

Howarth, George (Knowsley N)

Mallaber, Judy

Howells, Dr Kim

Marsden, Gordon (Blackpool S)

Hoyle, Lindsay

Marsden, Paul (Shrewsbury)

Hughes, Ms Beverley (Stretford)

Marshall, Jim (Leicester S)

Hughes, Kevin (Doncaster N)

Marshall-Andrews, Robert

Humble, Mrs Joan

Martlew, Eric

Hurst, Alan

Maxton, John

Hutton, John

Meacher, Rt Hon Michael

Iddon, Dr Brian

Meale, Alan

Illsley, Eric

Merron, Gillian

Jackson, Ms Glenda (Hampstead)

Michael, Alun

Jackson, Helen (Hillsborough)

Michie, Bill (Shef'ld Heeley)

Jamieson, David

Milburn, Alan

Jenkins, Brian

Miller, Andrew

Johnson, Alan (Hull W & Hessle)

Mitchell, Austin

Johnson, Miss Melanie (Welwyn Hatfield)

Moffatt, Laura

Moonie, Dr Lewis

Jones, Barry (Alyn & Deeside)

Moran, Ms Margaret

Jones, Mrs Fiona (Newark)

Morgan, Ms Julie (Cardiff N)

Jones, Helen (Warrington N)

Morgan, Rhodri (Cardiff W)

Jones, Ms Jenny (Wolverh'ton SW)

Morris, Ms Estelle (B'ham Yardley)

Mountford, Kali

Jones, Jon Owen (Cardiff C)

Mudie, George

Jones, Dr Lynne (Selly Oak)

Mullin, Chris

Jones, Martyn (Clwyd S)

Murphy, Denis (Wansbeck)

Jowell, Ms Tessa

Naysmith, Dr Doug

Kaufman, Rt Hon Gerald

Norris, Dan

Keeble, Ms Sally

O'Brien, Bill (Normanton)

Keen, Alan (Feltham & Heston)

O'Brien, Mike (N Warks)

Keen, Ann (Brentford & Isleworth)

O'Hara, Eddie

Kelly, Ms Ruth

Olner, Bill

Kennedy, Jane (Wavertree)

O'Neill, Martin

Khabra, Piara S

Osborne, Ms Sandra

Kidney, David

Palmer, Dr Nick

Kilfoyle, Peter

Pearson, Ian

King, Ms Oona (Bethnal Green)

Pendry, Tom

Kingham, Ms Tess

Perham, Ms Linda

Kumar, Dr Ashok

Pickthall, Colin

Ladyman, Dr Stephen

Pike, Peter L

Lawrence, Ms Jackie

Plaskitt, James

Laxton, Bob

Pollard, Kerry

Leslie, Christopher

Pope, Greg

Levitt, Tom

Pound, Stephen

Lewis, Ivan (Bury S)

Powell, Sir Raymond

Lewis, Terry (Worsley)

Prentice, Ms Bridget (Lewisham E)

Linton, Martin

Prentice, Gordon (Pendle)

Livingstone, Ken

Prescott, Rt Hon John

Lock, David

Primarolo, Dawn

Love, Andrew

Prosser, Gwyn

McAllion, John

Purchase, Ken

McAvoy, Thomas

Quinn, Lawrie

McCafferty, Ms Chris

Radice, Giles

McCartney, Ian (Makerfield)

Rammell, Bill

128

Rapson, Syd

Stuart, Ms Gisela

Raynsford, Nick

Sutcliffe, Gerry

Reid, Rt Hon Dr John (Hamilton N)

Taylor, Rt Hon Mrs Ann (Dewsbury)

Robertson, Rt Hon George (Hamilton S)

Taylor, Ms Dari (Stockton S)

Robinson, Geoffrey (Cov'try NW)

Taylor, David (NW Leics)

Roche, Mrs Barbara

Temple-Morris, Peter

Rogers, Allan

Thomas, Gareth R (Harrow W)

Rooker, Jeff

Timms, Stephen

Rooney, Terry

Tipping, Paddy

Ross, Ernie (Dundee W)

Todd, Mark

Roy, Frank

Touhig, Don

Ruddock, Ms Joan

Trickett, Jon

Russell, Ms Christine (Chester)

Truswell, Paul

Ryan, Ms Joan

Turner, Dennis (Wolverh'ton SE)

Salter, Martin

Turner, Dr Desmond (Kemptown)

Savidge, Malcolm

Turner, Dr George (NW Norfolk)

Sawford, Phil

Twigg, Derek (Halton)

Sedgemore, Brian

Twigg, Stephen (Enfield)

Shaw, Jonathan

Vaz, Keith

Sheldon, Rt Hon Robert

Vis, Dr Rudi

Shipley, Ms Debra

Walley, Ms Joan

Singh, Marsha

Ward, Ms Claire

Skinner, Dennis

Wareing, Robert N

Smith, Angela (Basildon)

Watts, David

Smith, Rt Hon Chris (Islington S)

White, Brian

Smith, Miss Geraldine (Morecambe & Lunesdale)

Whitehead, Dr Alan

Wicks, Malcolm

Smith, Jacqui (Redditch)

Williams, Rt Hon Alan (Swansea W)

Smith, John (Glamorgan)

Smith, Llew (Blaenau Gwent)

Williams, Alan W (E Carmarthen)

Soley, Clive

Winnick, David

Southworth, Ms Helen

Winterton, Ms Rosie (Doncaster C)

Spellar, John

Wise, Audrey

Squire, Ms Rachel

Wood, Mike

Starkey, Dr Phyllis

Woolas, Phil

Steinberg, Gerry

Worthington, Tony

Stevenson, George

Wray, James

Stewart, David (Inverness E)

Wright, Anthony D (Gt Yarmouth)

Stewart, Ian (Eccles)

Wyatt, Derek

Stinchcombe, Paul

Stoate, Dr Howard

Tellers for the Noes:

Straw, Rt Hon Jack

Mr. David Hanson and

Stringer, Graham

Mr. Mike Hall.

Question accordingly negatived.
Question, That the proposed words be there added, put forthwith, pursuant to the Order [this day], and agreed to.
MR. DEPUTY SPEAKER forthwith declared the main Question, as amended, to be agreed to.
Resolved,
That this House welcomes the Government's strong commitment to the UK farming industry and to the wider rural economy; welcomes in particular the steps which the Government has taken since May 1997 to support the beef and sheep industry via EU agri-monetary compensation and relief from charges; acknowledges the steps taken specifically to help the sheep, pig and cereal sectors with targeted EU measures; and endorses the Government's intention to bring about a secure and viable future for the UK farming and food industries through a market-orientated reform of the Common Agricultural Policy.

Child Support Agency
Motion made, and Question proposed, That this House do now adjourn.—[Mr. Betts.]
10.13 pm
Mr. Tony McNulty: I am grateful to have the opportunity in this short Adjournment debate to raise the problem of the Child Support Agency and self-employed absent parents. I want briefly to discuss many general concerns that I and many others have about the way in which the CSA treats such parents and to refer to a specific case in my constituency, the details of which I gave my hon. Friend the Minister in advance.
I want to make two introductory points. First, I have no animosity towards the self-employed sector and would deprecate any attempt to suggest otherwise. My brother is self-employed, as was my father before he retired, and so are many of my friends. Secondly, it is in some ways a matter of profound regret that I must refer to the case of my constituent, Theresa West, not least because it was the subject of an Adjournment debate introduced by my predecessor, Mr. Hugh Dykes, on 31 January 1994—four years ago. I also note with interest that, after I was notified on 14 October of my success in securing this Adjournment debate, the first question to the Secretary of State for Social Security on Monday 19 October concerned precisely this subject matter: the CSA and the self-employed. I welcomed the response from my right hon. Friend the Secretary of State regarding that matter.
I turn briefly to the case of Theresa West. Theresa sought a maintenance variation order in 1993 and the CSA rather than the courts took on the case. I hasten to add that that was not of Theresa's choosing; she would rather have seen the matter stay with the courts. She had accepted £300 a month maintenance for her two children following her divorce in 1986. The CSA took nine months to determine an assessment and reduced her agreed maintenance to £200 a month. She naturally appealed against that assessment. While awaiting the outcome of the section 18 review, changes in the law meant a reassessment of her maintenance, which was reduced to £100 a month.
The overall review was completed by March 1994 and, as a result, Theresa's payments were reduced to nothing and she was ordered to repay overpayments. That assessment was based on her ex-husband's claim that his salary was only £14,393—a claim that the CSA happily accepted. However, Theresa knew differently. Theresa's ex-husband is a self-employed record producer of international repute. In 1993, he purchased a house worth more than £300,000 and stated clearly on his mortgage application to the Queen's bank, Coutts, that his joint income with his new wife was almost £200,000 a year—at the same time, he had declared his income as £14,000 to the CSA. He also explained that he could easily access and repatriate overseas funds to the value of £160,000. He owned a Porsche, two BMWs, his two children from his second marriage attended private schools and he employed a cleaner and a gardener. He also paid himself a £28,800 dividend through his own company—but forgot to tell the CSA about it.
We have this information only because Theresa would not accept that her ex-husband's bank had, in its words, "lost" his mortgage application. With perseverance and
130
temerity, she obtained a copy of the application from the bank. To achieve that, she had to involve the Serious Fraud Office and the fraud manager of Coutts. At the tribunal hearing in July 1996—this is regarding the 1993 assessment—the CSA revised her assessment from nothing to £1,250 a month.
Her ex-husband appealed to the child support commissioner, who reported his determination on the July 1996 hearing of the 1993 assessment in August 1998. The ex-husband's appeal was refused and, in outlining the reasons, the commissioner stated:
"it appears to me that their"—
that is, the tribunal's—
"express finding that the applicant had over a long period failed to disclose the true level of his income was justified having regard to the evidence before them."
I remind hon. Members that that evidence existed only because of Theresa's own work, and not that of the CSA. The commissioner continued:
"In particular, the admitted and inadequately explained failure to disclose his £28,800 dividend from his company, the failure to disclose any overseas earnings or income at all through his tax return … and the inability to give any satisfactory information about the level of overseas or other income"
justifies the tribunal's decision.
Mr. Bill O'Brien: In the scenario that my hon. Friend describes, was the Inland Revenue contacted? Its records should be available to the CSA too.
Mr. McNulty: They should be, but they are not; and when they are, the CSA constantly says that it is beyond its discretion to go beyond what each party gives it.
Therefore, five years after the CSA became involved, a final assessment of the 1993 maintenance level was arrived at—in 1998. The process of getting to that point involved a suitcase of paperwork, thousands of work hours by the CSA, the appeals tribunal, the child support commissioner and legal staff, seven tribunal hearings, three High Court subpoenas, the cost of legal aid for counsel's opinion and a written determination by the commissioner—all simply for the 1993 maintenance assessment.
Theresa made numerous requests to the CSA for the collection of the arrears for 1993–94—a total of more than £10,000—but the CSA refused to pursue that because of her ex-husband's appeal to the child support commissioner.
In 1996, the CSA requested information to complete the periodic review for 1994. The 1994 assessment reduced the maintenance to £380 a month, largely because Theresa's ex-husband claimed that his income for that year was only £34,000—a drop of more than £150,000 from the now accepted level of the previous year. However, although the CSA recognised that this was unusual, it said that, without her ex-husband's co-operation in producing additional evidence, it was bound to accept his accounts.
Again, Theresa asked for a section 18 appeal, reminding the CSA that evidence already produced to the July 1996 tribunal showed that her ex-husband's projected income for 1994 was between £190,000 and £230,000. The result of that appeal was that the £380 a month assessment was confirmed, as although the appeal tribunal directed that her ex-husband's liability be calculated on

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the basis of the projected income figure, the CSA said that it did not have the discretion to use the projected figure as verified income. Sadly, there was no mortgage application or similar document that could be used to find out his real income level.
By October 1998—let us bear in mind that this process started at the inception of the CSA, in 1993—the picture is that Theresa's ex-husband is to pay almost £800 a month regular maintenance and £413 a month toward arrears. You might think that justice was served at last. The sting in the tail, though, is that the CSA is dealing with an outstanding periodic review of the assessment of maintenance from October 1996 and a further review of the period up to October 1998—and has said that it has no discretion to use projected income figures as verification. It says, therefore, that
"it is likely that"—
the ex-husband's—
"liability will reduce."
It would seem that the projected income is appropriate for the child support commissioner and adequate for the Queen's bank to advance a £250,000 mortgage, but not enough for the CSA to put food on a child's table.
Theresa's ex-husband is now claiming that his income is again around £14,000—despite the fact that he now has a third child in private education and that there is documentary proof that his mortgage payments alone total £28,500 a year. If the CSA used that figure for the two outstanding periodic reviews, the assessment of maintenance would be reduced to about £40 a month and he would be able to argue, on the basis of the assessment, that he is unable to pay any of the arrears, which now total more than £30,000.
This is indeed a sorry tale, and one that is not yet complete. It shows vividly how the CSA has not been adequately equipped to deal with the complexities of dealing with absent parents who are self-employed and who, in some cases, to say the least are unto-operative, if not downright misleading in a wilful fashion.
As I have said, I welcome the Secretary of State's response at Social Security questions on Monday 19 October 1998, when he said that a special unit had been established within the CSA to deal with self-employed people. I welcome the overall approach of the Green Paper "Children First: a new approach to child support" and many of its suggestions for the future.
However, so that we may ensure that the self-employed are dealt with fairly and efficiently by the CSA—in a way that is fair to the continuing parent as well as the absent parent—I should like the Under-Secretary of State for Social Security, my hon. Friend the Member for Wallasey (Angela Eagle), and the Secretary of State to consider areas such as the following, some of which are in the Green Paper.
First, I should like Ministers to consider the use of projected income as well as the most recent year's taxable profit in maintenance assessments, and all reviews should be based on verified and complete accounts. Secondly, as my hon. Friend the Member for Normanton (Mr. O'Brien) said, the Inland Revenue should be fully used—it does not always happen—to verify income levels claimed by the self-employed absent parent, including, crucially, overseas income and resources.
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Interest and compensation could be paid on overdue payments or arrears when determined. There could be a proper system of enforcement and collection of arrears, once initially determined, instead of the present constant to-ing and fro-ing round assorted areas of the legal or quasi-judicial system.
As the Green Paper says, there should be a firmed-up commitment that the giving of false or misleading information will be made an offence. I would go further and say that, where it has been proved that misinformation has been used, specifically in the case of the absent self-employed parent, the presumption should automatically then be based on projected income. Projected income is more often than not appropriate, and is used in normal commercial dealings; it is appropriate in other ways, and should be for the CSA as well.
If such a package is used, it will shift the burden of proving ability to pay fair maintenance on to the self-employed absent parent and eradicate the perverse incentives that litter the current system, especially for the self-employed. At present, it is in the interest of absent self-employed parents to play the system, avoid declaring real income and fail in their duties and responsibilities to their children. This package of measures, specifically geared towards the self-employed, is in tune with the spirit and ethos of the new Green Paper.
I formally request that the outstanding elements of Theresa's case are referred to and dealt with swiftly by the new CSA special unit on the self-employed. Clearly, that may not elicit an answer this evening. What my constituent has had to endure cannot be right or fair. The behaviour of her ex-husband has been deplorable. It is only her tenacity in the face of his mendacious behaviour that has meant progress for her case and ultimately for her children's welfare.
Five years after my constituent's dealings with the CSA began, the case still grinds on. That is not the fair, efficient and firmly enforced system of child support that our people need and that we seek. Currently, the CSA cannot adequately deal with the problem. I ask sincerely that, as part of our review, we sort out once and for all the way in which absent self-employed parents are dealt with.
It is a matter of profound regret that my constituent has had to endure this nightmare, but I know that she will agree that it will be made slightly more tolerable if lessons are learned from her case, and the scams, tricks and strokes pulled by some malevolent absent self-employed parents and their coteries of lawyers and accountants are curtailed because of her experiences. Sooner rather than later the welfare of the children must become paramount again.
10.25 pm
The Parliamentary Under-Secretary of State for Social Security (Angela Eagle): I congratulate my hon. Friend the Member for Harrow, East (Mr. McNulty) on having the good fortune to secure this debate, which he has used to great effect. He has drawn the House's attention to an important issue: how to get adequate child support from self-employed non-resident parents. The case that he mentioned shows up in stark relief many of the failures of the current system, which has often let parents down. However, we must remember that the self-employed present some of the most difficult cases with which we have to deal.
Because we guarantee confidentiality when we take on an application for child support, I cannot go into the details of Mrs. West's case on the Floor of the House

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tonight, although I will of course be happy to meet my hon. Friend to discuss more privately the handling of Mrs. West's maintenance assessment. Tonight, I shall address some of the key matters of concern to my hon. Friend. Before I do so, it may be helpful if I briefly set the problem in the context of the Government's reforms of the welfare state, as my hon. Friend did.
We are determined to reshape the welfare state to meet the needs of the future. The proposals set out in our Green Paper on child support are one part of those reforms. Child support has a key part to play in our determination to tackle child poverty: 1.8 million children are living with a lone parent on income support or family credit and receive not a penny in maintenance from the non-resident parent. It cannot be right that the separation of parents takes away their responsibility to support their children financially and emotionally. A child support system that works with parents to enable them to provide the support that their children need can help many to escape poverty and dependence on benefit.
That is why we are seeking to renew the way in which child support is delivered. Our Green Paper sets out how we intend to address the many problems of the current scheme. The on-going consultation is open and is due to end on 30 November. We must create a child support system that is practical to administer, enjoys the support of our society and delivers effective help to children and parents with care. I shall take on board my hon. Friend's comments and suggestions for dealing with the self-employed, which I shall regard as part of the consultation procedure.
Child support liability is, sensibly, based on the amount that a parent can afford. That means that there will always be the problem of determining how much money a parent has available. The case that my hon. Friend mentioned appears to be a particularly severe example of the problem, with the child support liability varying widely according to differing accounts of the non-resident parent's income.
We all accept that the rules of the current scheme are far too complicated to be workable. In the case of many self-employed non-resident parents, the current system is also too easily manipulated by those who wish to minimise their liabilities. We shall try to simplify the system to minimise any chance of abuse, and we have proposed introducing penalties for those who lie about the money that is available to them in any income-based assessment. However, there are real difficulties with the self-employed, and changes in the child support rules, although they help, cannot entirely overcome them. In other words, the self-employed were always the most difficult cases to assess when the courts were responsible for child maintenance, and after the creation of the Child Support Agency that unfortunately did not change.
In order to establish the income available to pay maintenance, we cannot simply ask the self-employed for wage slips, as we can with most employees. Indeed, simply providing proper accounts is often difficult for many small traders. There are undoubtedly some self-employed people who will always seek to minimise their declared income. Those people present difficulties to all agencies charged with collecting money, including the Inland Revenue.
This is not a new problem or a problem particular to child support. However, it is worth bearing in mind the fact that one in five self-employed non-resident parents
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pay all the maintenance that is due. That means that 80 per cent. do not, so clearly we must try to create a more effective system.
The means available to the CSA to pursue queries over income declarations are not adequate. Steps have been taken to address that problem. A task force set up to deal with self-employed cases has been successfully piloted. Specialist teams have focused on working with the self-employed to encourage them to comply. This approach has proved very successful in the pilots, with substantial reductions in clearance times and significant improvements in compliance. These special units will therefore be implemented nationally by 1 March 1999.
We are also looking to see whether we can make any improvements to current legislation to widen the access that the CSA has to essential information collected by other agencies. That is something that my hon. Friend emphasised.
Experience has shown that tribunals are able to look at the earnings of the self-employed more in the round. They have reached assessments based on evidence that cannot currently be used by child support officers. Occasionally, tribunals have used their powers to summon witnesses, another avenue not available to the CSA.
As part of our reform of the child support scheme, we are seeking to build on the provisions that allow us to depart from the usual formula assessment. That would enable us to make greater use of the tribunals' broader scope. This scheme can allow a parent with care to apply for what is called a departure from the actual maintenance assessment on the basis that the level of income declared by the non-resident parent is inconsistent with his life style.
We are examining the possibility of making changes to the treatment of self-employed earners. We are considering a method of calculation that is more aligned with Inland Revenue provisions. In that way, non-resident parents could give the same information to the CSA that they give to the Inland Revenue.
That would make things much easier for parents, encouraging compliance as well as speeding up assessments. It would reduce the possibility of unscrupulous non-resident parents hiding the true level of their income, to the detriment of their children. Simplification of the rules would allow officials to spend more time enforcing maintenance and less time trying to work out the assessment.
Child support offers a real route out of poverty for many lone-parent families and particularly for children, many of whom currently live in needlessly difficult circumstances. To make child support work, we will ensure that we close the many loopholes that allow some parents to escape their responsibilities. We will make sure that the self-employed cannot hide from their duties to their children behind false accounts and administrative confusion.
This is why we have made the reform of child support a feature of our welfare reforms, and why we are pressing ahead in the meantime with the short-term improvements that I have outlined tonight, which I hope will begin to address the problems that have been raised by my hon. Friend.
Question put and agreed to.
Adjourned accordingly at twenty-seven minutes to Eleven o'clock.