Commons Sitting of 22 March 1999

Preamble
The House met at half-past Two o'clock
PRAYERS
[MADAM SPEAKER in the Chair]
PRAYERS
  DISQUALIFICATION OF A MEMBER
  Madam Speaker: I have to inform the House that I have received a letter from the judge in the case relating to Mrs. Fiona Jones, which ended on Friday 19 March in Nottingham Crown court. A copy of the letter will be entered in the Journal of the House. Mrs. Jones was found guilty of the corrupt practice of making a false declaration as to election expenses. Under the provisions of the Representation of the People Act 1983, the seat is vacated with effect from 19 March.
Oral Answers to Questions
  DEFENCE
  The Secretary of State was asked—
  DEFENCE

    Recruitment and Retention
    Mr. Julian Brazier: If he will make a statement on the impact of current military operations on recruitment and retention in the armed forces. [75964]
    The Secretary of State for Defence (Mr. George Robertson): Although the current level of operational commitment of our armed forces is high, recruitment remains buoyant, particularly in the Army. However, retention remains a concern—although there does not appear to be a direct link between retention and commitment. Retention remains a key priority for this Government and we are pursuing a number of important initiatives to address the issue.
    Mr. Brazier: Does the Secretary of State agree with the recent remarks by the Chief of the Defence Staff? He said that, even if recruitment and retention were at target levels, we could sustain only
    "two medium level operations, such as we are doing in Bosnia … one … with fighting ending in six months."
    The Chief of the Defence Staff continued:
    "I do not think we could sustain two for longer than that."
    Does the Secretary of State agree with his principal professional adviser? Would we give up our operations in Bosnia or in Kosovo after six months?
    Mr. Robertson: My senior military adviser gives me guidance all the time and he is happy with the current proposals. Clearly, our commitment in Kosovo—which is considerable—involves a number of troops serving for only the first six months if they are deployed as part of an implementation force into Kosovo as members of the allied Rapid Reaction Corps. We are already seeing a reduction in the number of troops in Bosnia and I hope that that trend will continue as progress is made in that country.
    Mr. Gareth R. Thomas: Does my right hon. Friend think that recruitment and retention in the armed forces might be affected if we do not take action and send a clear message to President Milosevic that he must sign the Rambouillet settlement or face the prospect of air strikes? Although military action is

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    difficult and unpalatable, does my right hon. Friend believe that it is better to take that action rather than to risk further bloodshed in the Balkans?
    Mr. Robertson: My hon. Friend makes a very good point. I am well aware of the strain that our troops are under at present, and never a day goes by without our considering how best to deal with that problem.
    My hon. Friend is right: we are perhaps on the brink of a real humanitarian catastrophe in Kosovo. Our choice is either to stand by as the blood and the refugees flow or to take on the aggressor with determination and with a will to stop the carnage. As to the number of troops potentially committed to the operation in Kosovo, the House may wish to note that the Government have decided to make HMS Splendid—the Royal Navy's first submarine to be equipped with Tomahawk cruise missiles—available for operations in connection with the Kosovo crisis. That is a further measure of the Government's resolve.
    Mr. John Maples: It was good of the Secretary of State to give us that information, but his Department told the press before the weekend. So it was kind of him, but we knew already. Does the Secretary of State agree that, as a consequence of deploying about 8,000 British troops to Kosovo, it will be impossible for him to deal with the overstretch problem, which will inevitably worsen recruitment and retention?
    Mr. Robertson: First, my Department did not tell the press about HMS Splendid. A Pentagon spokesman inadvertently made that information available before I could tell the House. That was perfectly clear from all the newspaper stories about the issue. I intended to tell—and have told—the House of Commons before anyone in the press received confirmation of that story.
    Secondly, soldier recruitment to the Army has increased by 17.6 per cent. compared with this time last year. Although retention levels are still disturbing, they are better than they were in any of the years of the Conservative Government.
    Mr. Maples: In fact, an answer to a parliamentary question reveals that retention rates deteriorated in 1998–99 for the first time in several years. Another answer tells us that 86 per cent. of land command personnel are currently committed to operations or warned to deploy. Is not an inevitable consequence of this—[Interruption.] The Secretary of State questions that figure. However, information was provided that 55 per cent. of land command personnel are committed to operations and 31.3 per cent. are warned to deploy, which totals 86 per cent. As a consequence, is it not inevitable that tour intervals will get shorter, periods spent abroad will get longer, training will suffer and retention rates will get worse? If we are to commit 8,000 troops to Kosovo, is it not time to review the assumptions underlying the strategic defence review?
    Mr. Robertson: The assumptions underlying the strategic defence review have not been altered because they are global assumptions that will allow us to do less or more for specific periods. Although senior military commanders in the Ministry of Defence recognise the strain on individuals and the price that must be paid in
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    short-term training, they are content that we can discharge our responsibilities without paying too heavy a price. I am conscious of overstrain, and I will be aware if it becomes a serious factor in training.
    I visited our troops in Macedonia two weeks ago, and morale is high and training is going ahead. I hope that they will be there for a limited time, but while they are there they will be doing a job that can be done by few others in the world. They are proud of what they are doing and the country is proud of them.
    Mr. Martin Bell: Having been in Kosovo last week—I left on Friday—I must ask the Secretary of State whether, in the absence of a settlement, we have the option of walking away and saying that the situation is none of our business, or whether we are willing to consider the costs that would be involved in a military operation with our allies, opposed or unopposed, that would save tens of thousands of lives that, without us, would be lost.
    Mr. Robertson: I read the articles that were written by the hon. Gentleman when he came back from Kosovo. I have strong views about the situation there, and he makes good points about it. That is why my right hon. Friend the Foreign Secretary spent so much time at Rambouillet bringing the two sides together and getting close to agreement. That is why, last week, the Kosovar Albanians signed up to the Rambouillet text and why the Yugoslav Serbs have been told that they, too, must sign up to it. There is no question of our walking away from a part of our continent that, if it goes up in flames, will burn many people far from the immediate surroundings. That is why we have put President Milosevic and those who make decisions in Belgrade on notice that, unless they heed the demands of the international community, swift and determined action will be taken.
    Mr. Lindsay Hoyle: Will the Secretary of State ensure that, if troops are sent into Kosovo, they will not have redundancy notices tucked into their top pockets—which is what happened to the Cheshires when they went into Bosnia?
    Mr. Robertson: My hon. Friend makes a valuable point. We are trying to increase the strength of the Regular Army because they have a job to do and, under the strategic defence review, we have reconfigured our forces to make sure that they can do it. Partly because of the revitalisation of our forces, which is thanks to the defence review, Army soldier recruitment has risen by 17.6 per cent. since the same time last year. I know that those who are in that part of the world are determined to make sure that the potential catastrophe is averted and that the majority of the people of Kosovo are given the chance to get on with their lives in the political framework that was so ably negotiated at Rambouillet and which the Kosovar Albanians have signed up to.

    Strategic Airlift Capability
    Mr. John Bercow: What progress his Department is making in acquiring strategic airlift capability. [75965]
    The Parliamentary Under-Secretary of State for Defence (Mr. John Spellar): We received bids at the end of January for competing aircraft to meet our requirements for both short and longer-term strategic airlift capability. MOD officials are now assessing those bids. We will announce the outcome to the House once decisions have been made.
    Mr. Bercow: I have to tell the hon. Gentleman that that was a lamentably complacent response to my question. Given that it is now several months since Ministers described the need for four Boeing C17s as "urgent", will the hon. Gentleman tell the House today when those aircraft will be in service with the RAF, or whether he envisages that the country will be forced into the ignominious position of having to lease old Russian Antonovs?
    Mr. Spellar: One wonders who the Government were before May 1997 and why the hon. Gentleman displays mock indignation on this issue. We are considering possible alternatives—C17 or its equivalent. As the hon. Gentleman knows, the Antonov, among others, is being considered by potential industrial participants. We are conducting a proper evaluation to find out which fits our need and which would fulfil our longer-term requirements. A little less fake indignation and a little more examination of the facts would serve the hon. Gentleman well.
    Mr. Robert Key: Can the Minister confirm that the delay in the lease of the C17s is because of problems with military exports from the United States? Is he now looking more favourably on the Airbus A400M option, which appeared at one time to be shelved? Can he not rule out at least some of the Antonov aircraft, which would be particularly ancient and really not equivalent to the C17s?
    Mr. Spellar: The B52 could be described as ancient, but it seems still to be a very effective aircraft in its particular field of operation. Our short-term requirement is for out-size airlift. We are also considering our longer-term requirement for major airlift. We are examining synchronisation between the two requirements and whatever degree of commonality is possible if that will provide the best mix. We are examining the best possible outcomes and we hope as a result to remedy the deficiencies in heavy lift, in the air and at sea, that we took over when we came to office.

    Gulf War Illnesses
    Mr. David Kidney: How much the Government are currently spending on research into the illnesses of Gulf war veterans. [75966]
    Mr. Ben Chapman: How much the Government are spending on research into the illnesses of Gulf war veterans. [75970]
    The Minister for the Armed Forces (Mr. Doug Henderson): The Ministry of Defence's research into Gulf veterans' illnesses currently comprises two major epidemiological studies, a neuromuscular symptoms study, an independent review of research literature, and a
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    programme to investigate possible interactions between the medical counter-measures which were used during the 1990–91 Gulf conflict. So far, £1.9 million has been spent on these studies and we estimate that they will cost a further £4 million to complete.
    Mr. Kidney: I thank my hon. Friend for that answer. It is reassuring to hear of the money that is spent on research. I am sure that it is welcome to all the Gulf war veterans, including those to whom I spoke in my constituency, who still do not have a definite diagnosis of their illness, let alone any hope of a cure. Does my hon. Friend agree with the Royal British Legion that, for these veterans, time is of the essence if they are to benefit from the results of the research? Given the resources that are available to my hon. Friend, does he look to sharing information in the context of the results of research done in other countries, especially the United States?
    Mr. Henderson: I thank my hon. Friend for that question. I much agree with the Royal British Legion's view that time is of the essence for the individuals who are suffering from illness which they believe they contracted in the Gulf. That is why the Government have increased the resources that are committed to research to try to get to the bottom of what happened, to try to ascertain the illness or illnesses that they have suffered from, the cause, how similar illnesses could be prevented, and what sort of treatment is appropriate.
    We recognise that many people in the United States are suffering from similar illnesses. We want to enter into discussions with the US Government to determine how best we can combine our research resources.
    Mr. Chapman: I thank my hon. Friend for his reply. However, does he understand that Gulf war syndrome, if that is the right expression—it seems that there is a plurali—a plur—[Laughter.] It seems that there are lots of conditions. Does my hon. Friend understand that that is worrying generally, but particularly to those who are suffering? It is essential that the present level of research be continued so that a cause or causes are found. Will my hon. Friend confirm that, if the Government are found to be at fault, compensation will be paid?
    Mr. Henderson: If my hon. Friend had trouble with "plurality", he would have had even greater trouble with "epidemiological". I can assure him that we are doing everything we can to try to get to the bottom of what is wrong with people who are suffering from illnesses that were contracted in the Gulf, and that we shall commit any necessary resources—we have already committed three times more than the previous Government—to trying to find out what is wrong with personnel who served in the Gulf.
    Mr. Andrew Robathan: I think I am the only current Member who served in the armed forces in the Gulf, although I may be wrong. I welcome the Minister's remarks about investigating the causes of the illness. It is self-evident that some members of the armed forces have suffered severe illness, possibly from organophosphate poisoning, and they deserve swift compensation. Can the Minister tell us whether any evidence of a syndrome has yet emerged from the research in the United Kingdom or the United States?
    Mr. Henderson: I am grateful to the hon. Gentleman for that further question. It has not been possible to

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    determine whether there is a specific illness called Gulf war syndrome or any other name. Much research has already been undertaken. Much research is currently being undertaken, and we await the results. We want any necessary additional research to be carried out, if possible, in conjunction with our allies in the United States. If, at the end of that—I should have mentioned this in response to the previous question—it is shown that there is an illness and that there was negligence, compensation will be paid in accordance with the normal procedures.
    Mr. Nicholas Soames: Does the hon. Gentleman agree that it is important that none of those research programmes, many of which were started when the previous Government were in power, should duplicate the work done in the United States of America? Does he agree that it will add greatly to the credibility of those programmes, which have been undertaken by distinguished scientists, if it is clearly seen that they do not overlap with any American studies?
    Mr. Henderson: Yes, I very much agree. As I said during the previous Defence Question Time, I went to Washington three weeks ago. I spoke to the Department of Defence, the Department of Veterans Affairs and the White House about the kind of research that was considered a priority. The Americans are coming back next Monday, I think, and I will have further discussions with White House officials about how we can co-ordinate the research. It is crucial that there should be no opportunity for one group of experts to argue against another group, simply because they come from different sides of the Atlantic. We must get the experts together to give us the best medical and scientific opinion, in the hope that we can resolve the outstanding problems.

    Recruitment
    Mr. Simon Hughes: What level of recruitment he expects for (i) regulars and (ii) reserves to (a) the Marines, (b) Special Air Service, and (c) RAMC over the next five years. [75967]
    The Minister for the Armed Forces (Mr. Doug Henderson): The recruiting targets for Royal Marines, Special Air Service, and the Royal Army Medical Corps are set to maintain current and known future staffing requirements, for both regular and reserve forces.
    Soldiers and officers for the Regular SAS are recruited as required from among serving personnel.
    The Regular Royal Marines recruiting targets for 1999–2000 are 1,155 other ranks and 38 officers, reducing to 800 other ranks and 38 officers in 2003–04.
    The Regular Royal Army Medical Corps recruiting targets for 1999–2000 are 398 other ranks and 69 officers, rising to 625 other ranks and 78 officers in 2003–04. I am placing fuller tables of the targets for the Royal Marines and the Royal Army Medical Corps in the Library of the House.
    The Royal Marine Reserve adjusts its recruitment to maintain a trained strength of 592 reservists.
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    Following the strategic defence review, the Reserve Royal Army Medical Corps is to increase by more than 2,000 personnel, and we aim to recruit those additional reserve personnel as soon as possible.
    Mr. Hughes: I am grateful for a full and helpful reply. I believe that we are still a little below establishment in each of those forces. Can we increase the number of women and of black and Asian recruits? Will the Minister reflect on the benefit of trying to pull from the reserves in the Marines, the RAMC Corps and the SAS into the regulars? There is a link, but the numbers going from the reserves to become full-time service personnel are still relatively small. All the evidence and anecdotes that I hear suggest that there is potential there for further recruitment.
    Mr. Henderson: I agree that it is important to tap into all the potential resources for recruitment to our armed forces. The reserves are a key area for that, as are the cadets. That is why the Government put so much emphasis on building up the resources and the capabilities of the cadets.
    The hon. Gentleman also identified two important areas of recruitment. Although women are obviously not so important in respect of the Royal Marines, they are important in the other parts of the armed services and we must tap into such a major section of the population. Female recruitment has been improving significantly, especially for officers. About one in five such recruits are women and not many organisations in this country could claim that one in five of their middle management are women. It is a tribute to our armed forces that they have been able to achieve that.
    It is also important that we recruit from the widest base of the population. So many people in the black and Asian communities would offer so much to our armed forces if they could be convinced that they had a first-choice career there. It is our aim to make sure that that is the case.
    Mr. John Wilkinson: Is not the crucial test, particularly for the commando course of the Royal Marines and the selection course for the Special Air Service Regiment, whether people going through those courses have the mental and physical toughness to pass and to be fully operational thereafter? On the RAMC, do not the needs of the wounded and the sick transcend the racial divides in our society: therefore, should we not forget any notion of ethnic quotas for any arm of the armed forces and judge applicants only on their ability to do the job?
    Mr. Henderson: There is no question of quotas in our armed forces and no question of anyone joining our armed forces who does not have the qualifications—whether mental agility or toughness—to join. If we are to fulfil our recruitment targets, we have to make sure that an awful lot of people with mental agility and toughness who currently are not taking the opportunity to join our armed forces get that opportunity.

    Territorial Army
    Mr. Howard Flight: What impact his review of the Territorial Army has had on recruiting and retention levels. [75968]
    The Minister for the Armed Forces (Mr. Doug Henderson): As we expected, the numbers leaving the TA have risen since we announced the restructuring in mid-November and there has been a small decrease in those joining, by comparison with the previous year. None the less, we fully anticipate that many new young people will take up the many opportunities that there are to serve in the TA, and we launched a new TA recruitment campaign last month to make those opportunities widely known.
    Mr. Flight: I am sure that the Minister acknowledges that the TA is an important area of recruitment for regulars, as has been said. Does he not expect some commensurate fall in recruitment from the TA as numbers fall by 12,800? Is he concerned about the infantry, where the TA is being cut in particular and where there is the biggest under-recruitment in the Regular Army.
    Mr. Henderson: No, I do not expect that. With the restructuring of the TA so that it is in the kind of shape to be able better and more effectively to reinforce the Regular Army, there will be more people in the TA who have those qualifications and that background. It will be more attractive to them to join our Regular Army.
    Bill O'Brien (Normanton): There is still substantial support for the TA from about 6,000 companies. The relevant company in Wakefield is still as interested in recruiting and retaining members of the TA, and it is supported by local organisations. I commend my hon. Friend for the campaign that his Department is organising. Will he continue to make sure that local companies, such as mine in Wakefield, are retained to strength?
    Henderson: I am very grateful for my hon. Friend's support, and he makes an important point about the TA. The restructuring is not only about taking people from companies and using them in our armed forces; it is about giving people better skills, better qualifications and more experience while they are in the TA so that they return to their normal civilian employment with greater aptitude—and, often, greater commitment—which is why so many employers welcome the opportunity for their staff to serve in the TA.
    Keith Simpson (Mid-Norfolk): The Minister has expressed disappointment about recruitment and retention in the Territorial Army. Does he not think that part of the problem of retention is due to the restructuring of the TA, which now constitutes a major disincentive? Following the amalgamation of the 10th and 4th Battalions Parachute Regiment, an horrendous organisation will spread between Glasgow and London. What possible motivation is there for young men and women to join such an organisation, or to remain in it? Some of those valuable men and women are probably to be deployed in Kosovo.
    Henderson: As the hon. Gentleman knows, parachute units are already spread among a number of geographical locations. Nor do I accept that the restructuring of the TA has led to greater retention difficulties. On the contrary, I believe that, following the restructuring, people will be more inclined to join, feeling that they can make a real contribution to the reinforcement
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    of the Regular Army, and to stay to make that contribution. They will eventually return to civilian life with better qualifications, better able to contribute in civilian employment.

    European Defence Industry
    Mr. Barry Jones: What progress has been made towards the consolidation of the European defence industry. [75973]
    The Secretary of State for Defence (Mr. George Robertson): Governments in Europe are making good progress in their work to facilitate defence industrial restructuring, as set out in the letter of intent signed by the Defence Ministers of France, Germany, Italy, Spain, Sweden and the United Kingdom on 6 July 1998. Industry in Europe is responding to the initiative with its own commercial developments, most recently last week's announcement by GKN and Finmeccanica of a merger between Westland Helicopters and Agusta.
    Mr. Jones: Does my right hon. Friend agree that European consolidation can be enhanced if we speedily settle the requirements of the seven European air forces, including our own—specifically with regard to the A400M, formerly described as the future large aircraft? Is it the case that some 288 airframes are required by 2006? We had hoped for an order for 50 future large aircraft from the Ministry. My constituents—3,700 of them—are quite good at making wings for Airbus.
    Mr. Robertson: Few Members are as assiduous as my hon. Friend in promoting their constituents' interests. I pay tribute to those who make some of the best wings in the world for Airbus. There is no doubt that Airbus Industrie has been a huge commercial success, and its bid for the future large aircraft will deserve a lot of attention.
    Mr. Nick Hawkins: The Secretary of State has spoken of the importance of the defence industry. Does he accept that many companies have grown over the past 20 years especially because of their defence links? Does he recognise the enormous success of Admiral, an information technology company in my constituency—I visited it only this morning—which, having been founded by just two people in 1979, now has nearly 2,500 employees worldwide, and five offices in the constituency? It is now the 190th most successful company in the FTSE 250, and is heavily involved in Ministry of Defence work.
    This morning, representatives of the company told me that they wanted a successful future for the symbols of British defence. To that end, will the Secretary of State rule out any prospect of the conversion and ruining of the original, listed staff college buildings in Camberley, immediately opposite Admiral's headquarters, which I saw this morning and which his officials have been threatening to convert to luxury flats, ignoring the fact that there is a war memorial in that historic listed building?
    Mr. Robertson: The hon. Gentleman had a good try with his bid for attention for his constituents, but he still came in second behind my hon. Friend the Member for Alyn and Deeside (Mr. Jones).

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    I recently met the chairman of Admiral, and I know that the company's record is very good. I am sure that the chairman will be delighted to read the tribute in Hansard that may well have been intended by the hon. Gentleman.
    We have not yet come to a decision on the future of the fine buildings at Camberley, but it is something that I feel strongly about. The hon. Gentleman may be assured that we have not lost sight of the issue.
    Ann Clwyd: As my right hon. Friend is aware, there is considerable interest in the House in arms exports, particularly those to countries with bad human rights records. When are we to get the annual report on arms exports, so that we can see precisely what licences have been granted for such exports? I realise that my right hon. Friend's Department is not the only one responsible—three other Departments are involved—but the report is now one year overdue. Why has there been a delay? When the report is released, will a statement be made in the Chamber, so that we may question Ministers precisely on it.
    Mr. Robertson: On the issue of when, my answer is soon. On the question of delay, it has arisen in order that we get all the statistics right. Whether there will be a statement on the report depends on my right hon. Friend the Foreign Secretary, whose Department has responsibility for it.
    Dr. Jenny Tonge: Does the Secretary of State agree that, to have a European defence policy, we must have an integrated European defence industry? Does he also agree that that European defence industry integration must include the activities of illegitimate arms dealers in Europe? Will he assure the House that the Government will support the German Government's proposals to control arms brokers in Europe?
    Mr. Robertson: I welcome the hon. Lady to the Liberal Democrat Front-Bench team in the absence of her two colleagues, the right hon. and learned Member for North-East Fife (Mr. Campbell) and the hon. Member for Portsmouth, South (Mr. Hancock), one of whom wrote to me in advance and whose reason for being absent is perfectly understandable.
    I am not entirely certain what question the hon. Lady is asking. She calls for an integrated defence industry—the Government are working towards further consolidation in that sector, but, clearly, it must be driven by the industry itself. If I got her question right, I believe that she said that integrated defence industry is to include illegitimate arms dealers. We have absolutely no intention of including the activities of such dealers in that industry. If they are illegitimate, by definition, they have no place in our future consolidation or rationalisation of the industry.
    Ms Rachel Squire: I join my right hon. Friend in welcoming the latest example of European defence consolidation, namely, the merger of GKN-Westland and Italy's Agusta, both highly successful industries in their own right. Does he agree that further consolidation of European defence industries is essential if they are to be efficient and competitive and to have a
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    future role to play? Does he believe that progress is being made throughout Europe in achieving that consolidation and speeding it up?
    Mr. Robertson: My hon. Friend is absolutely spot on about the necessity for consolidation and about the fact that, at present, European industries lack the scale to be globally competitive. That must be a clear priority for all those who are employed in the industry and who depend on it. I assure her that we will continue to put in the maximum effort to ensure that the companies recognise that their salvation and, indeed, the industry's survival depend on further moves towards consolidation being made.

    Joint Carrier-borne Air Group
    Mr. Michael Colvin: What assessment he has made of requirements for new aircraft to equip the joint carrier—borne air group. [75974]
    The Parliamentary Under-Secretary of State for Defence (Mr. John Spellar): The new aircraft to equip the joint carrier-borne air group is known as the future carrier-borne aircraft. No decision has yet been made on the choice of aircraft to meet that requirement. A strong contender is a variant of the United States joint strike fighter. We are participating in the concept demonstration phase for that aircraft. We are also assessing a number of other options, including a navalised Eurofighter, Rafale-M, F18 and an advanced Harrier variant.
    Mr. Colvin: I thank the Minister for that reply, but will he bear it in mind that the acquisition of aircraft with short take-off and vertical landing capabilities could considerably reduce the capital cost of the two aircraft carriers that the Government have promised to order, because such aircraft do not require the long flight-decks needed by conventional aircraft? Does he see an opening for the Harrier, with its STOVL capabilities, in a sale to the French—whose new aircraft carrier, the Charles de Gaulle, was at sea undergoing trials when it was discovered that her flight-deck was too short for conventional French aircraft to take off from?
    Mr. Spellar: I would just correct the hon. Gentleman, who said that the Government have promised the aircraft carriers. We are accomplishing the stages, however, exactly on the time scale that we predicted, and I am sure that he will welcome that. Moreover, as I said in my answer, an advanced Harrier variant was one of the options being considered. He will understand the need to evaluate all the technical options, as those carriers will be considerably larger and much more capable than the current ones. We have to have consider all the options—including, as I said, not only the joint strike fighter, but others.

    Trident Targets
    Mr. Jeremy Corbyn: What targets the UK's Trident submarine missiles are aimed at. [75975]
    The Secretary of State for Defence (Mr. George Robertson): As I have made it clear before, our Trident missiles are de-targeted.
    Mr. Corbyn: If the missiles are not targeted at anyone, will the Secretary of State explain what they are for? Why

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    is it necessary to spend billions of pounds on building and maintaining a nuclear submarine fleet when there is no enemy against which to target it, and when launching Trident would cause a global explosion and the extermination of most of the human race? Furthermore, many people think that the whole issue of nuclear weapons is fundamentally immoral and—within the terms of the International Court of Justice judgment of two years ago—illegal. Is it not time that we decommissioned them, took them out of service and cancelled the whole programme?
    Mr. Robertson: My hon. Friend is perfectly entitled to take that point of view, but should always remember that he fought the previous general election on retaining Trident. A pledge to do so was in both the general election manifesto and the draft manifesto, which was endorsed by 95 per cent. of the Labour party. Insurance is the answer to his simple question about why we need the missiles—which, today, are de-targeted. In the future, neither we nor anyone else can tell what dangers will exist in an increasingly unstable world. That is why we have those missiles. My hon. Friend also says that a growing opinion holds that nuclear arms should be done away with and that they are illegal. I tell him that, at the weekend, in Newcastle, I attended a Labour party policy forum, at which only one question about nuclear weapons was asked. The party member said that we had not got enough of them, and that one submarine on patrol was not enough. No one demurred.
    Miss Anne McIntosh: Will the Secretary of State put my mind at rest? Is the hon. Member for Islington, North (Mr. Corbyn) a lone voice in the wilderness, or does the Labour party in government still insist on its campaign for nuclear disarmament?
    Mr. Robertson: The hon. Lady clearly prepared that question in advance. She was therefore unaware of what I would say, and did not bother listening to my answer. The Labour party fought the general election on the basis that we would keep Trident. We are committed also to further reductions and to moving towards a world without nuclear weapons. We are fulfilling both those objectives in what we have said and in the proposals that we have made in the strategic defence review.

    European Defence Co-operation
    Mr. Peter Bradley: If he will make a statement on the Government's policy towards further European defence co-operation. [75976]
    The Secretary of State for Defence (Mr. George Robertson): Our aim is to ensure a strong common foreign and security policy, so that Europe can speak with authority and act with decisiveness in international affairs. To achieve that, we need to provide the tools to allow the European Union nations to make decisions collectively on military matters, including the political control and strategic direction of Europe-led military operations. We also want more effective European military capability so that we are able, when necessary, to back up our policies with military action, both for Europe-led military operations and as a means of strengthening NATO.
    Mr. Bradley: I am grateful to the Minister for that reply. However, does he agree that, just as there is a need
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    for greater co-operation in Europe, there is a need for greater co-operation in our own domestic market? Does he recognise that, with a contracting and diminishing United Kingdom defence sector, interdependence between the Ministry of Defence's procurement strategy and the private sector is all the greater? Does he share my concern that companies with healthy long-term order books, and the jobs that underpin them, are at risk when they have no short-term work? Will he therefore consider the benefits of better and closer integration between the armed forces' procurement strategies and the needs of private contractors in order to predict their business, and thereby to underpin their capacity and the jobs that they provide?
    Mr. Robertson: My hon. Friend makes a valuable point. That is precisely why the Government have evolved a close partnership with the industry in this country. I do not think that I would be contradicted in the industry if I said that the co-operation between us in dovetailing our requirements and its demands is at an historically high level. My responsibility is to ensure that the budget that I have is spent in the most cost-effective way, but I am always conscious of the fact that we have a big industry with a huge export potential and a great record at the forefront of our manufacturing cutting edge. We cannot neglect our industrial responsibilities either.
    Sir Sydney Chapman: When deciding on European defence and security co-operation issues, will the right hon. Gentleman bear in mind the fact that there are six European NATO countries that are not members of the European Union and that five of the 15 European Union countries are not members of NATO? Does that not lead to the inescapable conclusion that the Western European Union should take the initiatives on such matters, rather than the European Union?
    Mr. Robertson: What matters is that NATO's integrity and strength remain undiminished. We in Europe should have the political will and the determination to act when it is in our interests. It is also vital that we have the military capability to act when we come to policy decisions. There are plenty of ways to design and redesign the security architecture of Europe. There are wiring diagrams by the thousand, but a wiring diagram cannot be sent to a crisis. That is where we have to put our principal efforts and energies. The Western European Union has shown how we can weld together all the nations that are involved in that common endeavour, but we need to concentrate much more on the political will and the military capabilities and allow institutional relationships to be developed thereafter.
    Laura Moffatt: Does my right hon. Friend agree that defence co-operation in the European Union will benefit our relationship with the United States? With a more grown-up relationship, the European Union would be able to deal with certain difficulties without being compelled to go to the United States for assistance. That would be better and more sensible.
    Mr. Robertson: My hon. Friend makes a strong point. Europe can and should do more. In many ways, that will strengthen the alliance. The European security and defence identity inside NATO was developed at the 1995

    15
    NATO summit, when the Secretary of State for Defence was one Michael Portillo. The development of the European capability inside NATO was not dreamed up by this Government, but the process of making that capability real, strengthening NATO and giving Europe more control over its destiny has come to fruition only since my right hon. Friend the Prime Minister launched that major and significant initiative.
    Mr. Crispin Blunt: The Secretary of State is in danger of confusing me. At one moment, he is trying to downplay the significance of the development, talking about it as merely wiring diagrams, but he told the Select Committee on Defence that the importance of the St. Malo agreement could not be understated. If I understand it correctly, it represents the most fundamental shift in British defence policy for decades. Bringing defence policy within the remit of the European Union would change the policy that informed the Government's approach to the treaty of Amsterdam. Will the Secretary of State confirm that that is an enormously significant change for British defence policy? Why were we not able even to get the French to join the integrated administrative structure of NATO as part of the St. Malo deal? That would be a small price for them to pay for a fundamental change in British policy.
    Mr. Robertson: There is a danger that I am misleading the hon. Gentleman, but that does not seem to be too difficult. Let me spell it out in simple terms for him.
    The concept of a European defence identity inside the European Union was not born in the Amsterdam treaty; it came into existence in the Maastricht treaty, signed by the previous Government. We are moving towards a European security and defence identity with the office of high representative, and all the responsibilities that go along with that for establishing the policy and making sure that that policy can be put into practice.
    The St. Malo declaration—which brought France and the United Kingdom much closer together in terms of being able to do things in Europe, rather than talk about them—was backed by a practical example, the extraction force based in Macedonia to relieve the Kosovo verification force, had it got into trouble. That force is French led, and has double the number of French to British troops; however, the French Government decided to put it under the command and control of the NATO commander.

    The hon. Member for Middlesbrough, representing the Church Commissioners, was asked—

    Redundant Churches
    Mr. Andrew Robathan: What discussions he has had with English Heritage regarding that body's support for bell towers of redundant churches. [75998]
    Mr. Stuart Bell (Second Church Estates Commissioner, representing the Church Commissioners): Redundant churches are the responsibility of the relevant diocese pending a decision
    16
    on their future. They then become the responsibility of the new owner if an alternative use is agreed, or the Churches Conservation Trust, if they are to be preserved by that body. It follows from this that we have had no discussions with English Heritage.
    Mr. Robathan: Is the hon. Gentleman aware that a recent newspaper report stated that English Heritage was placing such strict criteria on the repair of bell towers that some—redundant or otherwise—would not be able to ring in the millennium because the repairs would cost too much? I know from my church in Leicestershire that English Heritage is so strict as to be absurd. English Heritage does a good job, but will he and the commissioners ensure that the merits of a building are not judged at such an absurd level that the building can no longer operate in the way intended?
    Mr. Bell: The Church does not wish to prevent anyone from ringing their church bells for the millennium, and English Heritage has regular meetings with the Central Council of Church Bell Ringers to discuss matters such as those raised by the hon. Gentleman.
    I could not let this opportunity pass without referring to the bell ringing exercise in Aston, Birmingham yesterday, during a football match at Aston Villa—not too far from your constituency, Madam Speaker. We are always happy to announce that more people attend church services over the weekend than attend football matches. We like church bells to be rung, whether from redundant churches or otherwise.

    Church Income
    Mr. Simon Hughes: What plans they have to use opportunities afforded by the millennium to increase the income of the Church. [76000]
    Mr. Stuart Bell (Second Church Estates Commissioner, representing the Church Commissioners): As we move into the new millennium, the Church Commissioners will continue to manage the endowment funds entrusted to them to maximise their support for the Church's ministry over the long term. Any initiative to increase the income of the Church of England as a whole would be the responsibility of the recently created Archbishops Council.
    Mr. Hughes: Could the hon. Gentleman talk to the Church Commissioners and to the Archbishops Council to see if they would look at three ways of bringing more money in to the Church? First, those of us who go—particularly those who are well off—could be encouraged to pay a tithe from their income, as people used to do. Secondly, those who do not normally go to church could be invited to go at least once next year, because many who do not go still value it hugely. Thirdly, those who do not want to go to worship could be encouraged at least to visit the physical church in this country, and possibly contribute to its work—which, again, such people often value, even if they do not want to be members.
    Mr. Bell: I am grateful to the hon. Gentleman for his suggestions, and I never miss an opportunity of talking to the two archbishops. It is one of my little privileges in

    17
    life to go to Lambeth palace and, when I next do so, I will raise those three matters. The Church Commissioners' balance sheet shows that there are £3.5 billion of assets, and a press conference to be held shortly to announce our results for the financial year will be encouraging to the hon. Gentleman.
    Mrs. Virginia Bottomley: Is the hon. Gentleman aware that many people think that there is a spiritual lack in society? People of all faiths think that the spiritual dimension of the millennium should be recognised and that the Church Commissioners have a unique opportunity to put in place long-term resources to work for the wider community.
    Mr. Bell: The Church is celebrating the millennium in many ways: with candles, with the millennium resolution and with the presence of the spirit zone in the dome at Greenwich. The Church and others greatly regret the fact that insufficient publicity is given to those measures. The Church of England remains the fifth largest Church in the world, and we have a huge membership in many forms and varieties. Propagating the Christian message in the millennium year will encourage people to come to worship and will renew and enhance our Christian spirit.

    Ethical Investment
    Mr. Paul Flynn: What proposals he has to enlarge the ethical element in the commissioners' portfolio. [76001]
    Mr. Stuart Bell (Second Church Estates Commissioner, representing the Church Commissioners): The Church Commissioners and their investment managers are advised by the ethical investment working group on ethical issues that concern the central bodies of the Church of England. The portfolio will reflect those concerns, which means that, at the moment, about 10 per cent. of the United Kingdom stock market is excluded.
    Mr. Flynn: I am grateful for that reply, as far as it went, but it did not answer the question whether the commissioners propose to enlarge their ethical investment. Does the hon. Gentleman agree that some of the new threats to the world come from companies that are indifferent to the environmental effects of their activities? Could not the commissioners, who were trail-blazers in ethical investment as far back as 1948, consider excluding from their portfolio companies that failed to support the multilateral agreement on investment, which was proposed last year?
    Mr. Bell: The Church in its investments is not indifferent to those who are unfriendly to the environment. We note, for example, that the commissioners have shares in Shell, which very much regrets the pollution of the Manchester ship canal with refined oil from the Stanlow manufacturing complex in Ellesmere Port. The company has given an assurance that it will take the measures necessary to ensure that such an incident never happens again. The commissioners are fully advised on ethical investment through the working group. They continue to keep the matter under review and will take into account the suggestions made by my hon. Friend.
    Mr. John Bercow: In view of its Government's adventurist foreign policy and disregard for human rights at home, does the hon. Gentleman agree that the ethical element in the Church Commissioners' investment portfolio would not be increased if they decided to invest in Zimbabwe?
    Mr. Bell: The commissioners have a strong ethical investment policy. We certainly take the view, in relation to our investment in companies in this country, that nations have a right to defend themselves and to engage in peacekeeping initiatives. The ethical investment working group believes in the legitimacy of an indigenous defence industry supplying equipment under Government licence. We are bound by the criteria set by the working group, and we will seek to advance that policy if that is in the interests of the Church.

    Parochial Finances
    Mr. Andrew Lansley: What assessment he has made of the adequacy of the current level of financial support for the parochial ministry to prevent any long-term interregnums in clerical living. [76002]
    Mr. Stuart Bell (Second Church Estates Commissioner, representing the Church Commissioners): The commissioners put £20 million a year into parochial ministry support. That amount was agreed after detailed discussion with dioceses. A guaranteed annuity is payable for the overwhelming majority of benefices when the incumbent is present. Long interregnums are not encouraged, but their length can be affected by various factors, including the availability of a suitable incumbent.
    Mr. Lansley: Does the hon. Gentleman agree that, if the support available to the parochial ministry is agreed to be adequate to avoid long interregnums, it is undesirable for such interregnums to occur as an instrument of Church policy? I hope that, through the medium of this question, the Church authorities will take that view and seek to implement it.
    Mr. Bell: I am grateful to the hon. Gentleman. The Church of England does not generally encourage long interregnums. After nine months, the right of patronage and the legal rights of parochial church council representatives pass to the archbishop of the province, who then has nomination rights.

    Redundant Churches
    Mr. John McDonnell: What representations the Church Commissioners have made to the Chancellor of the Exchequer for the exemption from VAT of charges for building repair works and security measures for redundant churches. [76003]
    Mr. Stuart Bell (Second Church Estates Commissioner, representing the Church Commissioners): [Interruption.] I am sorry, Madam Speaker, I lost my place. The commissioners were co-signatories to a submission in November 1997 on behalf of the Church of England's national bodies to the Government's review of the taxation of charities which highlighted as a particular concern the VAT treatment of works to church buildings.
    Mr. McDonnell: I am tempted to say:
    "seek, and ye shall find".
    Through my hon. Friend, may I request the Church Commissioners to reinvigorate their campaign and join other charitable organisations to ensure that the
    20
    Government's review of the regulation of charitable and Church bodies results in all repairs on community buildings and churches being zero-rated for VAT?
    Mr. Bell: I am grateful to my hon. Friend for his biblical advice. VAT on repairs to listed churches and cathedrals is estimated to have totalled about £16 million in 1993, of which the Church of England paid about £12 million. The question of VAT on church repairs has been raised ever since the introduction of VAT more than 25 years ago and it has met with a negative response from every Administration. I shall end with a biblical quotation:
    "He that hath ears to hear, let him hear."
    Perhaps my hon. Friend's point will be heard.

Education (Excellence in Cities)
3.31 pm
The Secretary of State for Education and Employment (Mr. David Blunkett): Madam Speaker, with permission, I wish to make a statement on education excellence in cities.
On 11 March, I announced to the House that, with the extra investment in public services from the Budget, we would provide much wider access to information technology—with a clear focus on the inner cities. In our White Paper "Excellence in schools", we promised to modernise the comprehensive principle. Today, I can announce a major new framework for our inner-city schools—taking those principles forward in the six largest cities in England. It means shifting the focus decisively from the institution to the individual, irrespective of geography or birth, so that every gifted pupil will be stretched and special needs met. It means a substantial expansion of specialist and beacon schools promoting diversity and excellence. It means that every youngster who would benefit will have access to a learning mentor, with extra help available for those who need it most. This strategy will give every pupil an entitlement to new and more challenging opportunities.
There are particular problems in inner cities which have created a long-standing culture of low expectation. Today's action plan—which will be backed by £350 million over the next three years—will build on measures already taken to raise achievement. Sure start and expanded nursery education will give every child the best possible start in life. The daily literacy hour is teaching children to read, write and spell effectively for the first time in 30 years. From September, our numeracy strategy will restore mental arithmetic—including speed in performing it—to maths teaching. That is underpinned by a rapid reduction in infant class sizes.
Many teachers and pupils are already performing very well in difficult circumstances. We must build on and spread their success. Just as the city multiplies the barriers, we have to multiply the opportunities. Initially, our action plan will be taken forward in six areas—inner and north-east London; Manchester and Salford; Liverpool and Knowsley; Birmingham; Leeds and Bradford; and Sheffield and Rotherham.
Mr. Dennis Skinner (Bolsover): What about Bolsover?
Mr. Blunkett: Not the first time around. As the programme develops, we will link into other initiatives for regeneration and spread success.
We will strengthen leadership in our inner-city schools and provide gifted pupils with new opportunities to succeed. That means setting pupils into appropriate groups in their own schools as well as extra classes linked to specialist schools. If a child with a talent for languages wishes to study German or Italian, but their own school offers only French, that child should be able to do so.
All of us want to ensure that those who have the ability to go to university can do so. We will establish new university summer schools for 16 and 17-year-olds in inner-city schools and post-16 colleges. They will build on links already developed by individual schools and colleges with some universities.
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Many youngsters in our inner cities lose out because they drop out. All secondary school pupils in those areas who need one will have access to a learning mentor to assist in overcoming barriers—someone who can cut through red tape to offer support. That will benefit those who have traditionally been failed by the system, especially children from minority ethnic and disadvantaged backgrounds. This year, we will make a start, with £17 million to employ more than 800 mentors in our schools. Mentors will guide pupils towards extra help and tuition when they are falling behind.
Nor can we allow disruptive pupils to wreck the chances of others. Excluded youngsters miss out on education and often turn to crime. Seventy-five per cent. of those on remand have a reading age of 10 or below. We are already acting to tackle those problems. I propose that every secondary school should have access to a learning unit for disruptive youngsters, who will receive a full timetable and will return to class only when they can do so without disruption.
Turnover and the use of supply teachers are major challenges to the continuity of education in our cities. We will introduce new measures to attract and retain good teachers through enhanced retention bonuses and targeted training and development programmes.
Alongside today's measures, we are strengthening diversity and excellence across the education system. I can announce the expansion of our existing target for specialist schools from 500 to at least 800 by 2002. That will mean that nearly one in four secondary schools in England will offer a specialism linked to neighbouring schools and colleges.
Our new network of learning centres will include specialist schools with strong information and communication technology and a focus on adult computer learning. The first 80 centres will be placed in our inner-city areas, at a cost of £100 million. I can also announce a fivefold increase in our beacon school programme, from the current planned number of 200 by September to 1,000 by 2002.
There has been great enthusiasm for education action zones, and we will invest up to £24 million to extend the programme to support an additional 40 smaller zones. We will also accelerate inspections by the Office for Standards in Education of inner local education authorities.
I am pleased to say that, to spearhead this drive, my right hon. Friend the Prime Minister has today appointed my hon. Friend the Minister for School Standards to hold special responsibility for inner-city education. She will lead a strategy group that will include successful heads.
For too long, the specific educational characteristics of inner cities have been ignored. Today, I believe that we have set in train action that will lead to a step change in aspiration and expectation. Our ambition is real diversity and excellence, from world-class primary education to a comprehensive system that works for all our children, whatever their background.
I commend the statement to the House.
Mr. David Willetts: I begin by asking the Secretary of State to clarify some important aspects of his statement. What does it mean when we are told that the networks for more able pupils will sometimes be based in

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beacon schools and that extra classes will be linked to specialist schools? Are Ministers seriously suggesting that more able pupils should be bussed to other schools for special lessons? Is that what the right hon. Gentleman is telling the House?
Will the Secretary of State also confirm that the Government ban specialist schools from selecting by ability? Such schools can specialise in music, but not in maths. Is the right hon. Gentleman now saying that one can be bussed to a specialist or beacon school because of one's ability in maths, but one cannot be enrolled there for that reason? Is the right hon. Gentleman not simply tying himself up in knots because of his record of hostility to selection?
Will the Secretary of State confirm that he promised the Labour party that there would be no selection by examination or interview? So what procedure will be used to identify for special treatment the most able 5 or 10 per cent. of pupils referred to in his document?
As for the special classes that are to take place in pupil's own schools, but after hours or on Saturday mornings, why can those special lessons not take place during the school day? If they do, we will be back to setting in existing schools. We support setting, which should be spread further, but, on its own, it hardly constitutes the transformation of inner-city education.
The Secretary of State famously remarked:
"I'm having no truck with middle class left wing parents who preach one thing and send their children to another school outside the area."
Who was he thinking of and is it now all right to do that, provided it is on a bus to a learning centre?
We welcome university summer schools and commend the work that Mr. Peter Lampl and others have already done in establishing them. Mentoring can also be a useful way to help pupils, and we welcome that too. But what qualifications will mentors have? Will they be members of the teaching staff? Will they be responsible to the governing body and the head teacher? How are 800 mentors to take responsibility for every child in every secondary school in the target areas.
What about access to a learning unit? How many places will there be? Will they be in each school or will they be external units? Will existing pupil referral units be closed.
The Secretary of State makes great play of the money that will go to inner-city schools, but will he confirm that it is part of the education settlement that has already been announced? How will the money get to schools? Is the Secretary of State aware of the frustration and anger in schools when they hear yet another announcement from the Government, but know that it is financed out of money that should have gone to them as part of their core funding? Instead, that money is held back for another departmental initiative.
Is there not hopeless confusion at the heart of the Government's education policies? The Government have spent two years attacking any attempts by schools to specialise in more able pupils. Schools are losing power over their admissions policies, they will no longer be able to select pupils by ability and, of course, grammar schools are under threat. Now, the Government have suddenly come up with this scheme for selecting more able pupils
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in inner-city comprehensives. Why is that form of selection by ability imposed, whereas all existing forms are banned?
Mr. Blunkett: I am grateful for the warm welcome that the hon. Gentleman gave to the statement about raising standards and giving real opportunity to inner-city children. I am only sorry that the Opposition have not got any ideas of their own, other than returning to the policy of taking some children out of the area to grammar schools and leaving the other 80 per cent. to sink. We are proposing not bussing children, but giving them enhanced opportunities based on the fact that the majority of children are rooted in and will go to their local schools. The very nature of supply and demand ensures that that is the case. Therefore, we have to deal with that reality.
It is essential that we build on the after-school study centres, the university of the first age, which has been pioneered in Birmingham, the summer and Easter school programme and the Saturday schools, which are so popular, in particular, with ethnic minority children, to ensure that we do what the rich have always taken for granted—give children extra tuition when they need it, whether they need special needs support or are gifted. The rich buy tutors for themselves, provide crammers at Easter and in the summer, and condemn anyone else who seeks to have such provision at public expense. Instead of bussing a handful of children into successful selective schools somewhere else, we are going to transform the level of education for the majority of our children in the schools that they have to attend. Everyone can benefit from the programme in those areas and, if the programme is successful, we shall spread it across the country. Selection was an anachronism; providing excellence in the schools to which children actually go is common sense.
The hon. Gentleman asked how we would identify pupils who had particular talents. As I described in my statement, teachers know that, when there is setting rather than streaming, those children who are in the top set and have a particular gift for a particular subject need extra support to stretch them. Giving them additional classes or extra help, perhaps through new technological links between schools—that is now being done not only within this country, but between countries—and using our imagination to develop real diversity makes sense to everybody. If we can make this programme work, sending children outside their area will be a thing of the past. We can ensure that children who are rooted in their neighbourhood can have the standard of education that others have taken for granted.
The hon. Gentleman asked me about mentors and learning units. The initial trawl of 800 for the coming year will be full-time professionals recruited from teaching and educational welfare officer posts and elsewhere. They will organise volunteers, as well as give direct help to pupils and their families. They will provide a link between the school and the home and will form a network giving extra support to pupils in and out of school. The learning units for disaffected children will be in-school units and will ensure that children return to the classroom if and when they are in a position to do so. There will be a full timetable—which never happened under the Conservative Government.
The hon. Gentleman asked me about new money. As I pointed out in my statement, £100 million of the £350 million is indeed money that was announced on

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11 March as part of the investment in learning centres. The remaining £250 million over three years is money that was not previously announced; it is being taken from our reserves—because each Department now has reserves—and has been identified within our budget to take the programme forward. I am pleased that agreement has been reached with my right hon. Friends the Prime Minister and the Chancellor to make the programme possible.
Mr. Malcolm Wicks (Croydon, North): Unlike the gifted shadow spokesman, the hon. Member for Havant (Mr. Willetts), I welcome the emphasis on highly able children. We must acknowledge that we have neglected the highly able for too long in our education system, under the comprehensive approach. The Select Committee report on highly able children will be published shortly after Easter.
May I ask my right hon. Friend what he thinks about the relationship between inner-city schools and disadvantaged schools, given that not all inner-city schools are disadvantaged and not all disadvantaged schools are in the inner city? Will it be possible for the extremely disadvantaged schools in outer-London boroughs, such as my own, and those in rural areas and out-of-town housing estates to be brought into the next phase of this excellent programme?
Mr. Blunkett: The document that we are publishing this afternoon addresses those issues throughout the country, as well as in the six identified areas. The specialist school programme, the expansion to 1,000 of beacon schools and the support necessary for them, including the mini education action zones, will deal with those issues and will include a specific concentration on the 200 schools across the country that face the greatest challenge. We are monitoring those schools, which will receive special support and help. The programme is targeted on the six areas outlined, but is available to support the work of those schools facing disadvantage wherever they are in England.
Mr. Phil Willis: Liberal Democrats welcome anything that addresses the damage that took place over the past 18 years. Primarily, we welcome the recognition that in our inner cities, especially in failing schools, there is a host of very bright and gifted children. It is sad that the Education Acts of 1981 and 1996 failed to recognise such children under the category of special needs. Unlike the hon. Member for Havant (Mr. Willetts), I spent a lot of time in Leeds in an inner-city school of exactly the sort that will benefit from the initiative. We saw the effects of pupils drifting away and of staff being unable to get to grips with gifted children because of a host of problems.
However, I have to tell the Secretary of State, with all humility, as one who has worked in that area, that the thrust of his argument today is wrong. By saying that children can succeed only if they move to specialist schools or into EAZs, we are telling the rest of those schools and their teachers that they are failing—that is the reality of what has been said today. Will the Secretary of State make clear how schools are to be selected, and how pupils within those schools are to be selected to comprise the 10 per cent. who will gain? Will he rule out another bidding process, which I see on the horizon? Will he
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consider the 1996 legislation on special educational needs and include gifted children as a category, so that all gifted children, whichever school they attend, can gain from new legislation?
Mr. Blunkett: First, I applaud the hon. Gentleman for his work in Leeds; we are aware of the excellent contribution that he made and the lessons that he learned, so I am happy to take on board his suggestions about the programme, whether he makes them here or at another time. However, I have to disabuse him of a misunderstanding: we do not intend to select individual schools which will then have their pupils picked out as gifted children; rather, we are talking about all gifted children who have the ability to be stretched being able to benefit from the programme after having been identified by teachers through the setting and grouping process, which I described earlier. The children will not be taken out of their schools, and the schools that will benefit are not confined to those in EAZs; this is a universal programme.
Learning centres and the development of specialist schools will provide a network which can be drawn on by all schools, which will be able to link into neighbouring schools. The fact that one in four schools will be specialist schools will enable that linkage to take place easily, without disruption, and it will ensure that staff, equipment, materials and expertise can be shared. The beacon schools programme will enable schools to link with other schools. It is about sharing and working co-operatively, and about having a family of schools, not the market that was created by the Conservatives. It is about the system as a whole being geared to developing and supporting the needs of the individual.
Yes, I believe that gifted children should be included in the special needs category. In the foreword to the Green Paper "Excellence for all children: Meeting Special Educational Needs", I said:
"Good provision for SEN does not mean a sympathetic acceptance of low achievement. It means a tough-minded determination to show that children with SEN are capable of excellence."
Children, whatever their background and whether or not they have a disability, will get the education that they need and deserve.
Mr. Gerald Kaufman: Is my right hon. Friend aware that the response of the hon. Member for Havant (Mr. Willetts), who, in a refined use of the verb, wants understanding of the issue, validates the statement made by Mr. Michael Portillo that, when one hears the word "teacher", one knows that that individual will not vote Conservative?
We who represent inner-city schools are well aware of the huge reservoir of talent among all children; it exists in the 14,000 children who attend state schools in my constituency, as well as in those who attend the three assisted places schools in my constituency. Their talents require encouragement at every level, and that is what my right hon. Friend is doing. Is he aware that schools that assist such striving for excellence should be encouraged?
My right hon. Friend speaks, rightly, about the inclusion of information and communications technology in his programme, so will he take account of the fact that Spurley Hey high school in my constituency, which he

27
has just reprieved from closure but whose future remains in doubt, has a superbly equipped information and communications technology department, which should be allowed to continue its work indefinitely?
Mr. Blunkett: I knew that my right hon. Friend would get around to Spurley Hey high school. My hon. Friends and I will be happy to take account of the facilities and resources at that school. I agree entirely with the thrust of my right hon. Friend's contribution. I shall never forget the introduction to the Loyal Address when my right hon. Friend outlined clearly the disadvantages suffered by pupils in his constituency and the fact that so few of them were able to benefit from the resources available to Manchester grammar school.
Sir Teddy Taylor: May I offer my full and enthusiastic support to the Secretary of State and his statement and sincerely congratulate him on his courage in facing up to the nightmare of class segregation education, which is the inevitable consequence of having comprehensive schools in inner-city areas? Is the Secretary of State aware of the one problem associated with having mini grammar schools on each subject within comprehensive schools—pupils will feel that they have been excluded unfairly? If there is to be no 11-plus exam or something like it, will the Secretary of State at least ensure that there is some kind of appeal mechanism to help parents who believe that their children have been excluded unfairly from special education?
Mr. Blunkett: I welcome the thrust of the hon. Gentleman's remarks. The admissions policy, which was agreed last Thursday, endeavours to square the circle when supply and demand are out of kilter and it is necessary to ensure that there are fair and transparent methods of allowing parents to allocate a preference in the face of competing demands. We face a real challenge in ensuring that specialist schools do not become the preferred beacon, but are able to share their resources with neighbouring schools, so that we may link schools together. School collaboration will overcome the inevitable demand on scarce resources that arises when parents perceive one school as being better than another.
Mrs. Louise Ellman: Is my right hon. Friend aware that this afternoon's statement, combined with the Government's other education initiatives, will be very welcome in inner-city Liverpool, where talent has been ignored for far too long? Will he explain how the initiatives announced today will further assist schools such as Windsor Street and Shorefield, which have already been identified as schools that are working hard to give added value to pupils in inner-city Liverpool? How will the scheme work? Will my right hon. Friend provide guidance on how proposals submitted for education action zones may be affected by this afternoon's statement?
Mr. Blunkett: I am happy to answer that question. The policy paper that we are publishing today provides further answers—although I appreciate the fact that right hon. and hon. Members have not yet had an opportunity to read it.
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We will ensure that the mini-zones encompass a secondary school and a cluster of primary schools in an area. We will provide an additional £250,000 a year for three years, plus a matching pound for pound for the next £50,000 of sponsorship money that is raised by the schools. This is a mini-version of the broader education action zones, and it will benefit many schools when it is appropriate to focus on a group of schools.
The mentoring programme will be available directly to schools, as will the in-house units for disruptive and disaffected students. Pupils will be able to draw on the expertise of other schools through the linkage with beacon schools, which I described this afternoon. Excellence and experience will be spread to other schools—in the case of my hon. Friend, to schools in the Liverpool and Merseyside area. Much good work is going on. I celebrate it, and I applaud the teachers who are doing that work. This is an opportunity to back those teachers by ensuring that they are able to work better.
Mr. David Prior: Will the Secretary of State put a little more flesh on the bones of the issue of how the ability of the 10 per cent. of gifted children will be assessed?
Mr. Blunkett: I must stress that the initiative is not about a rigid figure of 10 per cent.; it is about recognising the particular talents or needs of individual children and saying that the historic situation arising from geography or birth will no longer restrain a youngster's ability to flourish. Wherever children are, they should be given the support that they need to be able to stretch their talent and do better.
If a school believes that, to develop a talent—whatever the subject—a child would benefit from extra help, it will be able to use the additional after-school facilities that we shall extend, the weekend and summer schools that we shall develop and the links with the expertise that might exist in another school. For example, only one state school in Sheffield, which has a population of 500,000, offers Latin. I should like other children in the city who think that they had an aptitude for Latin to be able to benefit from being taught it.
Mr. Bernie Grant: I warmly welcome my right hon. Friend's statement. Inner-city kids have long deserved such initiatives. However, I have a few words of caution for my right hon. Friend. On disruptive pupils, the proposals remind me of the old sin bins syndrome, against which a number of us fought. I hope that we are not returning to that situation, in which many black kids were put into sin bins because they were classed as disruptive.
Will my right hon. Friend pay attention to supplementary schools, such as Saturday and evening schools, many of which are provided by the black community? Those schools are financed by parents and, sometimes, by local authorities. Will he consider whether he can assist those schools in any way?
Mr. Blunkett: I welcome my hon. Friend back to the House after his period of illness. It is good to hear him speaking out and contributing once again on this important subject. I can make the absolute commitment that we shall not return to the use of sin bins, where students did not even receive an educational timetable and had no opportunity to improve their education, regain confidence or develop the ability to be reassimilated.

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We shall, first of all, prevent children from being excluded. There is a need to prevent black, and particularly Caribbean, boys from being excluded from our education system. Secondly, where there is a problem of disruption and disaffection, we shall enable pupils to be helped and supported on site, rather than in external units, which inevitably divide them from the school.
Thirdly, I celebrate supplementary schools. It is precisely that model that I have been describing this afternoon. We shall now be able to help parents who have previously raised the money themselves to become, over time, part of the system of giving the extra help that supplementary schools have sought to provide. I know that people, not only those from the ethnic community but those from the most disadvantaged parts of our country, will welcome this statement irrespective of whether it is condemned by extremely well-off people in leafy suburbs who seek a return to divisiveness.
Mr. Michael Colvin: I am interested to hear the Secretary of State's announcement, but I want to question him about the provision of a learning mentor for every young person who needs one. Where will those mentors come from? He said that he would recruit 800 mentors, who would then find volunteers.
I want to make a suggestion to the Secretary of State that we have been working on in Southampton. One of the less-favoured areas of the city, the so-called "Flowers" estate, is next to a university, where the students, like all students, are short of money and could earn extra by working part-time. Would there be merit in seeking part-time volunteers in universities and twinning them with schools? Young people who have not long left school and remember what it was like would be in a good position to help the disadvantaged children to whom the Secretary of State has referred and whom his scheme is designed to help. Will he consider that suggestion?
Mr. Blunkett: We rejoice in that. We are glad that the hon. Gentleman has had the decency or the courage to ensure that he is able to welcome and put forward positive ideas. We welcome his ideas entirely. We think that there is a positive role in developing such links. There is an argument taking place around me, with some occupants of the Opposition Front Bench saying that the shadow Secretary of State welcomes my statement. Lord help me if the hon. Gentleman had opposed it. However, I welcome the suggestion of the hon. Member for Romsey (Mr. Colvin), and we will build on suggestions of that sort. If postgraduate students are able to engage with inner-city schools, that will help not only the child or youngster direct, but will inspire them to believe that they, too, can go to university and succeed.
Mr. Robin Corbett: I thank my right hon. Friend for his statement. Will he congratulate and commend the very many teachers who achieve year-on-year improvement among pupils from deprived families in Birmingham and in every other big city in the country? Will he clarify whether the welcome extra assistance that he has announced this afternoon will depend not on geography, but on levels of deprivation, so that out-of-city schools in deprived areas will also benefit?
Mr. Blunkett: The assistance will be for schools in the areas that I have described, and how to accelerate and
30
provide initial support will be a matter for local determination. It is not about geography, in the sense of proximity to a central shopping centre; instead, it is about levels of deprivation in areas, including out-of-city estates, which are often the most deprived and least gentrified of all.
Clearly, we shall want to celebrate the excellence of the heads and teachers, who often do a tremendous job against the odds. We shall want to reward that success, and we shall want to celebrate it by spreading it. Above all, we want to ensure that that success is rewarded through the proposals in the consultative Green Paper, which I hope teachers will read, rather than reading views about it from those who have been against it from the word go.
Mrs. Virginia Bottomley: We spent 10 years working in Brixton and Peckham with some of the most educationally disadvantaged young people, who were suffering from the socialist ideology of the Inner London education authority and its lowest common denominator philosophy. There were then 10 years during which the Labour party bitterly resisted the introduction of a national curriculum and tests of attainment. It is strange now to hear the Secretary of State trying to square the circle to satisfy the socialist chattering classes.
Surely the dilemma that the right hon. Gentleman faces with his statement is that he is proposing an entirely arbitrary system of endless selection of which schools and which pupils will or will not participate in the scheme. Diversity was provided by assisted places, grammar schools and the changes that were set in place. Is the right hon. Gentleman surprised that so many head teachers despair at the level of announcements, the glitz, the glamour, the documentation and the bossiness of the approach? Is it not time now to let the schools get on and deliver the results themselves, rather than introduce a highly complicated scheme where children will be hurrying and scurrying from school to school and centre to centre, unable to settle down and achieve results?
Mr. Blunkett: Having condemned the lowest common denominator approach in the opening part of the right hon. Lady's statement, she went on to condemn measures that ensure that we do not have that approach, and instead celebrate diversity and accelerate the meeting of the child's individual needs. There is no suggestion of hurrying and scurrying between schools, because, unlike the system that offered real opportunity only if we took children out of their neighbourhood school and their area through selection or assisted places, the scheme that I have announced is about helping children who remain in their neighbourhood schools. They would do so under any system, because selection and assisted places took only a tiny fraction of children out of the state system, out of the normal system, and left the rest to manage for themselves. The proposal is for real diversity within the school that a child attends, where the necessary support will be provided. The scheme, if I may say so to the right hon. Lady, is free of dogma, which is why her hon. Friend the Member for Romsey (Mr. Colvin) had the decency to welcome it.
Mr. Eddie O'Hara: It ill behoves Opposition Members to be so critical of such an important announcement for the state education system, where the

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vast majority of our children receive their education, given that, during the entire discussion, the maximum number of hon. Members that the Opposition have been able to raise on the Back Benches is 12.
I welcome the fact that my borough, Knowsley, has been included in the project. I seek clarification of various aspects. Will my right hon. Friend advise me whether, in the areas that have been identified, attention will be given to the range of subjects that are currently available? For example, I can think of only one school in Knowsley where Latin—a subject that my right hon. Friend mentioned—may be available. I can think of none where Greek is available, and none where Russian is taught, except possibly at the same school that offers Latin. Will my right hon. Friend make sure that, within the zones, the full range of opportunities will be available?
In that connection, does my right hon. Friend envisage pupils crossing the borders within the zones—for example, from Knowsley to Liverpool? That may solve some of the problems of provision in Knowsley, but even in Liverpool, in schools that are still in the state system, some of the subjects that I would like to be available are not taught in any school.
Finally, will my right hon. Friend clarify how the mentoring system will work? As a former chairman of education, I have had some experience of trying to get schools to co-operate in sharing their resources, when not every school could offer the full curriculum. I was disappointed to see how schools were prepared to give up their pupils to another school for enrichment.
Mr. Blunkett: On the final point, the mentoring system will enable the red tape, obstruction and difficulty to be unwound more easily, as the individual will have an advocate working on his behalf, supporting him directly and unravelling the bureaucracy.
On the question of working across boundaries, that will be important not only in Merseyside, but in other conurbations, particularly London, where it will be necessary and beneficial for local authorities to share expertise and resources.
It is indeed a challenge to provide scarce specialisms such as Latin. I understand that my hon. Friend the Member for Bolsover (Mr. Skinner) has offered to assist with that, because, every time I mention Latin, he gives me the—
Mr. Skinner: Amo, amas, amat, amamus, amatis, amant.
Mr. Blunkett: I am grateful. At this point, the late Derek Enright would have sung "Yellow Submarine" in Latin. I deeply regret that he is no longer with us to do so.
Several hon. Members rose—
Madam Speaker: Order. Time is moving on, and there is the business of an Opposition day to safeguard. Questions and answers are far too long. I shall not be able to call many more hon. Members, as it has taken such a long time to get through the few questions that we have had.
Mr. Graham Brady: The Secretary of State knows well that the family of schools
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in the borough of Trafford achieves the best results in Greater Manchester—indeed, the best results in the north-west of England. Perhaps he will reflect on the fact that that is not just because 35 per cent. or more of the children go to grammar schools and get a good academic education, but, perhaps more important, because the others who go to good high schools get a good technical or vocational education, as was recognised by the Secretary of State in response to a sedentary remark from the Government Benches. The right hon. Gentleman has made one of those schools a beacon school. Is he not concerned that the proposals that he outlined may give some academic benefit to a fraction of pupils, but will sacrifice the vast majority, for whom there will be no improvement in the technical or vocational education that they should have?
Mr. Blunkett: Exactly the reverse. I commend those schools for being excellent; precisely because they are so excellent, the bulk of parents in the hon. Gentleman's constituency, should they vote for a non-selective system, would want their children to continue to attend them.
Ms Diane Abbott: Is my right hon. Friend aware that his statement will be widely welcomed in the inner cities? He will be aware that one of the distinguishing characteristics of many inner-city areas is a high number of black and ethnic minority children. He will know that, last month, I held a conference in Hackney on black children in schools, which attracted more than 500 people from all over the country. I do not want to prolong my question; will my right hon. Friend build on the positive work that is being done in the community, exemplified by the Saturday school movement, and listen to what black parents are saying? They, too, want excellence for their children.
Mr. Blunkett: The answer is yes.
Mr. John Wilkinson: Would it not have been so much better to have kept the assisted places scheme in place, because it would have had universal benefit throughout the country? As for the leafy suburbs, of which the right hon. Gentleman speaks so disparagingly, will he turn his attention to how local parents would be better able to secure a place in their local school for their children? That really concerns them.
Mr. Blunkett: Those children need a local place—an excellent local place. They do not need a system that allows a few to escape from a local place that they do not find acceptable.
Mr. Skinner: The many, not the few.
Mr. Blunkett: As my hon. Friend once again says, so rightly, that is why we are in favour of the many, not the few.
Mr. Terry Rooney: I welcome my right hon. Friend's statement—which, on top of his wise decision to support the Bradford schools review with £170 million, is good news—but will he clarify whether the money for gifted pupils will be awarded per pupil, per school or per local education authority?
Mr. Blunkett: The resources will be allocated in relation to the needs of an area as a whole and will be

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discussed with those areas so that we can ensure that we can get the initial programme off the ground as quickly as possible.
Mr. Christopher Chope: Does the statement not show that the Government are suffering from a serious split personality? I welcome what the Secretary of State has said, especially as it endorsed the policies being pioneered in Conservative-controlled Wandsworth, but can he explain why the Government are still undermining the grammar school system if they are now committed to selection on the basis of ability?
Mr. Blunkett: I thought that I had just explained that we are helping children, whatever their ability, in the school that they attend. The hon. Gentleman described the excellence in Wandsworth, but it also seems to have passed me by that we have adopted such a system. There seems to be a degree of schizophrenia here; either we are adopting such a system, which he would welcome, or we are not adopting such a system, which he would oppose. I heard both in his question.
Helen Jackson: My right hon. Friend will know how welcome his statement will be in Sheffield and in Rotherham. May I pick out two matters? First, I particularly welcome the widening of choice on foreign languages. My right hon. Friend will remember when Ecclesfield school, for example, offered a number of languages, including excellent provision of Russian, which was whittled down to nothing during the 18 years of Tory rule. Secondly, I welcome provision for the awkward squad coming back into schools and getting some education. However, both those areas require good specialist teachers. Will he say a bit more about how many extra teachers he expects to be involved with that provision, which will be so welcome in the inner cities?
Mr. Blunkett: I am pleased that my hon. Friend recalls her time teaching at Ecclesfield school, where she did an excellent job with special needs pupils. Not only will we seek to recruit and to accelerate those who have a specialism that is not readily available, but, as I have described, we will use technology to link up with schools that do not have those specialisms available. The experiment carried out in the Strathclyde region before the change in structure in Scotland was very interesting, because it linked small island and highland schools into a provision that was available only in a handful of urban schools in Strathclyde. That allowed pupils to link into classes and to teachers with such expertise. Although we need to do a great deal more, we can link up not simply across our country and across Britain, but across Europe and the world.
Miss Julie Kirkbride: I welcome what the Secretary of State has said about the pursuit of excellence for children with academic abilities in our inner cities. Some of those whom he despises—constituents of mine who live in "leafy suburbs"—go to school in Birmingham, alongside Birmingham children who are socially deprived and from ethnic minorities, because they attend the city's excellent grammar schools, which his Government want to abolish.
In the light of today's statement, and of what I believe to be his intention to raise standards for all, will the Secretary of State tell the people of Birmingham—the
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politically correct left-wing loonies, perhaps, who still want to use the mechanism introduced by his Government to abolish state grammar schools—to desist from doing so, in the interests of everyone, not just those in leafy suburbs?
Mr. Blunkett: In the interests of brevity, I shall not comment on that rant—except to say that, far from despising the hon. Lady's constituents, I want them to have the excellent education that some of them are seeking through the selective process which enables them to attend grammar schools in Birmingham, rather than the schools available to them in her constituency. This is the essence of our disagreement: at the heart of what we are doing is our wish for children to have confidence in local schools, rather than trying to escape from them.
Ms Gisela Stuart: I welcome the statement, as does everyone in Birmingham. I thought that I had heard the end of Conservative Members' referring to left-wing loonies and Birmingham in one breath—especially as I seem to remember a libel action some time ago which was most embarrassing for the then Secretary of State.
I was delighted to hear my right hon. Friend refer to mobility. When he mentioned it first, I thought that he meant pupil mobility, which is a great concern of mine, but I welcome what he said about the need to reduce the number of supply teachers, and to provide more stability among teaching staff. Will he elaborate on that, and explain how we can work together to provide such a stable environment in schools?
Mr. Blunkett: I take to heart the need to ensure that teachers are attracted to, and retained in, the schools that face the biggest challenge. Pupils at a primary school that was referred to in our document had 25 teachers in one year, which caused immeasurable disruption to their education. If, by means of retention bonuses, special development programmes and the attachment of mentors to teachers and pupils, we can avoid such disruption, we shall do a great service not just to pupils and parents, but to teachers, enabling them to fulfil their desire to take on the challenge to teach in the inner cities, knowing that they have the necessary backing.
Mr. Simon Hughes: Does the Secretary of State accept that two improvements are necessary if the parents of bright children who live in inner cities are to feel more confident, and if more of them are to send their children to non-fee-paying, non-selective inner-city schools? First, more transparent application arrangements are required, involving a fair appeals system in every school—including, independently, city technology colleges, which are not yet required to have such arrangements. Secondly, rather than issuing directives to local authorities for the prospective contracting-out of services—such a directive was issued to Hackney on Friday—the Secretary of State should ask local parents what sort of management of their schools they want, and, if they want a change of management, let them, rather than Ministers, lead the debate.
Mr. Blunkett: We are digressing slightly, but, in any event, I am not going to organise a referendum on school

35
management in Hackney or anywhere else. I shall ensure that there are proper structures enabling us to achieve the management and leadership that we need. Of course—as the hon. Gentleman said at the beginning—we need to get the arrangements right for individual children, and I should be happy for the hon. Gentleman to tell us, on the basis of his constituency experience, what he would like to see that is not mentioned in the document.
Ms Hazel Blears: A young man who attends Windsor high school in the inner city of Salford wants to be a civil engineer. For the past year, he has had a mentor who has helped to shape and focus his ambitions, and I believe that, as a result, he will succeed in having a career that previously he did not dream of having. The proposals will help thousands of children just like him to flourish. Does the Secretary of State agree that it is vital that those children have support not only in school, but at home in their communities? Will he confirm that the support for educational excellence will be linked to inner-city regeneration, to ensure that our success is long term and sustainable?
Mr. Blunkett: I can indeed. It will be rooted in the regeneration programme. Let me make it clear that, like everyone else, I accept that unemployment, poor housing, poor health and a poor environment have a dramatic impact on the life chances of children and on the schools and teachers who teach them. We need to compensate for and to overcome that disadvantage, not to excuse it. I take entirely the point that my hon. Friend makes. We will do that. We will provide those mentors. We will provide that support in Salford as part of ensuring that pupils such as the one whom she has mentioned have the aspiration and expectation that we take for granted.
Mrs. Theresa May: Earlier, the Secretary of State described selection as an anachronism. Will he confirm that, under the Government's policy, not only will some pupils be selected for their specific talents, but each school will be required to select 5 or 10 per cent. of pupils by ability, and to provide those pupils with a different teaching and learning programme from other pupils in the school?
Mr. Blunkett: No, I will not confirm that. I will confirm that the existing programme, which all pupils will go through, will remain, that those pupils will take that programme, but that it will be accelerated and extended where appropriate. This morning, I was at St. Paul's Way community school in Tower Hamlets, one of the most deprived areas of the country. Fifteen-year-olds there are taking A-levels, developing alongside their normal programme the ability to stretch and to extend their talent. I want every child to be able to do so, not just those who can buy private education.

Points of Order
4.27 pm
Mr. Iain Duncan Smith: On a point of order, Madam Speaker. I seek your guidance. As you will recall, the House received a serious admission from the Chancellor of the Exchequer on 16 March by written answer that his Parliamentary Private Secretary had received, before its publication, a draft copy of the report by the Select Committee on Social Security on taxing child benefit. However, at the time, the Chancellor had not answered other questions about the involvement of his political adviser, or possibly his officials. Therefore, I asked that question again. However, on 19 March, the Chancellor's answer to that specific question was simply to refer me back to his answer of 16 March; in other words, he refused to answer the question.
My point of order is to refer the House to the clear guidelines that are set down in paragraph 1 of the ministerial code. The paragraph is taken from a resolution of the House, which says:
"It is of paramount importance that Ministers give accurate and truthful information to Parliament".
It goes on to say that Ministers may refuse to provide information
"only when disclosure would not be in the public interest".— [Official Report, 19 March 1997; Vol. 292, c. 1047.]
As the code is at one with the resolution that was passed by the House, is not the Chancellor abusing the House and the public whom Parliament serves by refusing to answer that question? Do you agree that the Chancellor should now come before the House, apologise for his failure to uphold that code—which the Prime Minister stressed in his opening remarks in the code—and answer, once and for all, the question whether his advisers or officials were involved in that leaked draft report?
Mr. Eric Forth: Further to that point of order, Madam Speaker. Can you guide us on what redress is available to the House of Commons if we find, as we increasingly do—the example of my hon. Friend the Member for Chingford and Woodford Green (Mr. Duncan Smith) seems to exemplify it yet again—that Ministers refuse point blank to answer a question that has been accepted by the Table Office, and refuse on a second or subsequent occasion to give any further information? Is the House of Commons then simply left completely lost? Is there nothing that we can do? Are the Government now able, as they never were in the past, to stonewall and to refuse the House any information after a question has passed through the Table Office?
Mr. Edward Leigh: Further to that point of order, Madam Speaker. I am a member of the said Select Committee: the Select Committee on Social Security. The facts are clear. The Chancellor has admitted that his Parliamentary Private Secretary received a draft report. I have tabled a question to ask from whom he received the draft report. I await the answer to that question anxiously.
Surely the answer is simple. It is inconceivable that one of your Clerks, Madam Speaker, gave the PPS that Select Committee report. It is unlikely that a Conservative Member provided the report. However, someone must

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own up to providing it. If the Executive received a draft report from the Select Committee and no one owns up to providing it, it is difficult to see how the system will be able to continue operating. The system will simply collapse. We therefore do need your help and guidance on the matter.
Mr. John Bercow (Buckingham): On a different point of order, Madam Speaker.
Madam Speaker: Let me deal first with the first point of order.
I am grateful to the hon. Member for Chingford and Woodford Green (Mr. Duncan Smith) for giving me a little notice of what guidance he was seeking. As the House knows, Ministers take responsibility for the answers that they give, and I cannot comment on the specific answer to which the hon. Gentleman referred.
In general, the House is entitled to expect—as I do—that all Ministers will comply with the resolution on ministerial accountability. Enforcement of that resolution, however, is a matter for the House and not for the occupant of the Chair. I am sure that hon. Members, using our procedures, will find further ways of pursuing questions. Moreover, Ministers will have heard the points of order that have been raised and will take note of my response to them.
I call Mr. Bercow.
Mr. Bercow: Thank you, Madam Speaker. May I seek your guidance on the implications for the House following a report—on page 2 of The Sunday Times yesterday, by Jonathan Carr-Brown—of a transport conference being organised by Professor David Begg, which is due to take place tomorrow and to be addressed by, among others, the Secretary of State for the Environment, Transport and the Regions? The report states—the Department has not contradicted it—that the Secretary of State will make what is described as a "keynote speech" on bus policy, and that he is billed as launching the Government's White Paper on buses.
As the conference is advertised on that basis, and as charges—of between £175 and £275—are levied for attendance, is it not a matter of the utmost seriousness? Given that you have made very clear your views on the importance of informing the House first—and as Ministers might be hard of hearing—would you care to reiterate your views on this important matter?
Madam Speaker: I pay little attention to such newspaper reports, and am not in the least bit interested in keynote speeches made outside the House by Ministers. It is not a matter for me. Ministers know my views on the matter, and certainly the Deputy Prime Minister has an excellent record in coming to the House first before making announcements outside it. He also knows full well my views on the matter. If there is any new policy or a policy change, he is a Minister who usually comes to the House first before announcing the policy outside it.

Opposition Day
[8TH ALLOTTED DAY]

Council Tax Increases
Madam Speaker: We now come to the first debate on the Opposition motions. I have selected the amendment in the name of the Prime Minister.
4.33 pm
Mr. Paul Burstow: I beg to move,
That this House notes that the prime determinant of council tax levels is the amount of funding allocated by central government to local authorities; further notes that as a consequence of inadequate financial settlements for local government in recent years there has been a substantial real-terms year-on-year increase in council tax; and calls on the Government to improve the funding of local services and abolish budget capping within the lifetime of this Parliament.
Shortly before the 1997 general election, the House debated the then Conservative Government's last local government settlement. During the debate, the then shadow Secretary of State for the Environment, now the Secretary of State for Health, declared:
"The incoming Labour Government will be based on the supposition that democracy depends on the people who take the decisions carrying the can".
That is absolutely right. It is what this debate is all about—that those who take the decisions should carry the can for them. As our motion clearly states, the Government's responsibility is plain and clear when it comes to the increases that councils are now having to foist upon their citizens.
In the same debate, the right hon. Gentleman went on to say:
"We shall not roam around the country blaming local councillors for decisions that we have taken in the House of Commons."—[Official Report, 3 February 1997; Vol. 289, c. 701.]
That, too, is absolutely right.
Two years on, is Labour taking responsibility? Last November, the Deputy Prime Minister came to the Dispatch Box to announce Labour's second local government settlement. We were treated to much of the usual display of smoke and mirrors. We were told that council tax need rise by no more than 4.5 per cent., and Ministers spent the day going around television and radio studios underlining the positive message of only a 4.5 per cent. council tax increase. Moreover, we were told that the settlement was the most generous since council tax was introduced.
We know now how wrong those claims were. Council tax bills are rising by 6.8 per cent.—an average increase of £51 on band D in England alone. The Government have to take responsibility; they must stop blaming local authorities and councillors for the consequences of Government decisions taken in the House with the support of Back-Bench Labour Members.
Mr. Gordon Prentice: Why is the average council tax per dwelling so much higher in Liberal Democrat areas than in Labour or Conservative areas?
Mr. Burstow: If this is going to be one of those debates when we trade variations of statistics, we can cite with the band D average, which shows a 6 per cent. increase for Liberal Democrat authorities.

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The issue is not what local authorities decide, because more than 75 per cent. of what councils spend comes from central Government. The decisions of central Government overwhelmingly dictate council tax levels. We can all come up with spurious statistics, or even factual ones—I am sure that those referred to by the hon. Member for Pendle (Mr. Prentice) were factual—but we have to recognise that all the statistics are shaped by the decisions of Ministers on the distribution of grants and non-domestic rates.
Mr. John Bercow: The hon. Gentleman is right to point the finger of responsibility at the Government Front Bench, but I hope that he agrees that it is important that he should approach the debate with clean hands. Will he tell the House the average saving achieved by Liberal Democrat-run authorities from competitive tendering and market testing?
Mr. Burstow: I am grateful to the hon. Gentleman for that intervention and I shall give him a straight answer. I cannot give him the figure today, but I shall happily write to him with it in due course. I shall be interested to hear his speech later, when I am sure that he will try to give us every detail of the savings arising from compulsory competitive tendering by Conservative councils. The figure will be much smaller, because there are so few Conservative councils these days. Compulsory competitive tendering, which is referred to in the Government amendment, has produced inefficiencies because of the way in which it has been delivered. The crude and ineffective mechanism of CCT might have produced artificial savings, but they came at the expense of quality of service. The Conservatives never understood that when they were in government. That is why they lost so many seats in local government throughout the country.
The lion's share of what councils spend is provided by the Government in the form of grants and business rates. That means that small changes in the way in which the Government distribute the cash have large consequences for council tax bills. An essential qualification for being a Minister in the Department of the Environment, Transport and the Regions seems to be a willingness to live in a world of fantasy figures—a fantasy based on the pseudo-science of standard spending assessments. Ministers place great store on the standard spending assessment. Education Ministers seem to believe that it is a true measure of what councils should spend on education.
In reality, the formula is nothing more than a means for delivering and distributing a cash-limited budget. Minor changes in the algebraic formula that underpins the standard spending assessment can have profound effects on the level of council tax, as we are seeing as bills start to be printed and delivered to council tax payers. As the Chartered Institute of Public Finance and Accountancy recently said:
"Because the financing of local authority spending depends so heavily on central government support, raising relatively small amounts of additional local revenue results in exaggerated increases in council tax levels."
Standard spending assessments are only part of the story. The sleight of hand is more subtle than that. The gap between what local authorities are spending and what
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the Government are funding is growing. It stands at £2.3 billion and is set to widen further. As the Government withdraw support from local spending, the council tax payer has to pay more. During the debate before the election, Labour exposed that as a scandal, but the Labour Government have continued with the same policy. As a consequence, for every pound that the Government fail to fund, council tax goes up by an average of £4.
In the Government's fantasy world, we are told by Ministers that a 4.5 per cent. increase is all that is needed, and that no cuts will be necessary in front-line services. I have been watching closely and listening to Ministers and their advisers, and that is not what is happening on the ground. In the real world of inflation, an ageing population and an increasing number of school children, councils have already endured two years of Labour austerity; two years of Labour sticking to Tory spending plans; two years of cuts and council tax rises.
Labour would like us to think that year zero started with the comprehensive spending review. We are to forget the first two years of a Labour Government, and focus on the next three. "Cash for change" is the cry, but that ignores the cumulative effects of years of inadequate settlements under the previous Government, and now under this Government. In the real world, Labour's spending commitments are being oversold and underfunded. Over the lifetime of this Parliament—not just the last three years—compared with the last full Parliament, current real annual spending growth has halved: 1.4 per cent. versus 2.7 per cent.
On education spending, there is the much-vaunted £19 billion extra. The number of times that this figure, and sub-sets of it, has been launched and relaunched would place the Government well at the top of the Audit Commission's league table on recycling. Apart from being a three-year cumulative figure—rolling up total spending compared with current years—it is conveniently forgotten that the figure includes three years' worth of inflation and all aspects of education funding, including colleges, universities, Ofsted inspectors and special grants.
Nearly half the Government's promised increase is not an increase in funding, but comes in the form of standard spending assessment increases. That is not cash from the Government, but cash from council tax payers. Councils taking up the Government's so-called generous SSA increase will have to cut other budgets or increase council tax—or, in most cases, both. Last year, the Government left councils to find £562 million for local education in that way. The result was that class sizes went up, not down—which was an early Government pledge.
The total increase in central Government funds to local authorities is set to rise by an average of £1.5 billion over each of the next three years, and education's share of that is likely to be no more than £600 million a year. Those figures take no account of the teachers' pay award this year and the Government's failure—again—fully to fund the award leaves councils having to find an extra £68 million in the coming year.
It is not just in education that cuts in other budgets or increases in council tax will be needed to bridge the gap. A closer inspection of figures provided by the Library reveals that the social services standard spending assessment for England will rise by just 1.3 per cent. after

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changes in the grant and special grant regime that provided for community care in the past have been taken into account.
Even on the Government's own fantasy figures, that will leave a £100 million gap, simply to meet inflation, for social services to pick up. A lower inflation increase for social services will make cuts in current services inevitable. Undermining current social services by underfunding makes no sense at a time when the Government, rightly, are setting targets and directing a host of specific grants at social services to secure change and improvement. Ultimately, that is self-defeating.
To make matters worse this year, local authorities have been left waiting for the Department of Health to publish the conditions for all the new grants, turning the planning and budgeting exercise into a nightmare. Only last Tuesday, the conditions for the three biggest grants were finally published—well after most local authorities will have set their budgets and made their decisions about council tax.
It is not just the levels of council tax funding that make a difference, or the way in which money is distributed; it is also the capping system itself. The Government amendment applauds the abolition of crude and universal capping—and we, too, would applaud that. However, capping is still with us this year. The only difference is that the Deputy Prime Minister is keeping the figures to himself; he is not sharing them with anyone else. As a result, councils are forced to play Russian roulette with school budgets, meals-on-wheels charges and other services.
Just in case councils do not get the capping message from the Government, there is new Labour's own brand of crude and universal capping. Council tax benefit subsidy limitation gives the Government the power to claw back council tax benefit from councils increasing their council tax by more than 4.5 per cent. The result is a further increase in council tax or a budget cut to pay for the loss of council tax benefit subsidy.
The Labour manifesto promised an end to crude and universal capping, but with reserve powers to control council tax rises. The clawing back of council tax benefit is not a reserve power: it is crude and it is universal. A council with an 8 per cent. council tax increase will receive no further funding for council tax benefit for the poorest in its community, so the nearly poor will have to pay for the benefits of the really poor in their communities. So much for ending crude and universal capping.
For Liberal Democrats, local accountability means greater financial independence. As a first step, we would return to local councillors the power to determine local business rates, which would increase the amount raised locally for council expenditure from a quarter to nearly half. That would begin to rebuild financial independence, creating greater transparency and accountability to local people.
The figures are clear—the average council tax increase is 6.8 per cent., which will result in an average band D increase of £51 a year. That is more than the Government claimed, and more than people were led to believe.
Mr. Simon Hughes: My hon. Friend has been very accurate in his general observations, but I want him to answer a
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particular question which may be of interest to the Minister, who lives in the borough that I represent. When my constituents complain that the Labour council is closing day centres for the elderly and for adults with learning difficulties, and wants to sell off housing estates because it does not have enough money to repair other estates, is that more the local Labour council's fault, or more the Labour Government's fault? Which manifestation of Labour should people blame?
Mr. Burstow: I am grateful to my hon. Friend. Every single council tax payer faces that dilemma because accountability is even more blurred now than under the previous Government. Labour councils implement Labour Government council tax increases and cut services to try to keep council tax down a bit. Of course, individual councils have to set priorities, but in my hon. Friend's area a Labour council is making decisions that cut local services.
I have a final quotation:
"It is no good the Government complaining that councils blame central Government. Central Government have so constructed the system of local government finance that they tell it how much it can have, what it can spend it on and how to spend it. The country has rumbled that and knows that central Government are taking decisions and deciding how those decisions will impact in every area."—[Official Report, 3 February 1997; Vol. 289, c. 760.]
How very true were those words, spoken by the current Minister for Local Government and Housing; and they are truer today than when she first spoke them. The Conservatives may have engineered the local government finance system, but Labour has fine-tuned it to give Ministers even more power to direct what councils can or cannot do. The Government, more than local councils, have taken the decisions that have determined council tax increases, because so much of the money comes from the centre.
The people have indeed rumbled what has happened, and have seen that, as a consequence of decisions taken by the Government, there will be a massive back-door increase in taxation. Labour should carry the can for that.
4.49 pm
The Minister for Local Government and Housing (Ms Hilary Armstrong): I beg to move, To leave out from "House" to the end of the Question, and to add instead thereof:
"notes that the 1999–2000 local government settlement was the most generous since the introduction of the council tax; further notes the Government's commitment of an extra £40 billion for schools and hospitals; and welcomes the introduction of Best Value, the abolition of crude and universal capping, the reform of political management structures and the new ethical framework, set out in the local government White Paper."
This debate is interesting. Hon. Members may already know that it is little more than a fig leaf to cover the embarrassment caused by the Liberal Democrats' confused and contradictory local government policies. The hon. Member for Sutton and Cheam (Mr. Burstow) is a prisoner of his own party activists. He knows that the interests of Liberal councillors are not the same as the interests of local people.
Jackie Ballard: He is a party activist.
Ms Armstrong: Perhaps the hon. Lady has given us the truth.

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The interests of Liberal Democrat Members are not the same as the interests of the general public. Liberal councillors want higher taxes from local people, while local people want best value for their money. The hon. Member for Sutton and Cheam knows that he cannot take a responsible and grown-up attitude to local government policy and please both—so he has chosen to put party before people. Because the hon. Gentleman cannot reconcile the interests of his councillors with the interests of the electorate, he has this afternoon tried to shift the blame for council tax rises, many of which have been the direct decision of his party, away from councils and on to the Government.
Liberal policy is muddled: the Liberal Democrats say that they want the Government to grant more money to local councils, but councils to raise more of their money for themselves. The Liberal Democrats say they want lower council tax rises, but want to abandon all controls on local government spending. They say they support public services, but want to do nothing to ensure best value for local people. Much of local government has moved on from the old politics of spend and blame; it seems that the Liberals have not. They have become apologists for old-style municipal tax and spend, high taxation and low efficiency.
Jackie Ballard: If the Minister thinks that Liberal Democrat councillors and activists are so out of touch with the wishes of local people, will she explain why the Labour party—especially in the north-west of England—has lost council seat after council seat to the Liberal Democrats over the past year or two?
Ms Armstrong: If the hon. Lady revealed the turnout at those by-elections, she might not be so gung-ho. The Tories craved too much control over councils, but the Liberals propose out-of-control councils—with taxes as high as they like, spending as much as they want, service standards as low as they get—with the Government taking no responsibility for improving public services or protecting local taxpayers. The Government reject both those approaches.
Mr. Burstow: The Minister asserts that our policy is to release local government from central Government control, and she is right. However, much of what Liberal Democrats have said for many years is also the policy of the Local Government Association, including returning business rate control to local councils and a local income tax. The LGA has long campaigned for those policies.
Ms Armstrong: The hon. Gentleman will wish to retract that statement, because I have never known the LGA to propose a local income tax. I hope that the hon. Gentleman's enthusiasm will take him down the right road. The LGA has argued for the return of business rates to local control, but it also accepts that redistribution would be needed if that were to happen, from those authorities—
Mr. Burstow indicated assent.
Ms Armstrong: The hon. Gentleman did not make that point clear. Such redistribution moves away from the
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relationship between central and local funding. We believe that central Government should work alongside local councils to get the best for the local taxpayer and encourage local democracy. Central government should not seek to control too much or to abandon responsibility for what happens.
It is in the national interest that local communities should take more decisions for themselves; that local councils should be more responsible to local people than to central Government; and that responsible councils should set their own levels of taxation. It is also in the national interest that central Government should ensure that national standards of public service are set and met, and major failures in service delivery are halted and reversed. It is the responsibility of central Government to make resources available to local councils to provide and enable the provision of modern public services, at a price people are prepared to pay, and it is right for the Government to ensure that those resources are spent wisely and well.
The hon. Member for Sutton and Cheam tried to pretend in his peroration that the Government had not been generous to local government. In fact, in the five years of the previous Parliament, standard spending assessments fell by 3 per cent. in real terms, while the Labour Government have already increased SSAs by 2.6 per cent. During the first four years of the Government, SSAs will increase by 6.9 per cent.
When the Conservatives exercised central control through crude and universal council tax capping and pre-announced spending limits for every council in the country, it could fairly be claimed that they took responsibility for every council tax rise. The capping threshold ceased to be a maximum spending limit and increasingly became the norm. Conservative Governments enjoyed the right to limit every budget increase, and they must therefore take responsibility for every council tax rise. As we said we would in our manifesto, we have ended crude and universal council tax capping. This year, there have been no pre-announced capping limits.
Mr. Simon Burns: The hon. Lady said during her flight of fantasy that it was the responsibility of central Government to provide money for local authorities to provide local services. [Interruption.] She now says that she did not say that, but that was certainly the impression that she gave in her speech. How, then, would she respond to the hon. Member for Brent, East (Mr. Livingstone), who said that, as a result of the Government's settlement, £2.4 million would have to be cut from education in Brent? In addition, the hon. Gentleman said that provision of care for the elderly would be cut, that libraries would close and that children and the disabled in care would suffer. What would the hon. Lady say to her hon. Friend?
Ms Armstrong: It is not my job to account for the meanderings of my hon. Friend the Member for Brent, East. I am not responding to his electioneering; I am here to deal with the electioneering of the Liberal Democrats, and with the feeble attempts of the Tories.
Councils have set their tax and spending levels for themselves this year. They are responsible to their electorates for them, and they must now account for their decisions. Such decisions include that in Torbay—I am

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pleased to see the hon. Member for Torbay (Mr. Sanders) in the Chamber—where responsibility for the council tax increase of 17 per cent. lies with the Liberal Democrat council. Those decisions include that taken in Herefordshire, where responsibility for the council tax increase of 10.8 per cent. lies with the Liberal Democrat council. The biggest council tax rises among unitary councils are by Liberal Democrat councils. The Liberal Democrats can duck and dive, but they cannot escape their own responsibilities for council tax rises. It is little wonder that the average council tax bill per dwelling in Liberal Democrat areas is higher than in Labour areas.
Mr. Adrian Sanders: Which Government were responsible for reducing the formula for bed nights, which has affected tourist areas; which Government reduced weighting for elderly people; and which Government have caused problems for areas with rising numbers of school pupils because of the time lag in the head count in standard spending assessments? Can the Minister name a council affected by all three of those factors? I can give her an answer: Torbay, where those characteristics account for a large proportion of the tax rise.
Ms Armstrong: I wish that that were true. However, the truth is that Torbay is raising the council tax, not because it has taken SSA changes into account, but because it is raising its budget by 6.7 per cent., which is somewhat above inflation. That is why there is a council tax rise of 17 per cent. The Liberal Democrats are responsible for the rise in that budget and they are responsible for the consequent council tax rise.
The Conservatives are no better. Conservative councils have higher than average increases in council tax at 7.6 per cent. In shire districts, Conservative councils have higher average rises than Labour councils.
Mr. Sanders rose—
Ms Armstrong: The hon. Gentleman will have a chance to put his point in his speech.
In the 1980s, the Conservatives were proud of Wandsworth—their flagship borough. Last year, ahead of the local government elections in London, which may have been incidental, Wandsworth cut its council tax substantially. This year, when there are no elections, Wandsworth has the highest increase of any council in London, with a massive tax hike of 21.5 per cent. Compare that record with the rest of inner London
All inner-London authorities were treated similarly in this year's settlement. There are only three Conservative councils in inner London. The top three increases in council tax in inner London are in those same three Conservative councils. In Conservative Kensington and Chelsea, council tax is up 7.5 per cent.; in Conservative Westminster, it is up 8.7 per cent.; and in Conservative Wandsworth, it is up 21.5 per cent.
By contrast, other councils—Islington, Greenwich, Hackney and Lambeth—are cutting council tax this year. In the London borough of Redbridge, the Conservatives and the Liberal Democrats combined to vote through a total council tax rise of 11.3 per cent. in the face of opposition from the minority, but ruling, Labour group.
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It is little wonder that, across London, councils run by Conservatives and Liberal Democrats have higher average council tax rises than Labour councils.
Mr. Sanders: The Minister attacked Torbay council for a 16.4 per cent. rise, which she blamed on the Liberal Democrats. Will she explain why the Labour group on Torbay council wanted a 20 per cent. tax rise?
Ms Armstrong: I am not responsible for Labour group decisions and I do not support all of them, as I will make clear in my speech.
I do not make these points for partisan reasons. While it is the case that Labour councils have lower than average increases in council tax, I readily acknowledge that, in some Labour councils, council tax rises are higher than I would have argued for had I been a councillor. Those rises and the increases by Conservative councils—which are higher than average—are the responsibility not of the Government but of local decisions taken by local councilors.
It is the Government's responsibility to ensure that those decisions do not bear too harshly on the public purse, either locally or centrally. To protect the local taxpayer, we will shortly announce whether and how we propose to use existing capping powers for 1999–2000. To protect the national taxpayer, we have made local councils responsible for the extra costs of council tax benefit caused by large council tax increases.
The national interest demands that, where councils are proving irresponsible, the Government should have the power to intervene. The Local Government Bill, which is before Parliament, creates a reserve power for the Secretary of State, so that excessive council tax decisions can be judged over time, measured against expressions of support by local people and, if necessary, restrained. The Liberals oppose any restraining powers on local government. So, while they are prepared unfairly to blame the Government for higher council tax bills, the Liberals would stand back and let those tax bills rocket out of control.
Mr. Simon Hughes: Given what the Minister has said, will she explain, for the benefit of our constituents, the answer to the question that I put to my hon. Friend the Member for Sutton and Cheam (Mr. Burstow). If our local council, which is Labour run—for the first time in its history, Labour now has control only through the vote of the mayor—cannot raise the money that it wants because it is capped and the Government are setting a limit, and if the Government do not give it the money that it is asking for, whom should the council blame? It has been told that its day centres are to close—some have closed and the day centres for adults with learning difficulties are to close in the next few days. It has also been told that some of the council estates will have to be sold because there is not the money to repair them. Whom should the council blame?
Ms Armstrong: The hon. Gentleman's problem is that he does not understand local government finance; it has nothing to do with the housing account. The Government have put substantial new money into housing and that is a separate matter from this debate. As I understand it, that is not the argument that Southwark council is putting about its estates.

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In respect of the other issues raised by the hon. Gentleman, he said that the Government were capping councils. The Government are not capping councils. Councils have the opportunity to set their council tax at a level that they believe will deliver the quality of services for which people are prepared to pay. It is important that councils take responsibility for those decisions, and that they discuss them and argue them through with local people. Under current legislation, they are not supposed to do that; that is why we are changing the legislation in the way that will be announced tomorrow.
The Tories, who for years were hooked on centralisation, are today reformed "capoholics", slowly emerging from their blue haze, trying desperately to come to terms with the reality of their past, not quite certain whether to control their addiction by an occasional fix or to give up the cap for good. In contrast to the Conservatives and the Liberal Democrats, the Government recognise our responsibility to ensure that local services are well resourced and well delivered.
Best value will sweep away the outdated over-regulation of compulsory competitive tendering and usher in a new era of rising standards of public service, greater involvement by local people in setting and monitoring standards and an emphasis on year-on-year improvement, innovation and public-private partnership. Best value provides the best means for keeping council tax rises down over the medium term. It is a fact that this year's local government settlement has been the most generous since the introduction of the council tax, with substantial extra money for education and social services.
As we have said, if council tax had increased in line with the increase in SSAs, bills need not have risen by more than 4.5 per cent. However, councils have decided to increase their spending by more than that, so council tax bills will rise on average by 6.8 per cent.—less than £1 a week, and a lot less than the double digit increases predicted by the Conservatives and the Liberal Democrats. [Interruption.] We made no predictions, but said that, if council taxes rose in line with the increase in SSAs, the rise would be 4.5 per cent. Those council tax rises have occurred despite the extra resources we have committed this year: an extra £2 billion of Government grant, which is an increase of 5.5 per cent., well above the rate of inflation. No local authority has received less grant this year than last year, and all education and social services authorities have received more grant this year than last.
Of course, the Liberal Democrats have today repeated their usual mantra: tax more, spend more. However, it is based on a false boast. The Liberals say that the Government have not put enough money into health and social services. At the election, they promised an extra £3.5 billion; we have put in an extra £21 billion. They say that we have not put enough money into education. They promised £9.5 billion; we are putting in £19 billion. This debate has been called by Liberal Democrat Front Benchers for no other reason than to curry favour with the Association of Liberal Democrat Councillors—one might almost imagine that a leadership contest was in the offing.
The debate has not been called to hold the Government to account, because we know that this year's settlement is the most generous for seven years and more generous than
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anything offered by the Liberals or the Conservatives at the election. The Liberals keep telling me, and Paddy Ashdown reaffirmed it—
Mr. Deputy Speaker (Mr. Michael Lord): Order. The Minister must refer to parliamentary colleagues in the correct form.
Ms Armstrong: I am sorry, Mr. Deputy Speaker. The right hon. Member for Yeovil (Mr. Ashdown), who is still a Member of Parliament, reaffirmed last September that the Liberals would have stuck with the financial memorandum that accompanied their election manifesto throughout this Parliament. The figures I am using are drawn from that document and, if hon. Members do not like it, I am sorry for them.
Mr. Paul Tyler: Can the Minister be objective and non-partisan, just for a moment? From her remarks, it appears that she regards as irresponsible any local authority, whatever the colour of its controlling group, that has exceeded the 4.5 per cent. increase. Is that really what she is saying to the Local Government Association and to a large number of Labour-controlled local authorities?
Ms Armstrong: I have certainly not said that. That is why I have emphasised that we never set 4.5 per cent. as a figure above which councils should not go. We said that, if they went above that figure, they would have to share with Government the burden in terms of council tax benefit—
Mr. Tyler: The Government penalise them.
Ms Armstrong: The hon. Gentleman does not appear to understand that it is the taxpayer who funds council tax benefit, so the penalty is paid by the taxpayer. The Government are concerned about that, even if the hon. Gentleman is not.
Today's debate has not been called to highlight how responsible Liberal councils are. The hon. Member for Sutton and Cheam appeared almost embarrassed to mention Liberal councils.
Mr. Burns: She wrote that before the hon. Gentleman had even spoken.
Ms Armstrong: It is not written down here, so there you go.
We know that the average council tax per dwelling in Liberal areas is higher than in Labour areas, just as the average increase in Labour councils is lower than in Conservative councils. The debate has not been called to draw attention to the shires, because average council tax per dwelling in shire areas is lower in Labour areas than in either Liberal or Conservative areas. The debate has not been called to demonstrate how responsible Liberal Front Benchers are, because we know that they would let council tax rise faster and further without trying to protect the taxpayer, while their hare-brained local income tax scheme would cost millions to introduce and lead to a massive increased burden on business in implementing it.

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Local councils such as Wandsworth, Torbay and Herefordshire are responsible for pushing council taxes up, just as local councils such as Bristol, Lambeth and Greenwich are responsible for keeping average rises down.
Jackie Ballard: Liverpool.
Ms Armstrong: Liverpool, I grant the hon. Lady.
The Government are responsible for putting in place the necessary resources for local services, and we have done just that; the Liberals would have done even less. The Government are responsible for protecting the taxpayer, and we shall do so through our new reserve powers; the Liberals would do nothing. The Government are responsible for driving the modernisation of local government, just as we are doing through the introduction of elected mayors and a new ethical framework—the Liberals and the Conservatives simply do not know what to do.
It would do the House some good and do local government a great deal of good if we moved away from the yah-boo politics of spend and blame. It is time for a grown-up relationship, where councils take responsibility for their decisions and central Government intervene only in the national interest. Today's debate has been called by the Opposition, but they would do better to join the Government in taking a mature approach to the politics of local government. That is the Government's approach, but it is clearly not shared by the Opposition. I hope that, over the next few years, we can foster such an approach and demonstrate that there can be a fruitful relationship between the centre and the localities, in which both accept their responsibilities and work to ensure that local people get the best for their money.
5.15 pm
Mr. Simon Burns: I congratulate the Minister on her Alice-in-Wonderland speech. The only thing that I can say in her defence is that at least she could not keep a straight face for most of it.
I listened to Labour spokesmen making speeches from the Opposition Dispatch Box during the previous Government. They would have been horrified to think that, only two years after its return to Government, Labour's approach to local government spending would be turned on its head and changed so dramatically. I thought for a moment that it was a Conservative rather than a Labour Minister speaking—let alone an old Labour Minister from an old Labour Department.
Mr. Simon Hughes: The hon. Gentleman makes a perfectly valid point: it sounded more like a right-wing Conservative speech than a new Labour speech. Will the hon. Gentleman explain why no more than three Tories have been present for the debate so far? At one stage, only one Conservative Member was present. If they are so concerned about local government elections and council tax rises, where are the massed ranks of the Tories?
Mr. Burns: There is a simple answer to that question. I will go down the same road as the Minister and say that I suspect that the Liberal Democrats called today's debate not simply to discuss local government finance. I think
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that several Liberal Members have other agendas. It is sad to see that three prospective leadership candidates have now left the Chamber. No doubt, when more electors are present, they will return to their rightful places—as they now do every morning in the Tea Room at breakfast.
The first sentence of the Liberal Democrats motion reads:
"That this House notes that the prime determinant of council tax levels is the amount of funding allocated by central government to local authorities".
That is such a truism that I suspect that no hon. Member disagrees with it. In fact, it is almost as straightforward and simplistic as the statement that the battle of Hastings was in 1066—as every schoolboy knows.
When announcing the local government finance settlement last December, the Deputy Prime Minister declared, in his normal rumbustious way, that he expected council tax to increase by an average of 4.5 per cent this year. In a flight of hyperbole, he described it as
"the best deal for years for local people."—[Official Report, 2 December 1998; Vol. 321, c. 886.]
In the cold light of day, with council tax levels set for next year, the Deputy Prime Minister's view is not shared by most people around the country who are receiving their council tax benefits on their doormats.
Ms Armstrong: Council tax bills.
Mr. Burns: Many people will receive benefits as well—I shall come to that later.
If the Deputy Prime Minister's comments had been included in a prospectus designed to sell a commercial product or service, I suspect that the Serious Fraud Office would want to interview him. The situation that he described is far removed from reality. As my hon. Friend the Member for Croydon, South (Mr. Ottaway) rightly said, the Deputy Prime Minister is a bit like a used car salesman. As we know from the figures released by the Government this morning, the average council tax increase in England is 6.8 per cent.—which is significantly more than his overly optimistic forecast. On band D precepts, Buckinghamshire faces an increase of 9.8 per cent.; Oxfordshire, 11.8 per cent.; Worcestershire, Nottinghamshire and Cambridgeshire, 9.9 per cent.; Hertfordshire and Norfolk, 9.8 per cent.; Shropshire, 9.7 per cent.; North Yorkshire, 9.6 per cent.; and Northumberland, 9.5 per cent. Even my county of Essex faces an increase of just under 7 per cent. Those figures do not include council tax increases for borough and district councils, which will have to be added to them, or certainly amalgamated into them.
Unitary authorities, especially in London, face horrific rises. Brent will experience an increase of 15.2 per cent.; Kingston, 12.7 per cent.; Redbridge, 10.9 per cent.; and Bromley, 9.9 per cent. Wandsworth, which the Minister mentioned, faces a increase, when the figure is rounded up, of 16 per cent. Outside London, to mention only a few, Torbay faces a rise of 16.5 per cent.; Rutland, 9.4 per cent.; Milton Keynes, 10.7 per cent.; and Telford and Wrekin, 9.5 per cent. So much for the Deputy Prime Minister's statement last December and his forecasting skills. It is no wonder that no one outside Millbank and Blair's on-message babes thinks that this is the best deal for local people for years.

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Will the settlement, which the Government claim is so wonderful, enhance local services? Sadly, the evidence from budget setting throughout the country is that it will not. All over the country, there are cuts in crucial services, such as the police, due to budgetary pressures. In Essex, the mounted police section is to close down. [Interruption.] The Minister may laugh, but that is not funny for the people of Essex, who want a decent police force to combat crime.
Ms Armstrong: The hon. Gentleman should know that Durham had to close its mounted police section some time ago, but such policing is necessary only in certain areas and at certain times, and that is frequently an operational, rather than a budgetary, decision.
Mr. Burns: I suspect that the right hon. Lady is, to coin a phrase, speaking on the hoof. The police authority in Essex has made it clear that, due to the lack of £7 million for funding the police this year, it is having to close down the mounted police for budgetary, not operational, reasons. The same is true of cuts in the motor cycle section of the Essex police and the closure of several rural police stations.
Mr. David Watts: Does the hon. Gentleman think that his speech has any credibility, when the previous Government slashed public services for 18 years and, at the same time, jacked up the council tax and the poll tax to unheard-of levels? St. Helens council faces a 1.9 per cent. increase in council tax this year, which is in stark contrast to the cuts that it experienced under the previous Administration.
Mr. Burns: The answer to the first part of the hon. Gentleman's intervention is yes, but I am sure that his Whip has noted his remark and that, when the reshuffle occurs, his bid will be fully considered. In answer to his second remark, I shall deal later with areas such as St. Helens and the fiddling that has occurred this year in the setting of the amount of money that local authorities have received. If he would care to wait a little, I will explain why certain parts of the north have done considerably better than certain parts of the south, due to the Government's allocation of funding.
As I was saying, the effect of the settlement in Essex has been particularly difficult for the police and has resulted in 36 fewer bobbies on the beat compared with two years ago. The pledge "tough on crime and tough on the causes of crime" seems to be rather hollow in my county because, despite the tremendous work that the police are doing, they have found themselves financially squeezed, with their resources and equipment reduced year on year and fewer bobbies on the beat.
The settlement has had a similar effect in Barnsley. In an earlier debate, the hon. Member for Barnsley, Central (Mr. Illsley) told the House about the £2 million-worth of cuts in services there. There have been redundancies among teachers in Somerset, cuts in social services in Oxfordshire and education cuts in Brent. If the Deputy Prime Minister wants to join the real world to discover what is really going on as a result of his settlement which he thinks is so wonderful, I can recommend no better
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person for him to talk to than his hon. Friend the Member for Brent, East (Mr. Livingstone), who wrote in the Evening Standard on 29 January:
"How has it all gone so sour so quickly?"
I asked the Minister during her remarks what her answer to that question would have been if she had had the pleasure of meeting her hon. Friend. I am not sure whether it was out of nervousness because she did not know the answer or the result of in-fighting within the Labour party, but she dismissed her hon. Friend in fairly rude terms. I hope for her sake that the hon. Member for Brent, East does not read Hansard every day.
Ms Armstrong: Does the hon. Gentleman accept that Brent still has the 18th highest standard spending assessment in the country?
Mr. Burns: If the right hon. Lady were to go to the main street in Brent to give that message to pensioners who are facing cuts in provision for their care, if she were to meet children in children's homes who are facing cuts in services and if teachers in Brent who are facing redundancies and cuts were to hear what she has said, I think that—to put it politely—they would laugh her out of court.
It is not the SSA that is of interest to the people of Brent. They are interested in the services that are provided and whether there is enough money for an effective, efficient service, and the hon. Member for Brent, East does not believe that that is the case. He has made it clear in the Evening Standard that he is appalled.
I am trying to tell the right hon. Lady—this is only one example—that the wonderful financial statement that has been spun round every studio in the country is not quite so wonderful in the real world with real people who are receiving real council tax bills and who have to pay them.
One of the well-rehearsed arguments about the current settlement is that the Government have penalised the south of England, and possibly London, to the benefit of the north. The hon. Member for St. Helens, North (Mr. Watts), in an intervention that was designed to be helpful to the Government, referred to the wonderful situation in St. Helens. As St. Helens is a beneficiary of the settlement, I shall deal with the hon. Gentleman's intervention as I promised.
Given that shire counties and district councils increasingly have to raise more of their revenue themselves, it is fair to ask whether all such councils are treated equitably by the Government or whether there is a geographical bias in favour of one part of the country over another. To my mind, that can best be considered by examining which councils face the best and the worst changes in their total external support and percentage of SSA between 1998–99 and 1999–2000.
Of the 10 shire counties with the most favourable change in TES relative to SSA, six are in the north-east or the midlands, while, of the 10 with the least favourable, change, nine are in the south-east. If, on the same basis, we consider what is happening to the shire districts, we find that, of the 25 districts with the most favourable change, 15 are in the north of England and two are in the midlands. Out of the 25 districts that have done least favourably, 10 are in the south-east, eight are in the south-west and one is in East Anglia. Only three are in the east midlands, with only three in the west midlands.

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Interestingly, there are no shire districts from the north of England in those figures. That analysis shows categorically that, of both shire counties and shire districts, there is a geographical bias in the 1999–2000 settlement against councils in the south of England. The logical conclusion to be drawn is that that area of England has fared particularly badly compared with the rest of the country in this year's settlement.
Mr. Brian White: Will the hon. Gentleman give way?
Mr. Burns: No, I shall not for the moment.
Consequently, the pressures on council tax increases and service cuts will be the greatest in this area—hence the litany of examples that I gave earlier.
In total, over the past two years, shire counties have lost about £250 million and London £140 million, while metropolitan areas have gained about £365 million. I am sure that any hon. Member, particularly from a constituency in the south, south-west or south-east, will recognise how skewed the settlement has been.
I am delighted to see that there are three Liberal Democrat Members in—
Mr. Andrew Stunell: Four.
Mr. Burns: I apologise to the hon. Gentleman. I thought that he was a Scottish nationalist. He has obviously made a great impression since he entered the House.
I am pleased to see four Liberal Democrat Members in the Chamber, especially as their hon. Friend the Member for Southwark, North and Bermondsey (Mr. Hughes) commented earlier in the debate about the number of hon. Members present.
Mr. Stunell rose—
Mr. Burns: I will give way, as I was wrong about the hon. Gentleman's party.
Mr. Stunell: I am a Liberal Democrat and I do not come from Scotland, although I am called Andrew. Perhaps that explains the link in the hon. Gentleman's mind. May I point out to him that there are in the Chamber at present more Liberal Democrats than Conservatives, as there are in local government in the country?
Mr. Burns: I accept that there are more Liberal Democrats in the Chamber, but the hon. Gentleman is wrong about local government. Following the local elections last May and by-elections since, the Liberal Democrats are no longer the second party of local government. They are the third party, and no doubt they will be even more so in about eight weeks.
I shall deal briefly with council tax benefit. The full bill for council tax benefit is met by central Government. However, despite vigorous opposition from local authorities, the Government have decided to proceed with the reforms that they outlined in their White Paper "Modernising Local Government" which will transfer to local authorities some of the responsibility for meeting the cost of council tax benefit above a certain threshold from
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the beginning of the next financial year. That is the wrong way to proceed, as it will have a disproportionate impact on council tax payers in areas where an above-average proportion of residents receive council tax benefit. As the Local Government Association rightly said, that will mean that the nearly poor are paying for the really poor. That is an extraordinary philosophy for any Government, let alone a Labour Government, to adopt unashamedly.
Mr. Burstow: Will the hon. Gentleman give way?
Mr. Burns: No, I am not giving way.
That is an arbitrary and unfair system. I urge the Government to think again and to take account of the effect on people just above benefit level.
Finally, I shall deal with capping. In their manifesto at the last election, the Government promised to end what they described as "crude and universal" capping. However, they have not lived up to their promise or the expectations that they raised before the general election. The changes that they have made for the coming year could best be described as arbitrary and retrospective capping, especially as the changes further blur accountability in local government and reduce transparency.
By deciding not to announce provisional capping limits, but retaining the power to cap budgets if they exceed what they deem appropriate, the Government have given themselves the opportunity to decide the capping criteria that they eventually use on the basis of which councils they wish to affect. That is a ridiculous and unfair way to proceed. It is clear that the Government have no intention of changing their policy at this late date, but I warn them that there will be severe repercussions in the coming year, which they will find it extremely difficult to justify to the people who will be so badly penalised as a result of that policy. It is unfair to have left local authorities effectively in limbo without laying down some criteria in advance of then setting their budgets.
I can only reiterate that the Deputy Prime Minister's expectation that the average council tax increase would be 4.5 per cent. has turned out to be a hollow sham. As council tax bills land on people's doormats, they will see clearly that the claim that the settlement is the best deal for local people is patently false—a myth which cannot be justified—and, in the coming six to eight weeks, Labour candidates up and down the country will rue the day in December last year when expectations were raised so high. The bills that council tax payers will have to pay in April will not live up to what they were led to believe would happen.
5.36 pm
Mrs. Louise Ellman: I support the Government amendment to the motion. I am a strong supporter of local government and am absolutely convinced that local government working at its best can respond to local needs and wishes in a way that no other layer of government can. Local government working properly meets the needs of its communities; acts as a community leader; shows imagination, flexibility and initiative; and looks ahead as well as reacting to immediate difficulties.
I also understand the enormous damage that was inflicted on local government and on our communities in the 18 years before the Government came to power.

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Attacks were made on local government's financing and powers and on the whole principle of local government and local accountability itself. A start has been made on changing that in the two years since the Government came to power, but it is not feasible to imagine that those 18 long years of consistent attacks, consistent cuts and consistent denigration can somehow be ignored.
I consider what the Government have delivered to be the beginning of a new start for local government. Although I want a great deal more progress to be made in future years, that necessary beginning has been achieved, in the face of great difficulty and against that record of cuts and denigration.
The motion has been tabled by the Liberal Democrats, who are nothing if not opportunistic; indeed, they are everything to everyone. They are all in favour of public spending, as long as others are responsible for the bills. They hide away from responsibility, claiming that they want to spend public money, but blaming others if they are concerned that the public will not like the cost of meeting those bills.
Liverpool, the city that I represent, will benefit from next year's local government settlement; it is the most generous for many years and, at long last, recognises the needs of the city, which is in an objective 1 area—one of the poorest areas in Europe. The city has acute needs and tops the list of areas of urban deprivation in this country. For the first time, the real needs of the city are being addressed—by this Government; indeed, the settlement that they have delivered for next year has made it possible for a council tax freeze to be imposed.
Meanwhile, what are the Liberal Democrats doing in Liverpool? When the Government are delivering a revenue support grant settlement that starts to meet the needs of the people of Liverpool, the Liberal Democrats are mounting a major assault on pre-school services, on the youth service and on the voluntary sector. They are cutting funds for Lark Lane play association, and at Lodge Lane East residents association. They are cutting funds provided for children's services—after-school and pre-school services. They have threatened to close youth clubs, including Dehon youth club in Dingle, which is much used and much needed, and they are cutting funds for the pre-school education resource centre. While the Government are delivering money to Liverpool, the Liberal Democrats are mounting an assault on the voluntary sector and youth and pre-school services. That is what the Liberal Democrats mean, in practice.
Mr. Sanders: I feel rather confused. The Minister blames councillors for council tax rises, but the hon. Lady is giving the Government credit for a council tax freeze in Liverpool. Can she explain?
Mrs. Ellman: Certainly, I give the Government credit for increasing Liverpool's standard spending assessment for next year by 5.1 per cent.; increasing its education SSA by 3.7 per cent.; and increasing its social services SSA by as much as 11.3 per cent. It is right for the Government to be given credit for that, and for the Liberal Democrats to be deplored for cutting spending on the voluntary sector, the youth centre and pre-school services. That is a disgrace, and shows the hypocrisy of the Liberal Democrats.
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The Liberal Democrats say a great deal in the Chamber about their support for public spending. I agree that public spending is critical to the existence of a civilised society which can attempt to achieve equity, but what we hear from the Liberal Democrats is simply a call for more spending on education. That, too, is important, but only infrequently do we hear about the need to spend on the health service, social services and transport.
Incredibly, only a few days ago, the Liberal Democrats voted against the introduction of working families tax credit, which will put an extra £22 a week or so into the pockets of the families who need it most. Their pragmatism allowed them to vote with the Conservatives against a measure that will benefit people. I bear that in mind when I hear them criticise what the Government are trying to do, and I shall always remember that they found it painless to vote with the Conservatives against a credit designed specifically to deliver extra cash to those in the greatest need. That may eventually be their epitaph.
At the beginning of my speech, I spoke of the legacy inherited by the Government—a legacy of local government cuts in particular, but of cuts across the range of public services. I do not pretend that, in their second Budget, the Government redressed the wrongs of 18 long years; indeed, I do not think that it is possible to do that. The Government have, however, delivered an extra £2.6 billion directly to local government for next year, on top of more than £42 billion extra for, in the main, education and health. That is a creditable beginning, although it is only a beginning.
One of the deficiencies and inequalities of what we have inherited from the last Government is the inequity of local government settlements, which we have now begun to address in Liverpool and elsewhere. The Government have also imposed a three-year freeze while there is proper study and consideration of how to put right those inequities. At long last, we are having a pause, so that a proper assessment can be made of the needs of various local authorities throughout the country.
That is an important initiative—indeed, I urge everyone with a view to make representations during the three years. I hope that, at the end of that time, we will do something to right the inequitable gearing effect, which was inherited and means that the poorer a local authority is, the harder it is for it to raise additional money to support local services. In Liverpool, where 67 per cent. of properties are in band A, compared with about 24 per cent. nationally, the gearing effect is drastic. I hope that the Government will use the three-year freeze to examine gearing, the area cost adjustment, equity, differing needs and a poverty index, so that we can have a fairer settlement at the end of that time.
Mr. White: Does my hon. Friend agree that, in examining the area cost adjustment, we should meet the legitimate aspiration of councils such as Liverpool, yet not penalise councils such as mine in the south-east of England that would lose up to £7 million if the area cost adjustment were taken away just like that? There must be a way in which to satisfy the needs of both.
Mrs. Ellman: I thank my hon. Friend for his comments. The purpose of having the three-year freeze is to allow proper consideration of the point that he has raised. That is the purpose of having time for assessment—for consideration of various points that have been made and of new points that are being made.

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The hon. Member for Sutton and Cheam (Mr. Burstow) condemned the Government for what he described as a period of austerity. The Government's first two years in power have been not about austerity but about bringing stability to the inherently unstable situation that they inherited. That has allowed public sector deficits to be turned into surpluses. It has meant that we have the lowest long-term interest rates—and the lowest long-term mortgage rates—for more than 30 years. It means that we can look forward to a period of stability, where we can start to grow and move further on righting the wrongs of the past. In that economic climate, we will be able to continue to make progress and to look at the needs of varying communities throughout the country.
We must strike a balance between the need to spend more to protect public services and to promote higher standards, ensuring that there is efficient spending, and the problem of raising funds to pay those bills. I support public service. I have supported it for many years. When I was the leader of a major local authority, I took great pride in public spending—efficient public spending to promote high standards of service—working with the private sector to promote economic growth and economic development to support the needs of the community that I represented.
The Government are at a new beginning. Eighteen years of decline is a difficult basis from which to start, but, in the two years for which the Government have been in power, they have shown good faith and made a significant start in righting the wrongs of the past. They should be praised for that. They should be encouraged to do much more. That is why I support the Government amendment.
5.49 pm
Mr. Adrian Sanders: As hon. Members will know, the history of council tax is really the history of the 1980s income tax cutting agenda. An unfair rating system—which people increasingly thought to be unfair, and which was certainly spotted by a previous Prime Minister as being particularly unfair—led to the introduction of the poll tax. However, the poll tax had a different consequence, enabling Chancellors in the 1980s to shift the taxation burden on to local government.
The poll tax proved to be unwelcome to many people. I think that probably all Labour Members—certainly all Liberal Democrat Members—fought long and hard to get rid of that tax. The Government of the day decided that they would get rid of it, but replaced it with another regressive tax—the council tax. Granted, that tax was slightly more fair. Nevertheless, it was a regressive tax and was not related to ability to pay.
With the council tax came two other things: the uniform business rate, and the standard spending assessment—with which I shall deal in a moment. Before and during the period for which the poll tax operated, about 40 per cent. of local government finance came from local taxpayers and about 60 per cent. came from central Government. After the poll tax was ended, there was a shift, when about 80 per cent. of finance came from central Government and only about 20 per cent. came from local sources.
Mr. Burns: I do not want to spoil the hon. Gentleman's train of thought, but I should like to correct him on his
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facts—in case it might make a difference to the conclusions that he is about to reach. The uniform business rate was introduced with the community charge, not the council tax.
Mr. Sanders: I thank the hon. Gentleman for correcting me, but the uniform business rate was operated with the council tax. It was a part of the shift, which was not reversed, of the taxation burden from central Government to local taxpayers. The consequence has been that local authorities are now more dependent for financing on central Government than they were, and the tax burden has been shifted from central Government to local taxpayers.
My hon. Friend the Member for Sutton and Cheam (Mr. Burstow) said that the most recent local government settlement was a "smoke and mirrors" settlement. I should describe the most recent Budget as a "smoke and MIRAS" Budget. The Red Book for this year—and the one for last year, if one was sensible enough to keep it, as I did—shows the problem with the Budget, by showing the amounts that the Government expected to receive in council tax receipts from 1996 to 1999.
In 1996–97, council tax receipts were expected to be £10.2 billion. In 1997–98, they were expected to be £11.3 billion. The next year, they were expected to be £11.8 billion. This year's Red Book—under the chart explaining "where taxes come from"—shows that council tax is expected to be £13 billion. In the past two years, therefore, there has been a shift in the taxation burden of approximately 20 per cent. from central Government to council tax payers.
The 20 per cent. increase is equivalent to 1p on income tax—which would have been a progressive tax, related to ability to pay. Council tax is not a progressive tax; it is a regressive tax. However, the Chancellor will be able to blame local councillors for any increase, rather than accounting for it in the Budget.
Although all councils are affected by those Budget changes and by the shift in taxation from the centre to council tax payers, some councils are more affected than others by the changes to the grant formulae.
The standard spending assessment is a guideline and is not necessarily the sum that will be paid to councils. A table listing the assessment of needs for 82 similar councils—both metropolitan and unitary councils—across Britain places my own local authority's SSA assessment of need at 34. Therefore, the Government's own SSA totals show that we are the 34th most needy local authority. However, in grants, my local authority is 50th out of 82 councils. Had we been treated as 34th in both tables, my local authority would have received £44 more per person, or a total of £5.4 million. It is no wonder that our council tax will have to rise this year.
A number of factors in the grant formulae adversely affect—or benefit—local authorities. The factors are essentially political decisions about which formula changes to allow.
There is within the formula a calculation of the assets sold by councils. However, the calculation is based on the interest that councils derive from investments—which presupposes that councils have investments. Moreover, it is based on an average, not on a council's actual investments. Therefore, a local authority that has sold off its assets will be quids in, whereas a local council in

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which people have said, "No, we don't want to sell off our assets," will be penalised. My local authority is in the latter position.
The grant formula for tourist areas is vital. In previous grant formulae, it was recognised that local authorities with many visitors have to provide facilities 52 weeks of the year, although the facilities may be used for only a short summer season. Such authorities may have to spend money on cleaning the beaches and streets, for example, or on providing more public conveniences for a population that rockets at some times of the year. Those are all big expenses for such local authorities. However, last year, the Government reduced the weighting for tourist nights. The reduction not only affected us last year but will affect us again this year.
The minimum wage will affect my local authority. The effects of the minimum wage will be greater in low-income areas than in other areas. This year, because of the minimum wage, contracts previously agreed with private sector contractors will have to ratchet up much more quickly in low-income areas than they will in other areas with higher incomes.
Mr. Burns: Did the Liberal Democrats not support it?
Mr. Sanders: We did not vote for a national minimum wage; we are in favour of a regional minimum wage.
Torbay, Plymouth and Devon, which are low-wage areas, have been hit particularly hard by the minimum wage, particularly in social services.
Mr. Andrew George: Cornwall has been hit, too.
Mr. Sanders: Yes, Cornwall also.
Weighting for elderly people has been reduced. Areas with a high percentage of elderly people will lose out from that part of the formulae, too. Moreover, as I said in an earlier intervention, rising pupil numbers are another important factor, as the head count in the education SSA is 18 months behind current pupil numbers. Although councils have to provide money to schools for current pupils, the money councils receive lags 18 months behind. If pupil numbers are declining, one will be quids in in current cash flow, although one will lose out in future years. However, the effect of the changes on councils with rising pupil numbers will be a greatly increased education bill and, with £2,300 for primary school pupils and £3,000 for secondary school pupils, it does not take many new pupils to cause a significant percentage increase.
Until 1 April, my local authority had the lowest council tax in the south-west. After the rise, only two of the 10 local authorities in Devon will have a lower council tax than Torbay. Torbay's council tax will still be £100 below the national band D average. However—in an area with some of the lowest incomes in the United Kingdom, and with GDP per capita equal to that in Cornwall—we face a massive 16.4 per cent. increase.
I know that councillors of all parties were concerned when setting the council's budget. The Labour group thought that a 20 per cent. increase was required to protect services and to fill the gaps created by changes to the formulae and the overall grant settlement for local
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government. I saw a councillor in tears at having to make a choice between cutting social services, care for elderly people and care for people with disabilities, or increasing council tax by 16.4 per cent. That percentage on the lowest council tax is not as great as a smaller percentage rise on a larger initial council tax, but in an area that has such low wages and is so economically disadvantaged as a result of 18 years of Conservative government, it is more than many will be able to bear. Coming on top of a 10 per cent. rise in water charges—the highest water charges in the country—it is causing great difficulty.
One could say that things were worse when we had the poll tax. We had the highest poll tax in the south-west when the Conservatives ran the council. The poll tax was significantly higher, even without adjusting for inflation, than the council tax is today for a two-adult household in a band A or band B property.
There are three factors involved. First, we have an unfair tax. The Government should be looking for a fairer system of taxation for local services. It should be truly related to ability to pay and should bring in accountability and transparency. It should be clear to people who is to blame for tax rises or poor services. Secondly, there is Treasury chicanery. The burden of tax has been shifted on to council tax payers. Thirdly, the shift in formulae has made a difference, hitting councils in the south-east and the south-west and those with particular circumstances hard, while those in other parts of the country have gained. The hon. Member for Liverpool, Riverside (Mrs. Ellman) said that it was wrong of the previous Government to fiddle the figures to benefit councils in London and the south—the flagship authorities to which the Conservatives used to refer—but that it was all right for this Government to tweak the formulae in a similar fashion and for the Chancellor to play around with the budget and the overall settlement.
I should like to hear a recognition from the Government that council tax is an unfair tax. They should look at the areas that have suffered particularly from the changes in the formulae—areas whose local circumstances resulted in their being hit by a big stick. The Government should look sympathetically on such councils and work with them to do something about the problem. I should like to hear less from Ministers about league tables. It is funny that, when the Conservatives are in government, Conservative councils normally deliver the lowest rises in local taxes, whereas when we have a Labour Government, it seems to be Labour councils. The people of this country are not fooled by that. They know that Governments use the local government system for political ends.
6.3 pm
Mr. Brian White: When I read the first sentence of the Liberal Democrat motion about
"the prime determinant of council tax levels",
I thought, "Yes, I am happy to agree with that." When I read the words about the inadequate financial settlements of recent years and the substantial rise in council tax, I thought, "Yes, I am quite happy to agree with that." The motion then
"calls on the Government to improve the funding of local services and abolish budget capping".
If this were 1997, I would say that that was entirely fair, but the motion fails to recognise what the Government have done in the past two years.

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Failing to take account of the context is typical of the Liberal Democrats. They carry on making the same statements after the reality has changed. They asked for a penny on income tax, and they are still demanding it even after more money than they would have dreamed of has gone to public services. It is unacceptable to table such a motion without recognising the fact that the context has changed over the past two years. The Local Government Bill, which will receive its Third Reading tomorrow, will abolish crude and universal capping. That is a key manifesto commitment which we shall deliver on in this Session, never mind this Parliament.
Many people talk about local government finance, but I have yet to find anyone who can truly say that they understand it.
Dr. Alan Whitehead: indicated dissent.
Mr. White: My hon. Friend is the exception.
The Liberal Democrats did not compare like with like, but quoted meaningless statistics for different councils. For example, they took no account of the fact that some councils deliver nursery services and others do not.
It is important to recognise that the Government have introduced stability in the system. For many years, in the Local Government Association and previously in the Association of District Councils, I argued strongly that one problem with the system was that we did not know what was happening from one year to the next. The settlement provides stability for three years. Councils know what will happen. They can plan for three years because the formula has been set and they have stability. The comprehensive spending review has put billions of pounds into public services. Education services will get massively increased sums. That can be seen coming through into schools now.
I accept that this year's settlement does not rectify the legacy of 18 years of under-investment and a lack of decent settlements. One good settlement will not solve all the problems of local government, but ignoring the fact that there has been a good settlement, as the Liberal Democrats have, misses the point.
The Liberal Democrats are like Oliver, always asking for more, but they are not prepared to put in place the modernisations that are required to improve services. The Government have rightly said that the extra money is for improvements to services. The White Paper on modernisation of local government, the extra money, the best value pilots throughout the country and other schemes will stand local government in good stead. As a supporter of local government, I think that it is important to recognise what is good. One reason why I do not support the Liberal Democrat motion is that it does not recognise what is going on in local government.
My local authority has been going through a series of modernisations. The most recent was a referendum. I shall not go into details, but, if it had been left to the Liberal Democrats on the council, we would not have had a referendum and we would probably have had a 15 per cent. council tax rise.
The hon. Member for West Chelmsford (Mr. Burns) talked about fiddling. I suppose that the Tories know all about fiddling. He said that money was going to Labour councils, and then complained that Brent, a Labour council, was not getting it. He cannot have it both ways.
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My hon. Friend the Member for Liverpool, Riverside (Mrs. Ellman) talked about the changes to the area cost adjustment over the next three years. It is important that those changes should start early. Negotiations and discussions with the Local Government Association should take place as early as possible to ensure the best chance of securing a consensus. If we get a consensus, there will be an opportunity to move forward. The worst thing for local government would be to waste the three years of stability and have a row at the end of it. We should use the opportunity that the Government have given with the three-year plan to get the right benefits for local government.
I was interested in the ability of the hon. Member for Sutton and Cheam (Mr. Burstow) to rewrite history. He seemed to blame this Government for the nationalisation of business rates, for the switch from council tax to VAT and for centralisation. To cap it all, he said that, even if there were a shift back to council tax, that would be wrong as well. Yet again, the Liberal Democrats are trying to have it both ways, condemning centralisation and condemning giving local authorities a greater say over larger amounts of money. I am a great supporter of the view that we should increase the amount that local government can decide, including returning business rates to local control. The Liberal Democrats fail to realise that it is not as simple as just wishing it to happen—their normal policy. It does not work that way.
How many Liberal Democrats have talked to their local business community to get them onside in a campaign for the return of business rates to local authorities? Merely saying it will not achieve it—nor will it tackle the difficult issues involved in the redistribution of business rates.
Mr. Ronnie Fearn: Does the hon. Gentleman realise that the Local Government Association is pressing for business rates to alter because, in seaside resorts, it is an unfair tax which needs to be changed? The British Resorts Association has said that the tax is not progressive, but vies against the homelessness and the elderly people in seaside resorts. The LGA feels that that is wrong.
Mr. White: I am a strong supporter of the return of business rates to local authorities. However, Liberal Democrats must recognise that it is not as simple as that—they must get businesses to go along with that policy. It is important that we achieve a consensus. Many businesses want the business rate returned to local authorities, not least because there are large numbers of economic partnerships up and down the country where businesses and local authorities work closely together. It would be an incentive to have the business rate set locally, where it could result in changes in parking and other policies in which businesses, the voluntary sector and local authorities have a vested interest.
Jackie Ballard: The hon. Gentleman is arguing that the Government need to get businesses onside before changing the business rate. Does he agree, therefore, that the Government should get local authorities onside before introducing council tax benefit subsidy limitation, as all 189 responses to the consultation were opposed to that? Is there one law for business and another for local councils?
Mr. White: The hon. Lady will know that that matter has been discussed in previous debates. Liberal

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Democrats simply want to turn on the taps, and they have learned nothing. We want to make sure that the extra money starts to improve local services.
In my local authority, we have received the best ever settlement of 6.4 per cent. To counter the hon. Member for West Chelmsford, I should like to say that my authority is in the south-east of England and we received our best ever settlement.
The Government are right to put the case for modernisation. One of the problems with the motion is that the Liberal Democrats do not accept the massive changes that have been made by the Government. I find the opportunism of this debate rather depressing, but I should not be surprised by that. The Liberal Democrats say one thing to one person and another thing to someone else.
When my local unitary authority was created, the Liberal Democrats from the county were used to working with Labour, whereas the Liberal Democrats from the district were used to attacking Labour. The Liberal Democrat group meetings could not agree on whether to attack or support Labour—and they ended up doing both.
This debate shows the difference between the Liberal Democrats and Labour. Labour is about taking issues seriously and delivering services—it is not about protest votes, wishful thinking or whingeing from the sidelines. Labour is about delivering, and I commend the amendment to the House.
6.14 pm
Mr. Andrew Stunell: This has been an interesting debate. One of the key points of the hon. Member for Liverpool, Riverside (Mrs. Ellman)—who is no longer here—was that the Government have introduced stability. I was reminded of the political phrase "in the long run, we are all dead". When we are screwed down in the coffins, we have stability—and that is exactly what the Government have introduced for local government this year.
Before this year, Liverpool had the highest council tax in the country. Even after its freezing, under Liberal Democratic control—for the first time—it will still be the highest in the country. The hon. Member for Riverside did not make it clear whether she thought that the council tax should go even higher in Liverpool, or whether she had another solution—perhaps a more generous grant from the Government, which is, after all, the thrust of what is said today. There has been a tendency in the debate for Members to try to have their cake and eat it.
Stockport metropolitan borough council has had a 5.2 per cent. increase in its council tax, which is modest in comparison with the national statistics. However, it is faced also with cutting services by £4 million. It is a paradox that, in the year when the Government claim to have been so generous with their funding—with a three-year, long-term bonanza of money showering on us from the Treasury—Stockport is unable to set council tax at the rate that the Government predict unless there are massive and fundamental cuts to services.
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Even in an attempt to reach the Government's guideline figure, the council is faced with cuts of £4 million. I am a serving member of Stockport borough council and, therefore, familiar with the financial problems there.
Ms Armstrong: Does the hon. Gentleman agree that the actual budget increase for Stockport is 4.7 per cent.—which is not a cut of £4 million? The £4 million is what Stockport would have liked to spend.
Mr. Stunell: We could have an interesting rerun of the budget debate in Stockport, where Labour Members claimed that we should be increasing spending to a greater extent to protect education. There are so many funny figures and phoney funds that Ministers often confuse themselves about the situation that they are imposing on councils.
Historically, Stockport has, year after year, spent significantly more on education than the SSA allocated by the Government for education. In other words, we have been spending more on our schools, pupils, books and education services than the Government have felt we should. This year, we have had the paradox of the £20 billion injected into education, which has resulted in an above-average percentage increase in our education SSA. However, that increase has not even brought the current SSA figure up to the level of spending on education last year. In our case, the £20 billion is illusory; it is a phoney increase, which nearly catches up with the spending that the council was already making.
To make the situation more difficult to comprehend for the council, the Government have made strong play of the need to passport all the extra money into education. We have been asked to demonstrate that we have transferred all the extra money into our education service. The paradox is that we have had the money allocated, almost bringing the notional figure up to the actual figure, but we have had to raise the actual figure to demonstrate passporting, so the gap between what the Government say we should be spending and what the council is actually spending has been increased, not reduced.
The overall allocation to the council is insufficient to meet the needs created by inflation and by factors such as the increased number of pupils and elderly persons. We have indeed put extra money into education, but just by cutting £2.8 million in social services. The Government ask us to spend more on supporting and developing children's potential, but force us to make cuts in children's services.
There are such astonishing discrepancies between adjacent authorities with similar needs that it is hard to take seriously what Ministers say. For instance, the education SSA for Stockport is £260 a pupil, but for the adjacent authority of Manchester it is more than £600. For certain neighbouring schools serving the two boroughs, the discrepancy is more than £1,000 a pupil. That is difficult to justify or to understand.
Unfortunately, there is also now a prospect of Stockport social services contributing to the problem of bed blocking in local hospitals as well, which an excellent partnership between the health authority and social services has up to now prevented.
The problem is not solely a matter for individual councils. In the metropolitan areas, various residual bodies and authorities have the power to levy a precept on

65
the metropolitan councils. The Greater Manchester waste disposal levy, which covers 10 metropolitan authorities, has caused a great deal of grief in Stockport this year. The unfairness of the system was so fully recognised that the Government announced the intention of changing it this year, and the draft budgets in Stockport were drawn up in that expectation.
It might be thought that the most obvious way of imposing a levy for the disposal of waste would be in relation to the volume or tonnage of material removed, and we hope that the levy will eventually move to that basis. Alternatively, one might levy a certain amount per head. In reality, the levy in Greater Manchester is imposed in relation to council tax values, which are completely irrelevant. There is a major disincentive to any of the borough councils to pursue a vigorous recycling policy.
Stockport's recycling rate is just a little above the national average of about 8 per cent., and we find it irksome that other—Labour—local authorities in Greater Manchester that have managed rates of only about 2 per cent., or a quarter of the national average, are getting away with it because the levy has not been adjusted.
We discovered in December, after the draft budgets had been drawn up and were being discussed by committees, that the levy would not, after all, be changed for the next financial year. An additional burden of £1.5 million was imposed on Stockport by the simple failure of central Government to implement a decision that they had already notified to the authorities concerned. There are therefore detailed, practical reasons why I am sceptical about what Ministers say.
The Greater Manchester police authority can also raise a precept on the boroughs, and properly so. Last autumn, the chief constable of Greater Manchester police announced that, on his forecast of what he would receive from the Government and the budget that he thought he could set, there would have to be a cut of £15 million for the coming year. He said that, were that cut to be implemented, 400 jobs would be lost in the police service.
Things have not turned out to be quite as dire as those first predictions suggested. The cut was £12 million, not £15 million. The chief constable has written a detailed brief confirming that the result will be 123 fewer police officers serving at the end of the coming financial year than at present, despite a levy on the boroughs of about 12 per cent. Councillors may be criticised for failing to take the right decisions or to be brave—Labour Members have a tendency to criticise Liberal Democrats in those terms—but they could do nothing about that. The police committee in Greater Manchester consists of nine Labour-controlled authorities, plus Liberal Democrat Stockport.
That cut comes on top of a drop of 34 police officers since the general election, so there will be 150 fewer police officers available in Greater Manchester next April than when Labour came to power in May 1997. I regard that as absolutely unacceptable. The basis of financing the police is clearly wrong. Conservative Members should not be cheered up by that news, because almost exactly the same number of police officers were lost between the 1992 and 1997 general elections. Greater Manchester will have lost 300 serving officers since 1992, under both Tories and Labour.
Stockport has the lowest SSA of all the metropolitan boroughs. The formula is wrong, and the leverage is wrong. For every £1 supplied locally, £9 is supplied by
66
the national non-domestic rate and Government grant. The Government have made a rod for their own back. As my hon. Friend the Member for Sutton and Cheam (Mr. Burstow) said, we want to return the non-domestic rate to local control and, in the long term, to make the council tax a local income tax.
Mr. Watts: Does the hon. Gentleman believe that returning the business rate to local councils will automatically increase budgets? That may not be the case. The way in which the Government set up the redistribution network would determine whether local councils receive more cash to provide services.
Mr. Stunell: I thank the hon. Gentleman for his contribution, which brings me neatly to my next point. The Liberal Democrats believe that the proper role of central Government financing for local government is to achieve equalisation of resources, not to support the fundamental service. A significant fraction of the non-domestic rate is generated in the City of London and the fundamental task of central Government is to arrange an appropriate redistributive formula. In another life, I wrote a paper on how that redistribution should be organised.
Jackie Ballard: It makes good reading.
Mr. Stunell: I thank my hon. Friend for that remark, and I would be happy to forward a copy to the Minister, if she would undertake to read it.
Dr. Whitehead: Will the hon. Gentleman send me a copy?
Mr. Stunell: I am happy to put a copy in the Library, if that would suit hon. Members.
I have been critical of the Government because, while they have said the right words, they have done the wrong things. It is possible to make a speech from the Dispatch Box that sounds plausible and looks good in Hansard, but unfortunately bears no relationship to reality. Councils of every political persuasion face further reductions in the services they can provide and higher rises in council tax than the level nominated by the Government. The problem is not incompetence on the part of local councils, as I have demonstrated. It is not that local government cannot manage; it is that Government are bungling and fudging.
Mr. Andrew George: Does my hon. Friend agree that not only is the council tax regressive, but so are the powers associated with it? In my constituency, council tax payers in mobile homes have to pay sums well above their ability to pay, while wealthy second-home owners get a 50 per cent. reduction in their council tax. If the system is to reflect ability to pay, that issue must be addressed.
Mr. Stunell: I agree with my hon. Friend. If the council tax is to be retained, it needs major surgery, including the introduction of a band below A that deals with the situation that he mentioned. Some of us would also argue that we also need another upper band to deal with some of the discrepancies at the top end. However, in the long term, the council tax should be replaced by a fair and progressive tax, based on ability to pay.

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The brave words of the hon. Member for West Chelmsford (Mr. Burns) should not be taken at face value. His party introduced the current financial regime under which we suffer. His party swore blind that the regime would not lead to capping, but subsequently introduced universal, brutal and ridiculous capping for many local authorities. His Government planned to make the system more transparent, but introduced standard spending assessments whose complexity and folly concern anyone who considers the system. His Government enforced, in some cases with considerable glee, cuts on many services provided by local government, year after year. In the police service, as I mentioned, in education—which I could have mentioned—in social services and in many other services provided by local government, standards are worse than before the Conservatives began their attack on local government. The hon. Member for West Chelmsford pretends that, somewhere along the road to Damascus, something amazing has happened to the Conservative party. To me, it sounds less like Damascus and more like deceit. On the streets, many people know the truth about the Tories' legacy in local government, and they will show what they think of it on 6 May.
6.36 pm
Dr. Alan Whitehead: I apologise for not being present for the beginning of the debate. I wish to point out the apparent contradiction in the motion. The Liberal Democrats claim that they want more financial autonomy for councils, but the motion also calls for more money from the centre for councils, which logically means a higher gearing ratio when councils come to set their council taxes and, therefore, possibly less financial autonomy for councils.
I understand why the Liberal Democrats have advanced that position today. As a result of the collapse of the Tory vote in the shires, several authorities are under Liberal Democrat control, especially in the south of England. The Liberal Democrats find life difficult being in control, because they are more familiar with holding the balance of power. When they have to make the budget all by themselves, it can be a difficult process for them. It is also more difficult to write "Focus" leaflets when in control than when in opposition.
I can see the "Focus" leaflets being ground out as we speak. They will say that the Liberal Democrats raised the iniquity of the local government settlement with the Government in Parliament and did not get a satisfactory answer. However, I have some sympathy with the Liberal Democrats. The SSA system has been manipulated in the past by Government. It is also true that the conjoining of the SSA system to the idea of universal capping has meant that, increasingly, councils have spent up to their SSA limits. That has meant a decreasing amount of discretion on spending available to local government.
In recent years, local councils have invested large sums of money in commissioning reports and lobbying Government to tweak various measures in the SSA to the councils' advantage, possibly at the expense of examining the services they provide. In the past, we have seen outrages, such as the time when the Conservative Government tweaked the indicator on tourist bed nights to assist a particular local authority, which shall remain
68
nameless. Its name begins with "W", which gives hon. Members a choice. Local councils believe that it can be worth their while undertaking complicated exercises to petition Government about the SSA system.
For various reasons, the SSA system does not achieve a transparent and fair distribution of money to local government. The Government have introduced a three-year freeze on the methodology of SSAs, so that the basis of the distribution can be considered. However, it is difficult to introduce a system of local government funding that does not produce winners and losers.
Not everyone can be a winner all the time. Our standard spending assessment system is the most complex system of evaluating the distribution of local government funding anywhere in the world, except the state of Victoria, Australia. One may regard that fact as good or bad: a system perceived to be fair is likely to be complex, and a system that is simple and transparent is likely to lose out on perceived fairness of equalisation. We have, however, an immensely complex system that is also not perceived to be terribly fair. We must consider distribution.
I favour putting a greater proportion of local government spending at the discretion of local authorities. Among other things, that would lower the gearing effect, creating a more genuine relationship between what local government says it raises from local taxpayers and the outcomes of local taxation. I hope that the review will consider that point.
I, too, have written a paper on the subject; I will swap it with the hon. Member for Hazel Grove (Mr. Stunell). The system is devilishly complex, and there is no easy, fairies-at-the-bottom-of-the-garden solution, as the Liberal Democrats sometimes pretend. We must take the matter seriously and spend time getting the system right. I hope that the Government can come up with a solution that the Local Government Association and local authorities will agree provides fair distribution.
Every year, some people will believe that they have not got the best deal, and they will complain about it. I doubt that we can create a system that will entirely rid us of that, but we must have a system that is transparent and fair. A combination of that intention and of this year's local government settlement—a good one by any reckoning—will pave the way towards such a system.
6.42 pm
Jackie Ballard: I spoke earlier with some visitors from the United States of America who are examining the United Kingdom system of government on a Hansard Society scheme. Those visitors expressed surprise at the level of centralisation in our structures of government. They had noticed that local government did not have the freedom to do whatever it thought was in the best interests of local communities. They had noticed, too, local government's lack of financial freedom either to determine local taxation or to introduce different methods of taxation, such as the sales taxes or tourist taxes applied by many states of the USA.
Mr. Sanders: We don't want a tourist tax.
Jackie Ballard: We may not want those particular taxes, as my hon. Friend says, but the point is that local government in other countries has freedom to decide on the taxes appropriate in local areas. What may not be

69
appropriate to Torbay may be suitable in some other part of the country. Local authorities should be able to decide, as happens in many other countries, including European states that would not recognise our system, as the best example of a pluralist democracy.
Pluralism is not only about having the choice of which political party to vote for. It is also about having many centres of power within a democracy. Clearly, the Government are not particularly familiar with that concept.
Tomorrow, we shall debate the Bill that introduces best value. The Local Government Bill gives an extra 23 or 24 powers to the Secretary of State—I lost count of the exact number because one power was removed during the Bill's previous proceedings, a fact for which we are incredibly grateful. The Labour Government are continuing the process begun by the Conservatives of weakening local democracy and bringing more power to the centre.
The Minister has said, however, that she wants local government to be more accountable to local people. How can it be, when the local government funding system is so opaque? Is it thanks to Liberal Democrat councillors, for example, that Liverpool has had a 0 per cent. council tax rise this year? Or was that thanks to the Government's settlement? Is council tax above average in Buckinghamshire because of Conservative failure, or is that the fault of the mean Government settlement?
Who is to blame for service cuts in many local authority areas across the country? Is it the Secretary of State for Education and Employment, who says that all increased funding should be passported to schools? Or is it the fault of local councillors, of whatever political persuasion? How can a local citizen know whom to thank or to blame? [HON. MEMBERS: "Blame the Liberal Democrats."]
It is incredibly easy for each of us to say, "If in doubt, blame this party or that party." My hon. Friend the Member for Southwark, North and Bermondsey (Mr. Hughes) asked earlier whether the Labour council or the Labour Government were to blame for service cuts in his area. He is lucky: in his area, the answer is obviously Labour. Voting decisions for people in his constituency are easy, but the answer is not so easy for people in other constituencies.
The hon. Member for Liverpool, Riverside (Mrs. Ellman) gave credit for the freeze in council tax in Liverpool to the Government, but she blamed service cuts on Liberal Democrat councillors. Of course, Liberal Democrat Members will say exactly the opposite, which makes my point precisely. [Interruption.] If the Minister wants to intervene, I should be happy to allow her to, but as she keeps mumbling from a sedentary position, I find it difficult to understand her.
The Minister said that central Government were responsible for preventing excessive rises in council tax, and for ensuring delivery of local services. What is the point of local elections if central Government are to take all responsibility away from local government? She said, too, that the Tories had responsibility for every council tax rise because of universal capping. However, capping remains crude and universal. The only difference is that it is not preannounced. Local authorities have to guess what the Government will allow them to spend.
Ms Armstrong: Is the hon. Lady saying that there is no national interest for central Government in what local government does?
Jackie Ballard: The Minister will know my answer to that because we have had that debate many times during our happy hours on the Local Government Bill. Liberal Democrats believe that local authorities have their own electoral mandates and that they should be able to carry them out without being clobbered by national Government.
The Minister, and Labour Back-Bench Members who have spoken, may bandy about statistics. We have heard them repeat words about the same pot of funding over and over in the hope of fooling people into believing that they are generous to local government. However, local people will see the real impact on their services, not the fantasy figures put out by the Government. For example, in a survey conducted by Liberal Democrats in Brecon and Radnorshire—
Mr. Burns: Oh, yes.
Jackie Ballard: It is a very good survey, and surveys are one of the many ways in which we keep in touch with local people. In that survey, 90 per cent. of schools said that they were struggling with a standstill budget this year. They said that that was putting strain on staff, and that schools were having to cut back on books, equipment and staffing.
Mr. Richard Livsey: I am very pleased that my hon. Friend has mentioned my constituency. One factor there is that the Government and the Welsh Office failed to take account of the number of small schools. They did not calculate the impact that the number of head teachers would have on a standstill budget for education in the county. It is a classic example of centralised control.
Jackie Ballard: I thank my hon. Friend for that intervention. In the survey, 70 per cent. of schools said that they had to rely on fund raising by parent-teacher associations to finance delivery of the curriculum. We are talking not about extras, but about the basic curriculum. [Interruption.] I should tell the hon. Member for Milton Keynes, North-East (Mr. White) that that is the reality on the ground. Nothing has changed with the change of Government.
Mr. White: The reality in many schools up and down the country is extra money for books. In my constituency, a secondary school that has campaigned for years for a library finally has one. That is the reality: schools are getting the extra services and capital investment that they need.
Jackie Ballard: Is the hon. Gentleman telling my hon. Friend the Member for Brecon and Radnorshire (Mr. Livsey) that the 90 per cent. of schools that responded to our survey by telling us their reality did not know what they were talking about?
The hon. Member for West Chelmsford (Mr. Burns) attacked the council tax benefits subsidy limitation, as did Conservative members of the Standing Committee on the

71
Local Government Bill, but they forget that their 1992 legislation enabled the Government to introduce the scheme. Indeed, the Conservatives thought up the housing benefit subsidy clawback, which was opposed by Labour Members when in opposition, but now that they are in government they have done nothing to end it.
In her opening speech, the Minister queried why we had called this debate. We did so to call the Government to account. That is one of the main purposes of opposition. The debate has been called to demonstrate that this Government are as centralising as the previous Government, that they do not believe in local democracy and that the local government finance system does not help to make local authorities accountable to their electorate. It has also been called to persuade the Government to reject new Labour dogma and to get back in touch with their local activists and local people who want their locally elected representatives to decide on the priorities of their communities.
We Liberal Democrats are optimists. We had hoped that the Minister would listen to the debate and take note of it. We still hope that she will take the shackles off local government and reverse the years of Conservative centralisation. If she does not do so, she knows that her party will suffer in the ballot box in May and she also knows that, as the hon. Member for Southampton, Test (Dr. Whitehead) said, Liberal Democrats will continue to expose the difference between what the Government say and what they do.
6.52 pm
The Parliamentary Under-Secretary of State for the Environment, Transport and the Regions (Mr. Alan Meale): Contrary to what the hon. Member for Taunton (Jackie Ballard) said, my right hon. Friend and I have listened carefully to the points raised in the debate. My colleagues and I sometimes wonder whether Opposition Members, in particular the Liberal Democrats, have taken any notice whatsoever of the facts.
First, on the 1999–2000 settlement for local government, I repeat what my right hon. Friend the Minister for Local Government and Housing said—this is the most generous settlement for years. I commend the speech by my hon. Friend the Member for Liverpool, Riverside (Mrs. Ellman), who used the example of Liverpool to illustrate that point.
I agree with Liberal Democrat Members who say that, to some extent, local services have been underfunded for years, but that was not the fault of this Government—it was due to 18 years of misrule by the previous Administration. Total standard spending for 1999–2000 is up by 5.5 per cent. That is more than twice the average increase under the previous Government. Last year, we put an extra £835 million into education, over and above the spending planned by the previous Government.
Until the hon. Member for Taunton referred to education, the whole debate had been lacking any mention of that important subject—perhaps one of her hon. Friends referred to it briefly. As right hon. and hon. Members know, the Government have made education a priority. We want to improve the education of all children in the country. Funding is one important strand in achieving that aim. We have increased local government funding for
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education. Every council with responsibility for education will receive at least 1.5 per cent. more grant than last year—most will receive much more.
Furthermore, we are working closely with local government, so that it can improve and deliver best value to local people. As my hon. Friend the Member for Milton Keynes, North-East (Mr. White) stressed so avidly, that must be a continuing process. He said that the discussions, the debate and the help must continue. We are working closely with local government because we realise that local authorities want best value to work and they know that they can deliver better services. We are providing the funding that they need to do just that.
However, it is not merely about funding, but about improvements to local services. Throwing money at services will not improve them—indeed, it can and often does encourage waste. As my right hon. Friend the Minister and my hon. Friend the Member for Milton Keynes, North-East said, the Government considered carefully how much the country could afford to spend on local services when we carried out our comprehensive spending review last year. We will provide real increases in funding in the next three years, as well as stability in council funding to help local authorities to plan their spending.
Therefore, we do not accept that local services are underfunded.
Mr. Tony Baldry: When will counties such as Oxfordshire know whether they will be capped this year?
Mr. Meale: My right hon. Friend the Minister referred to that matter and said that we had only just received all the various calculations today. I can only advise the hon. Gentleman that it will be in due course. I know that he will not appreciate that answer, but it is the only one that he will get at the moment.
We do not accept that local services are underfunded and that there is any need for large increases in council tax. Furthermore, the figures that were published this morning bear that out. Indeed, the average increase is 6.8 per cent., which is down from last year. We gave local authorities the freedom to decide their budgets and we asked them to behave responsibly—most of them have done so. Most authorities will be considering how to use the increased funding to improve the services that they provide to local people—the people to whom they are accountable.
For those authorities that do not behave responsibly, we have said that we will take action. By that, I do not simply mean capping. We will certainly consider this year and in future whether we need to use our capping powers. However, contrary to what Opposition Members seem to think, we do not want to cap councils. We believe in local responsibility. Hon. Members must recognise that the Government also have a responsibility to the taxpayer. There is even more to it than that, as my right hon. Friend the Minster stated. Under best value, councils will have to review their performance and publish their plans to improve. Those plans will be audited and, where local authorities are not delivering best value, the Secretary of State will have the power to take the appropriate action. That combination of measures will ensure the best use of the additional resources that we are providing to deliver

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high-quality services. I was asked for a direct answer about building on the settlement to achieve future consensus. I can assure the House that that work will continue.
Opposition Members raised a number of queries. First, the hon. Member for West Chelmsford (Mr. Burns) said that the shire areas had done badly out of the settlement. We have treated all authorities fairly, whether urban or rural and in whatever part of the country. I cannot accept that we are biased against shire areas. In fact, they have had an overall increase in SSA of 4.9 per cent. compared with 4.8 per cent. in England as a whole. Shire counties did better than the average—they had a bigger than average increase in both SSA and Government grant. Their SSAs were increased by 5.2 per cent. Therefore, I cannot understand the hon. Gentleman's argument that they needed particularly large council tax increases. They have taken decisions locally and come up with an 8.3 per cent. average increase, which is well above the English average. I also find it hard to reconcile the good settlement for shire counties with the large increase in council tax there. I realise that they do not have any elections this year, but I am sure that the electorate will give their resounding response if the counties carry on in that way.
In response to the hon. Member for West Chelmsford, I should like to say that we promised to end crude and universal capping, and we have done so. Even the hon. Gentleman has admitted that we have not pre-announced capping limits. That is not arbitrary and retrospective. It has given councils an opportunity to consider carefully their local needs and resources when setting their budgets.
The hon. Member for Torbay (Mr. Sanders) illustrated all too clearly the Liberal Democrats spend-and-blame mentality. As he knows, most councils have disposed of surplus assets to the benefit of the people and of local taxpayers. Torbay council decided not to sell assets and has forgone the income that that would have generated in the belief that Ministers would increase grant distribution for the higher taxes that someone would pay in Torbay. We have not agreed to that at all.
The hon. Gentleman asked us to reconsider grant distribution. We made it clear from the outset that we do not intend to alter the distribution formula over the next three years, and that decision will stand. Although I am more than willing to accept the hon. Gentleman's invitation to visit Torbay and meet local representatives, I am not prepared to discuss that subject. He referred to changes in the standard spending assessments; those changes were justified by extensive research—some of which was tested and refined over three years—and will give fairer distribution. I hope that the hon. Gentleman will take that point into account.
The hon. Member for Hazel Grove (Mr. Stunell) implied that there would be cuts in policing and that the numbers of bobbies on the beat would be reduced. That is not the case. I have been given local information by the chief constable of Greater Manchester, who assures me that those numbers will not be cut.
As the Liberal Democrats took up so much time in the debate, I have gone slightly beyond the allotted time, and I formally close the debate.
Question put, That the original words stand part of the Question:—
The House divided: Ayes 40, Noes 309.

Division No. 123]

[7.1 pm

AYES

Allan, Richard

Jones, Nigel (Cheltenham)

Baker, Norman

Keetch, Paul

Ballard, Jackie

Kennedy, Charles (Ross Skye)

Beith, Rt Hon A J

Kirkwood, Archy

Brake, Tom

Livsey, Richard

Brand, Dr Peter

Maclennan, Rt Hon Robert

Breed, Colin

Michie, Mrs Ray (Argyll & Bute)

Burnett, John

Moore, Michael

Burstow, Paul

Oaten, Mark

Cable, Dr Vincent

Öpik, Lembit

Chidgey, David

Rendel, David

Russell, Bob (Colchester)

Cotter Brian

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

Cunningham, Ms Roseanna(Perth)

Taylor, Matthew (Truro)

Tonge, Dr Jenny

Davey, Edward (Kingston)

Tyler, Paul

Feam, Ronnie

Wallace, James

Foster, Don (Bath)

Webb, Steve

George, Andrew (St Ives)

Willis, Phil

Hancock, Mike

Harris, Dr Evan

Tellers for the Ayes:

Harvey, Nick

Mr. Andrew Stunell and Mr. Adrian Sanders.

Hughes, Simon (Southwark N)

NOES

Abbott, Ms Diane

Clarke, Rt Hon Tom (Coatbridge)

Ainger, Nick

Clarke, Tony (Northampton S)

Ainsworth, Robert (Cov'try NE)

Clwyd, Ann

Alexander, Douglas

Coaker, Vernon

Anderson, Donald (Swansea E)

Coffey, Ms Ann

Armstrong, Ms Hilary

Coleman, Iain

Austin, John

Colman, Tony

Barnes, Harry

Connarty, Michael

Battle, John

Cook, Frank (Stockton N)

Bayley, Hugh

Cooper, Yvette

Beard, Nigel

Corbett, Robin

Beckett, Rt Hon Mrs Margaret

Corbyn, Jeremy

Begg, Miss Anne

Cousins, Jim

Bell, Stuart (Middlesbrough)

Cox, Tom

Bennett, Andrew F

Crausby, David

Benton, Joe

Cryer, Mrs Ann (Keighley)

Bermingham, Gerald

Cryer, John (Hornchurch)

Berry, Roger

Cunliffe, Lawrence

Best, Harold

Cunningham, Jim (Cov'try S)

Betts, Clive

Curtis-Thomas, Mrs Claire

Blair, Rt Hon Tony

Dalyell, Tam

Blizzard, Bob

Darling, Rt Hon Alistair

Boateng, Paul

Darvill, Keith

Borrow, David

Davidson, Ian

Bradley, Keith (Withington)

Davies, Rt Hon Denzil (Llanelli)

Bradley, Peter (The Wrekin)

Davis, Terry (B'ham Hodge H)

Bradshaw, Ben

Dean, Mrs Janet

Brown, Rt Hon Gordon(Dunfermline E)

Denham, John

Dismore, Andrew

Brown, Rt Hon Nick (Newcastle E)

Dobbin, Jim

Browne, Desmond

Donohoe, Brian H

Buck, Ms Karen

Doran, Frank

Burden, Richard

Dowd, Jim

Burgon, Colin

Dunwoody, Mrs Gwyneth

Butler, Mrs Christine

Eagle, Angela (Wallasey)

Cabom, Richard

Efford, Clive

Campbell, Alan (Tynemouth)

Ellman, Mrs Louise

Campbell, Mrs Anne (C'bridge)

Ennis, Jeff

Campbell, Ronnie (Blyth V)

Etherington, Bill

Campbell-Savours, Dale

Fisher, Mark

Cann. Jamie

Fitzpatrick, Jim

Caplin, Ivor

Fitzsimons, Loma

Caton, Martin

Flint, Caroline

Chapman, Ben (Wirral S)

Flynn, Paul

Clark, Rt Hon Dr David (S Shields)

Follett, Barbara

Clark, Dr Lynda(Edinburgh Pentlands)

Foster, Rt Hon Derek

Foster, Michael Jabez (Hastings)

Clarke, Eric (Midlothian)

Foulkes, George

75

Fyfe, Maria

Kumar, Dr Ashok

Gapes, Mike

Ladyman, Dr Stephen

George, Bruce (Walsall S)

Lepper, David

Gerrard, Neil

Leslie, Christopher

Gibson, Dr Ian

Levitt, Tom

Gilroy, Mrs Linda

Lewis, Ivan (Bury S)

Godman, Dr Norman A

Lewis, Terry (Worsley)

Godsiff, Roger

Liddell, Rt Hon Mrs Helen

Golding, Mrs Llin

Linton, Martin

Gordon, Mrs Eileen

Lloyd, Tony (Manchester C)

Griffiths, Jane (Reading E)

Lock, David

Griffiths, Nigel (Edinburgh S)

Love, Andrew

Griffiths, Win (Bridgend)

McAvoy, Thomas

Grocott, Bruce

McCabe, Steve

Grogan, John

McCafferty, Ms Chris

Hall, Mike (Weaver Vale)

McDonagh, Siobhain

Hall, Patrick (Bedford)

McDonnell, John

Hamilton, Fabian (Leeds NE)

McGuire, Mrs Anne

Hanson, David

Mclsaac, Shona

Harman, Rt Hon Ms Harriet

McKenna, Mrs Rosemary

Heal, Mrs Sylvia

Mackinlay, Andrew

Healey, John

McLeish, Henry

Henderson, Doug (Newcastle N)

McNamara, Kevin

Henderson, Ivan (Harwich)

McNulty, Tony

Hepburn, Stephen

MacShane, Denis

Heppell, John

Mactaggart, Fiona

Hesford, Stephen

McWalter, Tony

Hill, Keith

McWilliam, John

Hinchliffe, David

Mahon, Mrs Alice

Hoey, Kate

Mandelson, Rt Hon Peter

Home Robertson, John

Marsden, Gordon (Blackpool S)

Hood, Jimmy

Marshall, David (Shettleston)

Hoon, Geoffrey

Marshall-Andrews, Robert

Hope, Phil

Martlew, Eric

Hopkins, Kelvin

Maxton, John

Howarth, George (Knowsley N)

Meale, Alan

Howells, Dr Kim

Merron, Gillian

Hoyle, Lindsay

Milburn, Rt Hon Alan

Hughes, Ms Beverley (Stretford)

Miller, Andrew

Hughes, Kevin (Doncaster N)

Mitchell, Austin

Humble, Mrs Joan

Moffatt, Laura

Hutton, John

Moonie, Dr Lewis

Iddon. Dr Brian

Moran, Ms Margaret

Illsley, Eric

Morgan, Rhodri (Cardiff W)

Jackson, Ms Glenda (Hampstead)

Morley, Elliot

Jackson, Helen (Hillsborough)

Morris, Rt Hon John (Aberavon)

Johnson, Alan (Hull W & Hessle)

Mountford, Kali

Johnson, Miss Melanie(Welwyn Hatfield)

Mullin, Chris

Naysmith, Dr Doug

Jones, Barry (Alyn & Deeside)

O'Brien, Bill (Normanton)

Jones, Helen (Warrington N)

O'Brien, Mike (N Warks)

Jones, Ms Jenny(Wolverh'ton SW)

O'Hara, Eddie

Olner, Bill

Jones, Jon Owen (Cardiff C)

O'Neill, Martin

Jones, Dr Lynne (Selly Oak)

Osborne, Ms Sandra

Jowell, Rt Hon Ms Tessa

Palmer, Dr Nick

Keeble, Ms Sally

Pearson, Ian

Keen, Alan (Feltham & Heston)

Pendry, Tom

Keen, Ann (Brenfford & Isleworth)

Perham. Ms Linda

Kemp, Fraser

Pickthall, Colin

Khabra, Piara S

Pike, Peter L

Kidney, David

Plaskitt, James

King, Andy (Rugby & Kenilworth)

Pollard, Kerry

King, Ms Oona (Bethnal Green)

Pond, Chris

Kingham, Ms Tess

Pope, Greg

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Pound, Stephen

Stewart, Ian (Eccles)

Powell, Sir Raymond

Stinchcombe, Paul

Prentice, Ms Bridget (Lewisham E)

Stoate, Dr Howard

Prentice, Gordon (Pendle)

Stott, Roger

Prescott, Rt Hon John

Straw, Rt Hon Jack

Primarolo, Dawn

Stringer, Graham

Prosser, Gwyn

Stuart, Ms Gisela

Purchase, Ken

Sutcliffe, Gerry

Quinn, Lawrie

Taylor, Rt Hon Mrs Ann(Dewsbury)

Radice, Giles

Rapson, Syd

Taylor, Ms Dari (Stockton S)

Raynsford, Nick

Taylor, David (NW Leics)

Reid, Rt Hon Dr John (Hamilton N)

Temple-Morris, Peter

Robinson, Geoffrey (Cov'try NW)

Timms, Stephen

Roche, Mrs Barbara

Tipping, Paddy

Rogers, Allan

Todd, Mark

Rooker, Jeff

Touhig, Don

Rooney, Terry

Trickett, Jon

Ross, Ernie (Dundee W)

Truswell, Paul

Rowlands, Ted

Turner, Dennis (Wolverh'ton SE)

Roy Frank

Turner, Dr Desmond (Kemptown)

Ruddock Joan

Turner, Dr George (NW Norfolk)

Russell, Ms Christine (Chester)

Twigg, Derek (Halton)

Ryan Ms, Joan

Twigg, Stephen (Enfield)

Salter, Martin

Vaz, Keith

Savidge, Malcolm

Ward, Ms Claire

Sawford, Phil

Wareing, Robert N

Sedgemore, Brian

Watts, David

Shaw, Jonathan

White, Brian

Sheldon, Rt Hon Robert

Whitehead, Dr Alan

Shipley, Ms Debra

Wicks, Malcolm

Simpson, Alan (Nottingham S)

Williams, Rt Hon Alan(Swansea W)

Singh, Marsha

Williams, Alan W (E Carmarthen)

Skinner, Dennis

Wills. Michael

Smith, Angela (Basildon)

Wilson, Brian

Smith, Rt Hon Chris (Islington S)

Winnick, David

Smith, Jacqui (Redditch)

Winterton, Ms Rosie (Doncaster C)

Smith, John (Glamorgan)

Wood, Mike

Smith, Llew (Blaenau Gwent)

Woolas, Phil

Soley, Clive

Wright, Anthony D (Gt Yarmouth)

Southworth, Ms Helen

Wright, Dr Tony (Cannock)

Spellar, John

Wyatt, Derek

Squire, Ms Rachel

Starkey, Dr Phyllis

Tellers for the Noes:

Steinberg, Gerry

Mr. David Clelland and Jane Kennedy.

Stewart, David (Inverness E)

Question accordingly negatived.
Question, That the proposed words be there added, put forthwith, pursuant to Standing Order No. 31 (Questions on amendments), and agreed to.
MR. DEPUTY SPEAKER forthwith declared the main Question, as amended, to be agreed to.
Resolved,
That this House notes that the 1999–2000 local government settlement was the most generous since the introduction of the council tax; further notes the Government's commitment of an extra £40 billion for schools and hospitals; and welcomes the introduction of Best Value, the abolition of crude and universal capping, the reform of political management structures and the new ethical framework, set out in the local government White Paper.

EU-US Trade
7.16 pm
Mr. Michael Moore: I beg to move,
That this House deplores the failure of the USA and the EU to resolve the trade dispute arising from the so-called banana war; recognises the serious impact which the US retaliatory measures are having on British industries, in particular the devastating impact on the cashmere industry in the Scottish Borders; is concerned that these actions are a precursor of further major trade disputes over the importation into the UK of genetically and hormonally modified food products from the USA; and urges the Government to step up its diplomatic and other efforts to ensure that all parties work together to first reform the WTO regime to ensure compatibility with international biodiversity agreements, environmental and animal welfare objectives, and then to ensure compliance with the WTO objectives of free and fair trade.
The motion stands in the names of my right hon. Friend the Member for Yeovil (Mr. Ashdown) and other right hon. and hon. Friends—[Interruption.]
Mr. Deputy Speaker (Mr. Michael J. Martin): Order. The hon. Gentleman is addressing the House and hon. Members must come to order.
Mr. Moore: Thank you, Mr. Deputy Speaker.
A vital part of world trade has entered a mire and, to an increasing extent, the very principles of free and fair international trade are at stake. A dispute about the world banana trade has got out of hand and now threatens the jobs of thousands of people employed in industries throughout the country, ranging from cashmere in the Scottish borders to candles in north Cornwall. Today we learned that not even the Scottish Tunnock wafer is safe.
To ensure the freedom and fairness of world trade, there have to be rules that are agreed by the participants and overseen by a credible international body. Painfully and painstakingly, over several decades, moves were made toward a consensus on that matter, leading only a few years ago to the establishment of the World Trade Organisation. Yet, as the WTO prepares for the new round of trade negotiations later this year, the whole trading edifice is on the verge of collapse.
The origin of the current dispute between Europe and the United States lies in a row over bananas that has rumbled on for many years. At the heart of that dispute is the European Union import regime, which offers special preference to former colonies in the Caribbean and elsewhere. The main points of today's debate relate to the manner in which the dispute has been handled by Europe and America and to the consequences of our failure to resolve it, but there are many other issues—for example, my hon. Friend the Member for Lewes (Mr. Baker) hopes to speak about genetically modified organisms.
It is worth remembering that, although the United States is much exercised about the problems affecting the export of Latin American bananas into Europe, the African, Caribbean and Pacific countries have only 20 per cent. of the European Union market, whereas three north American multinationals—Chiquita, Dole and Del Monte—control two thirds of the world banana market between them. The questions have to be asked, exactly how much do they think they need and how much do they think is fair? Ensuring fairness to African, Caribbean and Pacific countries in the resolution of the dispute will be one of the keys to a decent solution.
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It is evident that there is great animosity between both sides in the dispute. At different stages, my hon. Friends, especially my hon. Friend the Member for Roxburgh and Berwickshire (Mr. Kirkwood), and I have lobbied various people and organisations, including American ambassadors and the WTO itself. It has been apparent throughout that the WTO is caught in the middle as Europe and the United States flex their diplomatic muscles rather than try to find a solution. The situation is out of hand.
Mr. John Bercow: The hon. Gentleman mentioned three United States companies that he accused of controlling 60 per cent. of the market. Am I mistaken in thinking that the Liberal Democrats used to believe in free trade? Would the hon. Gentleman care to say instead that those companies won that share of the market?
Mr. Moore: The hon. Gentleman may advance the cause of those multinationals later if he catches your eye, Mr. Deputy Speaker. In response to his point, some of the practices of those multinational companies in different parts of the world are entirely questionable. I pointed out that the African, Caribbean and Pacific countries that import to the European Union have only 20 per cent. of the European market. So Conservative Members have ignored the fairness argument, which is surely as important as the free trade argument.
Moving away from bananas, the immediate and painful consequence of this dispute is the loss of thousands of jobs in the cashmere industry, in both small and large operations in Hawick and Innerleithen, and in the candle industry in operations such as Art Candles in Bodmin and Eclipse Candles in the constituency of my hon. Friend the Member for Weston-super-Mare (Mr. Cotter). In the medium and long term, the very principles of international trade may be damaged irrevocably if there is no solution soon.
For months, my hon. Friend the Member for Roxburgh and Berwickshire and I have been putting the case for an early resolution of the dispute to both the European Union and the United States on behalf of our constituents in the cashmere business. The situation was summed up for us when we travelled with my right hon. Friend the Member for Yeovil (Mr. Ashdown) to the World Trade Organisation in Geneva just over a week ago. When we visited the European Union ambassador to the WTO, he was very patient. He took his time and explained that it was all the fault of those nasty Americans. We then travelled around the city of Geneva to meet the American ambassador. She was also patient and energetic. She expressed sympathy with our cause, but explained that it was all the fault of those nasty Europeans.
It is clear that the WTO can resolve the dispute only if both sides make a serious effort to sort out the basic differences. The organisation is under-resourced and under-staffed, and many would say that it is being asked to solve an impossible problem. There is no point in the European Union or the United States blaming each other, because that ignores the real pain endured by our constituents in the borders, where thousands of jobs have been lost in the textile, electronics and farming industries in the past two years.
There can be little doubt that the European Commission has been sleepwalking through this crisis. It has failed at every stage to recognise the seriousness of the American

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Government's intention to sort out the dispute on their own terms. For at least the past six months, the European Commission has been more interested in name calling than in serious diplomatic efforts. In this area—as in so many others recently—the European Commissioners have clearly not been earning their pay.
In the wake of the Commission crisis, nobody knows who is in control. It could not have come at a worse time for these industries and for the jobs that are in jeopardy across the country. The House must send a strong signal to Sir Leon Brittan: although he may be tempted to campaign for another job, he must remain firmly focused on securing a resolution to this dispute before it is too late. We do not want him to get a new job if thousands of others lose theirs.
While the Commission is in limbo, Sir Leon has an opportunity to devise a scheme that will resolve the dispute fairly and equitably and to present it to the President of the European Union, Chancellor SchrÖder. The President could discuss the issue on his shuttle trips around the capitals of Europe and provide some impetus for a solution. Every day counts. The seasonality of the business—particularly the cashmere industry—means that, if producers do not sort out their orders in the next month, job losses will follow almost immediately.
For its part, the United States has earned little credibility. Notwithstanding the merits of its case, its unilateral response is completely illegal in international law and outwith the framework of the WTO, which the US claims to support. The list of targeted goods is openly cynical and is clearly targeted at the most vulnerable European work forces. The tactics are those of the international bully boy, and our constituents up and down the country are entitled to question whether our special relationship with the United States—of which we hear so much—is worth very much. Both sides in the dispute must recognise that the World Trade Organisation alone is the judge of the merits of the case and must be respected.
The United Kingdom Government clearly appreciate what is at stake. They have been keen throughout to highlight the role of the European Commission and the fact that it is the lead authority in the negotiations. It is also clear that, in choosing the list of goods to target, the Americans wanted to influence the British Government, whom they believe have not tried seriously to solve the problem. Ministers will have an opportunity to respond to that point later, and I recognise that they have made serious efforts in the past few months. However, that is not the perception of the American Government.
The meetings with American officials and ambassadors to which I referred have illustrated an awareness of the seriousness of the situation. The Department of Trade and Industry and the Scottish Office have been keen to listen to our views and those of others. However, the Government must be seen to be getting behind a fair and equitable solution to the banana crisis that Britain actively supports and encourages. While not employing the bully boy tactics of the United States, this Government must be seen to be interested in finding a solution. If they do so, British goods may come off the American hit list.
On 4 March, in response to a private notice question from my hon. Friend the Member for Roxburgh and Berwickshire, the Secretary of State announced that the
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Government would introduce a guarantee scheme for the cashmere industry. My hon. Friend and I welcomed that announcement, which recognises the special conditions that pertain in the cashmere industry and the importance of the American market. However, we face a real problem because the scheme's detailed requirements are not yet in place. Although we accept in principle that the Government intend to introduce the scheme and keep it in place until the dispute is resolved, the problem is that every day without a scheme sees the erosion of the confidence of US customers and of carriers such as DHL and Federal Express. It is critical that we retain that confidence and ensure that we get the orders.
Speed is of the essence. On 4 March, in response to my question, the Secretary of State said:
"I agree that time is of the essence and that we have to get the scheme in place as a matter of urgency."—[Official Report, 4 March 1999; Vol. 326, c. 1226.]
The statistics of the order book in the past fortnight vividly demonstrate that point. Two weeks ago, the United States' order book for cashmere was worth £4 million. Since then, that amount has doubled. This is a fast-moving situation. Perhaps more tellingly, however, although the amount on the order book has doubled, the same amount again has been lost because people are not prepared to gamble and take on board what the Government have been saying.
Murray Allan, a company in Innerleithen in my constituency, told me today that the latest visit to the United States by one of its sales representatives had resulted in two major US department stores declining to do business. One demanded a personal guarantee and disclaimer and another said that the risks were not worth taking. Those who work at Murray Allan, Ballantyne, Barrie and other companies in the cashmere industry want to know when the scheme will be up and running and the details known. For now, the clouds of uncertainty surround the industry and people are deeply worried. I hope that the Minister, in his response, will be able to give us an assurance and a reason to be optimistic.
As I have said, thousands of people are on the brink of losing their jobs because of macho diplomacy in the capitals of Europe and the United States which is divorced from the world of those whom it affects. Whatever the motivations of the different parties in the dispute, it is clear that one issue is a warm-up for the next set of issues to arise between America and Europe, whether they relate to bovine somatotropin, hormones in beef or genetically modified organisms.
Whatever else we learn from the dispute, it is clear that the macho tactics of the Europeans and the Americans do not work. The only way that we can hope to build up the credibility of the international trading order is to give the WTO full support. The Government have a major responsibility in that and must take the lead. We are in an awful mess and we need to get out of it as soon as possible.
7.33 pm
The Minister for Home Affairs and Devolution, Scottish Office (Mr. Henry McLeish): I beg to move, To leave out from "House" to the end of the Question, and to add instead thereof:
"recognises the significance of the EU/US relationship and notes that the majority of that trade relationship runs smoothly; commends the efforts of the Government to secure the Transatlantic Economic

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Partnership Agreement last year; acknowledges the efforts of the Government to find a way through the bananas dispute so as to minimise the impact on British industry and in particular the cashmere industry; notes the current position on the hormones dispute; welcomes the Government's commitment to sustainable development; and endorses the Government's support for comprehensive multilateral trade negotiations to be launched in Seattle at the end of this year."
I am pleased to have the opportunity today to speak on the subject of the EU-US trade relationship, the Government's efforts to strengthen that relationship, our efforts on the dispute about the EU's banana regime and, among other matters, our wider ambitions for the Seattle World Trade Organisation ministerial conference at the end of the year.
The hon. Member for Tweeddale, Ettrick and Lauderdale (Mr. Moore) has put a reasonable case to the House about his local concerns and he expresses a view that is shared by hon. Members on all sides of the House, especially in relation to Scotland. However, it is important to remember early in the debate that this is an issue not only for Scotland, but for the United Kingdom and the European Union.
The EU-US trade relationship is substantial and strong. The EU and US are the world's largest two economies, and together they account for about 54 per cent. of world income. Even excluding trade within the EU, together they account for around 38 per cent. of world exports and 39 per cent. of world imports. In 1997, EU goods exports to the US were worth $160 billion, compared with imports from the US worth around $156 billion.
The bilateral trade balance has fluctuated between surplus and deficit over the previous five years. The US is by far the most important external export market for EU firms, accounting for nearly 20 per cent. of exports. In 1997, direct investment flows from the US to the EU amounted to $24 billion. The US is the most important source of external investment into the EU, accounting for over 50 per cent. of the total. In 1997, EU investment flows to the US were worth $42 billion, with the US accounting for over 40 per cent. of total EU direct investment overseas.
Those figures demonstrate the depth and significance of the relationship between the EU and the US, but the bilateral relationship is not the only reason why the EU and the US matter so much in the world trading system. Together, the EU and US are the twin pillars of that world trade system, and co-operate to advance our many shared interests in world trade, some which have been expressed by the hon. Member for Tweeddale, Ettrick and Lauderdale.
All in all, it is important to bear it in mind that the vast majority of that trade and investment between the EU and the US takes place freely and without any difficulty whatsoever. Although there are a number of important disputes, it is vital to keep those in their proper context, and to ensure that the relatively few—although admittedly important—disagreements do not colour the nature of the relationship as a whole.
The transatlantic economic partnership was negotiated under the UK presidency of the EU last year, and agreed at the EU-US summit in London in May 1998. The TEP builds on an already strong transatlantic trading relationship. It provides a range of opportunities to improve the bilateral trade relationship between the EU and the US. It provides also a formal opportunity for an
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on-going dialogue to remove trade frictions and build confidence between the EU and the US. In addition to bilateral benefits, it provides a means of maintaining open markets and promoting the expansion of trade through the continued development and strengthening of the multilateral trade system.
The bilateral aspects of the TEP include substantial elements relating to services, where there is an opportunity for addressing sector-specific obstacles, and to agriculture, environment, food safety and biotechnology, with an agreement to establish proper dialogues to provide a system of early warning for potential disputes in each of those areas. Although those initiatives are at an early stage, they are important and we must build on them.
On electronic commerce, there will be further dialogue to ensure the elimination of unnecessary legal and regulatory barriers and the continued duty-free treatment of electronic transmissions. The TEP deals also with technical barriers to trade, and there is agreement to identify and implement jointly defined general principles for effective regulatory co-operation and to extend the current mutual recognition agreements to new sectors.
The issue highlighted by the hon. Member for Tweeddale, Ettrick and Lauderdale is the banana dispute, which is faced by the UK, along with many other EU member states. Acting through the European Commission, we have made a great effort to seek a solution to the banana dispute through the World Trade Organisation. I say again to the House—emphasising what my right hon. Friend the Secretary of State for Trade and Industry said on 4 March—that we view the US action of withholding liquidation on a range of EU products as deplorable. That action was completely unauthorised by the WTO and ignored the WTO arbitrator's appeal for discussions to continue without premature action. We have raised our objections at the highest levels. Only last week, my right hon. Friend the Secretary of State for Scotland lobbied the US Administration and the US Congress during his visit to Washington.
It is particularly unfortunate that the US action is directed against industries that are in no way connected with bananas. That is the source of the irritation that most people feel on this issue. There can be no justification for inflicting great damage on small, vulnerable businesses and communities, as the hon. Member for Tweeddale, Ettrick and Lauderdale pointed out. The US action has already stalled American orders for Scottish cashmere, and there is a real threat of job losses in the textile-dependent borders region. Of course, it is not only cashmere that is affected; biscuits, batteries, plastics, packaging, candles—to which the hon. Gentleman referred—bed linen and many other products are also on the US list.
Although the US argued that its higher tariffs will not apply until the WTO arbitrator rules and it is granted authorisation by the WTO, the effect of its action of 3 March is the same as if the higher duties were in place now. In view of the highly seasonal nature of the cashmere industry, where a high proportion of the industry's annual orders are being placed now for delivery later in the year, the Government announced that we would implement a scheme to guarantee the bonds requested by US customs in respect of cashmere knitwear.

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I am pleased that the announcement was warmly welcomed by the industry and hon. Members on all sides of the House and, later in the debate, my hon. Friend the Minister for Trade will give details of the way in which we shall implement that commitment. The hon. Member for Tweeddale, Ettrick and Lauderdale sought clarification on that, and I pleased to say that my hon. Friend will provide that.
Even now, it is not too late for the US to reverse its decision on retaliation in the interests not only of the EU-US relationship but to safeguard the WTO. Recognising the importance of resolving this dispute and of safeguarding the WTO' s dispute settlement system, the Government are, first, fully committed to implementing the WTO panel and arbitration outcomes, whatever they may be, without delay.
Mr. Archy Kirkwood: Does the Minister understand that there is an opportunity between now and the dispute resolution panel's finding being published on 12 April to seek an accommodation between the United States and the European Union that would be acceptable to all parties, and that would be the end of the matter? Are the Government using every capable power that they have to hand to obtain for the EU a sufficient mandate to enable a deal to be struck with the US before 12 April?
Mr. McLeish: I am pleased to give the hon. Gentleman that reassurance. I think that everything that can be done is being done by the Government to bring this matter to a conclusion. Clearly, we await the arbiter at the end of the process. There is then a meeting of the panel, and 12 April is a pretty important day. In the meantime, every conceivable step is being taken because of the importance of the issue not only to the cashmere industry, but to the principles that lie behind what is happening. Obviously, we expect our EU partners and the United States to take the same approach. We are hoping that, in the United Kingdom and elsewhere, there will be positive moves to try to resolve the matter.
We are encouraging the European Commission to discuss options with the US. For example, the WTO lays down that compensation is a preferable alternative to retaliation. If the WTO rules against the EU, compensation would be preferable in this, as in other cases.
I assure the House that we are also very concerned to safeguard the interests of traditional African, Caribbean and Pacific banana suppliers. Both the United Kingdom and the EU have long-standing political and legal obligations, which we shall respect. The UK also remains fully committed to safeguarding the WTO's dispute settlement system, and we shall do all that we can to make it work effectively.
Mrs. Gwyneth Dunwoody: Could my hon. Friend get over a fairly straightforward message to our American cousins, which is that, if they wipe out the one-crop export from very poor Caribbean islands, the people on those islands will certainly grow other products? In the end, the United States will be the recipient of those various products. If that is not so, the
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Caribbean islands may very well act as gathering points for other people's drugs. If that is a message that cannot be understood, will my hon. Friend please try to put it in simple terms or picture language, or something, that will get over to our American cousins what they are doing?
Mr. McLeish: I am grateful to my hon. Friend's contribution. I can reassure her that what she says is being done by my hon. Friend the Minister for Trade day in and day out, given the implications of what is happening. It is important also to acknowledge the importance of bananas to the countries that we are talking about. They are part of the wider and complicated matters with which we are dealing. I can reassure my hon. Friend that every step will be taken in a straightforward way to impress on the United States the importance of the matter being resolved.
I was talking about the WTO's dispute settlement system. It has already served us well, for example, in opening Japan's market to Scotch whisky, and it will continue to do so in future.
The European Union's ban on hormone-treated meat has been in place for more than 10 years. In 1998, the WTO found that the EU ban was inconsistent with WTO rules because it did not follow from a properly conducted risk assessment based on science. The EU was given until 13 May 1999 to comply with the ruling. It now seems that the EU will not meet that deadline.
The rules of the WTO require that trade measures put in place to protect human, animal and plant health must have a sound scientific basis. Governments can and do apply restrictions to protect their consumers, but they must be in line with international standards or justified by a risk assessment where they are more stringent than international standards. If those rules were not in place, countries could impose restrictions simply designed to protect their own domestic industries, but disguised as consumer protection measures.
We are encouraging the Commission to explore constructive solutions with the US and Canada, particularly ideas on labelling, and temporary compensation to avoid further escalation of the hormones dispute into a damaging trade war. I hope that those discussions will find a way forward in this dispute.
The hon. Member for Tweeddale, Ettrick and Lauderdale raised the issue of sustainable development, to which the Government are committed. All Governments need to consider their trade and environmental policies together. Protecting the environment and maintaining an open, non-discriminatory and equitable multilateral trading system are essential to achieve our objective of sustainable development. There are many effective, internationally recognised measures which aim to protect the global environment. There is more to be done, however, although significant progress has been made in the past 20 years or so with a number of multilateral environmental agreements. Liberalising trade helps to ensure that resources are used efficiently; it helps generate the wealth necessary for development and environmental improvement, and it encourages the spread of clean technology.
The world trade system should not be undermined. To do so would put at risk our aim of achieving sustainable development. That in turn would, of course, have negative environmental impacts.

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It is clear that trade and environmental policies must accommodate each other to be fully effective. They are less in conflict than some might claim, but that does not mean that potential conflicts do not exist. Governments have a duty to balance the objectives of protecting the environment and of upholding the multilateral trading system, whether they are negotiating in a trade forum or an environment forum. It is therefore for parties to both existing and new agreements to ensure individually and collectively that they do not sign up to conflicting requirements. At the most recent WTO ministerial meeting in Geneva, my right hon. Friend the Prime Minister said:
"Governments need to consider the environmental impact of everything they do, including in the trade sphere. Trade rules should not be used to impose unfair standards on developing countries, nor to discriminate against their exports."
I shall make some brief points about comprehensive multilateral trade negotiations. This is a welcome and timely opportunity to say something about the Government support for a comprehensive round of trade negotiations, which will be launched at the WTO ministerial conference in Seattle at the end of the year. The Seattle ministerial will be the third ministerial conference. The first meeting in Singapore in December 1996 put in place a work programme on new issues such as investment, competition, procurement and trade facilitation. The second meeting in Geneva last May agreed the process of preparation for Seattle. The UK believes that a comprehensive round would allow all countries, including developing countries, to secure an overall package that would reflect their broad interest, largely because of political impetus and because it would allow trade-offs across a range of areas.
Some have questioned the wisdom of pushing ahead with trade liberalisation proposals at a time of difficulties in the global economy. Trade policy was not the cause of the Asia crisis, nor does it provide a complete solution. However, it can help the world on the road to recovery. Freer trade has brought substantial gains to the global economy in the post-war era. Most recently, the Uruguay round brought a significant boost to world trade and incomes. One of the key lessons from the 1930s is that a protectionist response to a global crisis makes matters much worse. So far, there has been relatively little protectionist backlash. However, there are some signs of growing pressures, especially in the US. It is therefore essential that momentum for further liberalisation is maintained. That is why—I repeat the reassurance—the UK and the EU have pledged to resist protectionism, and are at the forefront of efforts to secure a new round of multilateral trade negotiations.
Mr. Terry Rooney: The House may know that the largest cashmere manufacturer in Britain is in my constituency. Part of the settlement under the Uruguay round was that British textile goods sent from the United Kingdom to the United States carried a 37 per cent. tariff, reducing by 1 per cent. a year over 10 years. Can we have that issue on the agenda at the Seattle conference at the end of the year? It is not free trade, but protectionism.
Mr. McLeish: The first priority is to resolve the outstanding issues that we face in that regard. I think that my hon. Friend acknowledges that. I am sure that my hon.
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Friend the Minister for Trade has acknowledged my hon. Friend's contribution and that he will make some reference to it in terms of the agenda for the next round in Seattle later this year.
I shall identify briefly some of the subjects that are particularly important to the UK. They include further tariff reductions, reducing the burden on business and barriers to trade represented by industrial standards and technical regulations, opening up Government procurement markets in third countries, simplifying import and export procedures, seeking substantial progressive reductions in support and protection for agriculture and developing better regimes to cover issues such as food safety, deepening and broadening the liberalisation of trade and services and establishing a liberal rules-based framework for international investment. Those are all issues that are very important for the UK and, of course, for the EU.
The Government are conscious of the fact that not all WTO members support a comprehensive round: many are more focused on market access than on new rules issues, and others stress the need to stick only to those negotiations to which we are already committed—those on agriculture and services. President Clinton's recent signal, in his state of the union address, of support for a new round was a welcome development.
It is too early to say what package will emerge from the ministerial conference this year. Discussions in Geneva have so far been necessarily general, in order to avoid pre-negotiation. As with all issues in the WTO, decisions on the scope and shape of those negotiations will be taken on the basis of consensus.
New issues, including new work on the environment, are likely to be the most difficult in the new round. Developing countries in particular are saying that those issues are not ready for substantive negotiation. Although we must be realistic about what is achievable in the circumstances and within the time constraints, we see value in such issues being included.
Clearly, there will be a strong focus on agriculture. The WTO negotiations will put added pressure on EU common agricultural policy reform. Agriculture liberalists are making it clear that they will want major liberalisation of tariffs, quotas and export subsidies. That is an important issue for developing countries.
Concerns are being expressed in Geneva about the implementation of existing agreements. A more coherent focus will be needed on technical assistance and capacity building. That is not, of course, for the WTO alone—the United Nations conference on trade and development, the World bank and the International Monetary Fund will have a part to play.
Developing countries make up the majority of the membership. Decisions in the WTO must be taken by consensus, and there is every sign that developing countries will articulate a clear agenda of their own interests, including implementation issues, anti-dumping rules, textiles liberalisation and agriculture. They will not be silent partners. The UK is doing all that it can to encourage their active participation. That is vital. Trade liberalisation is, of course, essential for economic growth, development and raising living standards.
Mr. James Wallace: Hon. Members in all parts of the House would agree with much that the Minister has said. He acknowledged that my hon. Friend the Member for Tweeddale, Ettrick and Lauderdale (Mr. Moore) was constructive in the way in which he moved the motion and gave credit to the Government where it was due. Is there anything in the motion that the Minister finds objectionable? If not, would it not be better for the House to speak with one voice?
Mr. McLeish: It is always a pity to undermine consensus by making a thought-provoking suggestion to a Minister at the Dispatch Box. I am in a mood, in a jocular way, to resist the hon. Gentleman's invitation. [HON. MEMBERS: "Why?"] We will find out later. I am sure that my hon. Friend the Minister for Trade will continue in our easy-going style at the Dispatch Box.
In summary, we are clear that free trade has never meant a free-for-all. That is always a danger. There is plenty of scope for reflecting particular concerns about health and so on in any country's actions. However, a system of international rules must have objective reference points. That is why it is important to rely on scientific justifications, to avoid a free-for-all.
The WTO has the difficult task of balancing the interests of all its members, which are at different stages of development. That fact, together with concerns about access to third-country markets on a non-discriminatory basis and the ability of member countries to develop and improve living standards, will influence the future as it has the past.
The subject is complex. I hope that, in the House, we can co-operate to ensure that we move quickly to resolve the issues globally and for the communities that each of us represents in the United Kingdom.
7.53 pm
Mr. Christopher Chope: This is indeed an important debate. We heard interesting contributions from the hon. Member for Tweeddale, Ettrick and Lauderdale (Mr. Moore), who introduced the debate, and from the Minister.
Global free trade must be in our economic and political interest. We as a nation have more to lose from protectionism and trade wars than the Americans or most of the continental Europeans. As we have heard, there are innocent victims in any trade war.
I was disappointed that the Minister did not say what would happen after 12 April. If the World Trade Organisation rules against the revised EU regime, what will be the approach of the EU and of the British Government? If the WTO rules in favour of the retaliatory action that the United States said it will undertake, what will be the approach of the EU and of the Government? I was worried when the Minister seemed to imply that compensation was a better option than compliance. Surely, if we are to make the WTO rules work, we should look for compliance before we look for compensation.
The Government have not taken the matter as seriously as they should have done, certainly in the earlier stages. When, on 23 February, my hon. Friend the Member for Woodspring (Dr. Fox), who speaks for the Conservatives on constitutional affairs, asked what contacts the Government had made directly with counterparts in the
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United States, and what contacts the Prime Minister had made with President Clinton on this serious subject, he was effectively told that there had been no contact at all.
We know that the Prime Minister is prepared to talk turkey with the President of the United States on issues affecting the President's personal life. It is a pity that the Prime Minister has not used his working relationship with the President to pursue the United Kingdom case in this important trade dispute. It was not until 4 March that the Secretary of State for Trade and Industry did anything.
Some Liberal Democrat Members have tended to simplify the issue. It is simplistic to say, as the right hon. and learned Member for North-East Fife (Mr. Campbell) did, that
"United States companies have 78 per cent. of the European banana market, compared with the Caribbean's 9 per cent, and that none of the bananas about which there is a dispute are actually grown in the United States",
but where does that take us in the context of global trading rules?
In opening the debate, the hon. Member for Tweeddale, Ettrick and Lauderdale called the United States an international bully-boy engaged in macho diplomacy. Such comments are hardly designed to improve relations. I agree with the hon. Gentleman that the WTO must be respected. As the Under-Secretary of State for Scotland, the hon. Member for Western Isles (Mr. Macdonald), said,
"The European Union banana regime is designed to comply with the World Trade Organisation regulations while honouring our commitments to those countries in Africa, the Pacific and the Caribbean with which we have relations through the Lomé agreement. We stand by those commitments.—[Official Report, 23 February 1999; Vol. 326, c. 162–63.]
It has been common ground among British Ministers both before and since the change of Government that the commitment to traditional ACP suppliers, as confirmed in the current Lomé convention, should be honoured, but there has always been a recognition that there might be different mechanisms for honouring that commitment.
As we know, the dispute goes back many years. Under the new WTO regime, unanimity is required for the report of a disputes panel to be overruled. The ruling of a disputes panel cannot be ignored. The WTO can justify retaliatory action against a country against which a ruling has been made. That is the problem facing us.
The WTO disputes panel reported as long ago as May 1997 its finding that the EU's banana import regime violated free trade rules on 19 counts. Significantly, as emphasised at the time by the Financial Times and other newspapers, the report did not target EU tariff preferences for Caribbean banana-producing countries, but focused on the EU licensing regime. The proportion of bananas that are coming from the Caribbean countries is irrelevant. The US and the WTO have accepted the tariff preferences that the EU has in place for the Caribbean banana producers.
In May 1997 the WTO panel ruling was confirmed, and in September 1997 it was confirmed on appeal. The EU was required to make its banana regime compatible with WTO rules by 1 January this year—quite a long period in which to do so. On 26 September 1997 the EU announced

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that it accepted the WTO ruling. It is important to remember that. As the then Minister of Agriculture, Fisheries and Food said,
"We have obligations under the WTO. We must find ways of revising the EU arrangements so that they conform with the rules."
The issue is whether that has been done.
We have not heard anything about the consumer, but the World bank estimates that the EU banana regime is costing consumers $2 billion a year and, that for every dollar, only 7.5 cents goes to the benefit of the former colonial producing countries. Going for a compensatory rather than a compliant regime would, I fear, result in the burden on the consumer becoming even greater.
In June 1998, a deal was agreed in the Council of Ministers. It was announced to the House on 3 July by the Minister of State, Ministry of Agriculture, Fisheries and Food. The United States and five Latin American countries argued that the EU' s changes were merely cosmetic and that the WTO should reopen its disputes panel on that issue. The United States announced its intention to impose duties on products exported from Europe, arguing that that was justified under the WTO rules. The EU argued that the matter should be referred again to a disputes panel, to determine whether the revised EU regime was incompatible with those rules. As we know, in January 1999 Ecuador called for a disputes panel to rule on the compatibility of the revised regime.
The United States agreed not to impose duties before 3 March and the EU went to the WTO arbitrator for a ruling on whether the level of retaliation proposed by the United States was appropriate. We know that 12 April is decision day and we will find out then whether the revised EU banana regime is compatible with WTO rules, but we do not know what will be the reaction of the EU, or of the Government, to any findings which emerge. More information has been asked for and, I understand, is being provided, but, from a United Kingdom perspective, it is important to realise that those Caribbean arrangements are not the issue of dispute.
It is also worth reminding individuals in the United Kingdom who are caught up in the dispute—not least those people in the cashmere industry in Scotland—that two European countries, Denmark and the Netherlands, voted against the revised banana regime in summer 1998. As a result, they have earned themselves exclusion from the list of retaliatory duties proposed by the United States. If the Government had done likewise, the threat to the Scottish cashmere industry would never have materialised. Perhaps the Minister will respond to that point.
Mr. Bowen Wells: Does my hon. Friend know why the Netherlands and Denmark voted against the regime? The reason, if I may suggest it to him, is that the subsidiaries of Chiquita, which distribute central American bananas, have the entire Danish and Dutch markets to themselves.
Mr. Chope: My hon. Friend implies that there is something unjust about a large number of bananas being produced for market by three United States-controlled companies. I have to disagree with him if he is implying that there is something inherently unfair about that; in itself, it is not against the WTO rules. This dispute is not about those particular companies. My hon. Friend
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suggests that the behaviour of two other members of the EU is wholly motivated by their connections with those companies. Although I understand his concerns on that point, I certainly would not jump to such a conclusion without clear evidence.
Mrs. Maria Fyfe: The hon. Gentleman is displaying a great deal of interesting expertise. Does he know the typical daily wage of a worker on a plantation owned by Chiquita and of a worker on a Fair Trade plantation in any of the relevant nations? I am concerned about knitwear workers in the borders and other workers in this country, but, like many people in this country and in the United States, I am also concerned about fair pay for people who grow the bananas in the first place.
Mr. Chope: I fear that the hon. Lady's intervention is depressing, because it shows that Labour Members are willing to engage in irrelevancies in the context of a world trade dispute. How much people are paid to produce bananas in any particular country is not the issue in dispute, and the WTO rulings do not take it into account at all.
Mr. Stephen Dorrell: Did not the hon. Member for Glasgow, Maryhill (Mrs. Fyfe) reveal a split between herself and her Front Benchers? We heard an impassioned plea for free trade from the Minister, but the hon. Lady seems to be in favour of free trade only where she is in favour of the wages paid by the producers.
Mr. Chope: My right hon. Friend is absolutely right; one either believes in global free trade or one does not. Disputes will arise if any individual nation starts to interpret global free trade on the basis of whether it thinks that trade is fair from its perspective. That is why we have the WTO, which has—
Mr. Phil Woolas rose—
Ms Tess Kingham rose—
Mr. Chope: I shall not give way any more; I will make my point.
Dr. Norman A. Godman: He is needled.
Mr. Chope: I am not needled in the least. I am sure that Labour Members will want to ask Ministers why their views have not been reflected. Conservative Members have always been somewhat suspicious about the commitment of some hon. Members to global free trade; I hope that the Minister will reaffirm that the Government are unequivocally in favour of it.
Mr. McLeish: It is interesting to see how the consensus in the House is breaking down. The costs of employing people in third-world countries have been dismissed as "irrelevancies". If that is official Conservative policy, let us have it on the record. The hon. Gentleman referred to "those people" in the cashmere industry. They are workers with families and commitments and they want their products to be exported. Are costs in the third world

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irrelevant and is he dismissing the concerns of people in the borders, the east midlands and elsewhere as the concerns of "those people"? That would be outrageous; he should make clear what he means.
Mr. Chope: I am glad that I gave way to the Minister, because he has had the opportunity to try to wriggle on the issue of what will happen on 12 April. What will be the response of the EU and of the Government when the ruling comes? We have made it clear all along that we sympathise with people in the cashmere industry, who are the innocent victims of this trade dispute, but what will be done on 12 April to ensure that the cashmere industry is able to survive in the way that it has under the regime of free world trade?
The wages that people receive for producing goods in different parts of the world is not a world trade issue. I hope, as a lot of Labour Members may hope, that one of the outcomes of the Seattle meeting in November this year will be that China becomes a member of the WTO, which would be good for global free trade. We cannot emphasise enough the fact that we in this country depend more than the Americans and the European continentals on the concept of global free trade, which means that people should be able sell their labour in the marketplace and market their goods without facing unfair tariff barriers.
World free trade is in the best interests of the third world and the developing countries. It is a shame that the EU and the United States cannot negotiate a deal on bananas, but it is also unfair to put the blame for that failure largely on the Americans, as Liberal Democrat Members seem to be doing. If one looks at the facts, one can see that the Americans have complied with past WTO rulings.
I understand that this is the first occasion on which a WTO member that has lost a case has failed to eliminate its measures altogether or to change them after consultations with the complaining parties. The United States has made such changes in three cases, but the EU is the first WTO member to fail to do so. That was the response of the United States representative.
Mr. Moore: The hon. Gentleman has been at pains to characterise some of the Liberal Democrat arguments as simplistic. Are we to believe that the fault in this whole dispute relates entirely to Europe, and that the Americans are for some reason devoid of responsibility?
As for simplistic arguments, surely it is utterly simplistic to suggest that American multinationals should have carte blanche to do what they wish in world trade, with no regard for the fairness of that trade or the way in which the work forces are protected.
Mr. Chope: I do not suggest that the Americans are without fault. Certainly, they were offside in introducing a retaliatory regime while the issue was still before the World Trade Organisation; we have never advanced a contradictory view. I think we are naive, however, if we do not understand some of the frustration that is felt in the United States about the long time that it has taken to resolve the matter in the European Union. There was a ruling in its favour back in May 1997; now, in March
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1999, it hopes that the issue will be resolved. Meanwhile, the European Union seems to have been delaying the issue. I hope that it will not delay further beyond 12 April, and that, notwithstanding the demise of the European Commission, there is a clear policy, worked out on a contingency basis, for an immediate response to the rulings that will be made on 12 April. If not, it is a serious matter.
Dr. Godman: The hon. Gentleman is right: we should not engage in a blanket condemnation of the Americans. May I point out that the American labour movement is actively engaged in a campaign to improve the terms and conditions of employment of those employed by American multinationals in central and south America, and elsewhere?
Mr. Chope: I thank the hon. Gentleman for pointing that out.
I have responded to a number of interventions. Let me now deal with the next issue on the horizon—the issue of hormone-treated beef, to which the Minister has referred. He told us, in a very matter-of-fact way, that he does not expect the European Union to comply with the World Trade Organisation ruling, which it must by 13 May, but he did not say why the EU would not comply with the ruling by that date. Is it surprising, in the light of that behaviour, that Richard Rominger, United States Deputy Agriculture Secretary, announced on Friday that the United States was drawing up a list of products that could face retaliatory sanctions if the EU failed to comply with the ruling? He is at pains to avoid such sanctions, but he has come to Europe seeking meetings with European Commission representatives, and, according to newspaper reports, has been told that it is not even possible to see officials at Cabinet level, let alone Commissioners, to discuss the crisis relating to hormone-treated beef. Moreover, only last week two European Commissioners missed a biotech conference at which they were to share a platform with Mr. Rominger.
That shows, on the part of the European Union, a disdain for the importance of world trade issues. I hope that the Minister will be able to assure the House that the Government are putting all possible pressure on the European Union to pull its finger out and get to grips with these important matters.
Another issue on the horizon—not mentioned in the motion—is that of hushkits. The EU is scheduled to put into effect, on 29 March, a law freezing the use of the aeroplane mufflers called hushkits, under which companies would be forbidden to add hushkitted aeroplanes to their fleets. A meeting is due to take place on 23 March between the United States Transportation Secretary and the European Union Transport Commissioner. It seems likely that the dispute will exacerbate the issue of EU-US trade, and it appears to be related very much to European Union protectionism. The only people who produce the hushkits are the Americans, and for the most part it is American airlines that use them. The European Union is saying that an arbitrary interpretation is being placed on an International Civil Aviation Organisation agreement, which seems to be being used to prevent the import and use of hushkits in the EU. That is another potential disaster for global trade. I hope that, as a Brit, the Commissioner responsible will realise that it would be counter-productive to proceed in the way proposed by the EU.

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I shall end my speech now, so that others can speak, but I look forward to hearing the Minister's response. The Government have clearly recognised the importance of the debate, given that they have asked two Ministers to speak.
8.16 pm
Mr. Stuart Bell: I agree with the hon. Member for Christchurch (Mr. Chope): this is an important debate. The issue of hushkits is also important, but I shall leave it to the Minister to respond to a pertinent question put by the hon. Gentleman, which was also touched on by the hon. Member for Roxburgh and Berwickshire (Mr. Kirkwood): what will happen on 12 April?
If, on 3 March, the arbitrator had come forward with a resolution of the dispute between the United States and the European Union on whether the new regime conformed with WTO rules, or had made it clear that he had fixed the amount of compensation in some other way, it might not have been necessary for all this to happen. It might not have been necessary to withhold the liquidation of entries for products such as cashmere. What will happen on 12 April? The United States has taken its action because it believes that it will be given a compensatory amount in damages of some $500 million—possibly $520 million.
That being the case, what will be the EU's response? Will it accept that the amount should be paid by the EU overall in compensation, after which the withholding of liquidation of entries on the products that we are discussing will disappear? The question is pertinent; we shall have to await the outcome. The United States has clearly stated that it will accept any arbitration result. If the arbitration favours the US, it will accept that; if it favours the European Union, and the EU has followed WTO rules in relation to bananas, it will accept that, as is proper.
The House moves through many moods. Not long ago—two weeks ago, perhaps—we were all deriding the European Commission, and applauding the fact that all the Commissioners had resigned en bloc. We were all calling them incompetent. Now, we are having to try to defend the way in which they have handled a dispute with the United States that goes back for at least six years, as the hon. Member for Roxburgh and Berwickshire said.
When we speak of the United States, there is a point that we often overlook. The Minister touched on it when he said that 38 per cent. of world exports come from America, and that 39 per cent. of imports go into America. America remains the largest trading nation in the world. It is also self-sufficient. If it ever decided that free trade was not the policy that it wished to follow, the rest of the world would go bust. We ought to bear that in mind, and be grateful for the fact that the United States follows free trade policies. In January this year, it had a $17 billion deficit on its trade. It took in other countries' washing to the tune of $17 billion against its own exports.
We in the European Union vaunt ourselves because we have a surplus on our exports, rather than a deficit. The largest bilateral trade deficit that the United States has is with China—$4.88 billion, up from $3.98 billion.
The hon. Member for Christchurch mentioned China's involvement with the WTO, and hoped that it would happen in the autumn, when the Seattle conference would take place. It is a pious hope that China will be able to
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come into the WTO at that time, but I do not think that it is ready as a nation state to meet the obligations placed on it because of the WTO' s free trade and fair trade rules.
My hon. Friend the Member for Bradford, North (Mr. Rooney) talked of the Uruguay round and its impact on textiles. For 12 years, we all followed the route of the Uruguay round—it went from Uruguay to Marrakesh—before the agreement was signed. The question of the entire Uruguay round was: how can free trade in the world be rules based? That touches on the point that was made by my hon. Friends the Members for Glasgow, Maryhill (Mrs. Fyfe) and for Greenock and Inverclyde (Dr. Godman). There have to be rules not only on trade through the WTO, but on labour through the International Labour Organisation.
There has to be free and fair trade for goods and services. There have to be rules under the International Labour Organisation. There have to be financial rules through the World bank and International Monetary Fund, which my right hon. Friend the Chancellor of the Exchequer is trying to bring about, but there cannot be free and fair trade in the world unless it is based on rules. In that sense, the hon. Member for Christchurch is right. It is a dispute about rules and about the interpretation of rules. It is important that we keep that fact in mind.
The issue of the African, Caribbean and Pacific countries and the European Union has been raised. The so-called Lomé convention is being renegotiated. In a few months, the 10-year agreement on issues such as bananas will come to an end. It is time for a renegotiation.
Dr. Godman: What my hon. Friend says makes much sense, but may I point out that many of the small producers in the Windward islands, for example, are deeply concerned about the massive lobbying power that Chiquita and others have on Capitol hill? The Caribbean producers feel at a distinct disadvantage because of that massive lobbying campaign.
Mr. Bell: Of course. We have heard much tonight about the various brands—Chiquita and the rest. I am grateful to my hon. Friend for reminding me of the situation in the Windward islands of Dominica, St. Lucia and St. Vincent, where bananas provide over half all export earnings. In St. Lucia, for example, the industry contributes about 16 per cent of GDP. In St. Vincent and Dominica, the figure is 17 per cent. Notwithstanding that, over the past year, production in St. Lucia has dropped by 7 per cent. because of drought and poor prices.
I take up the point about the African, Caribbean and Pacific countries and the negotiation with the EU. It may be an appropriate time for the two sides in the convention to design a specific and long-term aid package for banana growers that reconciles the need of those producers to continue to export to the EU, and ensures that agreement is reached between the United States and the EU on the implementation of WTO rulings. We come back to the rulings and to resolution of the dispute on bananas.
When we talk about the conclusion of the Uruguay round, I am reminded of the terrible difficulty that the EU had with the United States in resolving agricultural issues. There was a conference at Blair House in Washington in the United States. There were huge demonstrations in Paris by French agriculture workers and farmers, yet the issue was resolved in such a way that the Uruguay round

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could be signed. As we come up to 12 April, it is important for the EU and United States to resolve the issue of bananas in such a way that we can continue with our rules-based trade and with the type of conference that is to be held in Seattle, to which the Minister for Home Affairs and Devolution, Scottish Office referred.
It is interesting and significant that the United States declined to enter into a new Uruguay-type round. It wished to tie up all the fine pieces of string that had been left lying around after the Uruguay round. In the end, it agreed that there should be a new comprehensive round that took into account trade, the environment and other issues.
Therefore, the United States is making an effort in that area. That effort should be welcomed and commended, but this is the beginning of a series of major trade disputes. The question of beef hormones has been referred to. I understood from the hon. Member for Tweeddale, Ettrick and Lauderdale (Mr. Moore) that genetically modified foods might be raised by the hon. Member for Lewes (Mr. Baker) before the evening is out. All that is significant and important. It means that the rules of the WTO become even more important.
The President of the United States has received telephone calls from the Prime Minister on the issue. The Secretary of State for Trade and Industry has made his views known. The Minister for Home Affairs and Devolution, Scottish Office has done so, and so will my hon. Friend the Minister for Trade, but I agree with the recent statement by the President of the United States:
"This dispute is not really about bananas, it is about rules.
We cannot maintain an open trading system which is essential to global prosperity unless we also have rules that are abided by".
As I have said, in terms of finance, the rules should be through the World bank and the International Monetary Fund. In terms of workers, they should be through the International Labour Organisation.
If we can develop those rules over time, the world can look forward to the next millennium with some confidence that the disputes can be resolved for the benefit of all. There is no question that we should let the banana producers in the Caribbean go to the wall. When he was the Minister of Agriculture, Fisheries and Food, my right hon. Friend the Member for Copeland (Dr. Cunningham) made it clear in a statement in October 1997 that we would not do so. We have their interests at heart. We will seek to maintain their interests. We will do it within the compass of the WTO and the Lomé convention. We will do it in such a way that their interests are defended and protected, but world trade rules are supported.
8.27 pm
Dr. Vincent Cable: It is a great pleasure to speak in support of the excellent speech by my hon. Friend the Member for Tweeddale, Ettrick and Lauderdale (Mr. Moore). I do so from two standpoints. One is a constituency interest and the other is a long-standing interest in trade policy, particularly the current dispute, which has rumbled on in different forms for the best part of a quarter of a century.
The constituency issue is not textiles, unless it is well concealed in Twickenham. Other industries are affected. One in particular, the sweet biscuit industry, touches base
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in south-west London. I have heard from the companies concerned about the problem, but the major issue is the fundamental one of principle that underlies the whole subject: the idea of the rule of law applied to international trade.
We should not underestimate the achievements of the early 1990s when the Uruguay round produced a dispute settlement agreement under the WTO. For the best part of 40 or 50 years, there had been semi-anarchy in international trade, with disputes being settled largely by force. Now we have a system of law. Independent panels apply the rule of law principle, which is of value, above all, to small and weak countries.
There have already been several examples of the system's value. In cases brought by Costa Rica, which is a very small country, and by Venezuela, the United States has been obliged, for example, to accept rulings based on the principles by which the World Trade Organisation disputes settlement panels operate. We should be concerned with upholding that principle. Both the major powers involved in the current dispute, in roughly equal measure, have done violence to that principle.
I do not think that it is helpful for us to be picking sides between the United States and the European Union. In their different ways, they have each added to the dispute and aggravated it. The United States has, for example, acted unilaterally, and the current case is not an isolated example. For a very long time, the United States has fallen into the habit of acting unilaterally and without warning in trade disputes. Throughout the 1980s, it used the so-called section 301 powers to bully countries into opening their markets.
The US's behaviour has been curbed somewhat by the World Trade Organisation, but its habits are still there. The US Congress has passed the Helms-Burton and D'Amato legislation, which are all about using power unilaterally to force other countries to open their markets. Its habits are now returning.
The European Union also has had serious faults. Although the hon. Member for Christchurch (Mr. Chope) was at the receiving end of some barracking in doing so, he was quite right in how he catalogued the way in which the dispute has evolved, and the fact that, for the best part of two years, the European Union has dragged its feet in implementing an international legal agreement.
There is a feeling—I am sure that some hon. Members will echo it in the debate—of some sympathy for the European Union, which is acting in the interests not of its own producers, but of producers somewhere else. However, we have to get the issue in balance. In many ways, I have some emotional sympathy for the Caribbean producers. In the 1980s, I worked for some time in the Commonwealth Secretariat and helped in negotiating the Lomé convention, and I saw the force of feeling in the Windward islands about the vulnerability of their economies. However, I do not think that we should be over-sentimental about the issue, as there is another side to it.
The main banana producer in Latin America is Ecuador. Producers in Ecuador are not in large multinational plantations; they are small-scale peasant producers. Honduras is another major Latin American producer. It has just been devastated by a hurricane, in which the northern city of San Pedro Sul, the banana

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capital of Honduras, was virtually destroyed. They are very poor people who are trying to earn a living in the world market. They, too, have legitimate interests.
I think that the European Union has been seriously negligent in not appreciating sooner the problem that has been building, and has been around for a very long time. In the mid-1970s, I worked for some time in the diplomatic service, in London, and the section that I headed dealt with Latin America. We were perpetually on the receiving end of missives from the Ecuadorian and other Governments complaining about the dollar-area quota, which discriminated against them. The reply that we always gave was that it was a temporary measure.
The British Government—the Colonial Office—had invested a lot of money in the Windward islands, and, having given them that aid, we could not abandon them. That was 25 years ago. Consequently, we went out to the Caribbean islands and talked to people at St. Lucia, Dominica, St. Vincent and the other producing islands, and agreed with them that they had to diversify. That was a quarter of a century ago.
Mr. Dorrell: I have been listening with great care to the hon. Gentleman's comments; he is making a powerful case very well. His point on the alleged temporariness of protectionist controls is not unique to bananas, as the argument is used to justify almost every protectionist measure that is introduced. The "temporary" nature of the controls almost always proves to be much longer than people imply at the time.
Dr. Cable: The right hon. Gentleman is quite right—protectionism always generates its own vested interests. Although, as I said, the European Union has an important historical reason for wanting to be protective, it could have, and should have, thought much earlier about the need to switch quotas to tariffs, for example, and gradually to level out the tariffs. Those issues were discussed more than a decade ago, but no action was taken on them.
It is important to stress that the British Government have a particular responsibility in the current dispute, as they are in a uniquely advantageous position to influence the outcome. Britain is generally recognised, both within the European Union and outside it, to be a relatively free-trading country. We also have the confidence of the United States, in a way in which most other European Union countries do not. We also have an historic responsibility for the Caribbean islands. Combining the three factors, it is an issue on which the British Government should be giving leadership. Although the Minister for Trade made sympathetic noises, I feel that such leadership has, so far, been absent from the dispute.
The Minister was quite right to put the dispute in its wider context. If the dispute is not dealt with quickly and properly, we are on a conveyor belt to a very serious international trade conflict. Other disputes are brewing. Only the other day, the House of Representatives passed very serious protectionist measures on steel, and many other measures are coming. The old principle applied by Jacques Delors in the context of the European Union applies also in the current context: trade is like a bicycle, we have to keep pedalling or fall off.
Truly proactive action has to be taken to keep the trading system open and free of disputes and discrimination. That is why I strongly support current
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initiatives to launch another round of trade negotiations. That is partly to clear up some of the backlog of problems from the past, notably the limited progress on agriculture, but it is also to introduce new and difficult ideas. For example, international monopolies now apply not just in the banana trade, but in software and the media. The competition policies of individual countries are hopelessly inadequate and often incompatible. We need a global competition regime to manage the situation.
We have also seen an initially commendable effort to eliminate discrimination on foreign investment collapse pitifully in the Organisation for Economic Co-operation and Development, because it did not have full participation from all developing countries. The system has collapsed as a fiasco, and the World Trade Organisation has to take it on.
As the hon. Member for Middlesbrough (Mr. Bell) and others have said, another key issue is bringing into the World Trade Organisation key countries such as China and perhaps Russia, which are currently outside it. Probably the most difficult issue, to which my hon. Friend the Member for Lewes (Mr. Baker) intends to refer, is the very tricky problem of reconciling different health and sanitation standards. We know from our experience of the single market in Europe that that is not easy. Either standards have to be harmonised or there has to be mutual recognition of standards; both involve a surrender of sovereignty, which is difficult, but there will be great friction unless the issue is dealt with.
Unless the problem that we are facing is dealt with properly and quickly, it could destroy the rule of law in international trade, which has been carefully built up. I appeal to the Government, partly on behalf of the industries that have been affected, but also on behalf of a wider constituency, to act proactively and positively for a resolution to the dispute.
8.36 pm
Mr. Alan Simpson: I have listened with amusement and sadness to the way in which the debate has unfolded. It reminded me of the parallels with a recently released film called "This Year's Love" which has had wonderful reviews. It is a film with Kathy Burke about a series of disastrous relationships, in which people hop in and out of bed with each other to no purpose and pursue ultimately futile and unsatisfying relationships into their common and individual disasters. The current obsession—this year's love for free trade—is embodied in the Uruguay GATT agreement that we have signed up to. We should take the fundamental issues that underpin the disputes about this agreement more seriously.
The Liberal Democrats' motion is sunk by the fact that it is based on the oxymoron of free and fair trade. There is nothing fair about free trade and there is precious little free about it. It is worth reflecting on the state of the world markets in some of the commodities that have been mentioned: three global corporations control 80 per cent. of world trade in bananas; three companies control 83 per cent. of world trade in cocoa; five companies control 77 per cent. of world trade in cereals; and fewer than 10 companies control 94 per cent. of the market in agrochemicals.
A corporate agenda of trade is increasingly overriding any notions of free trade. The powerful preside over the global economy. There is precious little that the weak or

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those with a commitment to social equity can do to redress the imbalance when the rules are governed by such powerful vested interests.
History will judge the Uruguay round either as a corporate charter or—perhaps more appropriately—as a crooks' charter. It allows for the serious undermining of lines of democratic accountability within and between democratic states, in terms of what suits the needs of their citizens and the framework of internationalism that they wish to pursue. To those who say that the Uruguay round was a wonderful achievement that opened up world trade, it is worth reflecting on a comment from the World Wide Fund for Nature, which said:
"the current pattern of trade and investment liberalisation has been accompanied by a worsening of all unsustainable trends—greenhouse gas emissions, deforestation, biodiversity loss—as well as growing inequality, both within and between nations."
What follows is not only huge social undermining, but huge social protest.
Against all measures of sustainability, the regime has failed lamentably to have made the world a better place. It is driving us recklessly towards the illiberal, the irresponsible and the unsustainable. The disputes that we are addressing tonight deal with which corporations happen to control the biggest slice of today's markets; markets which themselves are riven by overcapacity, inequality and insecurity. The human and environmental casualties in the process simply do not matter. It is merely a matter of which corporate giants have their way today in relationships that they will abandon tomorrow.
The dispute strikes at the core of big questions that we must address about democracy and sustainability. The banana dispute is not about the shape or size of bananas, and it was a travesty for it to be misrepresented in that way when the dispute between the European Union and the United States emerged. It is about the right of countries to act individually or collectively to protect those who live and work in vulnerable economies.
Some think that free trade will bring the best of all worlds to all people. Anyone who has looked at the vulnerable Caribbean banana-growing economies knows that, if the US has its way and the dollar bananas dominate the whole market, those economies will be virtually destroyed.
It is tongue-in-cheek for the Conservatives to sing the praises of such free trade, because they never want to accept the consequences of it. When an economy is devastated by having all the rules removed, the only thing that can be guaranteed is what the UN consistently warns us about—that destroying the basis of sustainable economies in any one part of the world will mean that the people who live there flee in search of somewhere to survive.
It always amuses me to hear rallying cries about the free movement of capital, but when we have to deal with the consequences—the free movement of labour which goes in search of survival—the first thing that we hear, particularly from the Conservatives, is, "Not to our shores. These are just economic migrants. Let them fend for themselves somewhere else." Yet, time after time, we have been the ones who have removed the barriers that allowed those people to have sustainable economies and gave them a breathing space within which they could
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produce a sense of diversity. Those who want to take away the trade barriers also want to throw up higher and higher human barriers against the floodtide of refugees that those policies create.
Mr. Wells: If the small Caribbean islands cannot export bananas, the islanders' only other way of earning a living is to grow drugs, which they are increasingly doing because of the dispute. Is that a desirable outcome?
Mr. Simpson: No, but it is a predictable outcome. Susan George, a social scientist, wrote in "The Debt Boomerang" about the way in which the poorest nations repay us in kind for all the damage that we do. We shift those countries from sustainable subsistence agricultures to industries that destroy the lives of many in our own northern industrial towns and cities. The hon. Gentleman is right to caution us about the hidden consequences of going recklessly down that path.
There is also a massive threat to democracy. Why should the United States threaten a trade war over banana regimes? The United States does not grow bananas, but it may well be a relevant factor that Carl Lindner, the head of Chiquita, just happens to be one of the biggest bankrollers of the American political process. Post-Uruguay, the corporate view is that one can expect the best democratic decisions that one is prepared to pay for. At every level of governance, corporations are increasingly insinuating themselves into the channels of democratic decision making, subverting accountability to the electorate and establishing a financial line of accountability to the corporation.
The history of Monsanto's interests in bovine somatotropin milk and genetically modified crops is littered with the company buying its way into public policy decisions in its favour. Last week, evidence was published to show that the science on BST milk is wretched, the politics corrupt and the consequences for human and environmental health potentially devastating. Monsanto faces a ruling either from us or from the European Union collectively that says that we are deeply unhappy about removing the ban on BST milk, because of the damage to livestock and the potential damage to human beings.
There are public movements against genetically modified crops. When Monsanto threatens to take us and the EU to the World Trade Organisation in pursuit of the free trade rights that it claims, it overlooks the fact that it has systematically sought to hide from politicians and the public the downside of all the magic science that it is sailing past us.
Monsanto has failed even to conduct the necessary broader-based research on environmental damage. It wants the right to pursue new monopolies in monocultures that it controls and that will be fundamentally self-destructive. It is an irony that, in the pursuit of free trade rights, Monsanto does not happily own up to the fact that it is invoking the part of the Uruguay agreement that gave it closed markets: the TRIPS agreements on trade in intellectual property rights. Those agreements allow the company to take out patents on the crops that it modifies and, in some parts of the developing world, it slaps patents on crops that it has found. Its rights to patent life are attempts to remove from common ownership things that we have had since civilisation has existed. The

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company also seeks to take away rights from democratically elected Governments to protect the diversity of their environments and adequately to protect the health needs of their citizens.
If Monsanto obtains the rights to introduce the terminator technology as part of any WTO ruling, it will have the right not only to take ownership of life itself, but to take out a patent on death. The company says that it has encountered no problems in its experiments in the United States, but one should look at the vast acreage of GM crops on the prairies of Arizona where, apart from the Monsanto crops, the land is sterile. It has been soaked in the company's herbicide. It does not have a weed problem because nothing else can grow. When Monsanto is asked about the impact of its actions on biodiversity, its representatives throw up their hands and say that it is not an issue for them.
The company has manipulated the rules of the vetting agencies in a way that is technically brilliant, but ethically corrupt and degrading for humanity. We have to be prepared to make a stand against that. We easily forget, in this country and in Europe, that there is no public demand for GM foods and no agricultural need for them. The GM process has been driven past the advisory committees on the basis that it is the science that will save humanity, but it is the science that will turn bad research into huge corporate profits at huge social cost.
As a Parliament, we have been slow to catch up with the public's understanding of the issue. They know, in ways that we are only beginning to acknowledge, that Monsanto's claims about safety are bogus. The public know now that Monsanto's research on milk was fiddled. They know that the inclusion of GM soya with the rest of the soya crop was the result of calculated efforts by Monsanto to discover whether the public would buy GM produce if it were clearly identified. The company knew that the public would not do so, and it manipulated the regulatory regime in the USA so that it did not have to meet the obligation to identify it. The environmental damage falls outside the terms of the monitoring agencies in the USA.
As we debate the relationship between Britain, Europe, the USA and the World Trade Organisation, we must understand that people have given up waiting for a parliamentary lead. There are good reasons for that: we have a 200-year history of the public taking food safety disputes into our own hands. It was about 200 years ago when the first of Britain's food riots was caused by the adulteration of food. Farmers adulterated flour with sawdust and supplied the flour as part of the workers' wages. The riots were about whether anyone had the right to adulterate food in that way and I say with some pride that that was the momentum behind the Rochdale co-operative. The people wanted to be able to provide food that was safe for themselves and their children to eat. The same is happening now in the riots in India.
The "Cremate Monsanto" campaign is not waiting for a Government lead before burning the fields of GM crops that it does not want. The campaign is led by farmers and villagers who foresee the destruction of biodiversity in pursuit of corporate greed. It is echoed by the coalition of developing world countries who, at the Cartagena biosafety convention, said that they wanted the right to say no to such produce in order to protect their biodiversity.
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Any international trade agreement that fails to deal with workers' rights or environmental and food sustainability will not be worth adhering to. Social movements in France and Canada are attempting to take direct action to challenge the corporate rights assumed by today's global giants.
When I talked to my family about this problem, it was lovely to discover that my mother had been a food freedom fighter during my childhood. She put me in a shopping trolley when we went around supermarkets when there was a food scare about Argentinean corned beef. My mother insisted that nothing should cross the front line of her fully loaded trolley that might poison her children, and she was absolutely right.
We should bear in mind the public movements staking similar claims in relation to genetically modified foods in today's supermarkets. If the United States of America and the food corporations are to threaten us with a trade war and World Trade Organisation rulings that define our actions as illegal, we must reply that the British public would probably deem a trade war to feed safe food to ourselves and our children a war worth fighting.
Those who want to open up the market without ethical or safety constraints are backing a horse that the public will not bet on. Rulings may go in their favour, but, if Monsanto and the USA win the right to dump unsafe foods in United Kingdom markets, we can overrule that right with a civic right to dump those products in the sea or leave them stockpiled at supermarket check-outs. We can assert our right not to buy something that we believe to be endangering our health, the environmental viability of our country and the international sustainability of relationships in vulnerable economies.
The challenge before us is not whether we vote for or against the Liberal Democrat motion, which contains a huge contradiction. We must support a call for a new round of trade rules that are not driven by freetrade fundamentalism. The Government must face the challenge of whether we are prepared to make different statements about the importance of the Seattle meeting.
We must say that today's free trade rules are self-destructive and unsupportable. They must be replaced by a set of global and sustainable policies that protect vulnerable environments. They must set down terms and conditions for employment rights and pay. There must be a right not to be saturation-sprayed while on the Chiquita banana plantations or anywhere else. Are we to have a set of trade rules that are ethically driven and environmentally sustainable? I have no doubt that the public in the UK, across Europe and internationally already want that. The question is: does the House have the courage to join them?
8.59 pm
Mr. Bowen Wells: I shall briefly remind the House of the history of the banana dispute. In 1947, the islands of the Caribbean were given the exclusive right to export bananas to the United Kingdom. That right was given in compensation for the fact that, during and before the second world war, the European nations, including our own, had been subsidising the production of sugar beet.
Sugar beet is not an efficient convertor of sunlight into sugar. In fact, it has one tenth the efficiency of sugar cane. We wanted to produce sugar beet to make us more

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self-sufficient in sugar, rather than simply relying on cane production, principally from the West Indies but also from other Commonwealth nations. Similarly, sugar beet was also introduced in the United States of America. In both Europe and north America, sugar beet production was severely subsidised to enable it to compete in the market against sugar cane imports and, in the United States, against sugar cane production. Sugar beet is still heavily subsidised in Europe, the United States and most developed countries. As a result, sugar cane production was reduced or eliminated from many Caribbean islands.
In 1947, the then Labour Government were faced with trying to find some way in which the Caribbean islands could earn their own living. At the time, we did not have much money to give them—there was no aid budget available. As Michael Foot, luminary of this House, reminded me, the Government gave Britain's banana market to the Caribbean to enable the islands to grow bananas and diversify—we have heard that word already this evening—out of sugar.
That is why bananas became a major export of Caribbean islands that are undoubtedly, geographically and topographically, unsuited to their production. In contradistinction to central America, the land in the islands is mountainous. The soil is not the deep soil that the central American banana producers enjoy. In the Caribbean islands, bananas are produced by small farms in precipitous and inhospitable conditions. None the less, farmers there have managed to work the system and the plantations, many of which are as small as two or three acres, to produce a viable industry.
Importantly, the production of four tiny islands was combined and a shipment of bananas left the Leeward and Windward islands every week. In recent years, other diversified tropical products have been shipped on the same boats to be consumed in this country by West Indians and others who enjoy tropical fruits and vegetables. Unfortunately for the West Indies, without the banana trade the cost of transporting the other products would be prohibitive.
Therefore, in our arguments on the subject when we call for diversification, we must ask what the islands can diversify into. The answer is that, without bananas, they cannot hope to compete on any tropical vegetable or fruit with other major and efficient producers from the tropical countries of the world. The House should understand that the Caribbean islands can diversify their agriculture, but at a price.
Therefore, blocked as they are from coming to this or other countries to work, the islanders have to turn to something else, and that is undoubtedly happening. Perhaps you will be lucky enough, Mr. Deputy Speaker, to go on a Commonwealth Parliamentary Association trip to one of the islands. In St. Vincent in particular, there are empty banana fields because banana production has decreased by 50 per cent. Fields of marijuana are being destroyed by US helicopters with the permission of the Prime Minister. Let there be no doubt in the House that Caribbean farmers have no alternative other than to grow drugs if this ridiculous dispute continues.
I shall quickly remind the House of what the dispute is about. The banana protocol is protected by World Trade Organisation rules under waiver. Section 34 permits
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arrangements to be made, for poor developing counties, for preferential trade that is offensive to WTO rules under section 1. The banana protocol is protected in that way and the United States does not dispute that. However, that protection will last only until 2000, when regimes such as the banana protocol of the Lomé convention will have to be renegotiated.
The dispute is not over the protocol, but over the proposed banana framework agreement that the European Union now accepts was offensive to WTO rules. It was the hope of the EU that central America would agree, because only an extremely small percentage—less than 3 per cent. and falling—of the whole banana market in the EU enjoys the preferential arrangements given to the Caribbean, and in terms of the world banana trade, the percentage is less than 1 per cent. Incidentally, that trade is dominated—by more than 90 per cent.—by Chiquita, Dole and Del Monte. Those companies are in dispute with those tiny islands so that they can dominate the whole EU market, and they are making a huge trade war out of that dispute.
I do not want to go into the complicated details on which the WTO will opine in April. I appeal for sense and pragmatism to prevail. I give way to no one in my support for free trade, but free trade must be tempered with sensible arrangements for countries such as those small Caribbean countries for which special arrangements must be made. The alternatives are wholly unacceptable. I ask to the Government negotiators to appeal to the United States on the matter; indeed, I have asked the Prime Minister and the Secretary of State for International Development to intervene with President Clinton to call off this absurd trade war, which should not continue among sensible and pragmatic people.
9.7 pm
Barbara Follett: I welcome the opportunity to speak in the debate, although I deplore the necessity for doing so. The United States is a giant on the world trading stage and it is a pity, to say the least, that the United States should be taking retaliatory action against another giant, the European Union, for giving a few of the poorest Afro-Caribbean countries preferential access to our markets for a single crop—bananas.
I must declare an interest. I was born in the Caribbean and spent most of my early life in Africa. The disputed bananas come from struggling countries in those two regions and, from personal experience, I know how important it is to the people of those regions that what for many of them is their sole export crop should have access to our markets. For the tiny Windward islands of Dominica, St. Lucia and St. Vincent, bananas provide more than 70 per cent. of foreign exchange earnings and 60 per cent. of agricultural employment. As the hon. Member for Hertford and Stortford (Mr. Wells) has so eloquently described, the banana trade is the lifeblood of those islands.
Unlike the hon. Member for Christchurch (Mr. Chope), I do not think that it is simplistic to point out that Caribbean bananas account for only 3 per cent. of the world market and only 10 per cent. of the European market. That point makes it clear that we are arguing about crumbs from the giant's table. If that giant cared about the development of his fellow human beings, he would be glad to allow them those crumbs.

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As the hon. Member for Tweeddale, Ettrick and Lauderdale (Mr. Moore) pointed out, the world banana market is dominated by three companies—Chiquita, Dole and Del Monte—whose turnover accounts for more than 64 per cent. of world trade, whereas the total earnings of the Afro-Caribbean countries from bananas accounts for only 4 per cent. of the turnover of those three huge companies. My hon. Friend the Member for Glasgow, Maryhill (Mrs. Fyfe) pointed out that working conditions in those three companies cannot be described as fair. I am aware that the problem is difficult and that there is no prescription for fair trading rules, but we must bear that in mind when we consider the merits of the case.
Chiquita—formerly known as the United Brand Company and, before that, as the United Fruit Company—dominated my teenage years and my 20s. The company came into existence in 1899, since when it has completely dominated banana production in the United States, Europe and Japan. It made an attempt to take over banana production in Jamaica in the 1930s. It is controlled by the American Finance Company and its assets total $25 billion. It has little to fear from tiny family farms of the Windward islands, where wage costs are higher and the terrain and climate less friendly. In the Windward islands, an estimated 27,000 producers scratch out a living on farms of less than five acres each. Such producers can never compete on equal terms with the vast plantations on the flat and friendly terrain of south America—they simply do not have the economies of scale.
When giants fall out, it is always the small people and the small countries that suffer; in this case, those are the African and Caribbean banana producers and the cashmere producers of Scotland. As the EU Trade Commissioner Sir Leon Brittan said, the United States has acted in an "unacceptable and unlawful fashion". It has violated the rules of the WTO's disputes procedure. As hon. Members have pointed out, that establishes a dangerous precedent, which could extend to the 10-year long dispute between the EU and the USA over hormone-treated milk, or to the potentially explosive issue of genetically modified crops and food.
The United States has displayed a singular lack of interest in the needs of the people of the developing world, where, as my hon. Friend the Member for Crewe and Nantwich (Mrs. Dunwoody) and the hon. Member for Hertford and Stortford pointed out, the consequences of the Americans' actions could be diversification into the sort of crops that could harm the youth of the United States far more than the sale of Caribbean bananas at a preferential tariff to the EU could harm Chiquita, Dole and Del Monte. I hope that the Americans bear that in mind in the coming round of world trade talks, which hold out the hope of a solution to the problem.
I welcome what my right hon. Friend the Secretary of State for International Development is doing to promote diversification in Caribbean countries, but, as the hon. Member for Hertford and Stortford pointed out, that is not as easy as it sounds. In fact, it is extraordinarily difficult to achieve within the trading blocs of today's world. In the next millennium, we must do all that we can to solve such problems and ensure that everyone in the world gets a fair share of the world's trade. That is our task and the task that today faces the two giants—the USA and the EU.
9.14 pm
Mr. Norman Baker: I shall curtail my comments to allow other hon. Members to speak. As a result, my speech will be slightly less balanced that it would otherwise have been— [HoN. MEMBERS: "Oh, no."] Believe it or not, it is true.
The issue is not whether the rules have been interpreted properly—although that is a cogent argument, which has been advanced by the hon. Member for Middlesbrough (Mr. Bell) and other hon. Members—but whether the rules are right. In my view, the rules are not right because there is inherent conflict between the World Trade Organisation rules and the convention on biological diversity.
The World Trade Organisation is a powerful organisation with rules that can be enforced, but the environmental arm of international agreements is not so powerful and cannot be enforced. The biosafety protocol negotiations broke down because, as the Financial Times reported:
"The US has warned that hundreds of billions of dollars of agricultural trade could be at stake in a controversial international agreement on the safety of genetically modified organisms".
Although the Americans were not a party to the agreement, it got Canada to scupper it for them. The consequences of the World Trade Organisation being more powerful than the CBD are significant.
I draw the attention of the House to what can happen if one multinational company seeks to abuse its position in the international market in order to cajole its friends in power to use the WTO to maximum effect. As the hon. Member for Nottingham, South (Mr. Simpson) said, that is what has happened with Monsanto. The company does not have a proud record. We have had problems with bananas and knitwear, but, as someone at the WTO meeting I attended said, GMOs will make bananas look like peanuts. We will have to address GMOs and bovine somatotropin further down the line. It is not simply about bananas, but about what we will do in the future. If we do not resolve this dispute properly, we will sell the pass. We will have not free trade, but trade on the terms of a small number of multinational companies that happen to be in a position to influence trade arrangements.
Is the system free and fair? No, it is not—Monsanto and other companies are making sure of that. Monsanto has said that we must accept BST. However, an independent European Union veterinary investigation was undertaken by Professor Donald Broom, who said that the drug should remain banned because claims for its safety are flawed. He said:
"There is too much mastitis, leg disorders, reproductive disorders and injection site problems—and this is not a medicine, this is a substance that doesn't have to be used, and we think it shouldn't be used."
Those are the views of professionals in the European Union. Whatever happened to the precautionary principle?
The fact is that the World Trade Organisation does not take sufficient account of the environment and trade. Both those elements must be considered when the Government renegotiate the rules of the World Trade Organisation in Seattle later this year. I want the Government to confirm tonight that they will seek to include environmental, social and animal welfare issues in the discussions and will give them proper status within the WTO rules. We cannot

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enforce the rules regarding the shrimp-turtle case or leg-hold traps and, as it stands at present, WTO means "welfare taken out".
Monsanto has made itself public enemy No. 1. It has bulldozed elected Governments across the world and forced its wretched products on to the world's population, whether we want them or not. Monsanto must be brought urgently under democratic control. If the WTO rules permit such activities, they are wrong and must be changed. If we are not careful, Monsanto will become the bad news story of the 21st century. The company must be stopped.
Monsanto has deliberately refused to segregate GM and non-GM crops in order to deny consumer choice—something to which all hon. Members are committed. Monsanto also wishes to introduce GM crops, regardless of the possible environmental consequences. We know from the Advisory Committee on Releases to the Environment, other Government advisory bodies and the EU that there are significant environmental concerns about GM crops. Monsanto does not want to wait: it wants to steamroller those crops through and give us no alternative. When the crops are planted and problems arise, Monsanto will say, "Never mind, let's deal with it now."
The company wants to undermine alternative sources of non-GM crops. It is trying to stop us buying non-GM soya from Brazil by buying up Brazil and halting alternative supplies from that country. Monsanto is the antithesis of democracy. It is not worried about labelling; it is trying to persuade us that it is not necessary and that it is somehow a barrier to free trade. What nonsense. We are entitled to know what we are buying. To be fair, the Government have accepted that. They have always been committed to labelling. Monsanto does not want labelling: it wants its products to carry as little information as possible. It knows that if its products are labelled accurately—and they are not, because most GM material is not labelled under the present regulations—people will not buy them, and it does not want that.
Monsanto has been forcing crops into India and on to the developing countries of the third world. It has intimidated farmers in the United States by hiring private investigators and then fining farmers when a Monsanto seed is found in their soil.
In this country, Monsanto has been condemned by the Advertising Standards Authority, which found it guilty of making
"wrong … unproven, misleading and confusing claims"
in a £1 million campaign.
How does Monsanto manage to do all that? It uses the revolving door policy, and makes sure that personnel from Monsanto and Government agency advisory bodies frequently switch positions. Marcia Hale, the former adviser to the US President, is now the director of international government affairs for the Monsanto corporation. Michael Kantnor, the former secretary to the US Department of Commerce is now a member of the Monsanto corporation board. Josh King, the former director of production for White House events, is now the director of global communications for the Monsanto corporation. Margaret Miller, the former chemical laboratory supervisor for Monsanto, is now the deputy
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director of the new animal drug evaluation office in the US Food and Drug Administration. We have seen confidential European Union documents that have been passed to Monsanto by Dr. Nick Weber of the FDA, and a former Monsanto analyst.
Monsanto is abusing and twisting the system and getting from it as much as it can. It is getting the Food and Drug Administration on board and it is getting the US to fight its corner. I am in favour of free trade and the World Trade Organisation, but I am not in favour of one company so using its muscle and contriving matters for its own ends that the opportunity for consumer choice and Government decisions by democratic bodies is effectively removed.
Dan Verakis, the public relations manager for Monsanto in the UK, has said, "Everybody here hates us." I have to tell Monsanto that I hate it. It is the antithesis of democracy and it needs to be stopped.
9.21 pm
Mr. Phil Woolas: I am grateful for the opportunity to speak in this important debate. I congratulate the hon. Member for Tweeddale, Ettrick and Lauderdale (Mr. Moore) on raising this issue and giving us all an opportunity not only to express the concerns of the UK cashmere industry and others, but to have a fascinating debate about world trade and its future prospects.
I disagree with everything that the hon. Member for Christchurch (Mr. Chope) said in his speech, but particularly his earlier remarks. I say that not to win the sycophant of the week competition—I note that the diary sketchwriters are not with us this evening, perhaps because this is an important debate—but because the hon. Gentleman criticised the Government for their alleged inaction until the statement of 4 March. The work of the clothing and textiles all-party group has brought me into contact with employers, trade unions and hon. Members from both sides of the House. Since before Christmas, the industry has been supporting the Government in their actions and saying how well they have been doing, given the huge obstacles that they face. Those points were made by hon. Members from all parties in an Adjournment debate raised by the hon. Member for Tiverton and Honiton (Mrs. Browning).
The speech of the hon. Member for Christchurch contained a paradox in his tendency to attack the European Union for whatever it does and his wish to stand up for British industry. He is trapped in a cleft stick because he realises that, if he attacks the EU, his constituents will think that he supports the United States in this dispute. This debate has helpfully brought into the public domain the relationship between our industry and the EU on the one hand and the broader context of the US and the World Trade Organisation on the other.
I agree that the pay of workers in the developing world is not only a moral issue for Labour and Liberal Democrat Members, which the hon. Member for Christchurch dismissed it as being, but a part of world trade negotiations. The multi-fibre arrangement is, in part, premised on considerations of pay rates in China, north Africa and the Indian sub-continent. These issues are very important when considering the future of talks.
Mr. Denis MacShane: Is it not significant that the motion does not refer to social issues such as pay? It refers to
"environmental and animal welfare objectives"
and
"international biodiversity agreements".
Those objectives and agreements are very important, but the motion exposes the extent to which the Liberal Democrats are divorced from the real life conditions of working people in this country and throughout the world.
Mr. Woolas: I agree with my hon. Friend but, to be fair, his point does not negate the points that are set out in the motion, as I think he would admit.
Another interesting feature of the contribution of the hon. Member for Christchurch was his failure to recognise our responsibility to our Commonwealth partners. The responsibility which France and we in the United Kingdom recognise to our partners in the Caribbean and Africa has, in part, led to the dispute.
The cashmere industry—I highlight also the threat to the unembroidered cotton industry, which concerns Lancashire in particular—faces a vicious attack. I believe that the Americans knew full well the seasonal nature of the cashmere industry not only in marketing, but in buying and shipping. The position is made worse by the knowledge that if, as is happening, we lose this trade, it will go to China, which is the only other significant producer of cashmere in the world. It will be extremely difficult to get that business back.
It is worth pointing out on behalf of the United Kingdom clothing and textile industry that, if cashmere were not under attack, it could be Nottingham lace, Savile Row suits or Axminster. It could be any of the high-skilled, value-added sectors in the clothing industry on which that industry's future depends.
In this context, it is a very good thing that we are members of the European Union. Without the protection of that trade bloc, that single market, we would be vulnerable to the United States. I hope that no one will draw the conclusion from this trade dispute that membership of the EU is anything other than a good thing.
I shall conclude my remarks by drawing the attention of the House to one particularly important line in the motion. It sets out the fear that the dispute could be, or is, a precursor to future world disputes. However, since the beginning of the banana dispute, there has been a change, in that between the European Union and the United States we have two roughly equal trading blocs. I urge on the Government the importance of recognising the danger of mutually assured destruction between the two blocs.
9.28 pm
Mr. Stephen Dorrell: I shall not detain the House for longer than a couple of minutes. I begin by declaring an interest as a director of, and shareholder in, a clothing company that is not directly involved in the dispute that we are discussing. However, like virtually all modern clothing companies, it is actively involved in international trade.
This is an important debate. It has been occasioned by bananas and by the implications for the banana trade in the Caribbean and for our domestic cashmere industry of
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the actions that the Americans have taken as a result of the dispute. The significant point that the House should draw from the circumstances in which we find ourselves is the central importance, not only to the United Kingdom and other countries in Europe, but to poorer countries throughout the rest of the world, of following through the progressive liberalisation of trade that we have seen over the past half-century, since the end of the second world war.
The real debate this evening has been fascinating. It is the one that has taken place among the occupants of the Government Front Bench, my hon. Friend the Member for Christchurch (Mr. Chope) on the Opposition Front Bench and at least some Liberal Democrat Members. Liberal Democrats have argued the case for progressive liberalisation, while the forces that I think those on the Government Front Bench would recognise as old Labour, who are ranged behind them—at least they were—are still instinctively seeking to control, or to plan to safeguard, very proper concerns. Of course we are all anxious for living standards to be improved. Of course we should all be concerned to protect biodiversity and the environment.
Surely the history of the development of trade over the past half-century should persuade us that the best way of improving people's living standards, and of providing resources for reinvestment in the environment and other desirable social policy objectives—the best way of underwriting the improvement not only of standards of living, but of quality of life—is to create the wealth that allows those options to be open. The progressive liberalisation of trade makes that possible.
I agree wholeheartedly with the hon. Members for Middlesbrough (Mr. Bell) and for Twickenham (Dr. Cable) that the great gain that we have made in recent years is a decisive move towards rules-based trade. That is why the UK, every other member state of the European Union and the United States share essential national interests in strengthening rules-based trade, and in respecting judgments when they are handed down by the World Trade Organisation—the organisation that we have jointly set up to deliver that generality in the particular.
9.31 pm
Mr. David Chidgey: I congratulate my hon. Friend the Member for Tweeddale, Ettrick and Lauderdale (Mr. Moore) on the powerful way in which he opened the debate. He made a strong case for the plight of his constituents, the thousands of people who run the risk of losing their jobs. He rightly pointed out the shortcomings in the diplomatic efforts of the European Union and the United States so far. We need a fair resolution and respect for the World Trade Organisation and its rule base, as the right hon. Member for Charnwood (Mr. Dorrell) said.
I am pleased that, when he spoke on behalf of the Government, the Minister recognised that my hon. Friend the Member for Tweeddale, Ettrick and Lauderdale had put up a reasonable case. There is all-party agreement on the matter. The Minister pointed out that we in the EU and the USA are the two key players on the world trade stage. We should all remember that. We are intertwined, and our economies are locked together. The Minister told us a great deal about our trade successes. With all due respect to him, we all knew that. The issue is what we are to do about the unwieldy and unbelievable dispute about bananas.

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The hon. Member for Christchurch (Mr. Chope), who led for the Conservative party, made some interesting comments about his preference for compliance rather than compensation, and about his complete faith in market forces and the unfettered exploitation of the most vulnerable. I have always believed that trade should be not only free, but fair.
The debate has shown that the so-called banana war has all the makings of a Whitehall farce. It is a throw-back to 19th-century gunboat diplomacy, but it is a farce with deadly serious implications for sensibly regulated world trade, and for safely harnessing the science of genetic modification and hormone additives in the food chain—something about which my hon. Friend the Member for Lewes (Mr. Baker) spoke so eloquently.
Neither the EU nor the USA is blameless in the present fiasco. By using loopholes in the WTO compliance rules, the EU has tinkered with its banana import regime, stalling over the day when it must change the system whereby it protects its former colonies. Very few, if any, independent observers believe that the EU is acting legally, but the EU claims that it cannot be sure about that until the WTO rules again. On that basis, the EU could carry on tinkering with the rules and never comply with the WTO judgment.
America is also flouting WTO rules. By retaliating with trade sanctions through 100 per cent. duties on EU products targeted at the UK, it is effectively stopping trade. Not only will that destroy the livelihoods of thousands of workers in the Scottish borders, but the US is acting in direct contravention of WTO rules on free trade.
At the heart of the dispute lies a fundamental clash of different obligations to different parties. The EU has obligations to WTO trade rules and obligations under treaty to former colonies in Africa, the Caribbean and the Pacific. To American eyes, those colonial links might appear to be relics of the past, but it is time for America, as today's super-power, to accept the responsibilities of its dominant position and to think and act beyond the interests of short-term commercial advantage.
The dismantling of the EU banana regime would only marginally increase the profits of the multi-billion dollar American banana distributors, but it would destroy at a stroke about 25 per cent. of the economy of a string of Caribbean islands. America's response appears to be that the EU should replace preferential trade with economic aid. Nobody can imagine that destroying the fragile economies of small island states, and throwing thousands of people out of work and into benefit dependency, is a constructive policy. It flies in the face of America's own claims to social justice and Bill Clinton's claim that he would give America's poor a hand up, not a handout. However, he wants us to hand out aid in the Caribbean rather than have those economies prosper.
There is a darker side to the banana war—the blatant manner in which corporate America can corrupt political thinking in the Senate and in the White House. It would be far fetched to say that it was mere coincidence that the American banana distributors donated $500,000 to the Democratic party coffers only 24 hours before America lodged its latest complaint over the banana regime. Their actions show that the producers are more bent than the bananas that they sell.
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A still darker side to the banana war could be the reaction in the Caribbean to massive job losses on the banana plantations. America has spent billions of dollars in Latin America trying to turn fanning communities away from drug production to producing legitimate cash crops, and forcing a collapse in the Caribbean banana industry would only increase the likelihood of more illegal drug production. The hon. Member for Crewe and Nantwich (Mrs. Dunwoody) spelled that out early in the debate during an intervention. If more drugs are produced, they will go to the most profitable and readily accessible market. That is the United States of America.
The escalation of the banana war would bring a host of casualties—thousands of job losses in the Scottish borders, the destruction of island economies throughout the Caribbean and an increase in illegal drugs production and trade, targeted on America—but even more damaging in the longer term would be the signalling of a crisis of confidence in the WTO, which is the supposed arbiter of world trade disputes.
There is real danger that trade hostilities with America will escalate into other areas, and measures to protect its steel industry are before the Senate. America is angry about subsidies for Airbus, EU directives on data privacy and proposed rules on aircraft noise—the hushkits, which discriminate against American firms. Most worrying is American pressure on the EU to accept food produced from genetically modified crops and to lift the EU ban on American hormone-treated beef. At stake are the rights of the individual nation states, which have put the interests of public safety before access to the food chain for modified products.
As my hon. Friend the Member for Lewes pointed out, there are alarming reports from leading scientists in Europe about the drinking of milk laced with hormones increasing the risk of cancer. The bovine somatotropin hormone is the favoured method of American producers for increasing yields massively and reducing costs. In our view, the EU is right to ban those products in the face of scientific uncertainty over long-term public safety.
Dr. Ian Gibson: Scare tactics by the Liberals.
Mr. Chidgey: I see that some genetically modified Members have entered the Chamber, but perhaps we can keep them under control until the end of the debate.
It cannot be right for America to use WTO rules against trade discrimination to force those products on to the European market; our farmers are banned by law from competing with such products. We are faced with growing conflict between regulation of biodiversity in environmental science and commercial exploitation of modified food. There is a conflict between harnessing the benefits of science, maintaining public safety and reassuring public opinion. It is clear that present international structures for regulating trade and the environment are not able to respond adequately to those new environmental and social challenges.
The World Trade Organisation's rules are designed to be flexible and not prescriptive, but fears are growing that the WTO seems to be incapable of enforcing its own rules, and that could prove to be a fatal flaw. If countries feel that the WTO does not work, more and more will be tempted to bypass and ignore it. The major trading

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powers—America and the European Union—will be tempted to act unilaterally. Already, there are worrying signs that America is negotiating a bilateral trade agreement with China, shutting the door on the European Union and on established convention.
We are in danger of losing a predictable and fair rules-based system under the WTO, and gaining instead arbitrary arrangements based on power. That can lead only to more protection, more trade wars and, eventually, trade anarchy, which would inevitably stifle any response to the global, environmental and social challenges that we face. We must change the WTO's commitment to untrammelled, purist free trade to embrace the wider goals of achieving a sensible balance between free, fair and sustainable trade. We need to build mechanisms to resolve free trade and environmental arrangements—mechanisms that simply do not exist at present.
If anything, the process is moving into reverse. The collapse of the recent talks in Colombia, aimed at establishing a biosafety protocol, is a serious setback. The implications for trade, the environment and food safety are of major concern. It is now becoming clear that America and Canada are attempting to present us with a fait accompli on genetically modified organisms, first, by overriding legitimate concerns in the European Union about the environmental health aspects of genetically modified crops and food products and, secondly, by preventing consumer choice through the segregation of supplies and comprehensive labelling.
Even more alarming is the stance taken by the United States and Colombia that rules to protect the environment must be subordinate to trade rules. That will only heighten fears that trade liberalisation and environmental protection are mutually incompatible—and there is a real fear that the United States will try to overcome EU resistance to GMOs by using WTO dispute processes.
There is clearly a political conflict between the rights and obligations of the WTO and those arising from multilateral environmental agreements. It is vital for all WTO members to reach binding understandings, both political and legal, that will ensure that the trade provisions of the MEAs are accommodated within WTO rules.
This is where our Government must take a leading role. I am disappointed that their amendment merely "notes the current position". We could have done that before we started; what we want is a commitment, and some action. It is simply not good enough to "note the current position"; nor are the signals being sent by the Prime Minister—signals that he supports the American position—good enough. He appears to be backing the Americans' multi-billion-dollar GM commercial and industrial interests. I hope that he is not, but that is the signal that is sent.
The Government are failing to give a clear lead in suggesting that, while tremendous benefits can be gained from the science of genetic modification, it must be regulated and controlled in the interests of public health and the environment. As a result, we see shock-horror tabloid headlines, and widely conflicting claims about the supposed danger, or benefits, of GM technology. What is needed now is a breathing space for rational public debate. We need to find a sensible way of proceeding that will command widespread public support.
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The Government should ask the royal commission on environmental pollution to look at all the evidence. It examined the issues in 1989, and is well placed to produce a balanced and authoritative review in the shortest possible time. The Government must also take the lead internationally. They must stand firm with our partners in the European Union, and must use their influence with the United States Government to reduce the possibility of a trade versus environment conflict. They must step up efforts to reform the WTO to ensure compatibility with multinational environmental agreements and compliance with the aims of free, fair and sustainable trade.
9.45 pm
The Minister for Trade (Mr. Brian Wilson): It is something of a cliché to say that we have had an excellent debate, but, more than usually, it is accurate. There have been some extremely well-informed contributions from hon. Members on both sides of the House. It has been an evening of serious speeches on serious matters.
It is an unusual debate in a sense. It involves some extremely localised issues, which I am obviously expected to—and will seek to—address, but I do not want that to take away from the fact that it also involves global issues and important questions that affect every country and every citizen of this country. I congratulate the Liberal Democrats on raising the matter as a subject for debate.
I welcome the degree of common ground in the House. There has been recognition of the problems, but, as my hon. Friend the Member for Middlesbrough (Mr. Bell) pointed out, there has also been recognition of the scale and importance of the European Union-United States trade relationship. Although there are a number of problems in that relationship, we bear it firmly in mind that such disagreements are the exceptions to the rule and that the vast majority of trade and investment between the EU and United States takes place without difficulty. It is in no one's interest to upset that arrangement unduly. Let us address the problems, but keep a sense of perspective.
Much remains to be done to develop the bilateral relationship and to identify further common objectives for the multilateral trade system, so we must work urgently to enhance the dialogue for better management of disputes that develop between us. That is necessary not only for the better handling of individual disputes, but to avoid those relatively few disagreements that are colouring the wider relationship at such a crucial time for world trade.
I do not want to discuss the merits of the banana dispute. I will follow my advice to the Americans and to anyone else who will listen—await the outcome of the WTO panel arbitration process, which we expect to come to a head by 12 April—so it is not for me to get into the merits of the case tonight and to beat the drum about who is right and who is wrong in the banana dispute. That will not be productive. As the hon. Member for Hertford and Stortford (Mr. Wells) pointed out in his interesting and well-informed speech, the dispute has been going on for more than 50 years, so it is improbable that we will sort it out tonight with another dose of rhetoric.
Having said that, there can be no avoiding the reality that the action that the United States announced on 3 March was wrong. Irrespective of the merits of the dispute, that can be said because it took the resolution of the dispute outside the procedures of the WTO. As many Members recognise—I have had contact with them over

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the past few months on the issue—it must be resolved quickly, without causing serious harm to many unrelated industries, particularly cashmere knitwear. That statement lies outside the issue of bananas. First, it is wrong to act before the WTO procedures come to a conclusion. Secondly, it is wrong to take action against unrelated products. I can make both those statements categorically without going into the merits of the dispute itself.
I come to the passage of my speech that will be of particular interest to hon. Members on both sides of the House who represent areas with cashmere interests. On 4 March, the Secretary of State for Trade and Industry announced to the House that he would put in place arrangements to guarantee bonds paid in respect of exports of cashmere knitwear to the United States. I am delighted to be able to announce the details of that scheme.
The scheme will be operated by the Export Credits Guarantee Department. The guarantee will indemnify exporters of United Kingdom-manufactured cashmere knitwear against losses on exports to the United States as a result of conditions arising from the unilateral action of the United States. The scheme will apply to those contracts placed before midnight on the date of the World Trade Organisation panel rulings on the European Union banana regime—expected to be on or before 12 April—under which delivery to the United States is due to be made by 30 November 1999. The Export Credits Guarantee Department will be open for business as soon as a direction can be issued in the light of this announcement.
I make it clear that the decision to set up the scheme was not taken lightly. As I know that hon. Members who have been involved in the matter will realise, it is an exceptional response to a unique set of circumstances. The cashmere knitwear industry is highly specialised and concentrated in areas that face difficult economic challenges. Although the borders area of Scotland is certainly the main centre of the cashmere industry, it is not the only centre of the industry. Cashmere is important in other parts of Britain, and those areas, equally, will benefit from the announcement and welcome it.
The main market for the industry is the United States. Moreover, we are right in the middle of the ordering season. If we had not taken that action, the United Kingdom cashmere knitwear industry, and its upstream suppliers, would have been devastated, and there would have been a very real risk that it would never recover.
Under normal trade conditions, the United Kingdom cashmere knitwear industry can—and does—beat the world. In recent weeks, I have seen that at first hand. It is a superb industry, and we should back it. In the measures that I have just announced, we are doing so. We have had to take that action so that the industry will still be there to compete when trade conditions return to normal.
I look forward with great optimism to the industry's future success. I wish everyone involved in the industry well, and thank them for their forbearance, understanding, and calm and rational negotiation and discussion in the midst of a very difficult time in recent months.
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On the wider dispute, the Government will continue to do all that we can to press for alternatives to retaliation and—when we know the result of the rulings from the WTO arbitrator and panel—for immediate and positive action. We must safeguard the WTO's dispute settlement system, as it has served us well in the past, and will continue to do so in the future.
I should like to try to deal with some of the other subjects that have been touched on in the debate. Hormones were the next most topical issue. In that case, as in all cases, we must recognise the importance of sticking to scientific principles. In this case, the WTO found that the risk assessments that the European Union had conducted were deficient. The EU is now conducting new assessments. The view of the United Kingdom Government is that those should have been done well before now, as the WTO itself has said. Meanwhile, however, we must continue to engage in serious dialogue with both the United States and Canada to find a satisfactory way through the dispute.
The United Kingdom is encouraging the United States to discuss compensation—as an alternative to retaliation—and labelling options, taking into account on-going scientific assessments.
Events in the hormone issue have been moving rapidly. Just today, European Union Foreign Ministers agreed in Brussels to negotiate compensation. Meanwhile, the United States has been publishing a list of products for retaliation in the potential dispute. The list—which has just reached me—is rather eclectic, including products such as
"bellies (streaky) and cuts thereof of swine, salted, in brine, dried or smoked".
The list moves on to oats, and
"sugar confectionary cough drops, not containing cocoa".
Then again, it includes "lingonberry and raspberry jam". Prepared mustard also is included. The list on this matter is much longer than it was, the last time around, on the other matter.
The House should understand that the United Kingdom Government's position on the two sets of circumstances is that they are not directly comparable. We believe very strongly that the hormones issue should be settled by compensation, not retaliation. Once again, however, I deplore even the concept of going outside the trade disputes procedures, into the sphere of a retaliatory list. Once the list is published tomorrow, another set of industries throughout the United Kingdom and the European Union will be worrying about their future well-being and the livelihoods of the people who work in them. That is not the way to proceed. There should be negotiation on hormones. We have stressed the importance of scientific principles and we believe that the United States should back off from retaliation to settle the dispute.
Mr. Chope: Does the Minister accept that the situation is the fault of the European Union in failing to meet the WTO deadline?
Mr. Wilson: I have set out the Government's position on hormones clearly. We agree with the World Trade Organisation that the new assessments on scientific grounds should have been carried out sooner. I have made my comments without the prompting of the hon.

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Gentleman. The way forward is through compensation, if appropriate—as the EU Foreign Ministers agreed today—not through retaliation, which drags in many industries, of which I have mentioned only a few.
Trade in genetically modified organisms is a matter of much discussion. Strong feelings have been expressed on the subject in the House tonight. We have enough problems in world trade without talking up trade wars that do not exist. Although the United States has expressed some concerns about the European regulatory system and the time that it can take to grant an approval for a new product, there is no trade dispute between us. The United States clearly recognises that the European Union has a right to determine whether genetically modified products are safe. The United States also recognises that consumers need to be able to make an informed choice. That is why we have labelling of products that contain GM ingredients.
The hon. Member for Christchurch (Mr. Chope) referred to hushkits. The way through the problem is discussion. There have been intensive negotiations between the EU and the US in the past few days to reach a compromise that addresses the concerns that the United States believes that it has on technical and trade policy. A solution to the dispute would be welcome and would prove that it is possible to resolve difficulties through serious, bilateral negotiations designed to recognise the concerns of each side.
That may not be a bad point at which to draw my comments to a conclusion.
Mr. Baker: Irrespective of applying the rules as they stand, does the Minister accept that the rules have to be changed in Seattle to take more account of environmental, animal welfare and social issues?
Mr. Wilson: I am glad to have an opportunity to comment on Seattle. Uniquely and unprecedentedly, from the outset of discussions about the agenda, the Government have called in trade unions, non-governmental organisations and representatives of business and industry across the spectrum of opinion and interest. That will enable us to proceed with complete transparency about our position and allow it to be influenced by representations from interested parties and by the maximum discussion. I do not have time to prejudge what the opposition on the issues will be, even if I wanted to. Negotiations on trade cannot carry all the world's concerns on their back. It is not the developed countries but the less-developed ones that have to be persuaded on many issues, because they see in them the spectre of protectionism in another guise. Consultation is taking place. That is unprecedented, but it is the way in which the Government do business on such issues.
The issues can be resolved through discussion. It is vital that we do not start grandstanding or—
Mr. Paul Tylerrose in his place and claimed to move, That the Question be now put.
Question, That the Question be now put,put and agreed to.
Question put accordingly, That the original words stand part of the Question:—
The House divided: Ayes 39, Noes 314.

Division no. 124]

[10 pm

AYES

Allan, Richard

Keetch, Paul

Baker, Norman

Kennedy, Charles(Ross Skye)

Ballard, Jackie

Kirkwood, Archy

Beith, Rt Hon A J

Livsey, Richard

Brake, Tom

Michie, Mrs Ray(Argyll & Bute)

Brand, Dr Peter

Moore, Michael

Breed, Colin

Oaten, Mark

Burnett, John

Öpik, Lembit

Burstow, Paul

Rendel, David

Cable, Dr Vincent

Russell, Bob(Colchester)

Cotter, Brian

Sanders, Adrian

Cunningham, Ms Roseanna

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

(Perth)

Taylor, Matthew(Truro)

Davey, Edward(Kingston)

Tonge, Dr Jenny

Fearn, Ronnie

Tyler, Paul

Foster, Don(Bath)

Wallace, James

George, Andrew(St Ives)

Webb, Steve

Hancock, Mike

Willis, Phil

Harris, Dr Evan

Harvey, Nick

Tellers for the Ayes:

Hughes, Simon(Southwark N)

Mr. Andrew Stunell and Mr. David Chidgey.

Jones, Nigel(Cheltenham)

NOES

Abbott, Ms Diane

Clwyd, Ann

Ainger, Nick

Coaker, Vernon

Anderson, Donald(Swansea E)

Coffey, Ms Ann

Armstrong, Ms Hilary

Coleman, Iain

Atkins, Charlotte

Colman, Tony

Austin, John

Connarty, Michael

Bames, Harry

Cook, Frank(Stockton N)

Battle, John

Corbett, Robin

Bayley, Hugh

Corbyn, Jeremy

Beard, Nigel

Cousins, Jim

Beckett, Rt Hon Mrs Margaret

Cox, Tom

Begg, Miss Anne

Crausby, David

Bell, Stuart(Middlesbrough)

Cryer, John(Homchurch)

Benn, Rt Hon Tony

Cunliffe, Lawrence

Bennett, Andrew F

Cunningham, Jim(Cov'try S)

Benton, Joe

Curtis-Thomas, Mrs Claire

Bermingham, Gerald

Dalyell, Tam

Berry, Roger

Darling, Rt Hon Alistair

Best, Harold

Darvill, Keith

Betts, Clive

Davidson, Ian

Blizzard, Bob

Davies, Rt Hon Denzil(Llanelli)

Boateng, Paul

Davis, Terry(B'ham Hodge H)

Borrow, David

Dean, Mrs Janet

Bradley, Keith(Withington)

Denham, John

Bradley, Peter(The Wrekin)

Dismore, Andrew

Bradshaw, Ben

Dobbin, Jim

Brown, Russell(Dumfries)

Donohoe, Brian H

Browne, Desmond

Doran, Frank

Buck, Ms Karen

Dunwoody, Mrs Gwyneth

Burden, Richard

Eagle, Angela(Wallasey)

Burgon, Colin

Efford, Clive

Butler, Mrs Christine

Ellman, Mrs Louise

Cabom, Richard

Ennis, Jeff

Campbell, Alan(Tynemouth)

Etherington, Bill

Campbell, Mrs Anne(C'bridge)

Fisher, Mark

Campbell, Ronnie(Blyth V)

Fitzpatrick, Jim

Campbell-Savours, Dale

Fitzsimons, Lorna

Cann, Jamie

Flint, Caroline

Caplin, Ivor

Flynn, Paul

Caton, Martin

Follett, Barbara

Chapman, Ben(Wirral S)

Foster, Rt Hon Derek

Clark, Rt Hon Dr David(S Shields)

Foster, Michael Jabez(Hastings)

Clark, Dr Lynda

Foulkes, George

(Edinburgh Pentlands)

Fyfe, Maria

Clarke, Eric(Midlothian)

Gapes, Mike

Clarke, Rt Hon Tom(Coatbridge)

Gardiner, Barry

Clarke, Tony(Northampton S)

George, Bruce(Walsall S)

Clelland, David

Gerrard, Neil

119

Gibson, Dr Ian

Ladyman, Dr Stephen

Gilroy, Mrs Linda

Lepper, David

Godman, Dr Norman A

Leslie, Christopher

Godsiff, Roger

Levitt, Tom

Golding, Mrs Llin

Lewis, Ivan(Bury S)

Gordon, Mrs Eileen

Lewis, Terry(Worsley)

Griffiths, Jane(Reading E)

Liddell, Rt Hon Mrs Helen

Griffiths, Nigel(Edinburgh S)

Linton, Marlin

Griffiths, Win(Bridgend)

Livingstone, Ken

Grocott, Bruce

Lloyd, Tony(Manchester C)

Grogan, John

Lock, David

Hall, Mike(Weaver Vale)

Love, Andrew

Hall, Patrick(Bedford)

McAvoy, Thomas

Hamilton, Fabian(Leeds NE)

McCabe, Steve

Hanson, David

McCafferty, Ms Chris

Harman, Rt Hon Ms Harriet

McDonagh, Siobhain

Heal, Mrs Sylvia

McDonnell, John

Healey, John

McGuire, Mrs Anne

Henderson, Doug(Newcastle N)

McIsaac, Shona

Henderson, Ivan(Harwich)

McKenna, Mrs Rosemary

Hepburn, Stephen

Mackinlay, Andrew

Heppell, John

McLeish, Henry

Hesford, Stephen

McNamara, Kevin

Hit, Keith

McNulty, Tony

Hinchliffe, David

MacShane, Denis

Hoey, Kate

Mactaggart, Fiona

Home Robertson, John

McWalter, Tony

Hood, Jimmy

McWilliam, John

Hoon, Geoffrey

Mahon, Mrs Alice

Hope, Phil

Mandelson, Rt Hon Peter

Hopkins, Kelvin

Marsden, Gordon(Blackpool S)

Howarth, Alan(Newport E)

Marshall, David(Shettleston)

Howarth, George(Knowsley N)

Marshall-Andrews, Robert

Howells, Dr Kim

Martlew, Eric

Hoyle, Lindsay

Maxton, John

Hughes, Ms Beverley(Stretford)

Meale, Alan

Hughes, Kevin(Doncaster N)

Merron, Gillian

Humble, Mrs Joan

Michie, Bill(Shef'ld Heeley)

Hutton, John

Milburn, Rt Hon Alan

Iddon, Dr Brian

Miller, Andrew

Illsley, Eric

Mitchell, Austin

Jackson, Ms Glenda(Hampstead)

Moffatt, Laura

Jackson, Helen(Hillsborough)

Moonie, Dr Lewis

Johnson, Alan(Hull W & Hessle)

Moran, Ms Margaret

Johnson, Miss Melanie

Morgan, Rhodri(Cardiff W)

(Welwyn Hatfield)

Morley, Elliot

Jones, Barry(Alyn & Deeside)

Mountford, Kali

Jones, Helen(Wamngton N)

Mullin, Chris

Jones, Ms Jenny

Naysmith, Dr Doug

(Wolverh'ton SW)

O'Brien, Bill(Normanton)

Jones, Jon Owen(Cardiff C)

O'Brien, Mike(N Warks)

Jones, Dr Lynne(Selly Oak)

O'Hara, Eddie

Jones, Martyn(Clwyd S)

Olner, Bill

Jowell, Rt Hon Ms Tessa

O'Neill, Martin

Kaufman, Rt Hon Gerald

Osbome, Ms Sandra

Keeble, Ms Sally

Pearson, Ian

Keen, Alan(Feltharn & Heston)

Pendry, Tom

Keen, Ann(Brentford & Isleworth)

Perham, Ms Linda

Kelly, Ms Ruth

Pickthall, Cohn

Kemp, Fraser

Pike, Peter L

Kennedy, Jane(Wavertree)

Plaskitt, James

Khabra, Piara S

Pollard, Kerry

Kidney, David

Pond, Chris

Kilfoyle, Peter

Pope, Greg

King, Andy(Rugby & Kenilworth)

Pound, Stephen

King, Ms Oona(Bethnal Green)

Powell, Sir Raymond

Kingham, Ms Tess

Prentice, Ms Bridget(Lewisham E)

Kumar, Dr Ashok

Prentice, Gordon(Pendle)

120

Prescott, Rt Hon John

Stewart, Ian(Eccles)

Primarolo, Dawn

Stinchcombe, Paul

Prosser, Gwyn

Stoate, Dr Howard

Purchase, Ken

Stott, Roger

Quin, Rt Hon Ms Joyce

Straw, Rt Hon Jack

Quinn, Lawrie

Stringer, Graham

Radice, Giles

Stuart, Ms Gisela

Rapson, Syd

Sutcliffe, Gerry

Raynsford, Nick

Taylor, Rt Hon Mrs Ann

Reid, Rt Hon Dr John(Hamilton N)

(Dewsbury)

Robinson, Geoffrey(Cov'try NW)

Taylor, Ms Dan(Stockton S)

Roche, Mrs Barbara

Taylor, David(NW Leics)

Rogers, Allan

Temple-Morris, Peter

Rooker, Jeff

Timms, Stephen

Rooney, Terry

Tipping, Paddy

Ross, Ernie(Dundee VV)

Todd, Mark

Rowlands, Ted

Touhig, Don

Roy, Frank

Trickett, Jon

Ruane Chris

Truswell, Paul

Ruddock, Joan

Turner, Dennis(Wolverh'ton SE)

Russell, Ms Christine(Chester)

Turner, Dr Desmond(Kemptown)

Ryan Ms, Joan

Turner, Dr George(NW Norfolk)

Salter Martin

Twigg, Derek(Halton)

Savidge Malcolm

Twigg, Stephen(Enfield)

Sawford, Phil

Vaz, Keith

Sedgemore, Brian

Ward, Ms Claire

Wareing, Robert N

Shaw, Jonathan

Watts, David

Sheldon, Rt Hon Robert

White, Brian

Shipley, Ms Debra

Whitehead, Dr Alan

Simpson, Alan(Nottingham S)

Wicks, Malcolm

Singh, Marsha

Williams, Rt Hon Alan

Skinner, Dennis

(Swansea W)

Smith, Angela(Basildon)

Williams, Alan W(E Carmarthen)

Smith, Rt Hon Chris(Islington S)

Wilson, Brian

Smith, Jacqui(Redditch)

Winnick, David

Smith, John(Glamorgan)

Winterton, Ms Rosie(Doncaster C)

Smith, Llew(Blaenau Gwent)

Wood, Mike

Snape, Peter

Woolas, Phil

Soley, Clive

Wright, Anthony D(Gt Yarmouth)

Southworth, Ms Helen

Wright, Dr Tony(Cannock)

Spellar, John

Wyatt, Derek

Squire, Ms Rachel

Starkey, Dr Phyllis

Tellers for the Noes:

Steinberg, Gerry

Mr. Robert Ainsworth and Mr. Jim Dowd.

Stewart, David(Inverness E)

Question accordingly negatived.
Question, That the proposed words be there added, put forthwith, pursuant to Standing Order No. 31 (Questions on amendments), and agreed to.
MADAM SPEAKER forthwith declared the main Question, as amended, to be agreed to.
Resolved,
That this House recognises the significance of the EU/US relationship and notes that the majority of that trade relationship runs smoothly; commends the efforts of the Government to secure the Transatlantic Economic Partnership Agreement last year; acknowledges the efforts of the Government to find a way through the bananas dispute so as to minimise the impact on British industry and in particular the cashmere industry; notes the current position on the hormones dispute; welcomes the Government's commitment to sustainable development; and endorses the Government's support for comprehensive multilateral trade negotiations to be launched in Seattle at the end of this year.

Orders of the Day

  CONSOLIDATED FUND (No. 2) BILL
  Order for Second Reading read.
  Question, That the Bill be now read a Second time, put forthwith, pursuant to Standing Order No. 56 (Consolidated Fund Bills), and agreed to.
  Bill accordingly read a Second time.
  Question, That the Bill be now read the Third time,put forthwith, and agreed to.
  Bill accordingly read the Third time, and passed.

  DELEGATED LEGISLATIONM
  Madam Speaker: With permission, I shall put together the Questions on motions Nos. 3 and 4.
  Motion made, and Question put forthwith, pursuant to Standing Order No. 118(6) (Standing Committees on Delegated Legislation),

  LEGAL AID AND ADVICE (SCOTLAND)
  That the draft Civil Legal Aid (Financial Conditions) (Scotland) Regulations 1999, which were laid before this House on 22nd February, be approved.
  That the draft Advice and Assistance (Financial Conditions) (Scotland) Regulations 1999, which were laid before this House on 22nd February, be approved.—[Mr. Hill.]
  Question agreed to.
  Motion made, and Question put forthwith, pursuant to Standing Order No. 118(6) (Standing Committees on Delegated Legislation),

  SOCIAL SECURITY
  That the draft Social Security (New Deal Pilot) Amendment Regulations 1999, which were laid before this House on 22nd February, be approved.—[Mr. Hill.]
  question agreed to.
  Motion made, and Question put forthwith, pursuant to Standing Order No. 118(6) (Standing Committees on Delegated Legislation),

  GOVERNMENT TRADING FUNDS
  That the draft Ordnance Survey Trading Fund Order 1999, which was laid before this House on 24th February. be approved.—[Mr. Hill.]
  Question agreed to.
  Motion made, and Question put forthwith, pursuant to Standing Order No. 118(6) (Standing Committees on Delegated Legislation),

  CONSTITUTIONAL LAW
  That the draft Scotland Act 1998 (Consequential Modifications) (No. 1) Order 1999, which was laid before this House on 25th February, be approved.—[Mr. Hill.]
  Question agreed to.

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

  WELFARE OF LAYING HENS
  That this House takes note of the European Union Document No. 6985/98 on the protection of laying hens kept in various systems of rearing; and of the progress of negotiations; and supports the Government's intention to continue to work for the adoption of a Directive which sets a clear phase-out date for the battery cage, improved standards in the interim and robust and practical standards for the welfare of birds in non-cage systems.—[Mr. Hill.]
  Question agreed to.

  Fur Farming (Prohibition) Bill [Money]
  Queen's recommendation having been signified—
  Motion made, and Question proposed,
  That, for the purposes of any Act resulting from the Fur Farming (Prohibition) Bill, it is expedient to authorise the payment out of money provided by Parliament of any expenditure incurred by a Minister of the Crown in consequence of any compensation scheme made under the Act.—[Mr. Hill.]
  10.14 pm
  Mr. Eric Forth: On these occasions, I always say at the beginning of my remarks how unfortunate it is that the Minister never seeks to catch your eye, Madam Speaker, to set out—however briefly—the reasons behind the money resolution. I say that because it would be helpful to the House. It might even avoid the need for speeches, during the brief 45 minutes that we are allowed, if the Minister were to do the courtesy of setting out for the House the reasoning behind the money resolution.
  Even in our rather full Second Reading debate, we were unable properly to explore the financial implications of the Bill. Tonight's debate gives us a chance to do so. In the absence of any explanation from the Parliamentary Secretary to the Ministry of Agriculture, Fisheries and Food, I shall simply ask a few questions so that the House may judge whether it wishes to approve the money resolution.
  The resolution is intended
  "to authorise the payment out of money provided by Parliament of any expenditure incurred by a Minister of the Crown in consequence of any compensation scheme made under the Act."
  That is fair enough as far as it goes. The Bill does, indeed, in clause 5, make provision for a compensation scheme, and sets out in helpful detail its likely nature.
  I do not want to dwell on that because one or two of my hon. Friends wish to concentrate on the specific nature of the compensation scheme. Given the brief nature of the debate, I certainly do not want to take up too much time.
  Mr. Jim Dowd (Lord Commissioner to the Treasury): Why not?
  Mr. Forth: So that my all hon. Friends may speak. Whether the House will wish to divide on the matter will of course depend on the Minister's replies.
  Mr. David Davis: During my time dealing with private Members' Bills, I have always been led to believe that they are not allowed to be primarily for the purpose of spending money. My right hon. Friend has referred to the compensation scheme, on which, it seems to me, the Bill depends. Would my right hon. Friend give us his views on that point?
  Mr. Forth: I hate to disagree with my right hon. Friend, but my reading of the Bill is rather different from his. I am reasonably satisfied that the main purpose of the Bill is to ban the practice of fur farming, although, as I said on Second Reading, I do not agree with that. My right hon. Friend has made an important point, however, about whether the ban comes before the compensation or vice versa.
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  I cannot imagine that the Government wanted to provide compensation and therefore introduced the ban in order to do so, which is almost what my right hon. Friend suggests. However, we need a clear explanation from the Minister of the nature and basis of the compensation regime and the mechanism that he envisages for paying compensation. At least one of my right hon. Friends will pursue just that point in a moment.
  I read out the words of the resolution a moment ago to show that it refers only to the compensation mechanism. Yet, when I read clause 5(3) of the Bill, I found that it talked about the mechanism by which to resolve disputes, stating:
  "Any dispute as to…entitlement to payments under a scheme…shall be referred by the Minister to, and determined by"
  the Lands Tribunal.
  It strikes me that it is entirely possible that the extra burden of work that may be laid on the Lands Tribunal could give rise to additional expenditure by the tribunal, possibly on additional staff or training, or even on a further appeals mechanism. We must know whether the Minister agrees that that is so, and whether the money resolution may therefore be defective.
  Can the Minister give an absolute guarantee that the Lands Tribunal will incur no additional expenditure in fulfilling the responsibilities laid on it? My view is that either the resolution may be defective or the Minister must give that guarantee. Then we will be able to watch carefully to see that the use of the Lands Tribunal by those who find themselves in dispute over compensation takes place within a tight financial regime, because the tribunal may not be able to spend any more money. There is a possibility of real difficulty owing to inadequate drafting of the money resolution.
  Those are my main points. I am anxious to give my right hon. and hon. Friends time to raise further matters before we decide whether we wish to agree the resolution.
  10.20 pm
  Dr. Peter Brand: I am grateful that this issue is being discussed. I fully support the Bill to ban fur farming, but I am extremely concerned that people who have been carrying out what was a legitimate occupation should be adequately compensated. In the past few years, they have had an extremely difficult time. They have had to spend a great deal of money to maintain the security of their premises, to protect not only their livelihoods but the environment from the irresponsible actions of some animal welfare activists. Fur farmers have been spending money—
  Madam Speaker: Order. We are dealing with the money resolution, which is very narrow, not the Bill.
  Dr. Brand:: I fully appreciate that, Madam Speaker. The importance of the money resolution is that it will allow the Minister to make a statement on compensation before Third Reading. It is important that, before we vote on Third Reading, we hear from the Minister what compensation arrangements are being put in place.
  10.22 pm
  Mr. Michael Jack: Two out of the 11 remaining fur farmers in this country are in my constituency. They will be affected by the Bill if it is enacted. Therefore, they have a keen interest in the terms of the money resolution.

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  In my initial remarks, I shall deal with one point of concern. The resolution invites Parliament to agree to effect payment
  "in consequence of any compensation scheme made under the Act."
  That would give the Minister broad scope to invent whatever compensation scheme he felt was appropriate.
  Fur farmers are worried because many of them hoped that the compensation scheme covered by the resolution would be sufficiently flexible properly to compensate them for the losses that they will inevitably incur if the Bill is enacted and their present legitimate form of business has to cease.
  I want to know from the Minister whether any discussions have been held with the Treasury about the amount of money that could be agreed under the terms of the resolution. The House is invited to agree the payment of money out of funds provided by Parliament, but that is almost an open-ended commitment. We do not know whether the Treasury has agreed a cash-limited sum with the Ministry of Agriculture, Fisheries and Food that it can use in framing the scheme. Estimates of about £400,000 were suggested in the explanatory notes that were issued in connection with the Bill.
  The Minister has made it clear in discussions that he is contemplating a minimalist regime to compensate farmers solely and wholly for the loss of assets. That is his opening proposition. I hope that he will explain in his reply whether that is the opening position, the only position, or whether there will be opportunities for further discussion with fur farmers, who face the end of their legitimate trade. They want to know whether the terms of the money resolution can give them comfort to discuss the way in which the Minister might approach the powers that it will give him—namely, being able to use "any compensation scheme". I hope that that would give the Minister the flexibility to design a fair compensation scheme because the measure would end what is currently fur farmers' legitimate activity. When they consider the estimates that have been published so far, many of them may think that £400,000 is a grossly inadequate sum of money for the losses that their businesses will occur.
  Mr. Forth: Does my right hon. Friend have any sense at this stage of whether those people who are involved in their currently legitimate trade are worried more about compensation for loss of revenue and profits in their on-going businesses or about the possible loss of asset value? Are they concerned about compensation on the capital side as well as on the revenue side? Does my right hon. Friend have anything to say about that?
  Mr. Jack: My right hon. Friend asks the question that fur farmers themselves are asking. They are concerned about the compensation for business assets to which the Minister referred, but they are equally concerned that it seems that no further money will be available for consequential losses when they have to cease trading, or to give funding to enable them to re-establish businesses in other agricultural operations. Many of those farms are located in sparsely populated areas where other activities might be hard to get off the ground.
  The farmers would like to hear some certainty on compensation from the Minister when he winds up the debate. I should like to know—and I am sure that the fur farmers would like to know—how the Minister calculates
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  the figure of £400,000 which is put about. Is he willing to consider further representations on that matter? Those issues will determine the fate of the principal Bill in its passage through the House. My duty this evening is to represent the interests and concerns of those fur farmers. They have had some indications of what their future might hold, but it is only right that, if Parliament takes away the legitimate livelihood of that group of people, there should be proper compensation. I hope that the Minister will give them some satisfaction.
  Mr. Gordon Prentice: Why did those considerations not apply under the previous Government when head de-boners were put out of business and received no compensation whatever?
  Mr. Jack: That may be a perfectly legitimate point to raise. However, my task is not to discuss yesterday's business; it is to discuss the terms of compensation under this measure. We are discussing that, not a previous event.
  10.27 pm
  Mr. Patrick Nicholls: Unless I am seriously provoked, I do not intend the detain the House for long. However, the fact that my right hon. Friends the Members for Bromley and Chislehurst (Mr. Forth) and for Fylde (Mr. Jack) have come to the House to speak on the measure this evening shows that it is one that needs a few moments' consideration.
  If I attempted to revisit the arguments made on Second Reading, you would rightly pull me up, Madam Speaker, but I think that I am entitled to make the point that in the Bill we are dealing not with the suppression of an illegal activity, or even the curtailment of a legal activity, but with an activity that was once legal and that will be removed at a stroke. In that context, the case for proper rates of compensation is overwhelming.
  When the Minister addressed the matter briefly on Second Reading, he said in reply to my right hon. and learned Friend the Member for Sleaford and North Hykeham (Mr. Hogg) that the Government could not
  "provide any open-ended commitment on income that could or could not be forgone in future."
  That is a perfectly fair point and I am sure that my right hon. Friends would accept it. However, the Minister continued:
  "To a certain extent, we have accepted the principle of income loss."
  He went on:
  "We are prepared to deal with that. I hope that that goes some way towards meeting the right hon. and learned Gentleman's point. The details will be addressed after the Bill has been passed."—[Official Report, 5 March 1999; Vol. 326, c. 1378.]
  It is very new Labour to say that things will be addressed after the Bill has been passed, but it is not quite good enough for this House. There is a middle way; no one is asking for compensation on income.[Interruption.] Labour Members have pinched so many other ideas over the years that it is not surprising that they should have pinched that language as well. There is a middle way between open-ended and perpetual compensation in respect of income and the profoundly unfair circumstances in which people find their source of income destroyed at a stroke. Even if Labour Members cannot bring their minds, such as they are, to bear on the

  127
  arguments, I want the Minister to tell the House that he is prepared to accede to the perfectly fair points that my right hon. Friends and I have put to him. The House is entitled to nothing less.
  10.30 pm
  The Parliamentary Secretary to the Ministry of Agriculture, Fisheries and Food (Mr. Elliot Morley): First, let me make it clear to the House that my hon. Friend the Member for Liverpool, Garston (Maria Eagle), who is the Bill's promoter, would like to have been here tonight, but she has had a tooth removed, so it would have been difficult for her to attend.
  The money resolution is tabled as a matter of course once a private Member's Bill has received its Second Reading. Details of compensation and how it is to be applied have been addressed in the explanatory notes to the Bill. The right hon. Member for Bromley and Chislehurst (Mr. Forth) spoke about the Lands Tribunal, but it should be recognised that the Lands Tribunal mechanism is an appeal mechanism. Under the formulation for compensation, if an individual farmer feels that the compensation is unfair or has not been properly dealt with, an appeal procedure is available that is independent of Government.
  Mr. Forth: I am grateful to the Minister for pointing out the obvious fact that the Lands Tribunal provides an appeal mechanism. However, the question that I wanted answered was whether the Minister would give an undertaking that there would be no additional expenditure by the Lands Tribunal in fulfilling its role as an appeal mechanism. My point is that the money resolution contains no provision for extra money for the Lands Tribunal.
  Mr. Morley: The Bill relates to a relatively limited number of people. The Lands Tribunal is already established and is funded to deal with such matters, so I do not believe that additional burdens will be imposed on the tribunal as a result of the Bill.
  The hon. Member for Isle of Wight (Dr. Brand) raised the issue of security. We had proposed and had put out for consultation a proposal to increase security measures on all fur farms as a licence condition. However, because the Bill has now been introduced by my hon. Friend the Member for Garston, I have announced that we shall defer
  128
  a decision on increased security measures. Additional expenditure that could have been incurred by fur farmers has therefore been deferred.
  Dr. Brand: Does the Minister agree that responsible fur farmers have already considerably increased their perimeter security in response to the risk of illegal break-ins? Should they not be compensated for such expenditure over the past few years?
  Mr. Morley: We are talking about an acceptable standard of compensation for all fur farmers. It may well be that some fur farmers have implemented security measures. However, the fact that mink are now indigenous to the UK wildlife population is a result of escapes from fur farms. There is a fur farm in the hon. Gentleman's constituency; given the vulnerability of fur farms, he will appreciate the importance of proper security measures being instituted to ensure that there are no releases.
  I understand the argument advanced by the right hon. Member for Fylde (Mr. Jack) in respect of compensation; he made a reasonable case. The way in which compensation is to be calculated has been laid out. The estimate of what the overall cost will be comes from MAFF's professional advisers and is based on calculations of fur farmers' current income and their assets.
  Mr. Jack: Can the Minister satisfy me on one small point? As far as MAFF is concerned, is the total sum available for that purpose cash-limited, or is it open-ended?
  Mr. Morley: Open-ended is ambitious. If the right hon. Gentleman fears that the £400,000 estimate is set in stone and cannot change one pound either way, I can give him an assurance that that is not the case.
  The hon. Member for Teignbridge (Mr. Nicholls) talked about compensation for income forgone. On Second Reading, I made it clear that, because the three-year breeding cycle of mink might be interrupted by the cut-off date of 2001, in such cases, we would be prepared to consider income lost or forgone. That has been made quite plain.
  Mr. Nicholls: Was the figure of £400,000 based on the assumption that there might be a two-year income loss? I cannot relate the £400,000 to the Minister's present comments; I cannot see the tie-in.
  Mr. Morley: The calculation was made on the basis of a one-year income loss. However, the details can be considered properly in Committee.
  Question put and agreed to.

  Road Traffic (Vehicle Testing) Bill [Money]
  Queen's recommendation having been signified—
  Motion made, and Question proposed,
  That, for the purposes of any Act resulting from the Road Traffic (Vehicle Testing) Bill, it is expedient to authorise—

  (a) the payment out of money provided by Parliament of—

  (i)any expenditure incurred by the Secretary of State in consequence of the provisions of the Act, and

  (ii)any increase attributable to the Act in the sums which by virtue of any other Act are payable out of money so provided;

  (b) the payment into the Consolidated Fund of—

  (i)any sums received by the Secretary of State by virtue of the provisions of the Act, and

  (ii)any increase attributable to the Act in the sums payable into that Fund under the Road Traffic Act 1988.—[Mr. Hill.]

  10.35 pm
  Mr. Eric Forth: This is an interesting measure, which received a brief consideration at Second Reading. The brevity was such that the House did not have time to assess adequately the implications of the measure's financial aspects. My hon. Friend the Member for Basingstoke (Mr. Hunter), the Bill's promoter, hinted that it had some not insignificant implications that we should explore briefly in the context of this money resolution.
  One might have expected a Ways and Means resolution. Will the Minister explain to the House why there is no such resolution, but a two-part provision under the terms of the money resolution? I shall explore that matter in a moment. Are any significant initial set-up costs anticipated as a consequence of the considerable measures in the Bill? My hon. Friend the Member for Basingstoke said—albeit briefly in reply to a question on Second Reading—that he expected some increase in the charge made for MOT testing of vehicles. He said that he thought that the increase would be about £1 per test and that that would go some way towards—or would completely cover—the additional cost of the measures in the Bill.
  That may or may not be so. First, I seek the Minister's assurance as to whether she believes the additional revenues raised will cover the total costs. Secondly, does she have anything to say about an undertaking regarding limits on the increase in the charge for MOT testing as a consequence of the Bill's provisions? That information would be useful. I want to know what initial set-up costs will be involved. Will they be covered entirely by the Treasury under this money resolution or will there be an attempt to recover those moneys on behalf of the taxpayer through additional charges for MOT testing? That would involve not just the equipment required, but staff training and perhaps even the recruitment of additional staff. I seek the Minister's assurances.
  My main question is what will be the relationship between A and B: the payment out of money provided by Parliament for any expenditure incurred, and the payment into the Consolidated Fund of any sums received by the Secretary of State by virtue of provisions of the legislation. In other words, would moneys coming in be expected fully to cover the costs or would there be a limitation on the charges and the incoming moneys?
  130
  I can put that another way. Let us suppose that both the initial set-up costs and the running costs associated with the Bill's provisions were much greater than those envisaged initially. Would the Minister expect the additional charge for MOT tests to go up and up limitlessly in order to cover the costs, no matter what they were? Will the hapless motorist, who is obliged to submit his vehicle for an MOT test every year, be expected to pay any additional costs arising from the requirements of the Bill?
  That is a very important question because it goes to the heart of the matter. Will the measure be a burden on the motorist for virtually no return, or do the Government expect to pay for it so long as the initial costs remain as they estimated?
  Mr. Andrew Lansley: Has my right hon. Friend noticed, as I have, that the explanatory notes accompanying the Bill use the word "corresponding" to describe the relationship between the increased expenditure and the charges that are levied for the MOT fee? The Government's view seems to be that there is a direct, "corresponding" relationship between Government expenditure and charges.
  Mr. Forth: I am grateful to my hon. Friend for that point. That worries me. We want to hear from the Minister, as do tens of millions of motorists, whether all the costs—initial and running—of the measure will be passed on to the motorist by additional charges for MOT testing or whether she will give protection to motorists by saying that the Government will absorb some of the costs.
  That point is particularly apposite now, given the difficulties in which the Government find themselves on additional costs for motorists and users of commercial vehicles. The Government are already embroiled in that argument, and there was a demonstration today by road hauliers. Hidden within this money resolution is the potential for yet further increases in charges on the motorist for compulsory annual MOT testing. We seek reassurance on that.
  I take this opportunity to give the Minister a chance to reassure the country's motorists about the likely outcome of this measure. It would not be going too far to say that the answers that we receive to our questions on the money resolution will read across into the Bill's later stages and considerably influence hon. Members' decision whether to give it a fair wind when it returns to the House after its consideration in Committee. There is a degree of importance attached, as ever, to the information that we seek on the money resolution.
  10.42 pm
  Mr. Andrew Lansley: I shall follow the remarks of my right hon. Friend the Member for Bromley and Chislehurst (Mr. Forth) with one or two specific points because I agree with his general proposition about the money resolution.
  First, the legislation is designed not to achieve the computerisation of the MOT vehicle testing system, but to allow the Secretary of State to use the material generated through that system to a greater extent. The money resolution and the explanatory notes that accompany the Bill make it clear that £22 million will be transferred into the MOT test certificate charges annually. That is where

  131
  the figure of an extra £1 per test comes from, because there are about 22 million tests a year. That expenditure is, of course, directly consequent not on the Bill, but on the computerisation project. Yet the Bill and its money resolution are designed to give the Government a licence to increase the expenditure on the computerisation project and, as a consequence, obtain a "corresponding"—I use that word because it is used in the explanatory notes—increase in the fee that is charged to motorists.
  Mr. Forth: My hon. Friend has, typically, closely studied the Bill and its provisions. Is he satisfied that the figures mentioned are a limit on the likely expenditure and would, therefore, give a guarantee to motorists, or does he suspect that they are merely indicative and, if the costs were significantly higher, they would be passed on to the motorist?
  Mr. Lansley: The latter rendition is more accurate, and the figures in the explanatory notes are indicative. It would be interesting if the Minister were to say that she is sure that the expenditure on the computerisation project will not exceed £22 million, and motorists might find that reassuring.
  I fear, however, that the measure effectively gives the Government carte blanche to spend money and recover it through the fees. Of course, if Ministers wanted to do so, they would have to introduce amending regulations to raise the limit of £30.87 on the cost of an MOT certificate. They might well do so by statutory instrument at a later stage. They would have relied on the fact that the measure had been passed earlier without the proper scrutiny of the House, which clearly would have happened in the absence of this debate.
  My second point is that the £22 million that motorists will have to pay is not the sum total. Although it does not constitute public expenditure, the Bill makes it pretty clear that a cost will be imposed on the estimated 19,000 garages that will have to undertake training activity. That will amount to another £5 million in start-up costs.
  These matters are set in an unfortunate context, to which my right hon. Friend the Member for Bromley and Chislehurst referred. I shall not elaborate on it because that would be outside the strict confines of the debate. However, the total level of taxes on motorists is an estimated £33,000 million. As the House will know, only a small proportion of that sum is spent directly on roads and the maintenance and administration of the road traffic system.
  Mr. Deputy Speaker (Mr. Michael Lord): Order. Having just said that he would not stray beyond the bounds of the debate, the hon. Gentleman is starting to do so. I ask him to come within the bounds of the debate.
  Mr. Lansley: Yes, Mr. Deputy Speaker.
  I ask whether it is beyond the bounds of the Government to accept that the cost of the computerisation project of £22 million, or whatever it turns out to be, could not be accommodated within the enormous sums that are already raised from the motorist by one route or another.
  It is clear that one of the purposes of the proposed legislation is to allow the Secretary of State to provide the data generated for such persons as he sees fit. It is—
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  [Interruption.] The Government Whip, who is normally silent on these matters, seems to understand what I am saying. He will know that clause 2(6) makes the necessary provision. Presumably he will be able to enlighten the House on the terms on which the Secretary of State is proposing to make the data available. We know that he will be selling the information. However, it appears from the explanatory notes that the Government do not foresee a reduction in the cost to motorists of the MOT test certificate, although the Secretary of State will be able to generate income through the selling Of data that are generated through the MOT testing system.
  The money resolution is required not to generate money to support the Bill, but to support the computerisation project, which could proceed by way of secondary rather than primary legislation. Motorists will have to pay the bill for the project although they pay enormous bills in any event. This is just one of so many computerisation projects that are presumably intended initially to reduce costs but result in increasing them.
  Finally, the Government are proposing through the proposed legislation to exploit a money-making opportunity. However, nowhere in the explanatory notes or the money resolution is there an indication that the Government could raise money and defray the costs to the motorist of the MOT testing system. I suspect that rather the opposite is the case and that more money will be put into the pocket of Government in addition to whatever is asked of the motorist.
  10.48 pm
  The Parliamentary Under-Secretary of State for the Environment, Transport and the Regions (Ms Glenda Jackson): I begin by addressing the concerns raised by the right hon. Member for Bromley and Chislehurst (Mr. Forth) and the hon. Member for South Cambridgeshire (Mr. Lansley), which are exclusively about the costs of the computerisation of the MOT test. Both the right hon. Gentleman and the hon. Gentleman entirely ignored the benefits that will accrue to motorists from the modernisation that will come from the scheme. These are benefits that relate to reducing crime and the potential for crime, including fraud. There is the possibility that in future we shall be able over the telephone, for example, to make the relevant arrangements that apply to our vehicles.
  It is not unusual for Opposition Members to be concerned exclusively with the cost of everything and the value of nothing, and their overriding consideration is the cost of computerisation. As I am sure the House is aware, computerisation is being procured under a private partnership contract. We hope that the cost will be less than £22 million a year. However, we wish to ensure, as is par for the course with the Government, that the best possible value is gained from the contract. The taxpayer will not foot the bill. The costs will be met in their entirety through a moderate increase in the cost of obtaining an MOT test. It is estimated that the fee will increase by no more than £1 a test, which is one thirtieth of the existing cost.
  Mr. Forth: I am grateful to the Minister. She seems to be saying that the fees will be increased to cover whatever the costs may be. That is an important aspect of what my hon. Friend the Member for South Cambridgeshire

  133
  (Mr. Lansley) and I were asking. If the Minister is saying that, as I think she has just said, that means that she cannot guarantee that the increase in the MOT will be only £1. It could end up being considerably more than that, if the costs were more than are now estimated.
  Ms Jackson: Given the record of the Conservatives, I have no doubt that, if they proposed a computerisation project, the charges would be open-ended and would run for ever. As I have made abundantly clear, the Government are driven by the ethic—I believe it is an ethic—of best value.
  It is proposed, rightly, that after computerisation it will be possible for information to be sold. Of course the Government will ensure conformity to data protection legislation. In no case would information about vehicle presenters or vehicle keepers be available for sale, as such information cannot and will not be held on the database. In response to the hon. Member for South Cambridgeshire, the selling of such data to prescribed persons will be under regulations. The income from the sale of information will be used to offset the costs of the computerisation scheme.
  Another concern raised by the hon. Member for South Cambridgeshire was what he perceived as increased starting-up costs for MOT testing centres and costs for training inspectors. We estimate that the average start-up costs will be no more than £500.
  The first part of the financial resolution dealing with expenditure is a standard provision authorising any expenditure incurred by the Secretary of State in consequence of any provision in the Bill. In response to questions from the right hon. Member for Bromley and Chislehurst and the hon. Member for South Cambridgeshire, I have already touched on why such expenditure will arise. No new net public expenditure burdens are forecast to arise as a result of the establishment and running of the proposed MOT database. The costs will be passed on to the consumer, as I have said. We perceive the costs as being very small.
  The increase will apply to vehicles run by local authorities as well as by private motorists, although many local authorities run their own MOT testing stations and therefore test their own vehicle fleets.
  The second part of the provision dealing with expenditure reflects the possibility that local authorities may consequently incur additional expenditure. Another head of expenditure likely to arise as a result of the Bill's provisions will in future require organisations and people involved in MOT testing to meet the costs to the Vehicle Inspectorate of providing MOT training and authorisation for them. As I said, we estimate such start-up costs as being no more than £500.
  As an increase in local authority spending could mean an increase in revenue support grant, and, as the grant is payable under local authority legislation rather than under the Road Traffic Act 1988, the provision needs to be included in the Bill. However, as I have made clear, any new burdens arising are likely to be extremely small in the context of local authority spending generally.
  The first part of the provision dealing with potential sums likely to be received by the Secretary of State mirrors the existing provision in section 84(4) of the Road Traffic Act 1988 as regards the destination of sums received arising in pursuance of sections 45 and 46 of the
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  Act, among others, as currently drafted. The destination of sums received by the Government in such circumstances is generally to the Consolidated Fund, and that is provided for in the Bill.
  In practice, the income streams arising from the Bill—the most significant of which will simply be the replacement of income from the sale of blank pads of MOT certificates to testing stations with income from the notification by them of results of tests to the MOT database—will pass into the Vehicle Inspectorate's trading fund. It is standard practice for that to happen in respect of Government agency trading funds, in accordance with the Government Trading Funds Act 1973.
  The second part of the provision dealing with sums that are likely to be received by the Secretary of State is directed to potential new sources of income. I have already touched on the most significant of those, and that income will, in turn, be used to offset the costs of introducing computerisation into the MOT scheme.
  I regret that the promoter of the Bill is not present in the House.
  Question put and agreed to.

  FOREIGN AFFAIRS COMMITTEE
  Ordered,
  That Mr. Ernie Ross be discharged from the Foreign Affairs Committee and Dr. Phyllis Starkey be added to the Committee.—[Mr. Tyler, on behalf of the Committee of Selection.]

PETITION

  Palace Theatre (Westcliff)
  10.56 pm
  Mr. David Amess: I beg the leave of the House to present a petition, which has been signed by 6,000 of my constituents in Southend, West and surrounding areas.
  Mr. Steve McCabe: Basildon?
  Mr. Amess: Yes, perhaps including areas of Basildon.
  My constituents wish to express their distress at the closure of the Palace theatre in Westcliff. That beautiful Edwardian theatre was given to the town by Gertrude Emily Mouliott in 1943, and the 6,000 petitioners are very distressed that, having enjoyed productions for many years, the theatre remains in darkness.
  The petition states:
  To the House of Commons.
  The Petition of the association known as the Palace Theatre (Westcliff)
  Declares that the Palace Theatre (Westcliff) is closing and may not operate in the future as a predominantly producing theatre.
  The Petitioners therefore request that the House of Commons urge the Secretary of State for Culture, Media and Sport to take steps to ensure that theatres such as the Palace Theatre are able to remain open as predominantly producing theatres.
  And the Petitioners remain etc.
  To lie upon the Table.

  Contaminated Land (Barton upon Humber)
  Motion made, and Question proposed, That this House do now adjourn.—[Mr. Hill.]
  10.57 pm
  Shona McIsaac: This debate centres on contaminated land in the town of Barton upon Humber on the south bank of the River Humber. That market town has a rich history and boasts 200 listed buildings. On part of the riverbank, the Far Ings nature reserve attracts many visitors from all over the world, but a shadow has been cast over the local council's plans to regenerate the town and promote its wealth of attributes. That shadow is cast by a 35-hectare contaminated site. The soil and ground water are contaminated by heavy metals, following the closure of agrochemical factories on the site. The leaching of those metals into the River Humber is a cause of serious concern.
  Although what is known as the BritAg site was owned by ICI, it has absolutely no responsibility for cleaning it up. That responsibility lies with North Lincolnshire council which, through no fault of its own, has fallen foul of the "polluter pays" principle. The crux of my case is, should that principle be extended to the council tax payers of North Lincolnshire because of indemnities signed many years ago by Glanford borough council, which no longer exists?
  I hope to show my hon. Friend the Minister that my repeated requests for assistance for North Lincolnshire council to decontaminate the land are warranted. He and other Ministers in the Department have heard about this case many times, through my persistent representations. There have been equally persistent representations from my hon. Friend the Member for Brigg and Goole (Mr. Cawsey) and my hon. Friend the Member for Scunthorpe (Mr. Morley), the Parliamentary Secretary to the Ministry of Agriculture, Fisheries and Food, whom I am pleased to see in the Chamber.
  Let me explain how North Lincolnshire ended up in such an invidious no-win position. Following the closure of the BritAg factory, Tory-controlled Glanford borough council purchased part of the site from ICI in 1991. The other part was purchased from MTM, which also operated on the site. The council paid £335,000 for the site, and almost £140,000 was paid in consultancy and administration fees. Some superficial works were carried out at the time to make the site secure.
  In purchasing the site, Glanford indemnified ICI from any clean-up costs. ICI tells me that it will seek such indemnities wherever it can. I hope that my hon. Friend the Minister will tell me that he will do all that he can to end such practices. They may be legally binding, but, in this day and age, we should not be letting polluters off the hook.
  Having purchased the site, Glanford came up with an expensive plan for after-use, which would have cost £34 million. We are talking about hard after-use, involving more expensive reclamation and centred on industrial units. At the time, Glanford's existing industrial units were running at a vacancy rate of about 70 per cent., but it presented its plans with no firm guarantee of where the money would come from to carry out the work. A scheme existed enabling councils to bid for derelict land
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  grants to clean up such sites, but Glanford did not know whether it would qualify in connection with the £34 million scheme.
  Worry set in. Glanford began sending letters to the office of the Department of the Environment, Transport and the Regions in Leeds, asking whether the site would qualify for a 100 per cent. reclamation grant. A reply dated 19 August 1993 stated:
  "We have been advised by colleagues…that the withdrawal of assisted area status can have no effect on a local authority's entitlement to grant at 100 per cent. where schemes have already been approved."
  That is crucial to the argument, because the £34 million scheme had never actually been approved. A reply that I received today from my hon. Friend the Minister stated that, when English Partnerships was established in 1994, it took responsibility for the derelict land grant scheme, including projects such as this.
  Glanford thought that it would get the money, but, in fact, no one had ever approved the project. Local government reorganisation also came into the equation. Glanford was to be abolished; Humberside, the county council, was to go; and four new unitary authorities were to be created, including North Lincolnshire. Following the May 1995 council elections, Labour won control of the new authority, and, following a "shadow year", the new council was due to "go live" in April 1996.
  Back at the ranch, Glanford purchased a further six acres of contaminated land on the site—the former MTM works which I mentioned earlier. It purchased the land for £1 in December 1995. Again, the polluters were indemnified. It astounds me that the council purchased the land knowing that its days were numbered, and that nothing was likely to be done on the site before the new authority took over about 12 weeks later. Such activities merit an inquiry to discover what Glanford was getting up to in the early 1990s. I reiterate that we must put a stop to indemnities that absolve polluters from paying for decontamination.
  In April 1996, North Lincolnshire council inherited severely contaminated land and found itself—through no fault of its own—in the shoes of the polluter, and hence subject to the "polluter pays" principle. Wanting to get stuck in and to sort out the mess, North Lincolnshire deemed the former Glanford plans to be expensive and unsustainable, and devised a more practicable scheme for after-use. The current proposals will create a more attractive environment in Barton upon Humber by removing the contaminated land and water to create a country park known as Water's Edge. That is the key to the regeneration of the whole waterside area and crucial to single regeneration budget bids in the area.
  Water's Edge park will mirror the attractive and popular Far Ings reserve further along the riverbank. Reedbeds will be restored, and woodlands and hedgerows established. Essentially, it will provide for a continuous Humber wetland environment on the riverbank at Barton upon Humber—a unique visitor attraction. It will provide a focus for nearby sites of historic interest in the town. The scheme is sustainable. For example, a windmill will act as a source of energy and the energy needs of the visitor centre will be met through solar power.
  The council has good working relations with the many partners involved. For example, Anglian Water will assist with the after-use by using its new deal environment task force on the site. I praise the current council for its efforts to resolve the mess that it has inherited.

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  The stumbling block, of course, is decontamination of the land. What assurances can the Minister give me and my residents that assistance is available? Again, I assert that council tax payers in North Lincolnshire are not the polluters and, thus, should not have to foot the bill for decontamination. The residents of the area should not have to pay for the incompetence of a council that no longer exists, or have to pay to let a multinational firm off the hook. I hope that the Minister will be able to offer my constituents, and those of my hon. Friends the Members for Scunthorpe and for Brigg and Goole, some guarantees that he will be able to assist North Lincolnshire council.
  11.6 pm
  The Parliamentary Under-Secretary of State for the Environment, Transport and the Regions (Mr. Alan Meale): I am grateful to my hon. Friend the Member for Cleethorpes (Shona McIsaac) for raising the important issue of contaminated land at Barton upon Humber. She mentioned persistence; persistent she is. She has raised the issue with me and with my predecessor on a number of occasions. It is to her credit that she has done so. Many new Members could learn from the persistent manner in which she has carried out her role as the local Member of Parliament. I also pay tribute to the Parliamentary Secretary to the Ministry of Agriculture, Fisheries and Food, my hon. Friend the Member for Scunthorpe (Mr. Morley), who for many years has raised this and other issues of contamination in the region, and to my hon. Friend the Member for Brigg and Goole (Mr. Cawsey).
  As we have heard, the Water's Edge site at Barton upon Humber represents bad news. The site is part of the unfortunate side of our industrial past. It was first used as a clay-pit and then as a chemical factory. That has left the land seriously contaminated, as my hon. Friend the Member for Cleethorpes has rightly pointed out. That contamination is leaching off site into the Barton haven and River Humber and threatens the chalk aquifer underneath the site. It "neuters" the site and prevents it from being returned to a worthwhile use.
  Further bad news is that the potential cost of reclaiming the site runs into several million pounds. The complexity of the technical and legal issues involved makes reclaiming the site that much harder. However, I hope to give the House some better news in respect of that dilemma.
  We have systems in place to stop the creation of such problems. Many of the current problems on the site are the result of unregulated dumping of chemical by-products and wastes. I am pleased that such practices are no longer allowed. Furthermore, the Environment Agency enforces a stricter system of waste management licensing, which ensures that waste materials are properly treated and disposed of.
  The chemical factories that were once on the site would have been subject to environmental controls under the system of integrated pollution control. That system will be enhanced later this year under the European directive on integrated pollution prevention and control. The House will be pleased to learn that my Department has recently carried out a third round of consultation on how to implement the directive and a Bill is under discussion in another place.
  The key aspect of IPPC is that, when a licensed installation closes, operators will not be able simply to walk away from the site—as they have done in the case
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  that we are debating—but will be under a legal obligation to clean up any decontamination and to restore the site to a satisfactory condition, which definitely did not happen at Water's Edge.
  I am sure that the House will join me and my hon. Friend the Member for Cleethorpes in saying that we hope that not many sites are as bad as Water's Edge. The Deputy Prime Minister himself has, in very strong terms, commented to me that even one contaminated site is one too many, and that it is important that we continue identifying such sites and taking the necessary action to deal with contamination at them. The sentiment is particularly apt in the case of Water's Edge, as the Deputy Prime Minister represents a constituency that is not very far from it.
  Later this year, we shall bring into force a new statutory regime for contaminated land, implementing provisions in the Environment Act 1995. The provisions will place on local authorities and the Environment Agency a clear duty to find problem sites and will provide real teeth in ensuring that proper remediation is done. We are also working on improving the availability of technical solutions to the problems of land contamination.
  My Department—with the Environment Agency, English Partnerships, its Northern Ireland, Wales and Scotland counterparts, industry and the science research councils—is launching a new initiative, entitled CLAIRE, which stands for contaminated land applications in real environments, which will build a network of demonstration sites for innovative remediation technologies.
  Although all that may be better news for the future, and we should not be creating any more Water's Edges, we still have to contend with the task of dealing with Water's Edge itself. On that matter, I can give my hon. Friend the Member for Cleethorpes—for her persistent and very hard work on the issue—some good news.
  North Lincolnshire council, which owns the site, has been working up proposals on sorting out the problems at the site: to deal with water pollution; to create—as my hon. Friend the Member for Cleethorpes mentioned—new wildlife habitats; and to open the site for public amenity use. Like her, I think that those proposals are very imaginative and worth while, and that they will create a major new environmental asset out of a currently horrible environmental liability.
  The proposals have been in gestation for some time. As my hon. Friend said, part of the site was purchased, in 1991, by Glanford borough council. The purchase was funded by the derelict land grant, provided by the former Department of the Environment. More recently, English Partnerships has provided further grant support for site investigation and design work. In the 1997–98 financial year, £150,000 was paid for the work to be done.
  We are now able to make real progress. Last week, North Lincolnshire council submitted to my Department a formal bid for funding support, under our contaminated land supplementary credit approval programme. SCAs give local authorities permission to borrow money to fund specified capital works. The cost of servicing the debt is taken into account in local authorities' revenue funding in subsequent years.

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  The contaminated land SCA programme exists to support work by local authorities in dealing with the environmental risks caused by sites for which local authorities themselves are responsible. That might apply when they own the site or contaminated it themselves.
  Funding support is available also for orphan sites, where a local authority or the Environment Agency has to deal with a site from which the original polluters have long since disappeared and at which the current owners are not able to pay for remediation.
  In the case of Water's Edge, as my hon. Friend said, the site is owned by North Lincolnshire council. The council's bid has been for the first stage of works—to stop current pollution of the Barton haven and the River Humber, and to protect the aquifer under the site. It is a three-year programme which is expected to cost £5.7 million, with £1.2 to be spent in the next financial year.
  Discussions are continuing with English Partnerships on funding for the next stage of works—which will be to improve the site's natural habitats, and to open the site, as a water park, to public access. I am pleased to be able to tell my hon. Friend that, in consultation with my colleagues in the Department, I have approved the bid for the supplementary credit approval to fund work at Water's Edge in the coming financial year. My officials will write to North Lincolnshire council tomorrow to confirm that.
  Shona McIsaac: I thank my hon. Friend for that information. I am delighted that the SCAs have been
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  made available. That is excellent news for my local authority. Will he confirm that the SCA is not borrowing and will not be a debt landed on the council, as some people wrongly assume?
  Mr. Meale: My hon. Friend is correct. It is borrowing, but it is set against and taken into consideration with other money from central sources. Anyone who tries to give the impression that yet another debt is being laid on the community has misinterpreted the reason for such funding, which is to clear up contamination in special circumstances or to deal with extra needs that an area may have to sort out for its constituents. I understand that some people have been making false allegations about the credit approvals that the Government have allocated. Those in North Lincolnshire council are the best people to judge such a decision. There are many other sites around the country for which local authorities want SCAs. If they were given approval, there would be a clapping of hands and joyous sounds coming from those directions.
  I hope that the work can start without further delay. If we debate contaminated land at Barton upon Humber again, it will be to trumpet the success of the reclamation project.
  I congratulate my hon. Friend on her persistence and endeavour. I pay tribute to my hon. Friend the Member for Brigg and Goole and my hon. Friend the Member for Scunthorpe, who is on the Front Bench, for all their hard work to start the process of remediation and clear-up of the contaminated land.
  Question put and agreed to.
  Adjourned accordingly at seventeen minutes past Eleven o'clock.