Commons Sitting of 14 July 2004

Preamble
The House met at half–past Eleven o'clock
PRAYERS
[MR. SPEAKER in the Chair]
PRAYERS

  REVIEW OF INTELLIGENCE ON WEAPONS OF MASS DESTRUCTION
  Resolved,
  That there be laid before this House a Return of the Report of the Review of Intelligence on Weapons of Mass Destruction.—[Ms Bridget Prentice.]

  REVIEW OF INTELLIGENCE ON WEAPONS OF MASS DESTRUCTION
    Speaker's Statement
    Mr. Speaker: Right hon. and hon. Members will be aware that Lord Butler is due to publish his review of intelligence on weapons of mass destruction later this morning. I am aware of the considerable interest in Lord Butler's findings. In these exceptional circumstances, I have agreed that the Prime Minister will make a statement on this matter this afternoon. The statement will take place at 1.30 pm.
Oral Answers to Questions
  INTERNATIONAL DEVELOPMENT
  The Secretary of State was asked—
  INTERNATIONAL DEVELOPMENT

    Forestry Projects
    Mr. Graham Allen: Pursuant to his oral answer of 16 June 2004, Official Report, columns 758–9, on debt swaps, what progress has been made by the continuing forestry projects to which he referred.[183716]
    The Parliamentary Under-Secretary of State for International Development (Mr. Gareth Thomas): The Indigenous Peoples' Project has approved funding for about 30 projects promoting land demarcation and sustainable development in the Brazilian rain forest. In addition, the project seeks to support a number of indigenous movements and their leaders to be better able to articulate, defend and promote the rights of their peoples. Further support has been provided for the strengthening of the umbrella organisation for the indigenous people of the whole of the Brazilian Amazon.
    Mr. Allen: Is my hon. Friend aware that the Commonwealth Development Corporation, which is heavily involved in forestry, is being accused by native peoples in Papua New Guinea and Indonesia of driving
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    deforestation? Is he also aware that the central point of expertise that was established to fulfil the Government's promise of legal and sustainable sources for all timber coming into this country is neither adequately funded nor fully up and running, four years after that promise was made? Will my hon. Friend undertake to write to me on those two detailed questions, so that we can ensure that the UK purchases timber only from legal and sustainable sources?
    Mr. Thomas: I am happy to write to my hon. Friend, as he requests, with detailed answers to the specific questions he raises. However, I can reassure him on the question of illegal logging. The UK has been at the forefront of a series of efforts across the continents to tackle the issue of illegal logging. For example, we have committed to a new programme of work on forest governance and trade in west and central Africa, following the ministerial conference that I attended last year, and we have led the debate in Europe on how we can ensure that traders bringing timber into Europe can verify that their supplies have not been logged illegally. We expect that the regulation to achieve that will shortly be brought before the EU College of Commissioners.

    Maghreb
    Mr. Gordon Marsden: What assistance his Department is giving to the development of (a) civil society and (b) women's rights in the countries of the Maghreb. [183719]
    The Parliamentary Under-Secretary of State for International Development (Mr. Gareth Thomas): DFID does not have any bilateral programmes in the Maghreb region. However, working with colleagues at the Foreign and Commonwealth Office, we have successfully encouraged the EU through its MEDA programme to use its resources to assist civil society organisations and to promote women's rights. In addition, the FCO's global opportunities fund supports a number of projects in the Maghreb region that seek to increase the participation of women and promote good governance.
    Mr. Marsden: I thank my hon. Friend for that reply. This is a critical and opportune time for north Africa and the countries of the Maghreb. I had the privilege of chairing a conference with their Foreign Ministers here two or three weeks ago, and the emphasis was on the building up of civil society and, especially, the extension of women's rights, to which Baroness Symons referred. Will my hon. Friend work closely with his colleagues in the Foreign and Commonwealth Office to promote and develop our relations with the Maghreb? Those countries should not be seen as only within the French sphere of influence: they are keen to have support and encouragement for civil society projects and women's rights from Britain.
    Mr. Thomas: I congratulate my hon. Friend on chairing and initiating the conference to which he referred and on his work on the issue over a long period of time. As he may be aware, a series of donors already provide substantial aid in the Maghreb region. The Commission, for example, provides some €700 million

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    to the middle east and Africa and a further €30 million to Mauritania. I can give a specific example to offer my hon. Friend encouragement that the type of work he wants to see is happening. In Mauritania, about €10 million have been set aside to build up the capacity of civil society organisations and to promote human rights. Clearly, more is needed and the European Commission, at the most recent Council of Ministers, made a commitment to do just that.

    Sudan
    Mr. John MacDougall: If he will make a statement on action the Government are taking to prevent a humanitarian disaster in Darfur province in Sudan. [183720]
    Mr. Richard Bacon: What recent representations he has received regarding the humanitarian situation in Sudan. [183721]
    The Secretaryuof State for International Development (Hilary Benn): The humanitarian situation in Darfur, western Sudan, is of the gravest concern and the need for food, water and shelter is enormous. Civilian protection is also a major concern, with reports of systematic attacks. With our EU partners, we have made it clear that all alleged attacks should be thoroughly investigated and the perpetrators brought to justice.
    The UK has now allocated £62.5 million for humanitarian aid, which will include an additional £28 million for this year, as I announced yesterday. We are in daily contact with the Sudanese Government, nongovernmental organisations and UN agencies both to ensure that humanitarian relief gets to those in need and to seek to improve security for the long-suffering people of Darfur.
    Mr. MacDougall: I am grateful to my right hon. Friend for that response and I am pleased to hear his comments about the progress that has been achieved. Does he agree, however, that there are still significant gaps in humanitarian assistance and supplies to the camps, and that despite all the good work progress remains to be made? Can he comment on that?
    Hilary Benn: My hon. Friend is entirely right, although I can tell the House that the UN reports significant progress on humanitarian access and on the removal of the constraints that aid agencies have faced. There are now 31 NGOs registered in Darfur, including most recently World Vision International, which has expressed thanks to the UK for our help in getting its registration through. That enabled the organisation to send two airlifts to the region last Sunday, but the needs remain enormous. Time is very, very short and although there are now 300 international humanitarian staff in Darfur, the UN estimates that 1,000 are needed, so we must continue the effort to ensure that help gets to the people who need it.
    Mr. Bacon: Given the intense diplomatic activity of the Government and the UN Security Council in relation to Iraq, were we not entitled to expect more intense activity and pressure from the Government and
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    the Security Council in relation to what is going on in western Sudan? When can we expect a robust UN Security Council resolution on the issue?
    Hilary Benn: The UK has been vigorous both through the diplomatic channel and through the humanitarian work that I have just described. The hon. Gentleman will be aware of the reference to Sudan in the Security Council resolution passed in June and, I hope, of the resolution passed by the African Union at its summit last week, which was extremely significant and made clear the concern of the countries of Africa about what is happening. Like the United States and others, we have told the Government of Sudan that if there is not rapid progress in delivering the commitments that they have entered into—not just on improving access for humanitarian aid, but on ensuring security, which is the cause of the crisis—we shall have to return to the Security Council to take further measures, because if that is what is needed to protect the people of Darfur, that is what we shall do.
    Mr. Tom Clarke: I welcome the increased aid that my right hon. Friend announced this week, as well as the additional £150 million over the next three years that the Chancellor announced on Monday. Will my right hon. Friend continue to be resolute with the regime in Sudan to ensure that there is an infrastructure, so that aid can be delivered, and especially so that trucks are allowed access to those who desperately need what we want to provide?
    Hilary Benn: I am happy to give my right hon. Friend that assurance. He rightly refers not only to the additional aid that we have been able to give for the humanitarian crisis, but also to the aid framework that we want to put into development in Sudan when there is peace—not just peace as a result of the Naivasha process but peace in Darfur. That is a product of the generous increase in the UK aid budget that the Chancellor announced on Monday. My right hon. Friend is also right to note that real obstacles remain, including shortages of aviation fuel and diesel for the airlifts and of the trucking required to get help to the people who need it. We have to address each and every one of those problems with vigour and speed if we are to get help to the people who need it.
    Mr. Robert Key: Please will the Secretary of State tell us what progress has been made in the application of satellite technology to provide security and humanitarian aid in the area?
    Hilary Benn: The hon. Gentleman raised that issue with me when I made my statement. Yesterday, I looked at a report that Amnesty International has produced that does indeed use satellite technology to identify the villages that have been attacked. I shall, as promised, write to him shortly with further information on that subject. That demonstrates how satellite technology can assist, and the other issue that I will raise with the AU ceasefire monitors is precisely the extent to which they may be able to use it to aid them in the task. There are now 30 monitors in Darfur. They have already

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    undertaken four investigations. They have access to three helicopters, and it is important that we continue to support them in deploying as quickly as possible.
    Mr. Malcolm Savidge: Will my right hon. Friend expand on the UN's current and prospective involvement in Darfur?
    Hilary Benn: The UN agencies have been present for quite some time. As I have said in the House previously, they were in the past, frankly, slow in responding to the scale of the crisis. The situation has improved since first Kevin Kennedy arrived for three weeks, and now Eric Damor has been appointed as the acting resident coordinator. Next week, I will talk to Carol Bellamy of UNICEF and Jan Egeland, the UN emergency relief coordinator. I have also had conversations with Jim Morris of the World Food Programme. What is required now is for all the agencies—the UN, the
    international NGOs and financial support from the international community—to come together to exert maximum effort to ensure that the relief that is needed gets past the obstacles, including the security problems that the UN and other agencies continue to face.
    Mr. John Bercow: Given the harrowing plight of those in the internally displaced people's camps in Darfur, which I saw for myself only two weeks ago, what representations has the Secretary of State made to the Government of Sudan about reports that local authorities are still demanding travel permits in some areas? Does he accept that Khartoum's 90-day registration plan makes many NGOs reluctant to increase their asset bases because they simply do not know whether their permits will be renewed?
    Hilary Benn: I am, of course, aware of the problem to which the hon. Gentleman refers. Overall, the reports that we have had—I spoke to our ambassador in Khartoum this morning—show significant improvements in humanitarian access, but the hon. Gentleman is right to draw attention to the continuing difficulties with the local interpretation of travel permits, and we continue to pursue that issue regularly with the Government of Sudan. I am also aware of the problem that he identifies about 90-day registration. We take things a stage at a time, and as we have got that 90-day registration window, he can rest assured that I will continue to do all that I can to ensure that, having got in the NGOs and given that the crisis will last for a very long time, they are able to stay.
    Mr. Bercow: I am grateful to the right hon. Gentleman for that reply. Obviously, humanitarian improvement and sustainable peace are inextricably linked to each other. Further to the inquiry made by my hon. Friend the Member for South Norfolk (Mr. Bacon), will the Secretary of State tell the House what, if any, objection the Government have to the passage now of a tougher UN Security Council resolution that condemns unequivocally the Sudan Government for human rights abuses and demands that the abuses be internationally investigated, that the ceasefire and human rights monitors be vastly increased in number, that an assurance be given that people will not be forced to go home until it is safe to do so and that all the militias
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    will be disbanded immediately, failing which a robust UN sanctions regime will be applied within weeks and a UN protection force deployed before we see in Darfur a replay of the human horrors experienced in Rwanda.
    Hilary Benn: The words "failing which" that the hon. Gentleman used are the key to the progress. The Government of Sudan have given commitments on security, so it is right and proper that they should be given a chance—they have a short time—to deliver on those commitments in exactly the same way as we gave them a period to deliver on their commitments on humanitarian assistance, on which we are now seeing progress. That progress is unquestionably the result of international pressure. If the Government of Sudan fail to honour the commitments that they have given on security—to disarm the Janjaweed militia and to send in the police forces that they have promised—we will not hesitate to return to the Security Council to continue to apply pressure to ensure that there is further progress.
    Tony Lloyd: My right hon. Friend is absolutely right to emphasise the fact that security is at the centre of delivering humanitarian aid and making a difference. Does he appreciate that the Opposition's request for a clear and tough line would be supported by Labour Members and the Government? It is important that Khartoum is left in no doubt that the international community demands that it not only dissociates itself from the paramilitaries, but makes it clear that it will bring those engaged to justice. There is a suspicion that Khartoum will use weasel words yet continue to support those people unless the international community is resolute in its view and takes action.
    Hilary Benn: I recognise the strength of feeling on both sides of the House, not least because I share it. My hon. Friend can rest assured that the Government are doing precisely what he is asking for. We have been playing a leading role in putting pressure on the Government of Sudan, as my conversation with Sudanese Government Ministers demonstrates. I assure my hon. Friend that we will continue to do that because it is the key to progress, which is what the people of Darfur need.
    Tom Brake: Does the Secretary of State agree that humanitarian aid will have been effective only if the refugees feel safe enough to return to their homes? How many Janjaweed have been charged and how many have been disarmed? How many weapons have been collected, and what safeguards are in place to ensure that the Janjaweed—who I understand are being incorporated into the police—will not simply carry on harassing the refugees?
    Hilary Benn: On the hon. Gentleman's latter point, we have made it clear to the Government of Sudan that the refugees' sense of security will not be increased if, as one person put it to me when I visited Darfur, the Janjaweed return with police officers' badges on their chests. The Government of Sudan are sending police from other parts of the country to Darfur because they realise the force of that argument.
    Some reports suggest that attacks from the Janjaweed militia are declining in some parts of Darfur, but other reports indicate that there is increased conflict between the Government and the rebels. Some of the vital access roads that are needed to deliver humanitarian supplies are currently blocked, which is being monitored on a daily basis. We need to see indications of progress, which explains why the AU ceasefire monitoring force is important. With the helicopters that it now has, it can investigate incidents and report back to the whole of the international community on the steps that the Government of Sudan need to take to improve security.
    David Taylor: I heard the Secretary of State say that he is having discussions with UNICEF. Will he include on the agenda an update on the appeal that it launched only last month for £25 million, which will help the displaced communities in Darfur and Sudanese refugees in Chad, especially the thousands of children who are at risk of dying from entirely preventable diseases such as malaria and measles, and conditions such as diarrheea? Will he help UNICEF to reach its targets?
    Hilary Benn: I certainly will raise those issues during my discussions with Carol Bellamy next week. I can tell my hon. Friend that despite the coverage of the measles vaccination campaign, there are reports of outbreaks of measles. A further mop–up vaccination programme is planned. We are able to support UNICEF and other agencies because we have a rising aid budget—the UK is now the largest cash donor to the humanitarian situation in Darfur. That situation is in sharp contrast to Opposition calls for the budget to be cut.

    Zimbabwe
    Mr. Henry Bellingham: When he next expects to meet representatives of aid agencies to discuss ways of ensuring that aid to Zimbabwe reaches the poorer districts. [183722]
    The Secretary of State for International Development (Hilary Benn): I discussed humanitarian needs in Zimbabwe with the head of the World Food Programme earlier this month, and we are in regular contact with other UN agencies, major donors and non-governmental organisations. Recent Government claims of a bumper harvest are simply not credible. If large amounts of food aid are needed later in the year. UN agencies have warned that the international response could be delayed until there is more openness and co-operation with the UN. The Department for International Development and other agencies will continue to provide targeted help to the most vulnerable districts and sections of Zimbabwean society, including people affected by HIV/AIDS and vulnerable children.
    Mr. Bellingham: I am grateful for that reply, but there is now overwhelming evidence that Mugabe and ZANU-PF, having destroyed their own agricultural sector, are preventing food from getting through to the poorest communities. Surely more can be done to supervise the distribution of food, or this evil dictator will have succeeded in his strategy of getting re-elected on the back of systematically starving the Opposition.
    Hilary Benn: I share the hon. Gentleman's concern about the situation in Zimbabwe. He will be aware that
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    the Government of Zimbabwe predict a 600,000 metric tonnes maize surplus We do not agree with that. The international assessment is that there will be an 800,000 metric tonnes shortfall. It is the people of Zimbabwe who will pay the price, as he just said, for their Government getting it wrong. We retain the procedures that we have in place to ensure that the food aid that the international community gives is not used for political purposes, but none of us controls the distribution mechanism run by the, Government of Zimbabwe.
    Mr. Bill Olner: Can the Minister tell the House just how robust the intelligence is about the situation in Zimbabwe? It is essential that food gets through to the poorest people and is not used as a political weapon by ZANU-PF. Are we enlisting the agencies in South Africa to assist in gaining that robust intelligence?
    Hilary Benn: I agree about the importance of having access to reliable information about what is going on. That is not helped by the fact that both the crop and food assessment surveys were cancelled by the Government of Zimbabwe—one can only assume because they do not want to know the real position. However, our estimates are based on the best intelligence and information available.
    We continue to provide help to the poorest households—those that are suffering greatly. We are also running a clinic-based feeding programme for the under-fives, to help those who are most affected.
    Mr. Julian Brazier: Through the Government's investigation, they have accepted that the Mugabe regime stole a great deal of aid in the past. Will the Minister also accept that aid workers in Movement for Democratic Change areas have been attacked and food distribution centres forcibly closed, and that ZANU-PF is delivering food to its supporters? Given that most of Zimbabwe's close neighbours are heavy recipients of aid from this country, when will the Government put some real pressure on them to assist us in getting Zimbabwe out of the dark ages? [Interruption.]
    Mr. Speaker: Order. The House must come to order.
    Hilary Benn: The hon. Gentleman will be aware that the United Kingdom Government have been very strong in their condemnation of what is going on and very robust in their conversations with Zimbabwe's south African neighbours about the steps that they need to take to bring the current intolerable situation to an end. In that respect, I welcome what Kofi Annan said to the AU summit last week. I also welcome the summary of the fact-finding mission to Zimbabwe, carried out by the African Commission on Human and Peoples Rights, which speaks openly about the testimony it received
    "from witnesses who were victims of political violence and other victims of torture while in police custody. There was evidence that the system of arbitrary arrests took place."
    It is a welcome sign that the African Union is beginning to take responsibility for the action required to bring an end to the suffering of the people of Zimbabwe.

    Renewable Energy
    Lynne Jones: What his policy is on the encouragement of renewable energy technologies in developing countries. [183723]
    The Parliamentary Under-Secretary of State for International Development (Mr. Gareth Thomas): We work alongside a variety of agencies, including the World Bank and the European Union, to promote better access in developing countries to affordable and reliable energy services, including renewable energy, especially to the very poorest and those living in remote and rural areas.
    Lynne Jones: Solar voltaics are close to commercial viability in areas that are not connected to an electricity grid. Will the Government do more, both here and abroad, to support solar energy, because increased demand has been shown to be the best way of reducing costs? That would help more people in developing countries to enjoy improved energy supplies without adding to the demand for fossil fuels.
    Mr. Thomas: My hon. Friend is right. Solar voltaics have the potential of offering many of those who live in very rural areas—often the poorest people in developing countries—access to energy. We want to persuade the World Bank to go further than its commitment at the Bonn renewables conference, where it said that it would seek to increase funding for renewables by 20 per cent. in each of the next five years to some $400 million by 2010. It is starting from a low base. We want it to go a little further, but its statement at the Bonn conference was positive.
    Hywel Williams: Does the Minister agree that it would be beneficial for developing countries to take advantage of developments at centres of excellence such as the Centre for Alternative Technology at Machynlleth in Wales? What are the Government doing to assist that?
    Mr. Thomas: I have visited the excellent centre to which my hon. Friend referred and, after questions, I will reflect on the opportunities for developing countries to take advantage of such expertise.

  The Prime Minister was asked—
  PRIME MINISTER

    Engagements
    Ql. [183733] Tony Wright: If he will list his official engagements for Wednesday 14 July.
    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 will have further such meetings later today.
    Tony Wright: Amidst all the Prime Minister's preoccupations today, could I ask him about the elections? In just four months' time, the people of the United States may well elect a new Administration. Will he stand shoulder to shoulder with a new American Administration on climate change, the middle east and renewing the coalition against terror?
    The Prime Minister: I will always make sure that this country remains a strong ally of the United States of America. As I said at the last Prime Minister's questions, it is not wise for me to intrude on the American elections, but I shall simply say to my hon. Friend that the alliance with the United States of America, however criticised from time to time, is a bedrock of this country's security. We should support it and be proud of it. In particular, I am proud of the part that we have played in sustaining it over the past few years.
    Mr. Michael Howard: Last weekend, the Health Secretary described hospital cleanliness as a new challenge, but in the Government's last NHS plan four years ago, they promised to tackle exactly the same problem. How have they done on the MRSA—methicillin-resistant Staphylococcus aureus—super–bug since then?
    The Prime Minister: As the Health Secretary accepted, it is indeed a serious problem, which we have been tackling and must continue to tackle, as the National Audit Office report makes clear. I shall. however, read out one or two figures, as there has been discussion of our rate of infection and how much worse is it is than that in other European countries. In fact, the rate of hospital-acquired infection is 9 per cent. in England, compared with 7 per cent. in the Netherlands, 8 per cent. in Spain and Denmark, and between 6 and 10 per cent. in France. It is a serious problem, but we are not the only country to have it, and we are working very hard to eradicate it.
    Mr. Howard: I do not think that those figures will give much comfort to people suffering from those infections or the families of the 5,000 people a year who die from them. Since the Government took office, the number of deaths from the MRSA super-bug has doubled, and today the NAO states that four years after its original report on the subject, the NHS still does not even have
    "a proper grasp of the extent and cost of hospital-acquired infection".
    Why not?
    The Prime Minister: The right hon. and learned Gentleman should acknowledge that in fact the NAO says that there has been significant progress in dealing with the issue, but he is right that we still have a great deal to do to get proper information. I would point out, however, that until we came to office, there was no mandatory reporting at all. Indeed, it was introduced by the Government three years ago, precisely because we recognised that that was a problem. With respect, that

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    is why we should treat with a great deal of caution the comparisons that the right hon. and learned Gentleman made with 1997.
    Mr. Howard: Perhaps the Prime Minister will treat with less caution something that the NHS chief executive admitted this morning—Government targets have made dealing with the super-bug "more difficult". Does he accept that Government policy has actually made matters worse?
    The Prime Minister: No, I do not, but I accept that we need to make sure that we have the proper capacity in our NHS, because the higher the level of capacity, the easier it is to have isolation wards and so on. The Government are increasing that capacity in the NHS, and the Opposition voted against every penny of that extra investment.
    Linda Gilroy: I hope the Prime Minister would agree that a community safety partnership—a crime and disorder reduction partnership—that has delivered a reduction of more than 50 per cent. in vehicle crime and a reduction of more than 70 per cent. in domestic burglary since it was set up deserves to be congratulated. Does he also welcome, as I do, the fact that there have been days in Plymouth recently when there have been no domestic burglaries—in a city of 250,000 people? Will he go on with our right hon. Friends the Chancellor and the Home Secretary to ensure that the resources and the appropriate targets to deliver that can continue?
    The Prime Minister: I am delighted with that good news from Plymouth, though we must be careful to state that we do not encourage criminals. It is important to recognise that there have been substantial falls in burglary. The crime rate is, however, still too high and although it has come down, we need to see it come down further. I am sure my hon. Friend is right to say that the combination of record numbers of police, now to be joined by community support officers, plus the changes in the criminal justice system, and in particular the measures in relation to the mandatory drug testing of people when they are arrested for certain categories of offence and the action on antisocial behaviour, are a very important part of cracking down on crime. That is why I am so sorry that the Liberal Democrats opposed all those measures in Parliament.
    Mr. Charles Kennedy: I thank the Prime Minister for that characteristic welcome. Returning to the National Audit Office report, what does he say to its finding that 50 per cent. of health service trusts said that they find the Government's drive to meet performance targets inconsistent with infection control? Does he accept that finding from the NAO on behalf of the trusts?
    The Prime Minister: I accept that as we try to get more people treated and get people treated faster in the national health service that puts pressure on the system. But as I said to the right hon. and learned Member for Folkestone and Hythe (Mr. Howard), in my view it is important that we have performance targets for hospitals. It is important that we make sure that we are
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    bringing down waiting lists and waiting times, as we are. We have said that MRSA is a serious problem and we are committed to tackling it, but let that not obliterate the huge progress that is now being made by NHS staff in the national health service.
    Mr. Kennedy: It is significant that the Prime Minister has said that he accepts what the trusts are saying—that his targets are skewing their ability to deal with infection control. Why does it take seven years of a Labour Government and the problem getting worse and worse for the governmental response at the weekend to be simply to set yet another target? Surely cleanliness in our hospitals should not be a target: it should be taken as read by the patients when they enter the front door.
    The Prime Minister: We are not saying that the answer is simply to set another target. We are taking action to try and make sure that the rate of infection is reduced. We must be careful that we do not misunderstand the position in that regard. We are taking action. The problem is serious, but it will not be made any better by extending the length of waiting times and waiting lists. We are expanding capacity in the national health service and making reforms. When we speak of MRSA, let me remind the right hon. Gentleman that the NHS treats about 1 million people every 36 hours. The vast majority of those people are treated excellently within the NHS.
    Dr. Howard Stoate: I have recently seen two patients whom I suspected of having cancer, both of whom have been seen, investigated and had planned treatment within one week of my decision to refer them. That is a target that my patients are extremely grateful to have. The huge improvement in the health service will be sustained only if the Government continue to put in the resources that we need for meaningful reform. Can my right hon. Friend say how we can sustain the improvement to make sure that performance gets even better?
    The Prime Minister: We will pursue the reforms inside the national health service. The other important aspect is that we make sure that every single penny piece of the money going into the NHS stays with the NHS. We do not want to see a large subvention to those using private health care, which takes that money out of the national health service.
    Mr. Howard: Can the Prime Minister tell us what assumptions his Chancellor has made about increases in council tax over the next three years?
    The Prime Minister: There are no predictions on council tax, because the figure is an average of the past five years' figures. Last year, the actual amount catered for in the spending review did not result in the expected council tax rise. This year's council tax rise is less than 5 per cent. in Labour areas, more than 5 per cent. in

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    Conservative areas and more than 6 per cent. in Liberal Democrat areas.
    Mr. Howard: I am sorry that the Chancellor is not here to make sure that the Prime Minister is a bit better informed—he is probably still trying to decide whether to come and support the Prime Minister during the statement in an hour's time. Let me tell the Prime Minister the answer: the Chancellor is counting on council tax going up by 18 per cent.—almost one fifth—over the next three years, which, to take two councils entirely at random, would add £135 to the typical band A bill in Birmingham and £140 to the typical bill in Leicester. Last year, the Minister for Local and Regional Government said that council tax was very near "the limit of acceptability ", so why is the Chancellor planning those further huge increases?
    The Prime Minister: He is not, for the very reason that I have just given.
    On the basis discussed by the right hon. and learned Gentleman, we should have had council tax rises of more than 8 per cent. last year, but the average was less than 6 per cent., for the precise reason that I have just given him. Average council tax rises are, of course, lower in Labour areas than in Conservative areas. The other interesting point concerns the right hon. and learned Gentleman's shadow Chancellor. [HON. MEMBERS: "Where is he?"] Perhaps the Chancellor and the shadow Chancellor are having a conversation together. His shadow Chancellor said that he would freeze the local government budget in cash terms. [Interruption.] There is no point in the right hon. arid learned Gentleman shaking his head, because that is what the shadow Chancellor said. That freeze would result in a cut of £4.8 billion to the local government budget. What would that do to council tax?
    Mr. Howard: It is interesting that the Prime Minister wants to trade council tax increases in Labour-controlled councils and Conservative-controlled councils, because the highest rate of council tax in the whole country is in Sedgefield, which has a Labour district council, a Labour county council and him as its Member of Parliament. Since he came to office, that council tax has increased by 70 per cent.—three times the rate of inflation. That is a rise of almost £500 for a band D household. The Prime Minister told people that there would be no excessive council tax rises under Labour. Is that not yet another example of his saying one thing and doing another?
    The Prime Minister: The right hon. and learned Gentleman is wrong—the average council tax in Sedgefield is way below the highest in the country. Furthermore, the Conservatives keep using the band that includes only 10 per cent. of the properties in Sedgefield—90 per cent. of the properties are not in the band to which he is referring. It is typical of the Tories always to focus on 10 per cent., not 90 per cent.
    In respect of council tax, it is true that there have been rises that we found unacceptable, which is why we took action and got them down this year. We have been increasing the money that we give to local government, which can use it on services. We have not had an answer to this question: if, as the right hon. and learned
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    Gentleman says, council tax is too high, how on earth would cutting the budget to local government make it lower? It would make it higher, and I should have thought that even he could understand those mathematics, which will certainly be understood by people in Birmingham and Leicester.
    Jeremy Corbyn: Will the Prime Minister turn his attention to the plight of the Chagos islanders, who were prevented from returning to their islands by an Order in Council on 10 June, which cannot be debated in this House, having won their right legally to return in 2000? Will he accept that there has been huge American pressure to depopulate those islands and prevent the islanders from returning? Will he meet the islanders and the Government of Mauritius, and allow the gross injustice of the 1970s to be reversed and the islanders to go home?
    The Prime Minister: I know that this was discussed yesterday in Foreign Office questions, and my hon. Friend will be aware of the statement on the issue made by the Foreign Secretary. The position of Diego Garcia as a base—that is what this is about—is extremely important for this country, as it represents an important part of our security. I understand the concerns that my hon. Friend raises, but the Foreign Secretary dealt with them comprehensively in his statement.
    Mr. Nick Hawkins: Before the local and European elections, Conservative Members, the independent Electoral Reform Society, and the Electoral Commission, which his own Government set up, all warned that there would be fraud and chaos in the all-postal pilot areas. There have been yet more allegations of serious fraud in the current by-elections. Will the Prime Minister now abandon the Deputy Prime Minister's obsession with all-postal voting before the daft regional referendums?
    The Prime Minister: I do not agree with the hon. Gentleman. The Electoral Commission is looking into the issue, and we will study its report carefully. It has the right people to produce an objective and independent report on the matter. There is a lot of evidence that postal ballots increase turnout; I should have thought that that would be welcomed in this House.
    Mr. John Denham: Does my right hon. Friend agree that a just and lasting peace in the Israel-Palestine conflict is essential not only in its own right, but in terms of undermining any international support for terrorism? In the light of last week's condemnation of the Israeli wall by the International Court of Justice, and the damage that the construction of that wall will inevitably do to the chances of a proper peace, can my right hon. Friend tell the House what further steps the Government will take to ensure that the Israeli Government engage constructively in a solution to this crisis?
    The Prime Minister: We have pressed the Israeli Government on several occasions to re-route the fence away from occupied territory, and we have expressed our grave concerns about the humanitarian suffering of the Palestinian people. I agree, however, that the key to

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    many of the problems in the middle east is to get a negotiated settlement between the Israelis and the Palestinians, leading to the two-state solution—an Israel confident of its security and a viable Palestinian state. I assure my right hon. Friend that we will do everything that we can to make progress on the issue. I hope that as a result of the work that is being done over the next few weeks by the Quartet—the US, Russia, the EU and the UN—we will have something positive to say in this respect when we reconvene in September. I entirely agree that there is no more important issue in reducing some of the tensions in the world.
    Mr. Paul Tyler: Has the Prime Minister seen the research report in the British Medical Journal that shows a causal connection between British troops' service in the Gulf and infertility problems? Will he now insist that appropriate Ministers give evidence to the independent inquiry under Lord Lloyd, so that the appearance of secrecy surrounding this issue is dispelled once and for all?
    The Prime Minister: I am afraid that I have nothing to add to what Ministers have already said on the subject. Of course, it is a serious issue, and we investigate it continually. I will discuss with my colleagues the issue of giving evidence. It is important that we make progress on the basis of the actual evidence.
    Mr. Eric Illsley: My right hon. Friend will be aware of the recently published annual report of the Healthcare Commission, which expressed concern at the continued underfunding of those NHS trusts that have the greatest need. My right hon. Friend knows that this Government have funded the NHS to record levels, but will he take the opportunity of the comprehensive spending review to end once and for all the inequality in health funding that has blighted constituencies such as mine?
    The Prime Minister: I entirely understand my hon. Friend's point. As he was gracious enough to say, we have massively increased the amount of investment that is going into the health service. Indeed, by the end of this spending review, somewhere in the region of three times the amount of money, in cash terms at least, will be going into the national health service compared with a few years ago. We are trying to ensure that we deal specifically with health inequalities, and that will be part of what the Health Secretary announces later in the year. Such inequalities do not always arise because some trusts are being unfairly treated—they sometimes arise because people in a particular trust area have severe problems. The Health Secretary is looking into that, and I hope that we can give my hon. Friend some solace later in the year.
    Mr. Richard Spring: Is the Prime Minister aware of a breakdown in part of the planning process on the siting of base stations and transmission masts? Is he aware that, in practice, there is no effective local planning control and that the operating companies' code of practice is simply not being adhered to? Will he instruct the Deputy Prime Minister to talk urgently to the Local Government Association and
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    other interested parties to resolve the matter, which is of increasing concern throughout the House and to so many of our constituents?
    The Prime Minister: I do not dispute that the hon. Gentleman raises a teal issue for all parties and I am happy to engage in discussions with the Deputy Prime Minister and other colleagues. As I said in answer to a question on a different issue, it is important that we, as representatives of our constituents, are prepared ultimately to abide by what the science tells us about the risks, difficulties and dangers.
    I entirely understand that there is a planning issue, but concerns about planning are often driven by people's worries about the supposed health risk and whether it exists. Both matters should be considered together.
    Mr. Piara S. Khabra: Although I welcome the Government's commitment to providing more nursery places for children, can the Prime Minister confirm that the Government will take seriously the findings of a recent study by the National Institute of Child Health and Human Development, which warns of the dangers of starting nursery education too early and its impact on the child's character?
    The Prime Minister: Common sense tells us that we must have a balance. However, I hope that my hon. Friend accepts that the expansion of child care and nursery education as well as Sure Start have played a huge part, especially in some of the most deprived areas of our country, in giving life chances to children who would otherwise be without them. My hon. Friend and other hon. Members also know that all the evidence shows that investment in a child's early years pays real dividends in later behaviour and developing a sense of responsibility. That helps to create a better society.
    Mr. Elfyn Llwyd: Last week, the Secretary of State for Defence stated that investigations into the deaths last year of the six military policemen at Al Majar al-Kabir are to be transferred to the Iraqi central criminal court. My constituents, the parents of the late Lance-Corporal Tom Keys, are concerned that the court will not proceed with the investigations. Worse still, the Iraqi Prime Minister has said that he is minded to grant amnesties to insurgents. Will the Prime Minister intervene personally to ensure that the investigation proceeds to a fair conclusion, especially since suspects' names are known? Will he make the strongest possible representations to the Iraqi Prime Minister about the unsuitability of granting amnesty to those murderers?
    The Prime Minister: It is our understanding that the Royal Military Police special investigation branch has gathered sufficient evidence on the case for the central criminal court of Iraq to take on and direct the final stages of the investigation. In other words, we have evidence in respect of specific individuals. I shall

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    certainly ensure that we stay closely in touch with what is happening. There has been an exaggeration of the extent of any amnesty to insurgents in Iraq, but I would personally find it unacceptable if those people were pardoned for their appalling crime. I assure the hon. Gentleman that we shall stay closely in touch with him and with the families about the issue.
    Mr. Ben Chapman: In the light of concerns about wind power generation—it is relatively expensive and inefficient; it blights land and seascape, and it damages wildlife and marine life—does my right hon. Friend intend to re-examine the nuclear option, as other countries are doing, if we are to achieve our targets on carbon dioxide and global warming?
    The Prime Minister: My hon. Friend will know that I spoke about this in front of the Liaison Committee the other week. Nuclear power is an important source of carbon-free electricity, but the analysis of the energy White Paper showed that, at present, the economics make new nuclear build unattractive. However, I told the Liaison Committee that we are keeping the nuclear option open and continuing to invest in skills and research, but we would have to overcome both public concern and the cost issue. I entirely understand what my hon. Friend says, and as we move further to develop diversity of energy supply, we will have to keep all these options open.
    Mr. David Atkinson: If the Government have increased funding to local authorities as the Prime Minister has just claimed, why are the schools in Bournemouth and throughout the county of Dorset facing a funding crisis for the second year running that is causing head teachers to make their staff redundant and to appeal to parents to come forward with extra money? Why did the Prime Minister not warn our schools at the last election that they would be facing starvation, starvation, starvation?
    The Prime Minister: I do not know the precise situation in the hon. Gentleman's schools, but I will certainly find out about it in the light of what he says. All schools this year are receiving increases that have been passported through by the Government. They will then be given ring-fenced money directly. Over the last few years under this Government we have increased education funding dramatically. Let me remind the hon. Gentleman that when the Government he supported were in power, in the last few years when his present leader was sitting in the Cabinet, they cut the funding per pupil. We have raised it substantially, and I would be astonished if we had not raised it in his area as well.
    Mr. John Grogan: Given that, in London, our good friend Ken can regulate the buses to determine routes and frequencies, why cannot we do the same in the great northern centres of population such as Liverpool, Manchester, Leeds, York and, in particular, Selby, where Arriva is planning significant cuts in bus services?
    The Prime Minister: I understand my hon. Friend's concern. We introduced limited regulatory powers over
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    bus services for local authorities four years ago, and we are currently consulting on ways of making it easier for the local authorities to use them. I know that my hon. Friend would not want us to forget, however, that it was this Government who guaranteed all over-60s and disabled people in England half-price or better bus fares on their local buses, and who in 2003 extended that provision to cover long-distance coaches. I entirely agree that there is an issue in relation to regulation, but bus use has recently gone up in this country for the first time in many years.
    Mr. Roger Gale: Does the Prime Minister now regret his condemnation of the democratically taken decision by the people of the republic of Cyprus to reject Annan V? Will he give the House a clear undertaking that his Government will not support any measures in the European Union that would lead to a tacit recognition of the illegal regime in the northern part of the island?
    The Prime Minister: I am afraid that I do not regret what I said then. I still believe that it would have been better if Kofi Annan's plan had proceeded; it was a fair settlement. I also think that, although we made it clear that Cyprus's accession to the European Union could not be dependent on unification of the island, it would obviously be better if some process leading to a settlement between the two parts of the island took place. We will continue to work for that—of course we will—but I thought that Kofi Annan's plan was well judged, and I hope that we can return to this issue and get it properly negotiated. There may be some changes to it, I do not know, but the basis of the plan was a sound one.
    Mr. Kelvin Hopkins: My right hon. Friend will be aware that the private finance initiative contractor, Jarvis, has been teetering on the brink of bankruptcy for weeks now. This is putting at risk a large number of school repair schemes and other public sector works. Would he not think it sensible, given that Jarvis's share price has now collapsed to junk levels, to buy out all those public sector schemes, get them done in the public sector, and save billions of pounds of public money?
    The Prime Minister: No, I am not sure that I would say that to my hon. Friend. [HON. MEMBERS: "Think about it!"] I am not even going to say that I am going to think about it. Obviously, there are issues that need to be sorted out in relation to the Jarvis contracts. However, let us never forget that PFI has delivered enormous benefits in terms of infrastructure building in our constituencies and communities. I know from my own constituency that there are schools and hospitals that would not have been built without it.
    Mr. Nigel Evans: On Monday, I met two of my constituents in Alma place in Clitheroe. The wife is disabled. Normally, she travelled to her local post office in Henthorn road in her wheelchair, and she enjoyed doing that. On Monday, we travelled in a vehicle past the post office, which is now closed, to another post office in the centre of Clitheroe, which is on a hill. We had to park some way away from it, then get

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    out of the vehicle and travel up to the post office. Does the Prime Minister realise that his policy of closing post offices is causing such a deterioration in the quality of life of so many disabled people?
    The Prime Minister: As the hon. Gentleman must know, post office closures also proceeded under the previous Government, to the tune of several thousand. There is not a policy of post office closures, but as post offices undergo a tremendous amount of change, as
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    fewer people collect their benefits from the post office, the Government must give an additional subsidy to post offices. Over the next few years, they will receive a subsidy of £1 billion. We are doing what we can, but we cannot simply put endless sums of money into post offices that are not commercially viable. That is why it is not fair to say that it is the Government's policy to close post offices. We are doing our best to keep as many of them open as possible. The only way of keeping more open is to spend even more money, to which he is opposed.

Regional Assemblies' Referendums (Voting Arrangements)
12.30 pm
Charles Hendry: I beg to move,
That leave be given to bring in a Bill to make provision about the voting arrangements for regional assemblies' referendums.
I cannot recall a day when there has been greater media and public interest in what is going on in this House, and I am sure that I am not alone in realising that that is because people understand the importance of the issues contained in this Bill.
I am introducing this Bill because the experiments with all-postal voting in the elections in June did not give people the confidence that genuine free and fair elections demand. The Government have made it clear that they want to hold all-postal referendums for the regional assemblies, but I believe that before we continue down that path, the House must be given the opportunity to debate how those referendums should be held.
There is a real concern that the Government are only pressing ahead with all-postal voting in the regional assemblies referendums to ensure that there is not a derisory level of voting, partly, at least, because people are simply not persuaded by the case in favour of those assemblies. The Government's concern is that a poor turnout would deprive the proposed assemblies of their democratic legitimacy. In that, they are undoubtedly right, but the solution must therefore lie in the nature of the proposed assemblies, not in the nature of the electoral system.
The report by the Electoral Commission on the experiment with all-postal elections will be published in September, and I am glad that the Government have conceded that they will at least not go ahead with all-postal referendums if the commission concludes that they are unsafe. But there are fundamental reasons why we should decide now not to go down the route of all-postal ballots.
A few minutes ago, the Prime Minister spoke of the increase in turnout in the European elections. The turnout did indeed rise, but only marginally more in those areas in which there was universal postal voting than in areas in which traditional voting methods were used. Other factors that may have influenced turnout, such as a particular dislike of the EU constitution, were ignored.
First, there are logistical issues. The recent European elections have highlighted the fact that there are serious logistical issues that need to be addressed before we even consider more all-postal ballots. In Bolton, 6,000 ballot papers were never delivered, which resulted in emergency polling booths being opened. In Gateshead, boxes were placed in 18 libraries due to the late delivery of ballot papers: nearly 600,000 packs in Tyneside were delivered late. In Cheshire, in Vale Royal, a polling station had to be opened, as more than 700 electors did not receive packs. In Wigan, more than 1,000 voters had to go to the town hall to get their packs due to a breakdown in the delivery system. In Kingston upon Hull, a group of independent councillors are taking legal advice after many homes did not, receive ballot papers and the United Kingdom Independence party won that seat by only seven votes.
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Those issues have not yet been resolved, and the postal voting experiment should not be extended until we can be certain that such problems would not arise again. We cannot have that certainty in time for the regional assemblies referendums this November. If we are to go down the route of universal postal voting, safeguards need to be introduced to ensure that 100 per cent. of eligible voters receive one, and only one, ballot paper. As the Office of the Deputy Prime Minister: Housing, Planning and Local Government Committee has called for, there should be a requirement for Postcomm, the postal services regulator, to assess and set targets for 100 per cent. secure and accurate delivery of postal ballot papers.
We should, however, be worried about not just the logistical failures but the scope for fraud. Universal postal voting needs much stronger checks and balances if fraud is to be prevented. As the ODPM Committee's report suggests, there should be individual electoral registration; but again, we all know that that is not possible before the referendums to be held this autumn. The police should have additional powers of search and arrest to investigate claims of fraud, and there should be a new offence of intending to apply fraudulently for a postal or proxy vote.
Implementation of the Committee's recommendations would reduce the possibility of fraud. They need to be implemented immediately to maintain the integrity of elections, and the belief among the electorate that elections are genuinely free and fair. Without them, universal postal voting will continue to be subjected to widespread abuse and fraud.
The Government have dismissed claims of any widespread election fraud, but the evidence suggests otherwise. We should look at some of the examples of alleged fraud in the most recent elections. In Bradford, the city council has confirmed that 12 separate allegations to the police concerning undue influence and electoral irregularities are being investigated. In Burnley, Lancashire police are questioning 60 people about more than 100 suspicious postal vote applications. In Liverpool, a postman was mugged for ballot papers. The Manchester Evening News reported that the Greater Manchester police were snowed under with allegations of electoral fraud. In Oldham, a Liberal Democrat candidate was arrested on suspicion of stealing postal papers. Sadly, none of the Liberal Democrats are present to hear that. In Birmingham there were widespread allegations of fraud, although Birmingham was not a trial area.
The hon. Member for Birmingham, Sparkbrook and Small Heath (Mr. Godsiff)—who, I am pleased to say, is a sponsor of the Bill—spoke eloquently about the situation in Birmingham in his recent speech during a debate on the electoral system. He spoke of people being bullied to vote one way or another. He spoke of bribes being offered for ballot papers: a postman was offered £500 for a sack of them. He spoke of a councillor sorting through ballot papers in a back-street car park at midnight. Even Albert Bore, until June the Labour leader of Birmingham city council, said:
"At present, in relation to the handling of postal ballot papers, the law is so general that almost anything is legal".

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Even he called for a rethink of postal voting after a candidate was found with a bag of completed ballot papers.
Mr. Henry Bellingham: Another Liberal Democrat.
Charles Hendry: Further evidence of the abuse has been highlighted during the current campaigning in Leicester, South. A Liberal Democrat canvasser—
Mr. Bellingham: Yes.
Charles Hendry: A Liberal Democrat canvasser targeted a home for people with learning disabilities.
Mr. Bellingham: Another Liberal Democrat
Charles Hendry: According to The Mail on Sunday, he bullied the owners of the care home, Mr. and Mrs. Tweddle, to try to gain access to residents.
Mr. Bellingham: Disgraceful.
Charles Hendry: The canvasser also claimed that the care home owners could vote on behalf of their residents as their appointee, which is untrue. Mr. and Mrs. Tweddle say that his use of the correct jargon made them fear that he had received formal training before approaching their care home to persuade them to use their residents' postal votes.
Mr. Bellingham: Liberal Democrat training.
Charles Hendry: We all know that under common law, people with mental disabilities are unable to vote if on polling day they are incapable of making a reasoned judgment, but universal postal voting removes that safeguard, and leaves people with learning disabilities open to abuse.
Mr. Bellingham: By the Liberal Democrats.
Charles Hendry: The integrity of the vote is further undermined by electoral registers not being accurate. Following a recent initiative to clean up the electoral register, the number of people on the register in Portsmouth, South dropped by 14.5 per cent. In Edinburgh, South it dropped by 11 per cent. and in
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Brent by 12 per cent. Only limited proof is required for someone to get on to the register. The Daily Mail registered Mr. Gus Troobev—an anagram of "bogus voter" on 31 registers within a few hours. A Sunday Telegraph journalist had the ballot papers of 36 voters sent to the same address. We also know that people's names can often stay on the register long after they have left or died. That is why, to make registers more accurate, there should be individual registration, with positive identification rather than head-of-household registration. Until the register is cleaned up, postal voting will only increase people's opportunities to vote fraudulently.
The House should consider the wider democratic implications of all-postal voting, which are as important as the integrity of the voting system. Most people return their postal votes soon after they receive them, so they cannot take account of the full facts and issues in the whole election campaign. That changes the results in a way that none of us would consider democratically correct. In the forthcoming referendums, it is essential that the electorate hear all the arguments and make an informed decision, rather than being encouraged to vote before being made aware of the full implications of setting up the regional assemblies.
These changes are essentially undemocratic and give an unfair advantage to the Government of the day, who control the timetable and much of the agenda in a campaign. The Government have chosen the dates for the referendums according to when they think they have the best chance of winning them. The all-postal system reduces the opportunity to convince the electorate of the problems associated with regional assemblies and the arguments against them.
The Bill has cross-party support and I urge the House to support it, to ensure, that the voting process, which is central to our democracy, is not changed without proper consultation and consideration by this House.
Question put and agreed to.
Bill ordered to be brought in by Charles Hendry. Mr. Graham Brady, Mr. Nigel Evans, Mr. Frank Field, Mr. Roger Godsiff, Mr. Stephen O'Brien, Mr. George Osborne, Mr. Graham Stringer, Miss Anne McIntosh and Mr. Tim Collins.

REGIONAL ASSEMBLIES' REFERENDUMS (VOTING ARRANGEMENTS)
Charles Hendry accordingly presented a Bill to make provision about the voting arrangements for regional assemblies' referendums: And the same was read the First time; and ordered to be read a Second time on Friday 15 October, and to be printed [Bill 140].
Orders of the Day

  Patents Bill [Lords]
  [Relevant documents: The Second Report of the Regulatory Reform Committee, Session 2003–04, on the proposal for the Regulatory Reform (Patents) Order 2004, HC 337, and the Eighth Report of the Committee, Session 2003–04, on the draft Regulatory Reform (Patents) Order 2004, HC 683.]
  As amended in the Standing Committee, considered.

  Patents Bill [Lords]
    New Clause 1

      COSTS AND EXPENSES IN INFRINGEMENT PROCEEDINGS ETC
      1. Section 106 of the 1977 Act (costs and expenses in proceedings before the Court under s.40) is amended as follows.

      2. In subsection (1) (relevance of parties' financial position), for the words from "proceedings" to "the court)" there is substituted "proceedings to which this section applies".

      3. After that subsection there is inserted—

      "(1A) This section applies to proceedings before the court (including proceedings on an appeal to the court) which are—

      (a) proceedings under section 40;

      (b) proceedings for infringement;

      (c) proceedings under section 70; or

      (d) proceedings on an application for a declaration or declarator under section 71."

      4. This section applies in relation to proceedings commenced on or after the commencement of this section.'—[Mr. Sutcliffe.]

      Brought up, and read the First time.
      12.41 pm
      The Parliamentary Under-Secretary of State for Trade and Industry (Mr. Gerry Sutcliffe): I beg to move, That the clause be read a Second time.
      Mr. Deputy Speaker (Sir Alan Haselhurst): With this it will be convenient to discuss Government amendment No. 2.
      Mr. Sutcliffe: The intention behind the new clause and the amendment is to make a small additional improvement to the framework for enforcement of patent rights. We listened very carefully to the debate in Committee, and following further consideration I have identified one more improvement to the enforcement framework that could assist small and medium-sized enterprises in some circumstances I believe it appropriate for this provision on costs to be added to the Bill.
      It might help if I begin by exploring some of the background that is relevant to the enforcement framework in general, and to the new clause and amendment in particular. Members will be aware that in Committee, we discussed a number of possible modifications relating to enforcement of patent rights. I know that we are all keen to have a framework for enforcement of rights that is accessible to all. The difficulty, however, is delivering a framework that is accessible to an SME patent holder, but which is also fair to a party against whom enforcement action may be taken. In this respect, it is important to remember that the other party may be another SME.
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      Moreover, patent disputes can involve—indeed, they probably often do involve—difficult technical and legal arguments, so the framework cannot favour a patent holder over another party. The other party may have perfectly valid arguments as to why there is no patent infringement, or why the patent is not in fact valid; that would mean that there is nothing that can be infringed.
      Finding acceptable and workable ways that will really address the concerns raised in Committee is not easy, therefore. We explored various possibilities during the consultation process before the Bill was introduced. but some of them were not widely supported. Others received greater support, and we have pursued and developed them and made suitable provision in the Bill. We hope that the amendments and improvements to patent law that are relevant to the enforcement framework will provide some assistance on certain occasions.
      I know that there could be some disagreement as to how useful the Bill's provisions might prove to be. However, I hope that the very full debates that we have had so far will help people to understand our reasons for including them, and how they might help. I accept that the provisions provide only some pieces of the jigsaw that is necessary to improve the enforcement framework. As I said, during our earlier deliberations Members proposed alternative or additional provisions. In addition, the noble Lords in the other place have also tabled some amendments with a view to improving the enforcement framework. Many of the amendments were inspired by the desire to address the enforcement concerns of small and medium-sized enterprises, with which we also sympathise. Unfortunately, most of the amendments would not, in our view, work as intended or deliver a system that is fair to all. I did promise in Committee, however, that we would continue to consult and consider whether any further adjustments to patent law to help SMEs in patent disputes might be possible in the Bill.
      Since consideration of the Bill in Committee, we have consulted a number of stakeholders. My officials met the patent reform group, which was mentioned by some hon. Members in Committee. We also contacted several other individuals and groups, and the outcome of the consultation clearly showed the difficulty of finding a consensus on what more could be done to help SMEs. There has certainly been no widespread support for any of the proposals that were debated in Committee. Furthermore, it has not been possible to identify any additional provisions that could be added to the Bill that command support from all stakeholders.
      The difficulty of finding a workable and fair way of modifying the enforcement framework is perhaps not surprising. Indeed, the issue of patent enforcement is one of the issues that the Intellectual Property Advisory Committee has explored. That independent committee, which generally chooses its own work programme, decided to investigate the perceived and actual problems associated with the enforcement of patent rights. The Committee was particularly concerned about the costs when a patent dispute goes to court and believed that those costs might compare unfavourably with costs in other jurisdictions.
      It is perhaps regrettable that the Intellectual Property Advisory Committee was unable to report on the issue of enforcement of patent rights until November 2003.

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      By that time, following a public consultation that I have already mentioned, we were already well advanced in formulating and developing the contents of the Patents Bill. That consultation was conducted a year earlier, over the winter of 2002–03. Indeed, the Government's intentions for the Patents Bill were published a little before the Committee produced its position paper. Nevertheless, we found the Committee's report extremely useful in helping us to assess again whether the provisions in the Bill were right and whether more might be done.
      We have carefully considered the recommendations made by the Intellectual Property Advisory Committee. Its recommendations on re-examination were helpful and our discussions with some members of the Committee informed our development of the Bill's provisions on non-binding opinions. The Committee also identified the useful development of the new streamlined procedure by the patents county court and the need to make sure that it is actively promoted. We are very happy to endorse that and we will be monitoring developments at the patents county court to see that that and other reforms make a difference.
      It is interesting to note that the Intellectual Property Advisory Committee has not proposed provisions of the sort that would have been provided by various amendments that we considered in Committee. That perhaps illustrates again how difficult it is to identify measures that would have a wide degree of support and would actually work to give the desired result—that is, to help SMEs in trying to enforce their patent rights while being fair to all.
      There have been some calls for a general review of the patent system and enforcement of patent rights in order to find a consensus for a way forward. Those calls have, I believe, generally come from people who have already dismissed the enforcement provisions in the Bill as insufficient or irrelevant. The additional amendments that we have identified and propose today have not, I understand, made any difference to those calls for a wide-ranging review. Not everyone to whom we have spoken in the past few weeks agrees that the proposed amendments on costs are worth making.
      I am not so pessimistic, but we are not saying that what is in the Bill, either with or without the additional amendments, is a sufficient and complete answer to concerns about enforcement. Recent developments at the patents county court—I have already said that we shall follow them closely—are also important, and our continued exploration of the patent enforcement project is another useful work stream. Those examples demonstrate our continued commitment actively to engage with the enforcement agenda. Given the various strands of activity that are already under way, which may collectively deliver appreciable improvements to the enforcement environment, we do not believe that it would make sense to undertake a more general review now.
      I would like to assure hon. Members again that we have listened to the concerns raised during debates on the Bill, and that we have explored with a number of people over the past few weeks whether anything more could usefully be added to the Bill to deliver further legislative change at this point in time.
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      I have already mentioned that the Intellectual Property Advisory Committee pointed out that the costs of litigation in the UK courts are a serious problem for those with limited means. That concern has partly inspired our further consideration of the enforcement framework. I am very pleased that we have been able to identify a further small amendment to the Patents Act 1977 in the past few weeks, specifically on the issue of costs of litigation before the courts.
      The new clause and the amendment will, we hope, help SMEs in appropriate circumstances where they face litigation in the courts. However, we hope that the messages delivered by this amendment will also support the desire, which many of us share, to encourage parties to settle cases more cheaply by negotiation and mediation rather then litigation.
      In more detail, the new clause will amend section 106 of the Patents Act 1977 to allow the courts to take into account the financial position of the parties as one of the factors when deciding on costs in different types of patent dispute. Section 106(1) currently states that
      "the court, in determining whether to award costs or expenses to any party and what costs or expenses to award, shall have regard to all relevant circumstances, including the financial position of the parties".
      However, this applies only to proceedings brought before the court under section 40 of the 1977 Act. As some of us may recall from our earlier consideration of clause 10 of the Bill, section 40 deals with employee compensation and, in particular, with compensation for an employee who has made an invention that belongs to his employer, the patent for which has proved to be of outstanding benefit.
      The new clause would amend the current section 106(1) and insert a new section 106(1A) to extend the range of patent disputes in which regard must be had to
      "all the relevant circumstances, including the financial position of the parties"
      before the court makes an award of costs. Section 106(1) includes disputes concerning infringement, threats of infringement proceedings under section 70 and declarations of non-infringement under section 71, in addition to those concerning compensation for employees under section 40.
      Government amendment No. 2 makes a consequential amendment to remove the specific reference to section 40 from the title of the section, as the new provision will no longer be limited to court proceedings under section 40. Thus, this new power would apply to all disputes where a decision has to be made regarding infringement. For example, when deciding a case concerning a groundless threat of infringement proceedings under section 70, it is first necessary for the court to determine whether any infringement has taken place. Similarly, in proceedings under section 71, the courts are asked to confirm that infringement did not, or would not, occur. However, the provision would perhaps be of most use to a patent holder who is an SME bringing proceedings for an infringement.
      Of course, where a patent holder has commenced infringement proceedings against another party, it is common for that other party to raise concerns about the validity of the patent holder's patent. As well as deciding whether a particular activity falls within the scope of the

      1419
      patent claims, and so infringes the patent, the court is therefore often also determining in the same proceedings whether the patent is valid. As long as infringement is one of the issues being determined in the proceedings, the new provision on costs would apply. That is, the court will take into account the financial position of the parties with regard to an award of costs for the proceedings as a whole, even if a significant—or even the most significant—part of the proceedings concerns issues other than infringement, such as the validity of the patent.
      The wording of the amendment makes it clear that "all the relevant circumstances" have to be taken into account, and that the
      "financial position of the parties"
      is only one of the relevant circumstances that must be taken into account.
      Malcolm Bruce: I understand that the Minister is describing how costs might be apportioned at the end of proceedings, but is not part of the problem the fact that large companies effectively can prevent small companies from completing the action and getting to the costs stage? Is there anything in the amendment that supplies balance to the situation? In many cases, small businesses will say that they cannot afford to contest or defend their patent, because of the costs that their opponents can afford.
      Mr. Sutcliffe: I acknowledge the point that the hon. Gentleman makes, and the amendment is an attempt to supply the balance that he seeks. I am perfectly willing to listen to what hon. Members have to say about what we are trying to achieve. I recognise that these are difficult matters, for the reasons that I set out earlier. We want to arrive at general agreement between all the stakeholders involved.
      The amendment will not prevent other relevant circumstances from being taken into account. Accordingly, it is fully consistent with the existing duty of the courts, under the civil procedure rules, which requires them to have regard to "all the circumstances" in making orders about costs.
      According to section 130(1) of the Patents Act 1977 and section 62(1) of the Supreme Court Act 1981, the courts in England and Wales that deal with patent disputes are that part of the chancery division of the High Court that is known as the patents court, and the patents county court. In Scotland, the Court of Session deals with patents, and in Northern Ireland the responsibility lies with the High Court. In each of the three different civil jurisdictions, the courts have the power to take into account a number of factors when deciding on the issue of costs.
      For example, in England and Wales, the civil procedure rules lay down the rules for all civil litigation in the High Court or a county court. Hence, they apply equally to patent disputes, which are a form of civil litigation, whether they take place in the patents court or in the patents county court. Thus, the proposed amendment to section 106(1) of the 1977 Act must be consistent with the general rules on costs laid down in the civil procedure rules.
      The main principle behind those rules is that the court must take into account all the relevant circumstances when deciding whether to award any costs and, if so,
      1420
      what amount of costs. For example, the court can take into account the behaviour of the parties concerned in conducting the litigation, and whether it was reasonable to pursue particular allegations. That can then be reflected in the extent of the costs award.
      The proposed amendment to section 106 makes it clear that, in certain patent disputes, the court must have regard to the financial position of the parties in addition to all the other factors that it takes into account when deciding on costs. That is a factor that the court may already regard as relevant in some circumstances. As a result of this amendment, however, it will always be deemed to be a relevant factor.
      Accordingly, the amendment offers those embarking on a patent dispute an assurance that that will be one of the factors that the court will consider. Parties will know in advance that there is a statutory obligation on the court to take both parties' financial position into account when awarding costs, and so both parties are able to consider what that might mean for them. That, in turn, might influence how they deal with a patent dispute.
      The amendment will not alter the fact that the losing party will in any event normally have to meet its own costs, such as the costs of its legal advisers. Its main impact will be that, if the court thinks it appropriate after considering the relative financial position of the two parties, a less-well-off party may not be ordered to pay all the costs of a better financed party, even if the less-well-off party loses the case. I think that that covers the point raised by the hon. Member for Gordon (Malcolm Bruce).
      However, I stress that the amendment does not mean that a smaller less-well-off party can behave irresponsibly and launch patent infringement cases with impunity, safe in the knowledge that his small financial size means that he would not have to pay the costs of the other party even if he lost. It is true that this amendment means that the financial position of the less-well-off patent holder, relative to that of the alleged infringer whom he is pursuing, will be taken into account when an award of costs is being considered if that patent holder is not successful. However, the financial position is just one of the factors to be considered. The court could decide that the behaviour of this less-well-off party was irresponsible, and that that was also relevant to how costs should be awarded. In such circumstances, the financial position may not be the most important factor. The courts would be entitled, if they considered it appropriate, to make a large costs award against the less-well-off party who has behaved in an irresponsible manner.
      Moreover, even where a less-well-off party has behaved responsibly, but has lost the case, he may still have to pay at least some of the costs of the other party. Therefore, the amendment does not provide SME patent holders with a licence to litigate against wealthier parties without fear of paying any of the other side's costs, whatever the outcome. Yet the SME can be certain that its financial position will be carefully considered, along with other relevant factors, when the court decides how to award costs.
      Perhaps the main value of the amendment will be as a marker or sign. It will encourage parties to take a sensible attitude when considering the prospect of

      1421
      litigation. It acts as a warning to a party that has financial superiority and chooses to run up large costs in a dispute, that it will not necessarily get all those costs back even if it wins. We hope that that will encourage all parties to consider more carefully whether a dispute can be settled more cheaply, perhaps by mediation or voluntary binding arbitration. When appropriate, both parties might agree to infringement proceedings being undertaken at the Patent Office, where costs are likely to be less for all than when the proceedings take place before the courts.
      There may be very good reasons why none of these options is appropriate for a particular case, and the amendment does not in any way preclude a patent dispute from being heard by the patents county court or patents court. Nevertheless, we hope that it will encourage both parties to consider all the options before a case is taken to the courts.
      As I have already indicated, not all of those whom we have consulted about the amendment have supported it. Some have argued that it is irrelevant: as SMEs cannot even afford the expense of taking a case to the courts, it is pointless to make any provision on costs that could help. However, others have supported the amendment and agree that the proposed change would provide a useful signal to SMEs that their financial position can be taken into account by the courts.
      If the amendment also has the effect that I have indicated of encouraging parties to agree to resolve an infringement dispute in a less confrontational and expensive manner, it could have a much wider impact. It could help some SMEs that are not able to afford to bring a case to the courts in the first place, and in that way begin to address the concerns of those who say that it is irrelevant.
      By itself, the amendment may not have much effect. However, given the other changes in the Bill and the other improvements to the enforcement framework I have discussed, I believe that it is worth making. I hope that the House will agree with me, and that we can put in place today another small piece in the jigsaw to improve the enforcement framework for SMEs involved in a patent infringement dispute.
      1 pm
      Mr. James Arbuthnot: The Minister frequently used the word "small", and we heard today how small his ambitions are and how difficult everything is. The purpose of the new clause is to help small and medium-sized enterprises that cannot afford the massive costs of taking patent cases, with all their legal and technical complexities, through the courts. The Minister anticipated my question as to whether the new clause will achieve that.
      1422
      How will the new provisions provide any certainty for small and medium–sized enterprises? When deciding whether to take a case to court, they will still face the risk that the court will not exercise the new discretion and increase an award of costs in their favour. SMEs will not be able to budget in advance for that and will therefore still face the same risks, threats and uncertainties that they face at present.
      My second question is whether the Government will issue guidance to the courts on how to exercise the discretion. What criteria will the courts be expected to use? If nobody knows, how will the provisions help anybody? The new clause amends section 106 of the Patents Act 1977, which relates to section 40 of that Act, so that it applies to several different cases. However, there has never been a successful case under section 40 in the many years of its existence, so there is no current precedent. The third question is how the new clause differs from the current powers of the court. In practice, the courts already take into account the circumstances of the litigants.
      The Minister talked about consultation. What representations were made by those in favour of this change? How many people said that they favoured this change, and who made them say it? I worry about the new clause—not hugely, because it is a tiny Bill—because it is another action designed to reassure, or perhaps confuse, people into thinking that the Government are doing something important to help small businesses. There is little in the new clause. It is so watery that there is little to vote against, but the Minister still has some persuading to do.
      Paul Flynn: The right hon. Member for North-East Hampshire (Mr. Arbuthnot) has not taken a very positive line. The new clause is a genuine attempt to meet the objections from SMEs to the existing situation and what they perceived as deficiencies in the Bill. Certainty is too much to ask in litigation and there will always be some doubt about how legislation will work in practice. It would be generous of the right hon. Gentleman and the House to recognise the good will on the part of the Government that lies behind the new clause.
      The right hon. Gentleman said that this is a small Bill. I assure him that it will be the major news item from this building today for the South Wales Argus, if not the rest of the press, which may be distracted by events of lesser importance. This is the first Patents Bill since 1977 and is a major event for many of my constituents. We should accept that behind the Bill lies a strong warning to SMEs that the worst possible way to attempt to solve a dispute is to go to litigation, which will always be the most expensive and long-winded approach. If the Government were to he more generous, it might encourage people to opt for litigation without trying the procedures that are already available through the Patent Office, where matters can be dealt with speedily.
      Malcolm Bruce: I shall not be quite as churlish as the right hon. Member for North-East Hampshire (Mr. Arbuthnot), although I sympathise with his comments. The Minister said that he would consult further and table amendments if he felt that they would be helpful, and he has done so. However, as I suggested in an earlier intervention, the new clause does not go as far as the amendments I proposed, although it is a welcome gesture.
      The difficulty for many small businesses is that the lack of clarity in the law creates greater uncertainty in litigation, which picks up on a point made by the hon. Member for Newport, West (Paul Flynn). That works to the advantage of the large company against the SME, simply because the larger company can afford to fund litigation and effectively squeeze out the smaller business to the point where it cannot challenge an infringement of patent or otherwise defend its patent. The new clause would be irrelevant in such a case because the company would never reach the stage at which costs were apportioned. Many of us hoped that the Bill would make the law on defence of patents clearer to give a signal to larger companies that using their power in a process of attrition against SMEs would not be tolerated.
      Mr. Sutcliffe: I said that I would look again at the issue and I have tabled the new clause in that spirit. I do not want it to be irrelevant. It is a small step, as the right hon. Member for North-East Hampshire (Mr. Arbuthnot) said, but does the hon. Gentleman think that we would be better off without it?
      Malcolm Bruce: No, I am not saying that and I do not think that anybody will oppose the new clause. I am trying to make the serious point that the new clause may make a genuine contribution to a settled case and the fair apportionment of costs, and that may affect the extent to which companies are prepared to litigate. However, as the right hon. Member for North-East Hampshire pointed out, there would still be uncertainty about the apportionment. The cost of reaching that point might also be too great for an SME to absorb. The new clause is fine as far as it goes, but issues remain unaddressed. I was lobbied very heavily about those issues, and the people who lobbied me will remain disappointed that the Bill has not been able to come up with a legislative framework that would address their concerns. The process of patent protection needs to be made more equal for different sizes of companies.
      I do not wish to repeat the debates we had in Committee, where the arguments were well aired. I welcome the fact that the Minister has been courteous and consistent. He said that he would consult, he has done so and he has come back with a proposal. The problem is that he has consulted with both sides of the argument and therefore has to strike a balance. I welcome the new clause and shall not vote against it, but patent law still contains injustices that the new clause and the Bill have not addressed.
      Mr. Sutcliffe: I appreciate the comments made by right hon. and hon. Members, if not all the points made by the right hon. Member for North-East Hampshire. The new clause is a genuine attempt to resolve a problem
      1424
      that was raised in Committee. Some of the amendments tabled were not workable and would not have delivered what was intended. I accept the point about how large companies operate, but we are trying to change behaviour by giving smaller companies an incentive and warning larger companies that costs could be considerable. We are trying to resolve disputes in the way that my hon. Friend the Member for Newport, West (Paul Flynn) suggested.
      I was not being churlish when I asked whether we would be better off without the new clause. If hon. Members think that it would be pointless, I would be happy to withdraw it. It remains to be seen how it will work, but I think that it will help to change behaviour. We tried to accommodate the concerns of the patent reform group, and hon. Members will recall that it was represented in force watching our deliberations in Committee. We could not consult everybody, and we could not reach agreement on what we were trying to achieve. That is one of the difficulties that I set out and that is why expertise in the excellent Patent Office in my hon. Friend's constituency can be so valuable in resolving disputes. I ask hon. Members to support the new clause, despite their reservations.
      Question put and agreed to.
      Clause read a Second time, and added to the Bill.

    Clause 13

      OPINIONS BY PATENT OFFICE AS TO VALIDITY OR INFRINGEMENT
      Mr. Sutcliffe: I beg to move amendment No. 1, in page 8, leave out lines 3 to 5 and insert—

      (6)In relation to a decision of the comptroller whether to issue an opinion under this section—

      for the purposes of section 101 below, only the person making the request under subsection (1) above shall be regarded as a party to a proceeding before the comptroller; and

      no appeal shall lie at the instance of any other person.'

      Hon. Members who attended our debate on clause 13 in Committee will recall that I undertook to reflect further on whether we should make amendments on a right of appeal in relation to opinions. We considered the matter carefully and the amendment relates to a technical point—whether there is a need, in relation to the opinion procedure, to include an exemption to the general right of appeal from all decisions of the comptroller under section 97 of the 1977 Act.
      Our concern is to ensure that no person other than the requester of an opinion can appeal against a decision by the Patent Office as to whether or not to grant the request. That is to ensure that the issuing of an opinion is not subject to unnecessary delay while also safeguarding the requester's right to be heard before a request is refused. That right arises under section 101 of the 1977 Act, which gives a party the right to be heard before a discretion is exercised against him. However, there could be even more serious delays if a person who had no right to be heard on the original decision could none the less exercise a right to appeal the decision to the patents court under section 97. The current wording of the new section 74A(6) may, by implication, already

      1425
      exclude such a right of appeal. However, I am advised that it would be better to put the matter beyond doubt, so I have tabled the amendment to achieve that.
      I commend the amendment to the House.
      Mr. Arbuthnot: The Minister has just proposed an important amendment. I claim no credit for it but give that credit entirely to him, because of the way that he has responded so generously and appropriately to the representations that were made. I congratulate him on a superb amendment and hope that it will be accepted.
      Amendment agreed to.

  Schedule 3

    REPEALS
    Amendment made: No. 2, in page 16, line 28, at end insert—
    'In section 106, in the heading, the words "under s.40".'.—[Mr. Sutcliffe.]
    Order for Third Reading read.
    1.12 pm
    Mr. Sutcliffe: I beg to move, That the Bill be read the Third time.
    I am grateful to hon. Members for their contributions on Report, especially the right hon. Member for North-East Hampshire (Mr. Arbuthnot), who was the architect of the thought pattern behind our second amendment. I thank him for that.
    Our debates on the Bill have been interesting and well argued. On Second Reading, some reservations were expressed about the Bill, but it is fair to say that it was, by and large, welcomed on both sides of the House and I am pleased that hon. Members on both sides of the House have examined it in a constructive and detailed manner, both in Committee and again today. I thank them for that.
    I shall make a few remarks before I commend the Bill to the House. The Government fully understand the importance of giving support to innovative and creative UK businesses. The patents system is one important way in which that support is provided and the Bill will help to ensure that our patents system is robust in its operation, while also being well-balanced and accessible to all. We are committed both to ensuring that protection continues to be available for those businesses that have the creativity and drive to make technical advances that help us all and to improving and modernising the patents system so that it meets the needs of its users.
    As hon. Members know, the Bill brings our law into line with the revised European patent convention. I am, of course, pleased that it has been broadly welcomed for doing so, as there are significant advantages for UK businesses. The House will be aware that the Bill also makes some changes which, we believe, will help in the difficult area of the enforcement of patent rights.
    As I said on Second Reading, we are much more alive to the concerns expressed by patent holders, especially patent holders in small and medium-sized enterprises,
    1426
    about the costs and time associated with patent litigation. In that debate and in Committee, we heard the view that the enforcement measures in the Bill do not go far enough to address those problems, especially in helping SMEs.
    We believe that the changes we are making will certainly help all types of business, in particular SMEs, to resolve disputes over patents. We debated in detail clauses 12 and 13—two of the important ways in which the Bill will amend existing patents legislation, to help with the resolution of patent disputes.
    I promised to consider the careful analysis made in Committee by the right hon. Member for North-East Hampshire of the relationship between clause 12, the Brussels regulation and proceedings for declaration of non-infringement. It is fair to say that although his analysis is, in essence, correct, his proposed solution would, in our view, undermine the delicate balance provided by the threats provisions—merely to circumvent the way in which the Brussels regulation applies in respect of proceedings for declaration of non-infringement. We should accept the operation of that regulation, and its effect on businesses operating in a global market.
    The Bill is but one of the ways in which we are trying to improve patent enforcement. We realise that we cannot be complacent about the enforcement of intellectual property rights. Some new initiatives are being explored, and possible ways of addressing certain difficulties are being considered. We will continue to explore other possible ways to help patent holders enforce their rights, and to help patent holders and third parties resolve disputes over patents.
    That exploration will not end simply because the Bill may be nearing the completion of its parliamentary journey—far from it. For example, there is our continued work on the patent enforcement project, and the results of the Patent Office-led study into that project will, as I indicated in earlier debates, be available shortly. We will no doubt look carefully at those results and how best to take them forward. To give another example: we have already said, during deliberations on the Bill in another place, that we will monitor the ongoing improvements to the patents county court to ensure that it provides access to a simpler, less expensive forum in which to litigate patent disputes.
    The Government's innovation report, published at the end of last year, provides another example of our commitment not to let those issues pass us by. In addition, the joint project of the Prime Minister's strategy unit and the DTI on wealth creation from innovation and the knowledge economy will include an analysis of the current regime of intellectual property rights and their role in encouraging innovation in the knowledge economy.
    We also had an interesting debate on the pronunciation of the word "patent". Colleagues with an interest in the Bill referred to it as the parents Bill and the patients Bill and there was much discussion of what it was actually about. However, the measure is vital.
    Paul Flynn: My hon. Friend will remember the outrageous suggestion that I tried to pull the wool over the eyes of the Committee by saying that the 1,000 people in Newport who have to say "patent" hundreds

    1427
    of times a day decided that as it took three nanoseconds more to pronounce it with a long "a", they would pronounce it with a short "a" so that they could go home earlier for their tea. The outrageous and flimsy counter to that truth from the right hon. Member for North-East Hampshire (Mr. Arbuthnot) was to suggest that the Romans pronounced the word differently. How does he know that? Can he explain?
    Mr. Sutcliffe: I await the reply with interest. I congratulate my hon. Friend for his involvement in the Committee and I also thank the Patent Office in Newport for its excellent work and its support to industry.
    In conclusion, I am proud that the Bill plays a part in the continual process of reform and improvement of the patents system—a process that can be traced back four centuries and which will no doubt continue. Our deliberations have truly been part of the long-standing and admirable tradition of making sure that patent law keeps pace with changes in the economy. We will continue with that process, to ensure that the patents system supports and encourages innovation, for the benefit of everyone.
    I commend the Bill to the House.
    1.18 pm
    Mr. Arbuthnot: The Bill deals with something extremely important to our national economy: innovation and scientific advances. At the Lisbon summit in 2000, the Council of Ministers told us that Europe would become the most competitive and dynamic knowledge-based economy in the world by 2010. That is what the Bill is about. Well, jolly good. So why are we going so fast in the opposite direction? Why did a survey in May by the Swiss business school IMD show that the most competitive economy in the world was that of the USA, and that the UK had fallen another three places to 22nd? Why do we have the lowest growth in the English-speaking world? Why has our productivity collapsed in recent years? Why do we have the largest trade deficit for 300 years? One reason is that we have a Labour Government. Another reason is that this country's patents system is not in tune with that of the modern world.
    Britain is falling behind in Europe. The Financial Times said in an article in 2001:
    "Bottom of the pile for patent enthusiasm was the UK, where only 23 per cent"—
    of small and medium-sized enterprises—
    "had used the system"
    That compared with more than 50 per cent. in Spain. Europe is falling behind in the world. In the USA, taking out a patent costs £10,000. In Europe, it costs about £50,000. In the USA, it takes about a year to take out a patent. In Europe, it takes three years. All that is partly because of the costs of translation, but they only amount to about £12,000 of the £50,000 that must be paid in Europe.
    Enforcing patents is very difficult in this country. As we have heard, the patent reform group has been trying to put pressure on the Government to do something to help, and they have come up with the Bill, which will achieve little and deals with none of the real concerns of
    1428
    the business world. It is, as the Minister said, a necessary Bill because it introduces some minor changes to allow Britain to continue to be a signatory to the European patent convention. If we failed to do that, British inventors would have to take out lots of patents in many different countries in Europe, which would be expensive and time-consuming. There is no point in trying to force them to do that, but no one could say that it is a frightfully important Bill.
    I come now to the key issue raised by the hon. Member for Newport, West (Paul Flynn)—the pronunciation of the word "patent", a matter that exercised the Committee for some time. I said that he had led the Committee and the House up the garden path in suggesting that his constituents were supposed to get home earlier to tea, but I am afraid that he has got me wrong: I was agreeing with his pronunciation of the word "patent", on the basis that the Romans would have pronounced patens—meaning, "open"—with a short "a". I just think that he got his reasoning wrong.
    We do not oppose the Bill. How could we oppose it? There is virtually nothing in it, and it represents a sadly missed opportunity.
    1.22 pm
    Malcolm Bruce: I am conscious of the fact that another hon. Member wishes to speak, and I will allow him the time to do so.
    The Bill is rather disappointing, given that there was a pretty ferocious debate about what people had hoped for. Many hon. Members' core concern is that the reason why there is a lack of enthusiasm for patents in this country is that people do not have enough confidence that they can enforce them. The cost of enforcing patents is so great that is raises the question whether the cost of registering is justified. The Committee addressed that issue, and I am disappointed that the Minister, having been unable to accept one or two of the amendments that I proposed—I understand the reason why—was not able to develop them in ways that would have met those concerns more than the Bill currently does.
    First, we discussed frivolous patents, or vanity patents, and tried to suggest a way to deal with them so that the time, energy and cost were not expended on them. My hon. Friend the Member for Weston-super-Mare (Brian Cotter) entertained the House on Second Reading with examples not of bogus patents—they were fully approved—but of bizarre, irrelevant and rather unworkable ones. Secondly, I remain seriously concerned about the inequalities of defending patents for small and medium-sized companies. It was pointed out and not really challenged that the vast majority of new ideas come from small businesses, which may become larger businesses if they can patent the idea and develop that patent. I cited the example of Mandy Haberman, who invented the "anyway up" cup. I guess that, at the end of the day, she needed the benefit of the defence of her patent to maintain her business, but it cost her almost £1 million to achieve that. That is a good example, and I hope that new clause 1, which the Minister has just introduced, will help someone in that situation in the future, inasmuch as the allocation of the costs will be a little more equitable if one gets to the end of the process.

    1429
    The Bill, assuming that the House will approve it this afternoon, remains unfinished business. We must return to some issues if we are to ensure that the role, defence and legitimacy of patents are properly enshrined in future. There are serious concerns if people are not registering patents because it is too costly or they have no confidence in the system and if large companies—[Interruption.]
    Mr. Deputy Speaker: Order. I am sorry to interrupt the hon. Gentleman, but there must be quiet in the House. There may have been a late surge of interest in the debate, but it must be completed without disturbance.
    Malcolm Bruce: Rarely has the House filled up so enthusiastically for a speech of mine as it has in the past couple of minutes. I simply want to conclude because I am anxious to ensure that the hon. Member with the Patent Office in his constituency has an opportunity to put on record his remarks on the Bill.
    My final concern is that the Minister must continue to keep open the dialogue to try to find ways to ensure that there is confidence in the system, that the cost of registering is kept under control, that enforcement is kept within reasonable cost bounds that are fair and just for small and medium-sized business and that the process of attrition that large businesses can sometimes apply does not get out of hand. Of course, I welcome and support the small improvement that the Bill constitutes, but I hope that the Minister will acknowledge that this is not a closed book.
    1.26 pm
    Paul Flynn: My hon. Friend the Minister can take consolation in the fact that his eloquence and the growing realisation of the Bill's importance has drawn hon. Members into the Chamber in such numbers. Only every 25 years does the House debate a Bill on patents, and it is right that hon. Members should have that experience at least once in their parliamentary careers.
    On the vexed question that has dominated the proceedings on the Bill—the pronunciation of the word "patent"—it is not reasonable to make any assumption on how the Romans spoke their Latin. The pronunciation of the simple word "Davidus", which gave the two Welsh versions of the name—Dafydd and Dewi—has been deliberated for years. There can be no certainty about the interpretation of Roman pronunciation made by the right hon. Member for North-East Hampshire (Mr. Arbuthnot).
    1430
    It is a matter of great importance to my constituency that the Bill is passed. Of course, 2,000 years ago the Romans were in Newport, where the Patent Office is now, at a time when Europe had a common currency. It worthy of note that, after the collapse of the European union that existed in Roman times and the disappearance of that common currency, we entered the dark ages. That might well be a lesson for us all.
    The Bill will do a great deal to modernise our patent service. Although the right hon. Member for North-East Hampshire was a bit sour in his negative comments at the end of his speech, he should note that one of our nation's great successes is our innovation and creativity, and we continue to be brilliant in coming up with new ideas and in building our stock of intellectual property. It was right to relocate the Patent Office to Newport, where it has been a huge success. The office's staff turnover in London was 17 per cent. It has now gone down to nil. The people who came from south-east London have settled happily there, and many of them have now retired and stayed in the area. This is a fine piece of legislation and we look forward to the House passing it without a Division.
    1.28 pm
    Mr. Sutcliffe: With the leave of the House, I should like to respond to this excellent debate. The right hon. Member for North-East Hampshire (Mr. Arbuthnot) said that the Bill was not important, but just look at the House filling up, as hon. Members clamour to come in to hear the detail of the Bill, which is vital to industry. The hon. Gentleman will know that the science and innovation budget has been increased under the comprehensive spending review and that we have a commitment to ensure that British businesses improve.
    We have had good debates on the Bill. As the right hon. Gentleman says, our commitment is to come in line with the European patent convention. That is vital to ensure that our patent system works, and all hon. Members agree with that. It is an important Bill. I am sorry that the hon. Member for Gordon (Malcolm Bruce) is not in his place. [Interruption.] Oh, he is in his place. I should have liked to accept many of his amendments, but they were found to be unworkable. I know that he appreciates the spirit in which we tried to resolve many of the complicated issues involved.
    The Committee was visited by people from the patent reform group and others who wanted to share with us their expertise and views. We had to try to find a way to ensure that we were effective and efficient—
    It being half-past One o'clock, MR. SPEAKER put the Question already proposed from the Chair, pursuant to Order [12 July].
    Bill accordingly read the Third time, and passed, with amendments.

  Intelligence on Weapons of Mass Destruction
  1.30 pm
  The Prime Minister (Mr. Tony Blair): With permission, Mr. Speaker, I will make a statement on the report published by Lord Butler earlier today.
  Lord Butler's report is comprehensive and thorough, and I thank the members of his Committee and their staff for all their hard work in compiling it. We accept fully the report's conclusions.
  The report provides an invaluable analysis of the general threat in respect of weapons of mass destruction and the potential acquisition of WMD by terrorists. Although it devotes much of its analysis to Iraq, it also goes into detail on the WMD threat posed by Iran, Libya, North Korea and A.Q. Khan. Some of the intelligence disclosed is made available for the first time and gives some insight into the reasons for the judgments that I and other Ministers have been making. I hope that the House will understand if I deal with it in some detail.
  The hallmark of the report is its balanced judgments. It specifically supports the conclusions of Lord Hutton's inquiry about the good faith of the intelligence services and the Government in compiling the September 2002 dossier, but it also makes specific findings that the dossier and the intelligence behind it should have been better presented, had more caveats attached to it, and been better validated. It reports doubts that have recently arisen on the 45-minute intelligence, and says that in any event that should have been included in the dossier in different terms. However, it expressly supports the intelligence on Iraq's attempts to procure uranium from Niger in respect of its nuclear ambitions.
  The report finds that there is little—if any—significant evidence of stockpiles of readily deployable weapons, but also concludes that Saddam Hussein did indeed have
  "the strategic intention of resuming the pursuit of prohibited weapons programmes, including if possible its nuclear weapons programme, when United Nations inspection regimes were relaxed and sanctions were eroded or lifted."
  and
  "In support of that goal, was carrying out illicit research and development, and procurement, activities, to seek to sustain its indigenous capabilities."
  and
  "Was developing ballistic missiles with a range longer than permitted under relevant United Nations Security Council resolutions".
  Throughout the past 18 months, and throughout the rage and ferment of the debate over Iraq, there have essentially been two questions. One is an issue of good faith—of integrity. This is now the fourth exhaustive inquiry that has dealt with the issue. This report, the Hutton inquiry, the report of the Intelligence and Security Committee before it, and that of the Foreign Affairs Committee before that, found the same thing. No one lied. No one made up the intelligence. No one inserted things into the dossier against the advice of the intelligence services. Everyone genuinely tried to do their best in good faith for the country in circumstances of acute difficulty. That issue of good faith should now be at an end.
  1432
  But there is another issue. We expected—I expected—to find actual usable chemical or biological weapons shortly after we entered Iraq. We even made significant contingency plans in respect of their use against our troops. UN resolution 1441, in November 2002, was passed unanimously by the whole Security Council, including Syria, on the basis that Iraq was a WMD threat. Lord Butler, in his report, says:
  "We believe that it would be a rash person who asserted at this stage that evidence of Iraqi possession of stocks of biological or chemical agents, or even of banned missiles, does not exist or will never be found."
  However, I have to accept that, as the months have passed, it has seemed increasingly clear that, at the time of invasion, Saddam did not have stockpiles of chemical or biological weapons ready to deploy. The second issue is therefore this: even if we acted in perfectly good faith, is it now the case that in the absence of stockpiles of weapons ready to deploy, the threat was misconceived and therefore the war was unjustified?
  I have searched my conscience—not in a spirit of obstinacy, but in genuine reconsideration in the light of what we now know—to answer that question. My answer would be this: the evidence of Saddam's weapons of mass destruction was indeed less certain and less well founded than was stated at the time. However, I cannot go from there to the opposite extreme. On any basis, he retained complete strategic intent on WMD and significant capability. The only reason why he ever let the inspectors back into Iraq was that he had 180,000 US and British troops on his doorstep. He had no intention of ever co-operating fully with the inspectors, and he was going to start up again the moment the troops and the inspectors departed, or the sanctions eroded. I say further that if we had backed down in respect of Saddam, we would never have taken the stand that we needed to take on weapons of mass destruction, we would never have got the progress on Libya, for example, that we achieved, and we would have left Saddam in charge of Iraq, with every malign intent and capability still in place, and with every dictator with the same intent everywhere immeasurably emboldened.
  As I shall say later, for any mistakes made, as the report finds, in good faith, I of course take responsibility, but I cannot honestly say that I believe that getting rid of Saddam was a mistake at all. Iraq, the region and the wider world are better and safer places without him. [Interruption.]
  Mr. Speaker: Order. The House wants to hear the statement. I will move quickly on any Member who interrupts the Prime Minister. I say the same about the Leader of the Opposition—I will not tolerate any interference in his speech. Let us hear the statement; the House wants to hear the statement.
  The Prime Minister: The report begins with an assessment of intelligence and its use in respect of countries other than Iraq. It points out that in respect of Libya, the intelligence has largely turned out to be accurate, especially regarding its nuclear weapons programmes. Those are now being dismantled. In respect of Iran, the report says that it is now engaged with the International Atomic Energy Agency, although there remain
  "clearly outstanding issues about Iran's activities."

  1433
  On North Korea, the report concludes that it
  "is now thought to be developing missiles capable of delivering nuclear weapons as far away as the continental United States and Europe."
  The report goes on at paragraph 99 to say:
  "North Korea is a particular cause for concern because of its willingness to sell ballistic missiles to anyone prepared to pay in hard currency."
  The report also discloses the extent of the network of A.Q. Khan, the Pakistani former nuclear scientist. The network is now largely shut down through US and UK intelligence work, Pakistani co-operation and the dialogue with Libya.
  The report then reveals for the first time the development of intelligence in respect of the new global terrorism that we face. In the early years, for example, the Joint Intelligence Committee assessment of October 1994 said that the view was that the likelihood of terrorists acquiring or using chemical, biological or nuclear weapons was, while theoretically possible, highly unlikely. However, as the name and activities of Osama bin Laden became better known, the JIC started to change its assessments.
  In November 1998, the JIC assessment said that Osama bin Laden
  "has a long-standing interest in the potential terrorist use of CBR materials, and recent intelligence suggest his ideas about using toxic materials are maturing and being developed in more detail… There is also secret reporting that he may have obtained some CB"—
  chemical and biological—
  "material—and that he is interested in nuclear materials."
  In June 1999, its assessment said:
  "Most of UBL's planned attacks would use conventional terrorist weapons. But he continues to seek chemical, biological, radiological and nuclear material and to develop a capability for its terrorist use."
  By mid-July 1999, the view had hardened still further. The assessment said:
  "There have been important developments in"
  Islamist extremist
  "terrorism. It has become clear that Usama Bin Laden has been seeking CBRN"—
  chemical, biological, radiological and nuclear—
  "materials… The significance of his possession of CB materials is that, in contrast to other terrorists interested in CB, he wishes to target US, British and other interests worldwide."
  A series of further assessments to the same effect was issued in January 2000, and again in August 2000 and January 2001. To anyone who wants to know why I became increasingly focused on the link between terrorism and WMD, I recommend reading that part of the report and the intelligence assessments received.
  It is against this background of what one witness to Lord Butler called the "creeping tide of proliferation" that the events of 11 September 2001 should be considered. As the report rightly says, following 11 September, the calculus of the threat changed. I said in this House on 14 September 2001:
  "We know, that they"
  the terrorists
  1434
  "would, if they could, go further and use chemical, biological or even nuclear weapons of mass destruction… We have been warned by the events of 11 September, and we should act on the warning."[Official Report, 14 September 2001; Vol. 372, c. 606.]
  I took the view then, and I stand by it now, that no Prime Minister faced with this evidence could responsibly afford to ignore it. After 11 September, it was time to take an active, as opposed to reactive, position on the whole question of weapons of mass destruction. We had to close down the capability of the rogue states—usually highly repressive and unstable—to develop such weapons and the commercial networks, such as those of A.Q. Khan, helping them. Again, my clear view was that the country where we had to take a stand was Iraq.
  Iraq was the one country to have used WMD recently. It had developed WMD capability and concealed it. Action by UN inspectors and the IAEA had, by the mid to late 1990s, reduced this threat significantly, but as the Butler report shows at paragraphs 180 to 182, by the time the inspectors were effectively blocked in Iraq, at the end of 1998, the intelligence assessments were that some chemical weapons stocks remained hidden, that Iraq remained capable of a break-out chemical weapons capability within months, had a biological weapons capability—also with probable stockpiles—and could have had ballistic missiles capability in breach of UN resolutions within a year.
  This, of course, was the reason for military action, taken without a UN resolution, in December 1998. Subsequent to that, the report shows that we continued to receive JIC assessments on Iraq's WMD capability. For example, in respect of chemical and biological weapons, in April 2000 it said:
  "Our picture is limited. It is likely that Iraq is continuing to develop its offensive chemical warfare … and biological warfare … capabilities."
  In May 2001, in respect of nuclear weapons, its assessment was that:
  "Our knowledge of developments in Iraq's WMD and ballistic missile programmes since Desert Fox air operations in December 1998 is patchy. But intelligence gives grounds for concern and suggests that Iraq is becoming bolder in conducting activities prohibited by"
  UN Security Council resolution
  "687. There is evidence of increased activity at Iraq's only remaining nuclear facility and a growing number of reports on possible nuclear related procurement."
  Then in February 2002, the JIC said:
  "Iraq … if it has not already done so, could produce significant quantities or BW agent within days."
  The report specifically endorses the March 2002 advice to Ministers, which stated that although containment had been partially successful and intelligence was patchy, Iraq continued to develop WMD. It said:
  "Iraq has up to 20 650km range missiles left over from the Gulf War. These are capable of hitting Israel and the Gulf states. Design work for other ballistic missiles over the UN limit of 150km continues. Iraq continues with its BW and CW programmes and, if it has not already done so, could produce significant quantities of BW agents within days and CW agent within weeks of a decision to do so. We believe it could deliver CBW by a variety of means, including in ballistic missile warheads. There are also some indications of a continuing nuclear programme."

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  The point I would make is simply this: the dossier of September 2002 did not reach any startling or radical conclusion. It said, in effect, what had been said for several years based not just on intelligence, but on frequent UN and international reports. It was the same conclusion, indeed, that led us to military action in 1998, to maintain sanctions, and to demand the return of UN inspectors.
  We published the dossier in response to the enormous parliamentary and press clamour. It was not, as has been described, the case for war, but it was the case for enforcing the United Nations will, In retrospect, it has achieved a fame it never achieved at the time. As the Butler report at paragraph 310 states:
  "It is … fair to say at the outset that the dossier attracted more attention after the war than it had done before it. When first published, it was regarded as cautious, and even dull. Some of the attention that it eventually received was the product of controversy over the Government's further dossier of February 2003. Some of it arose over subsequent allegations that the intelligence in the September dossier had knowingly been embellished, and hence over the good faith of the Government. Lord Hutton dismissed those allegations. We should record that we, too, have seen no evidence that would support any such allegations."
  Indeed, the report says at paragraph 333 that in general the statements in the dossier reflected fairly the judgments of past JIC assessments.
  The report, however, goes on to say that with hindsight making public that the authorship of the dossier was by the JIC was a mistake. It meant that more weight was put on the intelligence than it could bear, and put the JIC and its chairman in a difficult position. It recommends in future a clear delineation between Government and JIC, perhaps by issuing two separate documents. I think this is wise, although I doubt that it would have made much difference to the reception of the intelligence at the time. The report also enlarges on the criticisms of the ISC in respect of the greater use of caveats about intelligence both in the dossier and in my foreword, and we accept that entirely.
  The report also states that significant parts of the intelligence have now been found by the Secret Intelligence Service to be in doubt. The chief of the SIS, Sir Richard Dearlove, has told me that it accepts all the conclusions and recommendations of Lord Butler's report that concern the service. The SIS will fully address the recommendations that Lord Butler has made about its procedures and about the need for the service properly to resource them. The service has played, and will continue to play, a vital role in countering worldwide the tide of proliferation of weapons of mass destruction. Indeed, its successes are evident in Lord Butler's report.
  I accept the report's conclusions in full. Any mistakes should not be laid at the door of our intelligence and security community. They do a tremendous job for our country. I accept full personal responsibility for the way in which the issue was presented and therefore for any errors that were made.
  As the report indicates, there is no doubt that at the time it was genuinely believed by everyone that Saddam had both strategic intent in respect of WMD and actual weapons. I make this further point. On the sparse, generalised and highly fragmented intelligence about al-Qaeda prior to 11 September, it is now widely said that
  1436
  policy makers should have foreseen the attacks that materialised on 11 September 2001 in New York. I only ask: had we ignored the specific intelligence about the threat from Iraq, backed up by a long history of international confrontation over it, and that threat later materialised, how would we then have been judged?
  I know that some will disagree with this. There are those who were opposed to the war, remain so now, and will for ever be in that position. I only hope that now, after two detailed parliamentary Committee reports, a judicial inquiry more exhaustive than any has ever been in examining an allegation of impropriety against Government, and now this voluminous report, people will not disrespect the others' point of view, but will accept that those who agree and those who disagree about the war in Iraq hold their views not because they are warmongers on the one hand or closet supporters of Saddam on the other, but because of a genuine difference of judgment as to the right thing to have done.
  There was no conspiracy. There was no impropriety. The essential judgment and truth, as usual, does not lie in extremes. We all of us acknowledge that Saddam was evil and his regime depraved. Whether or not actual stockpiles of weapons are found, there was not and is not any doubt that Saddam used weapons of mass destruction and retained every strategic intent to carry on developing them. The judgment is this: would it have been better or more practical to have contained him through continuing sanctions and weapons inspections, or was this inevitably going to be, at some point, a policy that failed; and was removing Saddam a diversion from pursuing the global terrorist threat or part of it?
  I can honestly say that I have never had to make a harder judgment. But in the end, my judgment was that after 11 September, we could no longer run the risk—that instead of waiting for the potential threat of terrorism and WMD to come together, we had to get out and get after it. One part of that was removing the training ground of al-Qaeda in Afghanistan. The other was taking a stand on weapons of mass destruction, and the place to take that stand was Iraq, whose regime was the only one ever to have used WMD and was subject to 12 years of UN resolutions and weapons inspections that turned out to be unsatisfactory. Although in neither case was the nature of the regime the reason for conflict, it was decisive for me in the judgment as to the balance of risk for action or inaction.
  Both countries—Afghanistan and Iraq—now face an uncertain struggle for the future, but both at least now have a future. The one country in which one will find an overwhelming majority in favour of the removal of Saddam is Iraq. I am proud—was proud and remain proud—of this country and the part it played, especially our magnificent armed forces, in removing two vile dictatorships and giving people oppressed, almost enslaved, the prospect of democracy and liberty. This report will not end the arguments about the war, but in its balance and common sense, it should at least help to set them in a more rational light; and for that we should be grateful.
  Mr. Michael Howard: In his statement, the Prime Minister relied on a finding in the report relating to the good faith of the Government in paragraph 310. The Prime Minister read it out, and it refers specifically to allegations that the

  1437
  intelligence in the September dossier had knowingly been embellished, and it agrees with Lord Hutton on those allegations. It does not refer to other findings in the report; it does not refer to what the Prime Minister said; it does not give the Prime Minister a defence. In January this year, the Prime Minister said:
  "The issue vis-à-vis my integrity is: did we receive the intelligence and was it properly relayed to people?"
  The question that arises from that statement is: was the intelligence given to the Prime Minister accurate, and did he give an accurate account of it to the country? Let us examine, on the basis of the Butler report, what the intelligence services told the Prime Minister, and then what he told the country.
  On 15 March 2002, the Joint Intelligence Committee said:
  "Intelligence on Iraq's weapons of mass destruction … and ballistic missile programmes is sporadic and patchy."
  I repeat, "sporadic and patchy". On 21 August 2002, the JIC said that
  "we have little intelligence on Iraq's CBW doctrine, and know little about Iraq's CBW work since late 1998".
  I repeat:
  "we have little intelligence … and know little".
  On 9 September 2002, the JIC said: "Intelligence remains limited." I repeat: "Intelligence remains limited." That is what the JIC told the Prime Minister, so let us look at what he told the country.
  The Prime Minister, in his signed foreword to the September 2002 dossier, said:
  "I am in no doubt that the threat is serious and current."
  He also said that
  "the assessed intelligence has established beyond doubt that Saddam has continued to produce chemical and biological weapons."
  I repeat that the Prime Minister said that he was in "no doubt", and that the intelligence was "beyond doubt".
  On 24 September 2002, the Prime Minister told the House that the picture painted by the intelligence services was "extensive, detailed and authoritative"—not "sporadic and patchy". Is that not why Lord Butler concludes that it was
  "a serious weakness that the JIC's warnings on the limitations of the intelligence underlying some of its judgements were not made sufficiently clear"?
  Is that not why Lord Butler concludes that the failure to include the limited intelligence base on which some of those assessments were made was "significant"? Is that not why Lord Butler concludes, specifically in relation to the language used by the Prime Minister, that it may have reinforced the impression that
  "there was fuller and firmer intelligence behind the judgements"
  in the September dossier than was, in fact, the case.
  I return to the central question: was the intelligence given to the Prime Minister accurate, and did he give an accurate account of it to the country? It is now clear that in many ways the intelligence services got it wrong, but their assessments included serious caveats, qualifications and cautions. When presenting his case to the country, the Prime Minister chose to leave out those caveats, qualifications and cautions. Their qualified
  1438
  judgments became his unqualified certainties, and the question that he must answer today is: why? He has said that mistakes were made and he accepts responsibility, but it is not a question of responsibility—it is a question of credibility. I hope that we will not face in this country another war in the foreseeable future, but if we did and this Prime Minister identified the threat, would the country believe him? [Interruption.]
  Mr. Speaker: Order. I want the hon. Member for Huddersfield (Mr. Sheerman) to be quiet. If there is any breach of the rules of the House there is a danger that the House will be suspended, which means that the Prime Minister and the Leader of the Opposition will have to wait until I recall it, so bear that in mind. I do not expect the right hon. Member for Dewsbury (Ann Taylor) to interfere either.
  Mr. Howard: If we faced such a prospect, and the Prime Minister asked the country to rely on intelligence, would it have confidence in him? If he said that in his judgment war was necessary, would the country trust him? The issue is the Prime Minister's credibility. The question that he must ask himself is: does he have any credibility left?
  The Prime Minister: Let me first deal with the issue of good faith. The right hon. and learned Gentleman supported the war—indeed, he supports it still.
  Mr. Howard: On the basis of what you said.
  The Prime Minister: Oh, is that reason? Let us just look at that for a moment. Was the right hon. and learned Gentleman duped into supporting the war by me? Let me quote something that the shadow Foreign Secretary said six months before the dossier was published:
  "The Iraqi threat is indisputable. Horrific weapons of mass destruction in the hands of a despot who will use them or give them to others to use in every part of the world."
  A few months later, before the dossier was published, he said:
  "We know there are weapons of mass destruction."
  The Leader of the Opposition made a speech to Murdoch's News Corporation in March this year, after the Hutton report, after all the arguments about the intelligence, and I managed to get hold of a copy. He said
  "The war against Iraq was necessary. It was just. It was, indeed, arguably overdue."
  He went on:
  "The British Conservative Party has been consistent in its support for the British Government"—
  that was in March this year, not March last year—
  "and for our armed forces, over the war in Iraq. Indeed"—
  he went on to boast—
  "Tony Blair would not have won last year's vote in the House of Commons … which gave him the mandate to go to war, without the support of the Conservative Party."
  So let us have no more of him being tricked into

  1439
  supporting the war by me. The fact of the matter is that he thought it was right then and he thinks even now, does he not, that it was right to go to war?
  Mr. Howard: Answer the question.
  The Prime Minister: Go on—just a nod of the head will do. The right hon. and learned Gentleman thinks even now that it was right to go to war, does he not? So let us leave aside his usual opportunism and understand that we both agreed that Saddam was a threat, we both still think Saddam was a threat and we both think the war was justified. Let us therefore concentrate on making Iraq better, not on point-scoring that has nothing to do with the central issues.
  Mr. Charles Kennedy: As the Prime Minister rightly acknowledges in his statement, whatever views we all took about the war, there is no doubt, given the importance of this report and others and his statement this afternoon, that nothing will ever be able to erase the loss of British military life and the loss of life of innocent Iraqi civilians.
  Our fundamental disagreement, as the Prime Minister knows from the time that he announced the setting up of Lord Butler's inquiry, remains. We argued from the outset that we wanted the political judgments that informed the decision that the Prime Minister took to go to war to be placed properly under the microscope. As we have seen from the very thorough and detailed piece of work that Lord Butler has produced, that was not possible within the remit set. However, what is possible within the remit and the words that Lord Butler has chosen to use in his report is to pose some direct questions to the Prime Minister arising from it, not least because the Prime Minister said in response to me when he made his statement setting up the inquiry that on the issue of political judgment
  "to subcontract to some committee the issue of whether it was right or wrong to go to war is not merely wrong: ultimately it is profoundly undemocratic."—[Official Report, 4 February 2004; Vol. 417, c. 755.]
  Lord Butler states in chapter 5 on page 99 that
  "from the evidence which has been found and de-briefing of Iraqi personnel it appears that prior to the war the Iraqi regime … did not, however, have significant—if any—stocks of chemical or biological weapons in a state fit for deployment, or developed plans for using them."
  As the Prime Minister says he accepts the report in full, he must accept that observation. Can he therefore square his acceptance of that observation with his own words in the introduction to the dossier, in which he wrote:
  "I believe the assessed intelligence has established beyond doubt that Saddam has continued to produce chemical and biological weapons"?
  Does not Lord Butler's conclusion, which I quoted, reinforce what the Prime Minister had said much earlier, in 1998, when he argued that the policy of containment was working?
  In chapter 7, on page 141, Lord Butler points out:
  "These international agencies"—
  that is, UNSCOM and the International Atomic Energy Agency—
  1440
  "now appear to have been more effective than was realised at the time in dismantling and inhibiting Iraq's prohibited weapons programmes."
  He goes on:
  "The value of such international organisations needs to be recognised and built on for the future, supported by the contribution of intelligence from national agencies."
  If the Prime Minister accepts the first part of that observation, as he has acknowledged, what steps will he take to make sure that the conclusion is followed, to underpin those international organisations for any similar events in future?
  Moving away, as we did, from the containment policy at the time of the September 2002 dossier, huge focus was placed on the 45 minutes claim. I take issue with the Prime Minister when he says this afternoon that that dossier assumed importance after the event. Surely he, like the rest of us, remembers, for example, well-publicised events such as tanks being deployed at Heathrow airport and the newspapers being full of the 45 minutes warning. That was the context at the time.
  Lord Butler says of the 45 minutes claim:
  "the JIC should not have included the '45 minute' report in its assessment and in the Government's dossier without stating what it was believed to refer to. The fact that the reference in the classified assessment was repeated in the dossier later led to suspicions that it had been included because of its eye-catching character."
  If the Prime Minister accepts that conclusion, could he tell us who bears the ultimate responsibility for the claim's inclusion and its highlighting in that way?
  Finally, in chapter 5 at paragraph 465, Lord Butler states:
  "We conclude that it was a serious weakness that the JIC's warnings on the limitations of the intelligence underlying its judgements were not made sufficiently clear in the dossier."
  That goes to the heart of the matter for many, many people. The legality of the war was a key issue. The advice of the Attorney-General has been looked at, as well as the advice—at times conflicting—from within the Foreign Office. It is acknowledged that twice in the past such advice has been made public. Is it not time that all of us were able to see the full advice tendered by the Attorney-General?
  Lord Butler speaks of a collective failure on the part of the Joint Intelligence Committee, but if that collective failure applied to the JIC, did it not also apply to the key political players in and around No. 10 Downing street at the time?
  The Prime Minister presides, we are told, over a Cabinet process of informality on such important issues. If he accepts the report's conclusions and recommendations, does he have any procedures in place, or is he planning any changes to his management of Cabinet government for such an important issue as war and peace? Surely we have a right to be told that.
  Inevitably, Lord Butler and his colleagues, deep and elaborate though their task has been, have not been able to address the fundamental question that many of us wanted to have addressed from the start: what was the key reality of the political judgments that led us to this war? When the Prime Minister now says that the outcome was desirable, albeit arrived at by insufficient conclusions and methodology, surely that is not a

  1441
  satisfactory way to proceed. Congress is continuing to try and get to the bottom of these matters. Surely the British Parliament should be seen to do better as well.
  The Prime Minister: First, I shall deal with one or two of the individual points.
  With reference to the tanks at Heathrow, I am not sure what point the right hon. Gentleman was making, but I can assure him that the reason we took that action, as has already been explained, is that we were advised to take that action. It was for no other reason than that. If we had ignored that advice, we would have been behaving very irresponsibly.
  On containment, yes, there was a policy of containment in respect of Saddam. People were always extremely doubtful whether it was working and became increasingly doubtful after the bombing of Baghdad in 1998. Yes, I and others wanted containment to work and at times believed it could work, but the evidence that we have now indicates almost certainly that it was not working. That is why I come back to the point about balance. At each stage, the right hon. Gentleman takes certain parts out of the Butler report and says that Lord Butler found that there was no threat from Saddam in respect of WMD. [Interruption.] That is what he tried to imply.
  As I pointed out to the House, however, it is clear that Lord Butler reached no such conclusion. Indeed, he said that it would be rash to draw any conclusion, even about WMD missiles in Iraq at the moment. He said, first, that Saddam plainly had the strategic intention of resuming the prohibited weapons programme; secondly, that Saddam was carrying out illicit research, development and procurement activities in support of that programme; and thirdly, that Saddam was developing ballistic missiles with a range longer than that permitted under the relevant UN resolutions.
  I shall quote what the right hon. Gentleman said in the Western Morning News two days after we published the dossier. He said that there was
  "no killer fact"—
  in the dossier—
  "more a confirmation of what we already knew."
  Everybody believed the same thing about WMD and it would be wrong to suggest that the dossier somehow altered his perception. He was not persuaded by the dossier and voted against the war, which is why I at least have some time for his objections, as opposed to those raised by the Leader of the Opposition.
  On the basis of the Butler report, the right hon. Gentleman must accept that Saddam still remained a threat of some sort, and I think that he does accept that. I think that he accepts that it was important to put back the inspectors into Iraq, and I also think that he accepts that the inspectors would never have been anywhere near Iraq but for the presence of US and British troops. The issue is whether we should have waited longer. [HON. MEMBERS: "Yes."] I shall deal with that head on.
  In March 2003, I made strenuous attempts to get a second UN resolution. I did so on the basis that we had to go through all Saddam's areas of non-compliance—it was clear that he was not complying—set them out in
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  the prescribed form in a UN resolution, and then combine that resolution with an ultimatum to Saddam that either he did those things or we would take action. If we had managed to secure that resolution, I agree that we would have had more time, but the plain fact of the matter was that we could not get agreement in the Security Council resolution to any form of ultimatum in any set of circumstances.
  In March 2003, we knew that Saddam was a threat and that the troops were the only reason why he had allowed the inspectors in, and we were left in a situation in which we could not obtain agreement on an ultimatum to him to comply with the UN inspectors. As I explained to the House at the time, we had a choice: we could either back down and not have inspectors backed by troops with an ultimatum or stick with it and see it through, and I still believe that we did the right thing in seeing it through.
  I want to make one final point. As many people do, the right hon. Gentleman talked about the murder of innocent civilians in Iraq. That point is occasionally presented as if the civilians who have died and who are dying in Iraq are somehow dying as a result of coalition action. We are not killing civilians in Iraq, terrorists are killing civilians in Iraq. What is more, thousands of people were killed in Iraq year in, year out under Saddam. The best judges of the best interests of civilians in Iraq are Iraqi civilians themselves, and they are the ones who congratulate us most on getting rid of Saddam.
  Ross Cranston: Will my right hon. Friend confirm that despite the speculation, the report does not criticise the Attorney-General or question the legal advice? He knows that there are disagreements among lawyers. In fact, the report notes that the deputy legal adviser at the Foreign and Commonwealth Office resigned—honourably—because she disagreed. At the end of the day, there was non-compliance over 12 years with UN Security Council resolutions. Security Council resolution 1441, which was unanimous, gave Iraq a final opportunity to comply, and Iraq failed to do so, which was the legal basis for what we did.
  The Prime Minister: What my hon. and learned Friend says is absolutely right. As he pointed out, the Attorney-General's legal advice was not related to the intelligence.
  Sir John Stanley: Will the Prime Minister assure the House that the unprecedented degree of interleaving of the political presentation process with the intelligence process that took place in the lead up to the war in Iraq will not continue under his Government?
  The Prime Minister: What I will say to the right hon. Gentleman is that we should accept entirely the recommendation of the Butler report that it would probably be better in future to separate the Government case and whatever JIC assessments are made. Had we done that, however, the effect would have been the same, and that point is very clear if one studies the Butler report. I remember—the right hon. Gentleman probably remembers this too—the enormous clamour

  1443
  at the time to provide the intelligence. The provision of intelligence in that way was unique but, given the different world in which we live and the different type of security threat that we face today. I suspect that it will not be the last time that we are called upon to do such a thing.
  Ann Clwyd: My right hon. Friend is right when he says that it is the Iraqi people themselves who are most pleased by the removal of Saddam Hussein, whom they always saw as the biggest weapon of mass destruction. Over the past two days, I have been at my old university college, where I met a man who fled the regime some years ago and who has since become a fellow of the university of Wales, Bangor. In a newspaper article, he said:
  "Millions of my people have been saved thanks to the downfall of Saddam."
  The article includes a photograph of a crowd of students who attended university with him in Iraq, all of whom were murdered by Saddam's regime or went into exile. I am glad to hear my right hon. Friend say that, even if we knew then what we know now, we would still have gone ahead with removing that awful regime.
  The Prime Minister: I thank my hon. Friend for that and once again congratulate her on the work that she did before Iraq was an issue for all of us. That work is an immensely powerful testament to her integrity and perseverance.
  Mr. Robert Jackson: As co-chairman of the Council for Arab-British Understanding, I chaired a meeting on Monday with the new deputy Foreign Minister of Iraq. The real progress that is being made in that country is not often acknowledged in our press, which sometimes gives the impression that it would prefer disaster, so that the war could be shown to be wrong. The deputy Foreign Minister's main point was that the country needs to learn the lessons from the past and tackle the problems that it faces in the future. Should we not draw the same conclusions for Britain? We in Britain should learn the lessons of the past, and put these inquiries behind us and we must get on and tackle the problems of the future concerning terrorism and proliferation.
  The Prime Minister: I thank the hon. Gentleman for that point. I explained in some detail the intelligence that we received not only on Iraq, but on Osama bin Laden and that particular type of terrorism to try to explain to people why I believe that there is a link between those two issues, and why going after the issue of WMD is not a diversion from pursuing global terrorism. 1 agree with the hon. Gentleman, and I have spoken to the Foreign Minister of Iraq. The Iraqis face the prospect of becoming a stable partner in the region, which will make a huge difference to the stability of the region and the world.
  Mr. George Howarth: Does my right hon. Friend agree that, perhaps justifiably, never has a Government decision been so deeply inquired into? At the end of those inquiries, two conclusions cannot be doubted: first, the security services acted with integrity; secondly, the
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  Government acted in good faith and with integrity. Is not the proper response now for all of us to get behind the effort to build a democratic, secure Iraq and to stop the inquiries, because we now know what took place and why?
  The Prime Minister: I do think that it is time that we recognised that the goal now is to make Iraq a stable country. I also emphasise once again that, as I said at the very outset of my statement, the key to this report is balanced judgments. People can pick out one part of the report or not, but the plain fact is that although it does indeed cast doubt on some of the intelligence that was relied on, it most certainly does not conclude that Saddam Hussein was not a threat in respect of WMD.
  Mr. Kenneth Clarke: Will the Prime Minister bring himself to accept that Lord Butler has shown more clearly than ever before, in annexe B and elsewhere, that time and again the Joint Intelligence Committee's first publication used language to describe the threat that did not match the language of its own assessments by its own officers?
  Can the Prime Minister think of any explanation for the removal of all the caveats and doubts in producing that publication other than that John Scarlett had been persuaded, by the Prime Minister's press secretary and others, to remove all the cautionary words and to stiffen up the case?
  Most importantly, does the Prime Minister believe that if, when he came to this House and made the case for war, he had used the actual language of the intelligence assessments that he had read, he would still have won the vote that carried this country into war? I must tell him that I do not think that he would have done.
  The Prime Minister: I totally disagree with the right hon. and learned Gentleman. He, of course, opposed the war, and was perfectly entitled to do so. He opposed the war at the time and opposes it now. I have absolutely no doubt at all that had the caveats been put in about the limits of intelligence and so on, the essential fact would have remained—that there was the clearest possible evidence on Saddam Hussein and weapons of mass destruction. Resolution 1441, which was passed subsequent to the dossier, was a resolution of the entire international community.
  If the right hon. and learned Gentleman looks at Lord Butler's report as a whole, he will find that the allegation that there was a knowing embellishment of the intelligence is refuted. That is precisely what Lord Hutton looked into, and precisely what Lord Butler, along with everyone else, finds is not right.
  I suggest that the right hon. and learned Gentleman, like others who opposed the war, should recognise that he simply made a different judgment as to what we should do in the light of this threat. The argument was not over the details of the threat. The argument was: is the judgment that the best way of dealing with this threat is to get the inspectors back in and leave them there for a period of time, or to continue the sanctions regime, or do we recognise that the only way of dealing with this threat is to remove the person constituting it? That is the difference of judgment between us: it was

  1445
  then and it is now. Nothing will change that, but I am afraid that I disagree with the right hon. and learned Gentleman's judgment.
  Mr. Robin Cook: May I welcome the Prime Minister's frank acceptance that there were no stockpiles of weapons of mass destruction at the time of war? He is entitled to argue that that does not mean that there was no justification for the war, but it does surely mean that there was no urgent necessity for the war, because there was no imminent threat. Will he now recognise that there was time for Hans Blix to finish his job and to confirm through the process of UN weapons inspections that Saddam had no weapons of mass destruction and that, had he done so, we might have been spared the unavoidable conclusion from the content of the Butler report—that we committed British troops to action on the basis of false intelligence, overheated analysis and unreliable sources?
  The Prime Minister: I know that my right hon. Friend has always taken the view that it would have been better if we had proceeded with the second UN resolution. I know, too, that he believes that we should have allowed Hans Blix to remain there for a longer period of time. I simply have to say to him that, as I said to the leader of the Liberal Democrats, if we had secured the second resolution, with a series of conditions and an ultimatum, then yes, there would have been more time. As I used to say at the time, it is not a question of a specific amount of time, but a question of Saddam fully complying, because that is what resolution 1441 says—that Saddam had fully to comply. I think that my right hon. Friend would accept that there is no way the UN inspectors would ever have been back in Iraq without the troops being there. And there is no evidence that Saddam was ever complying fully—indeed, the evidence points the other way.
  The problem is this. I agreeߞand I thought that my right hon. Friend put it, at least in the first part of his question, in a moderate way—that we have to put this in a different way with hindsight. I also say that, if it is correct, as Lord Butler also finds, that there was a clear strategic intent, that there was the illicit procurement of material in order to develop WMD, and that Saddam was carrying on developing ballistic missiles in breach of UN resolutions, there is no doubt that he was indeed in breach of those UN resolutions. So the question is this: if we had left the inspectors there longer, with the troops still down there, would they, in the end, have discovered, not that there were no stockpiles, but that there were actual breaches of the UN resolution, as Lord Butler finds?
  I have to say to my right hon. Friend that, ultimately, I do not believe that even if we had left the inspectors thereߞwith the troops, because he acknowledges, as I do, that the troops would have had to be there to keep the inspectors thereߞfor three months, six months, or even nine months, Saddam would ever have complied, because he never had any intention of giving up his WMD ambitions. In the end, therefore, we faced the choice of whether to take this on and deal with it or not.
  Incidentally, I would also say to my right hon. Friend that that is the reason why he and I, without a UN resolution, took military action in December 1998. We
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  did not take that action because we had some doubt about Saddam and WMD—we took that action because we were certain of it and believed that it was the right thing to do. I know that there was a difference between us on the second resolution, but I believed that it was the right thing to do in December 1998 and I believed that it was the right thing to do in March 2003.
  Mr. David Trimble: I wonder if the Prime Minister would agree with the following summary, as we stand back from things and look at them. There was, and continues to be, a very good case for the action that was taken with regard to Iraq, but the Government, in their anxiety and eagerness to get the widest possible support for that action, oversold the case, and the reaction from that has led to an undermining of the good case and results in a situation whereby it is now more difficult for us to make progress. Does the Prime Minister remember once making a similar mistake?
  The Prime Minister: No, I am afraid that I do not; and I have to tell the right hon. Gentleman that I do not agree with him. Even if one put in all the caveats, as the report suggests, the fact is that what we said at the time, back in September and in March, is that Saddam Hussein is an active WMD threat and has actual deployable weapons. That was the effect of the intelligence. No matter what changes we made to the way in which it was put, that fundamental thing would have remained. I say to the right hon. Gentleman, as I have said to others, that the fact is—this is why I am afraid that I cannot say that we were wrong in taking the action that we did—that even if we accept what is in Lord Butler's report now, that does not mean going to the opposite extreme and saying that there was no threat at all.
  Kali Mountford: Is it not the case that the policy of containment could be said to have been working only if we accepted people's containment in a situation of despair and mass graves? Is it not also the case that weapons of mass destruction, and the belief in them, were vital to the Saddam regime to maintain that state of despair? If we are to continue in this way as an international community, should not we now consider redrawing international agreements to ensure that when similar situations arise the case for action is absolutely clear?
  The Prime Minister: I entirely accept what my hon. Friend says. There is a very strong case, in the different world in which we live, for recognising that there may be circumstances in which we have to take such action in future. There is clear evidence of bin Laden, al-Qaeda and this new form of terrorism trying to acquire WMD. The best account of that, strangely, is in the statements made by Dr. David Kay, who was with the Iraq survey group. He says that, because of the nature of Saddam's regime—its instability and the way in which people were treated—the threat may have been different from, but greater than, the threat that we anticipated. That is why I believe that in future we will be placed in a situation where we have to calculate whether we need to take such action.
  Mr. Alan Duncan: Does the Prime Minister agree that it would be unjust for any public servant to take the rap today? What steps will he take to shoulder the blame, which, he admits, rests with him, when the main reason for the failure that the report uncovers and outlines largely on page 147 is the Prime Minister's circumvention of all the decencies and formalities of a proven system of government, and his replacement of it by informality. chumminess, distorted lines of communication and the concentration of all power around him and a small coterie in No. 10?
  The Prime Minister: I do not recognise that quote from the report, unless I missed something. Apart from the fact that regular, minuted meetings of the relevant Cabinet Ministers took place, the Cabinet discussed the matter in detail on no fewer than 24 occasions.
  Donald Anderson: Will my right hon. Friend confirm that, at the relevant time—before the publication of the September dossier—the then Leader of the Opposition had full briefing from the intelligence community and did not try to play politics with the matter, impugn my right hon. Friend's credibility or criticise any loss of caveats when the relevant debates took place? Will he also remind hon. Members that we are considering the fourth such report on the issue? Of course, some will never be happy because they want my right hon. Friend's scalp, which, again, an inquiry has denied them Is not it important that we now concentrate on the genuine consensus on the reconstruction of Iraq so that it does not pose a threat to the world community, its neighbours and, most of all, its own people?
  The Prime Minister: I entirely endorse my right hon. Friend's comments about the previous Leader of the Opposition, who supported us strongly throughout and acted somewhat in contrast to the right hon. and learned Gentleman who now occupies his place.
  It is important that we concentrate on the future in Iraq, while recognising that its history is one of trouble not only for its people but for the region and the wider world. That is why it is important that it becomes a stable partner for peace.
  Mr. Richard Shepherd: I am sure that the Prime Minister recognises that many hon. Members voted for the war on the case that he made so passionately and assuredly, and that, in the light of the material that became available through the Hutton inquiry and now through Lord Butler, they would not have voted for it. Is not it even more alarming that, after the Prime Minister based his case for war so narrowly, clearly and vehemently on the threat of weapons of mass destruction to the country, he now extends the basis for going to war and thus justifies it?
  The Prime Minister: We went to war to enforce the UN resolutions that were outstanding in respect of Iraq and weapons of mass destruction. I have had to concede, as the Butler report finds, that some of the intelligence cannot be relied upon, but the hon. Gentleman goes to the other extreme and says that, in that case, there was no problem. There was a problem: our evidence, which the Butler report details, is about
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  breaches of UN resolutions. If that information had reached the inspectors when they were in Iraq, it would have constituted a breach of resolution 1441.
  It is not a matter of my extending the case; there is a genuine issue, and that is why I went into such detail in my statement. It is my belief, which many people dispute, that there is a different sort of security threat today. It comes from the combination of the new form of global terrorism—terrorism is always evil, but we are considering a different sort, which is without limit—and the development and proliferation of weapons of mass destruction in unstable, repressive states or the commercial networks that live off them. That possible combination is the security threat that we face.
  My thinking has changed after 11 September. I am prepared to take all the criticism and so on because I know that, in future, people would look back and want to know why, if we were given information about the actions of terrorists after 11 September, and we knew about the trade and development of weapons and that terrorists were trying to get hold of them and unstable countries were proliferating them, we did not do anything to stop that. I therefore believe that we have to take an active rather than a reactive position. That is why we are in the current situation. I do not regret it.
  If the Butler report had found that Saddam and weapons of mass destruction were all a hoax, that would he different. However, no one seriously claims that. The issue is the extent to which readily deployable stockpiles existed. There is no question about the threat that Saddam posed because he used the weapons. There is no question about the intent, because the report found that. The question is what action to take—that judgment had to be made. Some people take the view that action was not necessary because the threat was not strong enough, but my view is that it was powerful enough. That is the difference between us. It is not an issue of integrity or good faith; it is just a disagreement.
  Mr. Peter Kilfoyle: The Prime Minister said that everyone genuinely believed that Saddam had both strategic intent for WMD and actual weapons. That is a classic definition of a threat: capability plus intent. However, I remind him that many of us took issue with that at the time. We voted for an amendment that said that the case for war was not proven—it was as simple as that.
  On intent and the way in which the imminent threat has long been the key to trying to convince Parliament and the people of the Government's case, I refer the Prime Minister to paragraph 374 of the Butler report—
  Mr. Speaker: Order. The hon. Gentleman must remember that a supplementary question should be brief. Other Back Benchers wish to speak. Perhaps he could ask the question succinctly.
  Mr. Kilfoyle: The Attorney-General said that there would be no justification for the use of force against Iraq on the ground of self-defence against an imminent threat.
  The Prime Minister: With the greatest of respect, that was not the issue. Indeed, on 24 September, when I presented the dossier to the House, I said that I could

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  not say that Saddam would use the weapons this year or next year. The dossier was the reason why we went back to the UN. If I believed that there was an imminent threat to this country from Saddam, we would not have waited for the UN but would have taken action immediately. I came to the view, which I still hold, that the potential combination of global terrorism and WMD meant that we had to act on WMD. That is what we did. As to the belief about Saddam and weapons of mass destruction, I simply refer my hon. Friend back to resolution 1441, which clearly stated that he was a threat in respect of the weapons.
  Mr. Elfyn Llwyd: I am pleased to say that we on these Benches were not duped into supporting the war, and we remain of that view. The Butler report refers to strains, mistakes, misinformation and the resultant carnage. Somehow, no one is to blame for all that. Why does not the Prime Minister take responsibility and do the honourable thing?
  The Prime Minister: First, Lord Butler does not use the words that the hon. Gentleman did. Secondly, let us consider the judgment at the heart of the matter. The hon. Gentleman says that he is glad that he was not duped into supporting the war, but if he had his way, Saddam Hussein would continue to run Iraq. [Interruption.] I have to deal with the consequences of my position, and he must deal with those of his. Would Saddam Hussein's continuing to run Iraq mean that the world and the region was a safer place? I do not think so.
  Angela Eagle: In the press conference that launched the report before the statement in the House, Lord Butler said, in answer to questions, that there was
  "no evidence to question the Prime Minister's good faith."
  The report states:
  "We have no evidence of deliberate distortion or culpable negligence … Government believed the assessments it was putting forward to the British people … There was no intention to mislead."
  How on earth can we listen to the Prime Minister's integrity being traduced by the Leader of the Opposition and others? They are not reading the same report.
  The Prime Minister: What my hon. Friend says is absolutely right. The disagreement that we should have is about the judgment over whether it was right to go to war. That is a disagreement that I can have with the Liberal Democrats. The problem for the right hon. and learned Member for Folkestone and Hythe (Mr. Howard) is that he supported the war and, truthfully, he supports it still. He therefore has to rerun the allegation of bad faith because he cannot make the case against the war.
  Sir Patrick Cormack: As one who voted on 18 March to support the Prime Minister, who does not regret that vote and who recognises that the consequence of a different vote would have been a shattering of the alliance, the remaining in power of Saddam Hussein and the fall of
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  the British Government, may I ask the Prime Minister whether he accepts that the Butler report underlines the fact that intelligence is an inexact science? It does not endorse or whitewash everything that the British Government did, but nor is it an indictment of the decision that the House took.
  The Prime Minister: I thank the hon. Gentleman for that; I agree with Him entirely. We should study the recommendations of the report carefully and implement them. As he rightly says, this is not an issue of integrity or good faith. It is about trying to deal with difficult decisions in a difficult world.
  Mr. Mike Hall: May I draw my right hon. Friend's attention to what Lord Butler said in his press conference this morning? He said that intelligence gathering in Iraq was very difficult because of the closed regime. He also said that intelligence gathering had been made more difficult by the cuts in the 1990s following the end of the cold war. What is my right hon. Friend going to do about that aspect of the report?
  The Prime Minister: What we are doing already is increasing significantly resources for the intelligence services. There has been criticism of some of the people concerned, but I think that the intelligence services do a fantastic job for this country—I really do. They have been an invaluable support to me as Prime Minister and, I am sure, to many Prime Ministers before me.
  Mr. A. J. Beith: What about the question that Butler did not answer and could not really ask, which is: how far was the Prime Minister's willingness to act on very uncertain intelligence the result of a belief that he had already formed that Saddam Hussein had to be dealt with, and a belief that, because the United States was moving inexorably towards an invasion, it was in Britain's interests to try to influence the United Nations in support of that and to be a partner in it?
  The Prime Minister: That is not what Lord Butler has found. The plain fact is that we did not go immediately to war. We went back to the United Nations to get resolution 1441. That was the whole purpose of what we were doing. One of the many things that has been exaggerated in retrospect is the idea that, when we presented the dossier, we were saying, "This is the case for war." We were not saying that; we were saying, "This is the case for dealing with this issue, preferably through the United Nations."
  As I said a moment ago, if I had thought that Iraq was a direct threat to this country, I would have taken immediate action. I did not do that, but I did think that the WMD issue had to be dealt with. September 11 meant that we could not wait around for it to materialise; we had to get out and get after it now. So that is what we did. We started with Iraq because of the history of UN resolutions. We then went to the United Nations. I believe that UN resolution 1441 was very clear: Saddam had to comply fully and totally. Through all the conversations that I had with Hans Blix, he never once suggested to me that Saddam Hussein was

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  complying fully. He used to say, "Well, he's co-operating a bit", and I would say, "That's not enough", and he would say, "Well, you know—". Then came the argument that we should give him more time, and I said, "Okay, let's give him more time, but tied to an ultimatum. If we don't tie it to an ultimatum, he's never going to do it." That is why the decision had to be taken on 18 March, as opposed to some weeks later, as it could have been if an ultimatum had been agreed to. France and other countries made it clear that, whatever happened, they would issue no ultimatum. That was their decision, but it meant that, on 18 March, we were faced with either another UN resolution that would have been meaningless, or taking action. That is what we did.
  Mr. Speaker: Order.
  Several hon. Members rose—
  Mr. Speaker: Order. I say to any Members who are complaining that Back Benchers have had half an hour.
  Harry Cohen: On a point of order, Mr. Speaker. You will note that many Back Benchers on both sides still have questions to ask the Prime Minister. You have been in the House a long time, as have I, and you will know that it was the practice, certainly of past Governments, whenever legitimate questions were tabled for written answer, to say, "I refer the hon. Member to the statement that was made on this issue" and to give that as a reason for not providing any further answers. If that happens in regard to the statement that the Prime Minister has just made, will you have a look at the matter, to ensure that any further legitimate questions that are tabled get a proper answer?
  Mr. Speaker: As always, the hon. Gentleman helps me out. This gives me an opportunity to say that a Committee of the House recommended to the Speaker that an hour should be given for statements. Because of the circumstances of this statement and the fact that the Prime Minister, the Leader of the Opposition and the Liberal Front-Bench spokesman took longer—I make no criticism of them for that—I gave exactly half an hour for Back Benchers' questions. As to questions being answered, I have said to the hon. Gentleman before that I am not responsible for the quality of ministerial answers. I thank the hon. Gentleman again.

  Public Expenditure
  Motion made, and Question proposed, That this House do now adjourn.—[Margaret Moran.]
  2.46 pm
  The Chief Secretary to the Treasury (Mr. Paul Boateng): The spending review announced by the Chancellor on Monday drew the dividing lines and gave a choice for Britain between this Government and the Opposition parties. The choice is between investment in security, law and order, or cuts; economic stability and investment in science and innovation, or cuts; and a future for our public services, or cuts, charges, privatisation and a return to the under-investment in our infrastructure that characterised the Conservative party in Government.
  This Government are in a position to invest more, not less, in public services and in those areas that will enable the UK to grow and to prosper in the global economy of the future. We are in a position to do this because the savings that this Government are making on debt interest and unemployment—the two great costs under the Conservatives—allow us to meet our fiscal rules, keep taxes low and spend more on vital services. We have cut the costs of unemployment and the national debt. Together, they now consume just 2.3 per cent. of national income—as opposed to 4.6 per cent. in 1997—and net borrowing is only 2.4 per cent. of gross domestic product and falling over the forecast period. Both are lower than in the past and lower than in our major competitors in the industrialised world.
  Because of the tough decisions that we have taken to secure economic stability, we have maintained stable and sustained growth, combined with the lowest inflation for 30 years and the highest levels of employment in our history. That is a far cry from the Britain under our Conservative opponents. That Conservative Government were first in and last out of the world downturns. That Britain suffered two of the deepest and longest recessions since the war. That Britain also had inflicted on it by a Conservative Government 3 million unemployed, interest rates at 15 per cent. and in double figures for four years, 1.5 million in negative equity and 250,000 repossessed homes. That was the Britain of our Conservative opponents.
  Because of the economic stability that we have put in place, because the public finances remain sound and on track to meet the fiscal rules, and because we have held strictly to the discipline of the total spending envelope, we are in a position to raise departmental spending from £279.3 billion this year to £301.9 billion next year, £321.4 billion the year after, and £340.5 billion in 2007–08. In this spending round, three quarters of the spending will go to vital, front-line services, so while overall spending in 2006–08 will grow by just 2.8 per cent., departmental spending on vital services will have a real terms rise of 4.2 per cent. over the next three years.
  Mr. Peter Pike: My right hon. Friend is making many important points. Is it not a fact that the 18 years of Conservative rule created problems in towns such as Burnley, which only this Government, with the housing renewal pathfinder project and neighbourhood

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  wardens scheme, have begun to tackle? Certainly, places such as Burnley will recognise what Labour has done for them over the last few years.
  Mr. Boateng: My hon. Friend, who served his constituency so well for so many of those Conservative years, and who made that case on so many occasions in the House from the Opposition Benches, makes an absolutely true point: cities and towns such as Burnley suffered degradation of their infrastructure, under-investment in schools and under-investment in health, which this Government have turned around. Under the spending plans unveiled by my right hon. Friend the Chancellor on Monday, we will continue to turn that around, with increased investment in health and education, but going beyond that in ways that we will no doubt explore during this debate.
  As the Chancellor said in his statement on Monday, resources have been, and will remain, linked to reform. We are committed to maximising efficiency within the public sector and to reducing administrative costs, while continuing our ambitious programme of public service delivery. We recognise that we have a duty to ensure that public money is spent efficiently, securing value for all. Therefore, on the basis of the evidence drawn from Sir Peter Gershon's rigorous 12-month review, and over and above our economic stability, growth and strong public finances, we have announced efficiency savings that will free up more than £20 billion a year by 2008. That will mean even more resources going from backroom functions to front-line services.
  Mr. Michael Fallon: The Chief Secretary says that he is committed to greater efficiency. Can he explain why the administrative costs of Whitehall, which he inherited at 4 per cent., have gone up in every single year in which he has been in government?
  Mr. Boateng: The hon. Gentleman makes a profound error in that intervention as the percentage is now falling, and will continue to fall to 3.7 per cent. of total spend. Let us compare and contrast that with 5 per cent. and more during much of the period in which the Conservatives had stewardship of the economy. That is perhaps not his strongest point as, on reflection, he would be happy to admit.
  Mr. Kenneth Clarke: The right hon. Gentleman gave a figure, which startled my hon. Friend and I, that costs were falling to 3.7 per cent. How much of that is because of the recent reclassification of quite a bit of Home Office spending and one other Department's spending, which has suddenly ceased to be classified as administrative spending and has been moved to front-line spending? Were we to keep a consistent definition, he would agree that administrative spending has been rising, as my hon. Friend suggested.
  Mr. Boateng: The point that I made clear is that as a percentage of total spend, what we are experiencing is a fall, which will be to 3.7 per cent. by the end of this spending review period. The right hon. and learned Gentleman's point, however, is one that I would be only
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  too happy to explore. Although what I have said is absolutely true, and we will see that fall, he, as a former Home Secretary, will recognise that it was always nonsense to classify a group of people such as prison officers, who are very much on the front line of our criminal justice service, as in some way equivalent to those working in back offices and providing administrative services. That was a reclassification that was long overdue—I notice him nodding in consent—but it makes no difference to the figures that I have given.
  Mr. Andrew Tyrie: Will the Chief Secretary give way?
  Mr. Boateng: No, I am afraid not.
  On Monday, the Chancellor announced details of planned efficiency savings: a gross reduction in civil service posts of 84,150, and efficiency savings in local government allowing for an additional reduction of some 20,000 posts; the merged Inland Revenue and Customs and Excise, which has increased planned gross reductions from 14,000 to 16,000; a total of 20,030 civil service posts to be relocated to the regions, which has been called for by Members on both sides of the House because it brings real benefits to all those outside London and the south-east whom they represent; and a real terms fall in administration costs and plans to deliver some £6 billion in procurement savings by 2008.
  Therefore, while Conservative Members talk of fat Government, planned administration costs, which rose to more than 5 per cent. of total spending under the previous Government, will instead fall to a record low of 3.7 per cent by 2008.
  Mr. Geoffrey Clifton-Brown: The right hon. Gentleman has just reiterated the Chancellor's announcement of a very big figure that he expects to receive from savings. If he does not achieve those savings, will public expenditure be cut, or will taxes be increased to make up the shortfall?
  Mr. Boateng: The hon. Gentleman knows well that the departmental limits are set, and that we are committed to meeting our fiscal rules. We have met them, and we will continue to meet them in this cycle and the next. The sum to be released by efficiencies—£20 billion a year by 2008—will mean even more resources going from backroom functions to front-line services. I thought that he—as he usually takes a progressive outlook on those areas and is usually hot for efficiencies—would see that as a welcome commitment and one that, far from dividing us, ought to unite us on the sense that it clearly represents.
  In this spending review, not only will we continue to address past under-investment, of the sort to which my hon. Friend the Member for Burnley (Mr. Pike) referred, but we will also invest to equip Britain to rise to the new challenges of the changed global environment: internationally, through investment not only in defence but in international aid and development; and here at home, with investment in the key drivers of our current and future prosperity and in our public services.
  In contrast, the shadow Chancellor, who I am sorry to see is not in his place this afternoon, but I can well understand why because he must have rather a lot on his

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  mind because the sums do not add up—[Interruption.] The hon. Member for Hertford and Stortford (Mr. Prisk), who works so hard for his party, chuckles, but he knows that the sums simply do not add up in terms of the Conservatives' spending plans—
  The Chancellor of the Exchequer (Mr. Gordon Brown): Cuts.
  Mr. Boateng: As my right hon. Friend the Chancellor says, those plans mean cuts. That is what it is all about.
  Members do not have to take our word for that. On 16 February this year, the shadow Chancellor made his position very clear. He told the Bow Group:
  "I have agreed with my Shadow Cabinet colleagues that the baseline for spending across all of these departmental budgets will be 0 per cent. growth for the first two years".
  We know what that means. I look forward to hearing any member of the shadow Treasury team say otherwise. Two years of cash-freezing departmental budgets would mean real-term cuts for every Department. Police numbers would be cut and crime would increase. Local government spending would be slashed, which would drive up council tax and force the closure of vital local services. Transport would be cut, which would undermine our infrastructure. The international aid budget—including programmes for Africa—would be cut. Defence would be cut, which would put our national security at risk.
  I paused at that point because I expected at least one Opposition Front Bencher to leap to his feet and deny that what I had said was true. They do not stir. No, I see a slight stirring—but now even that has subsided. They cannot even look each other in the face. They certainly cannot look their Front-Bench colleagues in the face, because they have all complained about the impact of the shadow Chancellor's words on their own budgets. We can well understand why.
  Let us explore the reasons for the element of confusion and chaos among Conservative spokespersons about their spending plans. We will invest more in the security of our nation. There will be a real-terms increase in the budget for our armed forces from £29.7 billion this year to £33 4 billion by 2007–08, to support their commitments abroad and to enable us to modernise and adapt our defence to meet the threat posed by the rapidly changing global security environment.
  Mr. Tyrie: Will the Chief Secretary tell us by how much the Government intend to cut defence in real terms?
  Mr. Boateng: We are providing a real-terms increase of some £3.7 billion by the end of the spending review period. It beggars belief—or perhaps it does not—that Conservative Members cannot distinguish between a cut and growth.
  Mr. Gordon Brown: Perhaps the hon. Member for Chichester (Mr. Tyrie) will read out the figures.
  Mr. Boateng: Yes, perhaps the hon. Gentleman would like to share the figures with us later in my speech, or perhaps he would like to make a speech of his own. The
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  fact is, however, that the Conservatives would cut defence, while we are increasing our commitment to provide resources for the armed forces.
  We are also increasing investment for security at home. Spending will have risen from £950 million in 2001 to £1.5 billion this year, and £2.1 billion by 2007–08. That is an annual real-terms rise of 10 per cent., which will go towards modernising our homeland security, our counter-terrorism efforts and our intelligence. Under the Conservatives, defence would be cut by £2.6 billion. We do not hear a word. No one is denying that that would be the result of the Conservatives' policy. Their silence says it all. Their silence signifies consent. The reality of Conservative policy is a defence cut of £2.6 billion.
  We will invest more in our communities as well, in order to tackle crime and the cause of crime. That will be matched by investment to make our communities safer and stronger. There will be more investment in law and order, including resources to create a new National Offender Management Service, a new serious organised crime agency, and a reformed charging and sentencing system. We will invest in community support officers and neighbourhood wardens. The Conservatives would cut Home Office resources by £1.6 billion. Again, we hear no word of denial.
  Mr. Dominic Grieve: We intend to increase the size of the police force by 40,000 officers. We have shown how that can be done within the financial constraints. I should like to ask—[Interruption.] I am asking a question. This is an intervention, not a speech. I should like to know whether the Government intend to go down the same road as us.
  Mr. Boateng: Talk about brass neck! It is this party that has increased the number of police officers by some 11,000 since taking office. It is this party that proposes to increase the number of community support officers. It is this party that is increasing the number of neighbourhood wardens. It is the Conservative party that will cut Home Office resources by £1.6 billion—and now Conservative Members pluck from the air a figure by which they say they will somehow increase the police force. It simply is not credible.
  Mr. Grieve: While we are on the subject of the Home Office, let me say that while looking at the claims for the future contained in the spending review, I noticed the claim that the Government would continue to reduce illegal immigration. As the Government have never given us a figure for illegal immigration and have never even deigned to give us an estimate, how can we judge whether that policy objective will be met?
  Mr. Boateng: I am afraid the hon. Gentleman has missed the point. It was for him to explain in his intervention how he would do more with less. We are happy to explain, on the basis of our record, what we have done to increase the number of police officers. We are happy to explain, on the basis of our record, what we have done to make our borders more secure and what we have done to make the long-awaited investment in the immigration and nationality directorate—a division of the Home Office that was shamefully neglected under

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  the Conservatives. We have reversed the decline of the IND, and strengthened our borders. Customs and the immigration service are working ever more closely together. The Conservatives would cut the Home Office budget by £1.6 billion. Not one of them comes to the Dispatch Box to deny that.
  We will do more. We will continue our long-term investment in our infrastructure, particularly transport and housing. The housing budget in England will rise from £5.9 billion this year to £7.2 billion by 2007–08, a 4.1 per cent. annual real-terms increase. That will fund a major programme of investment in affordable and social housing. It will tackle the long-term under-investment in and neglect of housing that characterised the Conservatives' stewardship of the economy, and promote the housing that is vital to both our economic prosperity and the quality of our lives.
  To deliver further reforms in the rail industry and on our roads, the transport budget will rise faster than was originally planned. By 2008, transport spending will be 60 per cent. higher than it was in 1997. In contrast, the economic judgment of the shadow Chancellor—who is still not present—is to cut investment in our transport infrastructure by £1.8 billion. That, I might add, is against the advice of both the Confederation of British Industry and a broad cross-section of representatives of British business.
  The Conservatives are never able to explain how it is possible for them to have a policy that is designed to promote economic prosperity—so they say—while cutting the very transport infrastructure upon which such prosperity so obviously depends. Rather than freeze budgets, which is the Conservatives' policy, we want to secure balanced economic development in every region, and to tackle regional weaknesses and build on regional strengths. Funding for regional development agencies will therefore rise from £1.8 billion a year to £2.3 billion by 2007–08. In addition, we have announced that, as with central Government Departments, local authorities will for the first time have three-year budgets that allow more effective long-term planning at local level.
  So rather than cutting investment, we will invest more in our children and build on our improvements to the education system. That will include a new determination to make pre-school provision available to the under-fives, as well as making child care available to all. As my right hon. Friend the Chancellor said on Monday, this Government are determined to equip Britain for the global economy of the future. To do this, we published alongside the spending review a 10-year investment framework for science and innovation, the aim being to make Britain the best location for science and innovation in the world. We will not cut science funding, but will increase it in real terms by an annual average of 5.8 per cent.—a doubling of cash spending on science since 1997. We have also set ourselves the ambitious target of raising overall research and development spending in the private and public sectors from 1.9 per cent. of national income to 2.5 per cent. by 2014.
  The choice is clear: Labour investment that is built on the strength of our economy, or Tory cuts and privatisation. This spending review seeks to invest, in an uncertain world, in law and order and security and
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  defence, in order to protect our citizens at home and our interests abroad. It also seeks to meet our global responsibilities to others by investing in international development and in the achievement of the millennium development goals. It seeks to secure and maintain the stability and growth of the economy and to invest in the education, skills, science and innovation that will drive our future growth and prosperity. It further invests in our vital health service and transport infrastructure, thereby increasing the well-being and prosperity of individuals, as well as delivering for UK business.
  The choice is stark: a stronger economy and a stronger Britain with billions of pounds more invested in housing, science, transport, defence, national security, skills, safer communities, sport and children; or billions of pounds of cuts in security, infrastructure, law and order, science and local government, and a return to a Britain of economic failure. That is the choice that my right hon. Friend the Chancellor set out for the nation on Monday, and which we will debate today. I have no doubt which option this House and the nation will choose. They will choose Labour and economic success, rather than the Tories and economic failure.
  3.13 pm
  Mr. Howard Flight: The central challenge for all mature economies today is to improve the efficiency of their public sectors in order to achieve better delivery of public services and better value for taxpayers' money. In the light of an ageing population and rising demand for public services, unless that challenge is met the growth of the productive economy will be reduced, and with it the long-term ability to sustain provision of public services. As British experience under the current Chancellor has demonstrated, just turning on the spending taps does not work. Higher taxes and an ever-expanding public sector crowd out the productive economy and reduce long-term economic growth.
  The real dividing line between the Conservative and Labour parties is our genuine commitment to improving public sector efficiency, downsizing the bloated Government that the Chancellor has created, and devolving power and responsibility to those at the sharp end who deliver public services—instead of seeking obsessively to micro-manage them—versus the sham of this Government, who have no intention of making the real reforms that are needed. As my right hon. Friend the shadow Chancellor pointed out so eloquently on Monday, Britain now has a fat—indeed, an obese—Government, and most of the extra spending has been absorbed by public sector inflation. That is the result of greater bureaucracy; more unproductive employees; failing and distorting targets; more initiatives, quangos and task forces; and greater regulation and centralisation.
  The issue is not just the public sector in the traditional sense of wrong decisions, bad management, lack of controls and poor project management—issues that were ably investigated by the National Audit Office and

  1459
  the Public Accounts Committee—but the inherent expense and ineffectiveness of a bloated, command-and-control Government.
  Mr. Boateng: Will the hon. Gentleman confirm that the Conservatives would cut public spending first to 35 per cent. of gross domestic product and then to 30 per cent.?
  Mr. Flight: It is perhaps time that the right hon. Gentleman grew up a little. That intention has never been indicated and, as he has just argued, the one commitment that the shadow Chancellor has given is to prevent public sector expenditure from rising to 42 per cent. of GDP, and to restrain it to 40 per cent.
  On defence, the Chancellor and the shadow Chief Secretary had better go back to school and learn their arithmetic—
  Mr. Gordon Brown: You are the shadow Chief Secretary.
  Mr. Flight: I am sure that it is not in order for even the Chancellor of the Exchequer to interrupt from a sedentary position.
  The Government's figures in the 2004 spending review show that their planned increase, in cash terms, for defence expenditure is 1.4 per cent. per annum. I was not aware that, even under his new consumer price index formula, the Chancellor was forecasting inflation of less than 2 per cent. [Interruption.] In cash terms, 1.4 per cent. set against 2 per cent. inflation is a reduction in real terms. In due course, I shall ask the Chief Secretary whether he is happy with the defence procurement record, whether he feels that good value for money has been achieved, and whether he thinks it appropriate that the number of civilian defence employees should be approximately the same as the number of front-line fighting forces.
  Mr. Andrew Love: The hon. Gentleman referred to the speech that the right hon. Member for West Dorset (Mr. Letwin) made on Monday, and I shall paraphrase it by asking the following question. Does the hon. Gentleman agree that, according to the position adopted by the Conservatives, if they intend to waste less they must spend less?
  Mr. Flight: Our position is that we will spend much better, and I have a great deal to say on how to achieve that. But before so doing, I should point out that this Government have increased public expenditure by some 63 per cent. in cash terms. As the National Audit Office reported, there has been a 54 per cent. increase in expenditure on public sector goods and services since 1997, but that has produced only a 12 per cent. increase in measured outputs. It is time that the Government learned to focus on outputs, rather than on spending.
  The national statistics deflator shows that public sector inflation has risen from 1.6 per cent. when the Conservatives left office in 1997 to 10 per cent. today—a record of which I am sure the Chancellor is proud. Total spending on the NHS has risen by some 37 per cent., but hospital activity measured by finished consultant
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  episodes rose by only 4.8 per cent. in the three years to 2002. While NHS spending has gone up by more than 50 per cent., productivity has declined by more than 15 per cent. since 1997. Indeed, overall productivity in the public sector has declined in the last three years by 10 per cent. No wonder the Government have tried to rig the figures.
  As a Labour Trade and Industry Minister recently told a conference on regeneration in Philadelphia:
  "Too often, a lot of money has been spent, but very little seems to have been achieved … In a year or so, we are going to have an election in the UK when people will say we have paid a lot of taxes but what has been achieved with all that money?"
  We now have a public sector in which the bureaucrats and administrators in all the Government-created units, boards and panels devise the heavy-handed regulations and set the conditions of the specific grants in order to implement the initiatives so that targets can be monitored by inspectors in the overgrown layers of Government that control central and local activity, administer over-complex taxation, organise the systems of dependency, constrain the choices of the consumer and end up by disempowering the citizen.
  Public sector employment has risen by some 10 per cent.—509,000 jobs since 1998—and an extra 350,000 public sector employees are planned over the next three years. Last year, 162,000 new jobs were created in the public sector while the private sector lost 98,000. The civil service is now the size of Sheffield; more than 5,000 new civil servants were hired every week in 2003. For every extra police officer, virtually one more bureaucrat has been employed in the Home Office, and the number of tax collectors has increased almost twice as fast as the number of doctors and nurses. Without the discipline of competition, that is essentially what happened in the nationalised industries, and the Chancellor has actively encouraged it across the public sector.
  Mr. Boateng: The hon. Gentleman's dislike of public service, the public sector and public sector workers is well known. Does he not accept that for every administrator employed in the NHS since 1997 there are six doctors and nurses? Does he not accept that if we examine outcomes in the NHS, we find that chronic heart disease mortality is down 20 per cent. and cancer mortality down 8.6 per cent. in the under-75s? All of that is a product of having a Labour Government since 1997. Has the hon. Gentleman not a word of praise for those public sector workers who have delivered those results and who have been helped by the targets and extra resources that he would take away?
  Mr. Flight: It is about time that the Chief Secretary spoke to some people working at the sharp end in the NHS. I have every sympathy and support for those people, toiling under the distorted regime of targets introduced by the Government. I suggest that the Chief Secretary, rather than quoting selectively, looks at the overall ratio of increased expenditure versus increased outputs.
  As William Keegan's book on the Chancellor—I am
  glad that he is in his place to hear it—points out, the Chancellor realises that his Achilles heel is that the electorate will perceive that his major increases in tax and spending have in the widest sense of the word been wasted and that he has failed to deliver. In order to head

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  off such criticism, the Chancellor introduced public service agreements in the 1998 comprehensive spending review to set out what public sector improvements were to be achieved from the additional spending.
  The reality, as the Chancellor knows, has been failure to meet most of the targets. The volume of targets and the rigid centralised structures accompanying them have stifled local initiative, diminished professional responsibility, distorted priorities and diverted time and attention away from the task of improving the public services. It is analogous to the Chancellor's fake savings announced on Monday. The target regime was merely a substitute for real public sector reform.
  Last year, as the Chancellor will be aware, a paper was produced for the European Central Bank. It compared the more efficient public sectors around the world, particularly Japan and the USA, with those of other countries. It found that to maintain output, UK public spending would need to be only 84 per cent. of the actual total spent if the public sector were as efficient as the best. Put another way, if the UK were as efficient as the best and maintained its current spending levels, output would be 25 per cent. higher. Effective reforms of the public sector need to focus on outputs rather than on spending, and to remove costs and activities that actually achieve little or nothing.
  That is the context of the Conservative party asking David James and his 60-man team to investigate and address in a bottom-up review each area of public expenditure. [Interruption.] I suggest that the Government would do much better if, rather than making inane remarks, they reflected on the advantages of that approach over their Gershon approach and carried out a proper analysis of where the inefficiencies really lie. They need to know where things are going on that achieve little or nothing. As part of a process that we started more than a year ago, over the next few months we will present in major policy announcements the efficiency savings that should be made. We will present them in a way that stands up, unlike how the Chancellor presented his proposals on Monday.
  The main precedent for establishing how to improve public sector efficiency has been the national partnership for reinventing Government in the US. It started by recommending more than 1,200 specific changes to make government work better and cost less, of which two thirds were implemented. It then focused on transforming the culture in the major Government agencies with the most public contact to be results-oriented, performance-based and customer-focused. It also addressed the scope for new technology to improve public sector efficiency. It succeeded in reducing the size of the federal civilian work force by nearly 500,000. Action on more than two thirds of the recommendations resulted in savings of approaching $140 billion.
  Government was downsized the right way by eliminating what was not needed—bloated headquarters, layers of managers, outdated field services and obsolete red tape and rules. It succeeded in cutting 640,000 pages of internal agency rules and eliminated 250 agency programmes. Of great ongoing importance, it introduced annual performance reports, required under the Results Act. All Government bodies in the US are subject to regular operational efficiency, as
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  well as financial audit, assessing whether the structures and processes in place in each Department and area are the most efficient and effective for carrying out their objectives.
  Major improvements in the US public sector have also resulted from the creation of FirstGov, a one-stop website for Government information transactions, programme results and e-mail feedback to public officials, with connections to 27 million web pages.
  In that context, we have welcomed the Government's Gershon initiative as a start. Gershon's cross-cut analysis of areas offering opportunity for efficiency saving is sensible as a starting base and useful as far as it goes, but the fundamental weakness is that the Government have failed to address how to implement the type of efficiency saving measures that Gershon recommends. The immediate shortcoming is that Ministers and civil servants have resisted reform in their territories. The existing huge infrastructures with strong vested interests outweigh the transitory and limited resources employed to implement change and reform.
  I presume that the Chancellor and the Chief Secretary are aware that there is currently no valid way to measure desired Government outputs. Gershon also addresses only limited territories in the cross-cutting proposals on which he has focused. He does not address the culture problem of fat government—the culture of regulation, initiatives, targets, grants, panels, boards, tsars and inspectors. That culture has increasing layers of Government bureaucrats and administrators, and of complex and intrusive taxation. It involves widespread dependency on the slate and restricted choices for the consumer.
  Throughout the public sector, the ratio of back-office costs to front-line services is far too high in comparison with private-sector service industries. Much more decentralisation of operational responsibility is needed to improve front-line services. That is one of the main objectives of Conservative policy, and of our aim to give citizens greater choice in health care and education.
  Gershon gives no explanation for the limited number of areas that he investigated other than that they might offer the greatest potential for efficiency improvements. His report does not question whether many areas of expenditure are needed at all. Essentially, it seeks to determine whether some costs can be shaved off some areas. That approach ignores the potential for other major efficiency savings.
  Gershon's time span is also too slow, and he hardly mentions the potential efficiency improvements and savings from outsourcing, except to say that they are typically of between 20 per cent. and 30 per cent. Although he is right to indicate the need for greater use of e-government, the potential in the UK remains restricted by the fact that a large proportion of the population in receipt of Government benefits does not use, or have access to, the internet. Moreover, Gershon seems to ignore the efficiency potential offered by the much greater use of technology within Government. That can yield large benefits speedily, as has happened in the US. Business best practice is to increase significantly the spans of control—that is, the numbers
  of people managed by one person compared with the practice of the recent past. Gershon does not address that territory.

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  Gershon's proposals for procurement efficiency saving are confined to centralised bulk buying, but they ignore the potential for improvement at local levels. Such an improvement was recently implemented successfully by Norfolk county council, which has saved some 25 per cent. of its procurement costs. His proposals for streamlining back-office functions are also unlikely to deliver without the discipline of outsourcing. He focuses on efficiency savings available from downsizing both private and public policy funding and regulation. He rightly points out that the cost of compliance to business is many times greater than to Government. However, a bolder Approach to both is capable of securing savings of at least £2 billion a year more, and in a shorter time.
  Mr. Boateng: The hon. Gentleman began by praising Sir Peter Gershon, and then proceeded to rubbish him at length. He accused Sir Peter of not taking into account the efficiency gains that can come from local government. Has he actually read the Gershon report? I refer him to page 55, where Sir Peter states:
  "Local government has a key role to play in this ambitious agenda, and many local authorities are already securing efficiency through investment in technology and rationalisation of back office and procurement functions."
  That certainly includes the Norfolk example. Sir Peter has done the very thing that the hon. Gentleman accuses him of not doing. Will he withdraw his ill-advised and misplaced comment?
  Mr. Flight: The Chief Secretary points out one sentence, but he does not refer to anything in Gershon that sets out how those improvements can be achieved. Gershon merely observes what has happened, and that is quite different from his cross-cut comments about centralised buying.
  At last year's spending review, the Chancellor stated:
  "In each area of service delivery from housing to education, from policing to defence, we are tying new resources to new reform and results, developing a modern way for efficient public services".
  He also said that
  "we have a special duty to ensure that public money is spent wisely and efficiently and we are as determined to secure value for money as we are to secure money for our services."—[Official Report. 15 July 2002; Vol. 389, c. 22, 25.]
  He said roughly the same thing about the 1998 and the 2000 spending reviews. He has failed and failed to secure value for money.
  The truth is that the Chancellor has engaged in a pre-election public spending spree, creating bigger and bigger Government, based on bigger and bigger borrowing and rising taxes, which will produce big problems for the future and require a major increase in taxation if Labour were to win another election. In recent weeks, the Governor of the Bank of England has warned not only that the housing market has become overheated, but that the public sector spending spree is causing the economy as a whole to overheat. The Chancellor shows no signs of heeding that warning.
  Mr. Boateng: The hon. Gentleman accuses my right hon. Friend the Chancellor of engaging in a pre-election spending spree. Would he care to reflect on the words of the director general of the CBI—[Interruption.]
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  Opposition Members say "Huh," but Digby Jones presumably speaks with greater authority on the views of British industry than any of them. He said:
  "Mr. Brown has taken a big step in the right direction. Companies will breathe a sigh of relief that growth in public sector investment is not going to become profligate pre-election spending."
  Those words are totally contrary to the claims made by the hon. Gentleman. Whom should we believe—Digby Jones, who speaks for British industry, or—
  Madam Deputy Speaker: Order. The hon. Gentleman has got the Chief Secretary's point.
  Mr. Flight: I am delighted to note that my point has hit home. If the Chief Secretary were to read most of the economic comment, he would find my point being made. As I have just pointed out, the Governor of the Bank of England has warned the Chancellor that the extent of public sector spending is causing the economy to overheat.
  The Chancellor and the Chief Secretary may try to speak the language of efficiency and of Gershon, but they are faking it. On closer analysis, many of the reductions are bogus. Bureaucracy has not been slashed: in just a single week at the end of June and the beginning of July, another 584 new jobs were advertised in the public sector, with a combined annual salary bill of £22 million. Salaries on offer included £74,000 for a new head of tourism sponsorship in the Department for Culture, Media and Sport and a whopping £130,000 for the chief executive of the Government education quango, Learndirect. On an annualised basis, that level of recruitment would add a further 30,000 jobs and more than £1 billion to the wages bill.
  As The Times has commented, it was said of the Holy Roman empire that it was not holy, not Roman and not an empire, and likewise, the comprehensive spending review is not comprehensive and not a review, but an intensely political exercise, better termed "the big spend".
  The public sector is now larger than Scotland. Whatever the Chancellor may say this week will not change anything, because he cannot give up his obsession with trying to manage and control everything from the centre—his only alternative to having the power of the Prime Minister. It is the medium and long-term economic damage caused by the Chancellor's big Government that is of the greatest concern.
  The legacy inherited by this Government did not consist only of tightly controlled public spending, a greatly reduced bureaucracy and a public sector current balance. It also, and more fundamentally, consisted of an economy much more vibrant and better placed to compete than at any time in Britain's recent history. Taxes were lower, and regulation was lighter. Huge and profitable businesses had emerged from the ashes of failing nationalized industries. Britain's productivity growth rate was on a par with other major industrial competitors. Britain's household savings rate was respectable by international comparison, and we were fourth in the international competitiveness league. Now we have dropped to 15th and our productivity growth and savings rates have virtually halved.
  The foundations of our economy are being eroded by over-regulation, over-taxation and excessive government. The vitality of the British economy has

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  been increasingly smothered. According to figures from the Organisation for Economic Co-operation and Development, the UK public sector now accounts for more than 42 per cent. of national output, making it the largest state sector in the Anglo-Saxon world, where our growth rate is now the lowest.
  In the long-awaited Gershon report, there is also a gaping lack of credibility as to how to deliver the suggested efficiency savings. The Chancellor's announcements on Monday added a further seven agencies and cooked the figures on civil service reductions. We need to cut away layer after layer of unnecessary government activity and layer after layer of bureaucracy. We need to remove swathes of regulation instead of continuing to add to them. That is the brief of the David James review.
  The next Conservative Government will take office with more comprehensive plans for downsizing bloated government than ever before in our history. That Government will require overall adherence to our medium-term expenditure strategy and the progressive reduction of the proportion of our GDP consumed by the state in order both to eliminate the structural deficit that the Chancellor knows he has created at a time when the economy is at full capacity and to prevent the massive increase in taxation that would be required if Labour secured a third term.
  Our objective is to give Britain smaller government that does less but does it better and a more vibrant and competitive economy, which alone can sustain first-class public services in the long term.
  3.41 pm
  Mr. John McFall: I welcome the Government's spending review, especially the commitment to public services. I think that I speak for all Members on the Labour Benches when I welcome the extra 2,500 children's centres to be set up by 2008 and the extra £2.1 billion to tackle crime. Following the Barker review, an extra 50 per cent. will be invested in social housing, where we have described the situation as a scandal. As a scientist, I welcome the indication that £1.5 billion more will be spent on science and research in 2008 than in 2004—05.
  The dividing lines for the next general election are clear. The Labour Government promise higher, better-quality public services. On the other hand, the shadow Chancellor, in his speech on 16 February outlining the Conservatives' medium-term expenditure strategy, said:
  "I have agreed with my Shadow Cabinet colleagues that the baseline for spending across all of these department budgets will be 0 per cent. growth for the first two years."
  The electorate will find that the Conservatives will not be spending on defence at a time of increased terrorism and insecurity; they will not be spending on crime at a time when we have to bear down on that problem; and they will not be spending on education when we need extra skills so that more young people can enter the work force.
  The Government have said that we must match investment with reform. I agree, but we must cast a critical yet constructive eye over the plans. Sir Peter Gershon advocates public sector efficiency goals of 2.5
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  per cent. over the next three years and efficiency gains of £20 billion in front-line services by 2007–08. As has been said, that will require the loss of 84,000 civil service posts and the relocation of 20,000 posts away from London. In his foreword to the efficiency review, Sir Peter stated that
  "this will result in a significant loss of employment opportunities over a relatively short period. It is important that these reductions are managed well both for the individuals concerned and to sustain the commitment and motivation of the whole Civil Service in light of the invaluable functions it performs".
  What discussions about those reductions have taken place with staff? How are staff savings on that scale possible? Will the Minister provide a regional breakdown of the proposed staff cuts?
  The history of such efficiency savings does not leave much room for comfort. Civil service numbers have exceeded Treasury plans in every set of annual public spending projections since 1999. For example, if the plans published by the Treasury in May 2002 had been achieved, there would be 45,000 fewer civil servants than now. The Rayner scrutiny, the financial management initiative, market testing and Executive agencies have all been trumpeted as major sources of efficiency savings. Each of them promised £500 million in savings, but they resulted in the delivery of less than 50 per cent. of those savings. Those schemes are dwarfed by the Gershon review, so it is important that we have a transparent process to follow the progress and to introduce the recommendations sensitively. Many of the people in the posts that will be lost are relatively low earners. A number of my friends in my constituency have worked in the Department for Work and Pensions for 12 or 15 years. Their earnings are £17,000 or £18,000, and they are married people with children, so it is important that the consultations are sensitive and done properly.
  I also note that the Lyons report asked for jobs to be moved from London, but again, I suggest to the Minister that we must ensure that we act more efficiently in such cases. I bring to his attention the DWP pensions centre in Liverpool, where more than 300 civil servants will lose their jobs on Merseyside. That news comes just three months after the Lyons report recommended that extra civil service jobs should be moved from London to Liverpool. The pensions centre in Breckfield only opened in December 2002 and the 316 staff deal with inquiries and claims for the state pension credit, but we now find that the plans that were trumpeted in December 2002 have been revised. That does not augur well for the efficient use of resources by the DWP and I look to the Minister and, indeed, the Chancellor when he appears before the Treasury Committee tomorrow, to answer those points.
  It is appropriate to consider the golden rule because the spending review is taking place against a background of increased deficits in the public finances. We have to ask whether the spending commitments are affordable if the Chancellor is to stick with his fiscal rules. How much margin for error against the golden rule does the Treasury have if the public finances turn out worse than expected? We can refer to tax receipts on that issue. The forecasts in the 2004 Budget assumed an ambitious rise in receipts from 37.8 to 38.7 per cent. of GDP, but last year's out-turn—37.6 per cent.—caused our current receipts to be £1.6 billion lower than

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  expected. Tax receipts could surprise us on the upside, particularly if the economy grows rapidly this year, but if so, the output gap will become an issue.
  Evidence that the Treasury Committee took from the Governor of the Bank of England and others shows that the output gap is narrower than expected this year, so meeting the golden rule will be harder to achieve, with growth running faster than trend. The Treasury indicated a 3 to 3.5 per cent. growth rate in the Budget. We have also seen increased employment in the labour market. Although those figures are positive, they put pressure on the output gap. Is it the case that the output gap will be eliminated by this summer—a year earlier than indicated in the Budget? The Treasury Committee will examine the Chancellor on that question tomorrow and in the future.
  May I make a point about the time scale of the spending review on behalf of the whole Committee? We are dealing with an enormously compressed schedule and I question whether that adds to the scrutiny of the exercise. For example, the public expenditure out-turn White Paper will not be produced until next week, yet such information is needed to gather the full picture. The Atkinson review on public sector output, productivity and associated prices has not yet been published. Given that it will focus on whether growth and spending have fed through into increased output and improved services, it will be important when we examine the spending review. I make a plea to the Minister—I shall also raise the matter with the Chancellor tomorrow—for adequate time to examine spending reviews adequately.
  The Treasury Committee held two meetings this morning with Treasury officials and our experts. The aim of Select Committees is to ensure that there is an informed debate in the House, so a Select Committee report should be available for hon. Members to debate and to help them with the process. We will take evidence from the Chancellor tomorrow, but given our other commitments, we will not produce a report on the matter. That represents an omission, and it is due to the time scale that the Treasury and the Chancellor have imposed. I ask for that lesson to be taken on board so that we may have a decent amount of time to examine reviews in their entirety—I cannot stress the importance of that enough.
  One aspect of the spending review that has received little publicity is the establishment of the financial inclusion fund, which I welcome greatly. The Treasury Committee will examine financial inclusion over the coming months. Almost 7 million people are currently financially excluded and, in today's society, people who are financially excluded are also socially excluded. I wait with interest for the Government's development of the fund.
  The Opposition have made several vigorous points against the Government, but it is important for an Opposition to have credibility and sound judgment. When I read the Sunday papers this weekend, I was appalled to discover that the shadow Chancellor would abolish the Financial Services Authority.
  Mr. Flight: I, too, was appalled to read the headline. If the right hon. Gentleman had read the story, he would have realised that the headline was completely stupid.
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  My right hon. Friend the shadow Chancellor made it clear that the FSA was over-burdened with the requirements of law and the Treasury, and that that was arguably leading to over-regulation, but nothing was said about abolishing the FSA—that is not our intention.
  Mr. McFall: I take it from the hon. Gentleman that although there has been an absence of clarification from Tory Front Benchers over the past few days, the Conservative party is committed to a single regulator—the FSA.
  Mr. Flight: I can confirm that.
  Mr. McFall: It was rather unfortunate that the headlines went well beyond that, so the hon. Gentleman's clarification was useful.
  The shadow Chancellor has claimed that official statistics are politicised, but he should apologise for saying that. He made a personal attack on both the head of the Office for National Statistics, Len Cook—he appears before the Treasury Committee and sometimes feels a bit traduced by us—and Tony Atkinson.
  I note that the Cabinet Secretary, Sir Andrew Turnbull, wrote to the shadow Chancellor on 27 April, saying:
  "there has not been any political interference with official statistics"
  and
  "the suggestion that the important work being done by a figure of Sir Tony Atkinson's stature is being used for political ends is untrue and deeply unhelpful."
  The shadow Chancellor has been personally assured by Len Cook that the work that the ONS and Sir Tony Atkinson are carrying out to improve current measures of productivity is completely independent. He was also told by Len Cook that any changes would be subject to peer review and in line with international guidance and the national statistics code of practice.
  The hon. Member for Arundel and South Downs (Mr. Flight) could do two things. He could confirm that the shadow Chancellor will apologise for those personal remarks and ensure that we have both integrity and soundness of judgment when we scrutinise the work of figures such as Len Cook, Tony Atkinson and the ONS staff.
  Mr. Flight: I understand that the shadow Chancellor had a conversation and meeting with Len Cook and the misunderstandings have been sorted out.
  Mr. McFall: So I take it that a private apology has been made.
  The Chancellor has committed the Labour Government to devoting 0.7 per cent. of national income to international development by 2013. That is a massive move forward. We must remember that the Government have increased spending on international aid by 140 per cent. since 1997. An extra £6.5 billion will be spent by 2007–08, but there is still an awful lot of work to do.
  It is important that the signal that the 0.7 per cent. gives out is loud and clear. It should be made into a manifesto commitment. That has still to be discussed by

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  the Cabinet, but I put it strongly to the Minister that that is what is needed. When the Treasury Committee visited Washington two or three weeks ago, we spoke to Mr. Rodrigo de Rato at the International Monetary Fund and Jim Wolfensohn at the World Bank. Jim Wolfensohn said that third-world countries must see the developed countries give a commitment for the future. If the 0.7 per cent. commitment were given in the manifesto, that would be of enormous benefit. It would be symbolic and help people around the world. It would also help the Chancellor's international finance facility proposals, which are appropriate.
  Hon. Members may know that the Chairman of the International Development Committee wrote to me and asked whether we could take a joint approach to our American colleagues and others to ensure that that IFF commitment is made. The United States Administration are against it, but it is important to keep lobbying and to continue the political contact between ourselves, our European colleagues and our American colleagues. The establishment of the 0.7 per cent. figure is a great step forward. Let us turn it into a manifesto commitment so that we have domestic prosperity and an international commitment for the future.
  3.58 pm
  Mr. Kenneth Clarke: This debate is the second part of the Budget. Indeed, before 1997, both the tax changes and the public spending changes for the coming year were announced at the same time in November. So this is the second arm of the Chancellor's explanation to the House of Commons of the fiscal policy that he is producing and how he intends to meet his fiscal rules. In my opinion, that is the most important thing that we should address. It is highly unlikely that the Chancellor will meet his fiscal rules. He is getting ever more ingenious in trying to disguise from the outside world what little margin he has and what he is likely to have to do after the election if he fails to comply with his golden rule and his other fiscal rules.
  At the time of the Budget, the Chancellor tried to explain how the rapidly deteriorating public finances would not lead to his breaking his golden rule. He forecast a sudden and dramatic acceleration in the collection of revenue, but he explained that that would not require a tax rise, which the public might find uncomfortable. Instead, he would stop avoidance, and there would be a dramatic rise in tax revenues over the next few years. At the same time, he said in the Budget that there would be a remarkable deceleration in the growth of public expenditure. Policy changes or diminution of the delivery of public services would not be required, as the public might find any such announcements uncomfortable. We were therefore told that 2.5 per cent. efficiency savings would be achieved over the next few years as the result of the great work of Sir Peter Gershon and his team. We are considering those proposals today, but I still doubt whether the Chancellor's tax revenues will accelerate over the next few years as he has forecast. I shall not give the House my figures, because they are different from those given by the right hon. Member for Dumbarton (Mr. McFall). We have been told that the tax take will increase more rapidly than the growth in gross domestic product, with
  1470
  particularly remarkable accelerations in the collection of corporation and income taxes, but I still fail to believe that that is the case.
  Sadly, I doubt very much whether the proposed reduction in the growth of public spending will not have any effect on Government activity. I do not accept that that slow-down can be achieved by improvements in efficiency without affecting delivery rates. Politics is not like that—policy changes are needed.
  The golden rule, which I have criticised in the past, is extremely lax and elastic. I prefer, as do the International Monetary Fund and the Organisation for Economic Co-operation and Development, to seek to balance the public budget over the cycle. However, we have a golden rule that we should borrow only to cover capital investment and never for current investment. Even if the Chancellor's figures turn out to be right, he has left himself a tiny margin for error. No one can ever get their forecasts exactly right. I remember the Labour party being amused by my remark, when I was Chancellor, that forecasts of deficits and surpluses involved such enormous figures that one had to give or take £10 billion either side. That is still true, so the Chancellor's tiny margin for error is almost incredible.
  I fear that we will carry on with the pretence of an explosion of tax revenues and a surge of public sector efficiency until the election. Afterwards, a Chancellor who has consistently denied that he will have to raise taxes will do so if he returns to office. Let us face it—that is what he did in 1997 and 2001. The public cannot say that they have not been warned if they vote Labour next year and find that the same thing happens after 2005. However, substantial reductions in the growth of public expenditure are required, but the Chancellor has not done well enough. I shall not invoke the name of the Governor of the Bank of England, save to say that I agree with my hon. Friend the Member for Arundel and South Downs (Mr. Flight). Mervyn King is, of course, independent of the Government and the Opposition—he is his own man, and I admire that. He talks in the delphic tones of governors of central banks, but his recent remarks are the closest that he has come to a warning and reproof that if we are to get mounting inflationary pressure in the economy under control and, more importantly, to maintain economic stability and consistent growth, the central bank, which is in charge of monetary policy, and the Chancellor of the Exchequer, who is in charge of fiscal policy, must pull in the same direction while they make their contribution. The Chancellor's contribution is not good enough.
  When the Chancellor made his statement on Monday, I made disparaging remarks about the consistency of his policies. He has been quite successful, I do not deny, as the British economy has performed moderately well over the past 10 years or so. He has been extremely lucky, but he has also shown the most remarkable ability to change the entire basis of his approach to policy. When he first came into office, prudence was the guiding watchword of everything he did. He applied, in a rather mechanical way, which had not been anticipated, the strict fiscal controls that he inherited, and we saw a substantial and rapid tightening of public expenditure limits.
  In 2000, or thereabouts, the Chancellor went in for a complete reversal. That came in the run-up to the 2001 election and in response to the political pressures of the

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  Prime Minister in particular, and quite a few of his political colleagues. From 2000, the iron Chancellor was gone and prudence deserted, and since 2000 or thereabouts, we have had four years of spend, spend, spend, on a quite extraordinary scale.
  We are now about to enter the third phase. There has been a sudden, sharp reduction in the growth of public expenditure, and a new Chancellor of the Exchequer has emerged—a man committed to efficiency, cost control, the quality of performance, cuts in bloated payrolls and so on. I find this third phase very unconvincing and, like the first two, not adequately described.
  The key to understanding the Chancellor, which is true to a certain extent of all Chancellors of the Exchequer, is in recognising that he is, above all, an intensely political man. Here we are, with the Chairman of the Select Committee and several members of the Committee that is about to start the serious business of parliamentary scrutiny of the public accounts, and we are debating a statement about public expenditure that made some references to the public accounts, gave some indications of what was to happen and set departmental limits, but was actually political pantomime. It was entirely aimed at creating a whole new basis for debate and seemed largely aimed, and still is, at trying to have a go at the Conservative party on the basis of a slightly deluded representation of what the Conservative party is supposed to be saying instead. That does not really help us to get to what the Government are doing.
  In my opinion—again, I mentioned this on Monday
  so I will not labour the point—the Chancellor would dearly have loved to go in for another pre-election spending spree. The classic thing, particularly for Labour Chancellors and, alas, occasionally for Conservative ones, is suddenly, when the election is coming up, to start spending a lot more public money to bribe the electorate out of their own pockets, get their party re-elected and deal with the consequences afterwards.
  The Chancellor cannot do that now because he did it last time, and he is dealing with the consequences. So this time, as a pre-election stand, we have Gordon the champion against waste, the new drive for efficiency, better government, more into the front line and so on, all of which is a worthwhile sentiment, but is political sloganising. It is all based on the assessment that the public feel strongly, and quite rightly, in my opinion, that they have not been getting value for money from the increased taxation that they have been paying.
  Of course, the public services are getting modestly better. The Government cannot keep increasing spending on the health service at 7 per cent. in real terms each year without getting something for it, but most members of the public realise that they are not getting value. Gordon feels vulnerable or the subject of waste. He decides to address that, and suddenly the most extraordinary targets are set for improving performance and shifting money to front-line services.
  The Chief Secretary today and the Chancellor on Monday almost passed over the fact that the key decision was the slow-down in the growth of public spending. We have two new years being brought into the public expenditure survey. We have been told that in those two years the rate of growth of public spending will almost be halved. Departments such as the Ministry
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  of Defence will unarguably see their spending as a proportion of GDP reduced as a result of the announcement. New Labour has never seen anything like it. If they get themselves re-elected, some of the more veteran Members may be reminded of the first two or three years, when the figures began to dawn on them. They are entering a new world of a marked slow-down of public expenditure. I seriously doubt whether anything of that kind, although desirable in principle, can be achieved so dramatically and so quickly without policy changes to improve efficiency. With the greatest respect, anyone who has been in this House for any length of time has heard hon. Members from all political parties try to square the circle on how they will constrain the cost of their policy proposals by saving on waste and increasing efficiency. I can see hon. Members on both sides of the House who have held the responsibility of office, some at national level and some at local level, and none of us believes it. We should learn from experience and realise that more must be done.
  That is not to disparage Sir Peter Gershon's work. I have praised him and, although I do not know him well, I am sure that he is an admirable man, and he and his team of keen, young accountants have been doing their best to deliver the remit presented to them by the Chancellor of the Exchequer. I have the Gershon report here, and it and the Butler report are two documents that will embarrass the Government in the longer term. As observers outside the machine, it is difficult to believe that Sir Peter and his team can transform delivery in every Department, and most of local government too, in anything like the terms described. Most of Sir Peter's proposals are sensible, and he goes for obvious areas such as backroom services and procurement. The sentiments are perfectly worthy, and the comments on management are good.
  On Monday, we were encouraged to believe that from now on every Department of State from the Treasury to the Scotland Office, local authorities, every branch of the NHS, the Ministry of Defence and all will embrace the principles of the Gershon report and—most importantly, given the Government's publications and public expenditure review—hit spot on the figures that we were given. Some of those figures were slightly alarming, such as the number of jobs that will be lost, and some of them are important to the Chancellor, such as the billions of pounds of efficiency savings. To believe those figures is to believe in magic, and events will not occur in that way.
  I am happy to concede that the report will prove to be a worthwhile influence on those parts of the public sector where officials genuinely wish to improve efficiency, to take on board experience from the management of other large outside organisations and to argue with the Treasury about how they have applied some of the Gershon principles. We will never know whether the Gershon report is delivered. It emphasises that delivery should be measurable and that an audit trail should be left, so that we can turn back in 2008 and see that it has been delivered, but I do not believe it.
  We have been promised that technical guidance will be given by each Department to enable us to audit and measure what the Gershon report delivers. I do not believe it, and I shall give some examples why. We have been given gross figures on staff savings, which must be alarming to Labour Members who are particularly close

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  to the white-collar trade unions. Never fear, we do not know the net figure, and many of those jobs will be saved, although the people will work somewhere else, and some administrative posts have already been redefined as front-line posts.
  On Monday, one of my hon. Friends asked a sensible question about how many of those jobs will be outsourced, which, particularly if one goes in for information and communications technology, is obviously the way for large organisations to go. Outsourcing often means that the same man or woman continues to do the same job in the same building, but they no longer work for their first employer and are transferred to a new employer.
  The targets include giant organisations that are not within the Government's direct control. Some local authorities strive to improve their efficiency, and a few have succeeded. I look forward to the process by which different authorities are persuaded to pool their backroom functions. The transformation of procurement across local government will not be delivered: in my opinion, much of local government was untouched by the Thatcherite managerial revolution of the 1980s, let alone by the Gershon report of 2004. Their reaction has not been to welcome with joy the idea that they should make these efficiency savings. This morning, the Local Government Association is reported to have commented that the total is at least £1 billion less than it requires to hold council tax increases below 7 per cent. a year. I continue to believe, and say so to all my colleagues, that unless and until someone comes up with a proposition that will credibly restrain local government expenditure and increases in local government taxation to anything like the rate of inflation, rate-capping is the only way to improve efficiency and to limit the cost to many of my constituents of the ever-rising demands of local government.
  As for the national health service—the largest employer in western Europe and a giant oil tanker of an organisation—the delivering of all these targets in relation to various NHS trusts is not under the direct control of Government. I find an extraordinary contrast between the highly desirable talk on all sides of localising more responsibility and the production of central documents mandating parts of such a huge organisation to produce particular efficiency improvements in particular ways. The principle of managing any giant organisation is that one devolves responsibility locally as much as possible, so long as local bodies remain accountable to the centre and one can give them clear objectives regarding the standards and quality that they are meant to deliver. One cannot give a bottom line in the public services as one can in a private company, but one can set quality standards such as waiting time targets, pupil achievement targets or rates of detection targets for those who deliver the service.
  Localism has now been taken to an extreme degree, with hon. Members on both sides of the House advocating that all central responsibility should be passed on to locally elected groups or locally appointed
  1474
  people who are to be allowed to go their own way. It is very unlikely that they would all be able to deliver Gershon efficiency improvements.
  Mr. Fallon: Does my right hon. and learned Friend find it as telling as I do that of more than 100 local authorities and 100 NHS trusts consulted by Gershon in his review, only 12 local authorities and 12 NHS trusts responded?
  Mr. Clarke: I did not know that, but it is a telling fact that gives some indication of how they intend to respond once our debates are over and the report has been put, together with many others that now reach them, on the shelves of the chief executive's office in county halls and NHS trusts up and down the country.
  This process is not even new—it has been tried before. The underlying drive behind the Gershon review, is on page 10 of the report:
  "The focus on productive time of frontline professionals reflects existing initiatives to reduce bureaucracy and significant investments in workforce reform and ICT across the health, education and police sectors in the 2002 spending review."
  The same things were put forward in the 2002 spending review, when we were given value-for-money public service agreements. In 2004, those have become efficiency agreements, but they are essentially the same, although much bigger numbers have been put on to them.
  Nevertheless, I hope that some good comes of Gershon and the other attempts to consider central government efficiency, because they are much overdue. My hon. Friend the Member for Arundel and South Downs cited several examples to show that we have been going in the opposite direction in the past four years of spend, spend, spend.
  Some things, many of which are very important, we will never measure. In making efficiency savings, a great deal depends on improving the productive time of staff, especially professionals. That would be valuable because the productive time in most professions has not increased in the recent years of massive increases in expenditure. We are all used to meeting teachers, doctors, nurses and policemen who say that, despite the recent vast increases in expenditure, the amount of time that they spend on their productive work is decreasing. Increasing that time is one of the principal and desirable objectives of the review. However, the Government have been going in the other direction for some time.
  Whatever the case for many of the changes that the Government have made in the name of reform, they have not tended to increase the productive time of our professional staff. For some reason, they renegotiated the contracts of all the key professionals in the national health service. I do not know why the Government bothered to do that. My experience of negotiating contracts with NHS professionals showed that it is a Pandora's box—the lid is best left where it was. The Government's negotiators lost. The guys from the British Medical Association are tough characters. The main achievement of the new contracts is to increase salaries and reduce work load significantly.
  In education, the Government take credit for the large number of classroom assistants. They were not employed to improve efficiency but because the

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  National Union of Teachers complained about teachers' work load. Extra people were brought in because the NUT complained about that. Extra people were employed to shift from teachers' shoulders the burden of work and share it with them.
  Alan Howarth rose—
  Mr. Clarke: I do not want to argue the merits of the case. My former right hon. Friend might be passionately in favour of all the improvements in professionals' working conditions, but they do not increase productivity. It is no good changing the statistics, as the Government have done, to try to prove that, because everyone works shorter hours with fewer duties, productivity is increasing. It is not.
  Alan Howarth: My former right hon. and learned Friend, who is also a former Secretary of State for Education, takes a broad-brush view. However, has not he noted that the NUT is the one teachers' union that did not want the classroom assistants?
  Mr. Clarke: That is a fair point.
  Let me give examples to conclude my point. We will never know how the extraordinary figures will be delivered. Let us get behind them and examine the so-called efficiency improvements and savings. How will we know, when we get to the end of the period whether, for example, NHS staff are making better use of their time? That is one of the Gershon objectives. Under that heading, half the Department of Health's total efficiency targets will be delivered. Anyone who could produce some means of auditing that would be the most brilliant accountant or work study consultant that I had ever met.
  The front-line professionals in schools, colleges and higher education institutions will use their time more productively, according to the report. That accounts for 30 per cent. of the total figure put down for the Department for Education and Skills.
  How will we know whether our police services become 3 per cent. more efficient? It would be interesting to have a conversation with one's local police commander about how he would demonstrate that he was 3 per cent. more efficient in three years as a result of Gershon. We should be glad to know that local authorities will achieve further improvements in the productive time of their staff. Figures are attached to those headings. Of course, it is highly desirable that all those things should happen, but we will never have the first idea about whether they have been delivered.
  Mr. Kelvin Hopkins: I am enormously entertained by the right hon. and learned Gentleman's speech. He talks about efficiency, which is obviously a good thing in one sense, but improving public services often means higher staffing ratios. If we want better teaching in schools, we need smaller classes. In hospitals, we need more staff per patient to improve the service. In one sense, that decreases efficiency, but it makes for a better service.
  Mr. Clarke: I accept that that can sometimes happen. A sensible approach to efficiency in government should
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  be a permanent duty of every Minister. It should not be based on arbitrary figures for staff reductions or on conjuring imagined monetary values for proposed productivity improvements.
  Every Government have their different methods. If I were really going in for dèjàvu, I could tell the House about the Rayner reviews in the early days of Margaret Thatcher, when I was a departmental Minister. In those days. it was not Sir Peter Gershon but Sir Derek Rayner who came round and explained to us how to run our Departments, along with some bright young accountant who was still trying to find out what the responsibilities of the Department were. I hate to say it. but I went in for staff number reductions. I did it in the NHS—often specifying how many jobs had to go—in despair of anyone attempting to raise productivity.
  I agree, however, that what is required is a wholly different approach to policy from the one that we have seen over the last seven years, in which the control of running costs, and the balance between administrative costs and what is being delivered by front-line staff, is a permanent feature of policy, to be built in to what is being done. I share the view of those critics who say that this Government, who lecture us on improving public sector efficiency, have actually been neglecting it for the last seven years.
  Before this debate is over, I shall no doubt hear more examples of all the areas in which things have gone in the wrong direction, even in my old Department, the Treasury, which I hold in very high regard. One day, the Chief Secretary must explain to me why even the central Treasury, which does not employ very many people, seems to have increased by at least half as much again since I was there, and now has about 600 more civil servants than it did on the day I left it. I have no doubt that the Minister has found productive ways of employing the time of all those officials, and I suspect that I would find that situation reproduced across Whitehall if I were to look at the way things have been going in the last seven years.
  The required policy changes would need a whole new speech to specify them, but I would advise my right hon. Friends to add some policy changes when they produce the James report and we all concentrate on efficiency again. To give an obvious example, we have far too many quangos. I would like to see a list produced by both sides, and by the Liberals, of the quangos that should be rapidly abolished. Of those quangos that now send me literature, I have often never heard of the acronyms of organisations that are now responsible for some comparatively obscure part of the public service. I would even get rid of some of those that have got themselves a certain dubious public popularity. The Electoral Commission drives me up the wall—it already has 150 staff, it is spending several million pounds and I am not sure what it is for—and there are a whole lot of other quangos that ought to be addressed.
  We do not even know how many regulatory bodies we have; it is thought to be between 140 and 150. I would like both Front Benches to produce a list of at least half of them that could be abolished or amalgamated. I agree with the Liberals about getting rid of the Department of Trade and Industry. It would have some residual functions—but no great budget—which could be put among other Departments. The Chief Secretary told us about the increased budget of the regional development

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  agencies; I would abolish them. I do not think that they make worthwhile use of public money or serve any worthwhile purpose. It is the old regional planning stuff all over again. As for the proposed new tier of regional government that some people are having referendums on in the autumn, I would kill it off now, if we are really trying to improve the efficiency of government in the country generally.
  I suppose that this is true of many people at my stage of life, but over the last few years I have found myself genuinely feeling—all politics aside—that I am living in a country that is increasingly governed by regulation. I am increasingly faced with forms to fill in for all sorts of routine parts of my life. I increasingly have to deal with public bodies that I have never heard of, but which have suddenly found that their participation is essential in whatever I am doing. Far too much of the world nowadays seems to be run by a second-rate bureaucracy that is over-manned yet still growing. That is what the Government need to tackle, and that is what I am sure that my right hon. and hon. Friends will tackle. Smaller, better government is what we require in the modern world—it has been growing too fast—and that way lies the health of the public finances and the long-term sustainability of growth in the British economy.
  4.28 pm
  Mrs. Lorna Fitzsimons: I feel rather humble to be following the right hon. and learned Member for Rushcliffe (Mr. Clarke), with his august Cabinet history. I clearly have not held any august office—I am just the lowly Back Bencher who represents
  Rochdale—and all that I want to comment on is the impact of the comprehensive spending review on my constituency, where I have lived all my life, apart from a blip when I went to university.
  The CSR has made a huge, long-lasting, significant and long-overdue difference. After all the hyperbole about what Gershon and everyone else says, we need to cut to the heart of what the CSR means, in real-speak, to real people's lives. When I was elected, unemployment in my constituency fluctuated between 9 and 11 per cent., depending on the point in the cycle. Now, it is never much more than 3 per cent. Youth unemployment and long-term unemployment have been cut so drastically that they are virtually impossible to measure. In terms of school results, we have the best in my constituency's history. Yes, they have a long way to go, but they have come a long way. The investment in schools is phenomenal and is set to continue.
  So phenomenal is this Government's investment in my constituency that my local paper will not even publish the figures, because it thinks that they are too incredible. The local development agency, at its annual general meeting this year, published a figure of £2 billion worth of investment by 2010 in the borough of Rochdale. The vast bulk of that was public money, but it will lever in a significant amount of other money. That figure is indeed incredible, but it can be broken down to projects all around the borough, and specifically in my constituency. We need to safeguard that investment, and I will do all in my power to support the CSR that has been laid before the House to do so. We need to build on that investment.
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  In my constituency, there are initiatives that need to be enlarged, but there are also those that we need to celebrate. For example, we have a new hospital, which has more doctors, more nurses and more people being treated in it. Yes, change means uncertainty in terms of certain profiles of service, but it does not mean lack of growth. We are developing extra services in Rochdale—more than we have ever had. For example, Rochdale has more police than it has ever had in its history. We have a bigger policing budget and a bigger and far more effective drugs treatment programme, and we hope to be beneficiaries of the Chancellor's announcement about neighbourhood wardens. The more local and specific the policing, through partnerships in law and order, the more effective it is, as the evidence shows.
  On housing, I welcome the wonderful announcement in the CSR. Rochdale is a net beneficiary in the housing market renewal project, arm's length management organisations and investment in better social housing. Housing market renewal is a real test in the pilot areas. It is a huge leap of faith in the amount of Government money that has been invested, but the difference that it will make will revolutionise communities that time forgot, and certainly the Conservative party when in government forgot. The reality is that those communities live in circumstances that most of us would not even tolerate, and they have been in that position not for five or 10 years, but 20 years and more.
  We need to ask specific questions of the Liberal Democrats about area-based initiatives, of which Rochdale has a lot: housing market renewal, single regeneration budget round 5, new deal for communities and neighbourhood renewal fund. The Liberal Democrats' economic policy contains a specific little clause—those are the interesting ones—proposing to scale back area-based initiatives. I would like to know what that means for constituencies such as mine, which need specific targeting. It is not the whole borough of Rochdale that needs those initiatives, as it houses two dramatically different communities. Norden and Bamford, which is in the constituency of my hon. Friend the Member for Heywood and Middleton (Jim Dobbin), has 0.03 per cent. of the richest population in the country. Wardleworth, in my constituency, has 0.03 per cent. of the poorest population, and we need area-based initiatives. I wonder what the Liberal Democrats mean by their economic policy.
  On the specifics of the statement, I wonder whether my hon. Friend the Minister will answer a few questions about area-based initiatives such as housing market renewal. One of the things we have learned through earlier programmes such as SRB5, and are still learning, is that the Treasury needs to allow flexibility—through the Office of the Deputy Prime Minister—to the regional development agencies, and organisations such as English Partnerships, in local spending on, for instance, housing market renewal. There is no doubt that that must be based on housing outcomes, but houses are about communities. and communities cannot be sustained without community facilities.
  Two years ago, 48 per cent. of Wardleworth's population were under 16, but there were no significant youth or sports facilities in the area. We have had to put bids together for the sports lottery. We have just secured £1 million, which is wonderful. It is £2 million short of our bid, but it is still £1 million, and we are not going to

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  say no to it. What we need, though, is the flexibility that I mentioned. Housing market renewal, English Partnerships and the regional development agency will then be able to add to the money we already have. We can use our initiative, with the help of brilliant local officers in both the RDA and the council, to capitalise on that. Yes, we are going to have mixed-market economy new homes, but they will not sustain a community without real youth facilities. I hope that my right hon. Friend can throw some light on that because we need detailed answers.
  I may have misheard, and I have heard no further details, but I believe that the statement referred to community facilities. I understood that a fund provided through the ODPM might help. Specific funds such as the housing market renewal fund are aimed at specific targets, and it might be as well not to deviate too far from those targets. This fund, however, might be used to provide much-needed health services and youth facilities. I should very much like to hear more about it.
  The extension of the neighbourhood renewal fund for three years is very welcome. As my right hon. Friend will know, one of the problems with some of the initiatives—although we do not suggest in any way that we do not want them—is that they involve short-term amounts. Anything that can be done to put chunks of money together and make the provision more permanent and sustainable will add to the undoubted impact of many NRF projects in our patch and across the country, and make them even more beneficial to the communities that they are intended to help.
  I am very pleased about the extra investment in early years and family facilities. It makes so much sense. Anyone who has worked in education or child development, or takes an interest in antisocial behaviour, will know that the most important investment is made in the first six years of a child's life. I am lucky to represent a constituency that has received wave upon wave of Sure Start support. It is so good that people think they designed it themselves. It is probably the most successful of all Government policies.
  I would welcome any additional investment from the CSR to extend the reach of Sure Start to all communities. The child poverty review acknowledges, among other things, the importance of investing in families. Although all the evidence suggests that poverty is a huge indicator of a child's health—including mental health—educational attainment and life chances, we must not assume that all parents, regardless of wealth or lack of it, do not need help with parenting. Nor must we assume that all children involved in antisocial behaviour come from poor backgrounds. Many children in my village who cause a neighbourhood nuisance—I would not place it on the same scale as the antisocial behaviour that some people must put up with—do not come from deprived backgrounds. Nevertheless, investment in youth facilities, in the extension of schools and in parenting assistance would accord with Government policy that is already making huge inroads in constituencies such as Rochdale.
  In places such as Rochdale, economic regeneration is also very important. We are very lucky in having Kingsway business park, which is the biggest economic development in the north of England. I thank the Northwest Development Agency, English Partnerships, the Treasury and the Office of the Deputy Prime
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  Minister for creating that huge development, which has used £35 million of taxpayers' money to lever in hundreds of millions of pounds of private money. As a result, a very deprived area of north Manchester enjoys untold investment in new economies.
  However, we need to capitalise on that investment. My right hon. Friend the Chief Secretary alluded to investing in the Northern Way, which forms part of the Deputy Prime Minister's vision. Can my right hon. Friend assure me that consideration will be given to capitalising on the public money that has already been invested in the Northern Way, and in places such as Kingsway business park? As I said, we have £35 million of Government money and hundreds of millions of pounds of private money, yet a certain tension exists, in that there are those who are focusing on investment in the major cities. We should note that the poverty index shows that the northern part of Greater Manchester is one of the poorest conurbations in the entire country.
  There is another Greater Manchester organisation, Knowledge Capital, into which the Government are pouring a lot of money; in addition, there is the merging of the universities. It would be a tragedy if we failed to widen the aperture a little—if we failed to combine these elements in order to ensure that we bring the Deputy Prime Minister's Northern Way vision to fruition. We need to make use of the substantial investment that the Treasury has made in places such as Rochdale, Oldham and north Manchester. I ask the Treasury to look into this issue and to ensure that we join up such investment. There is only a matter of miles between these locations; it would be a real shame not to capitalise on that investment.
  Constituencies such as Rochdale have not only thriving Church communities but huge and diverse ethnic populations, so I welcome the great interest that the Government are showing in international affairs. It is impossible to overstate the importance of their historic level of investment in international development. Cutting to the chase, such investment is also investment in security. My constituency is one of the biggest recruiters for the British Army, so it has a huge interest in defence. In the light of that and of my international development work, it is clear to me that we need to invest in other countries, because eventually somebody else's poverty becomes one's own lack of security.
  I pay tribute to the Government's approach to international investment. People talk about the war and describe us as the great devils, but we are the biggest single investor in Palestine. We are holding things together, yet no one else is putting their money where their mouth is. Indeed, we are about to become one of the biggest investors in Africa. I say to the Government: please do not stop making such investment. Some people argue that investing in Palestine and Africa undermines jobs and prosperity in this country, but the reverse is true; indeed, such arguments endanger community cohesion in places such as Rochdale. That investment ensures jobs and prosperity in this country, because the richer we make the rest of the world, the richer we make ourselves. I am not a religious person, but I do believe in the principle that we should do as we would be done by, and that one should give in order to receive. I commend such investment; it is morally valuable in itself, but it also constitutes a defence policy.

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  Be it housing, regeneration, schools, families, law and order or international development, the comprehensive spending review builds on policies that make me proud to be a member of the Labour party, and proud to be a Member of a Labour Government who are remembering forgotten communities such as Rochdale.
  4.44 pm
  Dr. Vincent Cable: I shall first respond directly to the hon. Member for Rochdale (Mrs. Fitzsimons) who threw a question at me. She is right, and I have never concealed the fact that I believe that all parties, whether in government or in opposition, have to make choices. That means saying that we cannot solve all the problems of government by eliminating waste. I entirely agree with the spirit of the comments made earlier by the right hon. and learned Member for Rushcliffe (Mr. Clarke). That is why we have said that there are certain things that the Government should get out of.
  We have paid considerable attention to area-based initiatives. It may well be that the one in Rochdale is brilliant and I commend it if it is, but our experience has been—it is not an academic analysis, as there are Lib Dem councils in northern cities as well as in the south-east—that many of the area-based initiatives duplicate and centralise many of the functions of local government. They should therefore be cut back. The hon. Lady is right that we are arguing in favour of cutting back those initiatives.
  The former Chancellor, the right hon. and learned Member for Rushcliffe, made wise and helpful comments. He rightly started off by placing the discussion in the context of macro-economic policy. Discussion about waste is important, but we have to look at the macro-economic context. It is certainly true, at least on the surface, that the budgetary position is very good and the debt position is comfortable. The golden rule appears to be being met.
  My concern about the macro-economic position is that, although the British economy as a whole has been fairly stable, the Budget has been highly unstable. We have had a lurch from famine to feast. We saw public spending at roughly half the growth of the economy as a whole for the first few years, then it greatly exceeded the overall growth of the economy, and we now have the third phase. The Government have not pointed out clearly that public spending plans are front-loaded with a big increase for 2005–06 and then a sharp slowdown subsequently.
  It is not simply that instability is a problem in itself, because enormous costs are associated with it. One of the biggest causes of waste in government is not so much bureaucrats—we will get round to them in a minute—but the £1 billion a year that we pay on excess charges in the NHS for agency nurses. There are several reasons for that. One of the reasons why there are so many agency nurses is that key decisions on nurse recruitment and education were not taken five or six years ago. We are paying the price for that today.
  Another example is that we are currently talking about paying £60,000 for a maths teacher, again because the problem of scarcity was not identified earlier on in
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  the Government's term of office. It takes a long time to take a child through from A-levels, to university, teacher training and then into teaching—and it is only now that the problems have been identified. We are now paying the costs and the price of the instability when we lurched from under-funding to over-funding within the public services.
  Mr. Hopkins: On nursing, a chief executive of a hospital trust told me that if he could take the same global sum of money that he spends on nursing and pay a higher rate to all his nurses, he would have a full permanently employed nursing staff. He would not need to employ agency staff. Unfortunately, he is not able to do that, so he has to have a lower level of pay for his nurses and buy in agency nurses.
  Dr. Cable: There is a lot of wisdom in what the hon. Gentleman says, but he knows that there is an overall problem of supply, which traces back in time to failures of recruitment.
  Our debate today has focused primarily on the concept of waste in public services. It was particularly evident in what the Conservative spokesman said, but it has been equated by virtually everyone with the cost of administration. We can argue about too much administration and too much bureaucracy, but waste is a wider concept than that. The Government are right to point out that some elements of waste have fallen. We have less unemployment, fewer debt interests and we are avoiding policy areas such as the poll tax.
  The concept of privatisation was also slipped into the Government's litany of Conservative crimes. I was rather surprised by that: as I understood it, one of the key elements in the Government's spending plan is £30 billion worth of asset sales. I think that that is privatisation, so I do not understand why it found its way into the list.
  Other elements of waste have not been mentioned. We heard the Prime Minister's statement earlier today. For some of us, the £3.5 billion spent on the war could be classified as a sort of waste—not simply because the war was fought, but because if it had been fought properly under multilateral rules, it would have been funded internationally, as the first Gulf war was.
  Yesterday we debated energy. What was not spotted by too many people was the fact that the Government have now put into the public domain, admittedly over a long period of time, liabilities of a minimum of £50 billion, because electricity—particularly nuclear electricity—was not properly costed. That waste, both physical and financial, is now dumped back into the public sector. Waste is multi-dimensional, and not only to do with bureaucracy.
  Mr. Flight: I said that there were two types of waste. One is defined in the narrow and traditional sense and investigated by the Public Accounts Committee and the National Audit Office; the other requires major policy change to address, as my right hon. and learned Friend the Member for Rushcliffe (Mr. Clarke) pointed out. It is highly important that we all are clear what we are talking about. I certainly meant the word "waste" to be taken in its widest sense.
  Dr. Cable: I agree, and I will develop the point now.

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  The key point in the debate is the assumption that public sector productivity can grow by 2.5 per cent. a year. In the private sector, which has additional incentives, service productivity growth is only 1.5 per cent. The Government assume that the public sector will be much more productive than the private sector, even without the incentive structures. The figures are elusive, but I understand public sector productivity growth is close to zero. That means that some pretty heroic assumptions are being made.
  I often call to mind the old story about the economist stranded on a desert island with tinned food and nothing else. When asked how he will survive, he says, "Let's assume the existence of a tin opener." Essentially, that is what lies behind the Government's plan. They are saying, "Let's assume the existence of 2.5 per cent. productivity growth—plausible or otherwise."
  The Chief Secretary helpfully clarified a confusing element in the statement. I refer hon. Members to page 13 of the published version. He said that the £20 billion Gershon savings, which include savings from the dismissal of a net total of 70,000 civil servants, will be outside the spending review. Therefore, the savings made from the sacking of civil servants and implementing the Gershon report will be over and above the spending limits. The Government's strategy is to feed those savings back, in some sense, into public services.
  That raises some important questions. How will the Gershon dividend be paid? What is the mechanism? I offer a simple example involving the Department for Work and Pensions. I do not want to go into the pros and cons of the matter, but by sacking 40,000 civil servants costing roughly £25,000 each the Department will save £1 billion a year. What will happen to that money? Will it go into improved services in work and pensions? Will it go into pensions, or back to the Treasury? How does the dividend get paid?
  There is a bigger question for the economy as a whole. I hope that Ministers will correct me if I am wrong, as I am trying to understand what is going on, but the Government have said that the £20 billion a year generated in additional savings and extra productivity will all be spent on public services, and that it will not go back to the taxpayer. Is not the logic of that that the share of public spending in gross domestic product will rise as a result of the successful implementation of Gershon? I should be happy to be corrected if I have misunderstood the proposition, but we need to be very clear about how the Gershon dividend will operate, at both micro and macro level.
  My second question is about conditionality, and it relates in part to what the right hon. and learned Member for Rushcliffe said. How do Departments get their spending allocations in the context of the Gershon reforms? Let us suppose—it may not happen—that the Department of Health performs extremely badly in respect of all the Gershon reforms, and that it does not achieve its IT or procurement targets and so on. Does that mean that the funding in the spending review will be withheld, or will it be increased because of the Department's underperformance? There has always been much ambiguity about what public service agreements mean, but what rewards and penalties exist
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  in the system to ensure the implementation of the Gershon improvements? How the conditions work is massively unclear.
  The right hon. and learned Gentleman asked another question: how do we know when reform has been implemented, and how do we measure performance? I am delighted that Professor Tony Atkinson, who is an underestimated and important academic, will be brought in to try to help answer those questions. However, economists have been worrying for 20 years about how to assess public sector productivity.
  The attempts to improve productivity in the public sector can be very daft. Shortly before I became an MP, I visited my local borough police commander. He was a bright young thing who had just come out of a refresher course at the police college and was buzzing with management speak about productivity. He told me that he had been thinking through his borough's strategy and that he intended to get rid of beat policing. He gave me a little homily to the effect that the chances of a burglar being caught by a beat police officer were as remote as the chances of being hit by an asteroid. That proved to him that good management and improving productivity meant getting officers back into the police station so that they could go out in their cars in emergencies. He called that high-productivity policing, but we all know in retrospect that it was just daft. The police have since done a U-turn on that policy, and we are no closer to understanding how we could improve productivity in policing.
  Further education is another example. The head of my local FE college tells me that it has been subject to productivity targets from the Treasury, via the Department for Education and Skills, for the past five years. The sector already has a 2.5 per cent. productivity target. The college achieves the target by increasing class sizes—more students, same number of staff. Is that what the Gershon reforms will mean?
  The Financial Secretary to the Treasury (Ruth Kelly)indicated dissent.
  Dr. Cable: Well, it is not clear who will decide how the target should be achieved and how Departments will be rewarded or penalised if they succeed or fail.
  The immediate action—as opposed to the general commitments in Gershon—is the dismissal of 84,000 civil servants. How much will that actually save? We hear some confusion about numbers. The BBC said that it would save £5 billion. However, a little mental arithmetic suggests that the loss of 84,000 people who are paid an average of £25,000 a year—who would all be paid redundancy money—would save only £2 billion. That suggests that Digby Jones is right to suggest that the 84,000 would be only a tiny fraction of the job losses necessary to meet the Government's objectives.
  Can the Government tell us a little more about the civil service cuts? Who will suffer them? Will it be the people who have been brought in over the past two years, many of them to do IT work? What will be the split between senior and junior civil servants? That will make a big difference to the cost savings, but we have no specific information at present.
  Can the Government tell us something about the deeper aspects of the Gershon reforms and how they will be delivered? From the documents that I have read it

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  appears that one of the key arguments is that we will see a big leap forward in information technology. However, the Government's record in that area is abysmal. The National Audit Office suggested in a report a couple of years ago that only a third of Government IT projects succeed. We all remember the Passport Office story, and the courts and the Post Office have suffered fiascos in that area. To their credit, the Government have introduced a much improved procedure, including the gateways, and the level of error has been reduced. However, many of the projects are still highly doubtful. People close to the industry, such as Computer Weekly, are concerned that the IT programme will unravel badly with disastrous consequences, especially for the NHS. One of my reasons for arguing that the Home Office should abandon its plans for identity cards—apart from the civil liberties aspect—was the management issue. How would a Department that has conspicuously failed to manage big IT projects in all its other operations be able to handle one that would be even more complicated and difficult?
  The other element in Gershon that is very important—the hon. Member for Arundel and South Downs (Mr. Flight) highlighted it too—is the centralisation of procurement. It will be a key part of the process. In business, centralisation of procurement has gone in and out of fashion, but Gershon goes in for it in a big way. A move from 400 to four major civil service procurement centres is planned. Is that feasible? At the end of the debate, may we have an indication as to the Government's progress in centralising procurement and how it will work? My understanding is that few councils or agencies have agreed to undertake that process.
  The Government and the Conservatives place great emphasis on the idea that somehow or other they can achieve great savings by getting rid of the back-office staff and concentrating on the front line—to use the jargon. However, I have never been wholly clear as to the distinction between the two; nor are the Government, because they have just reclassified £5 billion in that regard.
  One of the things that most shocked me when I became an MP was visiting my local police station and seeing big, brawny, fully-trained police officers doing their own typing. We were in the wake of cuts in the Metropolitan police; at the time, the current Conservative leader was Home Secretary and we had just gone through a period of downsizing, so when I asked why those officers were typing instead of being out on the streets, I was told, "We decided we needed to get rid of our civilian support staff to concentrate resources". However, somebody had to do the clerical work—the police officers.
  One of the new fashions that the Government have adopted and the Conservatives are advocating is to get rid of local education authorities—those parasitic, bureaucratic tiers of management. They claim that great savings will be made by getting rid of LEAs. In my area, I discovered that the LEA is small. I am not making a political point, by the way; the local council is a Tory one. The LEA occupies one floor of a multi-storey building and comprises fewer people than the James committee, yet it is responsible for all the borough's education administration. Which of those people would
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  the Government get rid of? Who would do their tasks when that "unproductive" layer of management was stripped out?
  Perhaps we do not need the LEA's four inspectors, although it is self-evident that schools need inspecting—they cannot wait for Ofsted every three years. A few people handle student grants and a few deal with special needs. Those people cannot be stripped out with no consequences. Other people deal with the payroll and staffing. If their posts are abolished at the LEA, they will reappear in schools, so where will we see the savings from stripping out that layer of management?
  Both the Government and the Conservatives have created the illusion that these changes can be easily made. I have been in a big company that was McKinseyed and saw the process at work. Management consultants decide that many functions can be stripped out, but it cannot be done, and senior managers end up doing their own secretarial work. In business, that is called "managing your own function" and it is often extremely inefficient. There is much glib talk about savings from eliminating waste and stripping out management. Of course, there are things that should be done, but much of what is actually achieved is worryingly superficial.
  It is my view, which I have also argued as my party's spokesman, that the Government must get out of certain activities. Although arguments about waste are important and we have to be on the ball about such matters, we have to make political choices. One of the reasons that my colleagues and I focused on the Department of Trade and Industry is that although it is not one of the biggest Departments, it raises the biggest questions about whether the Government have any basic competence in that field. It has a budget of £5 billion and it is supposed to help business and industry.
  When I attended a conference recently I was struck by the comments of one of our leading Asian entrepreneurs, Ghulam Noon. He turned to the Secretary of State for Trade and Industry, who was in the audience, and said: "Will the Government please stop trying to help us? Just let us get on with our job. Make sure the infrastructure works. Keep taxes reasonable, but please stop trying to help us."
  The Chancellor is passionately committed to science, innovation and research and development schemes, but many of those things are unproductive. The OECD did some good research recently, which showed that support for R and D distorts and completely displaces private sector R and D. It adds no value in the economic sense. I would not go quite that far; there is a residual role for the DTI, but much could be taken out.
  We really need money for pensions, which are a big priority; they must be lifted out of means-testing. We have to find the money from somewhere. That is the kind of choice we have to make.
  5.5 pm
  Alan Howarth: The hon. Member for Twickenham (Dr. Cable) calls for perfect forecasting and perpetual stability. All Governments would like to achieve that but, of course, government is very difficult. This Administration are decent and outstandingly capable, and the spending review demonstrates their intellectual and moral energy. The

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  review is based on seven years of experience, during which a matured and successful strategy for government has been developed.
  The fiscal stance seems to be sound and that is confirmed by a rather better judge—the markets, which are unperturbed by the spending review. The right hon. and learned Member for Rushcliffe (Mr. Clarke), my former right hon. and learned Friend, has the ability, amiable indeed, to make apocalypse sound very jolly, but I think that he will be disappointed. There is every reason to suppose that my right hon. Friend the Chancellor will successfully adhere to his fiscal rules and he has proved a better forecaster than most of his critics in recent times.
  An independent umpire, the Institute for Fiscal Studies—all hon. Members could accept its objectivity and competence—tells us that, as total public expenditure rises to a planned £580 billion by 2007–08, it will represent 42.3 per cent. of national income. That figure is below the average of 44 per cent. of national income that prevailed in the years of the Conservative Administration. It is in line with OECD standards and lower than the figure found in many European countries.
  The sustainable investment rule should be met. Public sector debt is expected to rise to no more than 36.5 per cent. of GDP—well within the 40 per cent. limit that my right hon. Friend the Chancellor sets himself—and public sector net investment is planned to rise from 2 to 2.25 per cent. I note that that is well out with the rules of the stability and growth pact. The borrowing requirement will clearly exceed the requirement of the stability and growth pact that a balance or surplus should be achieved over the cycle, taking into account public investment. Thank goodness, we are outside those constraints, and my right hon. Friend the Chancellor has kept us out of that financial morass. Given the dismal history of deflation and wasted potential in the eurozone, surely we cannot now wish that we were part of that system. It is interesting to note that the flat-earthers in the Commission were upheld yesterday by the European Court of Justice. Will they then proceed to impose penalties on France and Germany, compounding the deflation for which they have been responsible through their policies in past years? The answer is no. They would have had a go at that a couple of years ago; they will not do so now, thanks to the pressure for reform created by my right hon. Friend the Chancellor.
  Mr. Hopkins: I have great sympathy with what my right hon. Friend says. We have a happy fiscal policy because we have the ability to choose our monetary and fiscal policies and to ensure that they work well in tandem. That is possible because we are outside the eurozone. Does he agree that we should stay outside the eurozone so that we can continue to manage our economy sensibly?
  Alan Howarth: I can certainly see no case for subjecting ourselves to the consequences of a single currency, such as a one-size-fits-all interest rate and all the associated constraints on fiscal policy, so I agree with my hon. Friend.
  The Government's spending plans are predicated on an assumption that there will be no serious economic slow-down in the wider world. It is difficult to be entirely
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  optimistic about that. Given the fiscal profligacy and the monetary imprudence that have prevailed in the United States of America for a good long time past, clearly, after the presidential elections, there must be a retrenchment in the USA, which will be bad for growth. Equally, if the politburo manages to slow down the Chinese economic juggernaut to some extent, it might provide a shock to the world economy. However, I think that my right hon. Friend the Chancellor's plans allow for sufficient margins to accommodate any setbacks of such a nature that might occur.
  The departmental expenditure limits are anticipated to rise by 4.2 per cent. per annum on average throughout the spending review period but, as has been noted, reductions in the rate of growth are intended in later years. Rather than assuming that that will be achieved through a process of slamming on the brakes that would be impossible to handle, I take it that it is a prudent provision for the future. Let us see what proves to be fiscally manageable in the event.
  It must be acknowledged that it will be hard to spend a 4.2 per cent. average increase in public expenditure efficiently and effectively, which makes the efficiency review all the more important. Moreover, increases to front-line spending are intended to be substantially funded by the benefits of the efficiency drive. As hon. Members have noted, it will be difficult to achieve the efficiencies that are held out. All Governments have promised to achieve dramatic efficiencies in the use of public funds, but the Parkinsonian tendency for bureaucracies to expand is unrelenting. It will be a tough job to get the process right without any doubt. The process will also be tough for the public servants affected, so I was pleased, but not at all surprised, to note that my right hon. Friend the Chancellor intends to take a great deal of care of those staff, in human terms, to ensure that the personal consequences that they face are no harder than they need to be.
  Several commentators—the hon. Member for Twickenham added himself to their number this afternoon—have said that we will never actually know whether the efficiency targets have been achieved, but I do not think that that is right. My reading of the Gershon review is that it is rigorously set out and establishes bases and benchmarks against which we may judge performance and progress. It sets out relevant definitions, describes the methodologies for achieving efficiency and offers a variety of expert support systems.
  I do not think that any of us can doubt that there is scope now, as there always is, to achieve economies. Let me offer one small vignette that arises from my recent constituency experience. The young son of one of my constituents assaulted a teacher and there was a requirement that the boy attend a non-maintained special school. Monmouthshire local education authority was unable to provide appropriate schooling in its own system, so the boy had to be sent away. Two options were considered: a special school in Cardiff charging fees of £124,000 a year; and a special school in Somerset charging fees of merely £75,675. To get those amounts into perspective, I checked the fees at Eton, which will rise in the autumn to £22,380. It beggars belief that the public sector is paying such sums. I do not criticise the director of Monmouthshire LEA because he has no choice but to find a placement for the boy. He says that supply is limited and that the situation is what

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  market forces dictate. That provides a small example of the scope for considerable legitimate cost savings in the public interest. The search for efficiencies must be continuous because economies are always there to be won.
  On a more cheerful note, public servants who might have the opportunity to relocate to Newport have nothing to fear. I myself relocated there only a few years ago, and the House must discount my bias because I always fall in love with any constituency that is good enough to put up with me. Better witnesses to the merits of setting up public service shop in Newport are the public officials who already work there—the staff of the Patent Office, the Office for National Statistics and the UK Passport Service.
  As long ago as 1994, the National Audit Office found that, following the Patent Office's relocation to Newport, it had not only improved performance but saved on accommodation and staff costs. It saved on staff costs partly because salaries were somewhat lower in south-east Wales, but mainly because staff turnover was so much lower compared with turnover in south-east England. I shall not descant at length on the beauties and joys of Newport, but I ask my right hon. Friend the Chief Secretary to study an excellent document produced by Newport city council—"Newport: a pleasure doing business"—which is both eloquent and sobersided and makes the case irresistibly.
  The Government are also right to pursue a programme of asset sales, as one would in any substantial business in which assets are found to be surplus to need. It is no more and no less than their duty to the taxpayer, as is the whole drive for efficiency savings.
  I thank my right hon. Friends for specific features of the spending plan. I thank them on behalf of Wales for the average real-terms increase in funding of 4 per cent. that is planned over the period. In particular, I want to mention two items that are small in the scale of things but significant to me, partly because they represent unfinished business from my incarnation as a Minister with responsibility for the arts and heritage.
  I very much welcome the Government's decision to extend the VAT refund scheme to university museums and galleries to enable them, too, to offer free entry. I spoke on that subject in the public expenditure debate two years ago. The Chancellor and the Chief Secretary were kind enough to meet me and a deputation to discuss it. I pay particular tribute to Professor Martin Harris and Dr. Christopher Brown for their expert advocacy of the cause.
  The other small item in the cultural field for which I want to thank the Government is the decision to double the size of the national heritage memorial fund. The fund enabled the National Trust to acquire Tyntesfield. There are now similar needs and opportunities, with the possibility of the National Trust for Scotland acquiring Dumfries house, a wonderful house that reflects the undisturbed work of the three Adam brothers and which has Chippendale furniture, and Abbotsford, which is a house of great historic importance.
  More broadly, I want to express my appreciation to the Chief Secretary for the provisions in the spending review on the voluntary sector. Like me, he has taken a
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  close interest in policy for the voluntary sector over the years. The decision to introduce longer-term funding agreements, to consider in new ways the assignment of risk between the voluntary and statutory sectors, to accept full cost recovery if charities and voluntary organisations provide public services so that they are not subsidising the Exchequer, and the proposed lightening of regulation are all good news for the voluntary sector.
  As a member of the Intelligence and Security Committee, I express my appreciation of the additions to the secret intelligence account. Like all my other right hon. and hon. Friends, I single out the Government's commitment to achieving the 0.7 per cent. of GDP spending on aid as important and welcome. I hope that it will go into the manifesto. I also hope that the Chancellor's plans for an international finance facility are accepted by the international community so that we reach our 0.7 per cent. of GDP in 2008 rather than 2013. Next year, with the chairmanship of the G8 and the presidency of the European Union, Britain will have an important opportunity to mobilise the rich countries of the world to that cause.
  I want to speak about two other policy areas. On higher education and science, I welcome the reiteration of the Government's commitment to maintain funding per student during the spending review period. There are, however, other important requirements for higher education, such as infrastructure—buildings, libraries, laboratories, classrooms, lecture rooms—support for part-time students and, perhaps most particularly, academic pay. The Mouse will recall that in the 20 years to 2002, academic pay rose by 4 per cent. while average earnings rose by 45 per cent. The Treasury used to insist that that did not matter and that there was not a market failure, but that discrepancy was bought at the price of rapid deterioration in staff-student ratios and the jeopardising of quality. It has inevitably affected the quality of recruits to higher education. The Bennett report from the British Academy expressed unequivocal anxieties about the numbers and quality of people embarking on PhDs, including on subjects that are important by the utilitarian standards of the modern world, such as economics or Chinese.
  The issue is whether we can renew our enlarged universities, of which so much is expected, to an acceptable quality. The Government have paid more heed to the Roberts report on the supply of people with scientific, engineering and technological skills, but we must balance the needs of the arts and humanities with the need for science. We should be wary of going down the US route of simply paying more for teachers with marketable skills. I readily acknowledge that there has been a good settlement for academic pay this year, but where are the funds in the plans properly to restore academic pay? Where are the funds to make sure that our remarkable new laboratories will have remarkable scientists in them? How are we to pay for the costs of higher education? If every course charged the full £3,000 allowed under the new tuition fee regime that would bring in a maximum of £1.4 billion after 2009, which should be set against the shortfall in higher education funding of £8.8 billion cited by Universities UK. I do not expect the Treasury to agree with the latter figure, but the disparity is still huge.

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  I hope that the Government will at least fund the recommendations in the Thomas report, which looked at the possibility of creating endowments for our universities. It recommended that the Government provide time-limited match funding to pay for the costs of establishing development offices in universities and training in fund-raising techniques. It also recommended that they look again at tax relief. It is noteworthy that the largest endowments enjoyed by universities in the United States of America have, in the main, been built up in the past 20 years. Although it would be a long haul and a difficult task to raise endowments on a significant scale for our universities, we should certainly try to do so. If higher education in the United Kingdom achieved the same share of individual giving as higher education in the USA, our universities would be £600 million a year better off.
  Naturally, I welcome the extra £ I billion of spending on science in the plans, although I fear that it may partly be at the expense of other areas of the higher education system that are no less important, as a good proportion will come from the budget for the Department for Education and Skills.
  The planned spending on science represents funding beyond any dreams of avarice that I had as Science Minister. The Treasury has become quite dewy-eyed about science. It expects spending to increase by 5.8 per cent. a year in real terms, and is moving towards an objective of research and development taking 2.5 per cent. of GDP. The Government's science strategy in the "Science and innovation investment framework 2004–2014" is, however, rather long on assertion and aspiration and rather short on tight argumentation and precision. It seems to say that a lot of science means a lot of wealth, which is more redolent of alchemy than science. Science is somehow to be the elixir of competitiveness.
  There is much reference in the document to indicators and goals, but when one looks at them, they are all rather vague. The strategy dilly-dallies on its way, for example, to achieving the funding of the full economic costs of public interest research by Government Departments. We are told that the final adjustment to the methodology for that will not be in place until 2007–08 and the research councils should fund close to 100 per cent. only by the beginning of the next decade, yet the issue has been around for a very long time. The transparency review exposed the fact that the Government are not paying the economic cost of the research that they commission from universities. A decision should be taken so that the matter can be resolved.
  All that is strange, as I believe that Lord Sainsbury is an outstanding science Minister. The document smacks of negotiations not quite completed in Whitehall and material that was not quite ready for publication. Its commitments are deferred, qualified or imprecise. More Gershonesque rigour is needed in this regard.
  I am worried in particular that the document holds out a prospect of too much bureaucratic hassle. We are told that to inform periodic reviews of public spending, the Government will conduct every two years a detailed assessment of progress towards goals. Why not just let good scientists get on and do good science? It is not quite in the spirit of devolution, letting things go from the
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  centre and allowing people to take responsibility, that we find both in the Gershon review and in the spending review document.
  I am worried, too, that the tilt towards applied science may be carried too far. The research council programmes are to be more strongly influenced by and delivered in partnership with end users of research. The research assessment exercise is to favour research relevant to users more than in the past. But if higher education moves too far towards applied knowledge, the irony is that this may damage the economy because it may impair our national capacity to generate talent for broad-based problem-solving, disinterested consideration and original thought.
  If we commercialise and marketise higher education too far, we also risk losing the public values that we should respect in the universities and which the Government certainly do respect. Higher education is not just an annexe of the economic production line. Academics should address fundamental questions on our behalf. They should prepare students for democratic participation and social leadership, and they should speak truth to power. I hope that the Government will not overlook those important points.
  Finally, I shall say a word about pensions, as there is strikingly little mention of the subject in the spending review document. It states on page 159 that 3.2 million people will be on pension credit and 2.2 million will be receiving guaranteed credit by 2008, which the document acknowledges is a "stretching commitment" for the Department for Work and Pensions. The funding of pensions and the consequences of pensions policy are a major issue for public expenditure. We face looming problems in both the public and the private sector. The Government have been addressing aspects of pensions policy requirements piecemeal, and I believe this is a field where the Chancellor has not yet applied his own magisterial intelligence.
  The TUC is right to note with concern that fewer than half of people under 30 are saving for pensions. The defined benefit promises that the previous generation felt able to make will prove unaffordable. It is clear that the private sector is withdrawing wholesale from that commitment and, if not now, before long, the public sector will be in serious difficulty with it too. We are hearing about local authority pension scheme deficits. Part of the trouble is that local government employees contribute too little and people retire too early, presumably at the expense of council tax payers. Every time there is a new chief executive, he or she gaily restructures the senior management team, with a pension fund footing the bill.
  We used to be complacent about our prospects on pensions vis-à-vis Europe, but there is no more room for complacency. Radical reforms are needed. I hope my right hon. and hon. Friends will look carefully at the proposals from the Pensions Policy Institute and the National Association of Pension Funds for a citizens pension on something like the New Zealand model.
  We need a better basic state pension that is universal and based on citizenship and residence, not contributions. Only 14 per cent. of recently retired women are on a full basic state pension, so we do not have a universal state pension and we should have one. We should conflate the basic state pension and the state

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  second pension to build a platform at or above the present means-testing level, which would be affordable now. We should then index pension benefits to national earnings. We would get rid of the complexities and disincentives that riddle the system such as contracting out and great swathes of means-testing, including pension credit. That would enormously benefit not only women, but low-paid people who earn less than the lower earnings limit for national insurance and carers, which is entirely consonant with the Government's commitment to social justice.
  Above the basic pension platform provided by the state, individuals should build their own schemes to which employers should be compelled to contribute. The evidence from the Association of British Insurers is that, where employers do not contribute, only 13 per cent. of employees save for pensions, but where they contribute 5 per cent., 69 per cent. of employees save for pensions. The Treasury should switch from tax relief to grants, because an enormous proportion of tax relief goes to people who are already well off and who least need incentivising to save. Whether that is the right pattern for reform—I think it attractive and practical—we cannot continue as we are for very much longer.
  The spending review is admirable. It was made possible by a disciplined and intelligent approach on the part of the Government, who understand the dynamics and interdependencies in our society. They are dedicated to strengthening our society, so that talent and energy find scope and reward. They support vulnerable people, who find that they are respected, cared for and have opportunity. And they particularly seek to improve life for children born in poverty. The title of chapter five of the spending review, "A Fairer Society with Stronger Communities", expresses this Government's ethic, a society in which the public and private realms flow into each other fruitfully and in which the values of community and personalised public services, which are therefore true services, are restored.
  5.32 pm
  Mr. Michael Fallon: It is a pleasure to follow the right hon. Member for Newport, East (Alan Howarth). I hope that Front Benchers noted some of his points about science and higher education, with which I agree. This afternoon's debate seems to be turning into an old Department of Education and Science reunion, although some of us have not changed our positions. I begin by declaring my business interests, as recorded in the register.
  I note that the review is no longer called the "comprehensive" spending review, which is probably a wise omission because it does not give us a picture of public expenditure as a whole. As the Chairman of the Treasury Committee pointed out, the spending review has been published before departmental out-turns are available. We heard evidence this morning that that is an accident, because 14 days' notice must be given to the National Audit Office, the Office for National Statistics or somebody, so the departmental out-turns cannot be published until Monday. That is either incompetence or conspiracy, or, as I prefer to think, the spending review is a political exercise that has been rushed forward in this particular year to try to influence the results of tomorrow's by-elections.
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  The review does not include the all-important Atkinson report on public sector productivity, and I do not know why the Government could not wait for its conclusions, which would have enabled all of us more accurately to examine the efficiency targets. On the targets themselves, we have been told that the measures, which are now called the efficiency technical notes, will not be published until October. Sir Peter Gershon, an admirable man, has toiled away for a year on his report, and the Government have had two years in which to prepare the spending review, so I do not understand why the efficiency technical notes are not ready to be published alongside the efficiency targets.
  That point is all the more important when one considers some of the woollier targets. The Department for Culture, Media and Sport is pledging itself to save some £260 million a year by 2007–08. It has four plans to achieve that, the fourth of which is simply to
  "work with its sponsored bodies, local authorities"
  and other Departments
  "to facilitate the delivery of these … gains."
  That is not a specific plan. Such an objective should be properly measured: that is why the efficiency technical notes should have been finalised and published alongside it.
  The spending review document does not include crucial information that we need about the uprating of benefits. The Government blandly commit themselves to yet another reduction in child poverty, which is a very important target, but the totals for managed expenditure given in table A1 reveal that for the second two years 2006—07 and 2007–08—there is no assumption that tax credits, including the all-important child tax credit, should be uprated by any more than inflation. In other words, there is no assumption that the child tax credit will be uprated by the level of earnings growth, as is necessary if the target is to be met. The document has serious weaknesses, and I suspect that it has been rushed forward for political purposes. I regret that it does not provide the supplementary information that we need and that it does not give the Treasury Committee sufficient time to produce a report, as we normally would have done, that might better have informed the debate.
  It emerged in evidence given to the Committee this morning that the reduction in head count through the sacking of 100,000 civil servants will provide only between 10 and 15 per cent. of the proposed efficiency savings—the magical figure of £20 billion. In other words, 85 to 90 per cent. of the £20 billion has to come from everything else that is promised—better procurement, better working, lower sickness rates and so forth. In reality, better procurement often means more centralised procurement. The Government have already run into difficulties in forcing their way towards better NHS procurement because of objections from the devolved and empowered primary care trusts.
  On better working, I am, like my right hon. and learned Friend the Member for Rushcliffe (Mr. Clarke), sceptical about how some of the targets will be met. In the case of the Department for Education and Skills, we are told that 30 per cent. of its £4.3 billion savings—a total of £1.3 billion—will be provided by teachers and college lecturers working harder. I see nothing in Gershon or in any other document to give us any

  1495
  comfort about those savings being delivered in practice. It is noteworthy that when Sir Peter Gershon consulted the devolved units on the efficiency gains that they could deliver—contacting more than 60 police authorities, more than 100 health service trusts, and more than 100 local authorities—only 12 health service bodies and 12
  local councils responded. I suspect that the Government will find it much harder to enforce such savings on the devolved public services.
  The 2.5 per cent. efficiency saving is an enormous amount—I agree with the hon. Member for Twickenham (Dr. Cable) about that. The annual average productivity improvement in the economy over the past 40 years has been 2.1 per cent., yet we are suddenly told that the public sector will be 2.5 per cent. more productive. Like my right hon and learned Friend the Member for Rushcliffe, I suspect that that is a rain dance.
  I want to consider the fiscal position, to which there are three keys. Each is critical to the Government's obeying its fiscal rules and our being spared the additional tax burden that Conservative Members feared and that was realised after the last two elections.
  The first key is that tax revenues have to come in. There is already evidence that they are not coming in as the Treasury forecast that they should. Secondly, the Government must deliver the asset sales that they promised. The document mentions a total of £30 billion of asset sales, yet I cannot find a single list of what will be sold to deliver them by 2010. As we found in Government, asset sales get harder as one goes on. One sells the land and privatises the industries but the search for the £4 billion, £5 billion or £6 billion of asset sales that one needs every year gets increasingly harder. It should therefore perhaps be no surprise that the Government have not even listed where the asset sales will be made. They are unlisted, unquantified and will become much harder to achieve. As I said earlier, if efficiency savings—the third key—are not achieved in full, we shall be in trouble.
  The Government will be in trouble because the one certainty is not asset sales, tax revenues or efficiency savings, but spending. The spending is guaranteed and will now begin to flow, whether or not efficiency savings are realised, asset sales are pocketed and tax revenues come in. If the three keys are not achieved, taxes and borrowing will have to increase all over again.
  As my hon. Friend the Member for Arundel and South Downs (Mr. Flight) said, we have the largest state sector in the Anglo-Saxon world. We have a public sector that is larger than Scotland and we have slipped down the competitiveness league. It is a stark fact that if British GDP per head were measured against that in each of the American states, we would come 45th. Only four American states have a lower GDP per head than ours.
  We have had seven years of rising administrative spending. The Chief Secretary tried to bluster his way out of the figures, and I commend the table in this morning's Financial Times to him. It clearly shows that administrative spending has increased from 4 per cent. to 4.5 per cent. The right hon. Gentleman promised to
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  reduce it to 3.7 per cent. but the table shows how the Government have always promised to reduce it and always failed.
  There has been a lack of genuine, radical reform in our public services and a massive increase of more than 500,000 jobs in the public sector. That is real Labour. They start by spending and hiring more and more public servants and end so desperate to find savings that, suddenly and without warning, they send out 100,000 redundancy notices to their civil servants. Those 100,000 civil servants will see through the Government when they are put out of work. When the rest of the country sees through the Government, they will be put out of work, too.
  5.44 pm
  John McDonnell: I preface my remarks with the traditional statement of fealty or loyalty to the Chancellor and all his works. From the Budgets that he has introduced since 1997, my constituency has gained for the under-fives a Sure Start centre, a neighbourhood nursery and an early excellence centre. We have gained three schools—a primary school and two secondary schools—although I have to say that one was a private finance initiative that was imposed on us. I met the head of that school this morning, and we are not sure whether Jarvis will go bust over the summer so we are slightly anxious about that. My constituency has gained two medical centres, one of which I opened last week, and a mental health unit. We are also bidding for a new hospital. There is now neighbourhood policing in some of our wards, and it is developing throughout the others.
  That represents a programme of traditional Labour policies of investment in the community, of which I am proud. Especially welcome this week was our commitment to the development of international aid to a level that this country has not seen before and for which the United Nations has been calling for a number of years.
  However, the Budget statement and the spending review statement were tarnished by the treatment of the Government's own staff. They are the very people who deliver all those services and policies in my constituency and across the country, and we have treated them badly. We have used some of the worst employment practices of the worst employers. In the Budget, without any consultation, discussion or negotiation with the trade unions, the Chancellor announced 40,000 job cuts. In the spending review, it was announced—again without consultation—that there would be 100,000. Is it 100,000, 84,000 or 96,000? I am not sure. Certainly, it is now acknowledged that there will be compulsory redundancies. We need clarification on the precise numbers. The Scots have already revolted, and Jack McConnell has said that the 20,000 job cuts will not be imposed on Scotland by an English decision. What does local government have to say about the individual impositions of job cuts that will be made, council by council?
  I have always found the staff who work for the Government throughout the civil and public service to

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  be committed, dedicated and hard working. They are generally overstretched, and often over-stressed. I believe that we have the best civil service in the world—certainly in terms of probity, efficiency and dedication to the work that it does. I accept, however, that any organisation—whether a government or private sector body—will periodically need to examine how its staff deliver the objectives of that body. That is healthy and worth while, although reorganisation can sometimes become a displacement activity for real performance.
  Nevertheless, it is worth focusing our minds on how we deliver new methods and increase efficiency, and that is usually done in one of two ways. The first involves external intervention. We had that in local government through rate capping, and it can also occur in the private sector when a company's share price drops and there is a need for urgent reform. Such external intervention demands a response, although the response is often to slash and burn, as has been mentioned in previous debates.
  The alternative is internally generated reform, which is what I would have expected from this Government. It is a more inclusive form of change, whereby we challenge the role of organisations and involve managers and staff at every level. In particular, we involve the union representatives of those staff members to discuss the resources that are needed and how they are to be deployed and developed to achieve the organisation's objectives.
  With Gershon, we seem to have an approach that epitomises the former—the external threat—but which is dressed up as the latter, that is, some form of organic efficiency response based on discussion. There is a suspicion that, instead of the development of the real objectives that we want to achieve and the resources that we need, the Gershon approach is based on the achievement of a cuts level, forcing the Departments to stack up the sacrifices to be delivered over the coming period. I found it somewhat enchanting that it was dressed up in consultancy-speak. For example, "change agents" are to be placed in every Department, and I look forward to examining the "generic reform maps" and "e-enabled channels" in more detail as we go along.
  The staffing element of the proposals smacks of a political manoeuvre, in which we are involved in some kind of Dutch auction with the Conservatives on how brutal we can be towards bureaucrats, and how many staff we can cut, in a competitive game in which the numbers increase month by month. They have increased from 40,000 in the Budget statement two months ago to 100,000 in the spending review. What I find unpalatable is that we now wrap that up in the mythical division between backroom and front-line staff, whereby slashing backroom staff will in some way free up growth of front-line staff. We now have a similar concept to that of the deserving and undeserving poor: deserving frontline staff and undeserving civil servants working in the backroom.
  From my experience of working in the public sector, and even in the private sector, and of engaging with those civil servants who serve my constituents, I cannot see the breakdown between deserving front-line staff
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  and undeserving back room staff. In my local jobcentre, the pension worker who meets and greets, obtains information and provides immediate advice is of course valuable, but we also require the back-up of those backroom specialists who will analyse and process the payment, address the details of that claim, and ensure that it is done efficiently. The experience of Members is not that there are too many staff at the moment delivering benefits, pensions and so on—most of us have to deal with problems in our surgeries of ensuring that sufficient staff attention is given to our constituents because of the overstretch of existing staff.
  The announcements in the Budget and the spending review must be demoralising for existing staff, and must arouse fears among our constituents about service delivery. Those fears will be justified—services will be affected if we go for this scale of cuts. It is also an act of provocation to the unions. The union response, however, has been considered and has shown admirable restraint. I pay tribute to the general secretary of the Public and Commercial Services Union, Mark Serwotka, for the statements that he has made in the media about the need to achieve a rational approach by the Government, and about his willingness to negotiate and get involved in consultations. I appeal to the Government to start again that process of reform as a rational process, in which we engage the staff, their managers and their unions. This could be a real opportunity for reform and a renewed direction in the civil service, if that is what we want to achieve, but it must be done with the encouragement and participation of all the staff, particularly through their trade union structures, in which they have confidence. We have that opportunity, but it could be lost if threats of job losses and compulsory redundancies are handled in this brutal manner.
  On Monday, I requested a meeting with the Chancellor to discuss with the PCS parliamentary group the implications of his announcement. His response was that we had met the Economic Secretary days before. That is slightly inaccurate—we had met a couple of months before, and it was a meeting with the Economic Secretary about the pay round in the Department for Work and Pensions and across government; it was not about staff cuts. I would welcome a meeting with the Chancellor and any other Minister to discuss this in some detail. There is a real opportunity to get back on course in a reform and renewal process that will deliver the objectives of Government and that may deliver an element of savings, too. Those will be achieved efficiently and effectively only if we take the staff with us—they will not be achieved if we announce that we are going to decimate their employment opportunities for the future.
  Finally, there is failure by the Government to acknowledge that if we want staff to undertake work effectively and efficiently, we need to pay them a reasonable rate for the job. In the Department for Work and Pensions, for example, 90,000 staff earn less than £15,000 a year, and the starting rate for many of those posts is £10,000. Many of them pay themselves the benefits that they must administer, because they are on low pay. There is a chance for a fresh start for our civil service, but it will not be brought about by threats of job cuts or by underpayment in this scandalous way.
  5.54 pm
  Adam Price: It is good to follow the hon. Member for Hayes and Harlington (John McDonnell). As a fellow member of the PCS parliamentary group, may I echo his call for an urgent meeting to discuss the Government's proposals? I was as horrified as he was by the scale of the job reductions, the manner in which they were announced, and the impact that they would undoubtedly have on communities throughout the United Kingdom if the Government proceeded with their proposals.
  "Tax and spend" has always been something of a lame clichè when used to describe the fiscal stance of a social democratic Government. "Axe and spend" is something of a departure for a Government who still purport to be a Government of the centre left. However, I have learned that it is always a good idea to start with a few warm words of welcome, and I welcome one feature of the spending review. A public service agreement target for regional economic policy, introduced at the time of the last spending review, is still there and indeed has been strengthened in a sense. The Government have committed themselves to demonstrating progress in reducing the persistent gap in growth rates, albeit between English regions. I think that it should be extended to cover the whole United Kingdom because the Treasury retains that wider responsibility for economic performance; but the target is there, and progress must be demonstrated by 2006.
  While I welcome that target, however, I must ask how the Government will achieve it. We have the Lyons report, but the right hon. Member for Dumbarton (Mr. McFall) drew attention to the inconsistency between Lyons and Gershon—the fact that the Government are giving with one hand and taking away with the other. That is borne out by the details of the proposals. The biggest job cuts involve the Departments that are most dispersed, and least represented proportionally in London and the south-east of England. As Sir Michael Lyons points out, the most dispersed is the Department for Work and Pensions, just 17.5 per cent. of whose employees are in London and the south-east. The Ministry of Defence has 28 per cent. in London and the south-east, and the Chancellor's Department 25 per cent. Those three Departments, which were ahead of Lyons—which had already dispersed many jobs outside London and the south-east—are the very ones targeted by Gershon.
  What is the impact of that? The right hon. Member for Dumbarton asked for a regional breakdown of the efficiency review job reduction targets, and we should like to see one, but I have made a quick calculation myself. Thanks to the Lyons report, we have a detailed breakdown of the proportion of staff in the various Departments who are in London and the south-east vis-à-vis the rest of the country. If those figures are applied to the departmental breakdown in the Gershon report, it emerges that 63,000 of the 84,000 jobs lost will be lost outside London and the south-east.
  The poorest, most economically disadvantaged parts of the UK will bear the brunt of the Gershon proposals, and will do so disproportionately. At present 70 per cent. of civil servants are based in the rest of the UK, while 30 per cent. are in London and the south-east. Under the Gershon proposals, 75 per cent. of jobs will be lost outside London and the south-east. Lyons offers
  1500
  us 20,000 jobs, but 63,000 will be lost in the north and west of the UK. There will be a net loss of 40,000, and given the multiplier effect of 1.5 in the Government's own Lyons review, another 20,000 will be lost in the private sector.
  Of course, we cannot even be certain about the 20,000 jobs mentioned in the Lyons review. Only 30 per cent. of Departments are able to state whether such relocations will happen by 2010. Sir Michael Lyons himself says that, as a result of the Gershon review,
  "one implication … is that the figure of 19,700 may come down somewhat".
  Such a lack of precision about the relocation of jobs is in contrast to the steely determination that the Chancellor has shown in carrying out the cuts. He said that the civil service unions should be in absolutely no doubt that the Government will go ahead with these reductions, and that they are both necessary and going to happen. So there we have it: there is certainty in respect of the cuts, but doubts abound about the relocations.
  I agree with the hon. Member for Hayes and Harlington that the lack of consultation with work force representatives was appalling. That is true not only of the first tranche of losses, which were announced in the Budget, but of the second and wider cull that formed part of the spending review. Yesterday, Dave Prentis of Unison rightly said:
  "These issues should be dealt with through the established procedures and not announced through the media, which add to people's insecurity".
  The Government have been quick enough to condemn—and rightly so—private sector companies that announced large-scale redundancies in the media without advance consultation. I am thinking of Corus, Rover and Marks and Spencer. The Labour party manifesto of 2001 stated:
  "When large-scale redundancies are being considered, there is an especially strong case for consultation."
  On Monday 7 July 2003, Labour's website ran the following article:
  "Workers set to gain consultation rights … Trade and Industry Secretary Patricia Hewitt said she wants the changes to lead to an 'no surprises' culture at work and 'an end to the climate where people only hear about job losses from the media, over their breakfasts."
  If that were not enough, the Leader of the House said in "Progress", the Brairite in-house magazine, that because Labour believes in rights at work, it will extend information and consultation rights to end the scandal of workers learning that they have lost their jobs by text message. So there we have it: redundancies over breakfast conveyed in the media and by text message are wrong when carried out by the private sector; but redundancies at teatime conveyed by ministerial statement in this House are okay when carried out by the Government. Indeed, they are better than okay. According to a Wales Office press release, they were an "exceptional result" for Wales and a "once in a generation" step change. In one sense, they were exceptional—exceptionally bad—and it certainly was a once in a generation announcement. To my mind, it was the single biggest Government announcement of public sector job cuts since the pit closure programmes of the 1980s.

  1501
  To sack one's own employees is bad enough, but to sack somebody else's beggars belief. We were not only told of 84,000 job losses, but reference was made to the curious figure of 20,000 losses across the devolved Administrations and in local government. Rhodri Morgan, the First Minister of the Welsh Assembly, has been busily backtracking on those figures. He said yesterday:
  "They are not estimates we have come up with and we are the responsible body in Wales."
  He was clearly surprised and, I would imagine, probably a little angry about being bounced into that by the Chancellor. It now seems that the Treasury is saying that it plucked the figure out of the air. It was some sort of nominal, indicative figure and the Treasury had not consulted the local government bodies or any of the devolved Administrations.
  All that happened despite the anxiety caused for employees of the Welsh Assembly Government and despite the fact that it undermines the autonomy and authority of the devolved Administrations. It even breaks the memorandum of understanding signed by the Government on communication and consultation. According to that memorandum:
  "All four administrations are committed to the principle of good communication with each other, and especially where one administration's work may have some bearing upon the responsibilities of another administration."
  Yet Rhodri Morgan did not even know that the Chancellor was going to make a statement about job reductions in Wales and elsewhere across the UK. We also have to ask whether the devolved Administrations were consulted on embracing the idea of local pay, as contained in the spending review. We not only get fewer jobs, we get existing jobs at reduced pay with no consultation with the workers or the National Assembly for Wales.
  I did not disagree with every single line in the spending review. It states on page 178:
  "Performance in public service delivery and economic development varies across the regions and countries of the UK".
  It most certainly does. We have had dismal economic growth records. Growth in Scotland, for example, has been half that of the UK over the past seven years, and Welsh NHS patients face an appalling waiting gap. Pauline Purdey from Bargoed has been waiting nine and a half years for a hip operation and is still waiting.
  Why is there such varied performance across the UK? The reason is clear and it is the Treasury's responsibility because the Barnett squeeze is biting very hard in Wales. The figures in the spending review show the increase in the National Assembly's budget over the period covered as 4.5 per cent., compared with 7.1 per cent. for the NHS in England. The only way in which the Labour Administration in Cardiff will be able to match the increase in England is by raiding other budgets. The same applies to education. The increase is 5.7 per cent. in England—so if Wales is to match those improvements and is so far behind, it will have to raid other budgets.
  Mr. Grieve: I am intrigued to hear the hon. Gentleman refer to the Barnett squeeze. As he and I are aware, the Barnett formula delivers substantially more
  1502
  expenditure per head of population in Wales than it does in England. Admittedly, it is on a falling graph, moving towards a position of eventual parity in about another 20 years. Is the hon. Gentleman suggesting that, in the meantime, Wales is disadvantaged in respect of per capita expenditure?
  Adam Price: The hon. Gentleman is right that it is an equalisation formula, so year on year the gap that he describes gets less. That is the Barnett squeeze. If we look, for example, at per capita health spending, most people would accept—it is borne out by the figures on chronic sickness—that Wales has one of the worst health profiles in the UK. Of the 12 standard UK regions, we are now fifth in respect of per capita health spending. We were third only four or five years ago and have been overtaken by the north-east of England. London has far higher per capita health spending than Wales but, as I say, we have been overtaken by the north-east and we will be overtaken next year by the north-west of England. There is currently only £5 per head difference.
  The Barnett squeeze is having a real effect in Wales. It is impacting on the Welsh Assembly's ability to reduce waiting times. The public service agreements for health refer to a period of 18 weeks, but 18 months is the standard in Wales, and the waiting gap has increased. The only way to correct matters is to reform the Barnett formula. The spending review refers to Professor MacLean of Nuffield college, who is one of the strongest advocates of scrapping the Barnett formula, on the ground that it does not deliver territorial justice across the UK's regions and countries.
  I end by noting that the First Minister of the Welsh Assembly this afternoon announced that there will be a bonfire of the quangos. It will be dramatic: the Welsh Development Agency, the Wales Tourist Board and the Welsh Language Board will all be abolished. I hope that that is not how he intends to meet the job reduction targets, but I urge the Government to add the Barnett formula to the bonfire. We will never achieve territorial justice for Wales, for the south-west or north-east of England, or for any part of the UK while that formula stays in place.
  6.11 pm
  Mr. Tom Clarke: I have listened to almost all the debate, but I apologise to the hon. Member for Twickenham (Dr. Cable) and to my right hon. Friend the Member for Newport, East (Alan Howarth), as I had to leave the Chamber to chair an all-party group on disability with Lord Rix.
  The debate has been very interesting. The right hon. and learned Member for Rushcliffe (Mr. Clarke) has left the Chamber, having been here for most of the afternoon, but his remarks were of particular interest. Like other Opposition Members, he found himself in some difficulty. I recall how, when in government, he was defeated when he sought to persuade the House to increase the value-added tax on pensioners' fuel to 17.5 per cent. He predicted that the most dreadful things would happen if we did not approve his proposal. He also made dire predictions about what would happen if we introduced the minimum wage.

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  The right hon. and learned Gentleman, in opposition, has repeated those terrible predictions over the past seven years. I am sure that he will forgive me if I say that they have become even less convincing, given his record in terms of astrology, if not of economics.
  The Opposition have had to deal with the problem that the statement by the Chancellor was an indication that he has succeeded in reforming the economy. For example, the low level of inflation must fill the former Chancellor with envy. The consistently low level of interest rates has helped those of my constituents who aspire to home ownerships. Interest repayments on debt are much lower, and growth is high. All those factors have contributed to the economy's strength and stability.
  I shall concentrate on what is happening in my constituency of Coatbridge and Chryston, especially in respect of employment and the new deal. The transformation that has taken place in my area would not have been possible without the economic policies that the Chancellor has pursued.
  Before 1997, debates such as today's were dominated by the problem of unemployment. How could it be otherwise? My constituents accounted for more than their fair share of this country's total of 3 million unemployed—even at a time when we enjoyed the benefits of North sea oil revenues. Whatever disagreements might have emerged in the debate, I am delighted to say that today we are focusing on employment. We are rightly talking about job potential in terms of the new deal. We are thinking of a new agenda, as well as of what has been achieved. We are thinking of how the new deal can be improved to offer better quality jobs to those who benefit from it. I invite the House to focus on how we can build further on the excellent achievements of the new deal. Discussions on the new deal can appear somewhat abstract, but nearly 90,000 young people are participating in it as we speak. In Scotland, some 129,200 starts have taken place, 10,200 of which were for young people. In my own constituency up to March 2004, the new deal appealed to 2,031 people.
  Those statistics—we must not forget that they deal with real people and families—show that we are well on our way to full employment. The Beveridge ideal is an idea whose time has come. That fall in unemployment offers the foundation for this year's spending review: by freeing up resources that would otherwise have been spent in propping up unemployment, we are able to invest in those essential services—health, education and transport—that are so important to my constituents and throughout Britain.
  It is important to build on the success of the new deal so that the tremendous progress we have achieved can be enhanced still more. My constituents want to see that happen, and I hope that Department for Work and Pensions will ensure that the additional resources that the Chancellor made available in his announcement on Monday will allow it to focus on how it can improve still more on its approach to the new deal.
  There are three key elements to that improvement. The first is ambition. We should all do more to encourage people's ambition to achieve better paid, more secure jobs. We should invest in skills and training so that people have the opportunity to obtain
  1504
  qualifications and move on to better jobs. I extend my plea for ambition to employers, who should be encouraged to become involved in the design of the new deal programmes. Rightly, employers have had plenty to say through their various organisations, including the CBI, but they should play an important part in providing the demand for highly skilled jobs. Our people will respond to that.
  The second element is leadership. We need to see more evidence of leadership in providing higher quality jobs through the new deal and other schemes. We need leadership to involve more people from disadvantaged groups, people with disabilities and those from ethnic minorities. Business and commerce today are capable of providing that leadership, especially in my constituency.
  The third element is capacity. The biggest employers in my constituency are the health service and North Lanarkshire council, which offers an excellent example by making skilled jobs available.
  There is an even greater challenge: to recognise that the resources made available matter as much to the users of services as to employers, and indeed to the House itself. As a former civil servant, I am sure that when the Chancellor said that there would be full consultation, he meant it. I look forward to that nationally and locally.
  Some weeks ago, I introduced an Adjournment debate on laryngectomy and talked about people who suffered from throat cancer and had to use voice boxes for the rest of their life. I referred to the work of the charity, Macmillan Cancer Relief, which had established that £20 million in benefits were not being taken up by cancer sufferers. The Lanarkshire Laryngectomy Association informed me that benefits of £2 million were not being claimed in the area, although people with cancer should have been receiving them.
  In light of Gershon, the Chancellor's announcement about shifting resources to the front line is extremely important. Benefits forms are comprehensive so people such as those cancer sufferers should have the opportunity of one-to-one interviews, with as much assistance and advice as possible. I know that the Government want to achieve that and that the House will endorse that view.
  In that spirit, I welcome the Chancellor's statement. It provides opportunities for my constituents and for people throughout the country. More than that, however—because employment leads to growth—it means that we are recognising, at long last, our international responsibilities. The Chancellor's record on that is unprecedented.
  6.22 pm
  Mr. David Ruffley: I apologise for not being in the Chamber for the Chief Secretary's opening speech; I was in Room 12 whipping a statutory instrument Committee.
  The Holy Roman empire was neither holy, Roman nor an empire. So it is with the independent review of public sector efficiency by Sir Peter Gershon; it is neither independent nor a real review, and it does not have much to do with efficiency in the real world. Gershon's review is a form of gesture politics, politically inspired by the Chancellor to con us that he is serious about inefficiency and waste—the inefficiency and waste to which he has contributed over the past seven years.

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  Let us take civil service numbers. More than 500 new civil servants were hired every week in 2003. Civil service numbers increased on the Chancellor's watch from about 475,000 in 1997 to more than 515,000 at the end of 2003. Have we any faith that he will achieve civil service head count cuts of up to 100,000? Not really. It is much more likely that those posts will be rebadged and recycled. Serious cuts to the level that the Chancellor is predicting will not happen.
  For several months, permanent officials in Whitehall—one or two of whom I keep in touch with—have privately been deriding the Gershon review. As one of them told me,
  "it's all a bit of a joke—Gershon did a PowerPoint presentation a few months ago and made a few telephone calls to Departments on the back of it. You will find the document produced on the day of the CSR a bit thin."
  How right that official was.
  Gershon is short on serious detail. Why? Because Departments will not be able to tell us until the end of October exactly how those efficiency gains will be delivered. Why did the Chancellor not wait until that work had been done before announcing his figures? I will tell the House why. He was running scared of the Tory attack on waste. He was behind the game, and he realised that the James review was making the running. We will identify how profligate the Chancellor has been in the use of taxpayers' money over seven years.
  As my right hon. and learned Friend the Member for Rushcliffe (Mr. Clarke) made clear, smarter IT systems, better procurement and even cuts in the headcount will not in themselves deliver £21.5 billion in efficiency savings. As he and those on the Conservative Front Bench identified, that requires policy change, which is what the James review is about and why our approach is so different from Gershon's. Yes, it involves looking at closing down, in whole or in part, Departments such as the Department of Trade and Industry—any residual function can be moved to another Department—and, yes, it involves closing down wholesale the regional development agencies: policy change, not paperclips.
  Only now—perhaps the Minister will reply to this—have the National Audit Office and the Audit Commission been enlisted to draw up detailed plans on how each Department should meet its targets. Why did the Chancellor not do that years ago, or, better still, a few months ago? That would have been nice and helpful. All that looks like seat-of-the-pants stuff from where I am standing. Even worse, no one is sure how the monitoring of Departments' success or failure in meeting those targets will be measured. It is estimated that only 60 per cent. of the £21.5 billion target for savings is cashable—that is, a monetary value can be ascribed to each cut. It is very easy to identify what will be saved by cutting the headcount. It will probably be easy to identify more efficient, cost-effective procurement. However, let us take a look at the documents produced in relation to the Home Office, whose target for efficiency gains includes
  "substantially increasing the proportion of officer time spent on front-line policing".
  Amen to that—an aim that we all share—but the Government cannot tell us exactly how it will be measured so that those efficiency gains can be counted towards the £21.5 billion efficiency savings total.
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  Everyone agrees that measuring public sector productivity is a complex intellectual inquiry, but why has the Chancellor taken seven years to get round to it? Farcically, the Treasury failed to meet its own target, set in 1998, of delivering 2.5 per cent. in efficiency gains—ironically, the same target for savings as that given to Departments in this year's CSR. At that time, the Treasury said that it could not work out how to measure its own output, and it cannot do so today. We must wait until October before it even gets close to telling us how that will be delivered and measured adequately. Ministers might reply that Sir Tony Atkinson will deliver his interim report. Yes, but he will do so next week, and the report is unlikely to give us the detail, Department by Department, on how the targets will be met. That is not just my point; it has been made on behalf of the Treasury Committee by the right hon. Member for Dumbarton (Mr. McFall), having heard all the objective evidence from witnesses this morning, and the point was echoed and reinforced by my hon. Friend the Member for Sevenoaks (Mr. Fallon).
  The documents produced this week demonstrate that the Chancellor's approach is to spend first big time and ask the really detailed and important questions later—very much later. I trust that, when we publish the James review before the next general election, we will do what this week's set of announcements has not done: explain how serious efficiency gains can be delivered. That will require programme change and, above all, involve the introduction of the right to choose in our great public services—schools and hospitals. I look forward with relish to debating the James review and the Conservative alternative later this year.
  6.29 pm
  Mr. Dominic Grieve: It has been a pleasure and, from my point of view as the shadow Attorney-General, an education to sit in on the debate and hear hon. Members' contributions. Generally speaking, my role confines me to the spending end of things, rather than looking at how money should be allocated.
  Mr. Boateng: To what do we owe the honour?
  Mr. Grieve: As I have a heavy involvement in the departmental responsibilities of the Home Office, in addition to my responsibility as shadow Attorney-General, which does not relate to a heavy-spending Department, I thought that it might be interesting to scrutinise the way in which the Chancellor has approached spending in the Home Office, which I shall address in a moment.
  The debate has highlighted several interesting points of view, and I was struck forcefully by its aspects on which there was cross-party consensus. The right hon. Member for Dumbarton (Mr. McFall) pointed out with great care that he was extremely concerned about how the Chancellor was going to meet his golden rule on expenditure. His speech was made all the more compelling and interesting because it immediately preceded that made by my right hon. and learned Friend the Member for Rushcliffe (Mr. Clarke), who said exactly the same thing and expressed exactly the same concerns, albeit using slightly different language.

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  It is apparent that the Government have taken on a phenomenal task. On the belief of speculative receipts, they intend to continue to increase public expenditure further. At the same time, they clearly feel constrained because they are worried about whether that can be delivered, so they are having to ratchet up more than £20 billion of savings to help to subsidise it. I can think of few worse moments to try to make efficiency savings in Departments than the time at which they are also asked to expand their expenditure. That will maximise the likely stress that such Departments will be under. The Government have thus taken on what can be described only as a mammoth project.
  I listened carefully to the Chancellor on Monday. His speech contained all the traditional new Labourspeak—we heard of more bureaucrats, seven new agencies and 110 further targets. There will undoubtedly be more borrowing and we can be satisfied that there will be further taxation. We already know that higher council tax is inevitable and, although the Prime Minister tried to suggest today that that would affect only the wealthy, I am rather doubtful. I suspect that the council tax squeeze that will be experienced throughout the country will affect everybody, including the poorest. That is an inevitable consequence of the expansion of expenditure that the Chancellor has projected.
  The publication of the Gershon report represented the first occasion since I came to the House when I suddenly realised that I was not at a significant disadvantage as a member of the Opposition. The Minister will know that Oppositions go through periods, especially close to elections when they have to set expenditure targets, which the Government usually rubbish. That process inevitably involves shadow Ministers identifying savings that might be made in the Departments that they are about to take over. I have been through that process at least once and I daresay that we are embarking on it again. I have been struck that, after meeting and speaking to people, one is always left with two situations. First, when nothing else can be cut, we say that we will make efficiency savings because that always sounds like the easiest thing to do. Secondly, we say that we are not confident that all our fact and figures are right. Of course, we say that because we do not have hordes of civil servants helping us. Yet when I opened Sir Peter Gershon's proposals, I saw that, in terms of content, the document is identical to the sort of document that I would expect an Opposition to produce without all the support services. It is about as thin a document as it could possibly be.
  I do not know whether the Minister intends to publish the details of how the efficiency savings will be carried out, the guidance documents and the dialogue that has taken place. I simply say to him, in the spirit of cooperation, that if he wishes to persuade the House that the savings are deliverable, we will need something better than the managerial gobbledegook contained in the document which, frankly, does not amount to a row of beans. It is easy to claim that it is possible to make £20 billion of efficiency savings, but how those are carried out in practice is another matter.
  If one reads Gershon or listens to the Chancellor, the one thing that does not appear to be the case is that the Government are carrying out a spending review that completely reassesses the activities in which they intend to get involved. There is none of that and, in those
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  circumstances, Gershon is an extremely shallow document. I hope that the Minister will enlighten us on whether he will provide us with further information on which we can make a judgment as to its efficacy. My hon. Friend the Member for Sevenoaks (Mr. Fallon) also commented on that.
  What brought me to the Dispatch Box was the matter of my own shadow spending Department. When one looks in detail at what is proposed, one can assess whether what is being offered by the Government is valid. The Treasury released a press statement on the Home Office that makes entertaining reading, including the statements on how everything is so wonderful in the best of all possible worlds. It went on to identify what the extra money will be spent on. It was at this point that my antennae started to quiver as I considered the astonishing omissions from future Home Office spending.
  Let us start with the most basic, most important and probably least popular problem. The Government face the biggest crisis in prison numbers ever experienced. Some 75,000 people are in prison and the prisons are at breaking point. The Government cannot deliver the programmes that the Prison Service needs to rehabilitate offenders because of the churn, which means moving prisoners around from one prison to another. As long as that continues, all the Government's aims to reduce crime through rehabilitative sentences cannot work, but the press release makes no mention of a prison building programme.
  We are told that correctional services will be modernised by creating the National Offender Management Service and reducing reoffending. That does not exactly reflect a Government who are getting to grips with one of the key issues in a spending Department. Then we are told that the money is going to be used to increase neighbourhood policing and provide 20,000 community support officers, from which I infer that the current increase in police numbers, which has generated 11,000 officers, is not going to be pursued.
  We have had endless debates with the Government about the efficient use of resources, but if they want to reduce crime, which costs the country £60 billion per annum, they will have to target investment in the right place. My belief has always been that only a substantial increase in police numbers will enable the Government to introduce community policing on the American scale, which has a proven record of crime reduction. That is a classic illustration of the Government's failure on expenditure. They intend to spend more money but, when it comes to the crunch, they are unwilling to make difficult decisions that could result in long-term, substantial savings to the Exchequer as well as benefits for the national economy. It beggars belief that they should come up with a series of ersatz solutions to crime problems.
  Most extraordinarily, we have been told that the money will be used to curb illegal immigration, as I mentioned earlier, even though the Government have never given us a target and cannot enlighten the House about the levels of illegal immigration. I would therefore be grateful if the Minister would ask the Chancellor of the Exchequer to tap the Home Secretary on the shoulder and say, "How can I measure your success in reducing illegal immigration when I have no statistics on

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  the problem or, indeed, your efficiency in dealing with it?" In a spending review, such basic issues need to be addressed.
  The hon. Member for Rochdale (Mrs. Fitzsimons) made an interesting speech about Sure Start.
  Mr. Boateng: It was a very good speech.
  Mr. Grieve: Indeed, but the hon. Lady highlighted the fact that Sure Start is area-based. There is a desire not to stigmatise children by targeting individuals who could benefit from the programme, so the area is targeted instead. I suspect that she is aware of the evidence that shows that Sure Start does not reach those who need it most. If the Government want to maximise their expenditure and become more efficient, the Home Secretary should talk to the Chancellor and introduce his own Gershon review to see whether targeting is working effectively. I am a great supporter of Sure Start's aims, but the programme has many inefficiencies.
  Mrs. Fitzsimons: The hon. Gentleman may wish to reconsider his comments in the light of published evidence showing that all Sure Start programmes, even the newest ones, have a significant impact. The child poverty review refers to some of those programmes and I am sure that the Minister for Children can furnish him with examples because Sure Start is the most successful Government programme in this area.
  Mr. Grieve: I was not suggesting that Sure Start was unsuccessful. I have seen some extraordinarily successful examples of the programme, but I have seen others that are not working very well—it depends on the area. Area targeting inevitably means that some members of the client group to which services are directed do not receive them. At the same time, people whose need is not as great are receiving those services. I simply wish to raise the issue and have a mature debate about efficiency. If the Government want to maximise efficiency, they need to look at that problem.
  Turning briefly to the improvements in productivity and the envisaged release of resources to the front line, the Home Office is supposed to generate £2.3 billion of annual efficiencies along with the Department for Constitutional Affairs and the Crown Prosecution Service by 2007–08. That includes a contribution of £1.97 billion, from the Home Office, which is a colossal sum. How on earth will that be achieved? How does it square with the fact that the administration budget, on the Government's own projections, is due to rise from £697 million to £733 million before it peaks? The figures are completely unrealistic, so I would be interested to hear the Minister's justification.
  I shall conclude, because I am conscious that I am running out of time and wish to hear the Minister's reply. On a completely different note, I listened carefully to the hon. Member for East Carmarthen and Dinefwr (Adam Price), who spoke about the health service in his constituency and the Barnett squeeze. My constituency, like the rest of the country, has had seven years of Labour government. It receives 18 per cent. less than the national average per head expenditure on health
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  services. Over a seven-year period, the health service has been progressively impoverished and the quality has deteriorated, yet my constituents, because many of them are wealthy, are the principal milch cows that serve to fund Government spending. They are appalled at the way the Government have presided over the catastrophe.
  I have one major hospital, which is riddled with MRSA. Its maternity and paediatric departments are being closed and moved 20 miles away. The quality of mental health care is abysmal. It is nothing short of a national scandal and is entirely due to the Government's mismanagement of resources. I share with the hon. Member for East Carmarthen and Dinefwr the view that the £34 billion of extra expenditure that the Government are spending per annum on the health service has been wasted. I should be delighted to know where it has gone, as I fear that most of the programmed expenditure will be wasted, too.
  6.45 pm
  The Economic Secretary to the Treasury (John Healey): This has been a telling debate. The Conservatives pose as the party of choice, and it is clear from the contributions of those on the Opposition Front Bench and their right hon. and hon. Friends on the Back Benches that the British people are indeed offered a choice. That choice is between the vision and the plan set out by my right hon. Friend the Chancellor in the Budget and the spending review, and the prescription for failure set out by the shadow Chancellor in his speech to the Bow group in February.
  The choice is between the Labour Government holding on to economic stability and tough fiscal rules, as set out by the Chancellor, meeting our commitments on taxation and planning to continue with historically high and rising investment in education, health and essential public services, and the prescription set out by the shadow Chancellor, who has said:
  "I have agreed with my Shadow Cabinet colleagues that the baseline for spending across all of these departmental budgets will be 0 per cent. growth for the first two years".
  Two years of cash–freezing departmental budgets would mean real cuts for every Department.
  Instead, we plan to combine the longest period of sustained economic growth for two centuries with the longest sustained investment in public services for a generation. The Conservative alternative, as the hon. Member for Bury St. Edmunds (Mr. Ruffley) said, is driven by ideology and by the shadow Chancellor's fiscal arithmetic, returning to the same Tory policies that failed Britain in the past—under-investment in public services, charges for public services and deep, savage cuts in those public services and public investment. The choice is clear. Labour is committed to investment to secure the long-term strength and prosperity of the UK economy. The Tories are committed to cutting skills, training, investment in science, innovation and transport, and the new deal.

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  Labour is committed to investing in the public services that people need and want. The Tories are committed to cutting them. Labour is committed to investing in the security of our country and safety on our streets. The Tories are committed to cutting the funding essential to our armed forces, our security services and our police. The Labour party is committed to investing to halve and then eradicate child poverty, to guarantee elderly people safer, warmer homes, and to give the world's poorest countries a chance to develop. The Tory party is committed to cutting the very measures that are bringing relief from poverty and greater fairness to our country and to the world. That is the choice at the heart of this afternoon's debate. That is the choice that faces the country now, up to and at the next general election.
  My right hon. Friend the Member for Dumbarton (Mr. McFall) set out a series of questions and concerns about how the efficiencies and reforms that my right hon. Friend the Chancellor announced would be put into practice. In particular, he asked about discussions with staff, and my hon. Friend the Member for Hayes and Harlington (John McDonnell) and the hon. Member for East Carmarthen and Dinefwr (Adam Price) made the same point. Each Department is discussing the work force changes with their employees and the recognised unions; each Department is examining the detailed staffing changes with the work force; and each Department is examining with the work force and the unions ways to ensure that the maximum opportunities are available for employees to reskill and redeploy.
  My right hon. Friend the Member for Dumbarton said that it was important to have a transparent process. The hon. Member for Beaconsfield (Mr. Grieve) asked for further information, and it will be set out in the efficiency technical notes, which will be a key mechanism in ensuring accountability during progress towards the headline target of £20 billion of efficiency gains. In order to ensure that the House and the public have confidence and that the measures command credibility, the Government are currently inviting the National Audit Office and the Audit Commission to scrutinise departmental ETNs before publication. Progress towards meeting the efficiency targets will be publicly reported, so the Government and each Department will be accountable for their results. I am sure that the Treasury Committee, which is chaired by my right hon. Friend the Member for Dumbarton, will continue to play an active part in The scrutiny process.
  I say to my hon. Friends in particular that I understand the work force's concerns and the concerns voiced by the unions, but the measure is the right thing to do. Putting resources into front-line services must be a priority for any Government, and any good Government make savings where they can. The measure is also required: if we want to invest in the provision of public services, it is necessary to free additional resources. The measure is right and it is required, and the changes and gains are realisable. The investment in technology and the redesign of some working practices show that it is possible to reduce backroom staffing and transactional posts while improving services.
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  My hon. Friend the Member for Hayes and Harlington voiced some characteristically strong words of admonishment, but I share his end objective. He said, "This could be an opportunity for real reform, if it is done with the participation and consultation of staff and their unions." I endorse that view, which is constructive, and as chair of the Public and Commercial Services Union parliamentary group, he may have an important role to play in helping to meet that challenge.
  My hon. Friend the Member for Rochdale (Mrs. Fitzsimons) was right to remind us to "cut to the quick". In the end, what matters is what means most to people in their day-to-day lives. She argued for greater flexibility, so that plans and decisions are made not in Whitehall, but in the regions and local authority areas. I refer her to the series of devolved decision-making review reports, the latest of which was published alongside the Budget, and she will find that the approach set out in those reports is consistent with her arguments. She will have noted the continued support that my right hon. Friend the Chancellor set out for the neighbourhood renewal fund £525 million each year over the spending review period. She mentioned the safer and stronger communities fund, which is an opportunity for the ODPM and the Home Office to pool their budgets to make a difference locally, and I know that my right hon. Friend the Chief Secretary to the Treasury wants to write to her with more details.
  My right hon. Friend the Member for Coatbridge and Chryston (Mr. Clarke) discussed the transformation in his constituency as a result of the Labour Government's economic policies since 1997. He also discussed the success of the new deal for work, and I am sure that he will welcome the new deal for skills, which we propose to develop during the spending review period and which will help with many of the problems that he identified.
  The hon. Member for Twickenham (Dr. Cable) raised some serious, almost forensic, points, and I shall try to respond in kind. He asked about the make-up of cuts and the position of senior civil servants. We start from the point that it is right for Departments to decide on the exact details of staff changes and to do so in consultation with their staff and unions. All Departments have been set a flat or declining administration budget. Given that about 50 per cent. of administration costs are pay costs, they will need to control the overall pay bill, and that will be a factor in their decisions. The hon. Gentleman asked where the dividend, as he put it, would go from efficiency gains. Efficiency gains will remain within Departments. It will be for them to decide how to allocate those resources, and it will be their incentive to make those gains in order to redeploy to the priorities that they set out. I assure the hon. Gentleman that we have no illusions about the ease with which this can be done. It will be difficult, but it can be done.
  The right hon. and learned Member for Rushcliffe (Mr. Clarke) expressed similar concerns about how the efficiencies could be delivered. First, Departments have developed their programmes with Sir Peter Gershon, who has agreed that they are deliverable at this stage. Every Department has the incentive to deliver the efficiency gains because that will release resources that

  1513
  they can then spend on their own priorities. Secondly, since 1997 we have invested £6 billion across Government in new technology that will facilitate many of the savings that we can make. Thirdly, Departments will be accountable for the results of the efficiency measures that they take, which will be auditable and transparent. The National Audit Office and the Audit Commission will have a role not only in auditing the assumptions that Departments make and the measures that they use, but their progress against the measures once they are taken. Finally, Departments will receive specialist support on implementation and be challenged if their plans drift off course.
  My right hon. Friend the Member for Newport, East (Alan Howarth), who is a strong champion of his constituency, made a powerful case for Newport commanding the attention of Departments, in conjunction with Sir Michael Lyons, as a potential relocation venue for the 20,000 posts that will be redeployed from London and the south-east. I am glad that we were able to complete in the spending review the business that he left unfinished during his term as Minister. We have been able to extend the VAT refund scheme for university museums and to increase the budget of the national heritage memorial fund. I am glad that he welcomes those moves.
  The hon. Member for Sevenoaks (Mr. Fallon) made some important points about the potential for efficiency gains in relation to productivity, administration costs and asset sales. Let me respond to those in detail. On productivity, he was right to say that service sector productivity has been around 3 per cent. each year over the past five years. Therefore, if we interpret 2.5 per cent. efficiency gains as a 2.5 per cent. gain in productivity, we are in effect asking the whole public sector to make improvements in productivity similar to those that have been achieved over the past five years in the service sector.
  On administration costs, the answer that the hon. Gentleman and the right hon. and learned Member for Rushcliffe seek was published in the Budget. On a like-for-like basis, administration costs rose to more than 5 per cent. as a percentage of total expenditure under the Tories. They have been lower under Labour and are set to fall further to 3.7 per cent.—the lowest level since the running costs regime was introduced in 1986.
  On assets, we are building on the existing framework. If the hon. Gentleman consults the document published for the Budget, he will see the pattern of asset sales that we have been able to achieve since 1997 and why that gives us the basis on which to be confident in the long term about the £30 billion figure.
  I am glad that the hon. Member for East Carmarthen and Dinefwr found some warm words of welcome when he talked about the regional economic development public service agreement. He said that he did not disagree with every line in the spending review document, but I am disappointed that he reached page 178 before he found something that he could support.
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  The right hon. and learned Member for Rushcliffe asked whether the economic and fiscal forecast would be met. The full answer, which was given by the Chancellor in the Budget, is that there was 2.3 per cent. growth last year, with 3 per cent. to 3.5 per cent. growth forecast for this year and next year. Tax receipts are on target, and fiscal rules are also on target, with a built-in margin against the golden rule, and net debt is projected to stabilise just below 36.5 per cent. of GDP, comfortably meeting the sustainable investment rule.
  As a result of today's debate and in the run-up to the general election, the British people have a choice. They can choose to have the services they need and the opportunities they deserve, with no one left behind. They will get that under a Labour Government with a vision of Britain that will succeed—
  It being Seven o'clock, the motion for the Adjournment lapsed, without Question put.

  BUSINESS OF THE HOUSE
  Ordered,
  That, at the sitting on Wednesday 21st July, notwithstanding the provisions of Standing Order No. 16 (Proceedings under an Act or on European Union documents), the Speaker shall put the Questions necessary to dispose of proceedings on the Motions in the name of Mr Secretary Prescott relating to Devolution not later than three hours after the commencement of proceedings on the first Motion; proceedings may continue after the moment of interruption; and the Orders of the House of 28th June 2001 and 6th November 2003 relating to deferred Divisions shall not apply.—[Ms Bridget Prentice.]

  SITTINGS OF THE HOUSE
  Motion made,
  That, at the sittings on Monday 19th, Tuesday 20th, Wednesday 21st and Thursday 22nd July, the Speaker shall not adjourn the House until any Message from the Lords has been received, until any Committee to draw up Reasons which has been appointed at that sitting has reported, and until he has reported the Royal Assent to any Act agreed upon by both Houses.—[Ms Bridget Prentice.]
  Hon. Members: Object.

  PETITION

    Benfleet High Road Post Office
    7 pm
    Bob Spink: Mr. Brian Keeler is a stalwart campaigner for his community and he has compiled a massive petition to save the Benfleet High road post office from closure. He is right to do that because our post offices are part of the fabric of our society, giving viability to fragile shopping parades and areas and offering much needed facilities to the elderly and to families, especially those who do not have cars. I am most grateful to him and to others, such as Elliott Ward, who signed the front sheet of the petition. Elliott may be from a younger generation than Brian Keeler, but his signature shows how the whole community, young and elderly alike, is prepared to come together because it cherishes and wants to keep open our post office network.

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    The petition states:
    To the Honourable the Commons of the United Kingdom of Great Britain and Northern Ireland in Parliament assembled.
    The Humble Peititon of Mr. Brian Keeler and others of like disposition sheweth
    That residents of Castle Point and particularly Benfleet are deeply concerned by the threat to their post office at 18A High road Benfleet and believe that the threat of closure of this post office damages the fabric of our community and closure would be severely detrimental to residents and to our shopping area.
    Wherefore your Petitioners pray that your Honourable House urge the Government to change its policies. on post office closures and on the payment of benefits and pensions and the provision of full banking services so that post offices are able to be more viable and retained.
    And your Petitioners, as in duty bound, will ever pray.
    To lie upon the Table.

  Military Aircraft (Northumberland)
  Motion made, and Question proposed, That this House do now adjourn.—[Derek Twigg.]
  7.2 pm
  Mr. A. J. Beith: I represent a constituency in which the RAF is greatly valued and respected. Indeed, we have been trying to persuade Ministers that they are making a serious and expensive mistake in planning to move most of RAF Boulmer's activities down to Lincolnshire. It is also an area in which a great deal of low-flying training takes place, and although most of my constituents accept that we have to take our share of the disturbance caused by low-flying fast jets, it gives rise to a fair amount of concern and correspondence. I would like the burden to be more fairly distributed and, if possible, reduced.
  Low-flying area 12, which covers Northumberland, is one of the most intensive areas in the country for low-flying. It surrounds Newcastle airport, which is an increasingly busy and successful airport for both scheduled and charter flights. That is a potentially a lethal mix. A bulletin from the air accidents investigation branch in May on the dangers that have arisen makes chilling reading, and refers to the potential for large-scale loss of life if new procedures are not put in place to eliminate near misses and collisions over the north-east of Britain.
  I shall revert to the AAIB bulletin later. I am seeking, through the debate, to get absolutely clear answers and assurances that the safety recommendations made in it have been fully implemented. First, I want to consider the recent history of accidents and near misses and the measures taken, unsuccessfully, to try to prevent further incidents. I shall refer to only some of the incidents that have occurred.
  In December 1998, a low-flying RAF Harrier came within 100 ft of a civilian helicopter over Northumberland. In July 1999, a Harrier crashed in my constituency while avoiding collision with another military aircraft on an unconnected navigation exercise flight. In October 1999, an RAF Tornado crashed in Northumberland with the loss of two crew. Minutes earlier, it had been in an air proximity incident with a Boeing 737 flying out of Newcastle airport. In March 2000, there was a near miss involving an RAF Tornado and a passenger aircraft near Alnwick. The passenger aircraft was a Shorts 360 with 11 passengers inbound to Newcastle from Aberdeen. Newcastle air traffic controllers had warned the civil aircraft of the danger posed by unidentified, fast-moving military traffic. However, they had no means of warning the RAF pilots, who communicate on separate radio frequencies. On the advice of the controllers, the civil aircraft had changed course to avoid possible conflict with the Tornado, but a subsequent change of course by the military aircraft brought them back into conflict.
  Following that incident, I tabled a parliamentary question, which led the then Transport Minister, the hon. Member for Coventry, North-East (Mr. Ainsworth), to reply that
  "the CAA is working closely with airspace users and Newcastle Airport, as a matter of urgency, on a whole range of initiatives aimed at preventing such conflicts in the future."—[Official Report, 25 April 2001; Vol. 367, c. 274W.]

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  Those measures did not, however, prevent a further potential conflict involving a Boeing 737 and a military jet in February 2001, or an incident in July 2001 in which a military jet came within 500 ft of a passenger plane heading into Newcastle from Oslo.
  In April 2002, I tabled further questions and received a reply from the junior Defence Minister referring to further measures. These included the fitting of secondary transponders to military aircraft on exercise and arrangements for major exercises, including a temporary buffer zone and the presence of a military liaison officer in Newcastle air traffic control. Those arrangements were put in place only during major exercises. The Ministry of Defence and the Civil Aviation Authority were, however, satisfied that there was no need to change the airspace arrangements around Newcastle. Within days of that parliamentary answer, a Dash aircraft leaving Newcastle for Norway with 16 passengers on board was the subject of a practice interception by two Sea Harriers. They did not realise their mistake until they came within visual range and passed within 3,450 ft, with only 100 ft of height separation.
  Less than three months later, a civil transport plane heading into Newcastle came within 100 ft of an RAF Jaguar. The Avro crew heard a jet engine noise and the flight officer in the right-hand seat saw the Jaguar "in a flash", passing underneath while in a steep climb. The investigating board described this as
  "one of the most serious Airproxes"
  it had seen. RAF Strike Command said that "a robust directive" had been sent to all fast-jet pilots to ensure that a similar occurrence could not happen again, and that a draft amendment to military flying regulations had been raised.
  Unfortunately, that was not the end of the story. Two incidents in June 2003 involved aircraft flying from Teesside to Amsterdam and Aberdeen. On 1 October 2003, there was an alleged infringement of Newcastle controlled airspace by a military aircraft west of Newcastle, which necessitated avoiding action by an Airbus 319. In February this year, there was a very serious incident involving a helicopter and a Tornado in class G airspace in the Aberdeen area. The crew of the helicopter
  "suddenly became aware of a roaring noise"
  and severe turbulence. The commander grabbed the controls and looked across the cockpit to the left in time to see the co-pilot's windscreen and quarter light filled with what he believed to be the rear section of a Tornado aircraft in a steeply banked turn at a range of 50 ft.
  In May 2004, the air accidents investigation branch, in bulletin 5/2004, drew together these most recent incidents with others, and reached some very worrying conclusions. I shall quote from this analysis, which refers to
  "the potential risks involved when CAT aircraft"—
  that is, civil aircraft—
  "and military aircraft operate concurrently in the same unregulated airspace, especially when the controller has no communication or control over the manoeuvres of the military traffic and when providing a minimal radar service, ie, a RIS. In the general area where this incident occurred, there is a high level
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  of military activity and limited lower altitude … controlled airspace for CAT aircraft operating between the regional airports in the north-east of the UK and northern Europe. Whilst there are military regulations in place designed to avoid Airprox events"—
  such as the one in April 2002—
  "this incident highlights the difficulty of always ensuring compliance with such regulations. The obvious possible solutions are to require military traffic to operate under a radar service, to deny CAT aircraft access to areas of known military activity or to increase the regulated airspace. Either of the first two options, while providing a high level of safety, would be restrictive to both types of operation. An increase in the provision of regulated airspace from regional airports in the north-east of England would seem to offer the optimum solution for the safety of CAT aircraft, but this would be at the expense of the available airspace in one of the few large scale training areas in which military aircraft operate in the UK."
  We know that that last concern has led to the MOD resisting the expansion of controlled airspace or protected zones in the past.
  The AAIB went on to say, referring to north-east Britain, including both Northumberland and the Aberdeen area:
  "CAT/military Airproxes continue to occur in this area despite the procedures, monitoring and airspace changes that have been put in place in an attempt to prevent such incidents. The fact that collisions did not result from the circumstances of two extremely serious events of July 2002 and February 2004, with what would have been an inevitable loss of life, was extremely fortuitous."
  I come now to the specific recommendations, and I want to hear the Ministry of Defence's response to each of them. First, safety recommendation 2002–55 states:
  "The Civil Aviation authority should re-examine the airspace categorisation, procedures and services currently available to Civil Air Transport aircraft which operate through unregulated airspace associated with regional airports in the north-east of the UK, with the aim of ensuring that a level of protection is afforded to such aircraft from military aircraft such that airprox events are avoided. The impact of any potential changes to the available unregulated airspace used by military aircraft should be minimised as far as possible".
  What has been the result of that re-examination, and what has the MOD done to provide that protection?
  Secondly, safety recommendation 2003–53 states:
  "The Ministry of Defence should review the operation of military aircraft in the unregulated airspace around the north-east of the UK, including the conduct of practice interceptions of targets, to ensure that procedures in use and the equipment fitted to military aircraft assure adequate separation of military aircraft from Civil Air Transport aircraft which operates concurrently through unregulated airspace in the region."
  What changes have been made to procedures? Are all military aircraft fitted with the necessary equipment if they operate in those areas?
  Thirdly, safety recommendation 2004–21 states:
  "The concurrent use of unregulated airspace by both CAT and military aircraft in the north-east of the UK, should be reviewed jointly at the highest level by the CAA and MoD with the aim of eliminating Airproxes and potential collisions, with likely large scale loss of life"—
  those are the words of the AAIB—
  "between Civil Air Transport and military aircraft."
  What has been the result of that review, and what changes have been made in MOD practice as a consequence?
  Those are the key questions to which I want to hear answers tonight. Those were the recommendations of a highly responsible and expert body, which reflect

  1519
  detailed analysis of a long series of alarming incidents and of the failure of previous measures to prevent further incidents. They are expressed in unusually strong and dramatic language for a report of this sort.
  Finally, the time has come for a wider review of low-flying training, the need for it, the amount that is required, the areas over which it is carried out, and the ways in which it is monitored. It is increasingly common for those who complain to me about the extent of low flying over Northumberland to include people who have recently retired from the RAF and other armed services. When they write to me, they often ask whether there is as great a need for low flying by fast jets as there used to be, and they draw attention to the fact that it is a skill that has not been used much, if at all, in recent conflicts.
  Surely it is time that the case for this large-scale training investment was tested. If the case remains sufficiently strong, a review should consider how its impact on the areas where it is most intensively carried out can be lessened. If such a review is initiated, as I believe that it should be, it may lead to reductions, which will reduce the risk of dangerous interaction with civilian aircraft. That risk exists now, however, and the measures demanded by the AAIB in its bulletin of May this year need to be acted on urgently. They cannot wait for a wider review of low flying, even if the Government agree to one.
  The travelling public, the people of the areas over which collisions can take place, such as Northumberland, and the civilian and military aircrew on whose skills we depend, are all entitled to have those questions answered.
  7.14 pm
  The Parliamentary Under-Secretary of State for Defence (Mr. Ivor Caplin):I congratulate the right hon. Member for Berwick-upon-Tweed (Mr. Beith) on becoming a grandfather for the first time. I hope that mother, baby and grandparents are doing well. I also thank the right hon. Gentleman for providing the opportunity for a debate that I consider very important and pertinent.
  I can assure the House that in military aviation matters, safety is paramount. I therefore welcome the opportunity to address the points raised, and I hope I can add some balance to the rather alarming picture that the right hon. Gentleman painted. I welcome his support for the Royal Air Force, of which he has been a consistent supporter in the House, but I am afraid he will have to wait a little longer to hear of any decisions that might affect RAF Boulmer.
  Our obligation to those on the ground, as well as to our aircrew, ensures that we remain very aware of the risks of military flying, and flight safety remains the Ministry's highest priority. We strive to reduce any risks to the absolute minimum, and there are stringent regulations to safeguard both the general public and our own aircrew.
  I acknowledge recent concerns that have been expressed about flight safety over the north-east, largely arising from the air accidents investigation branch report that was published in May, and to which the right hon. Gentleman referred. The report conflated a number of incidents that have occurred during the last three years or so. The Ministry of Defence actively
  1520
  participates in the United Kingdom Airprox Board, and carefully considers all its recommendations. However, we must recognise that the area has seen significant growth in commercial aviation using Northumbrian airspace, both gaining access to Newcastle and other regional airports and in transit between the north and the south of the country. That has inevitably increased airspace congestion, and problems are likely to be exacerbated by the increasing use of uncontrolled airspace by commercial aviation. The diverse nature of operations within uncontrolled airspace means that the concept of eliminating all airproxes, while a laudable aim, is unrealistic in practice.
  The Ministry of Defence meets the Civil Aviation Authority regularly, at senior levels, to discuss the use of uncontrolled airspace, with particular emphasis on areas in the north-east of the United Kingdom. The major focus of every meeting is the maintenance or enhancement of safety standards, and ensuring that airspace is available for use by both military and civilian operators, with procedures to enable everyone to use the airspace safely.
  The right hon. Gentleman asked what measures the Ministry of Defence was taking in response to a number of safety recommendations that he cited. Let me give some examples. In response to safety recommendation 2002–55, measures were introduced in March last year to increase the controlled airspace between Manchester and Newcastle airports. Further adjustments to the controlled airspace around Newcastle were also made, which has given additional protection to civil aviation. More enhancements are anticipated as a result, and we believe that that will ultimately increase the safety of commercial aircraft in the Newcastle area.
  The right hon. Gentleman also mentioned safety recommendation 2004–21. The Civil Aviation Authority has initiated a review of overall airspace arrangements in the north-east. I can confirm that the Ministry of Defence will be fully involved in the work, and that the first meeting will be held next month. This will build on the work already accomplished in concert with our partners.
  The Ministry of Defence reviewed procedures immediately after the issue of the safety recommendation, which it partly accepts. I can say that the operation of military aircraft in uncontrolled airspace is kept under constant review in conjunction with the Civil Aviation Authority; but the right hon. Gentleman will recall that the UK Airprox Board assessed the incident to which he referred as one in which
  "no risk of collision existed".
  Mr. Beith: Can the Minister clarify why the Ministry of Defence only "partly" accepts that important safety recommendation?
  Mr. Caplin: We are still examining the issues with the CAA, which is why I used the word "partly". I undertake to keep the right hon. Gentleman up to date with progress made on the safety recommendations following this evening's debate.
  I can assure the House that all aspects of flight safety are kept under continuous review, and that there are many ongoing initiatives. For example, we have made

  1521
  the use of a transponder mandatory at low level for all our aircraft; that will make them visible to the collision warning systems that are fitted to airliners and to many helicopters. The use of transponders will also improve the ability of air traffic control radars to see our aircraft, and a programme to make our aircraft more visually conspicuous to others is virtually complete. All RAF aircraft operating at low level are now fitted with highintensity strobe lights, and all Hawk aircraft are fitted with forward-facing, high-power lamp assemblies. The high visibility black and yellow paint scheme used on our training aircraft has proved extremely effective, and we are conducting trials to improve further the visibility of helicopters through the use of coloured rotor blades.
  We continue to pursue technical solutions to improving safety at low level. Although the technology used in the collision warning systems fitted to commercial airliners has not proved suitable for use in highly manoeuvrable fast jets, we are investing in a programme to develop and fit a collision warning system to the Tornado. Where commercial collision warning systems have proved suitable, as with the Hercules C130J, they have been fitted. We have also carried out a very successful trial of a commercial system with the Tucano training aircraft.
  More generally, through the ShAirspace initiative the MOD and the United Kingdom Flight Safety Committee have developed a regional forum for discussion between the military aviation community and civilian operators such as airports, airlines and flying schools. These forums have been highly successful, giving aviation users an opportunity to exchange ideas and views, as participants of the forum held in Durham last October will doubtless agree. They will continue; indeed, my officials will arrange for the next forum to be held shortly.
  The MOD of course maintains excellent relations with the management of Newcastle airport, who, along with the CAA, meet MOD officials formally every six months. The right hon. Gentleman will be interested to learn that today, a military liaison officer briefed the airport's air traffic controllers about the details of a military exercise that occurred earlier today. It has become standard practice for the MOD to provide a liaison officer for any large air exercise that occurs in the north-east.
  We also seek to engage with local authorities that raise concerns about low-flying military aircraft. A joint presentation by the airport and the MOD to an inter-authority low flying working group last year was very successful, and it forms a basis for future co-operation. A further inter-authority working group event is being organised for the autumn, and the MOD is committed to supporting this initiative.
  Our armed forces are highly valued and respected around the world for their professionalism and skill. We as a nation continue to expect them to be ready to defend our interests, and those of our allies, anywhere in an unstable, unpredictable world, and often at short notice. They have distinguished themselves time and again, and they are able to do so because they are highly trained. The House will doubtless agree that such levels
  1522
  of proficiency are not reached overnight: they are the culmination of years of training, and military aircrew, like all other elements of the armed forces, need to train.
  One aspect of aircrew training is the ability to fly aircraft at low level, which is acknowledged as being a demanding but essential skill. I accept that, as the right hon. Gentleman said, such flying is not always required for military operations, but military commanders must be confident that if they need to deploy aircraft at low level, they can do so.
  Low flying remains a vital element in our armoury of tactics. Flying low and at speed, aircrew use the contours of the earth to screen themselves from sophisticated radar systems, fighter aircraft, missiles and anti-aircraft artillery. But low flying is a skill that may also be used extensively in humanitarian relief operations and by helicopters undertaking search and rescue tasks. Whatever the task, aircrew must train to be able to carry it out.
  I have said that low flying is a specialised skill: it is also a perishable skill and requires regular practice. It cannot be learned in an emergency, so rigorous training in a realistic environment is essential. Let me reassure the right hon. Gentleman that maximum use is now made of simulators, but they can only complement the reality of low flying—although we do, of course, continue to monitor carefully modern advances in simulator technology to assess the scope for their future use.
  The United Kingdom low-flying system comprises the open airspace of the whole of the UK and the surrounding over-sea areas from the surface up to 2,000 ft above ground level. Helicopters are generally permitted to operate to 100 ft, but may be authorised to operate to ground level for certain tasks and 250 ft is the lower limit for fixed-wing aircraft undertaking routine low-flying training—although they may fly much lower during operations. Training above 500 ft is of little value because, as height increases, the training value for this vital skill degrades rapidly.
  In addition to the routine low-level flying, a very small amount of fixed-wing low flying down to 100 ft is permitted in three specially designated tactical training areas situated in the borders, northern Scotland and central Wales. The borders tactical training area, low flying area 20 Tango. includes part of the right hon. Gentleman's constituency. The amount of that activity, called operational low flying, is limited to that which is absolutely necessary and is spread across three special areas proportionate to their size. It represents less than 2 per cent. of all low-flying training.
  Mr. Beith: I should like to point out briefly that one of our worries is that the main incidents have not been in the special areas, the 50 ft areas or, indeed, during the major military exercises when special measures are laid on. It is in the general run of low flying that the problems have arisen.
  Mr. Caplin: I understand what the right hon. Gentleman is saying, but he made a number of comments about the overall pattern of low flying and I am trying to put the whole thing into context in response to what he said.
  The undulating terrain of the north-east of England, largely an area referred to as low flying area 12, which also includes part of the right hon. Gentleman's

  1523
  constituency, offers valuable training, as it contains some of the most challenging terrain for aircrew. In addition, a number of training facilities are situated within and close to Northumberland. Aircraft from the many airbases situated on the east side of the country—or, indeed, some NATO allies—fly over the north-east or transit through to low-flying areas in Scotland. That is necessary because of the built-up areas and controlled airspace in the midlands, Yorkshire and other parts of the north-east over which they cannot fly. They must also avoid conflicting with other military activity at Leeming, Linton-on-Ouse, Dishforth and Topcliffe.
  We understand that military low-flying training can be intrusive to people on the ground, perhaps particularly in those rural, less densely populated areas that experience more low flying than their urban neighbours. We implement various measures to minimise disturbance as far as practicable. Accordingly, the amount of low flying that does take place is limited to that which is strictly necessary for aircrew to achieve and maintain operational effectiveness. Let me reassure the House that we continually assess our requirement for such training.
  In support of our aim to achieve a better balance between the need to train in the air and respect the sensitivities of those on the ground, most fast-jet low flying takes place during the daylight hours of weekdays. Public holidays are avoided, as are weekends as far as possible, although some activity may be permitted, mainly in support of reserve forces that are unavailable for training during the week. Night low flying is required to be completed as soon as possible in the evenings and it is rare for jet aircraft to be permitted to operate after 11 pm.
  I am determined that we will continue to be aware of, and sensitive to, the needs of the public. Any issue that is raised with me, or direct with my officials, is taken very seriously indeed. Individual RAF stations are at pains to explain their activities to their local communities, and
  1524
  they have community relations officers on their staff available to talk to members of the public. In addition, three regional community relations officers serve the communities remote from air stations in Wales, southern Scotland, and Cumbria and Tynedale. They are the focal point for military low flying issues in their respective areas, and members of the public in those areas may direct any matter, inquiry or complaint to them.
  Next week, I intend to make a written statement to the House presenting the figures to be published in the annual statement on the pattern of military low flying. I hope that the details will go some way to assuaging the anxieties of the right hon. Gentleman, in that the amount of low flying generally continues to decrease. I will ensure that he gets a copy of the statement.
  The Ministry of Defence is not complacent when it comes to safety. It is of paramount importance to us. I hope that I have reassured the right hon. Gentleman that we have measures in place to reduce risk, and that we are actively engaging with others to implement further measures.
  The maintenance of the skill of low flying is an essential military requirement. We manage low flying training so as to ensure the safety of those in the air and on the ground, and to take account of the sensitivities of those living in rural areas. We will never attain the ideal of distributing all low flying training across the UK on a totally equitable basis, but we aim to learn by events and to take account of lessons learned in our planning for the future.
  In conclusion, I hope that today's debate reassures the right hon. Gentleman, his constituents and the House about the action that we are taking on this very important issue.
  Question put and agreed to.
  Adjourned accordingly at twenty-nine minutes to Eight o'clock.