Commons Sitting of 10 April 2002

Preamble
The House met at half-past Two o'clock
PRAYERS
[MR. SPEAKER in the Chair]
PRAYERS
  PRIVATE BUSINESS

    CITY OF LONDON (WARD ELECTIONS) BILL (BY ORDER)
    Order for further consideration, as amended, read.
    To be further considered on Monday 15 April at Seven o'clock.

    MERSEY TUNNELS BILL (BY ORDER)
    Order for Second Reading read.
    To be read a Second time on Wednesday 17 April.

Oral Answers to Questions
  WALES
  The Secretary of State was asked—
  WALES

    RAF St. Athan
    Mr. John Smith: What discussions he has had with ministerial colleagues in the Ministry of Defence about Royal Air Force St. Athan. [44146]
    The Secretary of State for Wales (Mr. Paul Murphy): I have regular discussions with my ministerial colleagues at the Ministry of Defence. I very much welcome the recent announcement by the Minister for the Armed Forces that the Welsh Guards are to be relocated to RAF St. Athan, in my hon. Friend's constituency, from May 2003. I am also pleased that the Ministry of Defence and the Welsh Development Agency will be working together on proposals to develop the site facilities, including the possibility of establishing an aerospace park at St. Athan.
    Mr. Smith: I warmly thank my right hon. Friend for that reply. The development at RAF St. Athan, and especially the creation of a world-beating aerospace park, is indeed wonderful news. Will my right hon. Friend join me in welcoming the news this week that there will be no need, in that multi-million pound development, to extend the runway at RAF St. Athan, which I know is a great concern for the local community?
    Now that the Defence Aviation Repair Agency forms the central part of that development, will my right hon. Friend, when he next meets his ministerial colleagues, point out that as DARA has become a trading company, it must be allowed to trade fairly not only with the private sector but with other arms of the Ministry of Defence?
    Mr. Murphy: I am grateful to my hon. Friend for his comments. He will of course welcome the fact that the Welsh Guards are to come to RAF St. Athan, because it means that some 600 personnel will come to his constituency, which will obviously be a big boost to the local economy. In addition, the working relationship between the Government and the National Assembly, through the Welsh Development Agency, means that the development will be of enormous significance to the Vale of Glamorgan and surrounding areas. I pay tribute in particular to my hon. Friend for all the work that he has put into the project.
    Mr. James Gray: We, too, welcome the fact that the Welsh Guards will be based at RAF

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    St. Athan, and that they will be based in Wales for the first time in the 83 years of their existence. However, does the Secretary of State agree with Welshman and Welsh Guardsman Simon Weston, who recently said that it would be pure folly for the Government not to mark the 20th anniversary of our great victory in the Falkland Islands? What does the right hon. Gentleman intend to do to make certain that the part played by the Welsh Guards in that victory is suitably marked?
    Mr. Murphy: I take the hon. Gentleman's point, and I am glad that he welcomes the Welsh Guards' return to Wales after nearly a century. I shall certainly take up his point with my colleagues in the Ministry of Defence and, of course, with the Assembly.
    Chris Ruane: I welcome my right hon. Friend's efforts to preserve defence industry jobs at St. Athan. Is he aware that in the league table for defence spending in the UK, the north-east is top, with spending of over £700 per person, and Wales is bottom, with less than £120 per person? What efforts will he make to close that gap?
    Mr. Murphy: I have visited my hon. Friend's constituency on a number of occasions. The aerospace developments in north-east Wales are particularly significant for his constituents and others, but I am sure that he and others will welcome today's news in the Western Mail that 267 regional selective assistance projects have been approved in Wales, which is a record number; that manufacturing production figures are up for the first time since the summer; and that business confidence in Wales is better than it has been for many years.

    Barnett Formula
    Mr. Bill Wiggin: What plans he has to change the Barnett formula to ensure equality of spending per head on health between Wales and England. [44147]
    David Taylor: What recent discussions he has had with the First Secretary on the operation of the Barnett formula: and if he will make a statement. [44148]
    The Secretary of State for Wales (Mr. Paul Murphy): I meet the First Minister regularly to discuss a range of issues. The Government keep the operation of the Barnett formula under review, but have no plans to change it.
    Mr. Wiggin: I am grateful to the Secretary of State for his answer but I wish that he had said a little more about health spending. He is probably not aware that the new Hereford hospital will have 120 fewer acute beds than the current one and that 10 per cent. of the hospital's patients come from Wales. The primary care trust needs a 4.1 per cent. increase in health spending, which is £6.5 million. Will the right hon. Gentleman make representations to Health Ministers and the Treasury to ensure that Hereford hospital has 120 more acute beds, which will benefit not only my constituents but the people of Wales?
    Mr. Murphy: I suspect that not many hon. Members would see the significance of Hereford hospital, but the
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    hon. Gentleman is of course right that many patients come from mid-Wales to Hereford—and Shrewsbury—for treatment. He made his points well and I will make sure that the Minister for Health and Social Services in Wales is aware of them. However, the Assembly has given the health service in Wales £3.5 billion in 2002 and 2003, and a further £49 million for 2003–04. That is an enormous sum to be spent on the health service. I only wish that the Conservative party had some ideas about where it would get the money that it wants to improve the health service.
    David Taylor: The perverse nature of the Government grant distribution system within the United Kingdom must not be allowed to continue. The Secretary of State knows that even though Wales's population of 2.9 million is identical in aggregate to that of the east midlands counties of Leicestershire, Derbyshire and Nottinghamshire pre-1997, and the two regions have similar economic and social profiles, the level of public expenditure in Wales is significantly higher. Is not a full-scale economic and social assessment long overdue to form the basis for regional distribution, and should not the Barnett formula be thrown on the same bonfire as its English standard spending assessment cousin?
    Mr. Murphy: No, I do not agree that the Barnett formula should he scrapped—far from it. My hon. Friend is aware that the Barnett formula was established 20-odd years ago and that it has served us well under both Labour and Conservative Governments. As far as I know, the Conservatives have no plans to change the Barnett formula, nor did they when they were in office for all those years, and it was of course a Labour Government who introduced the formula. It prevents constant haggling about finance every year, and it deals only with changes in spending levels. My hon. Friend is also aware that one of the reasons—the chief reason—why Barnett was established was that deprivation in Scotland and especially in Wales was acute and needed to be tackled. The Barnett formula has done that very well.
    Mr. Elfyn Llwyd: The right hon. Gentleman is wrong. There is currently great deprivation in Wales—look at the fact that a good part of the country is covered by objective 1. Let me respectfully remind the right hon. Gentleman that Lord Barnett said that the Barnett formula was not a formula, and that it was meant to be temporary. It is time that we revisited it and introduced a proper needs-based formula, which is what is really needed in Wales and other parts of the UK.
    Mr. Murphy: There is very little evidence to suggest that Wales would be better off as a consequence of such a change. Some time ago in the Assembly, the Minister for Finance, Local Government and Communities was asked precisely the same question. She replied:
    "On the Barnett formula itself, if I were convinced that reopening the Barnett issue would be of benefit to Wales, I would do that. However, I am not yet convinced of that."
    The reality is that it has served us well and there is no need to change it.
    Mr. Win Griffiths: I concur with my right hon. Friend the Secretary of State. May I suggest that, in fact, the complexity of changing from Barnett to some other formula would result in much wailing and gnashing

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    of teeth throughout the United Kingdom, as we in Wales found when changes were made to the local government formula and all the new arrangements were regarded as worse than the originals?
    Mr. Murphy: The House should take note of my hon. Friend's words. As a former Welsh Office Minister before devolution, he is conscious of the fact that Wales benefited from the formula then. As it does now. I remind the House that because the formula ensures that changes per head are set at the same level in Wales as in England, the idea that the formula disadvantages England is simply wrong.
    Lembit Öpik: None the less, I am sure that the Secretary of State agrees that Wales could do with more money if it were available, and that the best way to achieve that is to elect a Liberal Democrat Government, who would raise direct taxation and put the money into public services. Until that great day, is the right hon. Gentleman at least willing to consider holding a cross-party debate on whether it is possible to produce a more level playing field for Wales, perhaps by reviewing the Barnett formula, accepting that if he can prove the points that he has already made, there is no need for change?
    Mr. Murphy: I suspect that I will have long retired from politics before we reach that great day of a Liberal Democrat Government. While we are waiting, I point out to the hon. Gentleman that some days ago his party discussed its shadow Budget. The hon. Member for Truro and St. Austell (Matthew Taylor)—I assume that this is agreed by Peter Black, who is the hon. Gentleman's Assembly spokesman on finance—is happy to commit a future Lib-Dem Government to using the Barnett formula. I assume, then, that the hon. Gentleman would agree that the formula gives Wales more money.
    Alan Howarth: Does my right hon. Friend agree that resources for health care should be allocated on the basis of need, and not, as the hon. Member for Leominster (Mr. Wiggin) suggests, on the basis of a crude head count?
    Does my right hon. Friend also agree that there is a correlation between household income and health? Therefore, notwithstanding the impressive growth in prosperity in Wales since 1997, so long as average household incomes are lower in Wales than elsewhere, it will be appropriate that more should be spent on health care in Wales.
    Mr. Murphy: My right hon. Friend is precisely right. He is aware, too, that it is for the Assembly to decide how much money is spent on the NHS in Wales, irrespective of what the Barnett formula gives Wales.
    Average life expectancy in Wales is about a year less than in England, and the proportion of the working-age population with a limiting long-term illness is about 50 per cent. greater than in England. These are fundamental problems that can be addressed only by proper resourcing, and that is precisely what a Labour Government and a Labour Assembly are doing.
    Mr. Nigel Evans: Is it not a fact that through the Barnett formula more money per patient is
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    spent on the NHS in Wales than in England? Is it not also a fact that the NHS in Wales is in a worse state than it is in England? There are far too many people waiting far too long for treatment in Wales because there is an enormous shortage of consultants and nurses. John Osborne, the ear, nose and throat specialist at Ysbty Glan Clwyd, said:
    "It is a more stressful job today, and people are retiring early. Money for new developments is virtually nil. That means the service stands still or goes backwards."
    Is he right?
    Mr. Murphy: The hon. Gentleman is entirely wrong in saying that the Barnett formula determines the amount of money spent per person on the health service in Wales. It does not do that.
    Mr. Evans: More money is spent in Wales.
    Mr. Murphy: Indeed, more money is spent on the NHS in Wales, but that is not because of the Barnett formula. The formula and the changes to it give Wales extra money. It is for the Assembly to decide how it distributes that money. It has given extra money to the health service in Wales precisely because of the points to which I alluded.
    The issue is not only about money, but about reform of the health service. I note that the hon. Gentleman and his colleagues in the Conservative party voted against the reform proposals when they were before the House.
    Mr. Evans: The Secretary of State agrees that more money is being spent per patient in Wales than in England, yet there are many shortages. The British Medical Association in Wales estimates that it needs a 30 to 50 per cent. increase in the number of consultants to improve hospital services. Vacancy rates in cancer are 24 per cent. In mental health, the rate is 17 per cent. and in radiology it is 13 per cent. We have eight consultant neurologists, but the British Association of Neurologists says that we need 28.
    After five years of a Labour Government, the Government are scouring Germany for doctors and Spain for nurses, while British patients are being sent to France for operations. Children in Wales wait up to nine years for non-emergency plastic surgery—the worst waiting time in the developed world. Is it not time to cut the spin, to stop the sloganising and to deliver a first-rate NHS, which is what the Government promised in the first place?
    Mr. Murphy: Why does the hon. Gentleman not understand that more money is spent on the health service in Wales because of the neglect of the health service for nearly two decades? That is the reason behind it. The hon. Gentleman should understand also that over the past 12 months, waiting for cardiac surgery fell by 38.6 per cent. Waiting for orthopaedic surgery fell by 10.6 per cent. and the number of patients waiting for cataract surgery fell by 25 per cent.—all during the winter months. In addition, the hon. Gentleman is wrong about personnel. We now have 400 more doctors, and 500 extra nurses are being trained in Wales this year. By 2004, there will be

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    4,300 more nurses, more midwives and more health visitors. That is far more than there ever were under the Conservative Government.
    Llew Smith: The Secretary of State will be aware that, in Blaenau Gwent, we have some of the worst health problems in the United Kingdom. I am sure that he will also accept that if we are to tackle bad health, we must tackle poverty. With that in mind, will he have a quiet word with the First Secretary about the money that he is wasting on a millennium arts centre and on the new Noddy-like transport system whose sole object seems to be to get Assembly Members from the Assembly to the council chambers without getting wet? Will he suggest that those schemes be dropped and the money reinvested in tackling health and poverty in areas such as Blaenau Gwent?
    Mr. Murphy: I shall certainly have a quiet word with the First Minister, although how quiet it will be on such issues is anybody's guess. With regard to my hon. Friend's constituency, as a valley Member of Parliament myself, I am aware of the health spending inequalities over the years between different parts of Wales. That is why the Assembly has rightly listened to the findings set out in Professor Townsend's report, which I hope will end that inequality.

    Regional Airports
    Albert Owen: What discussions he has had with the First Secretary of the National Assembly for Wales and ministerial colleagues on regional airports in Wales; and if he will make a statement. [44149]
    The Parliamentary Under-Secretary of State for Wales (Mr. Don Touhig): My right hon. Friend the Secretary of State and I have regular discussions with Assembly and UK Government Ministers on a wide range of transport issues, including regional airports in Wales. Aviation is a matter that is reserved to the UK Government, but Assembly officials have had close contact with colleagues in the Department for Transport, Local Government and the Regions about regional air services, regional air services co-ordination studies and the regional consultation documents that are to be published later this year.
    Albert Owen: I thank my hon. Friend for that reply. He is aware of the importance of a fully integrated transport system and the economic benefits that it can bring periphery areas, including mine in north-west Wales. Will he therefore use what influence the Wales Office can exert to ensure that all four corners of Wales are served, so we can have a united and inclusive Wales? May I suggest that commercialisation of RAF Valley in my constituency can help in that matter?
    Mr. Touhig: I should congratulate my hon. Friend on his efforts on behalf of RAF Valley and RAF Mona in his Anglesey constituency. I can tell him that the Wales air services consultation document, which is one of six regional consultation documents that are currently being finalised by the DTLR, considers specifically the possible roles that regional airports might play in terms of passenger air traffic. That consideration will cover all sites
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    in Wales, including RAF Valley and RAF Mona on Anglesey, as well as the airfields at Caernarfon and Welshpool.
    Mr. Greg Knight: Does not the Minister accept that an airport can only ever be as good as the infrastructure that supports it? It is not getting on and off the plane that matters to passengers, but the time that it takes to get to the airport. Does the hon. Gentleman share my concern about the National Assembly's road-building strategy which, by ignoring that fact, appears to condemn all airports in Wales to third-world status? Will he again have a word with his colleagues in the National Assembly to try to bring about a change of heart? What is needed are improved road links—and they should be built.
    Mr. Touhig: I am not so sure that we have third-world conditions in Wales. Perhaps if the right hon. Gentleman were to visit, he might find that out for himself. The regional air service study that has been commissioned by the DTLR will cover Wales, Scotland, Northern Ireland, the south-west midlands and the north of England, and will consider how each region might best be served by a combination of available airports and aerodromes. It will identify the strategic enhancements that are required to improve service access to existing and potential regional airports and appraise the economic, environmental and social cost-benefits of a range of airport developments. All those matters will be considered in the study.

    EU Structural Funding
    Mr. Wayne David: What discussions he has had with the First Secretary about the progress of the objective 1 programme in west Wales and the valleys. [44150]
    The Secretary of State for Wales (Mr. Paul Murphy): I meet the First Secretary regularly to discuss a range of issues, including progress with the objective 1 programme. On 21 March, more than 500 objective 1 projects had been approved, worth a total of more than £300 million in European grants. More than £68 million of objective 1 grant has already been paid out by the Assembly.
    Mr. David: I thank my right hon. Friend for his response. Would he care to give examples of specific projects in south Wales—perhaps in my constituency—which are receiving funding? Is he aware that Mr. Philip Owen, who is in charge of these European Commission programmes in the United Kingdom, sees the Welsh programme as a model of good practice?
    Mr. Murphy: I understand that my hon. Friend visited Brussels with other hon. Members some weeks ago, where that point was made to him. I have in front of me a large list of objective 1 approved projects in the Caerphilly constituency, which shows that the objective 1 programme is doing precisely what we wanted it to do when it was approved.
    Adam Price: During the last round of objective 1 negotiations with the Chancellor, the then First Minister of the National Assembly for Wales had to resign to ensure that Wales

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    got its fair share of the allocation. Is the Secretary of State for Wales prepared to put his political life on the line to ensure that Wales gets its fair share this time round?
    Mr. Murphy: The hon. Gentleman is aware that the Chancellor of the Exchequer is sitting not far from me, and that it is not appropriate for any Minister to comment on the spending review at this stage. I would simply say to the hon. Gentleman that I see no reason at all for the present First Minister to resign.
    Denzil Davies: Will my right hon. Friend raise with the First Minister the use of objective 1 funds to improve road links and the road-building programme? Is he aware that there is a view that objective 1 money cannot be used for roads? Given that west Wales is close to the periphery of Europe, and that roads can increase gross domestic product, is it not rather senseless to deny the use of objective 1 money for the building of roads?
    Mr. Murphy: My right hon. Friend has a point when he says that infrastructure projects, including roads, will help the economy in his part of Wales and in others. I am informed that roads can be part of an objective 1 programme, so long as the local partnership agrees. He is also aware that the whole purpose of objective 1 is to restructure the Welsh economy, and the infrastructure is obviously an important part of that.
    Mr. Roger Williams: The areas of Wales that were not fortunate enough to get objective 1 designation are very concerned about how objective 2 is being implemented. Will the Secretary of State receive representations on behalf of the people in objective 2 areas, and consider the redesignation of those areas to objective 1, given the effect that foot and mouth disease has had on them?
    Mr. Murphy: The hon. Gentleman is aware that two thirds of Wales is covered by the objective 1 funding, but I shall be more than happy to receive representations from his constituency regarding the operation of objective 1, bearing in mind the fact that that would have to be done with a representative from the Assembly, which is responsible for the implementation of the programme.

    Cardiff (European Capital of Culture Bid)
    Kevin Brennan: What recent discussions he has had with ministerial colleagues and the First Secretary about Cardiff's bid to be European capital of culture 2008. [44151]
    The Parliamentary Under-Secretary of State for Wales (Mr. Don Touhig): I have regular meetings with ministerial colleagues and the First Minister to discuss a range of issues, including Cardiff's capital of culture bid.
    Kevin Brennan: If, by any chance, in the near future, my hon. Friend sees the Prime Minister—[interruption.] Oh, here he comes! Will he draw to his attention the excellent bid that was submitted last week by Cardiff to be the European city of culture in 2008? Will he also note the total support across Wales, with one or two small exceptions, for that bid?
    Mr. Touhig: My right hon. Friend the Prime Minister has just entered the Chamber, and I have no doubt that he is aware of the issue that my hon. Friend raises. Cardiff is a vibrant and exciting city in which to live and work, and I am constantly impressed by its vitality. It is a commercial, cultural and learning centre, and a major centre for the arts. I can do nothing better than to echo the comments made by my right hon. Friend the Secretary of State for Wales at the Welsh Grand Committee last November—in answer, I think, to a question from my hon. Friend the Member for Cardiff, West (Kevin Brennan)—when he said that he was backing Cardiff's bid to become the European capital of culture. I hope that all Welsh Members will do that, as it would benefit Cardiff and Wales.

    Renewable Energy
    Mr. Simon Thomas: If he will make a statement on Government support for renewable energy in Wales. [44152]
    The Parliamentary Under-Secretary of State for Wales (Mr. Don Touhig): The Government's approach to renewable energy is to set the framework but leave the market to decide on the type and location of projects to be pursued. The renewables obligation, which came into effect in England and Wales on 1 April 2002, will provide an assured market for renewables until 2027.
    Mr. Thomas: I thank the Minister for his reply. May I remind him that an objective 1 project at Aberporth in my constituency has a renewable biomass energy-creating project at its centre? That project has been endangered by the withdrawal of Ministry of Defence funding for its apprentices in the past two weeks. What action is the Minister taking in the Wales Office to ensure that that shortfall of funding will be plugged so that the project can go ahead? Will he come and visit the project to see for himself how we can renewably regenerate that area of west Wales?
    Mr. Touhig: I am aware of the biomass project to which the hon. Gentleman refers. I am also aware that this morning he met the Secretary of State regarding the decision to discontinue apprenticeships at Aberporth. I commend the hon. Gentleman for his hard work lobbying on that issue, and I understand his disappointment. My right hon. Friend and the First Minister met QinetiQ earlier this week, and they are now exploring with other agencies ways to obtain continued funding for the apprentice school. I will happily visit the proposed site of the Aberporth technical park. If we pull together on this issue, we will gain great benefit for the whole of Wales.

  The Prime Minister was asked—
  PRIME MINISTER

    Engagements
    Q 1. [44176] Peter Bradley: If he will list his official engagements for Wednesday 10 April.
    The Prime Minister (Mr. Tony Blair): This morning, I had meetings with ministerial colleagues and others. In addition to my duties in the House, I shall be having further such meetings later today.
    Peter Bradley: This is a momentous day for my family and me, because this morning my wife and I, in common with thousands of parents up and down the country, took our children to school for the very first time. [HON. MEMBERS: "Aw!"] Thank you—any contributions to their lunch boxes would be gratefully received. Will the Prime Minister assure me that he and the Chancellor will regard next week's Budget as a defining opportunity not just to sustain but to increase Government investment in public services, which will define the quality of life that our children will enjoy, and to create a national consensus about the society that we want to live in, about the limits as well as the extent of the Government's power to create such a society, and about the rights and responsibilities of each citizen in helping to achieve that?
    The Prime Minister: I was not entirely sure what momentous decision my hon. Friend was about to announce. The key for the Government is to proceed on the basis of a strong economy that delivers the investment in our public services that we need. Already, record investment in education has produced the best school results this country has ever seen. We see from today's report by the chief executive of the national health service that most indicators in the NHS are moving in the right, positive direction, although there is a lot more to do. The only way we will be able to keep that investment coming through our public services is to make the right choices in the Budget to sustain that investment over the long term, so that the people of this country get the opportunities they need, and that depends on public services for all.
    Mr. Iain Duncan Smith: In the future, if left unchecked, Iraq will be able to deploy its weapons of mass destruction against targets in western Europe, including the United Kingdom. As the last head of the United Nations inspectors makes clear, development of those weapons continues unchecked. Given that, will the Prime Minister confirm reports that he told President Bush over the weekend that if military action is needed against Saddam Hussein, the British Government will support and, if necessary, contribute to it?
    The Prime Minister: The time for military action has not yet arisen. However, there is no doubt at all that the development of weapons of mass destruction by Saddam Hussein poses a severe threat not just to the region, but to the wider world. I draw the House's attention to the fact that, in my first statement to the House a few days after 11 September, I made it clear that the issue of weapons of mass destruction had to be, and should be, dealt with. How we deal with it will be a matter for deliberation and consultation in the normal way. After 11 September, we proceeded in a calm and sensible way, and we shall do so again, but we must confront the issue of weapons of mass destruction.
    Mr. Duncan Smith: Not only is Iraq developing weapons of mass destruction, but it has also become apparent that it is a major sponsor of terrorism in the
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    middle east, bankrolling many of the families of suicide bombers and providing terrorists with bomb-making equipment. In the United States, the Prime Minister spoke about a "regime change" in Iraq. Given his reported comments, will he confirm that getting rid of Saddam Hussein may now be an objective of the Government?
    The Prime Minister: As I said in Texas, there is no doubt at all that the region would be a better place without Saddam Hussein. It is worth pointing out that the Iraqi people themselves would rejoice most at Saddam Hussein leaving office. We should never forget that that regime has a particular record: the Iran-Iraq war in which 1 million people lost their lives; the annexation of Kuwait, which precipitated the Gulf war; and perhaps the most appalling act of all, the use of chemical weapons on the Kurdish people. There is no doubt whatever that the world would be a better place without Saddam. However, the method of achieving that is, as I said, open to consultation and deliberation. When the judgments are made, I have no doubt at all that this House—indeed, the whole country—will want to debate the issue thoroughly.
    Mr. Duncan Smith: Does the Prime Minister believe that countering the growing threat from Saddam Hussein is about protecting lives in Britain and the lives of British forces abroad, and not just about supporting our allies? In the USA, the Prime Minister described those who refuse to accept the need to act as "utterly naive". Does he believe that they misunderstand the nature of the threat, or that they will simply refuse to accept any evidence that they are given?
    The Prime Minister: I do not think that I should comment on other people's motives in relation to this matter, however kind it is of the right hon. Gentleman to offer me that opportunity—I am sure he wants to be helpful. The key issue is that this is not something that has suddenly arisen, and it is important that the House understand that. Before 11 September, a whole series of negotiations took place about potential new United Nations Security Council resolutions to put in place a better sanctions regime, and about how we try to ensure that weapons inspectors get back inside Iraq. The reason why the UN Security Council resolutions that were originally proposed and passed demand that weapons inspections take place in Iraq is precisely that the threat of weapons of mass destruction is real and present.
    The issue is quite clear. As I said in my speech in Texas, Saddam Hussein has a very clear message from the international community: the weapons inspectors should go back in—anyone, any place, any time. That is the message that we must give him. Simply turning our backs on the issue of weapons of mass destruction is not an option. That is why I think it so important that we stand with the United States in saying that this issue is one that has to be, and will be, confronted. We will do so in a sensible and measured way, but we cannot allow a state of this nature to develop those weapons without let or hindrance.
    Ms Joan Walley: May I tell the Prime Minister how pleased I am that our right hon. Friend the Minister for the Environment will attend the most important United Nations environment conference on rain forests next week? However, it is equally

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    important that we have a commitment to the environment at home. Will the Prime Minister look closely at assurances given to me that timber used in the refurbishment of the Cabinet Office, at 22 Whitehall, is sustainable? If, as Greenpeace suggests, it is not, will he look again at his Government's contract?
    The Prime Minister: Because of what happened earlier today, I am more acquainted with the fixtures and fittings of the Cabinet Office than I was previously. My understanding is that the timber that is being used is indeed certified as sustainable, so Greenpeace's campaign is misconceived. However, the matter will doubtless be looked into by those responsible.
    Mr. Charles Kennedy: It is reported today that 3,000 post office branches in urban areas are scheduled to close. Does the Prime Minister support that?
    The Prime Minister: No, it is not correct that 3,000 offices are scheduled to close. What is correct, however, is that there needs to be a major programme of change within the Post Office, which we are prepared to support with several hundred million pounds. The reason for that is perfectly simple: the current situation is not sustainable, unless we were to spend very large sums of public money in doing so. If that is the Liberal Democrats' position, perhaps they should say so.
    Mr. Kennedy: The House will notice that the Prime Minister cannot side-step the facts. Since he took office, 1,500 post office branches in rural areas have already closed. Double that number are to close in urban areas, yet Labour's last election manifesto described those facilities as "an invaluable resource". By definition, how can they be an invaluable resource if 4,500 of them are to shut?
    The Prime Minister: The reason why the change in the Post Office has to come about is precisely that it is not possible, unless we are to spend very large sums of money, to say that no post office will ever close. In fact, under the restructuring proposals, 95 per cent. of people will still live within a mile of a post office in urban areas, and as a result of the restructuring package, we will of course give the best protection possible to rural post offices. [Interruption.] I know that the Liberal Democrats always like to propose a problem but never a solution, but the fact is that, in the end, the only solution is to restructure. Even that will cost somewhere in the region of £270 million. If we were to go further by guaranteeing that no post office would ever close, no matter what its circumstances, the bill would run to hundreds of millions of pounds more. I am afraid that we simply cannot do that.
    Mr. Peter Kilfoyle: Given the Prime Minister's reported comment that those who take a different view from his on events in the middle east are utterly naive, may I ask him whether it is naive to be dismayed at the succour that has been given to Sharon by the mixed messages that have come from the American and British Administrations? Is it naive to be aware of the bellicosity of elements in the American Administration,
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    based on ideology; or is it naive to believe in the centrality of the United Nations in resolving the problems of the middle east?
    The Prime Minister: I have not described anyone who takes a different view from mine on Iraq as utterly naive. I said that it would be utterly naive to say that weapons of mass destruction were not an issue, and I am sure that my hon. Friend would not say that either. The issue is how we deal with that—I said what I said on Iraq a moment or two ago—but in relation to the middle east, it is not correct to say that there have been mixed messages. We are absolutely clear that we condemn entirely those things that are happening in the middle east at the moment, which is why Israel should withdraw from the occupied territories and do so now, as the American President has said; but we also—I hope that my hon. Friend would do so too—condemn without reservation the terrorist attacks on Israeli citizens: both must be condemned.
    This is a difficult situation not because the messages are mixed, but because I am afraid there has to be a message of restraint and an end to violence for both sides. The only way in my judgment that we will get a resolution to this issue is not if we take sides on it, but if we actually make sure that, in a sensible way, we say to both sides that the Israelis have to withdraw from the occupied territories and cease the reprisals, and the Palestinians have to take action against those people engaged in terrorist attacks.
    Mr. James Gray: In answer to my right hon. Friend the Member for Chingford and Woodford Green (Mr. Duncan Smith) a moment ago, the Prime Minister very properly said that there should be a period of consultation and debate before contemplating any military action against Iraq; but does he agree that, lying behind that debate, there would have to be the very fundamental principle that if a rogue state threatens the peace and security of this nation, it would be a gross dereliction of duty if we did not take military action against it?
    The Prime Minister: Of course we must make sure that we are protected against any such state. I hope that this Government's record on issues such as Kosovo and Afghanistan and, indeed, in relation to Iraq shows that we are prepared to take that action. But I hope that the hon. Gentleman will appreciate, as I am sure that the whole House will, that action of this nature is very serious, that it should not be undertaken lightly and that it should be undertaken in consultation and deliberation with key allies.
    Mr. Jon Owen Jones: Returning to the subject of Iraq, does not the Prime Minister agree that, dangerous and difficult though the situation in Iraq is, it cannot be tackled in isolation; and that, on the position in Palestine and Israel, we must tackle both issues without being seen to be exercising double standards, not only because that is fair and just, but because in the war against terrorism it would be counterproductive to be seen to be exercising those double standards?
    The Prime Minister: Of course I agree with my hon. Friend; it is important that we act without double standards and that we act on both issues. That is precisely

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    why we passed UN Security Council resolution 1402 in respect of the situation in the middle east at the present time, which made it absolutely clear that we support both Israel's right to security and a viable Palestinian state, and that Israel should withdraw from the occupied territories. Of course it is also important that we deal with the issues of weapons of mass destruction.
    Some people say that America has not been engaged in this issue, but that is unfair. Secretary of State Colin Powell is now in the region. He will visit Israel shortly. That mission is extremely important. [Interruption.] Well, with the greatest respect, these issues are difficult to deal with, and the fact that the Secretary of State has been sent to the region is an indication of the earnestness of American intentions in relation to these issues.
    It is also extremely important that we carry on, as we are, in intensive negotiations with everyone involved, including our European partners, the UN and countries such as Russia. The resolution of this issue will require a massive collaborative effort on the part of the international community, but no one should think it will be easy, because it will not.
    Dr. Vincent Cable: The Prime Minister may recall that a month ago I asked him about delays in cancer treatment. He reassured me that the Government were investing more. Is he aware of the anger and frustration felt by many cancer patients and clinicians because a high percentage of those specifically earmarked funds has been siphoned off, owing to NHS bureaucracy, and to financing low-priority activity such as reducing the debts of hospital trusts? What guarantees can he give that money specifically pledged by the Government to their top health priority is spent for the designated purpose?
    The Prime Minister: We do need to make sure that money allocated to cancer treatment is spent on that. All I would say to the hon. Gentleman—to put what he has just said in a balanced perspective—is that the report that drew attention to the problem also said in specific terms that cancer services in this country were improving. More than 90 per cent. of people who are referred to a consultant are now referred within two weeks; the figure was just over 60 per cent. when we came to office.
    We are investing a massive amount in cancer services, but the hon. Gentleman is right: more still needs to be done. I therefore hope that next week's Budget will give us an opportunity to make a sustained investment in cancer care—but also in other vital parts of the health service—over a considerable period. I hope the hon. Gentleman and his party will support us in that.
    Gareth Thomas: I believe that the Prime Minister has been entirely right—[Laughter.] I believe that he has been entirely right to be as active on the international scene as he clearly has been in recent weeks. May I, however, seek a reassurance on behalf of my constituents that, in next week's Budget and in the coming months, the Government will remain committed to their highly successful domestic agenda—a strong economy, investment in public services, and repairing the damage that the Conservative party has done to our communities? [Interruption.]
    The Prime Minister: I thought it was a very good question. My hon. Friend is of course absolutely right. The Conservatives never like being reminded that when they were in office interest rates were at 15 per cent. for a year and at 10 per cent. for four years, there was savage underinvestment in our public services, and unemployment rocketed. Fortunately, under this Government we have the strongest economy that we have had for decades, the lowest inflation, the lowest interest rates and the lowest unemployment. That is why the Conservative party does not like it.
    Mr. Iain Duncan Smith: Perhaps the Prime Minister would like to agree with this one. Commander Ward, the decorated squadron commander from the Falklands—a war whose 20th anniversary we now mark—said that the Prime Minister's decision to withdraw Sea Harriers would lead to the
    "loss of many lives and ships".
    Does the Prime Minister agree with that?
    The Prime Minister: No. We are satisfied that the decisions we have made through the strategic defence review allow us to defend our country properly, and I pay tribute to the superb work done by our armed forces around the world.
    Mr. Duncan Smith: The Prime Minister should know that in the strategic defence review it was proposed to phase out both the Sea Harrier and the GR7, but not before 2010, when a replacement aircraft was supposed to be available. He must also know that the aircraft that the Government are now talking about putting on the carriers—the GR7—is slower, has no air-to-air radar, and is not designed for air defence at all.
    The Prime Minister may recall that Sandy Woodward, commander of the Falklands taskforce, said his decision meant that the fleet would now have to rely on United States carrier support if it ever carried out operations. In the light of that, will he not reconsider the rather stupid decision to withdraw Sea Harriers?
    The Prime Minister: First, let me point out that the right hon. Gentleman is complaining about the amount that we are spending on defence. All these decisions are, in the end, about the resources available. I think people in the armed forces remember that when his party was in power it slashed defence spending. The first real-terms increase took place under this Government, when we came to office. As regards the right hon. Gentleman's specific point, I do not accept that the efficiency of our armed forces is being undermined by that.
    Mr. Duncan Smith: The Prime Minister cannot go back to the pre-1997 Government, given that his own strategic defence review, on which he bases his evidence, makes it absolutely clear that that aircraft would stay in service until a replacement had been found. The Prime Minister's previous Chief of the Defence Staff, General Guthrie, recently said that
    "the Defence programme was underfunded before September llth."

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    The Territorial Army has been cut, ships and the Royal Air Force is short of pilots, yet the Prime Minister constantly increases our commitments. Surely the resolve to stand up to would-be aggressors becomes worthless if we lack the ability to do so.
    The Prime Minister: I do not accept that our armed forces are at all in the state that the right hon. Gentleman describes. On underfunding, I was making exactly that point a moment or so ago. When his party was in office—[Interruption.] For 10 years, the Conservative party cut defence spending. Under this Government, the armed forces have had the first real-terms increase in defence spending for years. If Conservative Members are demanding that even more money be spent on defence, I hope that they will support the decisions that are announced in the Budget next week.
    Helen Jackson: In the context of Israel, I hope that the President was prepared to listen to my right hon. Friend's experience in Northern Ireland, which shows that the only way to build peace out of conflict is patient politics and persuasion, not bombs and bullying.
    During those important discussions, did my right hon. Friend have time to mention the United States' imposition of steel tariffs and to point out to the President that that is no way to do business with a loyal friend and ally?
    The Prime Minister: The action that the United States has taken—against many countries, obviously—is now the subject of European Union action under the World Trade Organisation. I made it absolutely clear that we fundamentally disagree with the United States' decision, which is not good for anyone, including the US steel industry. The action undertaken by the WTO is important. If the WTO finds against the United States, I hope that it will abide by that ruling. The more free trade there is, and the fewer restrictions on trade, the better.
    Mr. John Maples: Can the Prime Minister explain the difference between what we and the Americans are doing in Afghanistan to root out al-Qaeda terrorism and what Israel is doing on the west bank to root out Palestinian terrorism? Why is one right and the other wrong?
    The Prime Minister: In the case of Israel and the Palestinians, a process is under way to resolve a longstanding dispute, so the two situations are not identical. We will secure a lasting solution in the middle east peace process only when we understand that it cannot be simply a military solution. We will need a political solution. Israel will not go away; the Palestinians will not go away. The only solution will be based on recognising Israel's right to exist—that should be recognised by the whole Arab world—and on giving the Palestinians a viable Palestinian state in which to live.
    Having said that, of course I deplore the terrorism that is taking place. It is terrible that there are so many innocent victims. In the end, as we have learned from bitter experience in Northern Ireland, the only solution is a political process that works.
    Mr. George Howarth: Does my right hon. Friend accept that there is
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    widespread support in the House and the country for the proposition that the Iraqis should comply with United Nations Security Council resolutions and allow unfettered access to arms inspectors? Will he give the assurance that before any military action that may eventually become necessary is contemplated, Saddam Hussein will be given every opportunity to comply with those resolutions?
    The Prime Minister: My hon. Friend's point is right. Saddam Hussein is in defiance of the resolutions with which he should comply. However, he has the opportunity to comply with them now. He is not in doubt about what is necessary. The United Nations resolutions are clear; there are nine and he is in breach of every one. The international community's position is also clear. Whatever people think about the action that will follow, he must comply with the resolutions. To that extent, I entirely agree with my hon. Friend.
    Mr. Nigel Waterson: May I give the Prime Minister another opportunity to tell the House whether he has done a deal that involves an amnesty for IRA terrorists on the run?
    The Prime Minister: It is not a question of a deal but of recognising, as we did in the Weston Park proposals, that there is an issue about people who in some cases have been charged and in others, convicted, and who have been out of the country for a long time but are not covered by the existing process. We shall find a way to cover them, and we will do that sensibly; we made that clear at Weston Park. It is not a deal but a sensible issue that needs to be resolved.
    Phil Sawford: Contractors are currently on site, preparing to start construction work on the £11.5 million Rothwell-Desborough A6 bypass in my constituency. Will my right hon. Friend join me in congratulating the local authorities and all those local people who campaigned for that vital road for more than 25 years? Will he note the stark contrast between that public investment and the false promises and fantasy road schemes that we had from the Conservative party for so long?
    The Prime Minister: I am happy to congratulate all involved in the Rothwell-Desborough A6 bypass. It is worth pointing out that my hon. Friend's constituency is one of many that will benefit from such schemes. The transport plan includes an increase of 44 per cent. over the previous 10 years in investment in our public transport system, road and rail. That demonstrates the necessity of the investment in public infrastructure that we will continue to make.
    Mr. Mike Hancock: The Prime Minister has clearly set out what he expects the Palestinians and Israelis to do. I doubt whether a single hon. Member does not support that. What did he and the President discuss doing if Israel continued to ignore UN resolutions and persisted in its current actions?
    The Prime Minister: There is no alternative to continuing the pressure to ensure that it complies and, in line with that, that the Palestinian Authority takes the necessary action against terrorists. Even with the United

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    States, there can be no resolution without some assistance from the parties that are directly involved. From the perspective of the international community, we will remain fully engaged. Not only the United States but the United Kingdom, the European Union, NATO, Russia—the whole international community—wants to help. However, to do that we need at least some give from the sides that are directly involved in the dispute.
    Mrs. Louise Ellman: Although I acknowledge the Government's recognition of Liverpool's housing needs by placing it in the new pathfinder housing area, does my right hon. Friend agree that they cannot be tackled without major new investment funds being made available? Will he support the provision of major funds to the new housing market renewal fund, which will tackle dereliction and its associated problems in Liverpool and elsewhere?
    The Prime Minister: We are putting substantial additional sums into neighbourhood renewal programmes in Liverpool and elsewhere. When those schemes are properly co-ordinated, with all the various departments working together, they are very successful. I know that my hon. Friend will agree that we must also tackle some of the social disorder problems in those local communities. For that reason, the announcement by my right hon. Friend the Home Secretary on matters such as abandoned cars and street crime is so important today.
    Peter Bottomley: The Prime Minister sets standards in government. Will he tell the
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    House whether there is a daily record of authorised, unattributable briefings or are some deniable? Is it a condition of ministerial office that those in government obey the code for Members? Who monitors the ministerial code and who requires Ministers to uphold it?
    The Prime Minister: If the hon. Gentleman has any complaints to make, he can make them to the normal authorities in the normal way. I am absolutely satisfied that much of what the Conservative party raises is complete nonsense.
    Paul Flynn: On Friday last, when the final shift was worked at the heavy end of the Llanwern steelworks, it was announced that the steel boss who axed 6,000 steelworkers' jobs last year was to be rewarded with a bonus of 130 per cent., bringing his salary up to almost £500,000. Why, in almost every crisis of this kind, do the workers end up losing out and losing their jobs, but the steel bosses and bosses of other industries are allowed to gift themselves fortunes?
    The Prime Minister: I do understand the concerns that my hon. Friend has raised. All I would say is that, as a result of the money that we are putting into those areas, the work that the Employment Service is doing, and the strength of the economy overall—some 26,000 jobs have been created in Wales over the past few years—we at least give people who lose their job the best chance of getting a new one. In respect of the bonus paid to the chairman of the company involved, I am afraid that that is not a matter for me.

Speaker's Statement
Mr. Speaker: Order. Before I call the Prime Minister, I wish to express on behalf of the House our warm thanks to the Serjeant at Arms and to all those staff who contributed to the preparation of Westminster Hall for the lying in state of Her Majesty Queen Elizabeth, the Queen Mother, or who assisted in handling the large numbers of visitors who came to pay their respects. Many of the staff involved have worked extremely long hours with great dedication and the House is proud of them. I also wish to inform the House that a book of condolence is available for Members to sign in the Library of the House. I have signed it myself, and I encourage colleagues to do so.

Middle East
3.32 pm
The Prime Minister (Mr. Tony Blair): May I join you, Mr. Speaker, in the sentiments that you have just expressed? All those who worked so hard on the lying in state, the funeral and the procession gave the country a ceremony of which we can all be justly proud.
With permission, I should like to make a statement following my discussions with President Bush in Crawford, Texas. Normally, an informal bilateral meeting would not be the subject of a statement. Exceptionally, because of the situation in the middle east, I thought it right to come to the House and give hon. Members a more extended chance to put questions than Prime Minister's Question Time affords.
Of course, at Crawford, we discussed many issues, including bilateral relations, trade issues, Afghanistan, India and Pakistan, Russia and NATO, Africa, and energy policy. I am very willing to answer questions on those issues. However, I shall concentrate on the middle east. My right hon. Friend the Leader of the House will also deal with this issue in the usual way in tomorrow's business statement, and there will be a further opportunity for debate next week.
There are many situations, both at home and abroad, which are called a crisis when, in truth, they are not. In this case, however, it is hard to overstate the dangers or the potential for this conflict to impact far beyond the region. It is, indeed, a genuine crisis, and one on which all of us, in whatever way we can, small or large, have a duty to act.
In the past few days, I have discussed the situation not just with President Bush, but with President Putin, President Mubarak, President Chirac, Prime Minister Jospin, Prime Minister Aznar and others. I look forward to discussing it in depth with Chancellor Schroder of Germany this weekend. My right hon. Friend the Foreign Secretary has been in constant contact with his counterparts.
Nobody who has been following recent events on television could fail to recognise not only the seriousness of the situation but the appalling and real human suffering. In the past fortnight, there have been at least 55 deaths in six suicide bombings in Israel. Just this morning, at least eight people died in a suicide attack on a bus near Haifa. On the west bank, at least 230 Palestinians and 34 Israelis have died. Over 1,500 Palestinians have been injured, and a million Palestinians live under curfew.
There have been terrible human tragedies on both sides. Our hearts go out to the families of the victims, whether Israeli or Palestinian: the two Israeli women who went with their families to a cafe in Haifa and lost their husbands and children in a dreadful suicide bomb attack; the Palestinian bell ringer of the Church of the Nativity in Bethlehem who was shot and killed in Manger square; and the 12-year-old Palestinian boy who went out to buy some milk when the curlew was lifted and never returned—he, too, was shot and killed. Amidst the suffering, there appears to be no strategy to end it, and therefore no hope.
Both sides must see that violence is not, and never will be, the answer. The solution to this crisis will never be reached if it is seen purely as a security or military question. There must be a political process too.

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I believe that the whole House will welcome President Bush's statement last week calling on the Israelis to withdraw from the occupied territories, and on the Palestinian Authority to tackle the terrorism. Without those basic minimum steps, or some steps towards meeting those objectives, and without a proper ceasefire, we cannot even begin to get a political process restarted.
So what can be done? In summary, I can tell the House that we are taking the following steps. We are in close touch with the Israelis and the Palestinians, with the United States, with our European Union partners, and with Governments in the Arab world in the urgent search for a way of stopping the bloodshed and getting a political process restarted.
We shall he seeking a UN Security Council resolution, based on Crown Prince Abdullah's plan, to promote such a process, following Secretary of State Powell's visit to the region this weekend. We stand ready to help with monitoring, both of detainees and of a ceasefire when one is established. I am convinced that this is a role that the European Union is well placed to undertake.
We are also ready, together with our European partners, to help the Palestinian Authority rebuild the infrastructure of the west bank and Gaza, and to work with it, too, in reconstituting its administrative structures. We are also ready to help the authority establish an accountable and transparent security structure that can co-operate with the Israelis and the wider international community to ensure peace and security in a Palestinian state and so underpin the stability of the region.
In respect of stability in the region, I shall say a word on Iraq. Forgive me, Mr. Speaker, if I repeat some of what I said earlier. There will be many occasions on which to debate Saddam Hussein's flagrant breach of successive UN resolutions on his weapons of mass destruction. For the moment, let me say this: Saddam Hussein's regime is despicable, he is developing weapons of mass destruction, and we cannot leave him doing so unchecked. He is a threat to his own people and to the region and, if allowed to develop these weapons, a threat to us also.
Doing nothing is not an option. As I said in my speech in Texas, what the international community should do through the UN is challenge Saddam to let the inspectors back in without restriction—anyone, any place, any time. If he really has nothing to hide, let him prove it.
I repeat, however, that no decisions on action have been taken. Our way of proceeding should be and will be measured, calm and thought through. When judgments are made, Ishall ensure that the House has a full opportunity to debate them.
I return now to the more pressing matter of Israel and Palestine. At some point, both sides will realise that, no matter how much blood is shed and no matter how many lives are wasted, Israel will still be there, and the Palestinian Authority and the Palestinians will still be there.
The initiative of Crown Prince Abdullah, to which Ireferred a moment ago, has been agreed by the Arab nations and is based on UN Security Council resolutions 242 and 1397. It is the only realistic basis for a solution—land for peace. The Israelis must allow a state of Palestine, secure in its own borders. In exchange, the Palestinians and the whole
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Arab world must recognise and respect Israel's borders and her security. A UN Security Council resolution restating these principles, with firm international backing, is the best way forward politically.
The House will know that in the region, particularly from the Israelis, there is much hostility to the idea of outside intervention. I entirely understand why, but the sad and simple truth is that the hatreds are too deep, and the wounds too raw, for the two sides to be able to resolve this alone. The US is right to be engaged and to press both sides to change, and I am clear after my visit to the US that the focus and engagement that is required will be forthcoming. Colin Powell's visit to the region is welcome evidence of that.
Both sides have heard many words of condemnation, and I do not need to add to them here. I understand the anger of the Palestinians, who see the steady encroachment of Israeli settlers who take their land from them in defiance of international law and successive UN Security Council resolutions. That must stop, but so must the appalling suicide bombings that have taken so many Israeli lives in the past few months. Palestinians have supporters the world over for their cause, but that support is weakened every time the suicide bombers act. Chairman Arafat must speak to his people and do everything in his power to stop these murderous outrages.
Both sides, therefore, know from the international community what needs to be done and they should get on and do it now. Real leadership is tested by the tough decisions and not the easy words. So, no matter how strong the feelings, no matter how deep the hatreds, now is indeed the time to pull back, to stop, and to realise that the current strategy is going nowhere, that the time for violence is over, and the time to get a peace process going is long overdue.
The international community is ready to help. People the world over are willing us to do so. Wherever we can help, we will. Whatever we can do to help, we will. But we need co-operation from both sides directly involved in the conflict.
Mr. Iain Duncan Smith: May I start by joining the Prime Minister and you, Mr. Speaker, in congratulating the Serjeant at Arms and all the members of staff in both Houses who helped so significantly in preparing this House and Westminster Hall in particular for the Queen Mother's lying in state?
We thank the Prime Minister for making his statement today. The appalling terrorist attack this morning has reminded us—as he pointed out—that the crisis in the middle east remains on a knife edge.
The Prime Minister's list of those innocents from Haifa to the west bank who have lost their lives, particularly this morning, is tragic and memorable. Today, the prospects for resuming any kind of peace process seem remote. It is because of the gravity of the situation with which we are now confronted that there must be a stepping-up of our efforts to help both Israel and the Palestinian people find a resolution to this conflict, as the right hon. Gentleman said.
Of course, we wish the United States Secretary of State, Colin Powell, well in the round of negotiations that he is conducting and is about to conduct in the region and we welcome the reaffirmation today by the Prime Minister and President Bush of their commitment to a just

25
settlement—one in which the two states, the state of Israel and a viable, democratic Palestinian state, can live together in peace and security.
We also agree that the incursions by Israeli troops into Palestinian Authority territory must end without delay, as has been said. Whatever the short-term successes that might be gained through military action in the west bank, there can be no purely military solution to this centuries-old dispute. Does the Prime Minister agree, however, that it is also the duty of any Government to protect their citizens from violence, including terrorism, as I believe he pointed out? The Israeli people have also been subjected to a vile and orchestrated campaign of terror. Day by day, suicide bombers have massacred innocent civilians, while Chairman Arafat and the Palestinian Authority appear to have taken little or no effective action to confront those who are behind them. Does the Prime Minister agree that, in line with our demand for an Israeli withdrawal, there is now a heavy responsibility on Chairman Arafat and the Palestinian Authority? They simply must deliver.
I am sure that the Prime Minister is aware of two documents that the Israeli Government maintain were found in the camps. If they are genuine, they show a clear link between Chairman Arafat and the terrorist networks sustaining the suicide bombers. That confirms the belief that if the will exists within the Palestinian Authority, it is possible to deliver a period of peace—it happened for 24 days over Christmas. Chairman Arafat has admitted that he was responsible for that peaceful interlude. Now, he will have the opportunity to deliver again. There must be sustained pressure on the terrorists from Arafat and the Palestinian Authority.
I wonder whether the Prime Minister agrees that Arab states of good will must make it clear to countries such as Iran and Iraq that they should cease their meddling in these affairs, as it is becoming more and more clear they have been doing in the past few months.
Does the Prime Minister agree that the biggest issue and perhaps the key to the whole peace process, has to be the short and long-term guarantee of Israel's security? The worst outcome would be an Israeli withdrawal only to be followed by a further wave of suicide bombings. In the event of such bombings, Israel would again want to act to defend itself and its people, which would plunge the whole situation into crisis. The Prime Minister is aware of the problem because he has spoken about the need for observers—he did so again today. They may have a useful role to play in the coming months, but does the right hon. Gentleman accept that they cannot be expected to police terrorism on the west bank in the way that Israel would understandably require as a precursor for further talks? What is the Prime Minister's assessment of Chairman Arafat's willingness to guarantee Israel's security against future attack? What is his assessment of the ability of Arab states to assist in this crucial short-term task, beyond the long-term peace negotiations?
The principal lesson that we can take from Northern Ireland—the Prime Minister is right to make this point—is that only when terrorism ends will there be a realistic prospect of a resumption of meaningful peaceful dialogue. In his statement, the Prime Minister referred to rebuilding the infrastructure of the west bank and Gaza. Does he agree that a complete and unequivocal end to terrorism could lead to significant economic benefits? Does he
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agree that holding out such a prospect in very obvious terms could be an encouragement to those who are engaged in terrorism perhaps to think again?
We agree that the basis for any resumed dialogue following an end to violence should be the proposals put forward recently by Prince Abdullah of Saudi Arabia, which remain the only prospect for long-term peace and security in the area. But we should not lose sight of the fact that the plans should include the guarantee of the short-term security of Israel; otherwise, they will not come to anything at all. The two cannot be divorced, as I hope the Prime Minister agrees.
The Prime Minister is right to say that now is the time for real leadership to shine through. The crisis will only get worse unless two things happen without delay: the end to violence, coupled with those guarantees of security. The Opposition will continue to support the Government and the United States in their pursuit of those two objectives
The Prime Minister: We are in complete agreement about the basic principles here. The right hon. Gentleman says that the incursions by the Israeli defence forces should end without delay and that the Palestinian Authority must cease terror. That is right. The question is how we get people to a situation where that is likely to happen.
I totally understand why Israel feels, when its citizens are being subject to these appalling terrorist acts—acts of random violence, but with the specific purpose of doing as much damage to innocent civilians as possible—that it has to retaliate. My concern has always been—I have said this to the Israeli Prime Minister—that while I understand that, what is the strategy to get us from where we are at the moment to a different place?
In my view, the key is to make sure that we combine an overall long-term process—basing that on Crown Prince Abdullah's initiative seems sensible, since it recognises the two basic principles that most people now accept—with sufficient minimum security steps that re-engage the parties with some semblance of confidence.
That is very difficult, which is why I proposed some form of outside help. Of course, those involved could not do the work of policing terrorism. However, one of the things that the Israelis constantly say, with some justification, is that if the Palestinian Authority arrests suspected terrorists, they simply go through a revolving door; they are locked up, but then simply go back out again. One suggestion that I made earlier, and which remains, is that the international community could easily police the situation once those people are arrested and detained properly.
We have to look for imaginative ways of dealing with some of the key issues; otherwise, the suicide bombings will continue, the reprisals that the Israelis take will continue and the hatred and bitterness will get worse. One must ask how we have got to a stage where the bitterness is so deep that teenage Palestinians are wiring themselves up as suicide bombers and blowing themselves up. That is an indication of how deep the hatreds are. Unless there is a political vision that people can aim for, together with some minimum security steps, into the vacuum comes mindless and terrible violence, which is what we have at the moment.

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I totally understand the reluctance that Israel, in particular, has regarding the involvement of outside people. I also understand its frustration at the fact that the Palestinian Authority has not been, or was not, taking proper steps to deal with terrorism. In the end, however, unless the situation is to continue, with many innocent Palestinians dying as well, we have to find a way of unblocking the current situation and putting together the minimum security steps and the long-term process. Otherwise, I fear that the situation will get worse, and I do not think that people have yet contemplated quite how much worse it could get.
Mr. Charles Kennedy: On behalf of my right hon. and hon. Friends, Mr. Speaker, it is a pleasure to add our expressions of gratitude to all your colleagues and the House authorities for doing, with great dedication, such an efficient and characteristically courteous job with regard to the events attending the death and the funeral of Her Majesty the Queen Mother. We are all very grateful.
I am also grateful to the Prime Minister for having taken the decision to come to the House to make this statement and to take some questions. He is discussing a dangerous and deadly global situation. The loss of a British soldier from the first battalion of the Royal Anglian Regiment, killed accidentally yesterday in Kabul, brings home to all of us in the House just how dangerous these international commitments are for our service personnel.
The Prime Minister has reported back thus far in his discussions vis-à-vis Iraq. He will acknowledge that we must all be honest. This situation crosses the political spectrum—there is genuine unease in the Labour party, among the Liberal Democrats and perhaps in sections of the Conservative party. We must acknowledge that that unease is a reflection of genuine and sincerely held shades of opinion throughout the country. Therefore, as a result of his discussions with President Bush, will the Prime Minister acknowledge that no country can conduct a foreign policy on the basis of "my ally, right or wrong"? Although I am not implying that the Government are seeking to do so, there is a need for discernment. Many of us hope that the Government may be able to temper some of the ideas of the American Administration as the situation unfolds.
I welcome the fact that if decisions on Iraq have to be reached at some point in the future, the Prime Minister has confirmed that the House will have an opportunity to debate the matter fully. Will he confirm that if we reach that stage, incontrovertible evidence will be presented publicly, preferably at the level of the United Nations Security Council? That will be most important, not just for the legitimacy of any action under international law, but for maintaining a political consensus, not least with neighbouring Arab states. If the Prime Minister can continue to make a valued and valuable contribution in that direction, the whole House will thank him and his colleagues.
On the middle east and the appalling tragedy that is happening between Israel and the Palestinian people, we strongly support the Prime Minister. The Secretary-General of the United Nations has said that he is
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personally appalled by what is happening, and President Bush has called for Israeli withdrawal on three occasions. I hope that the Prime Minister will be assured that all parties in the House will join him in sending that signal to all the combatants involved. I hope that some sanity will be restored.
Finally, will the right hon. Gentleman acknowledge that meeting force and violence with still more force and violence will never provide a solution? It does not even provide the framework for a solution. That signal must be sent with increased resonance, and this is a very good opportunity for us to do that.
The Prime Minister: I join the right hon. Gentleman in expressing our condolences to the family of the soldier who was killed yesterday in Afghanistan.
On Iraq, what is important is to put into play all the different issues that arise here. Some people will be against taking action in respect of Iraq no matter what it does, but I accept entirely that there are many people who are concerned, for example, whether that action will be sensible, whether it will have the backing of international law and whether proper thought has been given to the consequences for the wider region. Those are all perfectly sensible questions. All I say is that of course those are questions that we shall consider very carefully, which is why I have constantly said that we are not at the time of decision making.
In addition, most people would accept—again, not everyone, but the vast majority—that Saddam Hussein does lead a despicable regime, that he is a threat in respect of weapons of mass destruction and that it is important that we deal with that threat. Those are all the things that are in play in debating the issue. All I can say to people is that I hope that the way in which we have proceeded in respect of Afghanistan shows that we are prepared to proceed in a reasonable and measured way, consulting with key allies and not taking action precipitately. Again, we will not do that.
But it is the case that Saddam Hussein poses a threat. That is why the UN resolutions are there. If this was somebody who, in all the time that he had been leader of Iraq, had behaved responsibly, but we were worried about certain weapon systems that he was now developing, I could understand even more so the hesitation that people might have. But this is somebody who has a track record of absolutely extraordinary aggression on his neighbours, on his own people, on everyone that he sees advantage in being aggressive towards. That is why the UN resolutions are there. That is why British pilots are still flying over the no-fly zone in order to protect people in Iraq. That is why the inspectors went in, could not do their job properly and then came out.
I hope that in the same way as I understand the need to respond to the concerns that are being raised, others will understand the need to respond to the genuine concerns about Saddam Hussein and realise that in the end we can all respond to concerns but we have to take decisions on them. I can assure people that those decisions will be sensible and that the House will have a proper opportunity to debate them before we act upon them.
I have never taken the view that we support the US right or wrong. In relation to steel or an issue such as Kyoto we make it clear where we have a disagreement. But I do believe in this country's relationship with the

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United States. I do believe that that relationship is special and I do believe that it is a fundamental part of British foreign policy and should remain so. All I can say is that in my dealings with the Administration and with this President, we have found them immensely open and consultative, and where they have acted they have acted not just with consultation but in what I would regard as a sensible way.
Finally in relation to the middle east, of course we should send out the signals that we are sending out as the international community, but I come back to the point that I do not think that the signals are enough any more, because if the signals were going to work, they would have worked before now. What is necessary is to help both sides to sit down and plan a way through this. That cannot be done simply by leaving the situation as it is or by UN resolutions, although those are important. It has to be done by getting down to the detailed work in order to make sure that, step by step, we have the necessary measures that can allow us to find our way out of the current situation and to give the political process a chance to restart.
David Winnick: Everyone should condemn the suicide bombers without any qualification, but is not the core of the issue the need for a viable and genuine Palestinian state, not a statelet, without which all the indications are that the sea of blood will continue and so many innocent people on both sides will lose their lives?
How far is the United States really committed to such a Palestinian state? We should bear in mind the fact that time and again Sharon has indicated his strenuous opposition—indeed, all his political lifetime, at least in the last 35 years—to giving up the territories occupied since 1967. Only the terrorists will triumph if we do not bring about the sort of state to which a Palestinian people are entitled.
The Prime Minister: I agree entirely with my hon. Friend: in the end, it is the political solution that will count. I believe that America is committed to the two principles that I described. Indeed, President Bush's recent statement made that very clear. The engagement of the United States now—especially the visit of Colin Powell—is ettremely important. All the way through, my plea to everyone involved in the situation is that we must stay with it to get a result. The current situation has gone down so far—it is so bad—that only by continuous engagement, which I am sure the US will offer, will we have any form of solution. My hon. Friend is right to say that in the end it is the political solution that will work.
Mrs. Gillian Shephard: I speak as chairman of the Conservative Friends of Israel. Like the Prime Minister, I have many links with the Jewish community in this country. He knows that among the principal concerns are guarantees for Israel. It is of course within the power of the Israeli Government to cease their military activity forthwith—Israel is, after all, a democratic state—but if they did, what guarantees would there be that the terrorist attacks would cease? Who is capable of delivering those guarantees? This afternoon, the Prime Minister hinted that there may be international policing and monitoring of the situation, but, for me, the nub of the problem is the question of guarantees.
The Prime Minister: I think that the right hon. Lady puts her finger on what is understandably the issue for
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Israel. The only truthful answer is that no absolute guarantees can be given about anything in this situation. However, what we can do is to look back two or three years when the current level of violence was not happening and a real political process was on track. I happen to believe that the offer made by Prime Minister Barak at the time should have been looked at in a different light—but it was not. We have to get back to a situation in which that political process is under way. The only reason why I offer the prospect of outside help in the initial stages is that I think that the thing is so bad now that I cannot see that there is even the basic minimum of trust for guarantees, which cannot be made without that. I totally understand—I have held this conversation many times, which is why I do not take the view held by some others. For example, some European leaders would probably take a less sympathetic view than I do towards the position of Israel. Knowing that its people are subject to suicide attacks and terrorist bombs—we know what that is like; we went through it ourselves in the 1970s—the pressure on Israel to act is enormous.
I understand all of that, but I come back to the basic point: unless there is a political process, the violence continues. Although the guarantees that can be given may not be absolute, we have a better chance of delivering security if there is a political process and if there is some outside help simply to make sure that the Palestinian Authority are actually doing what they said they would do.
Donald Anderson: A former Israeli Cabinet Minister said of Mr. Sharon, during their last election, that he was a serial arsonist. That was because of the experience of Lebanon. Again, Mr. Sharon seems to be wedded to a purely military solution. Today, we heard from the secretary-general of the council of ministers of the Palestinian Authority, Mr. Ahmed Abdel Rahman, that the only option left to any Palestinian was
"to become an explosive bomb wherever he goes".
That appears to be a clear incitement to suicide bombers and is wholly irresponsible. Given the gravity of the situation and the fact that it is getting worse, how can one force both sides to the table? Has my right hon. Friend, with President Bush and our US allies, considered using the threat of forms of sanction to force both sides to the negotiating table, which is the only way to find a resolution to this appalling problem?
The Prime Minister: I am not sure that in these circumstances that would provide the solution. In the medium term, we need agreement on basic security measures with, if necessary, outside help to monitor them.
I totally agree with what my right hon. Friend said about the remarks that have been made, but in the end the only way through is to restart the political process. I am repeating myself, but that is true. The trouble is that the political process cannot restart until minimum security steps are taken. My worry is that the two sides are so far apart that there is no prospect of a political process or of putting the parties round a table until we have begun a bridging process towards that, based on security.
Mr. Douglas Hogg: Will the right hon. Gentleman please tell President Bush that many in this country are not yet persuaded that the threat posed by Saddam Hussein is sufficiently great to

31
justify military action, especially when the middle east is in such a turbulent state? Will he also tell Prime Minister Sharon that although suicide bombs are a particularly horrible way in which to carry out murder, from the point of view of the victim there is not much difference between a suicide bomb and a rocket, a tank shell or an air-launched bomb discharged from afar? They are equally undiscriminating in their consequences.
The Prime Minister: I really cannot add much to what I have said on Iraq. On the last point, that is precisely why the situation is as it is, and in a sense that is what the terrorists want. The original terrorist act is designed to produce a reaction; inevitably in the reaction that follows, innocent people die as well as those who may be terrorists, and the situation spirals downward from there. The only way out of that situation is the one that I have described.
What is happening on both sides is absolutely appalling, and what always strikes me about such situations is that both sides get themselves into a position where they cannot see that innocent blood is being shed on the other side as well as on their own. That is why external assistance is necessary to bring the parties closer together.
Mr. Tam Dalyell: Going back to the Prime Minister's opening statement, he referred to his discussions with President Chirac. Did President Chirac tell him—I bet he didn't—that in 1977, when he was Prime Minister of France, he had as a guest the thuggish young vice-president of Iraq, and he took him on a detour in Provence to, of all places, Cadarache, the French equivalent of Aldermaston? It is to my discredit that like many others, turned a blind eye to the huge amount of arms being poured into Iraq in the 1980s by our country and others.
As late as January this year—between 26 and 30 January—Iraq was given a clean bill of health by the International Atomic Energy Agency. I concede that that is different from the inspectors. Nevertheless, the IAEA gave Iraq a clean bill of health on nuclear capacity. In those circumstances and given the fact that the Defence Secretary had an invitation to send a scientific delegation of his choosing to Iraq at the beginning of March, would it not be wise at least to go and talk to Iraq? If nothing comes of that, so be it, but is it not high time that we started serious discussions?
The Prime Minister: If my hon. Friend will forgive me. I do not think that I will comment on President Chirac and whoever he may have had as a guest in the 1970s.
My hon. Friend's point is serious on two levels. First, in respect of sending a team out to Iraq, in my view that is best done through the United Nations. Saddam Hussein has the opportunity to prove that he has nothing to hide by letting the inspectors back in unconditionally; he should do that.
My hon. Friend says, fairly, that he and everyone else turned a blind eye to what was happening in Iraq in the 1980s. There is some truth in that, but what we are learning about our international community is that when we turn a blind eye, sooner or later the problems come
32
back to us full frontally. That is precisely what happened in Afghanistan, and it is one reason why, although we must act carefully and sensibly, we should certainly not turn a blind eye to what Saddam Hussein is doing.
As for my hon. Friend's point about nuclear capability, there is no doubt that Saddam Hussein is still trying to acquire nuclear capability and ballistic missile capability. Furthermore, although we do not know what has happened, we suspect that the piles of chemical and biological weapons remain.
Mr. John Butterfill: When I met Chairman Arafat in the last few days of Binyamin Netanyahu's Administration, we spent about an hour and a half discussing all the outstanding problems in bringing a peace process to a conclusion. He said that there was at that time nothing that could not be resolved with good will, and that the main obstacle was the personality of Binyamin Netanyahu. When I asked him how that could be overcome, he said that if only he could deal with Ehud Barak, a deal could be achieved. It is therefore tragic that when he got a deal with Barak, he did not take it.
I am extremely worried that the documents that the Israelis claim to have captured in Ramallah and elsewhere, which were mentioned by my right hon. Friend the Leader of the Opposition and which I saw yesterday, appear to show that at the highest level the Palestinian Administration have been sponsoring, organising and even funding terrorist acts. As a result, it will be all the more difficult to build confidence in any future arrangements. What does the Prime Minister think may be done to overcome that problem, and can he flesh out his ideas about the possible involvement of other, sensible Arab Administrations in that process?
The Prime Minister: The hon. Gentleman's point about the proposals made by Ehud Barak is a good one: it is a tragedy that they were not acted on properly at the time. As for what can be done now, if the Israelis can be persuaded to withdraw and the Palestinians to take the necessary action—with outside help if necessary—to control terrorism, the principal thing the Arab states have to do is get behind that initiative. In other words, they have to make it clear that they do not suppprt terrorism; the states that are, either tacitly or openly, supporting terrorism must cease; and they must explicitly recognise—as Crown Prince Abdullah's plan does—Israel's right to exist.
Sometimes, people do not sufficiently understand Israel's sense of insecurity in circumstances in which a significant part of the Arab world overtly does not accept its right to exist. That is why it is important that we act on Crown Prince Abdullah's proposals. If there is a ray of hope in this ghastly situation it is that increase in recognition. All countries have moved their position. Countries that were hesitant about accepting the notion of a viable Palestinian state are now saying that they want it, including the United States of America. The European Union and the United Kingdom have stated it explicitly. Secondly, the Arab world is prepared to recognise Israel's right to exist. Those two principles are now accepted.
As the hon. Gentleman says, rightly, the problem is that mistrust is so great—how on earth can negotiations ever start again? That is why the minimum security steps are vital.
Mr. Stuart Bell: Since Saddam Hussein is the spectre at our debate, will the Prime

33
Minister put the subject with which we are dealing into context? He will recall that in 1988, Saddam Hussein rained down chemical weapons on Halabja, that 5,000 people died within half an hour, and that thousands of others were blinded or suffered severe side effects. For 17 months, poisonous gases were used on outlying villages, and 4 million people living in northern Iraq and Kurdistan were affected. Can we not remind ourselves of how important it is that Saddam Hussein lives with UN resolutions, and the sooner he does so the better?
The Prime Minister: My hon. Friend is absolutely right to remind us of the nature of Saddam's regime and the way in which it deals with its political opponents, with routine political executions. We should remember that. When they think about it, most people realise that this person constitutes a threat. We must be careful how we deal with it.
Mr. David Trimble: First, on behalf of my colleagues, I endorse everything that has been said in appreciation of the work of the Serjeant at Arms and his colleagues over the past few days.
On the middle east, I agree that there must be an end of terrorism, that there must be Israeli restraint and withdrawal, and that there is a need for a political strategy. However, I am a little concerned about some of the parallels that are drawn with Northern Ireland. Between 1970 and 1995, we had many different political initiatives, none of which succeeded. Among the reasons why the process after 1995 was more successful—there were many—were two that seem to me relevant. First, the terrorists became convinced that their campaign would fail. Secondly, there was a change in the underlying ideology. Even Irish republicans realised that the blood and soil nationalism that they had been attached to was wrong.
I do not see any sign of a similar ideological change in the middle east. We cannot look at Palestine apart from the rest of the Arab nation. While I appreciate what Prince Abdullah has done in recognising Israel's right to exist, the situation would be much more hopeful if the Saudi authorities were to start to try to redefine the particular brand of Islam that is the ideology of their state, because that has provided many of the wellsprings of the violence and the particular forms of terrorism that we have seen.
Of course we must deal with the symptoms, but until there is a willingness among the Arab states to get to the ideological roots of the problem, we cannot have very much optimism.
The Prime Minister: I always understand the right hon. Gentleman's hesitation about the parallels with Northern Ireland. However, I believe that there is a parallel. I do not believe that it would ever have been possible—everything that the right hon. Gentleman says is right, of course—to have a process unless there was continuous engagement in a detailed proposal to work our way out of the impasse, and a political vision to go alongside that, which was there in the Belfast agreement.
It is worth pointing out that two and a half or three years ago there was not the present level of violence. What has changed, first, is that a political solution was rejected. There then appeared to be no political strategy. In some ways the situation is not entirely dissimilar. Leaving that aside, I think that the right hon. Gentleman is right to say that we must judge the situation in the round.
34
I think that the Palestinians know perfectly well that the state of Israel will not cease to exist. The Arab world knows that Israel is not going to go away. Whatever the Arab world says and whatever ideological hangover there is from the past, it knows that that will not happen. The trouble is that while no political process is under way, it is reluctant to say that. That is why Crown Prince Abdullah's initiative was important.
If we could envisage a situation, difficult as it is now, where real progress was being made and where the Israelis and the Palestinians were working through a proper process, I think that a series of things would start to change in the middle east. For a start, many of those countries that have effectively reared their people on fairly poisonous anti-Israeli and often anti-Semitic propaganda would have to change. I think that there is a recognition among some of those Governments that people who are reared on that type of propaganda often turn into the sort of political extremists who ultimately come looking for the Governments of those very states.
There is a clear sense in which the region could change. For example, if people like Saddam Hussein were not in power any more, the situation could change. There are these prospects but they all depend on the basic political strategy being reinvigorated. Until that happens, the hatreds just get worse.
Mr. Robert N. Wareing: Everyone will agree with my right hon. Friend on his view of the Saddam Hussein regime: the world would be better off without it. Nevertheless, on 27 September last year, the Under-Secretary of State for Foreign and Commonwealth Affairs, my hon. Friend the Member for Exeter (Mr. Bradshaw), stated that the objective of British foreign policy was to remove the threat of Iraq's weapons and not to replace the Iraqi Government, which was described as a matter for the people of Iraq. On the other hand, as long ago as 1997, President Clinton stated that sanctions against Iraq must remain for as long as Saddam Hussein lasted. What is the current view and policy of the British Government? If they take the latter position, there is no incentive to get the current regime in Iraq to change tack and allow inspectors in. I happen to remember that, initially, the inspectors left of their own accord; the difficulty now is to get them back in.
The Prime Minister: Of course, the policy is to protect ourselves against weapons of mass destruction, but obviously that cannot be divorced from the regime, because it is the regime that is responsible. In respect of the comments made by President Bush, and indeed President Clinton before him, regime change in Iraq has been the policy of successive American Governments, but that is the case precisely because of the fear of weapons of mass destruction. All I would say to my hon. Friend is that it is for that very reason that the international community has said to Saddam Hussein, "Let the inspectors back in." That is what I am saying, but it must be done unconditionally.
Sir Patrick Cormack: In wishing the Prime Minister well in his immense task, may I ask him to consider two points? First, will he tell Mr. Sharon clearly and unambiguously that the way in which he has conducted his regime has not helped his cause and has made many friends into doubters, and that while we are

35
all committed to the existence of the state of Israel, we do not believe that the current regime is acting in a very civilised manner?
Secondly, to reinforce the bipartisan nature of the approach, which has been very evident in today's exchanges, will the right hon. Gentleman consider asking his predecessor John Major whether he would be prepared to play a part? He could perhaps act as a roving envoy and go to the middle east to talk to people. He has immense experience and a little more time than the Prime Minister. Will the Prime Minister take on board that suggestion?
The Prime Minister: I am certainly happy to consider that suggestion. On the hon. Gentleman's first point, which was about Prime Minister Sharon, I think that I have said all that I have to say. I understand the concerns that are being expressed. My view now is that the important thing is to try to get the process re-begun. Frankly, I am more interested in doing that than in condemning particular people for what they have done. The position that we have set out in respect of Israel's withdrawal from the occupied territories is very clear.
Richard Burden: I thank my right hon. Friend for coming to the House to make the statement and support him in calling for an end to suicide bombings and for withdrawal of Israeli forces from occupied towns. I should like to put two points to him. First, the sort of action that is being taken by Sharon and the Israeli Government has not brought, will not and cannot bring an end to the appalling suicide bombings. Secondly, while the international community has called for Israel to withdraw, it has not done so. It has been flouting the will of the international community.
It is not only mistrust that is a problem, but the fact that an illegal occupation is going on. On Saturday, I spoke to a Palestinian friend in Ramallah who had not been able to step outside her front door for more than a week. If she had done so, she would have risked being shot. Food and medical supplies were short; indeed, even ambulances could not get to the sick and wounded. Is there any other part of the world where, faced with such circumstances, we would think it suitable or sufficient only to call for withdrawal rather than ensure that that is backed up by some form of action? While I am unaware of the west supplying any arms to the Palestinian Authority or, indeed, to any Palestinians, an awful lot of military hardware is being supplied to Israel. May I call for an arms embargo on Israel while it is behaving like this? Secondly—
Mr. Speaker: Order. The hon. Gentleman is taking far too long.
The Prime Minister: My hon. Friend is drawing attention to the fact that some 1 million Palestinians are now living under curfew, and that is precisely what is happening. Many hundreds of the Palestinians who are losing their lives are innocent. The problem, however, is that innocent Israelis are dying, too, as the bomb at Haifa showed. The Israelis believe that these people are coming from the occupied territories to commit acts of terrorism. We have to recognise, therefore, that we are required to be even-handed, and that means being genuinely even-handed.
36
It means saying that the Israelis have to withdraw from the occupied territories, and that the Palestinians have to take the necessary action to stop the violence and the terrorism.
That cannot be done simply by condemning one side or the other. Who could possibly see the Church of the Nativity in Bethlehem being treated in the way that it is being treated and not feel a sense of tragedy about what is happening? All I will say to my hon. Friend is that, on the other side of the argument, he must realise that if, in his constituency—or that of any other hon. Member—people were going into cafés where families were sitting having a meal, and suicide bombs were going off and children were being killed by a deliberate act of violence, the anger of that community would be huge and intense as a result. We can take a position, one way or another, in condemning this side or that side. We have said what should happen on both sides, but I honestly believe that it will not happen until the things that I have described take place. I promise my hon. Friend that no amount of pressure will resolve this properly without external assistance to get over the problems.
Mr. Nicholas Winterton: I welcome most warmly the Prime Minister's statement. Would he not accept, however, that while terrorism—from wherever it comes—must be not only defeated but eradicated, the perception at the moment is that Prime Minister Sharon has declared war on the Palestinian people as a whole, not just on the terrorist organisations Islamic Jihad and Hamas? Is there no opportunity to get an international world community coalition together to guarantee a meaningful Palestinian state—not one involving Bantustans—and to guarantee the state of Israel within its traditional boundaries?
The Prime Minister: It is precisely that to which the United Nations resolutions are supposed to give effect. The hon. Gentleman is right to say that we need both those things to happen. My point is simply that, unless the Israelis are sure that there is at least some means of being secure from terrorist attacks, it will be very difficult to get them to stop doing what they are doing. That is why it is so important that we put both things together. Some external assistance is necessary precisely to allow each side the confidence that someone objective is trying to assist them to do the things that they both know they must do.
Joyce Quin: May I ask my right hon. Friend to confirm that the maintenance of the breadth of the international coalition against terrorism remains an important priority for him and for President Bush? On the point that my right hon. Friend made at Question Time about Saddam Hussein's chemical weapons attacks on the Kurds, may I say that it is important to try to ensure that those who have already been victims of Saddam Hussein will not suffer a second time in any action against Iraq'? Indeed, we should not repeat the mistakes of the past, in which one evil regime was replaced by another, but try to create as far as possible the conditions for a multi-ethnic, religiously tolerant, representative regime in Iraq, if and when Saddam Hussein's regime is changed.
The Prime Minister: I strongly agree with my right hon. Friend about the international coalition. It is

37
important that we build as much support as possible for any action that we may undertake. She is entirely right that, if the regime in Iraq is to change, it is important that it changes to one that is genuinely broad based. I hope that we have provided some symbol of our good intentions in that regard by what has happened in Afghanistan, where we are genuinely trying to produce a broad-based regime. I am sure that, like me and many others, she would be one of the first to say that many people in Iraq would rejoice at Saddam Hussein's departure. I hope that at some stage we shall be able to furnish the House with details of the way in which his regime operates, because its brutality is scarcely believable.
It is important to proceed in a measured way. As I said in my speech in Texas, I have been involved in three regime changes—Milosevic, the Taliban and the gangster group that took over Sierra Leone—and I can honestly say that we should not regret any of them. Let us proceed with care, and pay attention to my right hon. Friend's sensible warning that we must ensure that, if we ever get a regime change in Iraq, what follows is an improvement on what is there now.
Mr. Elfyn Llwyd: I welcome the impending visit of Secretary of State Powell, despite the length of time he has taken to arrive. The Prime Minister spoke of seeking an early United Nations Security Council resolution, which is most welcome. Will one be sought before any further action is taken against Iraq?
On the humanitarian side, is the right hon. Gentleman aware of the 400,000 people currently without running water in Ramallah, Nablus, Bethlehem and other areas? Will he spearhead a humanitarian effort to ensure that the lives of those people, who are being denied their Geneva convention rights as non-combatants, are not at risk due to a lack of basics, including running water?
The Prime Minister: The time for debating any legal basis of action against Iraq is when we take such action. The Foreign Secretary will speak to Shimon Peres later today about the situation in Ramallah. It is important that basic facilities are put back in place for the people there, and that the wounded, some of whom are seriously injured, are given proper medical attention.
Mr. Tom Clarke: I welcome my right hon. Friend's evenhanded approach to the middle east. Given the Israeli attack on the university in Bethlehem, and given the specific British interests and concerns, have discussions been held with the Israeli ambassador in London? Have instructions also been given to our ambassador in Tel Aviv?
The Prime Minister: I understand from my right hon. and hon. Friends that that is indeed the case. We are in close touch with the Israeli authorities about these issues the entire time.
Sir Peter Tapsell: Will the Prime Minister keep in mind at all times the fact that it is now 35 years since the Security Council passed resolution 242, and that the failure of the international community to impose that UN territorial demand has inevitably led to the present tragic and dangerous situation? Until something along the lines of resolution 242, which is not
38
dissimilar to the new Saudi initiative, is imposed, the situation will go from bad to worse. Nothing will he achieved by sending messages to Mr. Sharon or Chairman Arafat, or by sending envoys on tours of the middle east. What is needed is for the international community to impose a settlement on the area by military force, and to put in a permanent United Nations intervening force, such as that which has kept the peace in Cyprus for many years. Did the Prime Minister discuss that possibility with President Bush?
The Prime Minister: No, I did not discuss that particular possibility, but I agree with the hon. Gentleman that, without a political solution based on resolution 242 and the other UN Security Council resolutions, there will not be lasting peace. The question is how we get to the position in which negotiations take place to ensure that that happens and is successful. I am afraid that at present that is a very long way off.
Mr. Ernie Ross: Although I welcome today's statement by my right hon. Friend, the real significance of the past few weeks has been the commitment offered by the American Government—and, more importantly, by the President—to a Palestinian state. Those of us who have been involved in the middle east for more than 30 years know that the Israel-Palestine question is the core of the middle east problem, and that only a resolution of it will provide general peace. We have been hoping for an American President who recognises the need for a Palestinian state, and the significance of the recent statement cannot be overstated. If Colin Powell arrives quickly and the Americans remain truly engaged, the Palestinians will begin to believe that the President and the American people really do recognise their right to a state. That would go a long way towards building peace.
The Prime Minister: I am sure that my hon. Friend is right about that. The commitment of the entire international community to a viable Palestinian state is, as I have said, one ray of hope in this ghastly situation.
Dr. Julian Lewis: Some people view Yasser Arafat as being opposed to suicide bombings but unable to prevent them; others see him as being in favour of them and unwilling to prevent them. The Prime Minister has access to better sources of information than most of us: to which of those views does he subscribe?
The Prime Minister: I subscribe to the view that, if there is a proper peace process, the Palestinians are willing to engage in it. Although I concur with criticisms of the Palestinian Authority's inability, or refusal, to control terrorism properly, we have to recognise that we will be dealing with them, and that we cannot choose which of their members we will deal with. The truthful answer to the hon. Gentleman's point is that the real danger is that, as long as the bloodshed and violence continues, a growing indifference will come about—in fact, it is happening—to innocent blood being spilt on both sides.
Several hon. Members rose—
Mr. Speaker: Order. I remind the House that early next week a full day's debate will be held on this subject.

Point of Order
4.37 pm
Mr. Quentin Davies: On a point of order, Mr. Speaker. The very welcome news emerged on Monday that Sinn Fein-IRA have undertaken a second act of decommissioning. I am well aware that a great many people, including me, had been predicting for some months that such an act would take place in advance of the Irish elections; indeed, I first said so in this House in December. Nevertheless, this is an important event, about which Members on both sides of the House would like to question the Government. That desire will have been greatly enhanced by the Prime Minister's refusal during Question Time today to give straight answers to questions about the important and disreputable proposal for an unconditional amnesty for terrorists in Northern Ireland.
I do not know whether you, Mr. Speaker, have received a proposal from the Secretary of State for Northern Ireland that he make such a statement to the. House—I hope so. If not, I fear that the Government's refusal to come before the House and discuss the matter will be interpreted throughout the country as evidence that they have something rather shameful to hide in their dealings with Sinn Fein-IRA.
Mr. Speaker: The Secretary of State for Northern Ireland has not approached me, but he will have heard the hon. Gentleman's comments.

Children (Safeguards for Unaccompanied Travel)
4.39 pm
Margaret Moran: I beg to move,
That leave be given to bring in a Bill to make provision for a tracking system to safeguard the welfare of children travelling to the United Kingdom without their parents.
The Bill is intended to enable parents to register their arrangements with immigration authorities at the entry application stage and to enable registration to serve as a referral to agencies such as social services, health and education, so as to ensure that children receive the services to which they are entitled and that their circumstances receive proper attention. Establishing a tracking system would address an existing gap in immigration procedures when children travel to the United Kingdom without their parents.
The recent Victoria Climbié case demonstrates all too clearly how children who enter the United Kingdom without their parents can fall through the net provided by health, education and child protection services—with tragic consequences in some cases, as in that one.
In some countries, such as those in west Africa, it is common practice for children to be cared for in the extended family. Over the years, that practice has developed to include children travelling abroad to be educated in the care of family members and others. When a child travels abroad, as in Victoria Climbié's case, parents rely on relatives or friends to keep in touch and to provide them with information about their children.
The limited and expensive communications systems in some countries, such as those in west Africa, coupled with poverty, make it difficult for parents to monitor their child's welfare away from home, which increases the child's vulnerability. That practice is also vulnerable to corruption, as traffickers obtain children through deception, often with offers of education and employment, as was identified in the Home Office police research series paper No. 125.
Children's charities, such as the National Society for the Prevention of Cruelty to Children, believe that children unaccompanied by their parents are particularly vulnerable to child trafficking when they leave their country of origin and on arrival in another country. They are aware that children are trafficked into the United Kingdom and other European countries for the purpose of prostitution, child pornography, organised begging and benefit fraud.
Children are vulnerable to traffickers because of poverty in their country of origin, the low status of girls, unstable family life and child abuse. By its very nature, trafficking and the commercial exploitation of children is largely a hidden activity, so it is very difficult to investigate abuse, track victims, prosecute offenders and assess the extent of the problem.
My local authority admits that many children may enter the country in that way and arrive in Luton. It believes that such invisible children represent an important issue. The extent of the problem is emerging. A Home Office report on trafficking identified the former eastern European countries and west Africa as the main countries of origin. A significant number of children, especially from west Africa, are brought into the United Kingdom

41
as unaccompanied asylum seekers and are trafficked onwards to other European countries for the purpose of prostitution.
West Sussex social services report that, between 1995 and 2000, 59 unaccompanied asylum seekers disappeared from children's homes. In September 2001, the Government published a national plan on commercial sexual exploitation, in which trafficking was highlighted as an urgent area for action. The White Paper, "Secure Borders, Safe Haven", sets out a number of proposals to address the problem, including a new criminal offence for trafficking and preventive action in the countries of origin, all of which is to be welcomed.
The EU communication, "On a Common Policy on Illegal Immigration", is also welcome. It recommends financial support for action in the countries of origin and transit to help to strengthen their capacity to combat trafficking. That includes developing public registration structures, improving document security and deploying liaison officers. It also recommends introducing uniform visa and security standards to improve the security of travel documents, including incorporating photographs to link the person to the visa or entry clearance certificate.
The United Kingdom could take the lead in the EU to ensure that the European Commission's proposals are implemented. However, the NSPCC and other children charities believe that the issue of children who travel into the United Kingdom without their parents remains a problem. The protection of those children must be prioritised. Children entering the UK who are not ordinarily resident here and do not travel with their parents should be safeguarded by a tracking system.
The recommendations made by Mrs. Justice Bracewell in the case of R (2) 1999 highlighted those concerns. The case involved a five-year-old Romanian girl who had arrived at a port of entry accompanied by an adult unrelated to her. Summing up, Mrs. Justice Bracewell said that the case was a matter of serious concern with implications far beyond the circumstances. She suggested that whenever a child accompanied by a non-related adult arrived at a port of entry in the United Kingdom, the immigration service should inform the Department of Health within 72 hours. The Department would in turn inform the relevant social services department of the presence and address in the UK of a privately fostered child under section 66 of the Children Act 1989 and the Children (Private Arrangements for Fostering) Regulations 1991.
My right hon. Friend the Member for Blackburn (Mr. Straw), then Home Secretary, recognised the advantage of immigration officers' informing the Department of Health of the arrival of such a child. Unfortunately, however, he rejected the proposal, largely on grounds of cost. In the light of the Victoria Climbié case, I believe that the recommendation should be reconsidered.
Tracking all newly arrived children in the United Kingdom would be an enormous task, and it is not a realistic option. I propose that children entering the UK who are not ordinarily resident here and do not travel with their parents could and should be safeguarded by a simple tracking system. It need not involve the creation of a new administrative system; it could be built on existing immigration processes. A simple flag system could provide an indication on travel documents that a child was not travelling with its parents, and that details of the
42
arrangements were available. In addition, there should be a UK requirement for all children entering the country to hold their own passports. Visa or entry certificates should incorporate photographs, and demonstrate a link between adult and child, for example by adding the child's passport number and fingerprints to the adult's visa.
An awareness campaign is also needed in west Africa, and in other countries where there are a large number of unaccompanied children, to alert parents to the risk of child trafficking, and to inform them of the existence of a tracking system and the necessary immigration procedures involved in entering the European Union.
Such a system might not deter the most determined traffickers, who use forged travel documents. That is a complex problem requiring sophisticated systems of detection. The system could, however, safeguard the majority of children who travel without their parents. Child trafficking is a despicable activity, and ending it must be a Government priority. This relatively simple measure could make an important contribution to the protection of vulnerable children from the crime.
Question put and agreed to.
Bill ordered to be brought in by Margaret Moran, Mark Tami, Ann Keen, Fiona Mactaggart, Helen Jackson, Mr. Hilton Dawson, Kevin Brennan, Ms Meg Munn, Ms Debra Shipley and Ms Oona King.

Children (Safeguards for Unaccompanied Travel)
  CHILDREN (SAFEGUARDS FOR UNACCOMPANIED TRAVEL)
  Margaret Moran accordingly presented a Bill to make provision for a tracking system to safeguard the welfare of children travelling to the United Kingdom without their parents: And the same was read the First time; and ordered to be read a Second time on Friday 19 July, and to be printed [Bill 117].

Point of Order
Mr. Greg Knight: On a point of order, Mr. Deputy Speaker. As you know, at the beginning of each parliamentary Session we pass a number of Sessional Orders, which are not controversial and are normally agreed without a Division. One states that
"the passage through the streets leading to this House be kept free and open and that no obstruction be permitted to hinder the passage of Members to and from this House."
You may not know, Mr. Deputy Speaker, that today there has been utter chaos outside this building, creating severe traffic delays and impeding the work of many Members. The reason appears to be the closure of Victoria street where it becomes The Sanctuary. Having made inquiries, I understand that the road closure has nothing whatsoever to do with yesterday's events, nor with the demonstration by Greenpeace that took place earlier today, but is the result of roadworks that are being carried out.
That is a clear breach of our Sessional Orders. I can think of no other Parliament in the world that would allow democratically elected Members to be caused such disruption by roadworks, which could easily have been scheduled for when the House was not sitting.

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I understand that the roadworks may continue for the rest of this week or into next week, so will you, Mr. Deputy Speaker, draw the matter to Mr. Speaker's attention and ask him to look into it and report back to the House tomorrow?
Mr. Deputy Speaker (Sir Michael Lord): The right hon. Gentleman is obviously greatly concerned about the matter. I understand that, and I am sure that Mr. Speaker will also note the points that he has made. I think that the correct procedure is to ask the Serjeant at Arms to look into such matters, and I am sure that that will be done.

Orders of the Day

  Enterprise Bill
  Order for Second Reading read.
  4.51 pm
  The Secretary of State for Trade and Industry (Ms Patricia Hewitt): I beg to move, That the Bill be now read a Second time.
  In our first term in government, our economic priority was to establish macro-economic stability—the essential precondition for business success and wider prosperity. As a result of the decisions that we took nearly five years ago, we now enjoy low inflation and the lowest long-term interest rates and highest levels of employment that we have had for many years.
  In this second term, as my right hon. Friend the Chancellor of the Exchequer and I explained in our joint statement in June last year, our economic priority is to build on that foundation of stability by promoting higher productivity and greater enterprise. To achieve that, we will match the independence that we gave our monetary authorities with independence for our competition authorities, and alongside tough rules for public finances we will put tough rules for competitive behaviour and consumer protection.
  Our ambition is greater prosperity and world-class public services for all—for every individual and family, every community and every region and nation of our country. To achieve that ambition, we need dynamic, competitive businesses that generate wealth, create jobs and provide the tax revenues that we need to invest in public services. The Bill strengthens the foundations of an enterprise economy by promoting competition, protecting consumers and establishing an insolvency regime that will encourage honest but unsuccessful entrepreneurs to try again. It builds on our considerable achievements to date—the Competition Act 1998, recent insolvency reforms and the measures that have already been implemented from the 1999 consumer White Paper.
  Just as we are creating the right market framework for business in Britain, so we continue to press ahead with economic reform in Europe. We made solid progress in Barcelona, where, with our European colleagues, we set a timetable to complete the single market in financial services and achieved the long-awaited, if not yet sufficient, breakthrough on energy liberalisation.
  The Bill has been widely welcomed. For example, David Lennan of the British Chambers of Commerce said recently:
  "There is nothing more frustrating as an entrepreneur than finding you are unable to compete because other businesses have cheated and we therefore wholeheartedly support what the government is trying to achieve via this Bill".
  Sheila McKechnie of the Consumers Association said that the measures will
  "put an end to the billions lost to consumers each year from rogue traders".
  Digby Jones of the Confederation of British Industry said:
  "We support—
  the Bill—
  "in the round and we value a very tough competitive regime because it will enhance productivity".

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  The extent of support for the Bill reflects the fact that at every stage in formulating policy we listened to the views of business, consumers and insolvency and competition experts. In 1999, we consulted on the measures in the consumer White Paper. In 2000, we consulted on personal bankruptcy and reform of the merger regime, and last year we consulted on competition and insolvency. As a result, we have developed proposals that improve the competition, consumer protection and insolvency regimes for all concerned without creating additional burdens or regulation for business.
  Mr. Andrew Lansley: Before the right hon. Lady moves away from her references to the Competition Act, will she tell the House on how many occasions actions have been successfully taken for infringements of the chapters 1 and 2 prohibitions since that Act came into force?
  Ms Hewitt: There has been significant use by the competition authorities of the new prohibitions in the 1998 Act, which will continue to be an extremely important part of the competition regime.
  As a Government, we are unashamedly pro-competition. The best protection for consumers is choice—the choice that is provided in open and vibrant markets. Effective competition is a powerful incentive for firms to innovate, to improve their customer service and to become more productive. Of course, it also provides opportunities for new firms to enter markets and to grow. Strong, fair competition contributes to innovation and productivity growth and to the diffusion of economic power. It maximises opportunities for all.
  The United Kingdom therefore needs a modern, world-class competition regime and a regulatory framework that is designed to promote competition rather than perpetuate regulation. The more effective the regulatory framework, the more markets will work efficiently and fairly, and the less regulatory intervention will be needed in the long run—competition where possible and regulation where necessary.
  Before 1997, the competition regime had remained largely unchanged for almost 20 years, even though, for most of the period of Conservative government, it was clear that our competition laws were out of date and byzantine in their complexity. We have already made progress. My right hon. Friend the Secretary of State for Environment, Food and Rural Affairs, when she was Secretary of State for Trade and Industry, introduced the Competition Act and, with it, a modern, more streamlined regime that addressed anti-competitive agreements and abuses of dominant position. However, further improvement is needed. The mergers and markets regime needs to be modernised, and we need a step change in competitive pressures to help us close the productivity gap between the UK and our key competitors.
  Our reforms are based on a number of key principles set out in the competition White Paper. The first principle is that we need strong, pro-active and independent competition authorities that are able to deal with anti-competitive behaviour. The Bill therefore provides that, in the vast majority of cases, with the exception of national security cases only, decisions will be taken by independent competition authorities, free from political interference. Although the Conservative party did not
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  make that change when it was in power, I hope that it will support us in making it now. An overwhelming majority of respondents to our consultation supported the policy of taking the politics out of mergers and monopolies decisions. In removing those decisions from Ministers, we are removing a layer of regulation and streamlining the competition regime. Consistent with this new approach, I can announce today that, from September this year, UK competition views on merger cases that are being dealt with by the European Commission will also be a matter for the Office of Fair Trading, and not for the Government.
  For mergers and markets cases, the authorities will apply a focused competition test rather than the current, less precise, public interest test. The result will be more transparent and predictable decision making. There will also be more transparency in the operation of the competition regime. The OFT will be required to publish an annual plan. Alongside its annual report, that will provide a clear basis on which Parliament and others will be able to assess its performance. The competition authorities will also be required to publish guidance on how they will approach the consideration of cases under the new regime, and to publish reasons for all their key decisions. Provisional conclusions in mergers and markets inquiries and the remedies for dealing with them will be discussed openly with the parties.
  The Bill will also create better procedures for decision making, with statutory maximum timetables and a new right of appeal to the Competition Appeal Tribunal in mergers and markets cases. The effect will be a regime that operates more predictably, more consistently and more proportionately—better regulation.
  Mr. Lansley: Before the Secretary of State leaves the matter of the independence of the competition authorities, will she confirm that those authorities will not be subject to the same accountability procedures as apply to other public bodies? Will she take this opportunity to say that the OFT should have accepted in full rather than in part the views of the parliamentary ombudsman regarding the compromised investigation of the Colorvision case?
  Ms Hewitt: I am afraid that I am not aware of the details of the case to which the hon. Gentleman refers. However, he raises an important point, and I shall have a look at the matter. The Bill will establish that, in future, the OFT will be supervised by a board, so that its decisions will not be made solely by the director general. As I have said, we are also ensuring that there will be a new statutory right of appeal to the Competition Appeal Tribunal in mergers and markets cases. Those reforms, and the others made by the Bill, will establish a much stronger and properly independent system of competition decision making, but one with proper accountability to the law and to the House.
  Mrs. Angela Browning: Will the Secretary of State clarify the status of the boards of the OFT and of the Competition Commission? What plans does she have to ensure that the composition of the boards is representative? When a specific inquiry is in hand, what will the right hon. Lady do to ensure that the Competition Commission board has the relevant market expertise? There has been considerable concern about the number of

  47
  former Government officials who are placed on such boards. That renders somewhat suspect their ability to scrutinise markets.
  Ms Hewitt: I am aware of the concern to which the hon. Lady refers. We will ensure that the boards of the OFT and the Competition Commission contain members with the competition expertise necessary to deal with competition cases. We will also continue to have available the broader panels, which can be drawn on for specific investigations. Together with the increase in resources for the OFT and the Competition Commission, our reforms will ensure that the bodies have the range of expertise that will enable them to arrive at well informed and robust decisions in their investigations.
  The second principle of our reforms is to establish a strong deterrent effect for anti-competitive behaviour. The Competition Act 1998 introduced fines for firms that operate cartels, but did not provide a deterrent for those individuals who dishonestly engage in hard-core cartels.
  As I hope that the whole House will agree, those hard-core cartels do serious harm to consumers, businesses and to the economy as a whole by forcing up prices or keeping them high artificially, and preventing new entrants from gaining access to markets. Recent cartel cases include the price-fixing arrangements in the global vitamins industry, which cost consumers in the UK and the rest of the European Union millions of pounds, and the Sotheby's-Christie's price-fixing cartel, which was the subject of considerable publicity. Indeed, American competition authorities believe that cartels raise prices by some 10 per cent. on average.
  We therefore propose in the Bill to introduce a new criminal offence of dishonestly entering into cartels, backed by sanctions that include the possibility of up to five years' imprisonment. We regard forming cartels as very serious offences, and the threat of imprisonment is important to deterring them. The new criminal offence will send out a strong message to the perpetrators, their colleagues in business, the general public, and the courts. We envisage that a prison sentence would be imposed in cases of serious cartel activity. Alternative sanctions, such as a suspended sentence or a fine, would be available to deal with the less serious cases where there are mitigating circumstances.
  Mr. John Burnett: Who will police or monitor those cartel activities and how they will be brought before the courts? Which agency will be responsible?
  Ms Hewitt: The Office of Fair Trading will continue to investigate cartels. Indeed, it has 25 alleged cartels under investigation already. In general, prosecutions will be the responsibility of the Serious Fraud Office, as is the case with other offences of dishonesty.
  In the Bill, the offence is tightly drawn and properly so, but it will create a real deterrent effect. Again, I quote David Lennan of the British Chambers of Commerce, who said
  "I do not believe that many business people will end up in jail as a result of the goverment's proposal. But introducing a criminal sanction should provide a strong disincentive, which will focus minds and help to create a competitive environment in this country."
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  So, not only is this measure vigorously supported by consumers, as one would expect, but it has business support too.
  Our third principle is that people who are harmed by anti-competitive behaviour—whether other businesses or consumers—should have a genuine opportunity to obtain redress. The Bill will enable harmed parties to bring claims for damages before a specialist body—the Competition Appeal Tribunal. That will establish a cheaper, more streamlined route to obtain redress from companies that have broken the law.
  In the Bill, we are also providing that representative bodies will be able to bring claims for damages in front of the tribunal on behalf of named and identifiable consumers. That will help consumers to bring claims where a large number of parties have each suffered a relatively small level of harm.
  I shall turn now to the measures in the Bill specifically designed to protect consumers. As strong competition is the best form of consumer protection, all our competition reforms are good news for consumers. In particular, we are putting consumer interests at the heart of the new system with our new super-complaints, where the OFT must make a considered response within 90 days to properly investigated complaints from designated consumer bodies.
  As a strong competition regime is not always enough by itself, however, we are also introducing specific new powers to empower and protect consumers. The stop now orders that we introduced last year were widely welcomed by consumer organisations.
  Margaret Moran: I am sure that my right hon. Friend is aware that, by pure coincidence, my first ten-minute rule Bill concerned those orders, which shows that lowly Back Benchers are taken into account when legislation is drawn up. The measure is welcome, but there are concerns that it may cover not all rogue trading, but only that covered by existing legislation. So practices that are designed to get around the law may be excluded. I am referring specifically to pyramid money gifting, such as the women empowering women scheme, which extracted large amounts of money from women in my constituency and throughout the country and left many of them in grave debt. Will my right hon. Friend assure us that the Bill will deal with those sorts of schemes as well as the consumer protection issues that are covered by the law?
  Ms Hewitt: Of course, the stop now orders, which were indeed initiated by my hon. Friend, are designed to deal with rogue traders and others who are in breach of existing statutory provisions that apply to their sector. She raises an important matter and I am sure that we can deal with it in Committee.
  Mr. Nigel Waterson: Before the Secretary of State leaves that matter, will she confirm that, despite the urging of such bodies as the National Consumer Council, the Government have apparently set their face against introducing a general duty not to trade unfairly, which would be a catch-all method of dealing with exactly the matters raised by the hon. Member for Luton, South (Margaret Moran)?
  Ms Hewitt: We have looked carefully at the proposals for a general duty not to trade unfairly, but as I hope the

  49
  hon. Gentleman will accept, we have decided that such a duty—particularly if it is cast in negative terms—would be so vague and general that it would create real uncertainty for business and difficulties for enforcement. For that reason, we have not included it in the Bill. Instead, we are extending the protection of stop now orders to other areas, in particular in the service sector, where consumer interests are harmed by traders who do not meet their legal obligations.
  I guess that all of us in this House, and our constituents, have suffered from cowboy builders, incompetent plumbers, poor car servicing and so on. The reformed system of stop now orders, and the extension proposed in the Bill, will be clearer for businesses to understand and will create a single, coherent enforcement structure that will replace the parallel regimes that currently exist for different issues.
  Mr. Jonathan Djanogly: The proposals on rogue traders will be generally acknowledged and respected. However, the key to the effective enforcement of the Bill will be to ensure that trading standards bodies within local authorities are improved. I do not understand their omission from the Bill, and I should be grateful if the Secretary of State explained it.
  Ms Hewitt: I welcome the hon. Gentleman's support for the extension of stop now orders and he is right to draw attention to the vital role of trading standards officers. There is some variation in the quality and resourcing of trading standards officers around the country. That is why the Under-Secretary of State for Trade and Industry, my hon. Friend the Member for Welwyn Hatfield (Miss Johnson), the Minister responsible for consumer protection, is using funding from the modernisation fund, and working with the OFT and trading standards officers, to ensure that they are properly resourced and able to implement their extremely important responsibilities towards consumers.
  The National Consumer Council—to which reference has been made—has said in relation to the stop now orders and more general matters:
  "These measures will complete the crackdown on anti-competitive practices that for too long have damaged the interests of consumers."
  The Bill also includes measures to enable the OFT to give formal approval to voluntary industry codes of practice—provided that these are effective in protecting consumer interests and meet core criteria—and to promote the benefits of those codes to consumers and business. In that way, we will help consumers to identify reputable traders and benefit businesses by increasing consumer confidence in their products and services.
  I should now like to turn to the measures on insolvency and the insolvency reform proposals within the Bill. Failure, as well as success, is an integral part of an enterprise economy. But the fear and consequences of failure should not be so disproportionate that they act as a disincentive to entrepreneurs. We need to encourage honest risk-takers, while dealing with the minority of bankrupts who are thoroughly dishonest.
  Linda Perham: I welcome the proposals in the Bill on insolvency, a matter that the Select Committee investigated three years ago, when we
  50
  went to the United States and saw what was being done there. Will my right hon. Friend address the concerns of the TUC about consulting employees and protecting workers in cases of insolvency?
  Ms Hewitt: It is extremely important to take account of the position and interest of employees in cases of insolvency. The provisions and the reforms of administration, to which I shall turn in greater detail in a moment, will ensure that, in the case of a failed business, there is more money available to the creditors, who may well include employees; either directly, because wages or holiday money are due to them, or indirectly, because national insurance contributions have not been paid on their behalf. Employees will benefit, along with other creditors, from our proposed reforms.
  My hon. Friend the Member for Ilford, North (Linda Perham) referred to the experience of the United States, upon which the Select Committee drew in formulating its recommendations. It is noticeable that, in the United States, there is much less fear of failure. Only one in five people in America say that fear of failure would deter them from starting a business. Indeed, it seems that if people do not have one or two failures under their belt in America, they are hardly regarded as serious entrepreneurs.
  Mr. Tony McWalter: My right hon. Friend is assuaging the fears of some of those who have seen the Bill. Like my hon. Friend the Member for Ilford, North (Linda Perham), I greatly welcome the proposals on insolvency and the consultations with insolvency practitioners that my right hon. Friend has undertaken to provide. Will my right hon. Friend give an assurance that she will look carefully at the provisions on the possible impact on voluntary organisations such as citizens advice bureaux and the debt advice sector? That would do much to generate widespread acceptance of these measures.
  Ms Hewitt: My hon. Friend makes an important point. Our regulatory impact assessment draws attention to the possible increase in the need for advice and an updating of the advice given by citizens advice bureaux and money advice centres to take account of these provisions. So we are already aware of that issue.
  It is important to encourage entrepreneurship by addressing this fear of failure and supporting business start-ups. The Bill contains a number of measures to address that.
  Mr. Gareth R. Thomas: My right hon. Friend knows that I have an interest in industrial and provident societies. She, as a champion of social enterprises, will be aware that many use the industrial and provident society legal form. Given her comments about insolvency and the attractiveness to companies of the new regimes in the measure, will she ensure that Government officials keep under close consideration the possibility of applying the benefits of these measures across industrial and provident societies at some point?
  Ms Hewitt: I welcome the private Member's Bill that my hon. Friend has introduced to modernise the statutory framework for industrial and provident societies. I know that colleagues in the Treasury who are working with him

  51
  on the Bill are considering the best way to ensure that the present regime for mutuals that go into administration can be updated in the light of the reforms in the Bill.
  We are getting rid of the present "one size fits all" regime for individuals who become bankrupt and introducing a differentiated regime that takes account of the circumstances of the case. The Bill reduces the period before which a bankrupt is discharged from restrictions to a maximum of 12 months for those who have failed, through no fault of their own, and who co-operate with the official receiver. However, for those bankrupts who have acted recklessly, irresponsibly or dishonestly, the Bill introduces a new court-based bankruptcy restrictions order regime under which they will face much tougher restrictions lasting between two and 15 years. So there will be tougher penalties for the minority of dishonest bankrupts but a much lighter regime to encourage the honest but unfortunate entrepreneur to learn from his mistakes, try again and go on to business success. The Bill also removes many of the irrelevant and outdated restrictions that apply to bankrupts.
  Mr. Mark Field: I welcome, to a large extent, the thinking behind the changes on insolvency. However, the right hon. Lady's talk about the dichotomy between honest bankrupts and dishonest traders exposes the Bill's backward-looking and traditional British thinking on insolvency. As has already been said, there is an entirely different outlook on insolvency in the United States, where people do not see it in black-and-white terms of honest and dishonest bankrupts and insolvents.
  Ms Hewitt: I do not really accept the hon. Gentleman's point. The new regime that we are putting in place—the fact that there will be a maximum of 12 months for those who have failed through no fault of their own and co-operate with the official receiver as well as a set of restrictions that can last for between two and 15 years—will enable the courts to graduate their response according to the circumstances of the case.
  The reforms have been widely welcomed, not least by the Prince's Trust, which has done so much to encourage entrepreneurship among young people from disadvantaged backgrounds. It says:
  "We welcome the proposal to distinguish more clearly between those who have made a genuine attempt to succeed in business and those who have become bankrupt through reckless or fraudulent practices."
  That is a distinction that we are right to make, but by giving the courts a proper time scale over which restrictions can be imposed they can make their judgment on an individual case.
  Mrs. Browning: Will the right hon. Lady clarify how the difference is to be determined? Clearly, in some cases it will be obvious that people have become bankrupt through no fault of their own, but in the case of a company which is up against it in the tail end weeks and months, it is often the practice to pay preferential creditors in order to keep stock coming in. That is illegal, but one can understand why it is done. Would such a person or company be deemed to be on the two-to-15 year track?
  Ms Hewitt: Each case will have to be decided by the courts on the individual facts, but the new administration
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  procedure will encourage companies to come forward earlier once they get into difficulties rather than going up against the wire in the way that the hon. Lady describes and behaving in a way which, on the face of it, could be regarded as dishonest. That system of administration which, as I say, has been so widely welcomed, will encourage company rescue rather than insolvency wherever possible.
  Mr. Richard Page: Having been involved in business, I welcome the fact that someone who has become bankrupt through no fault of their own is to be given the chance to start again, but how shall we define "through no fault of their own"? There has to be some error of judgment in the management of a company for it to go down. The right hon. Lady's words have a good spin to them, but the practicalities on the ground might be slightly different.
  Ms Hewitt: I cannot help feeling that the hon. Gentleman is making rather heavy weather of this. We have consulted insolvency practitioners, and the British Bankers Association wrote to me a couple of weeks ago expressing its appreciation of the constructive dialogue that it enjoyed with the Department's officials and their willingness to listen. I have no doubt that in individual bankruptcy cases the courts will be able to make common-sense judgments based on the evidence before them and having heard from the individual concerned.
  Mr. McWalter: My point is similar to that of the hon. Member for South-West Hertfordshire (Mr. Page), in that there is a clear distinction between the malevolent bankrupt and those who have done their best, although perhaps not doing everything according to the book. I hope that my right hon. Friend might consider changes in the Bill's terminology to reflect that distinction more clearly. In particular, the odious word "bankrupt" really should not be used for those who are in the basically honest camp.
  Ms Hewitt: In Committee and at other stages in the Bill's passage, we shall of course see whether we can improve the wording. I welcome the support of my hon. Friend and others for the principle here. The Federation of Small Businesses, which has extensive experience of the problem, has also said that, clearly,
  "where it is obvious that the bankrupt has fallen on hard times through sheer bad luck, it is only right that they be allowed back into the system at a much earlier stage".
  It goes on to say:
  "We do not see anything controversial in these proposals and would urge all party support and speedy implementation through Parliament."
  I hope that our discussions can focus on the details of how we implement the principle rather than on any disagreement about the principle itself.
  Mr. David Ruffley: Will the right hon. Lady clarify the concepts of dishonesty and recklessness that are, I understand, at the heart of the culpability test? Will they be defined according to the criminal standard of proof—that is, beyond reasonable doubt?
  Ms Hewitt: This part of the Bill deals with civil proceedings, so we are talking about a civil standard of proof. The same applies to the new bankruptcy restriction orders.

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  I stress that we also want to ensure that companies do not go to the wall unnecessarily. That is why the Bill would restrict in future the use of administrative receivership, which places effective control in the hands of a single secured creditor. Instead, we shall shift the balance in favour of the new streamlined administration procedure that aims, as I said, to facilitate company rescue and to produce better returns for creditors as a whole. The reforms will ensure that account is taken of the interests of all creditors, including small firms and other trade creditors whose claims are unsecured.
  The Bill will abolish the Crown's preferential rights to recover unpaid taxes ahead of other creditors. That, too, will bring real benefits to unsecured creditors. We are also including measures that contribute towards reforming the Insolvency Service's financial regime, to bring increased transparency and simplicity. That will ensure that money does not flow, in effect, from the coffers of the creditors into the coffers of the Treasury. The reforms will ensure that the maximum possible return goes to insolvent estates. Together with the abolition of Crown preference, those two provisions will make up to £110 million available for distribution to all creditors.
  The measures in the Bill are radical and bold, but based on careful and extensive consultation. They will benefit businesses and consumers by hundreds of millions of pounds. They will boost productivity and enterprise, help our international competitiveness and make the United Kingdom an even better place in which to do business and to be a consumer.
  As I have emphasised, the Bill has attracted widespread support which will, I hope, be reflected in our discussions today and during its passage. I commend the Bill to the House.
  5.27 pm
  Mr. John Whittingdale: The measure has been described as the flagship Bill of the Department of Trade and Industry. It consists of 269 clauses and 26 schedules, running to 333 pages; and there are 139 pages of explanatory notes.
  It is true that many of the main principles of the Bill are not matters of controversy between us. However, I am sure that the Secretary of State will agree that the effects of the Bill are likely to be far reaching—across the whole of industry; and that the measure represents a major change in the law governing commerce and business in the UK which is likely to affect every company in the land.
  Given those facts, it is extraordinary that a Bill of such complexity is to be pushed through Parliament with so little opportunity for detailed scrutiny and debate. In her speech, the Secretary of State made much of the fact that business had welcomed the amount of consultation that had taken place while the Bill was being drawn up. I think that she specifically referred to the CBI, so I draw her attention to a speech given a few days ago by the deputy director general of the CBI, especially the section entitled "Lack of real consultation". He said:
  "Many CBI member companies have expressed serious concerns to us about the inadequacy of the consultation period, given the complexity and novelty of many of the proposals. Nine weeks for the White Paper—four of which were during August—was hardly sufficient, especially since so much of what was being proposed was new and unexpected."
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  The innovation for which the Government are responsible—subjecting Bills to pre-legislative scrutiny—has undoubtedly improved the process of law making, but if ever there was a Bill that would have benefited from such scrutiny, it was this one. Instead, however, its publication was delayed and delayed until finally it appeared on the very day that the House went into recess for Easter. Just 15 days later we are giving the Bill a Second Reading, with almost no time for those with an interest to study it and make comments. Worse still, the motion on the Order Paper requires its Committee stage to be completed by 14 May, less than five weeks from today. By any consideration, that gives remarkably little time for proper scrutiny of what the Government themselves claim is a measure of great importance.
  It is not entirely clear why there is any such need for haste, as only a few years ago the Government passed the Competition Act 1998, which was described at the time as the most radical overhaul of our competition laws for 50 years. Indeed, on Third Reading, the then Minister of State said:
  "Reform of the current regime is long overdue. The Bill will give us a really modern and effective competition regime at last"—[Official Report, 8 July 1998; Vol. 315, c. 1209.]
  Here we are, however, a few years later, debating a Bill that overturns several of the principles contained in the Competition Act and establishes new rules and powers that go far further than those allowed for under that Act.
  Can we conclude, therefore, that the regime established by the Government, which has only recently come into force, has proved to be neither modern nor effective? If so, what is the evidence for that? Will the Secretary of State tell us which anti-competitive practices have continued to occur that the powers contained in the Competition Act 1998 have proved inadequate to prevent?
  Lest there be any doubt, I should say that we are strongly in favour of a strong and effective competition regime. Although I am a believer in free and competitive markets as the ultimate protection for the consumer, I fully accept the need for tough laws to prevent abuse of market power and anti-competitive practices. Just as the vast majority of people in this country are law-abiding, so are most firms happy to win business by offering customers what they want at the best available price. However, there will be some who try to take advantage of their market strength to seek to eliminate their competitors by predatory pricing or by collusion with competitors to fix prices or markets behind closed doors.
  The purest free market thinkers, with whom I have traditionally had some sympathy, believe that the market will always win, and that when a firm seeks to take advantage of its elimination of its competitors or a price is fixed by a cartel of producers, a new entrant will always come along to undercut it. However, that takes no account of the damage suffered in the meantime by competitive companies and consumers as a result of market abuse. Therefore, I agree with the Secretary of State that legal sanctions are required to deter such practices, and I do not oppose measures designed to achieve that.
  There are several specific measures in the Bill to which we are happy to give unqualified support. The first is the decision to remove Ministers from the decision-making process on the clearance of mergers. I should declare that I had some experience of such matters when I worked as a special adviser to Norman Tebbit, the then Secretary of

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  State. Lord Tebbit established the Tebbit guidelines, which required that merger references should be made primarily on competition grounds, rather than on any of the wider considerations contained in the Fair Trading Act 1973. The proposal to remove Ministers from the equation entirely and to leave matters to competition authorities is in some ways the ultimate application of the Tebbit guidelines, although knowing that may not increase the Secretary of State's enthusiasm for her policy.
  Mr. Lansley: Will my hon. Friend give way?
  Mr. Whittingdale: I am delighted to give way to my hon. Friend, who had the same experience as I did at that time.
  Mr. Lansley: I am grateful to my hon. Friend, although for accuracy's sake I should point out that I was a civil servant at that time, not a special adviser. However, I did have the same experience. Would my hon. Friend agree that, whereas the Secretary of State implied that the measure should have been undertaken earlier, the whole point of the application of the Tebbit doctrine by subsequent Conservative Secretaries of State was that competition was given primacy? A degree of predictability in the market place was therefore engendered, which has been lost in recent years by the apparent unpredictability of decisions made by Labour Ministers. Is it not an implied criticism of her predecessors that the Secretary of State is taking this step?
  Mr. Whittingdale: I agree with my hon. Friend. It is a matter of some sadness that subsequent Secretaries of State did not apply Lord Tebbit's guidelines with the same rigour as he always did.
  Having welcomed some parts of the Bill, I shall explore some of the concerns that have been expressed, in particular by the CBI, about some aspects of the new competition regime—concerns that I think should be addressed. The new powers to be given to the Office of Fair Trading to investigate markets to identify and root out anti-competitive practices are considerable. Supporters of the Bill argue that those who are innocent of any such behaviour should have no reason to be concerned, but it is not true that those who are investigated and cleared of any wrongdoing face no penalty. The truth is that those who are subject to investigation are required to devote huge amounts of time and resources to proving their innocence. In some cases, they have had to do so repeatedly, as no sooner are they cleared of any malpractice in one investigation than they face another investigation—one that seeks to uncover evidence that the previous investigation failed to find.
  That has certainly been the case in the record industry, which has repeatedly been accused of rigging the market to maintain an artificially high price for compact discs. In 1993, the industry was subjected to an investigation by the Monopolies and Mergers Commission which lasted for a year and which cleared the industry of any wrongdoing. The MMC's subsequent report ran to 350 pages, and the total cost of that investigation to the industry in terms of professional fees and management time was estimated to have been between £17 million and £20 million. None the less, in the past three years the
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  industry has had to contend with five more separate investigations, none of which has overturned the MMC's original conclusions.
  There is genuine anxiety that the OFT might come under pressure from consumer groups and the media to hound particular industries such as supermarkets, newspaper owners, petrol retailers, or indeed record companies, if there is a popular view that anti-competitive practices are rife, even when previous inquiries have found no evidence to support that view. I hope that the Secretary of State will consider the representations made by business about the need to set stricter criteria that have been satisfied before an investigation can be launched. I hope, too, that she will consider the case for allowing businesses that are subject to an investigation in which no evidence of inappropriate behaviour is found to seek compensation for the costs that they have incurred.
  The provision of the Bill that has given rise to most controversy is the proposal to impose criminal sanctions on those found guilty of anti-competitive practices. I share the Government's view that those who participate in cartels or other anti-competitive practices are guilty of theft, both from consumers and often—and just as important—from other, small businesses. I therefore agree in principle that the penalties must be sufficient to act as a strong deterrent, and it may well be that fines—even at the punitive level provided for by the Competition Act—are not enough. However, we want the Government to tell us why they believe that that Act is failing in that respect, and why they think the fines now available to the courts are an insufficient deterrent. So far, only one fine has been imposed by the OFT under the Competition Act, so it seems a little early to conclude that it is not working.
  The Government must also explain why they are now departing from the European model, in which criminal penalties are usually not available, and seldom applied if they are available. On Second Reading of the Competition Act, the then Secretary of State criticised the existing law, saying:
  "UK companies that are large enough to be affected by the EU regime face differing laws, a differing approach and potentially differing judgments on the same competition issues."—[Official Report, 11 May 1998; Vol. 312, c. 25.]
  Yet that is precisely what might now result from the Bill. If a company is found to be in breach of EU competition law it may be subject to a civil administrative fine, while those found guilty of the same offence in the UK face criminal proceedings and imprisonment. As one European official has pointed out, that might mean that a double glazing salesman who fixes prices in the local pub can be sent to jail, while the biggest pan-European cartels risk at most administrative fines on their companies.
  There is also concern that the provisions recently introduced by the Commission to encourage whistleblowing might be undermined if the Commission is unable to guarantee immunity from prosecution in the UK. The creation of a leniency regime allows this issue to be addressed, but the process lacks transparency and appears to give considerable discretion to the prosecuting authorities. We shall be looking to the Government to provide certainty in this area and for assurances that they will be willing to work with other competition authorities to ensure that whistleblowers are not deterred.
  In large part we welcome the provisions that deal with consumer protection laws, but the increased powers for consumer groups give rise to some concern. The

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  super-complaints provision should allow malpractice to be dealt with quickly, but it must not allow consumer groups to set the priorities of the OFT. Such complaints clearly merit urgent consideration, but the OFT must retain the right to decide whether immediate action is justified. It is clearly essential that such complaints be subjected to the same degree of scrutiny by the OFT as any others.
  Perhaps of greater concern is the power to allow consumer groups to bring representative actions for damages. This risks turning consumer organisations from lobbying groups into prosecuting authorities, thus supplanting the role of the OFT. Should such actions be successful, it will be hugely difficult to quantify damages, and even harder to decide their distribution.
  In the United States, which we are told is the model for the Bill, the original Sherman Act gave injured competitors the right to seek treble damages for any violation of anti-trust laws. Consumers, too, are able to bring actions in the US if they are directly and adversely affected by a price-fixing conspiracy. However, the power proposed in the Bill goes considerably further than that which exists in the US, and risks creating huge additional burdens on business.
  The final part of the Bill is intended to reform and modernise the UK's insolvency and bankruptcy laws. Not being a lawyer, I admit that it is something that I struggled with when researching the Bill. However, it is of huge importance and a matter about which we have the most concerns. The Government's stated objective is to encourage a climate of entrepreneurship along American lines where business failure is not a mark of shame but evidence of economic dynamism and risk taking.
  That is an aspiration that we understand and share. However, it is not possible to legislate to transplant an American-style entrepreneurial climate into the UK. There is a real danger that the Government's proposals may end up making it harder for fledgling businesses to attract support, while at the same time encouraging reckless personal behaviour.
  We give an unqualified welcome to the abolition of Crown preference, which is long overdue. It is both absurd and unjust that the Government, who are better placed than any other creditor to absorb any losses incurred when a company becomes insolvent, should somehow take priority over ordinary trade creditors, many of whom may depend on being paid for their very survival. The provision has been widely welcomed by business organisations and lenders, and it is one that we are happy to support.
  The case for the abolition of administrative receivership, except in specific circumstances as set out in the Bill, is less clear. It was not contained in the recommendations of the review of company rescues and business reconstruction mechanisms, which was set up by the Chancellor of the Exchequer and the Secretary of State and published in November 2000. Yet the Government's intention to abolish ARs was announced by the Chancellor only seven months later.
  The Government's justification for doing so is that the AR procedure puts too much power into the hands of one group of creditors at the expense of those who are unsecured. It is claimed also that it gives the administrative receiver a primary obligation to recover the debts of the appointor rather than an obligation to treat all creditors equally. Yet there is considerable evidence that
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  the AR procedure has worked quite well and that it has proved successful in many instances in rescuing companies in difficulties rather than burying them.
  The ability of a lender to impose a floating charge, together with the power to appoint an administrative receiver if necessary, has encouraged lenders to be more flexible and to support companies that run into difficulties. By removing this power, the result may well be that lenders will be less flexible and more risk averse. It is therefore not only the businesses that go into administrative receivership each year that will be affected, but potentially every business that is seeking financial support. There is a real danger that as a result of this measure banks will be less inclined to lend, or will lend more expensively, and that the businesses that the Government are seeking to help will be the ones that suffer as a result.
  Mrs. Browning: I hear what my hon. Friend says. However, he will be aware also that the small business sector—especially small and medium-sized business—has been lobbying about the abolition of the floating charge for a long time. The genesis of the process goes back to the days when banks tended to lend not on the basis of a proper evaluation of a business plan presented to them but on the capital assets and collateral of the company concerned. Is it not incumbent upon the banking sector to start to do what it should be doing, which is to give good business advice and a proper evaluation of a business plan, not only when the initial application is made for the loan but in terms of the on-going cash flow and management of the business concerned? I hope that my hon. Friend will agree with me that there is an incumbency on the banking sector to carry out that role in its relationship with the business sector.
  Mr. Whittingdale: I agree with my hon. Friend that it is strongly in the interests of banks that they help businesses to stay in business, and to give them whatever support they feel able to give if they run into difficulties. To that extent, I share my hon. Friend's view. I think that banks now are much more careful in their lending practices than perhaps they were some years ago.
  I have outlined my concerns. It is not the banks that will suffer, because they will simply adjust their practices. Ultimately, small businesses may suffer if banks are less inclined to adopt flexible practices when making loans and decide to charge more for them. We must seriously address that danger when considering what the Government propose.
  The other main concern which has been expressed by a number of those who have examined the Bill's provisions is the extent to which the work load on the courts is likely dramatically to increase. In many instances it is essential, if a business is to have a chance of survival, that action is taken by the administrator quickly to salvage whatever is available. If the courts have to be involved in every case as a result of the change, and that means that letters have to be written to creditors and papers have to be filed with the courts, and a case has to take its place in the queue, there may be nothing left to rescue in the business by the time that those things have been done.
  We will be looking to the Government for assurances that extra resources will be given to the courts to allow them to handle cases quickly, especially those that have a

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  habit of arising at about 5 pm on a Friday. Administrators need to know the time from when they have the power to act and they need to be able to act quickly without having to revert to the courts.
  We understand and welcome the main thrust of the Government's intentions to help those setting up in business who may fall into difficulties. However, the Government's proposals for reform do not discriminate between business bankruptcies and personal bankruptcies. While their proposals are well intentioned, it may be that they will prove counter productive.
  The wish to remove the stigma of bankruptcy, which has been spoken of by the Secretary of State, and to encourage risk taking is admirable, but at a time when consumer debt is rising sharply, this measure risks sending exactly the wrong message to those who may be reckless and irresponsible borrowers.
  The distinction between so-called honest and culpable bankrupts, which has been mentioned by several hon. Members on both sides of the House, will be extremely difficult to draw, as my hon. Friend the Member for South-West Hertfordshire (Mr. Page) made clear. I have no doubt that the vast majority of bankrupts reach their position through personal incompetence or recklessness—in some cases, they will have become bankrupt through no fault of their own—rather than through deliberate malice. However, it should not be forgotten that whatever the causes of their behaviour, they will leave victims who are often not the banks, but friends or family who have acted as lenders of last resort. Creditors are often small businesses that may be unable to survive if they are not paid. Meaningful consequences are needed in respect of bankruptcy, with a minimum period set for it by law.
  It is worth bearing in mind what happened in America, as it is the American model to which the Government constantly refer. In the United States, 95 per cent. of bankruptcies are suffered by consumers and are unrelated to any business activities. The relaxation of bankruptcy laws in the United States in the late 1970s led to a fourfold increase in consumer bankruptcies, while the number of business bankruptcies fell. Some people in the United States have even said that bankruptcy is now regarded as an easy way of supporting social welfare, as a consumer can run up large medical bills and then go bankrupt, passing the cost on to the credit or health industry and ultimately to other consumers.
  The Bill fails to distinguish between consumer and business bankrupts. In seeking to encourage a small number of risk-taking entrepreneurs, the Government may end up merely encouraging a far bigger number of reckless individuals who run up substantial debts that have nothing to do with enterprise. Those that may end up suffering in the longer term are the businesses that will be left to pick up the bill and the consumers who will suffer restricted access to credit and higher costs.
  Although the Bill has been introduced today by the Secretary of State, it is not her creation. It was conceived in the Treasury and has been promoted at every stage by the Chancellor of the Exchequer. We know that raising the UK's productivity is his big idea for Labour's second term. It is an objective that the Government have so far been singularly unsuccessful in achieving. In the five years since the Government launched their productivity
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  agenda, progress has been virtually non-existent. Output per head in the UK remains way below that in not only the United States, but Germany and France. Whereas productivity here rose faster than in the United States in 1992–97, since that time, growth has been slower. As a result, the productivity gap is getting bigger, instead of narrowing.
  The Government may be correct that strengthening our competition laws will help improve productivity, but it will not put right the damage that has been done to our competitiveness by the relentless increase in tax and burdens on business that has taken place under them. The CBI has calculated that the amount of extra tax paid by business amounts to £29 billion. The British Chambers of Commerce, which the Secretary of State has quoted so approvingly on several occasions, estimates that the cost to business of the extra red tape and regulation under this Government is now more than £15 billion. It is that burden that is eroding our international competitiveness, crippling business and destroying jobs.
  Mr. Gareth R. Thomas: Will the hon. Gentleman give way?
  Mr. Whittingdale: If the hon. Gentleman will forgive me, I am just about to finish.
  This Government do not understand that one cannot regulate one's way to economic success. They seem to think that they can support enterprise simply by introducing a Bill with the word "enterprise" in its title. Sadly, it does very little to tackle the real problems that are affecting business in this country today.
  5.54 pm
  Mr. David Borrow: In welcoming the Bill, I should like to refer back to the Competition Act 1998. It is significant that the 1997 and 2001 Labour Governments both found time in their first year in office to introduce Bills that improve competition policy. That is in stark contrast to the work of the Conservative party during its latter years in office, when despite pressures to introduce improved competition legislation, it put the matter to the bottom of the list and introduced different measures.
  I welcome the Government's decision to give up the power to intervene in merger policy; at least, they have more or less given it up. However, I would like some reassurance about their ability to intervene when mergers are considered to be in the national strategic interest. I was interested in the BAe-Marconi merger a few years ago. If similar proposals were to arise in future in relation to mergers of major transnational defence companies, I should like to feel that a Minister was involved.
  The Government's decision to give up the power directly to intervene in merger policy means that they are giving up the power to establish national champions. That is good in terms of economic theory and competition policy, but it prompts this question: if the UK's competition policy is synchronised with that of its EU partners, should not those countries also operate a competition policy that precludes them from supporting national champions? It is also important, especially given the Prime Minister's recent visit to the United States and his discussions with the President, to ask whether the bastion of the free market, the US, will also give up a

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  policy of promoting national champions and perhaps reconsider its policy on the steel industry and its promotion as such a champion.
  The introduction of criminal law in respect of cartels is welcome. It is crucial that penalties for cartels be commensurate with the severity of the deed that is done. We have too often assumed that cartels are a minor issue and commit only small misdemeanours that do not matter. However, the crime in question is theft either from the consumer or other businesses and should be treated as such, so strong penalties should exist and I welcome those provisions.
  In broadly welcoming the provisions on insolvency, I wish to make a number of points. The issue of the Crown giving up its preferential creditor status is crucial not only to many employees in companies that currently lose out because the Crown takes the first cut of any resources that are left in insolvency, but to many other small businesses that are dependent as creditors on the business that is going into bankruptcy. If the Crown had not been a preferential creditor, some failed companies in my constituency might have received enough from businesses that went into liquidation to enable them to survive, instead of finding that the scale of the loss incurred was just enough to push them over into bankruptcy. Serious issues are involved, so I welcome very much the proposed removal of Crown preferential status.
  A number of bankruptcy issues have been raised by citizens advice bureaux in a briefing circulated to many hon. Members. They relate in particular to the problems of poor debtors who cannot use existing law on bankruptcy because of the fees that are involved in initiating bankruptcy proceedings. I know of cases that have been reported by citizens advice bureaux in Lancashire in which people with large debts who are on very low incomes are unable to move towards clearing their debts and sorting out their lives. They do not even have the necessary £250 to sort out their affairs through the bankruptcy arrangements, whereas people who are better off can use that procedure to get things sorted out.
  There is also an issue relating to married or unmarried couples who have joint debts. They would need a minimum of £500 to sort matters out and, for many couples in that situation who are poor and have no prospect of paying off their debts, the bankruptcy option is one that should be considered. I should be grateful if my right hon. Friend the Secretary of State reconsidered the fees involved, when the Bill goes into Committee.
  Another issue that has been raised concerns people whose period of bankruptcy has run out. Under these proposals, that could happen more quickly for someone who is regarded as an "innocent" bankrupt. Such people often have great difficulty in getting access to banking facilities, and I would like my right hon. Friend to consider whether there are ways of ensuring that people get their lives back into some sort of order once a bankruptcy period has run out, by being able to access banking facilities so that they can get wages paid into a bank account, take on a mortgage, or whatever.
  In too many cases, the fact that people have been bankrupt remains on a credit reference agency's files for up to six years, so that, even if their bankruptcy order has run out, they are still shown as having been bankrupt, so
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  far as financial institutions are concerned. That is a major barrier to their moving on, and goes against the thrust of the Bill in that area.
  I want to concentrate on consumer protection, and the proposed power under the Bill to give the Office of Fair Trading a supervisory role over trade organisations' codes of practice. There is a real problem in this area. There will be few hon. Members who have not heard their constituents say, "I thought I was covered, because this trade association's logo is on this letter, and it said it would look after me if things went wrong." Things have gone wrong, and the trade association has not been there to help.
  A constituent of mine came to see me recently with a very tragic case. With a hit of luck, we might be able to resolve it, but it serves to illustrate some of the problems that can occur. My constituent, Mr. Norburn, from New Longton, purchased a piece of land a few years ago and wanted to build a house on it. He looked around for a builder, and was obviously keen to ensure that the builder was registered with the National House Building Council so that he would be covered if anything went wrong. He employed a firm called Foys (Builders) Ltd., which was based in Preston, to build the property. It had all the necessary NHBC certificates.
  The house was not built correctly; there were things wrong with it. My constituent went to the NHBC to register a complaint and to see whether it could sort things out. Shortly after that, the builder started legal proceedings for non-payment of the remaining part of its bill. The NHBC decided that it could not continue to be involved while legal action was outstanding because the action was against one of its members. Eventually, the case went to court, and my constituent was awarded £155,000 to cover the cost of putting the house right and the legal costs. The builder promptly went into liquidation.
  The NHBC has since said that, according to the fine print of its certificate, its liability is limited to 10 per cent. if the house has not been completed. Because it had not intervened when my constituent approached it when the house was not being completed properly, and because the builder then went to court, this loophole means that my constituent is probably the best part of £150,000 out of pocket. He is very dissatisfied with the way in which the NHBC has dealt with his case.
  We may yet be able to resolve that case, but it illustrates the importance of the OFT being involved in a supervisory role with trade organisations that have similar schemes. Such schemes will, occasionally, go wrong, but having the OFT actively involved will be crucial in ensuring that people have more faith in them, and that they are better regulated. I have some concerns, however, about whether sufficient resources will be made available under the Bill for the OFT to carry out such duties properly. It will need resources and time to do that kind of job, and I will be interested to hear whether my right hon. Friend can give me some assurance that sufficient resources will be made available.
  Stop now orders will be extended under the Bill to areas that were not included in the Competition Act 1998. That is welcome, but, as one or two colleagues mentioned earlier, there is concern that this will not be sufficient and that the provisions will not cover the whole range of rogue traders who operate in this area. I would like the Standing

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  Committee to examine ideas for extending the stop now orders to areas about which organisations such as the citizens advice bureaux are concerned.
  I note that the citizens advice bureaux are also concerned about the differences between trading standards offices. My right hon. Friend the Secretary of State mentioned this in her speech, and has given assurances that resources are being made available to improve the quality of trading standards offices, and to ensure a more level playing field. This, too, will need to be discussed in Committee.
  I welcome the Bill, but I have sympathy with the comments made by some Conservative Members about it being very long, with 120-odd clauses.
  Mr. Waterson: Two hundred and sixty-nine.
  Mr. Borrow: I stand corrected. It is certainly a major piece of legislation. I think that it will be possible to deal with it within the Government's proposed time scale, but it will be important for Ministers to be prepared to listen constructively to the comments on various clauses from different sides of the Standing Committee. Many hon. Members will have concerns about whether we have got the definitions right—particularly in relation to insolvency, and about the issue of whether someone is an honest or dishonest bankrupt. Having seen the Bill, there are certainly issues on w hich I would like to seek clarification before it reaches Third Reading.
  6.9 pm
  Dr. Vincent Cable: There is a great deal to agree with within the philosophy of the Bill. We fully endorse the principles of competition, of encouraging entrepreneurship and of strengthening consumer protection, as the Conservative spokesman did. There are also specific proposals with which we agree, such as political independence, the competition test, and the use of stop now orders to protect consumers. They represent admirable advances, though they will all need much clarification when the Bill is scrutinised. The point that was made about stop now orders shows the uncertainty that still hangs around, and I noted that the Secretary of State did not answer it, although I am sure that she will do so in Committee. Other elements of the Bill are attractive in principle, such as the bankruptcy reforms and the criminalisat ion of cartels, but they could fall victim to the law of unintended consequences. I agree with many of the reservations that have been expressed.
  By way of introduction, I shall address what I think is the central logic of the Bill and what the Government are trying to achieve. The proposal is that we need to stimulate productivity growth, that the best way to do that is to have a more intensive and aggressive competition policy, and that the best way to achieve that is to import competition policy ideas from the United States. I do not disagree with the basic logic, but it is being massively hyped and exaggerated.
  An enormous political investment is being put into the Bill that I suspect will not be realised. The Chancellor and his advisers, and perhaps the Secretary of State, have probably been to the United States and been star-struck by people such as Joel Klein, who introduced the innovative
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  competition policies during the Clinton Administration. They may have jumped to false conclusions about the ease with which those policies could be applied on this side of the Atlantic.
  I shall make a few points about the American system and the difficulties of applying it in this country. Their system is immensely litigious: ask any American business man about the problems of doing business in the United States. A speech about such problems in this country would be all about red tape, but in the United States it would be full of complaints about lawyers and tort costs. That is the fundamental problem with their system, and importing it uncritically here—adding a new layer of legal costs—would not help business, innovation and productivity.
  I do not want to appear anti-American, because I am a great admirer of the way in which the American economy has performed, but we were in a similar state in relation to Japan 10 years ago. There was a Japanese economic miracle, and we were urged to copy everything that they were doing. A similar situation exists with the United States today, so a cautionary note should be sounded. Recent work suggests that productivity growth in the United States is almost certainly exaggerated by a factor of two, because of how national accounts in the US deal with depreciation in the rapid-growth computer industry. We should not get too carried away with the US experience.
  We should also be aware of intellectual fashion. I am a little older than the hon. Member for Maldon and East Chelmsford (Mr. Whittingdale). In the 1970s, when I did my stint as a special adviser in the Department of Trade and taught economics students the principles of competition policy, the intellectual fashions were very different from those of today. There was a tremendous belief in economies of scale, large-scale firms and large-scale plants. Such ideas were seen as the way to productivity growth. We had the Industrial Reorganisation Corporation, mergers in the car industry, and the idea of national champions, to which the hon. Member for South Ribble (Mr. Borrow) referred.
  In retrospect, we realise that that approach was probably not very smart, but at the time, there was consensus in politics and business that it was the way forward. In the 1980s, during the Reagan years, we drew on the Chicago school and the belief that we did not need a competition policy because excess profits bring new competition into the industry, provided that there are contestable markets. That idea prevailed for a while, and now we have a new fashion following the reforms in the United States in the 1990s.
  However, as the Americans are discovering, the position is difficult. One of the big problems that they have, and that the Office of Fair Trading and the Competition Commission will have with our merger decisions, is striking a balance between competition and monopoly in high-technology activities. On Friday, I am bringing back my private Member's Bill, which has wide support. The principle behind intellectual property rights is that a monopoly is deliberately created in which innovation can develop.
  The United States has had enormous problems getting to grips with the problems of Microsoft—the case is still bouncing around in the courts, for very good reasons. How do we deal with the balance of competition and

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  monopoly in such a case? The US Administration, despite their activist policy on monopoly, have still not determined how to deal with Microsoft. They have not tried to attack the underlying monopoly, which is the MS-DOS operating system. They have gone for the unbundling problem, which as a secondary issue. There is a genuine difficulty about how much competition should be allowed in the interests of innovation and growth.
  The United States policy is, in the Government's language, the gold standard, but there have been important changes in Europe. The European Union's competition policy has advanced considerably, and some of the toughest actions, such as those involving GE and Honeywell, have been taken by the EU. One of the concerns expressed by the Confederation of British Industry and the Law Society is that the Government are developing an American-based competition policy when the EU's own policy through the merger directive and the cartel legislation is developing independently.
  I do not want to get into an argument about whether the American or European approach is best: they just happen to be different. From the point of view of British companies, it is important to have consistency. If the Government are not consistent and do not take into account the European trends, the legislation will get into trouble in the courts. We have seen that already with one or two key cases, such as the Interbrew case, in which the Competition Commission was humiliated by being overruled by the court. One of the key lines of Interbrew's defence was that British law and European practice were at odds. The Government must be careful, because uncritically adopting an American approach to competition policy when the European Union is trying to refine competition principles for the single market will produce some difficult inconsistencies.
  I want now to address some of the specific points in the Bill, the first of which is on political independence. I think that we all agree that merger references should no longer be determined by Ministers. I had an open mind on that issue, until something that the Secretary of State's predecessor did finally persuaded me of the need to remove such decisions from the political world. The right hon. Member for Tyneside, North (Mr. Byers) made some excellent speeches on this subject, and strongly defended political independence until the NTL and Cable and Wireless case came along, which coincided with the interests of the Murdoch group. It was out of character, but he intervened, and although his motives may have been entirely innocent, it persuaded many people concerned with competition policy of the need for Ministers not to intervene politically, and not to be seen to be intervening. I support what the Government have now done.
  We must bear in mind the need for checks and balances. I am not sure how many hon. Members realise that, under this legislation, it will no longer be possible for them to go along to the Secretary of State every time a merger takes place that threatens jobs in their constituency and ask her to do something about it. She will not be able to do anything. There is a radical change in that policy area, and checks and balances must be built in.
  When the Bank of England was made independent of day-to-day political interference, checks and balances were provided, in the form of parliamentary accountability through the Select Committee on the Treasury. I was part
  66
  of that process, and it worked admirably. One of the key elements was confirmatory hearings. I would be interested to know why the Government have not proposed that in this area. Mr. Vickers and the four members of the OFT board are immensely powerful people, although Mr. Vickers is probably less powerful now that he has a board behind him. In their own way, they are just as powerful as the Monetary Policy Committee of the Bank of England. Their appointments should be vetted and scrutinised by Members of Parliament as a necessary part of the discipline. The same should apply to Mr. Derek Morris and the Competition Commission. That element of political accountability is missing from the legislation as it stands, and we would like more action taken on that front.
  The second element on which there is general consensus is the competition test. It is right that we should move away from the vague public interest test to a competition test. I am not entirely sure that the Government or the House have appreciated how radical that step will be, because as I understand the legislation, it will now become almost a matter of course for large mergers to be referred for examination. Almost by definition, a large merger reduces competition. Unless there are extenuating circumstances such as national security or palpable consumer benefits, or unless the companies involved are very small, there is no good reason why mergers should not be referred for examination. There is an irony here. A few years ago, the City called for the political independence of merger decisions because it did not like the interruption of merger processes by "Mrs. Blockit", as it described the then Secretary of State for Trade and Industry. It howled with pain and rage at the loss of its fee income, and asked politicians to keep out of the process.
  Ironically, there will almost certainly be many more merger references, because mergers will infringe on competition, and because of the growing volume of evidence that they do not add value. Many studies have been undertaken, but according to the KPMG study that I saw a couple of days ago, half of all mergers subtract shareholder value, let alone anything else, and a third do no good whatsoever. There is no good reason, therefore, why the Office of Fair Trading should ever stand aside and not refer a merger. We are entering into a totally different culture, which the City will probably have to get used to, whereby mergers will be constantly referred and investigated much more actively. I welcome that, but the implications have probably not yet been thoroughly thought through.
  I want to say a few words about a third issue—the criminalisation of cartels. I have no particular objection to that principle. It seems perfectly sensible that, if businesses behave in a very damaging and collusive way, their representatives should go to jail. Indeed, they already go to jail for offences such as fraud or the adulteration of meat. There is nothing particularly problematic about that.
  Mr. Tom Harris: Does the hon. Gentleman share my surprise at the call for harmonisation with Europe on this issue by the hon. Member for Maldon and East Chelmsford (Mr. Whittingdale)? Does the hon. Gentleman agree that that is a concern more for cartels than for consumers?
  Dr. Cable: The hon. Member is right. I, too, was a little surprised by the comment of the hon. Member for

  67
  Maldon and East Chelmsford; in fact, I was encouraged by it. Perhaps it illustrates the reformist tendency that we are told exists in the shadow Cabinet.
  The point about criminalisation is not whether it is wrong, but whether it is necessary. Is the problem a lack of powers, which we discussed earlier? As I understand it, only one case—involving Arriva and FirstGroup—was subject to massive fines under the Competition Act 1998, and that was thrown out by the courts. It is not a lack of powerful sanctions, therefore, that has deterred the authorities from dealing with cartels.
  One big problem in dealing with cartels, to which the hon. Member for Maldon and East Chelmsford rightly referred at length, is that of whistleblowers. Unless somebody blows the whistle on a cartel, it is impossible to track it down. By accident, I uncovered a cartel operating in my constituency. A constituent of mine, who was a leaseholder in a block of flats for which the council was the freeholder, challenged some building work on the roof that cost £5,000. On obtaining the tenders submitted to the council, we discovered that they were all within £5 of £5,000—a clear, prima facie case of a cartel.
  I asked for a proper investigation, and although there was clear circumstantial evidence, nothing could be proved. All who were involved denied ever having spoken to each other. Of course, such a case would not stand a cat in hell's chance in a cartel investigation, because it would not meet the standard of criminal proof. There has to be whistleblowing, and a culture in the British and European systems that encourages it. Criminalisation of itself will not solve the problem.
  One must also bear it in mind that, whenever cartel legislation has been significantly toughened, as it was in the 1950s, the response has been merger activity among small companies. Many companies will take cartels in-house, thereby preventing action under the law. Useful work by Mr. Simionides, a British academic, demonstrated a big increase in such activity in the 1950s, in response to the then Conservative Government's action against cartels. It is possible, therefore, to escape criminal sanctions through obvious business strategies.
  My basic point about cartels is rather different, however. What is a cartel? In her introduction, the Secretary of State said that she will provide a very tight definition, but there is a commonsense one. A cartel involves companies getting together to raise prices and restrict services. In addition to the highly proscribed cartels that the Government are going to act against, others are operating under their noses. I wonder whether the Government or the competition authorities have thought of looking at the Association of Train Operating Companies, which meets next week to take a collective decision to increase the price of the network card by £10, thereby devaluing it for anybody who lives within 35 miles of London. A group of business men is acting together to raise prices collectively and restrict a service—a cartel by any definition. However, it is operating under the Government's nose; indeed, I believe that the Government talk to it.
  Another example—in many ways, it is more topical and important—is the banking system. As I have repeatedly pointed out in debates with the Secretary of State and the Chancellor, and as the Cruickshank report showed, in
  68
  effect, the banking system operates as a cartel. However, I doubt whether anybody expects Mr. Barrett to go behind bars. The banking system is accepted as a legitimate structure, but the Government need to be more careful about distinguishing between small cartels—gentlemen in dirty macs in the back room of a pub who are subject to criminal sanctions—and legitimate cartels that operate in the heart of the business establishment and are totally free not only from criminal sanctions but from effective regulation. That gap in credibility needs to be bridged.
  On bankruptcy, I agree with many of the comments that have already been made. The hon. Member for South-West Hertfordshire (Mr. Page), among others, pointed out that distinguishing between good and bad bankruptcy could become virtually impossible, and certainly unworkable. Such problems are always difficult in law. One thinks of the problems associated with trying to discover the guilty party in a divorce case. We are importing into bankruptcy the same subjective judgments, Many people will be wrongly judged from their point of view. They will launch legal appeals and the process will become very complicated. The administrative system will lose much of its flexibility and become much more expensive.
  In respect of bankruptcy, I want also to endorse the point that was made about Crown prerogative. In that regard, a welcome and positive step is being taken, but we need to be careful. In many ways, we are talking not about the law but the spirit of the law. If the Inland Revenue loses its Crown prerogative but continues to operate in the same way, regarding itself none the less as driven by a need to get at assets before other creditors, the same problems will arise. The issue is as much about the way the Inland Revenue functions as it is about the law.
  I endorse the importance of personal bankruptcy. It has yet to be pointed out that many very poor people would benefit from personal bankruptcy, but cannot get through the bankruptcy process because they cannot afford the £250 fee. If the legislation is going to deal with personal and corporate bankruptcy together, we should devote time and thought to how the bankruptcy law affects the socially excluded, who are right at the bottom of the social scale.
  I want to reinforce the comments of the hon. Members for Luton, South (Margaret Moran) and for South Ribble about the stop now provisions. They constitute an important innovation, but it is unclear how they will operate. I fully agree with those hon. Members who emphasised the need to apply stop now orders not just to illegal activities, but to activities specifically designed to get around the law. Pyramid selling was mentioned, but there are many other examples, such as time-share and the jobbing contractor scandals. Such scams are often cleverly designed to get around the law, and it is important that the stop now provisions be applied to them. It may well be that, as the Secretary of State said, the general legal powers that were discussed do not apply, but we must Lind some other way to deal with the problem.
  Many of the consumer powers depend on the capacity of trading standards departments. Stronger consumer action powers are all very well, but if trading standards officers are severely under-equipped and resourced, as they are at present, much of that action will not be taken locally. Local councils' trading standards departments have to be beefed up so that that aspect of the legislation can be effective.

  69
  In conclusion, I welcome much of the philosophy behind the Bill, which is big and complex. It will require a great deal of scrutiny, and we shall certainly table a good many critical amendments to it.
  6.30 pm
  Ms Joan Walley: I want to make a small contribution, but I am grateful to have had the opportunity to listen to the debate because this is clearly a very far-reaching, complex and highly technical Bill that will affect our constituencies and the businesses in them in many ways. The hon. Member for Twickenham (Dr. Cable) made clear in his thoughtful contribution how far reaching the Bill is, and I hope that those hon. Members who are fortunate enough to serve on the Standing Committee—I do not include myself as one of them—will have an opportunity to give it the full scrutiny that it clearly deserves.
  I have briefly looked at schedule 25 and reckon that about 36 measures on the statute book will be affected by the changed powers of the Office of Fair Trading, as opposed to those of the previous Director General of Fair Trading. I hope that hon. Members will consider the way in which the Government are developing competition policy and the fact that there is more liberalisation.
  The Communication Workers Union lobbied Parliament earlier today. It is concerned that Postcomm might be taking forward its proposals too hastily, and perhaps not in the right direction. It is crucial, therefore, that we carefully consider how the Bill will affect other Acts on the statute book. I remember going to the OFT with other hon. Members to make representations about football coverage under the Broadcasting Act 1990 and football club mergers. Clearly, we need to understand how the Bill will affect such issues.
  My hon. Friend the Member for South Ribble (Mr. Borrow) mentioned some of the concerns that were expressed by citizens advice bureaux. I have had almost Herculean battles with firms facing bankruptcy in my constituency—usually manufacturing companies—especially when there have been real fears about what will happen to their employees. We have to consider the proposals very carefully, because perhaps they will bring about some changes.
  I welcome the Bill, which will bring real benefits to unsecured creditors, including many small businesses. People say to me, "Joan, I don't understand why the Inland Revenue always has the first call when a firm is about to go under." Many people may be owed money, which they need to be paid, but because they are not top of the queue they too go under. So the Bill will increase and enhance competitiveness in a way that benefits constituencies throughout the country, not just Stoke-on-Trent, North.
  Citizens advice bureaux have already circulated their concerns to many Members of Parliament. They are concerned about whether those on means-tested benefits and in hardship will be exempt from the bankruptcy deposit fee. I hope that the Minister will consider that issue in responding to the debate. Many of our constituents cannot afford to take advantage of some of the Bill's proposals. We should consider whether there should be an option to pay by instalment and perhaps reduced fees.
  As well as having talks with trading standards officers about guidance and consultation, I hope that the Government will have further talks with citizens advice
  70
  bureaux, as that might provide a way forward. Many of my constituents face debt and bankruptcy, and they need to be included. The Bill needs to be inclusive, especially in relation to the disadvantaged sections of our communities.
  I speak as a former chairman of a local government health and consumer services committee, which had responsibility for trading standards officers, and in doing so I should like to echo the concerns that have been expressed about trading standards officers. A consistent approach must be taken throughout the country. What happens in each part of the country—including Northern Ireland and so on—must reflect what happens elsewhere, so the guidance should be consistent. I hope that there will be proper consultation on that.
  I also hope that the Bill will continue to enable trading standards officers to act against rogue traders. The opportunities that it provides to act against rogue traders represent a real step forward and will he warmly welcomed by many people. I hope that the Minister will consider the guidance that will be issued to trading standards officers on the new extended stop now regime.
  For many years I have tried to get answers about unfair competition and barriers to enterprise, especially in relation to independent petrol retailers and the newspaper industry, which Select Committee on Trade and Industry and the OFT have investigated. A lot of Members have been approached by independent petrol retailers, many of whom have gone under during the past five or six years because of unfair competition. In swathes of the country—not in my constituency, where there are some excellent ones, I hasten to add—many of them have closed because of such unfair competition.
  In the time that I have had to consider this lengthy and hefty Bill, I have tried to consider whether that long-standing concern can be addressed. I hope that the Minister will consider the issue in detail in his reply or in a follow-up letter to me. Those retailers are buying fuel wholesale, but the wholesale suppliers are selling oil and petrol at less than cost price in parts of the country because they can gain an advantage elsewhere in the supply structure. The independent petrol retailers operate at a loss because of unfair competition in the buying and selling of petrol. That is grossly unfair.
  Many small businesses are severely disadvantaged by the power of the larger conglomerates that provide them with goods and services. Small businesses in rural areas and areas of high unemployment are particularly vulnerable. The Bill presupposes that the consumer is an ordinary member of the public, but small businesses are also consumers—they receive goods and services from larger businesses. Will the Bill afford them adequate protection? I know that clauses 5 to 8 refer to the issue, and I hope the Minister will pay close attention to it.
  Currently, a monopoly is deemed to have been brought about if a supplier dominates 70 per cent. of the market. In the oil industry, three players dominate 80 per cent. of the fuel-supply market. No individual company will cross the magic 30 per cent. threshold and thus trigger an investigation, but collectively they dominate the market. All their prices at the pump move either up or down in unison. What protection from such predatory action will the Bill provide? Those running independent garages in my constituency—I will not name them—will listen closely to the Minister's reply.
  6.41 pm
  Mr. Richard Page: Although I broadly welcome the Bill, I do not consider its title entirely apposite. It could have been the "This is the other half of the insolvency legislation that we should have produced in the last Parliament" Bill, or the "These are the OFT changes that we have been promising for years and years and have just got around to" Bill. What we have, however, is the Enterprise Bill. A more truthful title would be the Enterprise Regulation Bill: this Bill has precious little to do with enterprise, and an awful lot to do with the regulation of industry.
  I am not against that, in fact, but I think that the Government carry spin a little too far. When their time is up and the pundits engage in a critique of their activities, the one word that will sum up those activities will be "spin". It will run through them just as the word "Blackpool" runs through a stick of rock.
  Nevertheless, as I have said, I support the Bill. I am not in favour of rushed parliamentary reform: in many instances, it is a case of "Legislate in haste and repent at leisure". However, I agree with my hon. Friend the Member for Maldon and East Chelmsford (Mr. Whittingdale) that the Bill should have been scrutinised before being presented to Parliament. It contains 269 clauses and 26 schedules. In Committee, if the Minister speaks for only 10 minutes on each clause, it will take just a tad less than 3,000 minutes—50 hours—to give the background and the Government's reasoning. The House should realise how much those involved in industry and commerce want to hear ministerial explanations that may help them to interpret the Bill. Pre-legislative scrutiny could have taken place at its own pace, allowing us to deal only with items prompting interest or contention.
  This is a huge Bill. That pleases me in some ways—we shall be dealing in primary legislation with many matters that are normally contained in secondary legislation—but we are trapped in a savage timetable that will prevent us from devoting enough scrutiny to the Bill.
  I had some mischievous thoughts when reading the Bill. It seems that various designated organisations will be approved. I wondered whether a political party would be deemed a consumer group. Would the Conservative party be deemed to represent consumers? I must tell the Minister that I think we do a splendid job representing consumers, and I think we should be allowed to make representations to the OFT as a designated body.
  The hon. Member for South Ribble (Mr. Borrow), who has left the Chamber for a moment, raised an important point about trade associations, with which the Bill does not deal. I took a great deal of interest in the subject before 1997. I think consumer representation could be hugely advanced if leading trade associations were recognised, and if that recognition required appropriate insurance and certification. Government would recognise and deal with only those associations that wrote that requirement into their constitutions. Anyone dealing with, say, a builder who saw that the builder had that trade association accreditation would know that the insurance was there. The Association of British Travel Agents implements such an arrangement to a degree: it is one of the leaders in that regard. I can only commend it, and suggest that further thought should be given to the idea.
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  I experienced a moment of panic when my hon. Friend the Member for South Cambridgeshire (Mr. Lansley) mentioned clause 254, which refers to bankruptcies among Members of Parliament. For a dreadful moment I thought we were going to remove the rule that an MP who became bankrupt could not remain in the House. It flashed through my mind that if we had removed that barrier, the noble Lord Archer would not have had to resign all those years ago. He would not have gone to the United States and written all those books, and none of the ensuing drama would have taken place. He would probably still be in the House, entertaining us in some other way, rather than in his current abode.
  I listened to the Secretary of State's arguments in favour of the Bill with a good deal of attention, and at some points almost with enthusiasm. The repetition of the words "competition", "consumer" and "enterprise" from the Government Front Bench had a mesmeric effect on me. The Secretary of State's emergence from the chrysalis of clause IV socialism as a butterfly of enterprise is one of the more remarkable political transformations of the last 20 years or so. I welcome it: it is a definite step in the right direction.
  As I have said, I am happy to support some aspects of the Bill. The distancing of various Ministers from decisions about competition and mergers is highly sensible, and has clearly received a general welcome in the House. I also support, in principle, the proposals to reduce the problems of those who become bankrupt through no fault of their own—although, as I said earlier, it is difficult to ascertain exactly what constitutes "no fault of their own". The hon. Member for Twickenham (Dr. Cable) summed that up rather well. As he agreed with me, I think I should agree with him. This mutual admiration society suggests that between us we must have got something right.
  As a former small business Minister, I know that when people become bankrupt it is seldom through no fault of their own. Amazingly, there is a horrendous failure rate among those who start up businesses simply because it seems a good idea at the time. According to statistics I have seen, about one business in nine is still operating after a couple of years, but a much higher percentage of businesses whose programmes and financial statements have been vetted by various bodies, such as Business Links, are able to survive. We must consider that carefully in Committee.
  Let me give a small piece of advice. I hope that the Bill will help in this regard. I have observed that if a company is going to go bankrupt, the faster it does so, the less cost and pain will be involved. Companies should not hang on until the bitter end, running up more and more debts. That just means that more people outside are hurt. Those lending money to such companies are hurt far more than they would be if the companies had closed weeks or months earlier.
  I welcome the fact that the Crown will be put on an equal footing with other creditors of a failed business or a bankrupt person. That is long overdue. However, we must take care to discover whether the actions of the Crown will precipitate a more rigorous collection method, which may in turn cause businesses to have to close much sooner. I hope that in Committee the Minister will give guidance on how Crown organisations will behave.

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  Although, over time, the Secretary of State and her ministerial colleagues have adopted the rhetoric of saying that they want competition and consumerism, too great an extension of regulation seems to be taking place. They believe that there is too little competition in our domestic markets and that consequently British consumers suffer unnecessarily high prices. Their solution is to make even more stringent an already tough competition regime by creating a new corporate authority in the Office of Fair Trading and establishing new penalties for failing to comply with the enforcement regime. I support the measures to establish codes of practice for business and consumers. In case the Minister takes me seriously, I am only joking when I suggest that the Conservative party might become a designated consumer body. [Interruption.] I see that my hon. Friend the Member for Maldon and East Chelmsford is asking me to rethink that, but it would not be right for a political party to act in that way.
  Is not Ministers' initiation of their "super complaints" system redolent of the approach of traditional old-fashioned socialists? The Secretary of State, who tries to make out that her new political colours are a tasteful pink, may be a tad redder than we like to think. I was intrigued to read a recent interview in which she claimed that she wanted the Department for Trade and Industry
  "to be run more like a well-rounded business"
  and said that she believed that
  "entrepreneurs who take risks"—
  should—
  "get exceptional returns".
  If she had more business experience, she would know that running a business is nothing like running a Department. Ministers should not think that they can run businesses—they make regulations, not play in the game. As soon as they start to do that, we face problems similar to those that arose in the past. I remember the success achieved by the National Enterprise Board, which was set up to bring several organisations together to gain the benefit of socialist leadership and direction. Every single one went pear-shaped and cost the people of this country a small fortune. We should ensure that any additional regulation reduces, or keeps to a minimum, costs on business.
  I shall illustrate the confusion that lies at the heart of the Bill by considering two of its provisions. I fully understand why organisations such as the Consumers Association have enthusiastically welcomed the proposal to allow designated consumer bodies to complain to the OFT that one or more features of a UK market is harming consumers' interests—they have lobbied for years for the Government to honour their promise in that respect. All the consumer body has to do is to follow the OFT's guidance on how to present its case. However, neither hon. Members nor businesses are being told what criteria will have to met by complainants. For example, will they include exceptional profit levels? If so, the risk-taking entrepreneur whom the Secretary of State wishes to encourage will think twice about operating in this country.
  I am a practical person, not an academic economist or a lawyer—I live and operate in the real world—but it seems to me that the criteria are so widely drawn that any UK market of any kind could be open to investigation. In the Bill, the Government largely fail to appreciate that there are two sides to a market: supply and demand. Over the years, I have had a degree of experience in industry
  74
  and I have declared all sorts of interests for hon. Members who are paranoid about such matters. If one has a desirable product, there is a natural tendency for it to be in short supply and for its price to rise. Will the fact that a product is particularly desirable—other products are available, but they are not as nice—be subject to regulation and investigation by the OFT?
  Like my hon. Friend the Member for Maldon and East Chelmsford, I believe that the free market is the best system for providing the goods and services that any advanced commercial and industrial society requires. That system works best when the supplier of goods and services can respond rapidly to the changing demands of consumers. Perfect markets exist—dare I say it?—only in the minds of economists, civil servants and Ministers who are not of the real world. The idea that markets can be dragooned and regulated by criminal penalties to work better offers only a partial solution. When we consider the Bill in Committee, we must be given clear guidance about all the rules and regulations so that businesses know exactly where they stand.
  This massive Bill needs to be examined in detail, but as we shall have insufficient time in Committee to do so it will pass largely unchallenged and undebated. That is part of the Government's relaxed approach to the role of Parliament. They are dragooning business through without enabling us to consider matters in the detail that is our task and duty.
  I welcome the fact that the OFT will be structured as a board, not as a single person, and that rogue traders will face additional pressures. I also welcome the giving of more resources to trading standards officers. The Secretary of State made a lovely generalised comment about that, but those in local authorities would like to know—as would I—how many pounds will filter through to enable them to strengthen trading standards operations in their areas and in our constituencies. Several constituents have come to me with matters about which they have been told, "Sorry, we can't investigate it; we haven't got the resources." That is a common plea that will resonate with hon. Members on both sides of the House.
  We should all welcome the completion of the insolvency legislation and moves to produce a cohesive consumer law to replace the current piecemeal approach.
  This is a massive Bill, but we shall be in Committee for a very short time and it will not get the scrutiny that it deserves. As a result, consumers may ultimately be worse off rather than beneficiaries.
  6.58 pm
  Andy Burnham: It is a pleasure to follow the hon. Member for South-West Hertfordshire (Mr. Page), who, although he is a distinguished commentator on such matters, confirmed an impression that I have formed while listening to Conservative Members—that they are trying desperately hard to find fault with the Bill, but are in fact embarrassed that they did not introduce it themselves when they had the opportunity to do so in government all those years ago.
  The hon. Gentleman picked on a tried and tested piece of advice from the Conservative central office handbook—when in doubt, attack spin. He may find it worthwhile to quibble with the title of the Bill, but it is very relevant to my constituents.

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  Leythers have a history of enterprise and inventiveness. Indeed, Leigh has a strong claim to being the cradle of the industrial revolution. The spinning Jenny was invented there by a poor mill worker called Thomas Highs, but the design was pinched and patented by a wealthy mill owner from Blackburn. Some would say that that was the story of Leigh. We never got our rightful place in the history books.
  Leigh was one of England's—if not Britain's—most enterprising towns throughout the Victorian period and until the 1960s and 1970s. It had a thriving economy with thousands of jobs in mining, the textile industry and manufacturing. However, like other economies based on traditional industries, it has fallen on hard times in recent years. Since I was elected, we have undergone the pain of two large-scale redundancies in manufacturing. Two hundred and fifty jobs were lost at Ingersoll-Rand, which manufactures portable compressors, in Hindley Green. A month ago, a further 220 jobs were lost at Volex Power Cords, which manufactures household plugs and cords—long a staple of the Leigh economy.
  Beyond the headline redundancy figures, we have also lost jobs in countless smaller businesses that grew up around the companies and acted as suppliers to them. Such losses would be difficult to absorb anywhere, but they are devastating in a former coalfield area. I have set out the context because it leads to my main point: the Bill is most needed not in the City of London, but in our deprived communities.
  Communities such as Leigh need help to rekindle enterprise and revive the economy, especially in the new sectors of industry. It is fair to say that people in such areas are acutely aware of the need to foster greater competitiveness and productivity in the UK economy and to help businesses survive when they hit financial difficulties. They should not be allowed simply to go to the wall; that has happened too often in the past.
  The Bill will be welcomed by companies and employees in my constituency. Sadly, it will come too late for those who have already lost their jobs. However, I still believe that I can confidently say to them that since we came to government, Labour has made a huge difference through boosting our local economy and productivity. I am proud that the Government are introducing the measure.
  The hon. Member for Maldon and East Chelmsford (Mr. Whittingdale) criticised the Government's economic and employment records. I simply do not recognise those criticisms. Despite the large-scale redundancies and the obvious problems in manufacturing, we have hard evidence of strong economic growth and increasing employment since 1997.
  Yesterday, I was sent the latest labour market report for Leigh. Other hon. Members will receive such reports for their constituencies. The Leigh report shows that 1,602 people are unemployed—661 fewer than in May 1997 and a 29 per cent. decrease. The number of long-term unemployed people has fallen by 458—a cut of 69 per cent. since May 1997, and more than 500 people have been helped into work through the new deal.
  Such achievements cannot be belittled in an area such as Leigh, which has struggled over the years under Conservative party policies. The Conservative
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  Government closed down the mines and hit the textile industry. The Labour Government's achievements have a genuine impact on people in my constituency. That is testimony to the Government's measures to boost competitiveness and employment.
  Our local economy is slowly transforming itself from one based on traditional primary and secondary industries. The Bill can only help us through that difficult process. At the end of March, I attended a reunion of former miners from the Parsonage colliery, which closed, coincidentally, almost 10 years ago to the day, on the eve of the 1992 general election. That move did not help the Conservative party's attempts to win votes in Leigh.
  A manufacturing facility for Patak's—the Indian foods company—stands on the Parsonage site. Patak's is a startling British success story and I am proud that it is now based in my constituency. The fact that it is located on the site of a former pit embodies the transformation that the Leigh economy is undergoing. Although there is a long way to go, it points to a more hopeful future for our town.
  On Monday, I met representatives of Barlo Engineering, the UK's leading radiator manufacturer, which has a plant in the centre of Leigh. It wants to modernise, increase employment at the plant and invest in new equipment that will enable it to produce leading edge radiators in Europe. It is another example of a company that is sufficiently confident in the UK competitive environment to invest and bring more jobs to our local economy. The company is looking for help to invest through the regional selective assistance grants. I make a plea to Ministers to continue to consider seriously using such grants to regenerate deprived communities, especially former coalfield areas. I have an eye on the comprehensive spending review, which will be concluded shortly.
  Madam Deputy Speaker (Sylvia Heal): Order. The hon. Gentleman should relate his remarks to the contents of the Bill.
  Andy Burnham: I shall do my best. I was trying to make the point that the provisions to boost productivity and competitiveness need to be complemented by resources to help companies expand and become more productive.
  I want to consider the consumer protection provisions, and especially stop now orders. In recent weeks, some of the sharp practices that are used to sell gas and electricity to consumers have been brought to my attention. I am sure that that is true of hon. Members of all parties. This week, a constituent told me about a new policy that TXU Energi, which is trying to market its services in my constituency, has adopted. My constituent received a bill and an accompanying letter, which stated:
  "From now on, if you choose not to pay your bill within 14 days of the bill issue date (including this one), you'll pay 9.5 per cent. more on your next bill. However, we do believe in being fair, so once you return to paying promptly, your next bill will return to the lower rate."
  I readily own up to not paying all my bills within 14 days. The company is clearly attempting to get people on low incomes to use direct debit.
  People could be in hospital or on holiday. There are several reasons why those on low incomes simply cannot pay a bill in 14 days and do not want to use direct debit.

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  Such company policy is a licence to add charges willy nilly to consumers' bills and continue to fleece them. I am not 100 per cent. sure whether such a case is in the scope of the measure, but it suggests a need to be ever vigilant against sharp practice. Stop now orders and the ability to introduce them quickly show that companies are making rapid decisions that have a direct impact on consumers in weeks. We therefore need measures that can be implemented with great speed to prevent companies from doing that and acting directly against consumers' interests.
  Mr. Page: Does not the hon. Gentleman believe that the unfair contracts terms cover his point? Would not more funds for trading standards officers enable them to investigate such cases with more alacrity and thus prevent them?
  Andy Burnham: I am grateful for that intervention. I agreed with the hon. Gentleman's comments about the valuable role of trading standards officers. I should like them to be able to increase their activities and the work load that they are able to take on. Whether that is principally because of lack of resources or lack of legislative power, I am not in a position to say. However, I would support the hon. Gentleman in saying that there is a need to boost the role of trading standards officers.
  That brings me to the impact that the Bill may have on sport. That was touched on briefly by my hon. Friend the Member for Stoke-on-Trent, North (Ms Walley). I must declare a relevant interest in this respect: I am the chairman of Supporters Direct, a publicly funded organisation set up to promote greater supporter and community ownership of football clubs through the establishment of mutual trusts or industrial and provident societies. The Bill is relevant in the context of the issues facing the football industry at the moment. I remind the House that the administration of ITV Digital has real consequences for football league clubs up and down the country. I am no expert in these matters, and I would be interested to hear how the measures in the Bill would have impacted on the ITV Digital administration and how creditors would perhaps have been better protected than under administration as currently constructed. It leaves football league clubs very vulnerable to loss of revenue, for which they had clearly budgeted. However, the measures on administration in this Bill are extremely interesting, as we are about to see football clubs across the country falling into administration. Indeed, several football clubs are already in administration—Swindon and York, to name just a couple.
  Bad business practice or the asset stripping of clubs has endangered the very existence of football clubs in this country, many of which have a proud history and heritage. That is not at all the fault of football supporters, who simply want their clubs to survive and who want to keep them in trust for future generations to enjoy. Some would argue that the problems that football is currently facing are self-inflicted, and that high wages and bad business planning are largely to blame. I sympathise with those arguments, but that is not the fault of football supporters who face the prospect of their club going into administration, and who clearly want to do their best to guide the club through that process and enable it to survive and to thrive.
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  Two measures in the Bill are directly relevant to football clubs, because they are small, community-oriented businesses, and it is crucial that they be kept afloat for the well-being of the towns that we represent. Football supporters everywhere—particularly those of Brighton and Doncaster—will welcome the tougher sanctions against rogue directors introduced by the Bill, as they have suffered at first hand the effects of corrupt practice in the boardroom.
  The second measure that will be warmly welcomed is the Bill's key aim to facilitate the rescue of companies when reasonable and practicable and not to drive them to the wall unnecessarily. The Bill seeks to do that through streamlining the administration procedures and restricting the use of administrative receivership. If that gives a company or a sporting institution the breathing space to get back on its feet and sort out the bad debts that are often bequeathed by bad boards, that is all to the good, and should be wholeheartedly welcomed by all.
  I want to conclude on a note of concern, to which I should be interested to hear the Minister's response. That concern relates to how the powers and measures in the Bill can be used to impact on sport more generally, and how competition law might be used against the best interests of sport. I feel strongly that the competition authorities have been itching to get their hands on sport for many years. There has long been talk of cartels in premier league football—in a famous case, the Office of Fair Trading took the premier league to the restrictive trade practices court in 1999.
  I would not like the issue of the collective sale of sports rights to be reopened by a challenge from competition law or a suggestion that sports cartels need to be broken. At the time, I was working as an adviser to the Government's football taskforce. Our report, "Investing in the Community", which was published just before the court case, argued strongly for an exemption for football and sport in general from the regulations covering restrictive practices on two public interest grounds.
  The first of those is that collective bargaining, and the sharing of the revenue collected from it, is crucial to enable sports to maintain balance throughout their competitions. That is crucial to the television product—if leagues are well balanced and competitive, the uncertainty of the outcome remains and the television viewer remains interested and engaged in the product.
  The second issue is that the collective selling of rights for sport can generate income that can be top-sliced and reinvested in the grass roots of every sport. The Lawn Tennis Association is well renowned for investing money in inner city communities from the proceeds of rights sold on a collective basis, as are the Football Association and the premier league. The case was won, and the special public interest attached to sport when faced with competition law was accepted when the judge quoted at length from the taskforce report. Currently, Wigan council is about to bid for £1 million of the proceeds of the premier league contract to invest money directly in public football facilities in our area.
  In introducing tougher measures in the Bill, especially against cartels, I urge Ministers to consider building in safeguards to recognise the special nature of sport and to consider wider issues than pure competition. Sport is unique for the simple reason that companies in the sector

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  need each other. Without each other, they cannot carry on playing—they need competitors, which is not true of every other industry.
  Several hon. Members have referred to the experience in the United States, and we should note that although the US has the strictest pro-competition and anti-trust legislation in the world, it exempts sport and sports franchises from those provisions because it recognises the special nature of sport.
  I would support an amendment to the treaty of Rome to protect sport. In the knowledge that that will take some time, I hope that, in practice, the competition authorities will bear those points in mind when exercising their new powers under the Bill. With those provisos, I give my full support to the Bill.
  7.17 pm
  Mr. David Ruffley: Much of the Bill is unnecessary, some of it is ill thought out, and very little of it is to be broadly welcomed. It will not make a major contribution to closing the productivity gap, which is the Chancellor's objective. That objective can only be delivered if Ministers use their time a bit more wisely and legislate to reduce red tape and to simplify the British tax system. I fear that those aims are beyond new Labour Ministers.
  Instead, there is a flurry of press releases, White Papers and consultation documents inspired by a Chancellor whose misplaced sense of machismo about being pro-enterprise is just an excuse for one more headline. Never mind that the Competition Act 1998 has hardly had any time to bed in; the Chancellor wants another Bill to show that the Government are doing something. Never mind proper parliamentary scrutiny—we have already heard that the Bill will have a minimal amount of time spent on it in Standing Committee. But that does not bother the Chancellor in the pursuit of his big idea.
  All the rhetoric and spin in the press, of which we have heard much in the debate, conceals one basic fact—at bottom, new Labour does not understand what enterprise and competitiveness truly demand. If the Government
  "wants to draw a sustained cheer from business in this Bill it should tackle the explosion in red tape generated by Westminster and Brussels."
  That is not a quotation from my admirable and excellent colleagues on the Front Bench. It is the judgment of the Financial Times with regard to the Bill, contained in its 27 March editorial. That view was also expressed in The Independent on the same day, when it stated that the Bill contained
  "largely candy floss measures which fail to address the main problem facing Britain's enterprise economy—namely, the growing burden of regulation, especially as it concerns the labour force."
  The Chancellor and I agree on one thing at least—that raising UK productivity levels is essential to driving better economic growth, keeping borrowing down and keeping price levels low and sustained. However, the facts since 1997 show that productivity has not improved. The December outlook figures from the OECD show that the average annualised rate of productivity growth was lower in the past four years than in the preceding four. That is all the more worrying and depressing because the Conservative Government bequeathed to the Chancellor
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  an economy in fine fettle—the result, in large measure, of the decisions taken by my right hon. and learned Friend the Member for Rushcliffe (Mr. Clarke).
  Of course, the problem of UK competitiveness goes beyond the basic productivity numbers. Competitiveness has also deteriorated since this Chancellor took office. According to the International Institute for Management Development, this country was ranked 11th on the world competitiveness scoreboard in 1997. By 2001, under this Chancellor, we had fallen to 19th.
  According to the global entrepreneurship report of January this year, the UK has a higher proportion than Ireland, the US, Mexico or Australia of entrepreneurs who feel that they are a low priority—or less—for the Government. Of the UK respondents, 75 per cent. said that cutting red tape would radically improve the state of entrepreneurial culture in this country. David Wilkinson, head of entrepreneurial services at Ernst and Young, has said, in relation to the global entrepreneurship report, that
  "entrepreneurs are disappointed with the Government for continuing on the one hand to preach the benefit of an enterprise culture, whilst on the other burdening companies with an endless litany of red tape. It's not surprising they feel misunderstood and under-represented."
  One figure—£15 billion—explains why the widespread dissatisfaction is growing, and why the Bill so utterly misses the point about international competitiveness. That figure represents the cost of the regulation that has been piled on British business since 1997. The British Chambers of Commerce calculated that figure using some very accurate numbers—the Government's own figures for regulatory impact assessments in each Department. Importantly, the figure excludes the financial costs of the national minimum wage: it deals with administrative costs only.
  The Institute of Directors has also done some interesting work, as was evident in its survey published in the Financial Times on 25 March. The survey showed that 93 per cent. of the institute's members—not an insubstantial focus group of corporate players and business men—believe that excessive regulation is bad, and that it is getting worse every year.
  The new Labour Government have done nothing to limit the colossal recurring financial costs of regulations, which are represented in the cumulative figure of £15 billion since 1997. I shall list the yearly costs of some of the bigger-ticket items. The recurring financial cost to British business of the working time directive comes to £2.3 billion a year. For the data protection directive, the figure is £0.6 billion, and for the pollution directive it is around £1 billion. The recurring costs of payroll burdens—where firms have to do the Government's work—have varied between £125 million and £210 million a year for student loan repayments. There have also been recurring costs of £105 million for the administration of the working families tax credit. However, I fancy that that is an underestimate.
  Mr. Nigel Beard: Will the hon. Gentleman give way?
  Mr. Ruffley: I am more than happy to give way to my colleague from the Treasury Select Committee.
  Mr. Beard: I thank the hon. Gentleman. Phrases such as "general regulation" and "red tape" cover a multitude

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  of sins. Which of the items that he has listed would the hon. Gentleman abolish to reduce the so-called burdens that he is illustrating?
  Mr. Ruffley: I am using the nomenclature of the British Chambers of Commerce, not my own. That body has added up all the costs set out in each Department's regulatory impact assessment, and come to a total of £15 billion. I think that the working families tax credit—soon to be the working tax credit and family tax credit—is a mess. I do not believe employers and businesses should be required to be outposts of the Department for Work and Pensions.
  As for the other directives, some have not been argued against effectively in Brussels, from where many—though not all—emanate. That will be one of the priorities for the next Conservative Government. We will act in the interests of competitiveness, whereas the proposals in the Bill are strictly second, third or fourth order. The first-order question has to do with how we get to grips with the regulatory costs on business. I shall continue the litany of regulatory costs, although I shall not trespass too much on the House's time, as I want to get to the meat of the Bill and to deal with the specific clauses that worry me.
  There are in the pipeline EU regulations that will add to regulatory costs, and they include the information and consultation directive. Before the general election, the Government talked tough about opposing that directive, but we do not know what they will do when it reappears before the Council of Ministers. I hope that the Minister will tell us that the Government will oppose it.
  What will the Government do with regard to the proposed end of life vehicles directive, or the proposal regarding waste electrical equipment? Will the Government bother with the new framework agreement between social partners on temporary agency workers? Will they oppose those directives, or not? We need to know, as the answer is at the heart of competitiveness, and is much more important than the Bill.
  The Bill purports to promote enterprise, but it deals with too many second-order questions. I shall deal with the proposals in the Bill that are defective, but I acknowledge that some are to be welcomed. I welcome the sensible removal of ministerial rulings on proposed mergers, and the fact that the Bill will put the new OFT board on a statutory footing. Clause 8, which gives the OFT a more direct and forceful role in setting guidance standards in various sectors of the economy so that trade associations can put rule books together, is important and will benefit consumers. Finally, criminal sanctions against cartel operators will be a useful deterrent. Although I do not imagine that they will be used very often, the sanctions will concentrate minds. I welcome that, and I believe other Conservative Members do as well.
  However, part 10 of the Bill will require a lot of attention in Standing Committee. Reducing the stigma of bankruptcy is important in encouraging entrepreneurship, but the proposals have been put together in a rather misguided way. The Bill seeks to encourage entrepreneurship by reducing the bankruptcy period from three years to one year, or to less than one year, for non-culpable bankrupts—that is, people who are deemed not to have been reckless or dishonest.
  Will the Minister tell us if resources will be available so that the existing number of official receivers can investigate every bankruptcy case? In the first instance,
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  I fancy that they—not the courts—will have to determine whether dishonesty obtains in a particular case. Indeed, given the heavier sanctions that the Bill will introduce for the dishonest or reckless bankrupt—a bankruptcy period of up to 15 years applies—many commentators in the legal profession observe that the judicial review industry may get a shot in the arm. There could be more claims under human rights legislation, which could undermine enforcement of the distinction—assuming that one can make that distinction—between a dishonest or reckless bankrupt on the one hand and a non-culpable bankrupt on the other.
  Under the Bill, an individual could be out of bankruptcy in 12 months or even less. Are the Government seriously inviting us to believe that individuals will have an incentive to enter into individual voluntary agreements? Traditionally, such agreements and arrangements mean that bankrupts can repay over a period of time several times more to creditors than would be the case if they went into bankruptcy straight away.
  In addition, given the discretion that official receivers will have to reduce bankruptcy periods to less than 12 months—as low as two or three, it would appear—is it not likely that the public will get the impression that a rogues charter is being created? That is particularly worrying as, according to the Government's own figures, more than half of the bankruptcies this year are a result of consumer debt. Surely the proposals in the Bill may result in consumers racking up debt in the knowledge that filing for bankruptcy could mean that they are free in less than 12 months, provided that they have not been dishonest. Frankly, in those circumstances too little stigma leads to too much moral hazard. I cannot understand why the Government are proposing such slack and non-minimal periods for bankruptcy. Twelve months or less simply will not do, as the Opposition Front-Bench spokesman has already said.
  Equally, there seems to be a lack of clear thought and precision in the clauses that deal with corporate insolvency in part 10 of the Bill. Apparently, Ministers believe that administrative receivership is a very bad thing. The clichèd view, which the Minister probably shares, is that such receiverships are normally brought about by banks, which usually hold the debentures and floating charges. They pull the plug early when times are not so good and send businesses and their work forces into oblivion. Clearly, that is a bad thing.
  The problem with that caricature is that receivership is not always like that. In many cases it involves a hive-down or a transfer of assets to a new company or management. That scenario is not captured by the business failure numbers.
  Administration, which is what the Bill is pressing very aggressively and which will lead to the virtual demise of administrative receivership, is essentially a court procedure. While the Government ask us to believe that that procedure will not be as onerous as administrations at present, that the time and expense will not be as great and that there will be a fast-track procedure, I do not know any practitioner in the field who honestly believes that. Some businesses that do not have the opportunity to grant a floating charge or a debenture, and whose bankers do not have that facility, will have to go the administration route. They may face higher charges and more requests for personal security and guarantees. That is not what the Government want to achieve—a restriction in the ease of

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  accessing finance—but it could be a direct consequence of administrative receivership being kicked into touch by those clauses.
  Is the Minister aware that there are four times as many cases of administrative receivership as of administrations? Logically, if all those administrative receiverships become administrations, the court system will be severely burdened. There may be a capacity problem. This is not a party political point; it is a question of strategic planning. Has the Minister any idea of the amount of pressure on the court system if administrations become the norm as envisaged in the Bill?
  If there are blockages in the court system, creditors will take a particularly dim view of administration. They could ask for more onerous levels of security to counter the risk and uncertainty of a court procedure that might be overloaded or sclerotic and might damage their interests.
  Having talked to people in legal and corporate insolvency in the square mile, I have gained the impression that the Government have not thought the proposals on corporate insolvency out. They will have to do a great deal more work to get their act together. I trust that they will spend adequate time in Committee to ensure that that is done.
  The more I look at the Bill and its omissions, the more I realise that the Government do not understand what competitiveness and enterprise are about. The Bill completely misses the point—it misses it cubed. The Government and the Labour party do not grasp that more regulation, interference and complexity damage economies rather than strengthen them. The Chancellor, who is the true architect of the Bill, has got to understand sooner rather than later that the business of Government is not, and never can be, the government of business.
  7.36 pm
  Mr. Bob Blizzard: I shall concentrate on the part of the Bill that deals with insolvency. I support the Government's enterprise agenda because it is a key part of job creation. Clearly, full employment is the best form of social justice and the Government's record is already quite remarkable.
  When the Conservative Government left office, my constituency was well and truly the unemployment black spot of East Anglia, with unemployment of 11.5 per cent. Last autumn, it was down to 4.5 per cent. It edged up only a little over the winter and as we move into the spring it is starting to move down again. There are levels of optimism in my constituency that we did not see for many years under the Conservatives. I will not talk about feel-good factors, but things are much better than they ever were under the Tories.
  Mr. McWalter: Would my hon. Friend like to remark on the idea put forward by the Conservatives that the Labour Government took over a golden inheritance?
  Mr. Blizzard: The 30,000-odd people who voted for me in 1997 did not think that it was very golden. They were fed up with 11.5 per cent. unemployment and they threw out the Conservatives, who had held the seat for about 40 years.
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  The hon. Member for Bury St. Edmunds (Mr. Ruffley) said how bad things are and whinged about competitiveness. As he will be aware, I know his constituency well as I was born there and it is my family town. I know that business is booming there at the moment and that employment is as near to full as it can get in that town, so I do not see the local basis for all his moans and groans.
  Having said that, however, we must be careful that rogues cannot take advantage of the greater freedom that the Bill would introduce in the insolvency laws. It is important, therefore, to distinguish between responsible risk takers and culpable bankrupts. I am certainly pleased that the Government intend to extend the penalty for culpable bankrupts—or outright rogues—to a disqualification period of up to 15 years. I hope that it will be possible to distinguish clearly between the two types and to take firm action against those who need such action to be taken against them.
  I feel strongly about this matter because of some events in my constituency last autumn. Those events showed the inadequacies of existing insolvency law and how rogues can get away with appalling practices again and again. The people who suffer in such situations are not only those who are owed money; the work force, their families and the wider community suffer, and the taxpayer ends up picking up some of the costs—in particular, redundancy payments.
  The company in my constituency was called Zephyr Cams and employed 100 people; we call that a large company in my constituency. It became clear in the autumn that the company was in trouble. The people who worked there knew that, and strange things were happening. The management would not speak to them. There was no communication or meeting and employees were kept in the dark.
  Understandably, the workers contacted me. I wanted to speak to the management confidentially to try to be helpful. However, the management would not speak to the elected representative of the people of the area where the factory was based. I have never experienced that before; they did not want to know and did not answer the phone. When we obtained the mobile phone number of the man concerned and rang him, he turned it off to avoid facing up to his responsibilities.
  When one experiences such behaviour, one can only suspect the worst and that something improper, suspicious or shady is going on. The staff in the accounts department knew that any income received by the company was immediately being shipped out and transferred elsewhere. However, the company was also having county court orders made against it for not paying its bills.
  I then received information from the sheriff's office. By early September, writs against the company from the county court totalled £38,000. The sheriff's office has to recover that money, but its guidance is to try not to destroy companies in doing so. The sheriff reached agreement with the company over an item of machinery worth £9,000, which it wanted to seize as part of the repayment. However, the company said that the machinery was essential for it to struggle on. Agreement was reached that the company would pay the money by the end of September and that the sheriff would not take the machinery. But the company did not honour the agreement with the sheriff.

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  In October, the sheriff tried to remove some other equipment and received a letter saying that the company did not own the machinery, but that it was owned by a holding company. Therefore, legally, the sheriff could not get his hands on it. Clearly, this was a blocking device that would necessitate the sheriff going back to court.
  Staff then had to watch while machinery was removed from the company, but there was still no communication or information from the management. The staff believed, and have evidence, that some machinery and other assets were taken by the management themselves and transferred up the road to another factory in Great Yarmouth, the Breydon Bay company. Certainly the person running Zephyr Cams in Lowestoft, Mr. Paul Harris, is now running the Breydon Bay company. However, he was so unwilling to be held to account that he would not speak to his Member of Parliament.
  Once the story became public, I received all sorts of other information, and eventually learned the most worrying thing of all; that the process we had witnessed at Zephyr Cams—of assets being stripped out of a failing company and put into another—had happened four years earlier with the same people. Two companies in Weston-super-Mare—one called QEP Camtec Ltd, and the other called Quality Engineering Parts Ltd—went down owing £2 million, including one individual debt of £100,000. Again, assets and money were taken out of those companies to acquire Zephyr Cams in my constituency.
  The man behind it all was an American called Mr. Kenny Joseph, of Wells Industries, New Jersey. He was the ultimate owner; he was the so-called "holding company". He had a record of doing this kind of thing over there as well.
  There was misery for the work force, who all lost their jobs, with the taxpayer having to pay redundancy payments. However, Mr. Joseph has got away scot-free. He is not exactly hard up; I understand that he has an apartment in New York valued at about $12 million and a nice little house in the Hamptons, worth about $40 million.
  There is something deeply unfair about this. We do not begrudge people earning money legitimately. However, someone who has acquired such a fortune should observe decency and propriety in running a business over here without putting hundreds of people out of work. We have made attempts to get the matter investigated, but there are problems with the current receivership procedures. I am pleased that the Government want to reform them.
  Mr. Djanogly: I am not exactly sure what proposal in the Bill the hon. Gentleman is suggesting would solve the problem to which he has referred. The Insolvency Act 1986 provides for preferences for fraudulent trading and wrongful trading, but I am not sure how the example he gives in any way relates to the insolvency provisions in the Bill.
  Mr. Blizzard: I understand that the Bill will lead to cases being properly investigated, and the case to which I have referred has not been properly investigated. We have been in contact with the economic crime unit, because we have all sorts of evidence. However, the unit can only investigate a company in administration on matters relating to fraud if the company dealing with the
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  receivership makes a formal request to the DTI, or the creditors make a formal complaint to the economic crime unit. That has not happened in this case. It should not be at the discretion of the receiver as to whether the matter is investigated if there is evidence—I have evidence in my possession regarding this case—that should be investigated. I am asking Ministers to take note of these proceedings to ensure that the Bill's proposals regarding receivership and investigation can deal with such cases.
  There are also questions about the treatment of employees. I do not know whether these must be dealt with in other legislation or in the Bill. Some of the workers concerned had worked for the company all their lives, and they deserve better treatment. Sometimes companies fail and one must give bad news to employees. I have described what has happened to the company in my constituency as a smash-and-grab raid, while employees were left in the dark. People should not be allowed to do that.
  I hope that the Bill will be tight enough to identify and punish culpable bankrupts. How does the Bill relate to foreign owners, such as the American chap to whom I have referred? Will such people be able to be caught if there is evidence against them? People like that are simply rogues who give business and enterprise a bad name. There are some who think that big business is awful because of these incidents. That is not the case—most people run their businesses properly and well, but some play fast and loose with other people's money and employees' livelihoods.
  People have spoken of the different culture in the United States regarding risk and failure. That culture has spawned a successful and dynamic economy. Unfortunately, not all Americans, as we can see from the case to which I have just referred, are the kind of entrepreneurs that we want to encourage here. People such as Mr. Joseph do not deserve another chance—they simply deserve to be dealt with.
  Finally, it is the view of some in the economic crime unit that it is still too easy for companies and individuals to take everyone for a ride. I hope that the Bill will address these issues and ensure that people taking a genuine risk and trying their best have other opportunities while rogues, who treat people badly, are well and truly dealt with.
  7.51 pm
  Mr. Andrew Lansley: I am grateful for the opportunity to contribute to the debate. I come to it, I confess, with a strong recollection of the passage of the Competition Act 1998, on whose Standing Committee I served. Starting from that point, I want to explore why some parts of the legislation are being introduced in this form and the Government's justification for introducing the Bill now.
  The Secretary of State talked earlier about the damage that cartels can do and the theoretical calculation of the extent to which cartels could increase prices to the detriment of consumers. All that is true. However, four years ago, the Secretary of State's predecessor, now the Secretary of State for Environment, Food and Rural Affairs, the right hon. Member for Derby, South (Margaret Beckett), said on Second Reading of the Competition Bill [Lords]:
  "The Bill will radically reform and strengthen our laws to deal with cartels and with abuses of a dominant position in the marketplace".—[Official Report, 11 May 1998; Vol. 312, c. 23.]

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  In concluding the debate, the then Minister of State, Department of Trade and Industry—now the Minister for Pensions, the right hon. Member for Makerfield (Mr. McCartney)—said that the Bill would
  "give the Director General of Fair Trading the powers that he needs to uncover cartels, abuses and other anti-competitive behaviour. He will have effective powers to stop anti-competitive behaviour quickly and to impose stiff financial penalties that provide an effective deterrent."—[Official Report, 11 May 1998; Vol. 312, c. 117.]
  Just four years ago—two years ago, considering that the legislation came into force in March 2000—the Government believed that they were taking the necessary powers to identify and act against cartels with an effective deterrent. Only two years down the line and the Government have clearly concluded that they did not have effective powers for that purpose and do not have an effective deterrent against hard-core cartels. However, we do not have the evidence.
  The simple proposition that I put to the Secretary of State was that she might tell us on how many occasions the Director General of Fair Trading has brought actions for infringement of the chapter 1 prohibition so that we could examine it. The right hon. Lady does not seem to know. She refers to 25 cartel investigations, but an investigation is not an analysis of whether a cartel exists. We heard evidence from the hon. Member for Twickenham (Dr. Cable) and others that the Director General of Fair Trading, quite rightly in some cases, investigates and acts on complaints, but that is not the same as determining that cartels exist.
  The simple question that should start any examination of the legislation is: what is the evidence of the mischief to which the Bill is a necessary remedy? At no point did the Secretary of State justify the Bill or examine where the mischief that has to be remedied in this way lies. That leads me to the same conclusion reached by my hon. Friend the Member for Bury St. Edmunds (Mr. Ruffley). This is a demonstration of the Chancellor of the Exchequer's macho approach to policy making. The time has come for an Enterprise Bill and he wants to account for not having achieved what he set out to do in terms of relative productivity increases in this country compared with our main competitors. He wants to show that something will be done about it.
  I share the view of colleagues who have made it clear that the Chancellor and the Secretary of State have not addressed themselves to the issues that are of most importance to industry in dealing with the relative productivity gap between ourselves and our competitors—skills, capital intensity and the use of capital equipment in manufacturing, the relative impact of regulation and the complexity of the tax system. Such matters are at the heart of our productivity and our relationship with our competitors. It is clear, in both a theoretical and a practical sense, that if the competitive intensity of our industry can be improved, it will improve our economic performance. However, I suspect that it would be hard to demonstrate—it has not been demonstrated in the evidence that I have seen so far—that there is a substantial gap in the competitive intensity of economic activity in the United Kingdom compared with France and Germany, yet there is a substantial productivity gap between ourselves and France and Germany. It has not been narrowed since the
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  Government came to office in 1997 and if one were to look to a time when it was being narrowed, the evidence probably best supports the period in the late 1980s and early 1990s. That was to do with labour market reforms and the ability to employ more effectively in this country than in continental European countries, and that difference is being substantially reversed by the Government.
  The Secretary of State talks about narrowing the productivity gap with competitors, but that is not at the heart of the Bill. It is about competition and insolvency, and I want to confine most of my remarks to whether it is a sensible measure in terms of competition. Of course, the Bill should probably have been called the competition and insolvency Bill.
  As far as competition is concerned, I confess that I am not wholly opposed to the legislation. It contains some good aspects and some about which I have questions. However, I am surprised by the nature of this approach compared with what the Government were insisting on only four years ago. Ministers at the Department of Trade and Industry were then insisting on the necessity of bringing ourselves wholly into line with European Union legislation. It was all about bringing articles 85 and 86 straight into UK domestic legislation so that companies would not have to deal with two different types of competition law.
  In relation to the criminalisation of the cartel offence, we are to be presented with something different. The UK approach to the treatment of hard-core cartels will be different from the EU legislation. I admit that some EU countries have criminal sanctions available, but they are rarely enforced. If the Government believed that criminal sanctions were necessary, it strikes me that as a matter of policy it would have been better to bring forward evidence after a longer period of seeking to implement the penalties and sanctions in the 1998 Act. They could also have worked alongside the European Commission to ensure that by 2004, when the EU competition regime is modernised, if criminalisation is seen as a necessary sanction, it can be introduced on an EU basis rather than on a UK basis alone.
  The second point relates to structure. The Government consulted on two possible structures for the cartel offence. One related directly to the chapter 1 prohibition and the other to an offence of dishonesty. The Government have chosen the latter structure. That may well be easier to justify and to implement and enforce in the UK courts, and it will narrow and focus the nature of the criminal offence that is to be created, but it moves away from the effects-based regime that was at the heart of the 1998 Act. It looks at intention rather than effects, whereas previous competition legislation looked at effects.
  I do not want to go on too long as other hon. Members wish to contribute and probably have more and better things to say than I do. Leaving aside those general points of principle, the question is whether the Bill will in practice promote enterprise. With regard to the Bill's overall structure, the Government must recognise that there is a threat—I hope that they will try to reduce it in Committee—of a chilling effect upon enterprise because of the extent of regulatory intervention that will be undertaken using the powers in the Bill.
  The purpose of competition legislation is to remedy market failure, not to have an actor out in markets trying to impose a competitive regime by the determinations of

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  bureaucrats rather than by the actions of markets themselves. As the hon. Member for Twickenham rightly said, there is a risk that, if there are too many regulatory activities and too many investigations, the regulator will move from being focused on genuine market failure with substantive evidence into becoming—himself or herself, or the board collectively—an actor in those markets so that the markets respond to regulatory signals more than to market signals. Market signals must be at the heart of this.
  I shall not dwell on insolvency. Clearly, if the Bill fosters a sense of responsible risk taking, that will be to the good rather than to the ill. In respect of risk, Lord Hanson, who was—and still is—quite a business man, once told me that his approach was to say, "Look at the downside risk on a deal. If you can live with the downside, start to look at the upside." We need to think about that. This legislation is based around the idea of the greater the risk, the better, but the matter is not as simple as that. Business men should look for asymmetric risk where there is a limited downside with which they can cope and a greater upside benefit. Those probabilities have to be worked out. It is not a case of simply saying the more risk, the better. We do not want a risky culture, but an enterprise culture, and that means getting the risks right.
  My hon. Friend the Member for Maldon and East Chelmsford (Mr. Whittingdale) talked about the implementation of the Tebbit doctrine. Further to the points made by my hon. Friend and the hon. Member for Twickenham, I have two points to make on mergers and changes in the merger regime. First, we should think not just about the competition test—the Bill is structured in this way—but also, where a substantial lessening of competition occurs, about whether, in the Bill's terminology, a relevant customer benefit can be demonstrated. Transparently, that would mean that the lessening of competition implied by a merger in the context of that particular market makes it justifiable.
  The Tebbit doctrine was always based around competition as the primary consideration, but we are not trying to create a perfect market by applying the competition test because the perfect market would mean that the greater the number of actors in the market—the greater the number of enterprises in a given market—the greater the competition. However, we cannot necessarily legislate for that. There will be a degree of concentration in markets and we must be prepared for that, but we should look for the customer benefits to be transparent, and for them to be customer benefits not benefits to the political system, which is essentially what has sometimes intruded in the form of other public interest considerations.
  The other point that I am prompted to make by the comments of the hon. Member for Twickenham is that if we go down this path—the Government, probably rightly, are choosing to go down the path of independent competition authorities looking at mergers on the basis of the competition effects and the customer benefits—why do the Government not have a parallel consideration in relation to market investigations and anti-competitive actions? Why do the Government create a structure in the legislation that allows not only the Government to make references in relation to market investigations, but to make references even in circumstances where the Office of Fair Trading would have said that it does not see a case for such a reference? There is a strange lack of
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  complementarity between the Government's approach to independence in the merger regime and the direct power, untrammelled as far as I can see, for Ministers to intervene where market investigations are concerned. It will be good for the Government to think hard about that.
  If some of those matters are remedied in the legislation, perhaps we can hope for a Bill that is generally supportive of enterprise rather than otherwise. It will be if the effect of things such as super-complaints and the application of the new regime are geared to examining substantial examples of market failure that have significant anti-competitive effects. It will not be if the market investigations are lengthy and costly. Some serious thought must be given to timetabling market investigations so that they do not become politically motivated and are not arbitrary, too lengthy or too costly. We cannot have super-complainants acting on the basis of press and public agitation rather than of evidence. We must look carefully to make sure that the super-complainants and the consumer bodies themselves are not represented directly in the Office of Fair Trading. There must be a separation there if they have the power to make complaints.
  With regard to the criminalisation of cartels, I have substantial reservations not just about the principle in relation to EU legislation but about how it will work in practice. The Government consulted about, for example, whether prior EU findings that are based on civil proceedings in the EU would be admissible evidence in criminal prosecutions in Britain. They have concluded on the basis of those consultations that they should not he. That begins to demonstrate precisely the problems to which the Government referred in the consultation—that the OFT will therefore have to secure evidence to a criminal standard before trying to bring a criminal prosecution and will have all the procedural difficulties associated with that as well as possibly trying to pursue a criminal prosecution in the UK at the same time as there may be civil proceedings in the UK or the EEC. Those two matters operating side by side can clearly give rise to difficulties.
  If some of those points could be ironed out of the legislation, there is no reason why we should not end up with a Bill which, on balance, is capable of supporting enterprise rather than constraining it. However, whoever is called upon to do that task in Committee will have to do a lot of work in an unreasonably short period. The Competition Bill had 74 clauses and 14 schedules and at the time I did not think that it was examined at any exaggerated length in the course of 17 sittings in Committee. The Enterprise Bill is more than three times that size. It has 11 parts rather than four and 269 clauses rather than 74. Yet, so far as I can see, the Government propose to deal with it in pretty much the same number of sittings—perhaps 18 rather than 17. Therefore, on the basis of my experience, the Government are giving the Committee about a third of the time necessary—perhaps, to be generous, a half—to do the job.
  The Competition Bill had first been considered in another place and came here afterwards. The Enterprise Bill has started its passage here and will go elsewhere for revision. The Government should think again about the Bill's timetable and be prepared to be flexible in Committee in response to the arguments that are presented. I hope that the Bill will be amended in Committee so that it can deliver the principle that is intended—to support enterprise.
  8.9 pm
  Mr. Gareth R. Thomas: I am grateful for the opportunity to contribute to the debate. The Bill is being introduced against the backdrop of an extremely positive economic environment. Inflation is at its lowest for a considerable period; interest rates are low and the other great measure of the success of UK enterprises—unemployment—is also at a record low. I am sure that the whole House wants to celebrate that strong economic environment.
  Given that backdrop, it is tempting to consider whether we really need the Enterprise Bill. In April 2000, The Economist intelligence unit reported that, judged against about 70 factors, Britain was the second best place to do business among the world's 60 largest economies. However, we still need the Bill. We cannot be satisfied with second best—although that is a good record.
  The situation appeared to have improved even more by February, when Erkki Liikanen, the European Union Commissioner, published a report on the implementation of the small firms charter in each EU state. He confirmed that the UK was leading the way for the representation of small businesses. Nevertheless, we should consider what else we can do to foster the vibrancy of enterprise in the UK.
  I was minded, in part, to contribute to the debate when I read the Barclays bank survey of new business starts by region for last year. It revealed that Harrow was one of the top 10 UK regions for business start-ups. When my hon. Friend the Under-Secretary replies to the debate, I hope that, apart from responding to the wider points that have been made, she will take the opportunity to join me in congratulating Harrow in Business, an agency funded in part by the excellent Harrow local authority—well led by the Labour party—and by a series of Government funding streams, and the north-west London chamber of commerce. Between them, they provide a range of support for businesses and would-be entrepreneurs in my constituency and those of my hon. Friends the Members for Harrow, East (Mr. McNulty) and for Brent, North (Mr. Gardiner).
  We are not only good at entrepreneurship in Harrow: larger businesses have also done well since the sun began to shine, on that wonderful May day in 1997 when Labour finally came to power. Ladbroke, the largest private sector employer in my constituency, has created more than 1,000 additional jobs since 1997.
  May I be permitted to give a short advertisement for the enterprising nature of my constituents who work for Ladbroke? They now provide an extremely efficient betting service, of which Members may want to take advantage. Members may want to join sensible football fans and bet—with Ladbroke—on Arsenal winning the double this year. More courageous Members may want to take advantage of that betting service and back Wales to beat England in next year's Six Nations tournament.
  Members may want to take a political punt. Having listened to the opening speeches in the debate, Opposition Members will, I am sure, find that the odds have lengthened on the chances of a Conservative victory at the next general election. Small and larger enterprises do well in my constituency.
  Despite that generally good picture—in Harrow and nationally—it is right that we introduce further measures to celebrate and cement the effectiveness of the legislative
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  environment for entrepreneurs and larger businesses. The various provisions to promote competition, to take tougher action on individuals who might be tempted to operate cartels and to increase opportunities for redress for genuine victims of anticompetitive behaviour, as well as the additional support and rights for consumers, are entirely justified.
  As I suggested in my intervention on my right hon. Friend the Secretary of State for Trade and Industry, I strongly support the Bill's provisions on insolvency, but I want to comment on one sector of the business world that may not be affected by those provisions but which should come within the ambit of the insolvency reforms: the 9,000 businesses registered as industrial and provident societies under various Acts between 1965 and 1978.
  Unlike the traditional company model, with which all Members will be familiar, businesses registered as industrial and provident societies are either bona fide co-operatives or societies operating for the benefit of the community. Their business is regulated by the Financial Services Authority and they often operate in the same marketplace as companies. They run funeral services, travel services and retail businesses, such as supermarkets. Why then should not the same insolvency provisions that apply to traditional companies also apply to industrial and provident societies?
  The problem is that the societies are governed by industrial and provident societies legislation and not by the Companies Acts. That is why discrepancies in the application of insolvency law have developed between companies and industrial and provident societies.
  As a result of the Cork report, corporate insolvency law was reformed in 1986 and in 2000. It provides a range of procedures for companies that run into financial difficulties. There is the traditional liquidation, or winding-up, route, which, in effect, brings an end to the life of the company.
  The administration order process tends to have a wider purpose—to try to rescue a business or to facilitate a more beneficial winding-up. There are company voluntary arrangements. The administrative receivership process has been mentioned several times.
  Furthermore, at the time of the 1985–86 reforms, the encouragement of corporate rescue was backed up by a new regime under the process set up by the Company Directors Disqualification Act 1986. That disqualified directors when it became clear that through their actions in the insolvency of a company they were no longer fit to hold office.
  Sadly, industrial and provident societies are wholly excluded from the administration order and company voluntary arrangement processes; nor are their directors subject to disqualification under the 1986 Act. Why? They do not fall within the definition of "company" under the legislation. Unlike building societies and friendly societies, they have not had those rules applied to them, in whole or in part, in separate legislation. The Bill may provide an opportunity to remedy that deficiency.
  If the Bill were to make its way through the House without an opportunity arising to amend insolvency provisions for industrial and provident societies, that legal model, which is important for many businesses and for many communities who run businesses, would fall even further behind the company model. I point out, in a non-partisan way, that not only have this Government

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  introduced reforms for other business models but previous Governments made sensible reforms of company law. In this Bill, only the abolition of Crown preference benefits industrial and provident societies.
  I point out to my hon. Friend the Minister that the insolvency regime for those societies could be amended either by including them in the Bill or, as she knows, by making provision in the private Member's Bill making its way through the House. I seek an assurance from my hon. Friend that she and her officials will continue to have discussions across Government about how we can prevent the legal model of industrial and provident societies—a small but important part of the business world—falling further behind the company model. If we are serious about competition, we should ensure that all legal forms are modern and up to date and have the appropriate structure.
  I congratulate my colleagues in the Department of Trade and Industry on an extremely sensible Bill, and I note the warm welcome that it has received. I hope that we can address the issue that I have raised in Committee or at a later stage.
  8.22 pm
  Mrs. Angela Browning: I shall deal mainly with the part of the Bill that deals with insolvency, but before I do so I want to express my support for the comments made by my hon. Friend the Member for Bury St. Edmunds (Mr. Ruffley). He said that simply badging a Bill with the word "enterprise" does not necessarily produce an entrepreneurial culture. There is merit in many of the contributions that have identified the fact that, since 1997, the UK has dropped in the world competitiveness league, and that the burden of taxation and red tape, particularly on small and medium-sized businesses, has stifled the entrepreneurial culture that we cherish so much and which the Bill seeks to promote.
  On insolvency, the second chance philosophy is something to which I can subscribe. Before I came into the House 10 years ago, I ran my own business for 10 years. For some time, I dealt with an American company that was in chapter 11, and although one had to be very careful about making sure that the invoices went out on time and got paid on time, month by month, just as a safeguard, the arrangement seemed to work very well and eventually the company came out the other side. I am signed up to the idea that there are ways of rescuing and maintaining companies to ensure that, ultimately, they survive and do not cause the damage to creditors, customers and consumers that the Bill seeks to avoid. I support that part of the Bill, but I am concerned about insolvency practitioners and liquidators and their activities.
  The Minister will be aware—this is touched on in the regulatory impact assessment that accompanies the Bill—that small, medium-sized and, I think, large companies, have for some time been concerned about the way in which assets are disposed of and the lack of accountability of those responsible. They are particularly concerned about those responsible for winding up a company and those who are personally involved in disposing of assets on behalf of an individual or a company.
  I notice that the regulatory impact assessment contains a lot of detail about individual voluntary arrangements. There is a breakdown in a detailed table at section 518 which shows the value of receipts, the nominee fee and
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  the supervisor fee. We have heard tonight that many people avail themselves of individual voluntary arrangements because their personal and domestic finances are in trouble, but I am more concerned about the corporate sector, and particularly those small and medium-sized businesses that have assets to dispose of and where there is concern, not only about the proportion of the fee taken by those who wind up the business but about the way in which they go about their business and the lack of accountability. There are many well documented cases in which, despite the substantial sums involved, creditors received only a page of documentation giving them details about how the wind-up of a business was carried out.
  Only on Saturday morning, I was visited in my surgery by a lady who had run a small textiles business in my constituency. I suspect that this case is typical of small and large companies throughout the country, because many textiles businesses have folded in recent years, not least because of relocation to other countries where labour costs are much lower. My constituent seemed to me a very good business woman who had tried desperately to maintain jobs for her staff, which was small but very important in a small town, and done her best to get new orders to keep the company going. What she found most distressing about the proceedings was the fact that although she leased her factory, she owned the capital equipment in it, and that was left for a very long time before it was disposed of. It included the sort of equipment that one would expect to find in a textiles factory, such as cutting tables, which are valuable assets, yet it was all disposed of locally for £500.
  That is not best practice, and such behaviour is not acceptable. It is not good for the owner of the business; it is not good for the creditors and it is not good for the company's employees. I hesitate to call for more regulation, but I am disappointed that the Minister has not seen fit to include in the insolvency provisions statutory requirements on transparency and simplicity for insolvency practitioners and liquidators. They are key to insolvency practices. How those people go about their work and how long they take to do something is critical, and there is no mention of that in the Bill. They should be called to account because they have a duty of care to all the interested parties.
  Even at this stage, when the Bill has been printed, I should like the Minister to consider very carefully improving the part on insolvency. Clearly, if a business had assets that could be disposed of in a timely manner, at a rate that was more advantageous to creditors, that would be to the greater good. I accept that the philosophy is that something is worth only what the market will pay for it at a given time, but some businesses have specialised plant, and it takes somebody with knowledge of the sector to realise the best price for it. It seems to me that my constituent, whose case is not untypical, has not been well served by those who were given the responsibility of winding up her business.
  I suspect that the Minister will tell me that my next topic has more to do with the Companies Acts than with the Bill, but I consider it pertinent to the issue of directors. I refer, of course, to companies with limited company status. Concern persists about phoenix companies—companies that disappear and rise again, often with the second company having acquired some of the assets of the original one and with the same people involved.

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  I know that the Companies Acts tried to disqualify directors who engage in such practice, but it appears to be continuing.
  The matter is not unrelated to the Bill, although it may be other legislation that has to be amended. The hon. Member for Waveney (Mr. Blizzard) touched on the subject when he gave a constituency example of the way in which directors can behave, and continue to do so, perhaps by using holding companies to asset strip before moving on. They leave behind a trail of damage and loss to the work force and others. I am sorry that the hon. Member for Coventry, North-West (Mr. Robinson) was not present to hear his hon. Friend, as I suspect he might have been able to say something useful about running companies in such a fashion. Even if such issues cannot be covered in the Bill, they are pertinent to the general subject with which it deals. I hope that the Minister will take them on board as unfinished business connected with the Companies Acts.
  That is all I had to say. I shall now sit down, in case I am put on the Committee.
  8.31 pm
  Ross Cranston: I was unable to be present for the opening speeches. I apologise to the House, to Ministers, and specifically to the shadow Secretary of State, who is in his place. I was unavoidably detained elsewhere.
  I support the Bill. I shall concentrate on three aspects of it: the provisions on competition, consumer matters and insolvency. The competition aspects are very much a continuation of the Competition Act 1998, enhancing the provisions of that Act. The background in this country was one of an administrative system to deal with competition problems. Under that system, Governments sometimes actually promoted cartels, and we were not tough about promoting competition, so the 1998 Act represented a step change by, in essence, introducing to UK law articles 85 and 86 of the treaty of Rome.
  The Bill will take that step change further. It will enhance the role of the OFT and take politics out of decision making to a large extent, except in certain cases, for example, those involving national security. Unfortunately, in recent decades the public perception has increasingly become that politicians cannot make disinterested decisions. I do not accept that that is true of politicians on either side of the House, but that is the perception, so taking politics out of the matter, as was done in respect of the Bank of England, should boost public confidence in the operation of competition policy.
  I can deal briefly with the first specific aspect of the competition provisions, which is the criminalisation of hard cartels. I welcome that provision, which has been in operation in the United States for a century, but I doubt that it will have a great effect in practice. More important will be the second specific aspect—the damages provisions. The damages provisions of the Competition Act, whereby private persons could seek damages for losses they had suffered as a result of anti-competitive behaviour, were not especially clear cut. The hon. Member for South Cambridgeshire (Mr. Lansley) asked for empirical evidence in that respect, so here is some: to my knowledge, there have been no successful private damages claims under the 1998 Act.
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  The Bill is designed to make it clear that damages can be claimed; that they can be coupled with action by, for example, the OFT; and that they can be brought before the appeals tribunal. That will have an important effect on behaviour in the market. That has certainly been the American experience. The United States has a system of treble damages—we are not adopting that specific approach—and experience there is that the threat of private action by other businesses that have been damaged by anti-competitive behaviour is a stronger incentive for businesses to behave properly than criminal penalties.
  I should like my hon. Friend the Under-Secretary of State for Trade and Industry to give further consideration to the possibilities offered by representative actions, as set out in clause 17. I see that provision as an advance, but leopards, especially old ones, cannot change their spots. Although I have argued for many years for such a provision, I have gone further, saying that consumers on behalf of whom the action is to be taken should not have to be identified, Many consumers who are adversely affected by anti-competitive behaviour have no incentive to take action because the losses they suffer are extremely small. So there is an argument for someone, such as the OFT, to act as their surrogate and take action on their behalf.
  As drafted, clause 17 requires that such consumers be identified, but in many cases it will not be possible to identify the whole range of consumers who are adversely affected by anti-competitive behaviour. Therefore, I want the Minister to consider the provision. Perhaps in the fulness of time, an amendment can be made to allow for the aggregation of non-identified consumers who have suffered loss as a result of anti-competitive behaviour.
  One important consumer provision of the Bill appears in the competition part, in clause 8, which deals with codes of practice. That provision is an enhancement of one that has existed since 1973—in section 124 of the Fair Trading Act 1973, which was introduced by the Conservatives. Under that excellent provision, during the 1970s and early 1980s, many trade associations introduced codes of practice, which enhanced consumer protection.
  The example of the Association of British Travel Agents is illustrative of what can be done in this regard. Clause 8 seeks to take the process further because it provides for approval by the OFT of the codes. It provides also for the OFT to promote the codes. Many of the codes that were drafted in the past are now little known about. For example, there are codes that apply to funeral directors and shoes. There is always a debate about self-regulation. In this context, however, when it is backed up by public monitoring by the OFT, it is to be welcomed.
  As for stop now orders, the Bill seeks to go beyond the regulations that were introduced on the back of European Community directives. In the brief produced by the National Association of Citizens Advice Bureaux, it is suggested that the stop-now provision should be extended to behaviour that is not in breach of the criminal or civil law. I am not sure that the association argued in its briefing that persistent breaches of the codes might not constitute breaches of the criminal or civil law. However, they would be objectionable.
  The National Consumer Council, with which I have been associated back to the mid-1970s, is arguing for a duty to trade fairly. Again, I cannot change my spots.

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  I have been arguing for that duty in writing for many years. Perhaps it is not for the Bill, but it is certainly something to be taken into account. If it is taken forward, it is important that it applies only to anti-consumer behaviour. In other jurisdictions, such as that in Australia, which have a general unconscionability provision, there is a lawyers' charter. That is good for lawyers but not necessarily good for others.
  I support the changes in the personal insolvency provisions. It was suggested by the hon. Member for Bury St. Edmunds (Mr. Ruffley) that these will lead to a rogues charter, with consumers racking up debt and declaring themselves bankrupt. That is not the reality. People do not consciously incur huge amounts of debt that they cannot pay. They know that if they do so they will not get credit in future. They will have a black mark against them and creditors will take that into account and not lend. A stigma attaches to bankruptcy in this country that does not operate elsewhere, and the proposed change is to be welcomed.
  With the abolition of Crown preference, we are following other jurisdictions. For example, Germany has abolished it, and it is altruistic of the Government to abolish it. It is often the poor old tax collector who is paid last by a business in trouble. It will pay other traders so that it continues to receive supplies. It might even be able to pay its bank loan so that the overdraft will be continued. However, it will not pay its taxes. The abolition is magnanimous behaviour on the Government's part. As I have said, it follows a trend in other jurisdictions, and I welcome it.
  Corporate insolvency is a difficult area. The Insolvency Service produced a good paper in 2000, which considered the empirical evidence. A survey was produced by the London business school. There was wide consultation and it was concluded that there was a problem in some instances of banks pulling the rug too quickly. It was found that there was precipitate action by banks when dealing with companies that could be rescued. On the whole, however, it was felt that that was a problem of the early 1990s.
  The Bill tries to address the problem and it will abolish administrative receivership. The hon. Member for Bury St. Edmunds said that there would always be a court procedure, but anyone who reads the Bill will find that that is not the case. It will be possible for banks to appoint administrators out of court. Officials, Ministers and the Bill team have excelled themselves in coming up with a solution to the problem. A certain amount of tweaking still needs to be done, but they have carved out from the abolition of administrative receivership certain capital market transactions and project financings. Furthermore, as I said, there is the possibility of the banks appointing administrators out of court. The rationale is correct: we must promote the rescue culture. That issue was addressed by the hon. Member for Tiverton and Honiton (Mrs. Browning), whose point about the behaviour of administrators was right. The Bill introduces an explicit duty for them to act in the interests of creditors, but there may be room for further work in Committee in that regard.
  I accept that the promotion of an enterprise culture will not be achieved by the Bill alone, as it requires a range of measures. I agree that, as has been suggested from the Opposition Benches, there is a very good case for tax simplification. Indeed, I have been working with the
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  Institute for Fiscal Studies, as have hon. Members from the two main opposition parties, on how it might be better effected. Support is required for a range of other measures, such as those that my right hon. Friend the Secretary of State for Education and Skills is introducing to try to promote skills in schools and lifelong learning. Measures such as those introduced in recent years by my right hon. Friend the Chancellor of the Exchequer to promote research and development and science are also required, and we also need to promote a welfare state in which work is the primary avenue for getting people out of poverty. All those things are needed. The law can do only a certain amount, but inasmuch as the Bill makes a contribution, I welcome it.
  8.47 pm
  Mr. Alistair Carmichael: I am grateful for the opportunity to contribute to this debate. I am particularly grateful to have caught your eye, Mr. Deputy Speaker, as when I look around the Chamber at those who are present and have sought to speak, it seems that I will probably be the only Scottish Member to contribute. That is rather surprising; indeed, it is regrettable, given that all bar 13 of the 269 clauses of the Bill—not to mention the schedules—will apply to Scotland and have a profound effect on Scottish business and insolvency law. However, it appears that the only contribution to the debate from 56 Scottish Labour MPs will be the very brief intervention made by the hon. Member for Glasgow, Cathcart (Mr. Harris) during the speech of my hon. Friend the Member for Twickenham (Dr. Cable).
  I am afraid that I cannot speak with any great enthusiasm for the parliamentary love-in that we have heard hon. Members join today with regard to the merits of competition. I represent a part of the country where people view with some scepticism the notion that competition will be the panacea for all our business and enterprise ills—a point that I want to illustrate with one example. Recently, I met the director general of Oftel, who spoke at great length about the merits of competition with regard to the expansion of broadband access. I asked him what contribution competition would make to the £12 million project to lay a fibre-optic cable from mainland Scotland to Shetland. It is fair to say that the silence was deafening. There are some aspects of our enterprise development, particularly in remote areas, for which competition does not have all the answers. That is certainly true regarding the conduct of the Office of Fair Trading.
  My experience of the OFT to date has been one of disappointment, and that view is widely shared in my constituency. It has examined once, if not twice, petrol pricing, a matter which was also raised by the hon. Member for Stoke-on-Trent, North (Ms Walley). That is a live issue in my constituency, where we pay at least 15p a litre more for our petrol and diesel than people pay on the mainland. Obviously, a small element of that will be attributable to transportation costs, but I do not believe that that amounts to 15p a litre. The OFT examined the issue, and came to the conclusion that it could see nothing wrong with the way in which the market was operating.
  Since I was elected, I have had further experience of the OFT, when Esso decided to withdraw its business cards from businesses operating in my constituency. Under that system businesses were given the opportunity

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  to obtain cards with which to pay for their fuel, enabling them to pay the average United Kingdom cost. That created more of a level playing field and was a valuable asset for a number of businesses in my constituency. I raised the issue of the cards' withdrawal from Orkney and Shetland with representatives of the OFT, but they merely shrugged their shoulders and said that there was nothing they could do. That withdrawal was, by any commonsense definition, an unfair trading practice, and if that is the best that the OFT can do, I am afraid that, viewed from north of the Pentland firth, we see the organisation as worse than useless.
  Like other hon. Members, I am happy to give a broad welcome to the Bill in general. I have received briefings in recent days from bodies as diverse as the Law Society of Scotland and the Consumers Association, all of which have been broadly supportive. Any measure that can command support from organisations as diverse as those must have some significant benefit. I would, however, like to draw to hon. Members' attention a number of aspects of the Bill that cause me some concern, and which I hope will be given full consideration in Committee.
  The first of those aspects relates to the creation of a cartel offence. The hon. Member for South Cambridgeshire (Mr. Lansley) raised most of the points that I wanted to make on this issue and I do not wish to rehearse them, but I associate myself with the reservations that he expressed. My particular concern on this matter, however, is one that I raised at a number of stages during the course of the Proceeds of Crime Bill, on whose Standing Committee I served recently.
  The creation of a cartel offence of this sort, and the way in which it relates to the civil sanctions stemming from the Competition Act 1998, is a further instance of the blurring of the division between civil and criminal proceedings. It would greatly improve this part of the Bill if some guidance were to be given—either through a guidance note or in the Bill itself—on the circumstances in which evidence will be used in criminal proceedings, and those in which it will be used in civil proceedings. That is particularly the case as the OFT is to be the investigating but not the prosecuting authority in such cases.
  While I am on the subject of prosecuting authorities, I hope that the Secretary of State's earlier reference to the Serious Fraud Office being the prosecuting authority relates only to England and Wales, and that prosecutions in Scotland will continue to be brought by the procurator fiscal and the Crown Office. I am not too narrow and nationalistic in these matters; I am quite happy to import the best of English criminal procedure into Scotland, but I am afraid it would be stretching that definition to include in it the Serious Fraud Office.
  I have some concern about the definition of the offences that require proof of dishonesty. As a former criminal prosecutor and criminal defence solicitor, I can envisage problems stemming from a provision that requires proof of dishonesty beyond reasonable doubt. I understand why politically that may be desirable, but it may make it difficult to obtain successful prosecutions in the criminal courts. I suggest to the Minister that another form of words, such as "knowingly or recklessly" or "with culpable recklessness", would be preferable and would be more in line with procedures for similar offences.
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  I am also concerned about the powers of investigation that are to be given to the Office of Fair Trading. I flag up a particular concern about clause 184, which provides powers that could be quite intrusive and may not be compatible with the right to privacy under article 8 of the European convention on human rights. It would be sensible to have a procedure similar to what in Scotland we call commission and diligence, whereby application can be made to the court for the release of information by an investigated party before an order goes through that proper protection may be given to the rights of the individual in respect of that procedure.
  With regard to the powers of the Office of Fair Trading, will the Minister explain to me why, under clause 185, warrants relating to the criminal investigation are to be obtained only from the High Court of Justiciary? That is bizarre. As far as I am aware, warrants for every other criminal offence in Scots law can be obtained from a sheriff. It is possible to obtain a warrant to investigate the circumstances of a murder from a sheriff, but for some reason a warrant relating to the operation of a cartel must come from the High Court of Justiciary. All other legislation on criminal procedure in recent years has extended the jurisdiction of the sheriff court, and I do not see why this Bill should be any different.
  As for the insolvency provisions in part 10, I am not convinced that there is a great deal wrong with receivership as it operates north of the border. I am concerned that the significant differences in the way in which receivership and administration operate have not been reflected in the Bill. I am particularly worried that, unlike in England, administration orders in Scotland are not granted by Scottish courts on first application. The Bill envisages a three-month period for administration, and I suggest to the Minister that that is an unrealistic expectation. If the administration involved the disposal of heritable property, which poses a conveyancing problem of no great complexity, that might eat up the three-month period after the initial application granted by the creditors. It would require the administrator to go back to the court, and if for any reason it was necessary to do that on a number of occasions, it is quite conceivable that the proceeds and assets of the state would be significantly diminished, because of the cost of the lawyers' fees and the court proceedings, without the issue being properly resolved. I suggest that a longer initial period would be useful. The extra expense involved would defeat the Government's aim of streamlining the procedure.
  I am happy to give the Bill a warm welcome in respect of several points, particularly the abolition of Crown preference, which has been welcomed by Members on both sides of the House. I hope that that signals a general shift by the Government in relation to Crown preference. With those few caveats, I am happy to support the Bill.
  9 pm
  Mr. Jonathan Djanogly: I appreciate that others wish to speak, so I shall try to be as brief as possible.
  The Bill's enormous scope leads me to support the claims of other Members that the time allocated for its consideration in Committee is simply not adequate. The Government spent two years consulting on it, so why can they afford to allocate only five weeks in Committee? That makes no sense.

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  The Government clearly regard the Bill as a gateway to improving enterprise culture in this country, rather than as a means to improving insolvency, consumer and competition laws. The Secretary of State has said:
  "Our goal is to make the UK the best place in the world to do business. The Enterprise Bill is a major step towards achieving this."
  We must therefore consider not simply the legalities in isolation, but whether the Bill will help enterprise. That is a much more complex question, which requires us to view the Bill's likely outcomes in the context of the Government's overall position on enterprise. I believe that the Bill is particularly likely to fail in that regard.
  On insolvency provisions relating to individuals, I have serious reservations about the proposal to reduce the period of bankruptcy to a maximum of 12 months. Presumably, some bankrupts, if not most, will be released within the first three to four months of bankruptcy. Not only will unfair discrepancies in release times arise throughout the country, but given that more than half of all current bankruptcies involve consumer credit, rather than business debt, it seems highly unlikely that the provisions will make any difference to improving enterprise. Instead, as other hon. Members have said, they may enhance careless risk-taking and excess credit.
  The Government have missed the point. What bankrupts need most is the ability to clear the slate after the set period, and to make a fresh start. Shortening the period of bankruptcy is not the key; what is needed is the ability to declare a bankruptcy spent after a set period. As matters stand, bankrupts will still not get a loan because their record will remain for the rest of their life. It is also worth noting that one of the great successes of the Insolvency Act 1986 was the institution of individual voluntary arrangements. Time and again, IVAs have saved people from bankruptcy and saved creditors from losing their money.
  Years of repayment under IVAs will become increasingly unattractive. Instead, why should one not simply go bust for a few months? The maximum 12-month period will apply to those who have failed through no fault of their own. I am still not sure what those provisions—they have been mentioned by other hon. Members—mean. Will the person who makes an illegal but small preference or transaction at an undervalue be at fault, while the sole trader who squanders millions through weak cash controls will not? To my mind, the whole approach reeks of future court cases and human rights claims.
  I also have serious concerns about companies. The Government seem to be arguing that the procedure will in some way prove unfair to unsecured creditors, but at the moment there is transparency. A quick search on the Companies House register can reveal whether a floating charge is in place. In terms of the credit that they give and the size of the order, companies need to be careful when entering into contracts with their customers' suppliers. That is simply common sense. For larger loans, deals will be done with the creditor who has a floating charge, in terms of the preference that will he received in the case of insolvency.
  The main point relates to the cost of receivership compared with that of administration. Receivership is relatively cheap and quick, but administration is very court intensive, slow and expensive. If any hon. Member does not believe me, I suggest that they ask the Secretary
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  of State for Transport, Local Government and the Regions about that. Most companies that go into administration are eventually wound up, but at vast expense and therefore greater loss to their creditors than if they had gone into receivership. That is why receivership is almost invariably used for smaller companies.
  The Bill will involve more administrations, thus more costs and therefore less money will go to creditors. The key to realising value to creditors in the vast majority of insolvencies where creditors' voluntary arrangements are not possible lies directly with the speed at which the company's underlying business can be sold. Every hour of delay will lower the value of the goodwill and therefore the return to creditors.
  We currently have a major problem in this country in getting banks to lend to start-ups and smaller companies, and the Bill will make the situation worse. If banks lend to small companies without significant assets cover on which they can take a secured, fixed charge, they will do so at higher interest rates and the use of personal guarantees will certainly increase. I can only speculate on whether that has anything to do with the Government's proposals to reduce bankruptcy periods, but I am sure that those proposals will not help competition, productivity or enterprise; they will act against them.
  I turn now to the competition provisions, many of which will improve the current situation, particularly the decisions to take referrals away from the Secretary of State and to create an independent OFT board, which, as other hon. Members have said, will represent a dramatic improvement. Likewise, the scrapping of the public interest test in favour of the substantial lessening of the competition test will be of great benefit, backed up by a fair de minimis set of provisions that keeps small businesses out of the loop altogether. That makes perfectly good sense.
  However, problems have been identified for those companies affected, such as uncertainty and the additional costs involved in what the hon. Member for Twickenham (Dr. Cable) recognised would be a more judicial system. Concerns have also been expressed about the new enforcement powers and, more importantly, how they will be used. As the director general of the Confederation of British Industry put it:
  "Nobody will benefit from forcing good firms to defend themselves unnecessarily when their European rivals shelter under less rigorous regimes."
  Some may suggest that the attitude that companies should be fearful of the DTI, its investigations and heavy-handedness is mere bluff. I wanted to give two examples, but they will take up more time than I wish to use, given that other of my hon. Friends wish to speak. However, that is a real concern for companies, which are often subjected to Kafkaesque inquires by the DTI at great cost to those involved. That is all very well for listed companies with big pockets that can defend themselves, but the vast majority of companies in this country—85 per cent.—are small with fewer than 10 employees, and they simply cannot afford the costs involved in defending themselves. That is why it will be necessary to ensure that we look out for smaller businesses.
  All that is part of the existing enterprise culture, so I hope that hon. Members will forgive me if I seem to be a little bit cautious, but they should please keep in mind those examples as I consider one or two other provisions.

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  First, the super-complaints process will have to be considered very carefully to avoid its becoming a way to initiate witch hunts, as other hon. Members have said. The CBI noted that the 90-day period was too long, but that could miss the real threat: if the DTI requires a full investigation to take place in that period, how long will that full investigation take? That point was made earlier by my hon. Friend the Member for Maldon and East Chelmsford (Mr. Whittingdale). Will the Government pay the company's costs if nothing comes of an investigation? What rights will the company have to question the outcome? Will there be provisions to ensure that its reputation is not damaged during the investigation? I can imagine a series of trials by tabloid springing up.
  In October 2001, the OFT agreed to a Consumers Association referral involving a super-complaint against the dentistry profession. The outcome was interesting. The OFT said that it would undertake a full investigation, which is expected to be completed by the end of the year. The question is this: should it not be required to complete the investigation after a certain period? Indeed, many questions arise, which I think should be raised in Committee.
  That case is particularly interesting in one respect. The Consumers Association noted that one reason for the referral was the existence of
  "huge disparities in tariffs between dentists".
  That seems strange. While I understand the association's wish to identify high-charging dentists, I had always assumed that price variations were a sign of an open rather than a closed market. I shall not predict the outcome of the OFT investigation—we must see what emerges—but it would be helpful if we knew the results before the Committee stage, in order to analyse the way in which they would be implemented. Unfortunately, that will not be possible.
  Similar concerns arise in relation to proposals for actions against individuals. While acknowledging that some other countries provide for criminal liability regarding cartel arrangements, businesses note that it is rarely enforced, and that the more active enforcement in this country will put UK companies at a competitive disadvantage in Europe.
  Others have commented, relevantly, that criminalisation should be delayed until we have reviewed the Competition Act 1998. Concern has been expressed about how criminal liability—in terms of culpability—will work. One of my own main concerns is this: it simply cannot be presumed that criminal sanctions are an effective way of remedying the problem when juries in criminal courts may have to decide beyond reasonable doubt on complex questions of civil competition law when considering a cartel offence. Incidentally, the same applies to insider-trading legislation—as can be seen in section 151 of the Companies Act 1989, which the Government now want to get rid of, and in clause 246 of the Bill, which deals with the new civil bankruptcy restrictions orders that will protect the public from dishonest people.
  The Government's White Paper states:
  "The high evidential requirements of the current criminal sanctions mean that very few bankrupts have action taken against them."
  The same point can be made about the disqualification of directors and, indeed, about criminal charges.
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  Getting the Bill right will involve balancing the interests of consumers and those of businesses, and ensuring that timely, due and fair process is achieved for all concerned. I do not believe that that balance currently exists in the Bill. Over-regulation will cause companies to leave the marketplace, which will mean less choice for consumers and higher prices.
  That leads me to the question of whether the Bill will meet the Government's objective of strong competition, productivity and increased enterprise. According to the DTI website, the Bill's aim is, among other things, to make markets
  "work better for both businesses and consumers".
  That is an interesting phrase. I understand why Governments, particularly this Government, want to regulate markets, but how can they make them work? Will the Prime Minister send a memo to them?
  The Government are entirely wrong to believe that they can make markets work, although they can regulate them. The only thing that will make markets work is Governments' staying away from them as much as possible. What makes markets work—what increases productivity, competition and enterprise in small and large businesses—is freeing labour markets, reducing regulation and lowering corporate taxes.
  9.14 pm
  Mr. Mark Field: One of the great joys of representing the City of London is the ready availability of a vast array of historic material about that part of our nation. As I recently ploughed my way through David Kynaston's excellent history of the City—I wonder how often any of us have the uninterrupted chance to read a book—I came across a passage that seemed as apposite today as it was when it was written in 1857 by a contemporary commentator on commercial life, who said:
  "I gathered from them a strong idea of what commercial failure is, to English merchants—utter ruin, present and prospective, and obliterating all the successful past; how little chance they have of ever getting up again; how they feel they must plod heavily onward under a burden of disgrace—poor men, and hopeless men, and men forever ashamed…It is not so in America, nor ought it to be here."
  Perhaps things have not changed much in the past century and a half.
  I want to say a few words about cartels, then concentrate on insolvency. I realise that I may yet have a chance further to examine the Bill's 269 clauses and 26 schedules if I win the fierce competition to serve on the Standing Committee.
  On cartels, the principle of open competition has been supported across the political spectrum—if not by the hon. Member for Orkney and Shetland (Mr. Carmichael)—but in recent years there has been increasingly wide divergence on the means by which that can be achieved. There is also universal acceptance of the commercial need, in certain instances, for regulation. However, all too often the Government have used regulation as a rough and ready tool to promote competition while effectively displacing consumer choice. That has been especially true in the newly privatised industries, where under the pretext of enhancing competition the Government have shifted nominally to allow private utilities the responsibility to ensure that their disadvantaged customers benefit from improved efficiency and greater fairness. Under the

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  disguise of competition, regulators have been given significant new powers of social engineering and, with that, an added burden on business that should properly be borne by the Government.
  The importance of regulation dates back to the United States in the early part of the 20th century, when anti-trust legislation under Theodore Roosevelt clamped down on the protectionist power of big business. The undesirability of monopolistic power was deeply entrenched in the US's corporate psyche, and that played its part in the years ahead.
  The domestic system was introduced about two years ago when the Competition Act 1998 came into force. The Bill goes a step further by proposing a maximum custodial sentence of five years for offenders. That creates a problem in relation to the complementary jurisdiction of European Union law. Where a cartel has an inter-state trade aspect, EU law will apply to the exclusion of national legislation. In view of the reluctance of many European countries to extradite their own nationals, it is difficult to see how the proposed new "get tough" cartel rules will work in practice.
  On insolvency, I welcome the Government's clear commitment to grasp the nettle after so long. I suspect that many of the concerns pre-date even the comments from 1857 that I quoted. For as long as I can remember there have been plans to relax our insolvency laws. The Bill allows at least for a dispassionate analysis of some of the key issues, although I shall have time to do no more than set out a few ground rules.
  During my experience as a junior corporate lawyer in the recession of the early 1990s, when I dealt with restructurings, administrations and liquidations, many UK lawyers cast an envious eye across the Atlantic at what appeared to be the infinitely more flexible regime under chapter 11. US insolvency legislation enables directors to continue in business well beyond the point at which a director in the UK would have incurred some personal liability for trading insolvently. Moreover, the mechanism allowing for the restructuring of older debts operates alongside a welcome breathing space for a company to reorganise without the ever-present prospect of creditors breathing down its neck. I accept the wisdom of trying in this country to emulate America's bankruptcy laws. However, we need to recognise that the stigma of insolvency is probably as strong as ever. It has been argued that, culturally, Britain is not sufficiently attuned to using insolvency to return a restructured company to the hands of its management. As a practical issue, that is as strong as ever. The commercial reality is that, without strong management and a distinct restructuring plan, no amount of tinkering with the insolvency law is likely to make a great difference.
  The experience of Railtrack in the past six months seems to be adequate evidence that creditors should do anything that they can to prevent a business going into administration or any form of receivership, since the costs of that process are absolutely prohibitive. Railtrack is by no means an exception in that regard. All too often, the management of such companies is paralysed by having to concentrate on day-to-day rather than strategic concerns. That applies particularly to businesses in the service sector, in which the main assets of companies are often the middle-ranking and junior staff. A protracted cycle of
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  administration is likely, as much as anything, to result in the rapid departure of that key staff asset in such businesses.
  Before administrative receivership is consigned to the archives, it is worth pointing out that it is a quick, cheap and often effective mechanism, which allows businesses to be sold without interference from companies or their creditors. The unfettered power of secured creditors to appoint receivers makes them insufficiently accountable to other creditors, but that appointment puts paid to other potential rescue plans. Although the Bill seeks to water down the power of secured creditors to control an insolvency situation, a greater degree of certainty is needed as to its true replacement.
  For all the Bill's much-heralded radicalism, these proposals are still founded—as I mentioned in my earlier intervention—on the traditional British insolvency distinction between innocent bankrupts who are victims of economic circumstance and more culpable cases, without recognising that there is often a very grey area in cases of negligence and recklessness. In its own terms, the Bill aims to improve enterprise and enhance responsible risk taking. However, I am concerned about the difficulties in relation to these measures, and I question whether they will make as much practical difference as the Government would have us believe.
  9.22 pm
  Mr. Mark Hoban: As the last Back-Bench speaker in this debate, I feel that, although everything has been said, not everybody has said it.
  I want to focus on the competition aspects of the Bill. First, from my experience of talking to businesses in my constituency, and on the basis of more than 100 responses to a business survey in my constituency, the main concern of businesses is not the competitive framework within which they operate, although that is important, but the burden of red tape and taxes that the Government have imposed on them. As colleagues have said, the costs of regulation since May 1997 have been £15 billion. That is the context in which the benefits that will accrue to business as a consequence of the Bill must be set.
  As I believe that the Bill is peripheral to most businesses, I welcome much of its content. The removal of decisions on mergers from the Secretary of State to the Competition Commission is fundamentally right. It is a great strength to a country when it is perceived that decisions that affect business are made not on the whim of whoever happens to be in government at the time but on the basis of a clear, legal framework. Although I am sure that my hon. Friends the Members for Maldon and East Chelmsford (Mr. Whittingdale) and for South Cambridgeshire (Mr. Lansley), who referred to the Tebbit test, were right in extolling its virtues, merger policy should not be dictated by the incumbent Secretary of State for Trade and Industry, especially as there have been four of them since May 1997. Business requires a more stable and consistent framework than such a turnover allows. In that context, it is also right to change the test for whether a merger or takeover should be referred from one of public interest to one of competition. That will enhance the certainty within which major companies can operate when they undertake what I know from experience to be complex, lengthy and expensive transactions.
  It is regrettable that although they have taken themselves out of merger and takeover decisions, the Government have retained reserve powers with regard

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  to market investigations. Those powers allow the Government to override decisions made by the Office of Fair Trading, or to force the Competition Commission to investigate potential market abuses when the Government believe that the OFT will not act satisfactorily on evidence presented to it.
  It is sad that the Government have not grasped fully the importance of taking competition policy out of Ministers' hands. They should accept that the OFT should not be second-guessed by the Government, and that, if the OFT has completed an investigation into supermarkets, for example, that should be the end of the matter.
  It is sad that the Secretary of State has not learned from the experience of her predecessor, the present Secretary of State for Transport, Local Government and the Regions. His dealings with campaigns about "rip-off Britain" proved fruitless in many cases, but imposed high costs on British business. He distracted businesses from achieving their main goals, which are to grow bigger, to recruit more staff and to make profits. Such distractions force an unnecessary cost on business.
  A further provision in the Bill will make matters even worse. Consumer organisations will have the potential to make super-complaints. Such organisations have their own priorities, and there is a grave risk that they will use that ability to press political agendas with a small "p". We need to make sure that more organisations can make super-complaints.
  Moreover, the Confederation of British Industry has recommended that the powers to launch super-complaints be used sparingly to ensure that they retain credibility. Too many super-complaints launched by consumer groups to raise their profile, justify their existence and demonstrate a macho style of consumer self-interest will throw the system into disrepute and force companies to pick up the costs of defending the complaints. Those costs will eventually be passed on to consumers. It would be ironic if the competition measures in the Bill ended up increasing costs to consumers, rather than reducing them.
  We must make sure that there is a prima facie case for each super-complaint made under the Bill, and that each such case passes a reasonableness test. I am sure that that will be discussed in Committee, as we must ensure that only fair burdens are imposed on business, and that businesses and consumers do not have to pick up the costs of fishing expeditions mounted by consumer organisations.
  This is an important Bill for business. Many businesses will not benefit from its provisions, and most will not fall under its competition provisions. I hope that any businesses that take advantage of the insolvency changes will be those acting as creditors, rather than those that are insolvent.
  I hope that the Government have listened to the comments made in the debate. The Bill is peripheral to most businesses. The Budget is to be announced next week, and the Government should accept that the real way to improve the competitiveness and productivity of business in this country is to lift the burden of regulation and taxes.
  9.29 pm
  Mr. Nigel Waterson: It is fair to say that we have had a wide-ranging debate on this large Bill. As my hon. Friend the Member for Maldon and East Chelmsford (Mr. Whittingdale) made clear in his opening speech, the Opposition join with business and consumer organisations in welcoming much in the Bill and I will deal in more detail with the measures that we specifically welcome in a moment.
  Many of the provisions are far removed from party politics, but much in the Bill is complex, technical and legal and needs careful and close scrutiny. We are far from convinced that the draftsmen have got it right first time. As has been pointed out more than once, this is precisely the sort of measure that cries out for a draft Bill and proper pre-legislative scrutiny. My hon. Friend the Member for South-West Hertfordshire (Mr. Page) made that point powerfully. What has happened? The Bill was published on the very day that the House rose for the Easter recess and this Second Reading debate is on the first day back after it.
  The Bill contains no fewer than 269 clauses and 26 schedules. Myriad regulations will have to be made under it; I hope that we shall see drafts of at least some of them in Committee. However, we face yet another timetable motion and the Government's absolute insistence that the Bill be out of Committee by the middle of May. So, with the best will in the world, the Bill will not receive the detailed scrutiny that it deserves and that is no one's fault but the Government's.
  I think that it was Bismarck who once commented that those who love laws, like those who love sausages, should not see how they are made. That comment is particularly apposite to this long and complex Bill. Of course, it is right that the Fair Trading Act 1973—legislation enacted under a Conservative Government—should be revisited. We support that, as do all the consumer organisations. However, we need to ensure that the functions and powers of the new Office of Fair Trading are properly defined and that it will have the resources to carry out those functions.
  How will the so-called super-complaints and stop now orders work in practice? Will they really benefit the consuming public as the Government claim? Why has there been no attempt to reform consumer credit legislation, which also calls out to be revisited at this time?
  Ministers should also be aware of the keen disappointment that consumer organisations feel at the failure to introduce a general duty not to trade unfairly as part of the promised replacement for part II of the 1973 Act. Only this morning, I attended the launch of the "Stop Shark Practices" campaign, led by the National Consumer Council with representatives of the Trading Standards Institute, the Federation of Small Businesses, the National Association of Citizens Advice Bureaux and the Consumers Association.
  NACAB, for example, has some significant concerns, which it lists in its briefing for this debate: a series of rip-offs that it believes will not come within the scope of the legislation. Examples include pyramid money-gifting schemes, credit repair scams, time shares and holiday clubs, doorstep and distant selling, and pressure sales often to elderly and unwell consumers. It lists the case of a 90-year-old client with Huntington's disease who was sold an adjustable bed. The company would not refund

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  the £300 deposit and was guilty of all sorts of abuses of normal trading practices. There is also the story of jobbing builders. Is there an hon. Member who has not received correspondence about cowboy builders from some of their constituents? Another such issue is home working. Those are some examples of infringements that NACAB believes will not be affected by the legislation as it stands.
  While we are on that subject, in clause 202, where is the list of so-called domestic infringements that are meant to be covered? How on earth are we meant to debate that clause and those powers in Committee if we do not have that list in front of us? Will the Minister assure us that it will be available in plenty of time, before the Committee reaches those deliberations?
  Under existing legislation, stop now orders have not been the success some hoped that they might be. They are at present operated with a lack of clarity and predictability, which is worrying for business. The guidance required by the relevant regulations has still not been published. When can we expect to see it? We need to ensure that the new measures do not create unacceptable and costly burdens for business, as well as giving consumers the protection that they need.
  Another point made by more than one hon. Member in the debate concerns resources. It is all very well passing all these new regulations and giving new powers, but what if the resources are simply not there for trading standards departments to enforce them? We all know from our own experience that, as it is, trading standards departments are overstretched in many parts of the country. If they are to have all these new powers and duties without a concomitant increase in resources, that is simply unacceptable.
  As we have made clear, we welcome the end of ministerial interference in the competition and mergers regime, but that was on the cards anyway and, in recent times, Ministers have only rarely refused to follow the advice of the director general. We have a Conservative Secretary of State to thank for the existing guidelines that decisions on mergers should be based primarily on competition grounds. My hon. Friend the Member for Fareham (Mr. Hoban) made some good points on this issue, based on his own hands-on experience.
  The Opposition think that it is too early to revisit competition—the Competition Act 1998 has only been in force for a couple of years. More time should be allowed for the legislation to settle down in practice. My hon. Friend the Member for South Cambridgeshire (Mr. Lansley) made that point powerfully in his knowledgeable and telling speech.
  We note the concerns of business about criminalising cartels. Of course, no one is in favour of cartels—hardcore or otherwise—but is this the right way forward? The new regime will be out of step with most of the rest of Europe. In practice, it might make little difference and it seems to propose an extreme range of possible punishments for individuals. We also think that the new powers of the OFT to investigate markets could well be a massive extra burden on business. There must be some limit on how those powers are exercised and how the costs are dealt with.
  On the Bill's insolvency provisions, we welcome the abolition of Crown preference—who would not? But we wish to ensure that the Inland Revenue and Customs and Excise will not find other ways of securing their pound of
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  flesh. In trying to remove the stigma of bankruptcy and making it easier, the Government seem oblivious to the fact that the dramatic rise in consumer debt is the real problem. How in the real world are we to distinguish between culpable and non-culpable bankrupts without making distinctions that are both unfair and arbitrary?
  Sadly, there will always be the Maxwells and others who are genuine villains, but what about the pathological optimist who can often leave just as much wreckage in his wake? In short, we must ensure that there is no danger of this becoming a rogues charter.
  We have concerns also about the cost of bankruptcy. Some people will still be too poor, literally, to go bankrupt. We have concerns about whether the official receiver will have sufficient resources to operate the new system. The question of resources will run through Committee.
  We can all see the wisdom of giving innocent bankrupts a fresh start but, in the real world, credit reference data are kept for anything up to six years after a bankruptcy. That is bound to affect the ability of a discharged bankrupt to take on new obligations. The Government seem to have missed this point altogether, but it was dealt with powerfully by my hon. Friend the Member for Huntingdon (Mr. Djanogly).
  We also share the concerns of a whole range of organisations about the proposals for administration, which we think are unrealistic. They could be costly, bureaucratic and slow; these issues were dealt with by my hon. Friends the Members for Tiverton and Honiton (Mrs. Browning) and for Cities of London and Westminster (Mr. Field).
  Fundamentally, we all know that this is not really a Department of Trade and Industry Bill at all—it has the Chancellor's fingerprints all over it. We are told that he is impressed by the enterprise and productivity of the United States economy, yet he has completely missed the point in ignoring the role of light-touch regulation, low taxes and limited bureaucracy in the USA's success. We agree with the CBI when it says:
  "The Bill is something of a misnomer".
  It goes on to say:
  "The Government is putting far too much weight on competition policy as a tool to boost productivity as opposed to other key policy areas, ie boosting investment, reducing the regulatory burden on business and encouraging greater enterprise and risk-taking."
  The CBI also talks about the "chilling effect" on enterprise of the new powers to investigate markets.
  The Institute of Directors has this to say about the Bill:
  "We do not believe it will make any major differences to the way businesses are run in the UK…What is needed for enterprise to flourish is a serious attempt to cut the red tape strangling business."
  We have already heard in this debate how the UK continues to lag behind countries such as the United States, Ireland, Australia and Mexico in overall entrepreneurial activity. During their first term, the Government imposed new costs of £15 billion on business. Those points were echoed by my hon. Friend the Member for Bury St. Edmunds (Mr. Ruffley). No wonder The Independent said:
  "these are largely candy floss measures which fail to address the main problem facing Britain's enterprise economy—namely the growing burden of regulation, especially as it concerns the labour force…the Government's pro-business agenda is at odds with its social objectives, for business will always do best if the Government simply gets out of its way."

  111
  We agree with that sentiment.
  It stretches credulity when the regulatory impact assessment accompanying the Bill claims that no significant costs will be imposed on business as a result of the competition and consumer measures. [Interruption.] I welcome back the Secretary of State, fresh from relaunching her website, no doubt.
  The real irony of the Bill's timing is that we are debating it against the background of the Government's sharply deteriorating relationship with business and the City. Even after the humiliating U-turn of the Secretary of State for Transport, Local Government and the Regions over Railtrack, it still seems likely that the shareholders will sue him and the Government. Even if the Government can raise the funding for their various projects, it is bound to cost the taxpayer more than it would have done. There will now be a premium to be paid for financing Government projects.
  Among the large flock of chickens coming home to roost is the disastrous effect on company pension funds of the Chancellor's smash-and-grab raid on pensions. If we add to that the seemingly never-ending string of revelations about the Prime Minister's cronies such as Mr. Mittal and Lord Levy—the list goes on—we see a massive loss of confidence in a Government who, in opposition, went to enormous lengths to woo business.
  Finally, is not the truth that the first super-complaint about the Bill should be about its title? It has about as much to do with enterprise as the Government's spinning has to do with the truth. I shall not invite my right hon. and hon. Friends to vote against Second Reading because of the measures that I have indicated that we support and that are supported by business and consumers. However, we shall not let the Government get away with the preposterous notion that the Bill has anything to do with encouraging enterprise.
  9.44 pm
  The Parliamentary Under-Secretary of State for Trade and Industry (Miss Melanie Johnson): My right hon. Friend the Secretary of State for Trade and Industry has set out how the Bill will promote a spirit of enterprise in the UK and, along with other Government policies, help to boost productivity. Without strong competition, business, consumers and the economy get firms that have little incentive to provide better goods and services or to innovate and improve productivity.
  In developing our proposals for stronger and more independent authorities we have had the challenge of building in proper accountability, transparency and effective checks and balances. My right hon. Friend detailed how we have met that challenge.
  The competition reforms and the consumer protection measures will ensure that markets work better for consumers. The insolvency reforms will help to address the fear of failure that is a significant barrier to enterprise and help to prevent companies in difficulty from going under unnecessarily. Together, the reforms will help to make the UK become a better place to do business and a better place to be a consumer.
  Many interesting points have been made in this useful debate. I am pleased with the consensus among hon. Members today on a number of points. We agree on the
  112
  benefits of strong competition and of taking politics out of competition decisions and the need to support entrepreneurs.
  Several Opposition Members, including the hon. Member for Eastbourne (Mr. Waterson), argued that the Bill should have been given pre-legislative scrutiny, that it will have too little time in Committee and that it is generally being pushed through.
  The Bill has been subjected to extensive consultation. We published White Papers last year and the Government's response to consultation at the turn of the year. As the hon. Member for Huntingdon (Mr. Djanogly) remarked, over the past couple of years we have consulted in one form or another on many of the Bill's measures. We have also had continuing and regular dialogue with interested stakeholders throughout the process. The remarks of the British Bankers Association, quoted by my right hon. Friend the Secretary of State earlier, reflect the fact that we have worked closely with a number of groups in building our proposals.
  Today's debate has shown that many, if not most, of the Bill's provisions have wide support in the House. We shall work hard in Committee to examine the Bill thoroughly and carefully and I am sure that we will be extremely constructive.
  My hon. Friends the Members for Luton, South (Margaret Moran) and for South Ribble (Mr. Borrow) and the hon. Member for Twickenham (Dr. Cable) referred to stop now orders. There is no easy way of legislating against unfair practices that are currently legal. The Bill is about the better enforcement of existing consumer protection law. It will cover what is currently covered by the stop now orders, including the timeshare issue raised by the hon. Member for Twickenham and mentioned by the hon. Member for Eastbourne. Those will be extended to cover other areas too. As my right hon. Friend the Secretary of State said, they will include the breaches of contract for supply of services to consumers, such as those by cowboy builders, rogue planners, car repairers and others. We agree that those are important questions and we shall discuss them in more detail in Committee.
  My hon. Friend the Member for South Ribble referred to a constituency issue involving the NHBC. The Bill gives the OFT clear powers formally to approve codes and to remove approval from codes that are not working effectively to protect consumers. I shall write further to my hon. Friend in relation to the points that he raised.
  Several hon. Members referred to the importance of trading standards, on which we strongly agree. As my right hon. Friend the Secretary of State said, there are variations between trading standards throughout the country. There are more than 200 of them covering different population levels and types of community. I recognise that that needs addressing in a way that will produce consistent standards, and we are doing so.
  Trading standards are funded from general local authority funds, as hon. Members know, but, as my right hon. Friend said, we have introduced the modernisation fund to support trading standards further. That fund is providing £10 million this year, of which £5 million is devoted to effective enforcement and improving trading standards capabilities, and £2.5 million is specifically devoted to supporting the implementation of the current stop now order regime. That is in addition to the £10 million a year that we currently estimate trading standards departments will need to implement the Bill.

  113
  The issue is not just about money, however, as hon. Members know; it is also about planning and performance. We have worked closely with trading standards officers and other stakeholders to develop a national performance framework for trading standards. After a pilot last autumn, I launched the framework in January and it is being introduced by local authorities this month.
  I was interested to hear the support for our proposals on competition, and I welcome that. I note that the main concern of Opposition Members seems to be that we should not rest on our laurels after introducing the Competition Act 1998. We are not saying that the prohibitions in that Act are not valuable. It was a major step forward, as the then Secretary of State for Trade and Industry pointed out, and was much quoted by Opposition Members.
  The prohibitions are only against firms. We are building on that. The cartel offence will have a serious deterrent effect and that obviously relates to individuals. Merger and market reforms are sensible and have received widespread support.
  The hon. Member for Maldon and East Chelmsford (Mr. Whittingdale) referred to criminal offences and the cartel proposals in relation to Europe. The criminal offence is compatible with the EC regime; it is narrower in scope and targeted at a different legal entity. The UK criminal offence targets dishonest agreement to run cartels by individuals whereas the EU civil regime covers a much broader range of competition breaches committed by undertakings.
  The evidence for a criminal prosecution will, of course, have to be collected to criminal standards, following the safeguards in the Police and Criminal Evidence Act 1984. The OFT will collect the evidence separately from any civil proceedings. The Serious Fraud Office as prosecutor will take the decision on whether to prosecute in particular cases, in consultation with the OFT. I take the point made by the hon. Member for Orkney and Shetland (Mr. Carmichael) about prosecutions in Scotland. Continuing close co-operation between the UK and EU authorities will be the key to avoiding difficulties in practice.
  The hon. Member for Orkney and Shetland and my hon. Friend the Member for Stoke-on-Trent, North (Ms Walley) asked about the organisation of particular markets—I think that they both mentioned the petrol and fuel markets. As they are aware, that matter is for the competition authorities and I cannot discuss particular cases for that reason. However, the Bill builds on the Competition Act, giving our competition authorities effective tools to allow markets to be investigated and to deter anti-competitive cartels.
  Ms Walley: Does my hon. Friend agree that legislation is introduced so rarely that we need to find some way to address the genuine concerns that exist? Will she consider that point further in Committee?
  Miss Johnson: I shall study the report of our debate and if my hon. Friend would like to write to me on the matter I shall consider it. However, without further consideration, I can give her no assurances as to what action I might take.
  114
  The hon. Member for Twickenham anticipated that a far larger number of mergers would be referred to the Competition Commission. I do not share that analysis. I expect that the proportion of mergers to be referred will be broadly the same as at present. In practice, the OFT has already applied a competition test to mergers, but in future the process will be more certain and transparent. That is an advantage of the changes that we have made.
  Insolvency was raised by several Members. Our proposals have stimulated a great deal of interest and debate, which is healthy, and I have listened with interest. One point that I must stress before answering individual concerns is that there are two distinct areas of insolvency law, and flowing from that two distinct parts to our insolvency provisions.
  The individual insolvency provisions will reduce the stigma of bankruptcy and provide a second chance for those who failed through no fault of their own. The company provisions will ensure that companies do not go to the wall unnecessarily and will ensure a better result for all creditors.
  One area where we propose to apply the same provisions to both individual and corporate insolvencies is in the abolition of Crown preference. I am pleased that that provision has been welcomed by so many Members on both sides of the House.
  A number of hon. Members suggested that we are looking to copy the US system of personal insolvency and that the problems experienced in America will manifest themselves here. In drawing up the proposals, we have drawn inspiration from the insolvency regimes in a number of countries. I point out that the fundamental principle of our legislation is that those who can pay should pay, and we are not changing that position. The US is in the process of amending its insolvency regime better to reflect that principle, and is moving closer to the system proposed in the Bill.
  Our insolvency proposals fall into four broad areas. The hon. Member for Maldon and East Chelmsford has raised concerns about the work load in the courts. I reassure the House that the intention in company insolvencies is to disengage from active involvement of the courts except in cases where there is dispute or complexity. As my hon. and learned Friend the Member for Dudley, North (Ross Cranston) pointed out, in future, both floating charge holders and the company itself will be able to appoint an administrator without a court hearing. The administrator will have extensive powers to deal with cases quickly without reference to the courts.
  The hon. Member for Orkney and Shetland alleged that the proposed time scales for the new administration procedure are unrealistic. We have taken soundings from a range of insolvency practitioners, and their feedback indicates that the time scales would be realistic in a significant proportion of cases, although obviously there will be cases in which extensions are needed.
  The hon. Gentleman also raised concerns that the company insolvency proposals might affect the cost of lending to business. There is no evidence to support that; it is simply scaremongering. We are not affecting the right

  115
  of lenders to take a floating charge. We are simply providing for them to exercise their rights through collective procedures in which all creditors have a stake. We have liaised closely with all interested parties in developing these proposals, and, as the Secretary of State pointed out, the discussions, as the British Bankers Association acknowledges, were constructive. Secured lenders have nothing to fear from the proposals. I expect that many of those issues will be raised as the Bill progresses through the House.
  The hon. Members for South-West Hertfordshire (Mr. Page) and for Twickenham questioned how the distinction will be drawn between bad-luck bankrupts and those who have behaved dishonestly or recklessly. Obviously, that is a matter for the courts, and the Bill sets out some of the criteria that they may take into account. No matter what hon. Members think, people do find themselves bankrupt through no fault of their own. Those who are in business may fail because of the failure of a major customer, and others may be made redundant. At present the law draws no distinction between those individuals and those who set out to defraud their creditors, and that cannot be right.
  The official receiver will take a view based on the facts before him, including those provided by third parties, and on whether it is in the public interest to bring a bankruptcy restrictions order application. The court will decide, according the facts of the case, whether an order should be made. It is likely, as in the case of company director disqualification, that case law will develop over time and judgments will provide guidance as to what constitutes culpability and on the length of the orders. Those are matters to which we will no doubt return in Committee.
  My hon. Friend the Member for South Ribble raised concerns about the costs of entering into bankruptcy. That point was raised by the National Association of Citizens Advice Bureaux. Individuals with small debts can and do apply to the county court for administration orders, and a growing number of individuals with debt problems seek advice. Voluntary organisations will administer debt repayment plans on behalf of debtors at no cost to the debtor. I recognise my hon. Friend's concerns, and I will write to him with further details.
  I reassure my hon. Friend the Member for Harrow, West (Mr. Thomas) that we will take on board his points about industrial and provident societies as far as possible, although clearly some of these policy areas are a matter for the Treasury.
  Finally, I turn to the questions about stop now orders raised by the hon. Member for Eastbourne. I assure him that all the areas that he listed, including timeshare, doorstep selling, distant selling and consumer credit, are covered by regulations on stop now orders, and they will be covered by the Bill. We shall provide a draft list of legislation in Committee.
  Question put and agreed to.
  Bill accordingly read a Second time.

  ENTERPRISE BILL (PROGRAMME)
  Motion made, and Question put forthwith, pursuant to Order [28 June 2001],
  That the following provisions shall apply to the Enterprise Bill:
  Committal
  (1) The Bill shall be committed to a Standing Committee.
  Programming of proceedings
  (2) All proceedings on the Bill (including any proceedings on consideration of Lords Amendments or on any further messages from the Lords) shall be programmed.
  Proceedings in Standing Committee
  (3)(1) Proceedings in the Standing Committee shall (so far as not previously concluded) be brought to a conclusion on Tuesday 14th May 2002.
  (2) The Standing Committee shall have leave to sit twice on the first day on which it meets.
  Consideration and Third Reading
  >(4)(1) Proceedings on consideration and Third Reading shall be completed in two days.
  (2) Proceedings on consideration (so far as not previously concluded) shall be brought to a conclusion at Eight o'clock on the second of those days or, if that day is a Thursday, at Five o'clock on that day.
  (3) Proceedings on Third Reading (so far as not previously concluded) shall be brought to a conclusion at Ten o'clock on the second of those days or, if that day is a Thursday, at Seven o'clock on that day.
  Programming Committee
  (5) Sessional Order B (programming committees) made on 28th June 2001 shall not apply to proceedings on consideration and Third Reading.—[Mr. Heppell.]
  The House divided: Ayes 308, Noes 185.

  Division No. 204]

  [10 pm

  AYES

  Adams, Mrs Irene (Paisley N)

  Blears, Ms Hazel

  Ainger, Nick

  Blizzard, Bob

  Ainsworth, Bob (Cov'try NE)

  Boateng, Rt Hon Paul

  Alexander, Douglas

  Borrow, David

  Allen, Graham

  Bradley, Rt Hon Keith (Withington)

  Anderson, Janet (Rossendale)

  Bradley, Peter (The Wrekin)

  Armstrong, Rt Hon Ms Hilary

  Bradshaw, Ben

  Austin, John

  Brennan, Kevin

  Bailey, Adrian

  Brown, Rt Hon Nicholas (Newcastle E & Wallsend)

  Baird, Vera

  Banks, Tony

  Brown, Russell (Dumfries)

  Barnes, Harry

  Browne, Desmond

  Barron, Kevin

  Buck, Ms Karen

  Battle, John

  Burden, Richard

  Bayley, Hugh

  Burgon, Colin

  Beard, Nigel

  Burnham, Andy

  Begg, Miss Anne

  Caborn, Rt Hon Richard

  Bell, Stuart

  Cairns, David

  Bennett, Andrew

  Campbell, Alan (Tynemouth)

  Benton, Joe

  Campbell, Mrs Anne (C'bridge)

  Berry, Roger

  Caplin, Ivor

  Best, Harold

  Caton, Martin

  Betts, Clive

  Cawsey, Ian

  Blackman, Liz

  Challen, Colin

  117

  Chapman, Ben (Wirral S)

  Heyes, David

  Chaytor, David

  Hill, Keith

  Clapham, Michael

  Hinchliffe, David

  Clark, Mrs Helen (Peterborough)

  Hodge, Margaret

  Clark, Dr Lynda (Edinburgh Pentlands)

  Hoey, Kate

  Hood, Jimmy

  Clark, Paul (Gillingham)

  Hoon, Rt Hon Geoffrey

  Clarke, Rt Hon Tom (Coatbridge)

  Hope, Phil

  Clarke, Tony (Northampton S)

  Hopkins, Kelvin

  Clelland, David

  Howarth, Rt Hon Alan (Newport E)

  Coaker, Vernon

  Howarth, George (Knowsley N)

  Coffey, Ms Ann

  Howells, Dr Kim

  Cohen, Harry

  Hughes, Beverley (Stretford)

  Colman, Tony

  Hughes, Kevin (Doncaster N)

  Connarty, Michael

  Humble, Mrs Joan

  Cook, Rt Hon Robin (Livingston)

  Hurst, Alan

  Corston, Jean

  Hutton, Rt Hon John

  Cousins, Jim

  Iddon, Dr Brian

  Cranston, Ross

  Illsley, Eric

  Crausby, David

  Ingram, Rt Hon Adam

  Cruddas, Jon

  Irranca-Davies, Huw

  Cummings, John

  Jackson, Helen (Hillsborough)

  Cunningham, Rt Hon Dr Jack (Copeland)

  Jamieson, David

  Johnson, Alan (Hull W & Hessle)

  Cunningham, Jim (Cov'try S)

  Johnson, Miss Melanie (Welwyn Hatfield)

  Cunningham, Tony (Workington)

  Curtis-Thomas, Mrs Claire

  Jones, Helen (Warrington N)

  Dalyell, Tam

  Jones, Jon Owen (Cardiff C)

  Darling, Rt Hon Alistair

  Jones, Kevan (N Durham)

  Davey, Valerie (Bristol W)

  Jones, Lynne (Selly Oak)

  David, Wayne

  Jones, Martyn (Clwyd S)

  Davidson, Ian

  Joyce, Eric

  Davies, Rt Hon Denzil (Llanelli)

  Kennedy, Jane (Wavertree)

  Davies, Geraint (Croydon C)

  Khabra, Piara S

  Dean, Mrs Janet

  Kidney, David

  Denham, Rt Hon John

  Kilfoyle, Peter

  Dhanda, Parmjit

  King, Andy (Rugby & Kenilworth)

  Dobbin, Jim

  King, Ms Oona (Bethnal Green)

  Donohoe, Brian H

  Knight, Jim (S Dorset)

  Dowd, Jim

  Kumar, Dr Ashok

  Eagle, Angela (Wallasey)

  Ladyman, Dr Stephen

  Eagle, Maria (L'pool Garston)

  Laxton, Bob

  Edwards, Huw

  Lazarowicz, Mark

  Efford, Clive

  Lepper, David

  Ellman, Mrs Louise

  Leslie, Christopher

  Ennis, Jeff

  Levitt, Tom

  Field, Rt Hon Frank (Birkenhead)

  Lewis, Ivan (Bury S)

  Fisher, Mark

  Lewis, Terry (Worsley)

  Flint, Caroline

  Liddell, Rt Hon Mrs Helen

  Flynn, Paul

  Linton, Martin

  Follett, Barbara

  Love, Andrew

  Foulkes, George

  Lucas, Ian

  Francis, Dr Hywel

  Luke, Iain

  Gardiner, Barry

  Lyons, John

  George, Rt Hon Bruce (Walsall S)

  McCabe, Stephen

  Gerrard, Neil

  McCafferty, Chris

  Gibson, Dr Ian

  McDonagh, Siobhain

  Gilroy, Linda

  McDonnell, John

  Godsiff, Roger

  MacDougall, John

  Goggins, Paul

  McFall, John

  Griffiths, Jane (Reading E)

  McGuire, Mrs Anne

  Griffiths, Win (Bridgend)

  McKechin, Ann

  Grogan, John

  Mackinlay, Andrew

  Hall, Patrick (Bedford)

  McNulty, Tony

  Hamilton, David (Midlothian)

  Mactaggart, Fiona

  Hanson, David

  Mc Walter, Tony

  Harman, Rt Hon Ms Harriet

  McWilliam, John

  Harris, Tom (Glasgow Cathcart)

  Mahmood, Khalid

  Havard, Dai

  Mahon, Mrs Alice

  Healey, John

  Mallaber, Judy

  Henderson, Doug (Newcastle N)

  Mandelson, Rt Hon Peter

  Henderson, Ivan (Harwich)

  Mann, John

  Hendrick, Mark

  Marris, Rob

  Hepburn, Stephen

  Marsden, Gordon (Blackpool S)

  Heppell, John

  Marshall, David (Shettleston)

  Hewitt, Rt Hon Ms Patricia

  Marshall, Jim (Leicester S)

  118

  Marshall-Andrews, Robert

  Simpson, Alan (Nottingham S)

  Meacher, Rt Hon Michael

  Skinner, Dennis

  Meale, Alan

  Smith, Angela (Basildon)

  Merron, Gillian

  Smith, Rt Hon Chris (Islington S)

  Michael, Rt Hon Alun

  Smith, Geraldine (Morecambe)

  Milburn, Rt Hon Alan

  Smith, Jacqui (Redditch)

  Miller, Andrew

  Smith, John (Glamorgan)

  Mitchell, Austin (Gt Grimsby)

  Smith, Llew (Blaenau Gwent)

  Moffatt, Laura

  Soley, Clive

  Mole, Chris

  Southworth, Helen

  Moran, Margaret

  Spellar, Rt Hon John

  Morgan, Julie

  Squire, Rachel

  Morley, Elliot

  Starkey, Dr Phyllis

  Morris, Rt Hon Estelle

  Steinberg, Gerry

  Mullin, Chris

  Stevenson, George

  Munn, Ms Meg

  Stewart, David (Inverness E)

  Murphy, Jim (Eastwood)

  Stewart, Ian (Eccles)

  Murphy, Rt Hon Paul (Torfaen)

  Stinchcombe, Paul

  Naysmith, Dr Doug

  Stringer, Graham

  Norris, Dan

  Sutcliffe, Gerry

  O'Brien, Bill (Normanton)

  Tami, Mark

  Olner, Bill

  Taylor, Rt Hon Ann (Dewsbury)

  Organ, Diana

  Taylor, David (NW Leics)

  Osborne, Sandra (Ayr)

  Thomas, Gareth (Clwyd W)

  Owen, Albert

  Thomas, Gareth R (Harrow W)

  Pearson, Ian

  Timms, Stephen

  Perham, Linda

  Tipping, Paddy

  Picking, Anne

  Todd, Mark

  Pickthall, Colin

  Touhig, Don

  Pike, Peter

  Trickett, Jon

  Plaskitt James

  Truswell, Paul

  Pond, Chris

  Turner, Dennis (Wolverh'ton SE)

  Pound, Stephen

  Turner, Dr Desmond (Kemptown)

  Prentice, Ms Bridget (Lewisham E)

  Turner, Neil (Wigan)

  Prescott, Rt Hon John

  Twigg, Derek (Halton)

  Primarolo, Dawn

  Tynan, Bill

  Prosser, Gwyn

  Vaz, Keith

  Purchase, Ken

  Vis, Dr Rudi

  Purnell, James

  Walley, Ms Joan

  Quin, Rt Hon Joyce

  Ward, Ms Claire

  Quinn, Lawrie

  Wareing, Robert N

  Rammell, Bill

  Watson, Tom

  Rapson, Syd

  Watts, David

  Reid, Rt Hon Dr John (Hamilton N)

  White, Brian

  Robertson, John (Glasgow Anniesland)

  Whitehead, Dr Alan

  Wicks, Malcolm

  Robinson, Geoffrey (Cov'try NW)

  Williams, Mrs Betty (Conwy)

  Roche, Mrs Barbara

  Winnick, David

  Rooney, Terry

  Winterton, Ms Rosie (Doncaster C)

  Ross, Ernie

  Wood, Mike

  Roy, Frank

  Woolas, Phil

  Ruane, Chris

  Worthington, Tony

  Ruddock, Joan

  Wray, James

  Russell, Ms Christine (Chester)

  Wright, David (Telford)

  Ryan, Joan

  Wright, Tony (Cannock)

  Salter, Martin

  Sedgemore, Brian

  Tellers for the Ayes:

  Sheridan, Jim

  Jim Fitzpatrick and

  Simon, Siôn

  Mr. Fraser Kemp.

  NOES

  Ainsworth, Peter (E Surrey)

  Bottomley, Rt Hon Virginia

  Amess, David

  Brady, Graham

  Ancram, Rt Hon Michael

  Brazier, Julian

  Arbuthnot, Rt Hon James

  Breed, Colin

  Atkinson, Peter (Hexham)

  Brooke, Mrs Annette L

  Bacon, Richard

  Browning, Mrs Angela

  Baker, Norman

  Burnett, John

  Barker, Gregory

  Burns, Simon

  Baron, John

  Burt, Alistair

  Beith, Rt Hon A J

  Cable, Dr Vincent

  Bellingham, Henry

  Calton, Mrs Patsy

  Bercow, John

  Campbell, Gregory (E Lond'y)

  Beresford, Sir Paul

  Campbell, Rt Hon Menzies (NE Fife)

  Boswell, Tim

  Bottomley, Peter (Worthing W)

  Carmichael, Alistair

  119

  Cash, William

  Lilley, Rt Hon Peter

  Chapman, Sir Sydney (Chipping Barnet)

  Llwyd, Elfyn

  Loughton, Tim

  Chope, Christopher

  Luff, Peter

  Clappison, James

  McIntosh, Miss Anne

  Clarke, Rt Hon Kenneth (Rushcliffe)

  MacKay, Rt Hon Andrew

  Maclean, Rt Hon David

  Collins, Tim

  McLoughlin, Patrick

  Conway, Derek

  Malins, Humfrey

  Cormack, Sir Patrick

  Maples, John

  Cotter, Brian

  Mates, Michael

  Cran, James

  May, Mrs Theresa

  Curry, Rt Hon David

  Mercer, Patrick

  Davies, Quentin (Grantham)

  Mitchell, Andrew (Sutton Coldfield)

  Davis, Rt Hon David (Haltemprice)

  Moore, Michael

  Djanogly, Jonathan

  Moss, Malcolm

  Dodds, Nigel

  Murrison, Dr Andrew

  Dorrell, Rt Hon Stephen

  Norman, Archie

  Doughty, Sue

  O'Brien, Stephen (Eddisbury)

  Duncan, Alan (Rutland & Melton)

  Öpik, Lembit

  Duncan, Peter (Galloway)

  Osborne, George (Tatton)

  Duncan Smith, Rt Hon Iain

  Ottaway, Richard

  Evans, Nigel

  Page, Richard

  Ewing, Annabelle

  Paice, James

  Fallon, Michael

  Paterson, Owen

  Field, Mark (Cities of London)

  Portillo, Rt Hon Michael

  Flight, Howard

  Price, Adam

  Forth, Rt Hon Eric

  Prisk, Mark

  Foster, Don (Bath)

  Pugh, Dr John

  Francois, Mark

  Randall, John

  Gale, Roger

  Redwood, Rt Hon John

  Garnier, Edward

  Rendel, David

  George, Andrew (St Ives)

  Robertson, Hugh (Faversham)

  Gibb, Nick

  Robertson, Laurence (Tewk'b'ry)

  Gidley, Sandra

  Robinson, Mrs Iris (Strangford)

  Gray, James

  Roe, Mrs Marion

  Grayling, Chris

  Ruffley, David

  Green, Damian (Ashford)

  Russell, Bob (Colchester)

  Green, Matthew (Ludlow)

  Salmond, Alex

  Greenway, John

  Sanders, Adrian

  Grieve, Dominic

  Sayeed, Jonathan

  Gummer, Rt Hon John

  Selous, Andrew

  Hague, Rt Hon William

  Shepherd, Richard

  Hammond, Philip

  Simmonds, Mark

  Hancock, Mike

  Simpson, Keith (Mid-Norfolk)

  Harris, Dr Evan (Oxford W)

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

  Harvey, Nick

  Smyth, Rev Martin (Belfast S)

  Hawkins, Nick

  Soames, Nicholas

  Hayes, John

  Spelman, Mrs Caroline

  Heald, Oliver

  Spicer, Sir Michael

  Heath, David

  Spink, Bob

  Heathcoat-Amory, Rt Hon David

  Spring, Richard

  Hendry, Charles

  Stanley, Rt Hon Sir John

  Hoban, Mark

  Steen, Anthony

  Hogg, Rt Hon Douglas

  Streeter, Gary

  Holmes, Paul

  Stunell, Andrew

  Horam, John

  Swire, Hugo

  Howard, Rt Hon Michael

  Syms, Robert

  Hunter, Andrew

  Tapsell, Sir Peter

  Jack, Rt Hon Michael

  Taylor, Ian (Esher & Walton)

  Jackson, Robert (Wantage)

  Taylor, John (Solihull)

  Jenkin, Bernard

  Taylor, Sir Teddy

  Johnson, Boris (Henley)

  Thomas, Simon (Ceredigion)

  Key, Robert

  Tredinnick, David

  Kirkbride, Miss Julie

  Trend, Michael

  Kirkwood, Archy

  Turner, Andrew (Isle of Wight)

  Knight, Rt Hon Greg (E Yorkshire)

  Tyler, Paul

  Laing, Mrs Eleanor

  Tyne, Andrew

  Lait, Mrs Jacqui

  Waterson, Nigel

  Lamb, Norman

  Watkinson, Angela

  Lansley, Andrew

  Weir, Michael

  Laws, David

  Whittingdale, John

  Letwin, Oliver

  Widdecombe, Rt Hon Miss Ann

  Lewis, Dr Julian (New Forest E)

  Wiggin, Bill

  Liddell-Grainger, Ian

  Wilkinson, John

  Lidington, David

  Williams, Hywel (Caernarfon)

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  Winterton, Mrs Ann (Congleton)

  Younger-Ross, Richard

  Winterton, Nicholas (Macclesfield)

  Wishart, Pete

  Tellers for the Noes:

  Yeo, Tim

  Mr. David Wilshire and

  Young, Rt Hon Sir George

  Mr. Desmond Swayne.

  Question accordingly agreed to.

  ENTERPRISE BILL [MONEY]
  Queen's recommendation having been signified
  Motion made, and Question put forthwith, pursuant to Standing Order No. 52(1)(a), (Money resolutions and ways and means resolutions in connection with bills),
  That, for the purposes of any Act resulting from the Enterprise Bill, it is expedient to authorize—
  (1) the payment out of money provided by Parliament of
  (a) any expenditure incurred by the Office of Fair Trading, the Secretary of State, any other Minister of the Crown or a Government Department by virtue of the Act;
  (b) any increase attributable to the Act in the sums payable out of money so provided by virtue of any other Act;
  (2) the payment of sums out of the Consolidated Fund into the Insolvency Services Account or the Insolvency Services Investment Account.—[Angela Smith.]
  Question agreed to.

  ENTERPRISE BILL [WAYS AND MEANS]
  Motion made, and Question put forthwith, pursuant to Standing Order No. 52(1)(a), (Money resolutions and ways and means resolutions in connection with bills),
  That, for the purposes of any Act resulting from the Enterprise Bill, it is expedient to authorise—

  (a) the charging of fees; and

  (b) payments into the Consolidated Fund.—[Angela Smith.]

  PETITION

    PRISONERS OF WAR
    10.15 pm
    Fiona Mactaggart: I rise to present the petition of my constituent, Mr. Leslie Allen, the honorary secretary and founder of the National Ex-Prisoner of War Association, and of other ex-prisoners of war who were held in German camps. In the petition, Mr. Allan declares
    "that he was taken prisoner and held captive by Nazi Germany between May 1940 and May 1945; that, during that period, he suffered ill-treatment contrary to the Hague Convention on the Laws and Customs of War on Land; that his fellow petitioners suffered similar ill-treatment during their captivity; that a letter to him from the German embassy, dated 23rd January 2002, acknowledges this fact in stating that 'many prisoners of war were not treated by the Nazi regime in accordance with international law, and as a result suffered damage'.
    That fact is also acknowledged in a letter to me from the Under-Secretary of State for Defence, my hon. Friend the Member for Kirkcaldy (Dr. Moonie), who says that
    "it is accepted that there were cases of deliberate ill-treatment of our servicemen held by the Germans and that during the course of the war, the possibility of subsequent claims against the detaining power was recorded."

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    My hon. Friend goes on to state that the German Government have set up a new scheme to compensate forced labourers and others from concentration camps, but the laws governing that scheme specifically exclude prisoners of war, and no compensation out of the reparations which the allied powers have received has been paid to ex-prisoners of war who were held in German camps in respect of the ill-treatment that they suffered when held prisoner.
    The petitioner therefore requests that
    "the House of Commons urge the Government to review its policy on the compensation of ex-prisoners of war ill-treated in German camps, and to accord them equal treatment with ex-prisoners of war held in Japanese camps"
    who have now received compensation.
    "And the Petitioner remains, etc."
    To lie upon the Table.

  Racing Industry
  Motion made, and Question proposed, That this House do now adjourn.—[Angela Smith.]
  10.18 pm
  Mr. Alan Meale: In recent months, right hon. and hon. Members—along with others in another place—have become aware of disputes and divisions within the racing industry, and subsequently within the sport itself. For those not fortunate enough to be familiar with this very British pastime, there may be the temptation to regard such matters as a little local difficulty, of interest only to wealthy racehorse owners, the tweedy set, rich bookmakers—most of whom are regarded as having short, stubby arms and deep pockets—or, worse still, every mother's nightmare: the compulsive gambler. This debate gives me the opportunity to put the record straight, although not in the case of the bookmakers, of whom that is an apt, commonly used description.
  As long as 15 years ago, I was regularly being verbally bludgeoned by hon. Members, many of them Conservatives, about the definition and status of racing. I say to them again, and to others in the racing industry who chose to remain in their comfortable time warp: yes, horse racing is a sport, but it is primarily a gigantic industry in Britain, and one in which the nation and those who work in it can take great pride. It is also of great economic and social importance to the country.
  The realities of racing today may surprise many. Indeed, on closer examination, even the racehorse owner often turns out not to be what most people would expect. That is because of the heartening development in recent years of syndication, or should I say partnerships of people in large and small groupings who share maintenance costs and ownership of thoroughbred horses.
  That development has enabled enthusiasts from a wide range of socio-economic classes for a comparatively small outlay to share the impecunious pleasure of ownership of a horse whose blood-line may recall classic triumphs. More usually, it enables owners to appreciate the delightful pleasures of countryside retreats such as Ayr, Kelso, Catterick or Lingfield Park, which are all wonderful places.
  I am led to believe that some right hon. and hon. Members in this House and in the other place follow such equine dreams—unfortunately I am not one of them, for the moment at least, although I would never rule out the chance of making such a mistake given the right, or the wrong, opportunity.
  The importance of the racing industry is clear. Collectively, it is the eleventh largest industry in Britain. Some 60,000 people are employed directly in the racing and horse breeding industries, which is the equivalent of one in eight of all agricultural workers in the United Kingdom. What is more, a further 40,000 are employed in the betting sector, which remains dependent on horse racing for the majority of its revenue. In addition, a host of large and small businesses and individuals depend on racing for much of their income, including the transport companies that move the horses of the 523 registered trainers between the 1,200 fixtures and more than 7,000 races held in the UK's 59 turf tracks and three all-weather tracks spread throughout the length and breadth of the

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  country, more of which are in the planning stage. On top of that, more than 5 million people become racegoers every year when they visit a race track meeting.
  To imagine the scale of local business dependency connected with horse racing, we should think also of the hotels, restaurants and bed and breakfast establishments that supply the demand for accommodation at race meetings not just at Ascot or Epsom Downs, but at Redcar, Bristol, Yarmouth, Uttoxeter and many more. The hon. Member for South-West Hertfordshire (Mr. Page) is present. He is the joint chairman of the all-party group on racing and bloodstock, and I wish him well in his endeavours on this important subject.
  The regular audience to such events has witnessed some of the finest feats of horsemanship in the world at the recent national hunt festival in Cheltenham, Gloucestershire, at the grand national meeting at Aintree, Liverpool and at the opening race meeting of the flat season, with the Lincoln meeting held at the Minister's local race track at Doncaster. That is estimated to have brought hundreds of thousands of people to those beautiful but usually sleepy communities. I am not attempting to give the Minister, who is a true Yorkshire lad, the impression that Doncaster is a quiet town, especially at the weekend, but I hope that he gets my point.
  The impact of racing extends to our greater economy through a huge network of subsidiary businesses that supply services as various and as numerous as feed merchants to farriers, vets and vehicle manufacturers. For the media, racing represents a front-line sport, with cumulative television audiences of more than 400 million, which makes it the second most televised sport on terrestrial television after football. It is even more important for the corporate hospitality industry, the main reason being that, whereas football and rugby take a couple of hours, a day at the races is usually just that, with at least a four or five-hour experience for those attending and considerably longer when travel is taken into account, especially as most race courses are situated in rural settings.
  If the racing industry is in a state of war with itself, it is not merely the hobby of a few rich men and women at risk. On the contrary, it is the jobs of tens of thousands of workers in this important industry along with many more who supply it.
  Let us consider those in the media, among whom Clare Balding is a good—or perhaps bad—example. She did a great disservice to the sport. She tried to undermine the new Minister for Sport in his first few hours in the job by turning her interview with him—his first as Minister for Sport—into a pub sports quiz. She probably regarded that as a golden opportunity for herself, but in retrospect it was very silly—indeed, stupid—and about as useful to the industry as some of her so-called expert advice and tips, which she regularly gives to television viewers. She and others in the media should get a life and remember the old racing adage: a beaten favourite is never more popular than before it runs, and never less trusted than afterwards. Thankfully, the Minister is the sort of person who does not hold a grudge, and who will not be brow-beaten or hesitant as a result of such behaviour.
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  Putting that issue aside, something needs to be done quickly, as the war in racing to which I have referred is raging as never before. To some, it might sound strange to hear me say that, as I have a long history of campaigning for a change in racing, and of warring with the likes of the Jockey Club and the bookmaking fraternity in doing so. However, somebody has to attempt to bring order and common sense, before it is too late. It will indeed be too late if no solution is found before 1 May, when betting customers will be robbed of screening races in betting offices. The 47 race courses that control 1,050 of the 1,200 meetings that are screened have decided not to allow those meetings to be shown in betting offices.
  Great strides have recently been made in this place to help racing. That is not usual, although there have been some notable exceptions in previous Governments. In June 1993, under the previous Administration, the Jockey Club handed over the operation of British racing to the British Horseracing Board—a development that the hon. Member for South-West Hertfordshire, who leads for the Opposition on these matters, and I had long campaigned for. Indeed, several of the Members present also engaged in that debate. Although the hand-over was not as comprehensive as I would have liked, it did usher in a change of management and approach that offered a modern dynamism befitting such an important industry.
  I take this opportunity to pay tribute to the then chief steward of the Jockey Club, Lord Hartington—or "Stoker", as I and many others know him—and most of his board, who put their hearts and minds into achieving that important change.
  The issue that the Minister will soon have to address is that the hand-over was only half the trick. The Jockey Club continues to own the majority of the UK's prestigious race courses. Those courses run the best races, most of which are televised, and the majority were purchased through public funds. The value of those publicly funded courses is estimated at hundreds of millions of pounds. Like others, I think that they should be transferred to a new racing trust. Those public funds should have been used for the public's benefit, rather than for that of a small, Jockey Club elite.
  Members will also be aware that, in recent years, a deduction from bets—a tax, as the punters called it—excluding those made on race courses, has contributed some £500 million per annum to the Treasury, and to the financing of racing through the operation of the Horseracing Levy Board. The deduction was subject to negotiations between the betting industry and other elements of the racing industry, led by the British Horseracing Board. As the Minister is now painfully aware, on those occasions when the parties involved could not reach agreement, responsibility for setting the levy passed to the Government. In reality, that was a get-out clause for the industry, allowing it to delay, or avoid, taking a decision. That stupid scenario led the racing side of the industry to arrive at largely gutless non-agreements, to the delight of bookmakers, whose annual strategy was to deny and delay agreements. As one of them honestly and openly admitted to me, "We enjoy the ritual of annual refusals, but we cannot be seen to be getting too carried away. The trick is the negotiations and, of course, the delay." Consequentially, I can tell the Minister that the concept of an agreement in the racing industry has been, if not extinct, certainly an endangered species for many years.

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  Those outdated strategies and system epitomise the lunches of industrial brewers in times now long gone, when they annually paid for their lunches with successive Chancellors who then misled them about the beer duty that they set in their Budgets. In simple terms, as I have said, those outdated and useless practices managed to produce only the most expensive lunches in London for brewers and beer drinkers alike.
  Of course, as the Minister knows, a different approach is needed. By the end of the 20th century, it was apparent to everyone with even a modicum of brain cells that the levy arrangement was quickly becoming unworkable. The Minister is also aware that the proverbial straw broke the camel's back when offshore bookmakers—many of them well known British bookmakers—established themselves overseas and offered British punters easy access to tax-free betting.
  Even more significantly, the internet had arrived and offered a further threat to arrangements and other opportunities to betting customers and bookmakers alike, who saw its potential in the global marketplace. Therefore, with the speed of the available technological development and the imminent arrival of broadband technology, it was a realistic prospect that punters in Malaysia, Moscow or Mansfield would be able to study the form for the 2.30 at Cheltenham, check different bookmakers' prices and current Tote pool odds, place their bets and then watch the race on their laptop computers.
  Thus the strong and aggressive new management under the BHB and its chairman. Peter Savill, had to move quickly to counter the threat, vigorously engage with new developments and stake out its demands for a share of the spoils. I readily pay tribute to him for the work that he and his board have so far done in that regard, but now I appeal to him to go the last mile to keep the industry running. I ask him not to risk an ITV Digital scenario for racing, but to find a solution in the coming days.
  I pay tribute to the Government, particularly the Chancellor, who acted swiftly to aid the industry in several ways, such as ending betting tax, as well as a number of other important measures, all of which helped the industry to adjust. I also pay tribute to my hon. Friend the Member for Knowsley, North and Sefton, East (Mr. Howarth), who is sitting beside me, for the work that he did as a Home Office Minister. Indeed, I pay tribute to his successor. Perhaps more importantly, the Government also recognised that this large and valuable industry had to change fundamentally if it was to move forward as it should.
  I am pleased to say also that the Government were right to say that some of that change had to be addressed not by the Government, but by industry itself. However, at the same time, they also recognised that there are areas of direct Government responsibility that had also to move into the future. I am pleased to admit that, under the guidance of my right hon. Friend the Minister, they are thankfully making progress towards such badly needed change, first, with the Horserace Totalisator Board—the Tote, as it is more generally known—which is the organisation established to provide pool betting at every race course in Britain. It also operates as a commercial bookmaker, with a chain of betting shops, and as active credit business, which is now emerging as a front runner in the international internet betting market.
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  The Tote is very special to all connected with racing, because it exists to service racing itself. As many hon. Members know, the Tote is currently the largest sponsor of racing and its profits are ploughed back in to the sport. Its facilities are not dictated purely by profit considerations alone. Moreover, its provision of high quality computerised betting facilities and smartly staffed Tote points at every racing meeting throughout the year, regardless of location, weather or size of crowd, are part of the service that it provides the sport and form vital parts of the race-going experience.
  In the same way, the Tote's promotion and use of large television screens at race tracks has greatly improved visibility for racegoers and greatly helped to develop the racing experience itself, as well as the use of those facilities in many other sports. Because of that, the Minister and other hon. Members will understand my and many other Members' view that the Tote is, as I have stated, very special and, of course, important to racing. Indeed, I will go much further—it is the mortar that holds together much of the fabric of the sport. It also marks the point at which betting and horse racing are seen most clearly as part of the same industry, rather than as warring interests.
  It is vital for any changes to the Tote's position to be made carefully and sensitively. Nevertheless, changes are needed urgently, and should not be unnecessarily delayed. As the Minister knows only too well, the Tote today is a strange hybrid, operating in the commercial market yet under Government control. Along with many other Members, I believe that running a betting shop is not a proper role for Government; nor is the Tote helped by such an awkward relationship. Indeed, never was such a silly relationship exposed at its worst until other bookmakers moved offshore to avoid betting duty. When that happened it was difficult, indeed nigh impossible, for a Government-controlled organisation to do the same. It is a great credit to the Tote chairman Peter Jones and his senior executives that they kept the organisation competitive in such circumstances.
  At other times when the Tote has wanted to raise money in the financial markets to invest in its growth, its hybrid status has proved to be a stumbling block. I know, of course, that the Government and indeed the Minister have recognised that change is needed, and that the Government have announced that the Tote will in the near future be privatised by its transfer to an independent trust. I use the word "transfer" rather than the word "sale". I can tell the Minister that the racing world in general has warmly welcomed the decision, but I must also tell him that care is needed in the fulfilment of the task.
  It is vital for the Tote to continue to serve and benefit racing. To achieve that, it must be truly independent. It must be out of the Government's clutches, and not controlled by the commercial betting industry or other racing bodies whose views may be either sectional or subject to mood or their interests at any particular time. I believe that the Tote should be a trust, but should not become simply a milch cow of convenience. There should be a close relationship, yes; but it should not be so close that damaging issues or conflicts of interests prevail.
  The Tote is, in the main, a bookmaking business. As such it must be allowed to compete with other businesses in the betting sector, with the ultimate aim of continuing to support racing. Bodies such as the British Horseracing Board may take a different view, but herein lies the

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  conflict. I hope the Minister recognises that if the BHB controlled the Tote, it would be within its power to benefit from, or to disadvantage, the operations of individual bookmaking businesses.
  Although I have never been known to be a friend of this sector of the industry, most people who know me are aware of my belief that choice is of paramount importance to the British betting public. Currently, it is not available to customers in France and elsewhere. In saying that, I question neither the professionalism nor the probity of the BHB and its management. I think it imperative that their administration or regulatory role should never be compromised in any way, even by the suspicion of bias that direct engagement or amalgamation might cause.
  Until last year the Tote and the sport of racing in general, like policing and penal policy, were controlled by the Home Office. Thankfully, the Government have recognised that racing is neither a sin nor a crime, and that—along with other sports—it should be subject to the sensible guidance of the Minister. That move has been welcomed by all sections of the industry. I therefore ask the Minister again to continue his efforts to get the industry to manage itself, to protect the Tote's special status in racing, and—last but not least—not to succumb to the threats and innuendos of bookmakers and others who have tried to continue their previously tested practices of kidology, brinkmanship and bullying in order to get their way, most recently with a Labour Government and with the Minister himself.
  I congratulate the Minister on the businesslike approach that he has adopted so far. What I hope will come next is action that will help a peace process to deliver the Tote to a racing trust without compromise, and without accusations of favour being levied by one side or the other. I wish the Minister well, and good speed for his efforts.
  10.39 pm
  The Minister for Sport (Mr. Richard Caborn): I congratulate my hon. Friend the Member for Mansfield (Mr. Meale) on obtaining the debate. Many hon. Members know that he has long been a friend of the industry and that he takes an interest in the subject. Hon. Members who are present also take an interest in that industry and represent various facets of it.
  We are in one of the most crucial periods in the history of horse racing in this country, and my hon. Friend outlined some of the reasons for that. The debate is therefore timely and gives us a chance to recognise the importance of racing to the economy and to consider some of the challenges and opportunities that it faces. The most important is its future funding, which my hon. Friend mentioned.
  Perhaps for too long, racing has relied on the statutory levy. I hope that it is well established that the Government believe that such a levy is no longer needed. That rightly places the responsibility for funding squarely on the racing industry and those whose businesses depend on its success. I am therefore heartened that it has become widely accepted in recent months that racing and bookmakers should regard each other as business partners rather than traditional foes. Meaningful discussions are now taking place and I shall be disappointed if they do not reach a successful conclusion in the not-too-distant future.
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  I believe that there are people of genuine ability on both sides of the negotiations. Despite some of the recent megaphone diplomacy, which has blighted relationships to some extent, there is a recognition that they need each other. Both industries' perception of each other will not change overnight; it will evolve and shared initiatives and partnerships will develop. If the industries work together, they will prosper.
  It is encouraging that a deal for the sale of pre-race data is in sight. My hon. Friend referred to that. Doubtless both sides have made concessions, which will be needed throughout the process. I urge everyone to maintain the flexibility that has been required to get the recent negotiations to the current point. I hope that such a flexible approach can be adopted for the last mile. I have always believed that there was a deal to be done and I hope that I am right for the sake of the industry.
  I expect the bookmakers to reconsider whether it is in their interests to pursue their outstanding legal action against the Government on state aid. It would be nice to believe that a settlement between racing and betting would be taken into account by other agencies that are currently examining both industries. I believe that such agencies should consider the maturity that has been shown in reaching a deal of the sort that we believe is under discussion for the fundamental change that my hon. Friend outlined.
  Of course, the negotiation is properly commercial, and the Government cannot play a direct role in it. However, it would be fair to say that we have played our part in creating the environment in which a deal can be done. Through a changed tax regime, the Government have given the betting industry a boost. That benefit will be shared with the racing industry, as we wanted. We are in the enviable position of having two important industries that should do better financially in future than in the recent past. By any standards, that should count as a success.
  For the first time, bookmakers are being asked to pay a commercial price for the racing product. I understand that separate negotiations will take place for the sale of the picture rights. Let us hope that they will be quickly resolved so that racing will continue to be televised throughout Britain's betting offices after 1 May when the current contract expires.
  The Tote is another, albeit less significant, source of finance for racing. I should like to restate the Government's position on its future. I take on board what my hon. Friend said earlier, but our preference continues to be that we sell the Tote into a consortium of racing interests. A model of the consortium and of the way in which it would acquire the Tote was put forward jointly by the BHB and the Tote's management. As long as circumstances do not change markedly, there will be no need for us to revisit our planned strategy.
  The recent disagreement between the Tote and the BHB about the sale of racing's media rights was unfortunate, and was made all the worse by its public nature. Although this has understandably raised some concerns about future relations between these two bodies, it is important to make it clear that this episode has not caused us to reconsider our plans for the Tote.
  I have talked so far about the importance of funding for the racing industry, whether it comes from commercial payments, the levy or the Tote. When we all get caught

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  up in the machinations surrounding these issues, it is vital that we do not forget why continued funding on such a scale is needed. Again, I pay tribute to my hon. Friend for the way in which he described the industry, and its importance to the many thousands of people who rely on it for their livelihoods.
  The sport of racing in this country has a rich history and, I have no doubt, an equally rich future. That future, though, must be built on firm foundations. That means that it must have the funding to attract the best horses and to provide the best facilities at race courses, but also that it must have the money to invest in the grassroots staff upon whom the whole industry depends.
  In many rural areas, horse racing is one of the main employers, and we should never forget the role that it plays in local economies and local communities. Largely as a result of changes to the tax regime covering them, bookmakers will be paying more to racing than ever before. There can be no excuse if these additional funds do not also contribute to improved pay and conditions for stable staff.
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  It is to be hoped that that would be one way of addressing the problem of poor staff retention rates. Another way might be to put more resources into the training of people at all levels in the industry. This is an area in which I have previously expressed an interest, and one that I will continue to keep a close eye on.
  The racing industry is now the responsibility of the Department for Culture, Media and Sport. I had not long been Minister for Sport when Clare Balding interviewed me, as my hon. Friend noted, and asked whether I knew which horses were running at a meeting. I am running a half marathon in two or three weeks' time, and I invited 70 journalists to join me. They told me how good they were at writing, and I said that they write the write, I talk the talk and we all should run the run. Unfortunately, only seven—
  The motion having been made after Ten o'clock, and the debate having continued for half an hour, MR. SPEAKER adjourned the House without Question put, pursuant to the Standing Order.
  Adjourned at twelve minutes to Eleven o'clock.