Commons Sitting of 24 March 2004

Preamble
The House met at half past Eleven o'clock
PRAYERS
[Mr. Speaker in the Chair][Mr. Speaker in the Chair]
Oral Answers to Questions
  WALES
  The Secretary of State was asked—

  Affordable Housing
  Mr. Elfyn Llwyd: What representations he has received on the provision of affordable housing in Wales; and what discussions he has had on this with the First Secretary of the National Assembly for Wales.
  The Parliamentary Under-Secretary of State for Wales: My right hon. Friend the Secretary of State for Wales and I receive representations from time to time on this subject. It and other matters are discussed regularly with Ministers in the National Assembly.
  Mr. Llwyd: I thank the Minister for that less than illuminating reply. He will know that in the debate in the Welsh Grand Committee this morning there was considerable consensus on the problems of affordable housing in Wales. Is he prepared to meet colleagues and me, as well as Members from other political parties, to discuss that important issue and see whether we can come up with answers to this serious problem?
  Mr. Touhig: I welcome the comments that the hon. Gentleman made to me in the Welsh Grand Committee and, I believe, his support for what the Government are trying to do as a result of the Barker report, which was published last week. The Government have already introduced an exemption from stamp duty on property transactions under £150,000 in designated areas, which benefits 363 disadvantaged areas in Wales. The Planning and Compulsory Purchase Bill, when enacted, will require local planning authorities to take on board community views when they prepare local development plans. A number of initiatives are in the pipeline, but it would be beneficial to have a widespread discussion about how to overcome that difficulty in Wales.
  Mr. Huw Edwards: Does my hon. Friend appreciate the fact that in a constituency such as mine the cost of housing is high, and every effort should be made to encourage housing associations to help people who do not necessarily want to rent to part-rent,
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  part-buy. Such initiatives by, for example, the Gwerin housing association are most welcome. Can my hon. Friend speak with the First Minister to see how such schemes can be encouraged?
  Mr. Touhig: I welcome the point that my hon. Friend makes, and commend the homebuy scheme produced by the National Assembly. There is no limit on the proportion of resources that local authorities can spend on homebuy schemes, and rural authorities have allocated £2.6 million to them this year. Such initiatives are important, because we must try to make sure that more people can access affordable housing; and I believe that they will be beneficial.

  Special Constables
  Mr. David Amess: What discussions he has had with the Home Secretary on the number of special constables in Wales.
  The Parliamentary Under-Secretary of State for Wales: My right hon. Friend the Secretary of State and I have regular discussions with ministerial colleagues about matters affecting Wales. Together with police officers and community safety officers, special constables play an important part in modern-day policing, and the Government have recently announced plans to increase their numbers.
  Mr. Amess: The Minister will know that there is great concern among the public about the lack of visibility of those responsible for law enforcement in this country. In view of that, and the fact that the number of Welsh special constables has been cut by 50 per cent. since 1997, is the Minister content? If he is not, what are he and his Department doing about it?
  Mr. Touhig: The Government have launched a national television campaign to recruit extra specials, but in Wales we have a record number of police constables, and we also have 126 community support officers. We are pushing forward with a recruitment drive for specials, as I said, but it ill behoves an Opposition Member to comment on police numbers, because when the leader of his party was Home Secretary, police numbers declined by 1,000.
  Mrs. Betty Williams: Representing a Welsh constituency, and knowing what goes on in Wales, may I ask whether my hon. Friend is aware of the successful launch of an initiative by North Wales police to recruit more special constables? Its target is 25 new recruits a year, and is he aware that it is on target to meet that figure?
  Mr. Touhig: Yes, I am aware of the efforts made by North Wales police. Specials play a key role in representing their local communities in the police service, gathering important community intelligence to tackle crime and antisocial behaviour. In addition to 588 specials, we now have 7,366 police officers in Wales, together with 125 community safety officers, which is a record.
  Mr. Bill Wiggin: There are only 588 special constables in the whole of Wales, and I was disappointed by the Minister's rather complacent answer. Is he still prepared to maintain that nobody in his Department did anything to prompt the letter from the chief constable to me from which he quoted last time we had Welsh questions—nobody?
  Mr. Touhig: That is a grave and serious allegation, and there is no basis at all for it. I made the point to the hon. Gentleman in the last Welsh questions that my right hon. Friend had nothing to do with the letter from the chief constable, and I reiterate that that letter had nothing to do with the Wales Office. I urge him to withdraw that remark immediately.
  Mr. Wiggin: Can I withdraw a question, Mr. Speaker? The Minister for Crime Reduction, Policing and Community Safety admitted that the views of the chief constable of North Wales were contrary to Government policy. The wife of the deputy chief constable of North Wales has called for a Home Office inquiry into the way in which the chief constable handled allegations against her husband that may have led to his suicide attempt. Will the Minister support her call—
  Mr. Speaker: Order. That has nothing to do with the question before us.
  Huw Irranca-Davies: The issue of special constables was raised by a very able young constituent of mine called Alistair during a recent visit by Baroness Scotland to Pencoed school, as part of the big conversation. While I applaud the work that is now going on to recruit special constables, will my hon. Friend join me in stressing the element of partnership? It is not only special constables but community support officers, the increasing numbers of police and the community who have a role in making the sort of communities that we all want.
  Mr. Touhig: As I have travelled around Wales, I have been greatly encouraged by community activities involving the police service and other organisations, community groups in particular, aimed at building stronger and better communities and overcoming some of the types of antisocial behaviour that many of our communities face. I pay tribute to the police service for the important part they play in that.
  Mr. Roger Williams: Special constables in my area are aware of the greater burden being put on them with very little reward. That is not surprising, considering the appalling financial settlement that Dyfed-Powys police received in the latest police financial settlement. Will the Minister comment on that?
  Mr. Touhig: I do not believe that Dyfed-Powys had a bad settlement at all. Funding for the police properly remains a top priority for the Government, and there has been an increase of £403 million, or 4.2 per cent. in cash terms, for 2004–05. The police service faces considerable demands on its work force in terms of the responsibilities they carry out, but the Government,
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  working in partnership with our colleagues in the Assembly and with local authorities, have made sure that the police service is well funded.

  Renewable Energy
  Ian Lucas: If he will discuss with the Secretary of State for Trade and Industry the establishment in north Wales of a research centre for the manufacture of renewable energy products.
  The Secretary of State for Wales: I will certainly raise that with ministerial colleagues, because the Government are committed to their target of producing a far greater proportion of the UK's energy supply from renewable sources, with north Wales making a key contribution to that goal.
  Ian Lucas: In the past fortnight my right hon. Friend visited the Sharp manufacturing plant in my constituency, where photovoltaic cells for the whole of Europe are to be produced. Is he aware that in Germany more than 130,000 jobs in the manufacture of photovoltaic cells have been created in the past five years? As we are looking forward to more house-building projects in the UK, is not the time right for seizing the initiative on photovoltaic cells, developing research and providing the infrastructure to make sure that when new houses are built, they are supplied with renewable energy sources constructed in Wales?
  Mr. Hain: I agree with my hon. Friend. May I say how impressed I was with Sharp's new investment, creating 90 jobs, to build photovoltaic cells in Wrexham, when I visited the plant with him? It is a path-breaking initiative which, I hope, will create a centre of excellence in north Wales of the kind that he describes. He is right that we should find a way—this was raised in the energy White Paper of last year—of designing into new-build housing projects photovoltaic solar energy and other renewable energy sources.
  Mr. Simon Thomas: In Germany, a price was set for the sale of renewable energy into the market. That is not the case in this country, and we do not even have net metering to allow householders to generate their own electricity, if necessary, from small-scale embedded renewable energy. As a former Energy Minister, what is the Secretary of State doing in discussions on the Energy Bill, which is shortly to come before the House, to ensure that we have opportunities for job creation in Wales for wind generation, tide and wave generation and the very useful photovoltaic cells being produced?
  Mr. Hain: I welcome the point that the hon. Gentleman makes. I know that he has taken a close and informed interest in these matters. We want Wales to become a centre for green energy. We need to focus on the issues that he raises, which is why the Government have made available nearly £350 million for support for renewable energy projects right across Britain. Wales should claim its share of that.
  The hon. Gentleman mentioned wind power. It is important that there be greater support from local communities and local authorities for planning consent

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  to take forward wind power projects. Wales has a great deal to offer if we are to take a lead in renewable energy in that way.
  Mr. Hugo Swire: Does the Secretary of State recognise the mounting concern that the Government will not meet their own renewable energy targets? Does he share the concern that not enough investment is being made in that industry, and admit that far too great an emphasis is being placed on wind farms to generate electricity, rather than any other form of new technology?
  Mr. Hain: The hon. Gentleman is right to say that complementing wind power are biomass, photovoltaics and solar energy. An exciting new initiative called wave dragon is being developed around Milford Haven, involving a partnership between a Welsh company and a Danish company, which seeks to harness the power around the coasts of Wales using the newest technology. There are many different renewable energy opportunities in which the Government are providing a lead. May I say, in the nicest possible fashion, that the shadow Chancellor plans to cut support for renewable energy and other such programmes in the Department of Trade and Industry?

  Sure Start
  Julie Morgan: What discussions he has had with the (a) National Assembly for Wales Government and (b) Cabinet colleagues on the effects of Sure Start in Wales. [162545]
  The Secretary of State for Wales: I regularly meet Cabinet colleagues and National Assembly Ministers to discuss a range of areas, including programmes such as Sure Start, which are helping to secure better outcomes for children, parents and communities.
  Julie Morgan: Does my right hon. Friend agree that investment in the early years is the key to the future for children? Does he further agree that Cymorth, the umbrella organisation that includes Sure Start in Wales, is doing a really good job of reaching the most deprived children, and, together with Assembly policies such as free breakfasts for school children, is making a significant difference?
  Mr. Hain: I wholeheartedly agree with my hon. Friend. Support for that age group is crucial to opportunities later in life, and that is why the Assembly Government are funding Cymorth to the tune of £42 4 million during the coming year, a figure increased year upon year. It is interesting that, although the Opposition would apparently ring-fence the schools budget, the shadow Chancellor's plans, which I am sure that my hon. Friend will join me in condemning, will result in savage cuts to precisely the programmes, such as Sure Start, that are providing life-chance opportunities for many of our poorer children.
  Adam Price: Why then is the level of Sure Start funding per child in Wales half that in England, even though Wales has a
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  higher rate of child poverty? Does the Secretary of State think that we should match the Chancellor's commitment in England and build a children's centre in each of the most deprived 20 per cent. of wards in Wales?
  Mr. Hain: Clearly, Wales wants to do at least as well as England in every area of policy, and the National Assembly will want to consider the hon. Gentleman's points, but I do not think that he can take away from the Welsh Assembly Government the record investment that has gone into Cymorth in supporting pre-school children, in terms of educational opportunities and in other ways. That programme needs to be taken forward, and it will be, under Labour.

  Air Ambulances
  Hywel Williams: What discussions he has had regarding the provision of air ambulance services in Wales; and if he will make a statement. [162546]
  The Parliamentary Under-Secretary of State for Wales: I regularly meet the Assembly Minister for Health and Social Services to discuss a range of issues.
  Air ambulance services have been provided in Wales since March 2001. Since 1 December 2003 the service has increased its coverage across the whole of Wales to seven days a week.
  Hywel Williams: Should not this vital life-saving and successful service he publicly funded, as is the case in Scotland, or does the Minister agree with the Health Minister in Cardiff, Jane Hutt, who told me in a letter that we should be following
  "the regions of England and depending on charitable giving".
  Mr. Touhig: I am aware of the correspondence that the hon. Gentleman has had with my colleague, the Assembly Health Minister, in Cardiff, but the Scottish ambulance service includes the provision of aeroplanes and helicopters and is centrally funded, as he says; and it has been built up over the last 40 years, recognising the need of island populations that have no health services and where air transport is the only way to get to hospital. It is estimated that some 75 per cent. of all air ambulance missions in Scotland involve patients being air-lifted from islands off the Scottish mainland. The same situation does not apply in Wales.
  As for the operation of the air ambulance service, I could not put it better than the hon. Gentleman did in a recent press release when he said:
  "The air ambulance has been a tremendous success and I pay tribute to the efforts of all those concerned in its operation."
  Lembit Őpik: But would the Minister not accept that there is great rurality in Wales and it is sometimes difficult to get people to hospital in time to save their lives. Had it existed, the air ambulance would probably have been able to save the life of Councillor Hugh Taylor from Welshpool, who died a few years ago. Would he be willing at least to

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  discuss the prospect of greater financial support from the Government to ensure that people do not die simply as a result of lack of access to fast transport to hospital?
  Mr. Touhig: In March 2003, the Assembly announced the provision of £100,000 for the cost of air ambulance staff in Wales in 2003–04, and funding for future years will also come from the national health service. My colleague, the Assembly Minister in Cardiff, has made clear how she will take the issue forward.
  Mr. Bill Wiggin: I pay tribute to the work of the air ambulance, which must come as a great relief to those who are in pain on mountainsides in Wales and other rural areas. Can the Minister examine the point that charitable money is available only to fund the air ambulance and not paramedics? People like to give money to charity, and the point needs a great deal of attention.
  Mr. Touhig: I note the hon. Gentleman's point, but I understand that paramedics are a matter for the Assembly.

  Community Support Officers
  Mr. Wayne David: What assessment he has made of the effectiveness of police community support officers in Wales. [162547]
  The Parliamentary Under-Secretary of State for Wales: CSOs have been warmly welcomed by the communities they serve and the police officers with whom they work. The Government are carrying out an ongoing programme of research into the effectiveness of CSOs throughout England and Wales, and a summary assessment will be published shortly.
  Mr. David: CSOs are doing a great job throughout Wales and a tremendous job in my constituency, and they undoubtedly contribute hugely to cracking down on antisocial behaviour. Has the Minister received representations on what would happen to the police budget in Wales and CSOs if certain plans, which were mentioned earlier, came about?
  Mr. Speaker: Order. If the hon. Gentleman is talking about the policies of Her Majesty's Opposition, it is not for the Minister to reply.
  Mr. Win Griffiths(Lab): In my constituency, CSOs have been a resounding success. There are plans under which communities can make a 50:50 contribution with the police towards CSOs. Will the Minister explore the extension and improvement of that idea so that we get more CSOs, which would be welcome in my village of Cefn Cribwr?
  Mr. Touhig: CSOs provide public reassurance through visible patrols and free up police officers to do the job that they are trained for, and there are currently 126 of them in Wales. It is important to extend the CSO scheme, which was piloted in my local police division, Caerphilly, where it was hugely successful. I will certainly explore my hon. Friend's point. The
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  Government are determined to defend and invest in the police service, and will not allow it to be subjected to the cuts proposed by the Conservative party.

  Primary Legislation
  Gareth Thomas: If he will make a statement on the effectiveness of present arrangements in relation to enacting primary legislation affecting Wales. [162548]
  The Secretary of State for Wales: The arrangements have been working well. The partnership between the Wales Office and the Assembly Government has delivered 24 legislative measures that have given the National Assembly additional powers.
  Gareth Thomas: My right hon. Friend describes the effective partnership between the Government and the National Assembly. Does he agree that good reasons would need to be advanced to overturn the current arrangements, which were endorsed by the people of Wales in a referendum?
  Mr. Hain: I accept my hon. Friend's point that a persuasive case would need to be made, but I am sure that he will join me in saying that if it were made, we would examine it properly and sympathetically. We will all read and digest the Richard report when it is published next week.

  Employment
  Paul Flynn: What percentage of the population are in full-time employment in Wales; and if he will make a statement. [162549]
  The Secretary of State for Wales: During September to November 2003, 74 per cent. of the working population in Wales was employed on a full-time basis. The labour market in Wales continues to perform well, and better than the average for the UK economic regions.
  Paul Flynn: Does the Secretary of State agree that part of the wonderful success story of employment in Wales has been the relocation of civil service jobs from the south-east of England to Newport, where the Patent Office, the UK Passport Service and the Office for National Statistics have all settled happily? The move has also improved efficiency by reducing costs. Does he agree that if jobs are lost in the Newport area as a result of the changes announced in the Budget, they should be replaced by new jobs, as recommended in the Lyons report, which states that the relocation to Newport is a model that should be copied by other areas?
  Mr. Hain: I agree with my hon. Friend. Newport is a centre of employment excellence that offers great opportunities, not only for public sector jobs, of which he described many good ones, but for jobs that may be transferred in future as a result of the Lyons review. It is important that we continue to build up the employment

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  base of areas such as Newport in both the public and private sectors, and that is exactly what the Government are doing.
  Alan Howarth: Has my right hon. Friend noted that between the beginning of 2002 and last autumn, unemployment in Newport fell by nearly 18.5 per cent.? Is it not the case that under this Government we have been seeing the creation not only of higher levels of employment, but of more diversified and sustainable patterns of employment, giving new hope and opportunity to all too many people who in the past saw few prospects for themselves?
  Mr. Hain: Indeed. Our record in Wales on employment and on the economy generally compares extremely favourably with that of our predecessors. At that time, unemployment reached 160,000—now, it is well down to around 40,000. With employment rising all the time, economic inactivity rates coming down and average earnings going up, Wales is a good place in which to invest, to work and to achieve greater prosperity.

  Employment (Private Sector)
  Bob Spink: If he will make a statement on recent employment trends in the private sector in Wales. [162550]
  The Parliamentary Under-Secretary of State for Wales: The latest figures show that 75 per cent. of the employment increase in Wales over the past year was in the private sector.
  Bob Spink: I am rather surprised by that complacent reply, considering that jobs in the manufacturing sector in Wales fell by 3,000 during the past year. Is not that a result of the Government's over-burdensome regulation of businesses in Wales, where 3,990 new regulations were introduced in the past year? That over-regulation is destroying jobs and livelihoods in Wales. When are the Government going to deregulate?
  Mr. Touhig: I can tell the hon. Gentleman that in February 2004 the private sector economy in Wales expanded for the 11 th month in a row. Recent announcements of jobs created in Wales include: 90 at Sharp in Wrexham; 41 at Quotations Software in Holyhead; 100 at Brecon Pharmaceuticals; 700 in construction and 50 permanent at Exxon Mobil in Milford Haven; 40 at Bemis Global in Swansea; 700 at Logica in Bridgend; and 400 in aerospace in Blackwood and Cwmbran. We will take no lessons from the Conservatives, who said that unemployment was a price worth paying. Across the United Kingdom, unemployment under Labour is 3 per cent.; when the hon. Gentleman's party was in government, it was 3 million—not once, but twice.
  Kevin Brennan: While we are on the subject of employment trends in Wales, does my right hon. Friend agree that it is important to remind the House that at one time—when the Leader of the
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  Opposition was Employment Secretary—unemployment in Wales went up from 80,000 to 120,000? Now, it is down to 40,000—a third of that level.
  Mr. Touhig: My hon. Friend makes an important point. Thanks to this Government's efforts and successful management of the economy, investment has progressed, employment has increased, and record numbers of people are in work. There is a determination in Wales not to return to boom and bust and to the destruction that we had in Wales when the Conservative party—some of whose members want to return to their Thatcherite principles—delivered mass unemployment, wrecked much of our industry, put thousands of miners out of work, and destroyed local economies. We will not return to that.

  Dee Estuary
  Mr. Ben Chapman: If he will make a statement on dredging in the Dee estuary. [162551]
  The Secretary of State for Wales: Following completion of the environmental assessment, further discussions are taking place between the regulators and the port of Mostyn to establish whether there are alternative solutions that will meet the needs of Airbus. If none is found, consideration can be given to allowing the dredging to proceed if there is an overriding public interest.
  Mr. Chapman: Does my right hon. Friend agree with the Environment Agency for Wales that misleading reports are abroad about this issue? Although I defer to no one in my recognition of the importance of Airbus, the Dee estuary is a vastly important habitat and ecological site which dredging has the potential to damage. Does my right hon. Friend agree that all aspects of the argument must be taken into consideration when decisions are made, and that those decisions must be based on facts, not misinformation?
  Mr. Hain: Of course I agree that environmental issues must be taken into account, especially in the light of the habitats directive. I am sure that my hon. Friend will accept, however, that Airbus is a vital local manufacturer in his part of the world—and one of the best in Europe—and it must succeed in the future. The wings that it makes, which are transported to Toulouse, are a vital part of the A380 world-beating aeroplane. Airbus will go from strength to strength, and these problems need to be resolved as soon as possible.

  The Prime Minister was asked—

  Engagements
  Steve Webb: If he will list his official engagements for Wednesday 24 March.
  The Deputy Prime Minister: I am delighted to have been asked to reply. As the House will know, my right hon. Friend the Prime Minister is in Madrid today. He is attending the memorial service to pay tribute to all those who lost their lives. As the House will know, I represented this country in Madrid last Friday with other European leaders, to join the Spanish people in their protest against the terrorist outrage. I witnessed their grief and anger, and I expressed our solidarity with them. I am sure that the whole House would wish to do so again today.
  Mr. Webb: I welcome the Government's plans to protect workers who lose their jobs after April next year because their company has gone out of business, leaving them with a pension fund without enough money in it. The Deputy Prime Minister will know, however, that 60,000 workers are already in that position and have few or no pension rights. Does he believe that we should also support the people who lose out before the Government scheme comes in, and will he put pressure on the rest of the Government to ensure that that happens?
  The Deputy Prime Minister: The hon. Gentleman will be aware of the great concern over this matter, which has been discussed in the House. Some of the issues involved are before the courts. We have made it clear that the difficulty in these situations is that we need greater regulatory control, and we have taken action on that. We are also taking steps to improve the protection of workers' pensions in existing funds. In regard to those who have lost out at this stage, discussions are continuing with my right hon. Friends, and we shall take into account the views expressed by the hon. Gentleman.
  Mr. George Howarth: Does my right hon. Friend agree that most people find it difficult to understand what is objectionable about having to prove that they are who they say they are? Given the problems that we have with organised crime and terrorism, is it not time for us to have an identity card scheme, so that many Conservative Members will be able to prove that they are who they say they are?
  The Deputy Prime Minister: I shall avoid the temptation to define who people in the House are. ID cards are a matter of controversy. The idea has caught the attention of the House in debates over a decade or so, and I can assure hon. Members that the controversies and discussions continue. The Government have made it clear that they would work towards a compulsory card system, and we shall be doing that in stages. We shall also give the House every opportunity to vote on the issue. It is clear that ID cards can play a part in our campaign against the acts of terrorism that we must act against.
  Mr. Michael Ancram: We fully appreciate that the Prime Minister cannot be in the House today, and we join him in paying tribute to the people of Spain at this time of great grief. I understand, however, that, astonishingly, he will then go on to visit Colonel Gaddafi. That visit is highly questionable, and its timing even more so. This country has suffered
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  especially from Libya's support for terrorism, in the form of the murder of Yvonne Fletcher, Libya's supply of arms to the IRA and its complicity in the murder of more than 200 people over Lockerbie. Welcome though Libya's commitment to disarmament is, we should never forget the victims of Gaddafi's sponsorship of terrorism. Does the right hon. Gentleman at least agree that, if the Prime Minister meets Gaddafi, he should sup with a very long spoon?
  The Deputy Prime Minister: I note the right hon. and learned Gentleman's comments on that serious issue, but I think that he, like me, recognises that it is right to continue discussions. It was a British initiative that got one country to begin to take steps to renounce weapons of mass destruction, and as I understand it, he welcomes that. All other issues to do with talking with that country are a matter for judgment, and I think that the judgment that we talk to these people is an important one. I note that a representative of the families of those who were killed in the Lockerbie bombing has welcomed the fact that talks are taking place. I might add that the previous Administration began talks with the IRA, which eventually led to a reduction in deaths and terrorist actions. We have to strike a balance, and the Prime Minister has got the balance right.
  Mr. Ancram: As I said, we welcome the move towards disarmament, but that does not mean that we should forget what happened in the past or what is happening now. Can the Deputy Prime Minister guarantee that the Prime Minister will raise Colonel Gaddafi's financial backing for President Mugabe's evil regime in Zimbabwe and make it clear that such support is totally unacceptable?
  The Deputy Prime Minister: Again, I think I understand the concerns that the right hon. and learned Gentleman has expressed, but the original deal on Zimbabwe came from the Lancaster House agreement in the 1980s between Prime Minister Thatcher and Mugabe. That has some connection here. The only point I want to make about that is that it is still absolutely essential to try to secure agreement by talking. Acts of violence do not help, whichever part of the world they might take place in, whether it is Ireland or Libya. We have to keep the peace, talk and talk, and eventually get an agreement. To a certain extent, that has been achieved in Ireland, preventing additions to the kind of horrific death toll that cost 3,000 lives. The answer must be to keep on talking while at the same time maintaining a robust defence against terrorists and their deadly actions.
  Ms Julia Drown: In this year's spending review, will the Government show that they really are at the forefront of tackling global poverty by setting a timetable to achieve the United Nations target of spending 0.7 per cent. of GDP on international aid? If Norway, Sweden, Denmark and the Netherlands have been doing that for 20 years, why cannot we?
  The Deputy Prime Minister: My hon. Friend makes a serious point about how much aid we give to developing countries. We have increased the amount, I understand, from about 0.2 per cent. to 0.4 per cent. That does not

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  reach the target, but it is going in the right direction. We must also take into account the resources and help that we have given in reducing the debt problems of the third world. My right hon. Friend the Chancellor has worked extremely hard to get international agreement on that. While it is right to say, "Keep on pressing", because this is an important responsibility for us, we have to take into account what would be likely to happen to that programme in view of the Tories' announcements on budget spend and cuts. They mean that that programme would take a nosedive, not increase, as it is doing under this Government.
  Sir Menzies Campbell: I believe that the thoughts of us all are with the people of Spain today. On the matter of Libya, we on the Liberal Democrat Benches certainly support the Prime Minister's visit.
  Does the Deputy Prime Minister recall that a year ago, when the House of Commons was persuaded to endorse military action against Iraq, the Government welcomed the publication of the road map and committed themselves actively to work for peace between Israel and the Palestinians. What is his assessment of the prospects for that road map today?
  The Deputy Prime Minister: I thank the right hon. and learned Gentleman for his supportive remarks; I think he is absolutely right. The talks that are to take place in Israel are the only way forward to find agreement, and it is important to get co-operation with our European partners. My right hon. Friend the Foreign Secretary has made it absolutely clear that we deplore the action by the Israeli Government, but let us make it clear that the road map is the only way forward. We have to keep hoping that the parties who are signed up to it will agree to it and begin to implement it. The recent announcement by the Israeli Government that they will remove themselves from the Gaza strip is very welcome, but we need to look at the conditions. It is the only way forward, as indeed I would say the Good Friday agreement is still the only way forward in Northern Ireland—talking and talking.
  Sir Menzies Campbell: The whole House can accept that Israel is entitled to live at peace within secure and recognised borders. But when the Government's view is that settlements and the so-called security fence, when built on Palestinian land, are illegal under international law, and when the Foreign Secretary, in his trenchant opinion of yesterday, asserts that the assassination of Sheikh Yassin was unlawful, unacceptable and unjustified, what concrete steps are they prepared to take to persuade Israel to comply with international law?
  The Deputy Prime Minister: Again, the point is well made by the right hon. and learned Gentleman. That matter has concerned an awful lot of people in the House. The assassination to which he referred has been denounced by my right hon. Friend the Foreign Secretary, who has made it clear that it was an illegal act, which should not have taken place and which will make the situation much worse, as we can see today. The wall itself was a unilateral measure that will not provide lasting security for people in Israel, which we all
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  recognise. At the end of the day, there must be a negotiated settlement, which is always the more difficult way, and acts of violence or such unilateral actions will not help. The situation is escalating from day to day. Talking at the table is still the only solution, and in talking with other leaders in Europe, my right hon. Friend the Foreign Secretary will seek again to try to get discussions and negotiation under way on the road map.
  Mr. Barry Gardiner: Will my right hon. Friend join me in welcoming the 42 per cent. drop in unemployment in my constituency? Does he realise that the most important factor, particularly for those on lower wages, is the rise in the national minimum wage? Can he tell me when that will go up to £5 an hour?
  The Deputy Prime Minister: I am grateful for the remarks about the drop in unemployment, which is sometimes ignored by the general public. I came into politics to reduce unemployment. Under the Tories, it went up to 3 million. We have seen a reduction in that, and connecting that drop to the minimum wage, as my hon. Friend does, reminds us that the current Leader of the Opposition said that introducing the minimum wage would increase unemployment by 1 million. In fact, the opposite happened: we had the minimum wage, millions of people benefited from it, and we increased employment. Throughout the period of Labour Government, we have seen employment increasing by a quarter of a million in every year we have been in office. At the same time, we have increased the minimum wage and have recently announced the new date for the minimum wage increase.
  Mr. Peter Luff: What are the Government planning to do to help the Plain English Campaign celebrate its 25th anniversary later this year? What will the Deputy Prime Minister do personally to help it wage its war on gobbledegook?
  The Deputy Prime Minister: The hon. Gentleman, from time to time, may get his grammar right, but his thinking on politics and his common sense are often missing. And to that we can add the sketch writers as well. But I will not be addressing the conference.
  Dr. Howard Stoate: May I tell my right hon. Friend that 250 young people in my constituency have not been offered a secondary school place owing to failings of administration by Kent county council? That is causing huge problems not only for the young people involved but for their parents, because the county council has not even managed to run its own scheme in an efficient manner. Will he use his good offices with the Secretary of State for Education and Skills to ensure that Kent county council gets its act together for next year, even if it cannot sort out the problems this year, so that young people can be given a decent place, near where they live, at a school they want to go to, so that they can get the education they deserve?
  The Deputy Prime Minister: I am quite shocked to hear that Kent county council is not providing what it has a legal obligation to provide—places for children in

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  its area. It seems to spend more time thinking about the 11-plus than about providing places. The resources provided by this Government for education are unsurpassed, and that is why we are getting better standards and more places, in newer schools. We must face the fact that, even with the £8.5 million that has been promised by the Chancellor, on top of the increase in investment, the Conservative party voted in the Lobby last night against such an increase for education. Perhaps the Tories could explain that to Kent county council.
  Mr. Michael Ancram: Last week the Chancellor of the Exchequer announced that the Government were to cut 40,000 civil servants' jobs. Can the Deputy Prime Minister tell us how many extra civil servants the Government have hired in the last three years?
  The Deputy Prime Minister: I cannot give the answer, quite frankly, but I will write to the right hon. and learned Gentleman as soon as possible. I ask him to bear in mind that changes take place in the work force in a number of areas, which is natural in a growing and thriving economy. As I said earlier, we have increased the number of jobs offered by a quarter of a million each year. That means well over a million—nearly a million and a half—new jobs. The announcement made by my right hon. Friend the Chancellor in the name of efficiency—I thought that the Opposition were calling for efficiency from Government, and an end to waste—should be seen against the background of the growth in jobs that he and this Government have created.
  Mr. Ancram: Like the Prime Minister, the Deputy Prime Minister has not answered the question. The only difference is that the Prime Minister doesn't answer because he won't, while the Deputy Prime Minister doesn't answer because he can't. Let me help him. I asked how many extra civil servants the Government had appointed over the last three years. The answer is 40,000. Now they are cutting 40,000. First they hire them, then they fire thern. That is not exactly competent government.
  Can the Deputy Prime Minister answer this question? What percentage of the Government's spending is being wasted?
  The Deputy Prime Minister: The immediate answer is that we have cut the percentage of GDP that goes into administration. The figures were given by the Chancellor in his Budget statement, and I noticed at the time that there were no comments, cheers or shouts from the Opposition, because my right hon. Friend had shot most of their foxes in the lead-up to the Budget.
  Even the 40,000 figure that the right hon. and learned Gentleman mentioned, which I believe is correct, must be seen against the creation of a quarter of a million jobs each year—something that could not be achieved by the Opposition. Just think of the increase in the number of doctors, nurses and teachers that has taken place under this Government. There is no doubt that all those people face having their jobs cut simply because of the Opposition's commitment to cutting public expenditure
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  by £18 billion in two years. It is just hypocrisy for the right hon. and learned Gentleman to go on about waste, administration and unemployment.
  Mr. Ancram: Let me help the Deputy Prime Minister again. He says it is hypocrisy to talk about waste. Even the Government's own report says that up to £20 billion—almost 5 per cent.—is wasted.
  Let me try asking the Deputy Prime Minister about tax. At least we may get an answer this time. The Government are borrowing more than £140 billion over the next five years. The ITEM Club, the Institute for Fiscal Studies, the Organisation for Economic Cooperation and Development and the International Monetary Fund have all warned of further tax rises under Labour. Does the Deputy Prime Minister agree with them?
  The Deputy Prime Minister: We will take no lectures from the Opposition about borrowing. When they were in government, they borrowed nearly as much in a single year as the amount that the right hon. and learned Gentleman says will be borrowed over five years. The fundamental criticism is that whereas we borrowed to invest, he borrowed to keep people on the dole because of the failure of his economic policies.
  If the right hon. and learned Gentleman wants to see the benefits of what we did, he should look at his own constituency, where long-time unemployment has fallen by 96 per cent. As for education, there is an extra £660 for pupils. Crime has fallen, and there is more than £90 million for the primary care trust. Those are the benefits for the right hon. and learned Gentleman's constituents from this Government's policy. Perhaps he would explain to them why he wants to cut the amounts.
  Mr. Ancram: Once again, the Deputy Prime Minister has not answered the question I put to him. I asked whether expert economists were right in saying that there would be further tax increases under Labour. I cannot understand why the Deputy Prime Minister is being so evasive. The Prime Minister is not watching him. Has he not finally got what he has campaigned for throughout his political life—more taxes, more borrowing, more bureaucrats? After seven years of embarrassingly having to mouth new Labour slogans, why can he not just be happy that he has got what he wanted?
  The Deputy Prime Minister: In fact, there is now less tax, more employment and more investment, and we have reduced the bands of tax, which was never achieved under the Conservative Government. There is no doubt that the argument at the coming election will be whether money should be raised to pay for public services or to pay for tax cuts. We have no promise of cuts from the Opposition—they say that they will look at that, and that they might do it, but they will not commit to it. All that we can be sure of, as promised by the Leader of the Opposition, is that they will cut investment in public services. That is the choice that we will have at the coming election, and the Leader of the Opposition will have to answer for it, just as anyone else would.
  Mr. Stephen Pound: I realise that there are some questions that the Deputy Prime

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  Minister cannot answer in detail, for obvious reasons of security, but I personally find the prospect of a 30 ft-high concrete wall topped off with razor wire surrounding the Palace of Westminster utterly grotesque, and it would probably be ineffective. What is the Deputy Prime Minister's view?
  The Deputy Prime Minister: That is another piece of speculation that I would put down to press prattle. There is no substance in it.
  Mr. Andrew Rosindell: Will the Deputy Prime Minister personally intervene to ensure that the chaotic mess in our post office system is sorted out? He might not be aware of this, but last week, the main post office in Romford was closed at only four days notice. Coupled with that, a number of local sub-post offices are threatened with closure. When will he restore order to this vital public service?
  The Deputy Prime Minister: There will be a debate on that matter later, but we have discussed it at Question Time and during debates, and the Prime Minister has always made it clear that £400 million has been put in to develop the post office system and to prevent closures. That closures are continuing has been admitted from this Dispatch Box, but that amount of money has been put in to modernise and to help, and it has prevented a lot of closures. That has been going on for a long time. We have made it clear that pension payments can be made through a post office or a bank, and we are trying to find a good way of operating that will keep as many post offices as possible in existence. Many more would have closed had it not been for the financial support that this Government have given.
  Mr. Neil Gerrard: My right hon. Friend will know that even in my constituency, which is in a borough where housing is relatively cheap by London standards, it is becoming virtually impossible for someone on an average income to get into the housing market or to find property to rent. I appreciate the steps that my right hon. Friend has taken this week to help key workers to buy, but does he accept that that does not really address the problem of the overall supply of affordable housing? What does he intend to do to deal with that problem in London?
  The Deputy Prime Minister: I thank my hon. Friend for his comments on the announcement yesterday of the £670 million programme for houses for key workers in London and the south-east. He probably knows that English Partnerships will today announce a further £150 million programme for 2,000 homes for key workers to be built on in-fill brownfield sites in London. I believe that one of those is in my hon. Friend's constituency. He refers to affordable homes, and the Housing Corporation will announce today a £3.3 billion budget for a programme of 67,000 affordable homes in England. That contribution will take housing investment to a level that is double what we inherited in 1997. That contrasts, yet again, with the cuts in housing proposed in recent Opposition plans.
  Mr. Owen Paterson: The Deputy Prime Minister's decision to overrule all the
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  statutory planning authorities, including his own inspector, in their approval of development schemes in Ellesmere has provoked a petition signed by more than 85 per cent. of the town's electorate. Will he agree to meet a delegation of those people?
  The Deputy Prime Minister: The hon. Gentleman knows that everyone with responsibility for planning who stands at this Dispatch Box has to wait until the full planning procedures have been completed, and I am not sure whether they have been in the case that he refers to. Ministers are always available to discuss these matters, but they will reserve their judgment on planning issues. No Minister has ever been in doubt about that. I cannot give a yes or a no in this case, because I do not know what stage planning is at.
  Mr. Paterson: The right hon. Gentleman overruled it.
  The Deputy Prime Minister: Thousands upon thousands of planning decisions are taken, usually in my name. I often pick up a newspaper and find that it tells me—[Interruption.]
  Mr. Speaker: Order. When a Minister answers, I expect hon. Members to be quiet.
  The Deputy Prime Minister: I will consider what the hon. Member for North Shropshire (Mr. Paterson) has said and will write to him about it.
  Tony Lloyd: Does my right hon. Friend agree that it is normally fairly ludicrous when the non-elected Chamber lectures this elected Chamber on democracy, and that it is not merely ludicrous but dangerous and despicable when the official spokespersons of the major Opposition parties deliberately block the planned pilot schemes for postal votes in the European and local elections for the north-west and elsewhere, put party political advantage to the fore and leave a door wide open for the British National party?
  The Deputy Prime Minister: My hon. Friend makes a very serious point, and Lords amendments to the legislation in question will be debated later today. I find it completely unacceptable that the Lords should make judgments on the planning and procedures for the European parliamentary and local elections; it should not be up to unelected people to take such decisions. We have greater moral authority to take decisions on such planning, and we have said that four regions will be involved.
  The Opposition and their spokesperson in the House of Lords implied that they oppose postal ballots because they feel that such a system is a bit too convenient for voters. The Leader of the Opposition was asked in an interview for the Yorkshire Post whether he would accept the result of the referendum if people decided to vote for regional government. He said:
  "We wouldn't necessarily regard ourselves as being bound by that kind of majority."
  I hear a lot of talk about referendums, but the Leader of the Opposition is telling us that they might not accept the judgment of the electorate in this referendum. It has

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  been suggested in this place and in the House of Lords that such ballots might have more to do with the convenience of the electorate than with getting the greater turnout that all-postal ballot pilots have already achieved. Let us have more democracy and participation, and less hypocrisy from the Opposition.
  Mr. Edward Gamier: What are the qualities that the Deputy Prime Minister looks for in a European Commissioner, and does the right hon. Member for Hartlepool (Mr. Mandelson) possess any of them?
  The Deputy Prime Minister: I am sure that my right hon. Friend the Member for Hartlepool (Mr. Mandelson) would be well able to do the job, and the same is true of a lot of other Labour Members. I read in the press that I am backing certain people. The press have got it wrong again, but I do not want to get into personalities. The Labour Benches are so full of talent that the decision will be a difficult one for the Prime Minister.
  Chris Ruane: My right hon. Friend will be aware that the Department of Health has published a very important document today, entitled "Winning The War On Heart Disease." As chairman of the all-party group on heart disease, I welcome that document, but what extra measures can we adopt to ensure that we build on the successes that we have achieved to date?
  The Deputy Prime Minister: I am pleased that my hon. Friend has drawn attention to that document, which
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  points out that we are making some remarkable advances in respect of heart operations. That is welcome news, and to be fair, the Opposition spokesman on the national health service has also welcomed it, saying:
  "No one welcomes those improvements more than I do. It is excellent news that progress has indeed been made".—[Official Report, 22 March 2004; Vol. 419, c. 597.]
  We want to build on that progress, and I should have thought that Members on both sides of the House would take the view that the national health service does a wonderful job and that we want to do all that we can to improve it. We have made our position clear, which is that billions of pounds in resources have to be put into the health service, whereas the Opposition have decided that, basically, they want to reduce resources. That will provide a clear choice. I have often heard it said that there might be some more money for health and education, but I should like to see their proposals.
  I concede that the Opposition have said that they would not subject health and education to the kind of cuts that they are prepared to implement elsewhere, but I shall wait to see exactly what that means. An £18 billion cut in the first two years of a Tory Administration would mean that nearly everyone would he open to such attacks. If the Opposition want to say that the cuts would affect only defence, housing and other such areas, then okay, let them be clear about it. But on health, we have the success story of winning the battle against heart disease. All Members will welcome the fact that death rates are down by 23 per cent., and our target is to deliver 6,000 extra operations one year earlier.

  Court Papers (Wrongful Disclosure)
  12.30 pm
  Mr. Dominic Grieve(Urgent Question): Will the Solicitor-General make a statement on her Department's wrongful disclosure of court papers to the Minister for Children?
  The Solicitor-General: This question relates to the case of Re B, a minor, who was the subject of a care order on the ground that the child had been harmed by the mother, who was suffering from Munchausen's syndrome by proxy. The House will remember that I made a statement on 20 January after the Court of Appeal gave its judgment in the case of Angela Cannings. That was a criminal case where the mother was alleged to have been suffering from Munchausen's syndrome by proxy, but she was freed by the Court of Appeal.
  The House will remember that I announced that we had set up a review to establish whether there were any other cases where the expert evidence had been central to the conviction and that such cases would be reexamined by the Director of Public Prosecutions and, if necessary, by the Criminal Cases Review Commission.
  In answer to questions and expressions of concern about injustices that might have happened, not in the criminal courts but in the family courts, I told the House that the Minister for Children would be responsible for considering the implications of the Cannings case for cases involving care proceedings in the family jurisdiction. That statement in the House received widespread media coverage, which was understood by some to be an announcement that the Minister for Children was herself going to review individual family cases.
  On 23 February, the Minister for Children made a statement to this House explaining that she was issuing guidance about how local authorities should proceed to review care cases where the basis of the evidence was expert testimony that the mother was suffering from Munchausen's syndrome by proxy. After the reporting of my statement to the House, I had a number of discussions with people raising the question of reviewing cases involving care proceedings. That includes, for example, discussions with some hon. Members and with the director of social services for Southwark, in my own constituency.
  I was told by a solicitor, who happened to be my sister, that she was considering what action to take in respect of a client of hers who was seeking to challenge an order of the High Court taking the child into care. Part of the evidence had been that the mother was suffering from Munchausen's syndrome by proxy, about which I had been liaising closely with the Minister for Children. The solicitor in the case of Re B, a minor, sent me a copy of the High Court judgment, which I read. The names had been blanked out, so I did not, and do not, know the name of the child or the family. I simply looked at the court judgment.
  I formed the view, on reading it, that it was likely to form the basis of a ruling by the Court of Appeal that could assist local authorities and others in understanding whether the issues raised in the Cannings case—a criminal case, of course—had any implications
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  for care cases in the family jurisdiction. I thought that the Minister for Children should be aware of the judgment.
  I understand that, subsequently, the Court of Appeal had itself notified the Minister for Children of the judgment in Re B, a minor, and offered to send her a copy of that judgment and all the papers, and invited her to consider whether she wanted to intervene in that case. It gave leave for the judgment and associated papers to be sent to her. Before I sent the judgment—without the names—to the Minister for Children, I sought legal advice from my office. I was advised that there was no prohibition on my doing so because the names had all been blanked out, and subject only to checking with the solicitor that there was no specific ruling in the case that prohibited disclosure. Having checked with the solicitor, I then sent the judgment to the Minister for Children.
  When the local authority responsible for the care proceedings challenged my sending the judgment to the Minister for Children, the lawyer in my office who advised me reconsidered the question and decided that he probably was wrong, and that I should not have sent the judgment to the Minister for Children without a court order.

  However, I can reassure the House that I acted on legal advice. I did not identify the child: I could not do so, in any event, as I did not know the child's identity. Also, in any event, the Court of Appeal subsequently asked the Minister for Children to consider whether she wanted to intervene in the case and gave leave for the disclosure to her of all the papers in this case on 23 February.
  Mr. Grieve: I thank the Solicitor-General for her statement, which has certainly helped to clarify what appeared in the press this morning. Does she agree, however, that it is an extremely unfortunate state of affairs when the Law Officers Department, which after all is supposed to advise the Government on the law, does not know the rules covering contempt of court and the confidentiality of documents? Does she also agree that, in such cases, it is not appropriate for Law Officers to pass responsibility on to those to whom they turn for advice, as their role and function must require them to take responsibility for their own actions in respect of documents that come into their possession? Will the Solicitor-General assure the House that the case is not another example of the gradual erosion of the principle of the confidentiality of documents, or of the Government taking the view that they have a right to anything that comes into their possession? That must be one of the inferences that could be drawn from how the documentation was handled.
  A second question relates to the handling of cases involving Munchausen's syndrome by proxy under civil proceedings. The Solicitor-General will confirm that we were told that the matter would be reviewed by local authorities, according to guidelines set out by the Minister for Children. However, does not this episode highlight the fact that that system does not appear to be working properly? The Solicitor-General has, at least, intervened to pass documents to the Minister for Children that would allow her to intervene against a decision made by a local authority. Can the right hon. and learned Lady reassure the House about how the

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  process is working in practice? Are there other examples of local authorities being unwilling to co-operate or to act according to the guidelines laid down by her and the Minister for Children?
  These are important issues. I hope that the Solicitor-General can provide some proper reassurance.
  The Solicitor-General: I am sure that I can give the hon. Gentleman that reassurance. It is not a question of not knowing the rules. I am very clear that I take responsibility for my actions in the case, and I remind the hon. Gentleman what the rules are. They state that it is a breach of the Children Act 1989 to do anything that identifies, or which would tend to identify, any child involved in any proceedings. I think that I have made it absolutely clear that it was not the case that I breached those rules.
  Under the Administration of Justice Act 1985, a second prohibition prohibits some publications of proceedings in private. The question that arises at that point has to do with what constitutes a publication. The hon. Gentleman will know that that has been the subject of some considerable consideration by the courts. Therefore, this is not an open-and-shut case, in which the only question is whether the action taken was in breach of the rules. It is a question of how far the rules extend, but it is certainly absolutely clear that I was fully aware of the provisions of the Children Act 1989. I did not breach them and I did not identify the child involved.
  One approach that I could have adopted, but did not, was to argue before the court that to send one copy of the judgment to a fellow Minister did not amount to publication within the meaning of the Administration of Justice Act 1985. That was an approach that I could have taken, but I left it. I am happy to accept responsibility, and I hope that I have made that clear.
  The hon. Gentleman's second point concerned any erosion of the principle of confidentiality. There was no erosion of that principle, or of any other principle. The hon. Gentleman also made a wider point and implied that because I had discussions with my right hon. Friend the Minister for Children the system had not worked and that somehow I had intervened. The system did work. I became aware that a judgment by the Court of Appeal was forthcoming. As it happens, I took the same view as the Court of Appeal. It became aware that it was about to make a judgment that would have implications for the review by the Minister for Children. It thought that she should know about the case and it wrote to her. I became aware that the Court of Appeal was about to consider a case that might have implications for the review by the Minister for Children. I thought that she needed to know about it and, having taken legal advice and considered the legal issues myself, I sent her information about that case.
  The hon. Gentleman would have more justification if he had said that on this important issue of the crossover between the civil and criminal jurisdictions, in cases involving Munchausen's syndrome by proxy, the left hand of Government does not know what the right hand
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  is doing. One Minister considered the criminal issues and another considered the family issues. All such cases involve a lack of confidence in and a fresh consideration of Munchausen's syndrome by proxy and, therefore, the primary responsibility for the family jurisdiction lies with my right hon. Friend the Minister for Children. I thought that it was right that she should see the case, and the Court of Appeal thought the same, separately. On that issue, it was a case of great minds thinking alike.
  Mr. David Heath: I am grateful to the Solicitor-General for the clarity of her reply. It is a misfortune that the solicitor in the case in question is her sister, but let us set that aside. Let us also recognise that whatever she may have done in the court system is a matter for the courts, not for the House. We need to consider what the Solicitor-General has done.
  I find it difficult to reconcile what the Solicitor-General has told us today—that the paper passed was an anonymised judgment—and what Mr. Justice Munby is reported as having said, which was that a Department had no right to see a family division file. He said that it needed leave from a judge to do so and found that a contempt had been committed in this case. I do not doubt the good intentions of the Solicitor-General in this important and difficult area of public policy. However, given that her ministerial responsibilities include civil litigation and advice on civil law matters, including charity and family law issues, and that her secretariat is intended to provide high-grade legal advice, it is a matter for concern that matters were got wrong in this instance, because that undermines confidence in her Department.
  Does the Solicitor-General agree that wider issues still need to be resolved? I suggest that one is the quality of advice available to families who have been involved in a case of Munchausen's syndrome by proxy. It should be possible to gather information in a way that does not conflict with court rules to inform Government policy on the issue. She is right to say that we need an effective crossover between civil and criminal practice in that area. Does she accept that, in this instance, she did not choose the right way to go about it?
  The Solicitor-General: The hon. Gentleman is right to say that Mr. Justice Munby says that a Minister has no right to see a family court file, but, of course, I do have the right to see family court files in some cases because I have a responsibility to intervene to assist the courts in family cases.
  David Davis: The right is limited.
  The Solicitor-General: The right hon. Gentleman assists me by saying that the right is limited. Perhaps I can just make it absolutely clear to the House that I want to do my job properly. I want to assist with the administration of justice. I want to abide by the rules. I want to be absolutely clear that that is the case. Obviously, I shall consider how the different Acts of Parliament—the Children Act 1989 and the Administration of Justice Act 1985—and the different jurisdictions with which I have some involvement intersect. I will make the position clear, and perhaps that will assist the House.

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  The quality of the advice that is available to people who challenge care rulings in respect of their families is a matter for the Department for Constitutional Affairs and the Law Society.
  On the point about gathering information, there is an issue about how we can discuss cases in principle and how the law is working in principle when there is an absolute prohibition on discussing the circumstances of individual cases, but that is a wider point about which the House has been concerned.
  Mr. Gwyn Prosser: My right hon. and learned Friend will be more aware than most of the excellent work that Sarah Harman—the solicitor in this case—has done over recent years. She takes on some of the most difficult and, frankly, unpopular cases. She is held in the highest esteem, not just in east Kent but right across the country. However, does my right hon. and learned Friend share my additional concern that Friday's judgment could effectively deny MPs access to papers and documents that could be crucial in their assisting with certain casework? Frankly, some of that casework involves the most difficult and sensitive subjects that ever come to visit us in our surgeries.
  The Solicitor-General: I thank my hon. Friend for his comments about Sarah Harman, and I wish to take up the additional point that he raises, which is important for the whole House. There can be very few hon. Members on either side of the House who have not had a man come into their surgeries saying, "There has been an injustice. I'm not allowed to see my children." That is the background of the case, and it is what the court has said. There can be very few hon. Members who have not experienced a woman coming to their surgeries saying, "The council has got a court order to take my children into care, and this is wrong and an injustice." That happens regularly. There is a question about where the correct response lies because Parliament must perhaps provide an avenue, a safety valve, an opportunity for those who feel that they have suffered an injustice to come to speak to their MP. Perhaps that is the right position; or perhaps the right position is that, because of the laws that we have passed in the House and their interpretation by the judges, we should tell those constituents, "Don't speak to me about this. By speaking to me, you are in contempt. Please go away. I'm not even going to talk to you."
  On the point raised by the hon. Member for Beaconsfield (Mr. Grieve)—I do not know whether he has had the opportunity to see the full judgment—we need to be clear exactly how the situation lies, so that we can protect the interests of children, the administration of justice in the family division and the opportunity for the House to be a safety valve for our constituents who feel that they have suffered an injustice, rather than seeing them dress up as Spiderman and climb up on to a crane.
  Mr. Edward Garnier: Is it not regrettable that the Solicitor-General thought it appropriate to refer us to the internal workings of her Department in mentioning another lawyer's advice? It is her advice as the Solicitor-General that is important, and not the internal advice that she may have received from her lawyers in the Department. She is here as the
  890
  Solicitor-General and is accountable to us in that guise. Surely, the matter is all the more regrettable when one considers her involvement in the law of disclosure. She will remember, 25 years or so ago, the case of Harriet Harman v. the Home Office, which related to improper disclosure of documents. It seems to me that her conduct over the past few days in this matter, although understandable, is regrettable.
  The Solicitor-General: The hon. and learned Gentleman raised the question of the case of Harman v. the Home Office, but what he omitted to say was that it was subsequently decided that I had not acted improperly. Perhaps I could remind the House, for those who cannot remember this case of 25 years ago, that it was decided I had not acted improperly in that case. I should like to set the record straight on that, in case anybody is putting two and two together and making five.
  On the question of the internal workings of the Department, the local authority in question wrote to me and sought information about exactly what had happened prior to my being sent the judgment and after my having been sent the judgment. I responded to it, and copied this into the court. Having written to the local authority and sent a copy to the court, I do not think that it is right to give a partial version to this House. Therefore, I am giving the House the information in as full a form as that in which I gave it to the local authority and the court. It was in that spirit that I gave that information.
  As former Law Officers will know, it is not at all unusual for Law Officers to take a preliminary view and then ask for a lawyer in their Department to give it further consideration. Indeed, leading counsel will often take a preliminary view and ask junior counsel to check it out. I am not resiling from or trying to shed responsibility
  Mr. Garnier: You are.
  The Solicitor-General: No, I am not trying to shed responsibility. I am trying to explain the procedures. I hope that they will lead the House to reflect on and accept the fact that I acted in good faith and with due diligence, and that the interests of the child were not harmed, although there are some further issues that we need to consider in relation to the contempt proceedings and the relationship between Members of this House and our constituents.
  Mr. David Kidney: I am sorry for any personal embarrassment that has been caused to my right hon. and learned Friend, as she does an excellent job in her post, and long may that continue. However, it occurs to me that the review of the criminal cases and the investigations of the decided family cases that are going on at the moment will put a lot of Departments and other organisations into a position of some conflict and doubt about whether to respond to the requests for information for the review and investigation, and about their duties under contempt of court rules. I wonder what the position is in terms of the Government requesting information or somebody else, such as the courts, giving some absolute advice to people so that that can be clear. Beyond that, I wonder whether this is

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  a passing phase to do with the investigations following the Cannings decision or whether, bearing in mind that the Children Bill has just started its progress in the other place, a more general application needs to be considered for inclusion in that Bill before it makes it on to the statute book.
  The Solicitor-General: I thank my hon. Friend for his question. There are more general issues that need reflection and consideration. Whether they need a statutory amendment to children's legislation is not at all clear, but I think that further consideration is needed. He is right that we want to be sure that Ministers in other Departments and, indeed, Members of this House are in no doubt about the position when people come to see them, particularly if they have seen reports of such judgments. We do not want anybody to be in any doubt about whether they can carry out their duties by proceeding to discuss a case, or whether they would be in breach of contempt rules.
  I hope that the House will find it helpful if I offer to consider how we think about clarifying the situation. It is an issue not only for Ministers, but for Members in general. Perhaps, as I am fully respectful of the long years of experience of the shadow Attorney-General, I will offer to consult him, and he can help us to ensure that we have an agreed position that everybody in this House can be clear about, as they should be able to feel certain of their duties to their constituents and their duty to obey the law.
  Mr. Peter Lilley: Does the Solicitor-General accept the traditional doctrine of ministerial responsibility, under which Ministers are responsible for the advice that they take and are therefore obliged and have an incentive to probe, question and validate that advice? Or is she joining the long list of Ministers who seem to be enunciating a new doctrine under which, if the advice proves correct and successful, Ministers take responsibility, but if it does not do so, they invoke an official and point the finger at them?
  The Solicitor-General: I have never been in any doubt—and I think that the Law Officers are in a particular position on this—that responsibility lies not with the adviser, even where that adviser is the Law Officer, but with the person who is taking the decision. In this case, the person who was taking the decision was me, and I take responsibility for it. I simply described to the House, in the way in which I described it to the local authority and the court, what the process was.
  I want to be clear that I take responsibility for the actions that I took. There was nothing improper about the actions that I took. The court has no criticism of me or of the actions that I took, and I do take responsibility for them. I do not want the House to be left with the idea that my explanation of the background to my actions was somehow a denial of responsibility. I accept responsibility, and no harm was done.
  One of the things that I would be very concerned about and would regret would be if the excellent work of the legal secretariat to the Law Officers, which has served Law Officers down the decades excellently and
  892
  with a high degree of professionalism, somehow was criticised as a result of what has happened. The Attorney-General, Lord Goldsmith, and I value most highly the work of the legal secretariat of the Law Officers, which is recognised throughout the profession as providing the highest quality legal advice.
  Vera Baird: Although I am rather late in the day, may I congratulate the Solicitor-General on the blow that she struck 25 years ago by breaking the barrier of contempt of court, which was a real obstacle to freedom of information in those days? I congratulate her on that and I am sorry not to have done so earlier.
  May I also congratulate my right hon. and learned Friend on her wisdom in taking a second opinion and not relying solely on her own legal advice in making the decision? May I deplore the criticism that has been levelled at her when she has asked to come to the House and explain how the decision was taken? If she did not explain that she had taken advice and how it turned out, she would have been heavily criticised for not mentioning it. No doubt, she would also have been belaboured for taking the decision on her own. May I congratulate her, as she did absolutely the right thing?
  May I express very briefly my sympathy with anyone who finds themselves in the complicated, multi-layered depths of contempt of court? It is often very hard to know where the public interest lies in that sector, and frankly that whole area of law needs urgent review.
  Further to the comments of the hon. Member for Somerton and Frome (Mr. Heath), I have certainly seen a letter from the Law Society suggesting that it is considering writing to all its family practitioners inviting them to review their files to see whether there is a case to be brought out and put into this whole area of review. Is my right hon. and learned Friend aware that the Law Society is going to write to all family solicitors inviting them to submit cases for review, and is that being done with the encouragement of her Department or the Minister for Children?
  The Solicitor-General: I thank my hon. and learned Friend for the points that she made. Issues have arisen around the edges of the case that require further review, and I am aware of those that the Solicitors Family Law Association and the Law Society have been looking at.
  Rev. Martin Smyth: The Solicitor-General suggested that we should broaden consideration of the problem, particularly as a reference in the press suggested that a Member of Parliament could be in contempt of court if a constituent brings an issue to him. In reality, as she said, most Members of Parliament will deal with cases, from both men and women, which go on to the family division. I dealt with one case in which fighting had been going on for two years—not with the courts but with the evidence given by social services to the courts. Ultimately, a guardian ad litem was appointed for court proceedings, which confirms that the guidance I was given was correct. It is important that the right of the citizen to see their Member of Parliament as an ombudsman is maintained.
  The Solicitor-General: I am sure that we all want to be reassured that citizens maintain the right to meet their Members of Parliament, tell them what has been going on in a case that affects their life profoundly and, if they want the opportunity, to protest to them and ask for something to be done. Of course, we all want to be absolutely clear that we are sticking to the letter of the law. I suspect that custom and practice operates when a Member writes to social services on behalf of a constituent, as the hon. Gentleman may have done, and asks for background to the case. However, if such information consists of issues that have formed the background to court proceedings that custom and practice may not be within the strict letter of the law. We have to be absolutely sure about that—we do not want to invite social services to break the law in communicating with MPs; we do not want to give comfort to constituents but at the same time breach the law; and we do not want to break the law in anything that we do in the House or debates. We need to discuss the issues of principle and we need to support our constituents. When we discuss those issues, it will assist us to have an understanding of the way in which the courts deal with those issues in practice

  Points of Order
  1.3 pm
  Mr. Jeffrey M. Donaldson: On a point of order, Mr. Speaker. This afternoon, in Prime Minister's questions, the Deputy Prime Minister accused the deputy Leader of the Opposition of hypocrisy. May I draw your attention to column 1603 of the Official Report on 10 March 2004? In a debate on the Justice (Northern Ireland) Bill, one of my hon. Friends was called to order by the Deputy Speaker for accusing another hon. Member of hypocrisy. I know that you wish to protect and uphold the rights of Back Benchers, and would not wish to have two sets of rules in the House for Front Benchers and Back Benchers. Will you therefore give a ruling on whether it is unparliamentary for one hon. Member to accuse another of hypocrisy, regardless of whether they are a Front-Bench or Back-Bench Member of Parliament?
  Mr. Speaker: I always say to the House that temperate language should be used at all times, and it is unfortunate if it is not. Whether Members are Front Benchers or Back Benchers, all are hon. Members and are treated the same. I am sure that the hon. Gentleman knows that I have no fear about whether the Member concerned holds high office—they will abide by the rules of the House.
  Mr. Peter Robinson: Further to that point of order, Mr. Speaker. In that case, the Back-Bench Member was asked to withdraw their comments, but today the Front-Bench Member was not.
  Mr. Speaker: Perhaps the Deputy Speaker was more attentive than I was today, but the hon. Gentleman will know that Prime Minister's Question Time—whether questions are fielded by the Prime Minister or by the Deputy Prime Minister—is a heated time of the week and I have many things to watch out for. I would put it down to that.
  Mr. Stephen McCabe: Further to that point of order, Mr. Speaker. Is there not a distinction between referring directly to an hon. Member and accusing them of being a hypocrite, which you would rightly rule out of order, and making a general criticism that the Opposition's position is hypocritical?
  Mr. Robinson: That is not the case.
  Mr. Speaker: Order. Let me deal with the point made by the hon. Member for Birmingham, Hall Green (Mr. McCabe). I have been able to answer the other points of order. There is a distinction—he is quite right—[Interruption.] Order. I know what hon. Members are asking, and I think that I have given as good an explanation as I can.

  Restricted Byways
  1.5 pm
  Mr. Robert Walter: I beg to move,
  That leave be given to bring in a Bill to make new provision about establishing the existence of byways open to all traffic.

  I want to make it clear at the outset that the Bill is not about banning things but about clarification of the law. Many in the House relish the countryside and its beauty. I have two areas of outstanding natural beauty in my constituency: the Dorset AONB and Cranborne Chase, and West Wiltshire Downs AONB, which also covers the constituency of my hon. Friend the Member for Salisbury (Mr. Key), who is present. My Bill is about co-existence in the countryside. I have been accused of being anti-biker and anti-four-wheel drive, but it is not my intention in the Bill to be anti-anything of that nature. I want to defend the rights of horse-riders, walkers, hikers, and genuine users of the countryside—people who have traditionally used it in certain ways, particularly those who have experienced peaceful enjoyment along green lanes, bridleways and footpaths.
  There is still room in the countryside for people who want to ride their motorbikes and trailbikes, and who want to drive their four-wheel vehicles. Yesterday, I discussed the Bill with someone outside the House who asked, "What about the new souped-up tractors that people are driving in the countryside?" Some of the Bill's provisions will cover that, as it would create a framework for co-existence in the countryside.
  The Government have already issued a consultation document on the subject, "The Use of Mechanically Propelled Vehicles on Rights of Way". I am delighted that the Minister for Rural Affairs and Local Environmental Quality is on the Government Front Bench, because I want to make particular reference to the fourth proposal in the document, which says:
  "We propose to introduce legislation, which will make it no longer possible to establish the existence of a byway open to all traffic by reference to historic (pre-commencement) use by, or other evidence relating to, non-mechanically propelled vehicles"
  probably a horse and cart. However, it also says:
  "We propose to do this by introducing a cut-off date after which (subject to certain exceptions) any unrecorded rights of way for vehicles shall be recorded as restricted byways in the definitive map and statement.
  We propose that the cut-off date should be one year from the commencement of the new legislation."
  The cut-off date is a problem, which is why I am moving the Bill now, rather than waiting.
  In a letter that I received earlier this month from the leader of Dorset county council, Mr. Tim Palmer, he stated that he has forwarded to me a letter that he had written to a committee considering the consultation on opening a byway to all traffic in the county. He writes:
  "You will see that all the evidence allowable under the current law is in favour of a byway"
  open to all traffic. He goes on:
  "Everyone is now looking to your Bill to give them a voice and to add to the clamour for a change in the law. One aspect you may want to cover is the retrospective review of existing byways. This is not allowed for in the Government's consultation paper. Because of this the TRF,"—
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  the Trail Riders Fellowship—
  "4WD clubs etc are rushing to claim more byways before the legislation comes in. In addition we do need to be able to review the status of some ancient byways, national monuments like the Ridgeway and the Oxdrove through this constituency, both currently completely wrecked by swarms of bikes, quads and 4WDs."
  This is not solely a Dorset issue. It has great support across the House. Early-day motion 380 dealing with the use of unsurfaced byways open to all traffic was tabled by the hon. Member for Bassetlaw (John Mann) and signed by 90 other hon. Members. It particularly mentions the Ridgeway. In my constituency, there is a bridleway—bridleway 17—emanating from the village of Cranborne. Last June I had to attend a public meeting in the village. The 300 people who had gathered were very concerned about bikers using the bridleway not local people using it for their enjoyment, but people who had travelled almost 100 miles because it was considered a good place to ride their bike, particularly when it had been raining and the bridleway was rather muddy. There was talk of biking groups that came regularly from Bristol, Southampton and so on.
  I know that my proposal has the support of the British Horse Society, the Ramblers Association and the Green Lanes Environmental Action Movement, but I also want the support of the Trail Riders Fellowship and an organisation of four-wheel drivers in my constituency called—perhaps slightly incorrectly—the Friends of Dorset Rights of Way, who have written to me on several occasions suggesting that we should find a form of co-existence.
  So what will my Bill do? It will state that when a county council or other body responsible for rights of way is considering an application for a green lane, or whatever it is, to be designated as a byway open to all traffic, if the evidence is solely that 100 or 150 years ago the byway was used by a horse and cart, the council will be able to protect the rights of existing users of that byway—the riders and the walkers—as well as look after the access for farmers and for others to open spaces beyond the byway. The council should be able to protect the rights of the disabled, who may well need to use four-wheel drive vehicles to get to the open spaces beyond the byway.
  The Bill would give the county council rights of way committee the powers to designate a byway as a restricted byway, and to consider the rights and responsibilities of those with mechanically propelled vehicles—the trailbikes, the four-wheel drives and so on—and to make sure that those rights are not jeopardised. Laying down specific rights should be a matter of local decision for local people exercised by their local authority. By creating a byway known as a restricted byway, we can balance the needs and rights of all the users of the countryside.
  Question put and agreed to.
  Bill ordered to be brought in by Mr. Robert Walter, Sir George Young, Jeremy Corbyn, Sandra Gidley, Mr. James Gray, Mr. Robert Key, Mr. David Drew, Mr. Anthony Steen and Mr. John Randall.

  RESTRICTED BYWAYS
  Mr. Robert Walteraccordingly presented a Bill to make new provision about establishing the existence of byways open to all traffic: And the same was read the First time; and ordered to be read a Second time on Friday 16 July, and to be printed [Bill 80].
  Opposition Day
  [7th ALLOTTED DAY—FIRST PART]

  Post Office Services
  Mr. Speaker: I inform the House that I have selected the amendment in the name of the Prime Minister.
  Mr. David Willetts: I beg to move,
  That this House believes that all Post Office customers who wish to continue receiving their benefits, pension payments and tax credits through the Post Office should be able to do so through a Post Office Card Account opened at the counter of a Post Office or sub-post office; notes that the Government has encouraged Post Office customers to use their own bank accounts or basic bank accounts, whilst preventing the promotion of the Post Office Card Account; further believes that the Government should use the roll out of Direct Payment to encourage the take-up of all benefits and tax credits; calls on the Government to clarify urgently how housebound, disabled and older people who are not able to cope with the three direct payment options will be able to claim their pensions and benefits after 2005; recognises the significant role played by local post offices in both rural and urban areas; appreciates that ending cash benefit payments will deprive sub-postmasters of an average of 35 per cent. of their income; notes that this will make many post offices commercially unviable and is likely to lead to yet further closures; further calls on the Government to ensure that the urban post office closure programme is conducted systematically and only after consulting all relevant parties including Post Office users; and condemns the Government's failure to deliver benefits and tax credits in a simple, easy to understand manner while at the same time jeopardising the future prosperity of the Post Office.
  The motion reflects a widespread belief not just among those on the Opposition Benches but in all parts of the House about the importance of post offices as part of the local community. We have deep concerns about the long-term viability of the post office network under the Government's approach. Those concerns were powerfully expressed by my hon. Friend the Member for Eddisbury (Mr. O'Brien) in the debate in the House on 13 January. That debate focused on the post office network and the importance of sustaining it and investing in it. Today I shall consider the post office network from the point of view of the people who use it—from the demand side, rather than the supply side. I shall consider the point of view of benefit claimants and the pensioners whom we represent, who wish to have access to a viable post office and to claim their benefits in a way with which they are long familiar and comfortable.
  Although it is always good to see the Secretary of State in the Chamber, it is a great pity that she was not present for the debate on 13 January, which was about her responsibilities for support for post offices. Today, even though we are talking about services for benefit claimants, the Secretary of State for Work and Pensions is not present. I regret that, because I want to consider the crisis in our post offices from the point of view of those claiming benefits, many of whom are very unhappy with the Government's approach.
  Mr. Patrick McLoughlin: May I tell my hon. Friend about Belper? Under the reinvention programme, which seems to be more like a programme of mass destruction, of the five post offices that were opened in Belper, four were closed. We were
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  assured that the one remaining post office would be able to cope, but last week there was absolute chaos in it. When the Government made a commitment to allow people to collect their benefits, they did not say that they would make it impossible for them to do so—but that is just what they have done.
  Mr. Willetts: My hon. Friend reflects the views of many constituents across the country who face practical problems that give the lie to some of the complacent assurances that we received from Ministers. The Trade and Industry Committee report "People, Pensions and Post Offices" contains powerful evidence about the scale of the problem that our post offices face and confirms why we are right to press for the right of people to choose how they receive their benefits. Paragraph 12 of the report states that the "old" system—the so-called old system
  "offered the choice between a bank or building society account or an order book for use at a post office to collect benefits and pensions. Direct Payment essentially offers the choice between a bank or building society account which may or may not be usable at a post office, or the Post Office card account, but not the order book. It is difficult to see that customer choice has, in practice, been extended significantly. Offering the full range of customer choice would entail allowing those who wish to persist with the order book system to do so."
  The Opposition are committed to the order book system as an option not because we are retro or old-fashioned, but because we believe in choice. If there are millions of people in Britain, including many pensioners, whose choice it is to use such a system, why should the Government try to deprive them of the choice that they reasonably wish to exercise?
  People are right to be wary of some of the options that are in front of them instead. I shall quote the experience of a constituent of mine—Mrs. Mortain, who lives in Havant—whose case I have heard about literally in the last few days; I have her permission to do so. She has been receiving her pension via her bank account, in exactly the way that Ministers are trying to encourage, but she has not received a bank payment for the past five weeks. They have suddenly ceased. She got on to the Pension Service and it told her that it is currently experiencing what it called
  "a glitch in the system",
  and that hundreds of others are affected.
  The Secretary of State for Trade and Industry may not be able to respond to this, but I hope that in the winding-up speech of the Under-Secretary of State for Work and Pensions, the hon. Member for Gravesham (Mr. Pond), we will learn whether he is aware of problems in delivering pension payments into bank accounts, and whether my constituent is not alone and there is a glitch in the system affecting many others. It has reached the stage where the Pension Service is saying, "The only way we can get you the money is to issue you with a giro cheque that you can cash at your local post office." That will be the fallback when computerised payments to bank accounts have not worked. Is that not why so many pensioners do not trust the Government's assurances on payment in other ways?
  Mr. Crispin Blunt: That news will be of great concern to old people in Reigate, where three post offices have been closed—in fact, the latest one is closing on Saturday—and they are left with the main post office in Reigate, which is hosted by Safeway. Morrisons, which is taking over Safeway, has been quite unable to provide me with any reassurance that the post office will stay open. Meanwhile, the Post Office is pressing ahead with closing the branch in Holmesdale road. It is a dreadful state of affairs if it cannot guarantee to pay people their money. The reinvention programme should be stopped immediately until the matter can be sorted out.
  Mr. Willetts: My hon. Friend is absolutely right. He rightly draws my attention to the fact that, given all the changes in the world of supermarkets at the moment—in my constituency, Tesco has just taken over our local one-stop shop—many of the established arrangements for post offices in such shops are in question. That is another source of uncertainty and instability. I hope again that we will hear from the Secretary of State about what steps she is taking given that significant communities—towns—face the uncertainty that my hon. Friend describes.
  Gregory Barker: Does my hon. Friend accept that a great deal of insult seems to be added to injury when post offices are closed in the circumstances that he has just articulated, because of the mechanistic and formulaic way in which the Post Office goes about closing them? In Bexhill, three post offices have closed, yet when I have tried to make representations, I have received only a computer-manufactured letter, and even when errors in the reply have been pointed out, I have merely received a further computer-generated letter.
  Mr. Willetts: My hon. Friend is quite right. One problem with the so-called consultation is that it is not real. Instead, we have something of which the Government have made rather a speciality: bogus consultation during which one never gets the sense that one is receiving a genuine, individual letter or that any response will be properly assessed by an individual. The Opposition wish to respect the views of the people whom we represent—the pensioners and the many people claiming benefits. We are in favour of choice and in favour of the customer. That is the philosophy that underpins our approach to the Post Office.
  There is further evidence in the direct-payment statistics produced by the Department for Work and Pensions about what people prefer. They show the responses that it has had when it has invited benefit claimants to convert to the new payment systems. We see from the latest statistics that it has so far approached approximately 2.5 million pensioners, of whom 1.9 million have responded. Of those 1.9 million responses, only about 750,000 have said, "Here are my bank account details; of course you can pay my money into my bank account." Some 1.2 million people have said that they want a Post Office card account. Similarly, with regard to Jobcentre Plus, 2.5 million letters have been sent out, eliciting 1.3 million responses. Of those,
  900
  about 800,000 have said, "Here are my bank account details", and 600,000 have asked for a Post Office card account.
  The Department's latest statistics show that we have already had 2.5 million requests for a Post Office card account. The Government's limit was to be 3 million, and they have already received 2.5 million, so does the Secretary of State accept that their statistics are, first, evidence of a widespread preference for a Post Office card account rather than bank account, and secondly, very different from the Government's forecast? In the light of that clear evidence about what real people in the real world prefer, what is her new forecast for the use of the Post Office card account?
  The evidence about people's preferences is even more powerful in the light of the clear bias at every stage in the system against people having a Post Office card account. Those people have expressed their preferences for Post Office card accounts despite every attempt by the system to push them in a very different direction.
  Mr. Michael Weir: Does the hon. Gentleman accept that, even after the initial stages, the procedure for obtaining a card account is complex and difficult for many elderly people?
  Mr. Willetts: The hon. Gentleman is quite correct, and that is a point to which I will turn in a moment.
  The evidence of the bias in the system that I was about to cite is from a report in The Sunday Telegraph of 7 March, in which a member of the DWP staff quoted an instruction received from head office, which is devastating evidence that the Government have not stood by their assurances that there will be equity and fairness in the system. The instruction states:
  "We need to pay most of these customers into bank accounts which cost 1p rather than into Post Office card accounts which cost up to 30 times more. You should be aiming to get 9 out of 10 new claimants (to use) bank accounts, with a small proportion paid through Post Office card accounts."
  That was the aim set for benefit claimants. I hope that either the Secretary of State or the Under-Secretary will say whether that is an accurate record of instructions sent out by the Department.
  The Parliamentary Under-Secretary of State for Work and Pensions: Is the hon. Gentleman being disingenuous? Does he understand that people who seek work need to be job-ready, and that the Post Office card account, although it has many favourable characteristics, does not allow the payment of wages into it? Does he not, therefore, understand that it would be quite irresponsible for Jobcentre Plus to advise people to take out a Post Office card account, which would not leave them job-ready? May I underline the fact that the 3 million figure is not a limit on the number of Post Office card accounts? We have never said that there is a limit. If people want the Post Office card account, they can have it.
  Mr. Willetts: Was the 3 million figure a forecast then? The Government themselves put that figure into circulation, so if it is no longer accurate, what is their forecast? Not only the Opposition but many people working for the Post Office would wish to know where

  901
  the Government think things now stand. Of course I accept the Minister's point about wishing people to be job-ready, but assurances have been given that the system will not be biased. Nevertheless, the evidence is that it is biased, and the Minister has just cited a reason why it should be so. That is a very different position from the one that they have taken so far.
  Mr. Pond: The system is not biased. It is a matter of choice for the customer. Customers must know their full range of choices, and that is what we provide. It is not for the Government or the Opposition to tell people whether they should have a Post Office card account, a current account, a basic account or a building society account. It is for the customer to decide and it is our responsibility to ensure that they fully understand their options.
  Mr. Willetts: It is, of course, for the customer to decide, and that is what we believe. Contrary to the claim made by the Under-Secretary of State for Work and Pensions, the hon. Member for Gravesham (Mr. Pond), that the Government allow the customer to decide, we all know that they are trying to push customers in one direction rather than the other. All we are asking him to do is to ensure that the Department of Trade and Industry and the Department for Work and Pensions stand by their assurances that all they are doing is extending choice. Conservative Members want to see fair and open choice, which is not available at the moment.
  Mr. Owen Paterson: Does my hon. Friend agree that the Minister is talking nonsense? I visited 28 post offices last summer, and I shall briefly quote three postmasters. The first said:
  "The Benefits Agency is bullying people to change. The Government has not been fair."
  The second said:
  "The Benefits Agency has been very difficult. The forms are designed not to help."
  The third said:
  "The initial letters give a clear idea that customers must go direct. They are misleading. The bank section is deliberately put before the card section."
  The Minister should apologise.
  Mr. Willetts: My hon. Friend is absolutely right. His point is repeated by Labour Back Benchers in early-day motion 648, which was tabled by the hon. Member for Falkirk, East (Mr. Connarty). Many hon. Members support early-day motion 648, which recognises the problem—we can all see the problem, our constituents experience it and people who run post offices are concerned about it. It is not good enough for the Minister to come to the House and say that the system is fair and even—it is not, and that is the nature of the problem.
  Mr. Nick Hawkins: One of the things that most concerns pensioners in my constituency, where Ash Vale Station and Mytchett post offices have closed, is that if they even inquire about the system, as a result of Government instructions, their inquiry is treated as a request for automatic payment.
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  That is part of the Government's dishonesty. Does my hon. Friend recognise that one of the problems is that the Government are not putting any pressure on the many banks and financial institutions that will not allow cheques to be cashed at post office counters? Only three of the banks currently allow their cheques to be cashed in that way. Does my hon. Friend agree that all banks should allow cheques to be cashed at all post office counters, which would reintroduce footfall into post offices and help sub-post offices to survive?
  Mr. Willetts: Both my hon. Friend's points are absolutely right. First, we are all concerned about the insidious process whereby people are pushed towards the bank account option rather than the Post Office card account at every stage. Secondly, Conservative Members do not want to subsidise post offices; all we want is people to enter post offices because that is the service they want to use. We seek increased footfall, which is the best way to ensure that as many post offices as possible are viable in the future.
  Andrew Selous: Is my hon. Friend aware that the Work and Pensions Committee visited the telephone call centre for the Pension Service last year? We were shown the script that the call centre operators use when new pensioners request a pension. The script made it clear that the Post Office card account is the last option. Does my hon. Friend think that it would be useful if the Minister were to ensure that a copy of that script is placed in the Library?
  Mr. Willetts: Yes. I recall that that important point came up in the Select Committee, where my hon. Friend the Member for South-West Bedfordshire (Andrew Selous) does sterling work. Yet again, the evidence that the system is biased is building up. All we are asking for is fairness for the millions of people who want their benefit to continue to be paid at the post office, which is not too much to ask of the Minister.
  Mr. Pond: The House will have noted the hon. Gentleman's statement that the Opposition do not want to subsidise post offices. Are the Opposition confirming their opposition to the Government's £2 billion investment in the post office network? I shall quote Postwatch research—the research was conducted on a small scale, but it was, nevertheless, conducted by Postwatch—to those hon. Members who suggest that the process is biased to encourage people in one way or another. The vast majority of pensioners said that advice from the customer conversion centre
  "was given in a clear and unbiased manner".
  Mr. Willetts: I began my speech by saying how much I regret the absence of the Secretary of State for Work and Pensions to answer on behalf of the benefits system. which is why we called the debate. The junior Work and Pensions Minister has intervened on me three times, but so far we have heard nothing from the Secretary of State for Trade and Industry. The Secretary of State for Trade and Industry did not turn up when we debated the issue from the point of view of the post office network, and now she is silent when we discuss the subject from the point of view of the claimant—instead, it is a Minister who has intervened.
  My response to the Minister's challenge is to examine the seven-stage process to open a Post Office card account, which clearly shows the bias:

  Wait for the letter from the Pension Service or the DWP saying your benefit will in future be paid direct.

  call the helpline number on the letter and say you want a post office card account

  the DWP then will send you a 'Personal Invitation Document' to open an account

  This document must be taken to your local Post Office. They will give you an application form".

  By stage four, one has obtained an application form.

  That application form must be filled in and handed back to the Post Office

  The Post Office will then post you two letters—one containing your PIN, the other called a Pick Up Notice

  The Pick Up Notice must be taken to the local Post Office to collect your card. The account is then activated."

  That is not skilled mass marketing. The system has not been designed to be customer friendly in order to maximise people's opportunities to obtain Post Office card accounts. The process contains a set of bureaucratic hurdles that are designed to put off the millions of people who want to receive their payments at the post office.
  Mr. Weir: The hon. Gentleman missed out a stage. After the form has been taken to the post office, one must obtain information from the post office to fill in on the original letter from the Pension Service, and return that letter to the Pension Service before the account is activated.
  Mr. Willetts: I am happy to be corrected by the hon. Gentleman, and I apologise to the House for having made the system sound simpler than it really is.
  Mr. Alan Reid: The hon. Gentleman is right that it is difficult to open those accounts. I draw his attention to the fact that if an elderly person writes outside the correct box when they fill in the form, the whole form is rejected. As he says, the system is biased against the Post Office card account.
  Mr. Willetts: The problems with the computer recognition system form a whole subject, and there have been many such cases. One gentleman wrote his sevens in the continental style—Conservative Members do not object to the continental method of writing seven—and the computer could not recognise them, so his benefit claim could not be processed, which is not a good way to operate.
  Richard Burden: The hon. Gentleman may know that I am a member of the Select Committee that made some observations about the complexity surrounding the Post Office card account. Given what he said about order books, does he want to improve the Post Office card account or does he want to abolish it?
  Mr. Willetts: I do not want to abolish the Post Office card account—we accept that we are too far down the
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  track for that. We want a user-friendly system that allows people to choose a Post Office card account, which is a way to maximise footfall through the post office. In a moment, I shall turn to the important subject of the exception service, which is needed to supplement the Post Office card account.
  Richard Burden: I want to clarify the Conservative policy. The hon. Gentleman says he wants to improve the Post Office card account system, but he has not said that he wants to return to an order book system.
  Mr. Willetts: The Post Office card account does need to be improved, but I am also talking about the form that the exceptions service should take.
  I intended to cite evidence from a range of charities about the problems involved in opening a Post Office card account, but so many of my hon. Friends have intervened with evidence of their own that I need not detain the House with it, save to quote Age Concern, which says in an appendix to the Select Committee report:
  "We are concerned at the considerable hurdles that seem to be being put in the way of opening a POCA. One cannot simply go to a Post Office and open an account."
  The Secretary of State must tackle that fundamental charge regarding the bias in the system.
  Does the Secretary of State recognise the problems that particular groups face? We have all heard sad stories about the problems that many disabled people have experienced when using the new post office devices. It is a sad irony that the House is finally considering the draft Disability Discrimination Bill at the same time as the Government are introducing a measure that is the most hostile to disabled people, and in respect of which their interests and views have been least well considered, in many years of public policy. The Secretary of State knows about the problems, because the Government have already had to admit that the PIN machine will have to be changed. Some people find it difficult to reach the keypad and others—for example, blind and visually impaired people—find it difficult to manipulate. Will the Secretary of State tell the House where the redesign of the keypad stands and when we will see the user-friendly keypads in our post offices for which many disabled users are crying out?
  The Secretary of State must deal with the problem of multiple users, which arises where, for example, claimants are housebound and receive support from carers and social services. In an ideal world, those people might have one carer or social services support worker who is with them all the time, but, sadly, it is not like that in the real world. Many of our housebound constituents face an ever-changing cast of support workers coming to their houses to assist them, which makes it very difficult for them to access the system that has been designed by Ministers and the Post Office. Citizens Advice says:
  "Direct payment will bring few advantages to claimants who need someone else to collect their benefit for them, or to help them operate an ATM or pinpad. This is a significant issue that needs a solution".
  It believes that in order to resolve such practical problems, the DWP should allow housebound people and those who cannot cope with a PIN to choose the

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  exceptions service as their normal method of payment and that it should be accessible for claimants who do not have a permanent collector.
  I do not blame the DTI for failing to understand this, but I do blame the DWP—after all, it is responsible for delivering benefits and should understand claimants' needs—for failing to put up the Secretary of State to respond to the debate and for failing to ensure that such problems were tackled as the system was being designed. I am afraid that that has done much damage to the Department's reputation for understanding the needs of disabled or housebound people.
  In response, the Government have proposed an exceptions service. I should be grateful if the Secretary of State could give us some reliable information about how that will work. So far, Ministers have failed to inspire confidence when offering us assurances about that. The Minister for Pensions sounded like Corporal Jones from "Dad's Army" when he told the Select Committee on Trade and Industry:
  "The advice to people at the moment is do not panic."
  I am afraid that that is not good enough as a piece of serious ministerial advice on how the new exceptions service will work. The only response to, "'Do not panic', says Minister" is, "Panic!". He advised people to hold on to their pension books and not to worry. He also said that the exceptions service is not being offered as a "fourth option"—in other words, that it is not an option for anyone dissatisfied with the other three options. Will the Secretary of State tell us more about who will be able to access it, on what terms they will access it, and for how long they will have to wait?
  The Select Committee's report is highly condemnatory on this point. It states:
  "It is clear from the evidence presented to us that the failure of the DWP to develop its ideas for the Exceptions Service in advance of the introduction of Direct Payments has led to uncertainty and confusion over the means by which some groups of disabled people will receive their benefits in future. At the very least, the Government should take steps to allay their concerns by making clear that claimants do have the choice of continuing to use order books until 2005 or until such time as the Exceptions Service has been developed."
  There is widespread concern about this issue, and I hope that the Secretary of State will deal with it.
  Standing back from this individual disaster, we see a wider picture of a catalogue of problems and failures going right back to the original decision in 1999 to abandon the Horizon project and go for this option instead. I think we all know what happened then. Ministers thought to themselves, "There is this hidden subsidy coming into the Post Office from the benefits system. We can save money by paying the benefits in a different way and we will remove the hidden subsidy for post offices." That is what they thought they were doing. Instead, they have ended up putting even more money into post offices than they would otherwise have had to, because they have taken away the footfall of benefits claimants, while finding that many benefits claimants are deeply distressed because they have been unable to continue with the reliable system for claiming their benefits. During those five years, the Government have not taken us forward—instead, they have managed to perform the extraordinary double trick of weakening our post offices and leaving many people who wish to claim benefits with a less adequate system than they had before.
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  This is a classic example of a failure of public policy; yet another example of this Government's failure to deliver; and, even more significantly, a failure to understand the needs of millions of people, especially elderly people, who wish to carry on being paid in the same reliable way.[Interruption.] The Under-Secretary of State for Work and Pensions is giggling. I have to tell him that it is no accident that this policy was decided in 1999. If we date it from the geological fault lines of this Labour Government, it is a classic "cool Britannia, modernising Britain" policy, which says, "Let's get rid of the old order books: we're going to have spanking new systems and gleaming new technology." It is a classic example of a policy cooked up by people who had no understanding of the views of disabled people or of pensioners. It comes from the time when the right hon. Member for Hartlepool (Mr. Mandelson) said that what he really thought about pensioners was that there was "no mileage" to be had from them, and when the chairman of the Labour party denounced them as "racist", then, as a final insult, as "predominantly Conservative". That is why they took no account of the interests of the many people using the post office, and that is why it is Conservative Members who are pressing for their interests today.
  1.48 pm
  The Secretary of State for Trade and Industry: I beg to move, To leave out from "House" to the end of the Question, and to add instead thereof:
  "supports the Government's strategy to modernise the way benefits and pensions are paid, and to provide customers with a choice of accounts; welcomes the fact that with Direct Payment customers will still be able to collect their cash from the Post Office if they wish using a current account or basic bank account with Post Office access or the Post Office Card Account; notes the Government's plans for a cheque payment, cashable at post offices, for people who cannot be paid through an account; recognises that Direct Payment is a more modern, efficient and secure method of payment which will also help increase financial inclusion; welcomes the fact that more customers are now paid through an account than by order book without problems, including nearly six million pensioners; notes the previous government's attempt to introduce a Benefit Payment Card, which wasted millions of pounds of tax-payers' money; notes the fact that the Post Office had not until recently kept up with changes in customer demand and so had seen transaction volumes dropping and losses increasing; recognises the need for change and congratulates the Government for taking decisive action to help turn the business around; welcomes the record £2 billion investment in the Post Office network over a five-year period, including £450 million for the rural network and £210 million to modernise the urban network; and believes that this will help ensure a viable Post Office network that people will want to use."
  I am delighted to join the hon. Member for Havant (Mr. Willetts) in a debate entitled "Post Office Services", and to respond to his opening speech. As Secretary of State, with the privilege of being shareholder on behalf of the public in the Royal Mail and in Post Office Ltd., I regard it as entirely appropriate that I should have this opportunity to respond to his increasingly absurd statements.
  Let me first deal with the issue of benefit payments and the shift to direct payment that is taking place. The hon. Gentleman talks about choice. He appears to have ignored everything that has been happening about customers making their own choices over the past decade and more. For many years, well ahead of the

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  decision by my right hon. Friend the Secretary of State for Work and Pensions to switch to making all payments by direct credit, more than half of benefit recipients were already having their benefits cash paid directly into their bank accounts.
  Let me underline that point by saying that nearly two thirds of recipients of child benefit and nearly six out of 10 new pensioners already get their benefits paid directly into their bank accounts. Those claimants and customers are exercising choice, yet we heard nothing about them from the hon. Member for Havant.
  Gregory Barker: The Secretary of State makes great play of the issue of choice, but where is the choice for my constituents who want to use a post office in their village, but find it closed?
  Ms Hewitt: I shall come to post office closures in a moment, but if the hon. Gentleman will forgive me, I want to start with the issue with which the hon. Member for Havant started—benefits payments and the introduction of the Post Office card account. Let us remember that the Government of whom he was a member introduced their own plan for a benefit payment card. It was supposed to use the latest technology of the time, and it was part of a public-private partnership. When we came into office in 1997, we discovered that their benefit payment card programme was a shambles. It was well overdue, the technology was not working—because the programme was so overdue, that technology was also out of date—and the costs were overrunning.
  We spent a year and a half trying to make that programme work. In the end, however, we decided that there was no point in rescuing that absurd out-of-date Conservative proposition for a benefit payment card. Instead, we invested the best part of £500 million in the Horizon platform—on which I shall elaborate in a moment—which forms the basis for universal banking, which is extending the benefits of banking and financial inclusion to millions of people.
  Mr. Steve Webb: If the right hon. Lady wants to extend universal banking to all people, why cannot the job-ready unemployed have their wages paid into one of those accounts?
  Ms Hewitt: Because the card account was never designed to do the entire job of a bank account. Basic bank accounts and regular cheque accounts are available for people to have their wages paid into; the Under-Secretary of State for Work and Pensions, my hon. Friend the Member for Gravesham (Mr. Pond) has already dealt with that point.
  Mr. David Drew: I am sure that I was not the only Member who went to see ICL to talk about the Horizon system, which came out of the ideas of the previous Conservative Government. When I did so, ICL made it clear to me that the system was full of capability but was being underused. It was also made clear that there was a need to invest in it because it was going to be the saviour of the Post Office. Will my right
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  hon. Friend point out to all concerned that that was the clear message? The Opposition do not seem to be able to remember that.
  Ms Hewitt: My hon. Friend is right, and I am grateful to him for making that important point. Thanks to the investment and the decisions that we have made, the Horizon platform and the automation of the post offices have now modernised post offices to enable them to offer new banking services to millions of customers who did not previously use the post office. That is extremely important.
  We are now phasing out the order book system. It is out of date, and it uses systems that, frankly, belong to the era of the ration book. It is inefficient, costly to administer, and open to fraud and abuse. That is why we were right to decide to phase it out and extend benefit claimants' choice, which includes maintaining and strengthening choice for claimants who wish to get their benefits in cash at a post office.
  Mr. Stephen McCabe: As my right hon. Friend said, the order book system is open to fraud and abuse. Will she confirm that 100 pensioners a week have their order books stolen?
  Ms Hewitt: My hon. Friend is right—and that is a disaster for the individual pensioners who are robbed, with all the distress that that entails. It is also enormously costly to the taxpayer, who has to foot the bill for this kind of fraud. I would have expected the hon. Member for Havant, who is so against waste and inefficiency in the public sector, to support rather than oppose our efforts to get rid of a system that makes elderly people and taxpayers vulnerable.
  Our commitment to financial inclusion, universal banking and the introduction of the Post Office card account has been welcomed by Citizens Advice, Mind and Help the Aged. Indeed, Citizens Advice's excellent recent study on financial inclusion stated:
  "The government, the banking industry and the Post Office should be commended for the progress they have made in establishing Universal Banking Services. The ambition to enable all people to own the most basic of financial services—a bank account—is one we share."
  I commend Citizens Advice on the way in which it has helped us to put universal banking in place.
  Mr. Blunt: I am pretty certain that, having seen the post offices at St. John's, Lesbourne road and now Holmesdale road close, and with a threat hanging over the main post office in Reigate, Citizens Advice and Help the Aged would be less than impressed by the accessibility of post office services to the elderly in my constituency. Those closures are happening at exactly the same time as the Government are going through the automation process. The conjunction of those two things, plus the £50,000 incentive to sub-postmasters to take their businesses out of service which places them in an impossible position—is causing a collapse in the availability of services in Reigate and elsewhere. It was the concern about all those issues that generated the petition that was presented to me by hundreds of my constituents this morning.
  Ms Hewitt: I am not surprised that the hon. Gentleman and his party want to go back to the days of

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  the Conservative Government. when post offices were closing in their hundreds and thousands in an entirely unplanned and unmanaged way, partly because, with fewer customers cashing benefit cheques at post offices, it was simply not possible for sub-postmasters to make a decent living. I am not sure whether the hon. Gentleman is suggesting that people should be forced to carry on in businesses that are no longer viable.
  I shall return to the issue of urban reinvention in a moment, but I want to deal first with the series of allegations made by the hon. Member for Havant about the alleged difficulties involved in opening a Post Office card account. He made great play of the difficulty of the process, the seventh and eighth steps and all that nonsense. Let us be clear: there are three steps that individual claimants need to take. First, they ring the customer conversion centre. I looked extremely carefully at the script to be used there before I approved its use, to ensure that it was neutral in its presentation of the options. Secondly, they discuss the options. Thirdly, if they want to open a Post Office card account, they wait for their personal invitation document to arrive and they take it to the post office branch, where they get and complete their application form. They then send those account details back to the Department for Work and Pensions.
  Andrew Selous: It is my recollection—and that of the Chairman of the Select Committee—that, when the Committee visited the new pension call centre, we found that the script was not neutral on that matter, and that the Post Office card account was very much the last option. Would the right hon. Lady agree to place that script in the Library of the House?
  Ms Hewitt: I do not agree with the criticisms of the script that have been made by members of the Select Committee, but I should be happy to place it in the Library. I shall do so in the knowledge that Postwatch, which conducted some small-scale research with actual customers, has reported that almost all the pensioners to whom it spoke felt that the advice given by the customer conversion centre
  "was given in a clear and unbiased manner".
  Most of them described the DWP customer information material as being of "good quality", and most of the people ringing the centre had their questions answered satisfactorily. Most of those who had rung the centre to open a card account felt that the information that they had been given was "clear and unbiased", and most did not feel that staff were seeking to persuade them to choose one option over any of the others.
  Mr. Paterson: I am amazed. Has the Secretary of State talked directly to any postmasters? As I said in an earlier intervention, I have visited 28, and every one said how difficult it is for people to apply for cards. I can tell my hon. Friend the Member for Havant (Mr. Willetts) that the National Federation of Sub-Postmasters would say that he underestimates his case. It says that there are 22 steps in the process of getting a card. When I visited the Minister for Energy, E-Commerce and Postal Services, taking a delegation of postmasters along, it was explained clearly to him that those who manage to get through that thicket of measures do so only with the
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  specific help of the postmaster himself. I urge the Secretary of State to come to North Shropshire to visit some postmasters.
  Ms Hewitt: The position of Conservative Members becomes more and more absurd as they keep inflating the number of steps that supposedly need to be taken. Let me stress to the hon. Gentleman that about 2 million Post Office card accounts have already been opened. That scarcely bears out the absurd allegations being made about how we are biasing the system, driving people away from the Post Office card account and making it impossible for anyone to open one. That is complete nonsense.
  Mr. Willetts: The Secretary of State calls those claims absurd, but all Opposition Members know how true they are. Is she saying that the National Association of Citizens Advice Bureaux is absurd when it reports that
  "clients who want to open a Post Office card account feel that there are obstacles placed in their way … We consider that this process acts as a barrier to opening a card account, particularly for vulnerable people"?
  That is what NACAB is saying, and that is what we all know to be the case. Why does the Secretary of State continue to deny what everybody knows to be true?
  Ms Hewitt: I am going by what customers have told Postwatch and, more importantly, by the fact that about 2 million people have opened a Post Office card account. The eventual number of card accounts is expected to exceed the original operating assumption of 3 million; none of that is evidence that people are finding it hard to open an account.
  The hon. Member for Havant also raised a number of important issues involving people with disabilities. The first to be raised, quite properly, was the problems that people who are blind or have difficulty in seeing have in using personal identification number pads. That issue has been recognised by the Post Office, which has already improved the PIN pad by putting a key guard over it to make it easier to use, and adding a dot to the No. 5 key. The Post Office is working with the Royal National Institute of the Blind to make further changes to the PIN pad to make it easier for that group of customers to use the system.
  Mr. McLoughlin: Why was it necessary to make those changes? Why were those things not thought of in the first place?
  Ms Hewitt: I agree that it would have been better if the original PIN pad had been designed with full regard to the needs of people with different disabilities. The technology is still developing, and was not available at the right price and at the right time when the service was introduced. It is being introduced now, and I pay tribute to the RNIB, which not only raised the issue, but has helped the Post Office to resolve those problems in a practical way, as we readily acknowledge.
  The hon. Member for Havant also asked about people who are housebound. I think that he accepts that there is no problem for those with a regular carer who use a Post Office card account, because they will have their own PIN number. However, housebound people may have different people caring for them in different

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  weeks. Of course that is a problem: under the existing system, the claimants can simply sign an order book counterfoil, which provides great flexibility, but I am afraid that that practice is wide open to fraud and abuse. We are saying that where claimants need people to collect their money for them, they will, for the time being, simply continue to use their order book while we work with the various organisations to design the exceptions service.
  The exceptions service will be based on a cheque system, which will be much more secure than the order book system. It will be introduced and available from October this year, in plenty of time for the ending of the order book system in May next year. I am delighted to say that, exactly as we would expect, my right hon. and hon. Friends at the Department for Work and Pensions and their officials have been working extremely closely with Citizens Advice, Help the Aged and many other groups representing vulnerable customers to ensure that there is full understanding of the needs of different vulnerable groups that cannot have their benefits paid directly into an account. That new system of payment by cheque will all be in place to ensure that there is no trouble in getting benefits for those vulnerable claimants.
  Mr. Drew: Does my right hon. Friend agree that it would be useful to give Members a full briefing, given that people are likely to question us on how the system will work? Before the system goes live, will she arrange for us to see how it will operate?
  Ms Hewitt: That is an excellent suggestion, and my right hon. Friend the Secretary of State for Work and Pensions and I will ensure that such a briefing is provided.
  The successful introduction of the Post Office card account is only part of a much bigger—[Laughter.] They are very slow over there this afternoon.[Interruption.] The card is extremely successful—about 2 million people have already opened a Post Office card account, because they have decided that that is what they want. However, that account, which many Opposition Members said would never see the light of day—let me remind them of that—is part of a much bigger programme of universal banking. Thanks to the £500 million investment in the Horizon platform, the Post Office can become the high street bank for millions of other bank customers.
  The Post Office is providing banking services on behalf of the Alliance & Leicester, Barclays, the Cooperative bank, First Direct in Scotland, Lloyds TSB and two internet banks—Smile and Cahoot. Customers of all those banks, with their ordinary bank accounts such as cheque accounts so on, can get cash at post offices free of charge.
  Mr. Alan Reid: The Secretary of State knows that she has not mentioned any of the three main Scottish banks, which means that pensioners and benefit recipients in Scotland do not have the same choice as those in other
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  parts of the country. What progress is she making in negotiations with the three main Scottish banks to reach agreement with them?
  Ms Hewitt: I am happy to say that the Scottish clearing banks and other major financial institutions, as well as those I mentioned, already provide access at post offices. Those services—for instance, access to a basic bank account—were launched on schedule on 1 April last year. Access to the other current accounts—the cheque accounts—is a matter for commercial negotiations between the Post Office and the various banks.
  My point is that because of our investment in it, the Post Office can offer that service to all the commercial banks, and therefore to all their customers. It is involved in those negotiations at the moment. I have repeatedly urged all banks to provide all their customers with access to their various accounts through the post offices, but obviously that is a commercial decision for the individual banks.
  The result of that programme of investment and universal banking is that there are 20 million current account customers—not Post Office card account customers, but current account customers—who can use the new electronic systems and undertake banking transactions at Post Office branches. The result of that is that since April last year there have been nearly 25 million banking transactions at post offices. That is a huge success story, which the hon. Member for Havant completely ignored. That is why Citizens Advice welcomed this expansion of banking at post offices. It is a significant step forward in financial inclusion. Above all, from the point of view of this debate, it brings more people into post offices and gives sub-postmasters a new source of revenue.
  Mr. Paterson: How much income has the Post Office lost through the changes in the card payment system and how much income will be replaced by the new banking arrangements on which the Secretary of State and her colleagues—as was repeated to me when I saw the Minister for Energy, E-Commerce and Postal Services—are hanging so much?
  Ms Hewitt: Sub-postmasters have seen a reduction in their income from benefit payments over the last 10 years and more, for the reasons that I set out earlier, as customers have moved away from that. The choice to which the hon. Gentleman is not willing to face up was to enable the process of customer choice and seize the opportunity to have a much more efficient and fraud-proof system of paying benefits, and to make post offices attractive to customers through expanding their range of products, such as financial services and so on. Alongside the decline in income from benefit claimants, we are seeing an increase, which will continue, in income from other sources, such as home insurance, travel insurance, travel exchange products and so on. All of those are hugely popular with sub-postmasters, and all provide the prospect of continuing increases in new sources of income.
  Mr. Weir: The Secretary of State's vision of an integrated post office and banking system is impressive, but does she accept that there is a problem in many rural

  913
  areas, because over the last two decades many banks have pulled out of rural areas and closed small branches? I cite the case of Friockheim in my constituency, where the last bank closed a few years ago. The post office has now closed, so there is neither a bank nor a post office to enable people to use any of those services.
  Ms Hewitt: The hon. Gentleman makes an important point. It is perfectly true that many of our rural communities no longer have a retail outlet, bank or post office, because none was commercially viable. I shall refer in a moment to the investment that the Department has been making to prevent all avoidable closures of rural post offices and our work with the Department for Environment, Food and Rural Affairs to try to expand in new ways the availability of services for people in rural communities.
  Mr. Paterson: Will the Secretary of State give way?
  Ms Hewitt: No, I want to make progress.
  I want to underline the point that there is still a view, which I regret that some sub-postmasters share, that the only way to keep post offices viable is somehow to force customers to use them by maintaining an out-of-date order book system that gives those customers no choice at all about where they get their cash. That is not the way forward for our sub-post offices. I am glad that, in its evidence to the Select Committee, Age Concern said:

  "Although we are aware that a number of organisations"—

  it may have been referring to the Conservative party—

  "and individual sub post masters are promoting the POCA on the basis that this is the way to save the post office network, Age Concern does not subscribe to this view."

  Nor do we.
  That brings me to the second set of issues raised by the hon. Member for Havant and other Opposition Members, about the number of local post offices and the restructuring. We want a viable national network.
  Mr. McLoughlin: Will the Secretary of State take this opportunity to apologise to the constituents of those Members who raised cases with the Minister for Energy, E-Commerce and Postal Services the last time that we debated this subject, when we said that the consultation process was a sham? He assured us that it was not. The "Westminster newsletter", which was sent out by the Post Office after he made his announcement on 5 February, referred to new developments, one of which, it said, guaranteed that the Post Office will

  "not make a decision until after the public consultation period"

  The Minister of State's statement included the following provision:

  "No contract binding on Post Office Limited is signed before the public consultation process has ended."—[Official Report, 5 February 2004; Vol. 417, c. SOWS.]

  That meant no binding closure on that particular post office. That proves the point that many of us made before 5 February the whole consultation period was an absolute sham.
  Ms Hewitt: I am not sure whether the hon. Gentleman is complaining that my hon. Friend the Minister responded to the concerns raised in that debate and took full account of all the individual complaints that have been brought to him. As a result of individual complaints, where the process has apparently not been followed as it should have been, he discussed matters with David Mills, the excellent chief executive of Post Office Ltd., and put in place stronger measures to ensure that in every case, and in every part of our country, the consultation process is properly followed and the area plan is finalised only after that consultation has been finished.
  Mr. Stephen O'Brien: To be absolutely clear, is the Secretary of State saying that she is grateful to Her Majesty's official Opposition for the debate on 13 January, which highlighted issues on which we were supported by Members across the House, not one of whom was in favour of the Government? Do not the Opposition therefore deserve thanks for having prompted the Government to take the right decisions, which then came forth in the Minister of State's statement?
  Ms Hewitt: I am congratulating my hon. Friend, who is an excellent Minister, on taking account, as he always does, of constituency issues raised by Members on both sides of the House. I should have thought that the hon. Gentleman would have been less churlish on that point.
  Mrs. Patsy Calton: I thank the Secretary of State for her answer. There is one group with a particular problem—those for whom the network reinvention programme and the so-called consultation and decision-making processes were already under way. It is no comfort to my constituents or those of other hon. Members to find that their consultations were so flawed that matters would be put right in future but that closures would go ahead as was clearly planned from the outset in their constituencies. Why has the Minister failed to put a halt to those processes?
  Ms Hewitt: I am sure that that is a point on which my hon. Friend the Minister of State has had discussions or communication with the hon. Lady. If not, I shall ensure that he does so.
  Let me stress the need for a planned reorganisation of the post office network. In the previous financial year, Post Office Ltd., not the whole of the Royal Mail, made losses of £194 million before exceptional items. In the year before that, it made losses of £163 million, and the half-year results that have just been reported show significant losses again of £91 million. What has been happening over many years is a process of completely unplanned post office closures. Indeed, the Conservative party presided over 3,500 post office closures during its period in office.
  As a result of such unplanned closures, as sub-postmasters gave up the unequal struggle of trying to make a living out of too few customers, we ended up with a pattern of provision that had no basis in rational response to what customers needed. Let me give the House the example of my city, in which one post office branch, in the constituency of my hon. Friend the Member for Leicester, South (Mr. Marshall), has 12

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  other post offices within a one mile radius. Indeed, it has 15 others within a radius of 1.1 miles. That is an impossible situation, in which none of the sub-postmasters can make a decent living, none can afford to invest in their shop or post office to make it more attractive to customers, and all are chasing and competing for a hitherto dwindling band of customers. Before the Post Office began its urban reinvention programme, more than 1,000 urban post offices had at least 10 others within one mile. Either we allow that to continue and let the decline go on—which is what the Conservatives were doing, and presumably would still do today—or we face up to difficult decisions and invest to ensure a planned restructuring of the network.
  The problem is not unique to the United Kingdom. Customers in developed countries all over the world have been changing their patterns of banking, using the internet more and so on. In Germany, the number of post office branches has been reduced from 30,000 to 13,000 as a consequence of changes in customer behaviour.
  Richard Burden: I agree that it is vital for us to plan the changes that are necessary, but does not the way in which Post Office Ltd. is going about a number of the reorganisations fall short of expectations? In south Birmingham, for instance, the closure of 29 out of 90 sub-post offices is being suggested. Is not one of the problems the excessively inflexible view adopted by Post Office Ltd. of the assistance available to Government, which often leads it to maximise its chances of closing post offices and minimise the opportunities to create sustainable businesses? Will my right hon. Friend assure me that in future Post Office Ltd. will be encouraged to look at the opportunities for post office business, and not just the threats?
  Ms Hewitt: My hon. Friend makes an important point. I know that he and other south Birmingham Members have been enormously active in engaging in the current consultation on the area plan with Post Office Ltd. and Postwatch, and representing the views of his and others' constituents on what the restructuring should involve. If necessary, I will convey what he has said to David Mills, the chief executive of Post Office Ltd., whose entire vision for the Post Office is based on maximising opportunities for new products and much better, brighter urban post offices, thanks to the programme of restructuring and investment. We have invested a substantial financial commitment to providing compensation for sub-postmasters who are leaving their businesses, as well as investment for those who are staying, to ensure that the remaining post offices are better and more attractive to customers. That is essential.
  Mr. Nigel Evans: The Secretary of State makes all the changes sound rather exciting. If she were to lose her seat at the next general election, would she consider opening or taking over a post office and running it? I wonder whether she really understands the pressure that some of our postmasters and postmistresses are under. Would she consider being a postmistress?
  Ms Hewitt: I certainly would, given the example of the wonderful Mrs. Patel, who runs an urban post office in a disadvantaged community in my constituency. Like most successful sub-postmasters, she combines it with a retail outlet. She welcomed "Your Guide", but welcomes much more the opportunity to have an automated teller machine in her shop. She has one of several thousand ATMs that have now been installed, thanks to our investment in sub-post offices. That is helping to bring new customers and more business into her post office. Along with many other sub-postmasters and sub-postmistresses, she provides a great example of entrepreneurial commitment—which is what Labour wants to encourage, even if the hon. Gentleman does not.
  Mr. Willetts: I was going to encourage the Secretary of State to consider a job swap. She is clearly keen to be a postmistress, and we would greatly appreciate a Secretary of State who knew something about the business. Would the Secretary of State consider a swap. even just for a week?
  Ms Hewitt: I am grateful for the suggestion.
  Let me end by saying something about our investment in Royal Mail—a total commitment of some £2 billion over several years. It includes £480 million to rescue the Horizon project and ensure that we have a platform for universal banking, £450 million for the rural network to stop avoidable closures, £210 million to support the urban network reinvention, £15 million to keep open post offices in disadvantaged urban areas that would not otherwise be viable, and £750 million to repay historic debt to Royal Mail so that the renewal and restructuring plan can proceed. It is an extremely successful plan that is significantly reducing Royal Mail Group's losses and returning it to the path to profitability.
  That is the commitment—£2 billion over five years that the Government have made to Royal Mail and, in particular, to the post office network. What do we have from the Conservatives? We have a commitment to grow public spending

  "about 1 per cent. more slowly than the Treasury view of the trend rate of nominal GDP growth."

  I am, of course, quoting from the medium-term expenditure strategy document recently published by the shadow Chancellor. What the Conservatives offer us is a freezing of the overall total of public spending for the first two years—in other words, a cut of £18 billion in public spending.
  I understand that, on top of that, the Conservatives are now considering abolishing the Department of Trade and Industry—abolishing the Department that is making the investments that are beginning to turn Royal Mail around, have saved rural post offices from unnecessary closure, and are supporting an absolutely necessary restructuring of urban post offices.
  I hope that when the hon. Member for Eddisbury (Mr. O'Brien) winds up the debate, he will tell us how much of the £2 billion that we have committed to Royal Mail and Post Office Ltd. he intends to cut. If, as appeared to be the case from the speech of the hon. Member for Havant, the Conservatives are saying that they want more money to go into the post office network, perhaps he will tell us how many child care

  917
  centres he will close to pay for that, how many cuts will be made in the transport budget or how many police officers are to be sacked. Where precisely will the cuts fall? If they are to fall on Royal Mail and the post office network, everything we have heard from the Conservatives this afternoon amounts to crocodile tears, hot air, words with no commitment of resources behind them.
  If the Conservatives intend to sustain the investment that we have been making in Royal Mail and post offices, in all honesty, the hon. Gentleman will have to confess to the House that, under his own shadow Chancellor's public spending plans, the cuts will fall somewhere else—on services that, in a different debate, he and his right hon. Friend will be busy defending and crying crocodile tears over.
  Mr. Stephen O'Brien: Will the Secretary of State give way?
  Ms Hewitt: No, I will not. I have reached the end of my speech. I just want to make the point that Labour has faced up to tough decisions as his party was never willing to when it was in government. We have backed those tough decisions with the necessary resources, against the Conservatives' commitment to public spending cuts and decline in our public services.
  2.29 pm
  Mr. Steve Webb: I am glad that the Opposition proposed this subject, because it matters to Members from urban constituencies who have seen a programme of closures, and to those who represent rural and market town constituencies and, over many years, have seen one closure after another taking post offices out of villages and small towns up and down the land.
  This subject is perhaps the most acute example of how those who govern are completely out of touch with those whom they govern. It is the one matter on which, when hon. Members from all parties give case after case of constituents who have received biased information or who have been pressurised or messed around, Ministers just smile benignly and tell us that there is no bias or pressure, but that there is free choice. We wonder sometimes what planet they are living on. Hon. Members from all parties have made those points, but the Government have decided to close their ears.
  What the Liberal Democrat amendment calls for, which in many ways is similar to what the Conservative motion calls for, is respect for people's choices. The statistic that the Secretary of State cited in defence of the Government's position—that six out of 10 new pensioners opt for payment into a bank account—was striking. That is an extraordinarily low figure. One would imagine that of people just arriving at state pension age, eight, nine or nine and a half out of 10 would opt for payment into bank accounts. The fact that four out of 10 new pensioners think that an order book suits them best should tell the Government something: that people like that way of receiving their money.
  If that is the case for four out of 10 people who have just retired, it is even more so for people who have been retired for 20 or 30 years, and who have been receiving
  918
  their pensions in that form very happily. That works for them, so why can their choices not be respected? Every pensioner at any point could have opted for payment into a bank account. The Government have not invented that as a new choice. Pensioners have always had the option of payment into a bank account, so the fact that they have gone on getting money through an order book suggests that that is their positive choice. Why are the Government now telling millions of those people that they do not respect their choice and that they do not think that they have the right to choose the method of payment that suits them best?
  Andrew Selous: The hon. Gentleman may be interested in a briefing from the House of Commons Library last year, which said that two thirds of benefits paid in Britain were paid over a post office counter, which meant that 18 million benefit recipients were using post offices to access their benefits. I am sure that he will agree with that.
  Mr. Webb: The hon. Gentleman is right. The use of order books at post offices is very extensive, and reflects people's positive choice. The Government should respect that.
  This is a classic case of a lack of joined-up government. One can imagine the day on which the Department for Work and Pensions felt the Chancellor leaning on it to save some money and, after sitting down to think about how to do that, came up with the idea of getting money paid into accounts rather than through giros because it was less expensive. I accept that that is less expensive, but let us guess what happened then. The DWP saved £400 million a year and the Department of Trade and Industry had to find hundreds of millions of pounds to deal with the subsequent mess in the post offices. I sometimes think that if Departments talked to each other, we would be saved many difficulties.
  We have many questions to ask about how the system is going to proceed, because millions of pensioners have yet to make a decision and respond to the letters that they have been sent. The Secretary of State has cited customer satisfaction surveys, but I strongly suspect that the pensioners who are most worried about the system do not phone. They receive a letter and are anxious about it because they like the way things work and do not want anything to change, so it is put behind a mantelpiece and not responded to. The people who reply to the customer satisfaction surveys are a biased sample. They are the people who are willing to play the game and respond to the Government, so it is not surprising that they are less likely to be dissatisfied with what they get. We all know, however, of people who are being leaned on. The Government should come clean about that.
  We are told that the infamous Post Office card account has been a great triumph and very successful, but I bring to the House's attention a couple of the cases now building up in my constituency in-tray. I am sure that many other hon. Members have similar examples. One constituent, whom I shall call Mrs. P, has had a card account for five weeks but cannot get her money. One does not ask much of an account, but it would not be a bad idea if it paid out money. The postmaster said that the card had not arrived, so she applied for another. He then said that that had not come, but when the lady

  919
  insisted on checking through, he found both of them. However, the first PIN number was out of date and the second did not work, so she rang the helpline. It told the postmaster to use a blank card from the vault with Mrs. P's PIN number, but that did not work either. She then rang the Pension Service, which said that it would send her something, but that has never arrived.
  That is just one example of the way in which people who have played the game and gone along with the Government have found that the system is not working. All those people wish that they had just kept their giros, because they were never told that their giro did not work, or that a PIN number was needed. They just had their giro and got their money.
  Mrs. P is not alone. Another lady who has had real problems with the Post Office card account said to me:

  "I went to the local Post Office today only to find a notice notifying PO account cardholders that they would be unable to make a withdrawal since the computer had failed."

  She wondered how people were going to get their weekly money, and commented:

  "If they could not get their money, I fear that some would go without essentials."

  If someone has a giro in their hand, they get their money even if a computer is down, but what happens if they have a plastic card and the computer is not working?
  I had a helpful reply on that from the Under-Secretary of State for Work and Pensions, the hon. Member for Gravesham (Mr. Pond), which said that although the matter was not really anything to do with his Department, it had contacted the Post Office,

  "which has confirmed that the branch in question did not follow the correct emergency payment process…because the regular subpostmaster was off duty and the branch was being covered by a relief, who did not fully understand the process."

  However, the post office staff involved had now been contacted and had the correct process explained to them. So what is supposed to happen if computers go down and people cannot get their money? The Minister's reply continued:

  "If the customer needs to access their funds immediately"—

  I presume that people quite like to have their pension—

  "the Post Office may authorise an instant payment of up to £20."

  I know that the pension is not generous under Labour, but allowing people only £20 is pushing it a bit. For how long might the computer be down? Or do those people have to go back the next day for another £20? The letter continued:

  "If the customer requires more money, it is possible to get an emergency payment"

  not from the Post Office, but

  "from the Department. Customers would need to contact the office that normally pays their benefits for this to be arranged."

  I can just imagine the process.
  None of those complications is necessary. This is not a matter of free choice for people. People ring me up to say that they want to keep their giro, but that they have filled the form in anyway because they are afraid that their giro will just be taken away from them and they will not get their pension. People are responding out of
  920
  fear, not because they have a free and positive choice. The Secretary of State has given a misleading impression of a free, open choice.
  Just to give an example of how the system is not working, the Government have said that people can get all their benefits paid into their Post Office card account, but that is not true. People cannot get their housing benefit paid into their Post Office card account. I have a Department for Work and Pensions document here: the riveting publication "Housing Benefit Direct—March 2004". It says:

  "Currently, it is not possible to pay Housing Benefit into a Post Office card account, due to technical and contractual constraints."

  So all the pensioners who have had letters asking them to move over to a Post Office card account, and who have played along with the Government, have then found that they cannot get their housing benefit paid into it. Presumably, they receive a giro for that, and go along to the post office with a giro in one hand to get that payment and a plastic card in the other, with their PIN number, to get another one. We can just see the mess, the bureaucracy and the complications.
  Mr. Pond: I am a little puzzled. I might have missed something, because I have been in this job only since June, but did pensioners previously get their housing benefit paid into their pension book?
  Mr. Webb: No, they did not. What a crushing intervention. However, I presume that the whole point of this new integrated system is to give people a single point of access. It is about bringing benefit recipients into the mainstream; it is financial literacy, a one-stop shop. Instead, we find that people will receive one of the principal benefits, which they use to pay their rent and council tax, in the form of giros, when they have to have a plastic card for other payments. Presumably, the Government want this system to be put in place or they would not be having contractual negotiations. If they think that the scheme is an irrelevant waste of time, why are they having contractual negotiations on it? They cannot have it both ways.
  When the hon. Member for Havant (Mr. Willetts) quoted from an internal memorandum, which he was quite right to do, the Secretary of State responded by saying that the Government were pushing people away from Post Office card accounts to ensure that they were job-ready, which meant that they needed a proper bank account. However, there is no suggestion in the memorandum that that is remotely what has been going on. The memorandum says:

  "In order to meet Business Case requirements"

  not to help to serve clients—

  "we need to move quickly toward getting 9 out of 10 customers who make a new claim onto Direct Payment. Any further delay will"—

  Will what? Undermine claimants? No. It will

  "cause overwhelming backlog in 2004/5, impacting on field performance."

  That is nothing to do with serving the public. It is to do with saving money, and the Government should come clean about it.
  My hon. Friend the Member for Argyll and Bute (Mr. Reid) has already said that the situation in Scotland is very different, and that none of the major banks there

  921
  will allow customers to access mainstream bank accounts at post offices. The Secretary of State's rather glib reply was that basic bank accounts in Scotland could be accessed through a post office. That is great. People have to open a different bank account—one with rather limited features—if they want to get their money from a post office. That is totally unsatisfactory.
  When I asked why it is that people will be unable to pay wages into these accounts, I was told that they are not really regarded as proper accounts. But if the point is to support the post office network, these accounts should surely be made as good as, not as limited as, possible. So I hope that the Minister will recognise in his response that people want these accounts to be proper accounts that are accessible at post offices.
  We have heard about the position of people with disabilities, whom the Government seem to have treated as an afterthought. They have rushed out this proposal, and the idea that a PIN pad with nine keys constitutes new technology is astonishing. These issues must have been dealt with before; why were the Government so slow to take them on board?
  We have heard a little about the important issue of the exceptions service, and I hope that the Minister is listening at this point. The service will be available from October 2004, we are told, and so far as we can tell it will provide people with a cheque. From April 2005, when the use of order books ceases, anybody who has not replied will presumably be on the exceptions service, so they will be sent a cheque in the post. Into where can they pay that cheque? Presumably, they will be able to pay it into a post office; otherwise, the system would be absurd. So instead of being sent a giro that specifies their name and the amount, which they take to a post office, they will get a cheque that specifies their name and the amount, which they will take to a post office.
  What is the point in generating an entirely new system when a perfectly good one already exists that people know and trust? I genuinely cannot fathom this one. Spot the difference between a cheque received in the post that specifies one's name and the amount, and an order book that contains the same information. Why is one system better than the other? I really cannot understand the difference. The millions of people who probably have not responded will want to know what their position will be after April 2005.
  The consequence of the Government pushing people into using such accounts and away from post offices is that the latter have suffered. Indeed, 1,000 post offices have closed in the past three years. This is a long-term phenomenon that has existed under Governments of both of the two largest parties. However, even though the rural post office network has supposedly been bolstered, 74 rural post offices have closed in the year to September 2003—a figure that is net of the number that have opened. Indeed, the problem is getting worse. So as has been said, the promise that people's money can be paid into a post office is not worth the paper it is written on if the post offices are not there.
  We have heard about the so-called consultation process. It has been acknowledged that it is a shambles, and I shall cite one example from my own constituency. One of the two post offices in the town of Thornbury came up for closure. All the local residents objected and
  922
  everyone pointed out that the idea would not work, but the Post Office ignored them and shut it. The one remaining post office has people queuing outside the door, and the health and safety people are worried because they cannot fit in the staff needed to deal with all the customers. That does not sound to me like a town that cannot support two post offices, but did the Post Office listen? Of course it did not. I am not convinced that the new, so-called consultation process will be any different from the old one. Frankly, we know what the Government and the Post Office want to achieve, and if an individual post office gets in the way consultation will not make a blind bit of difference. If they are determined to shut it, they will shut it anyway. There has to be an alternative vision, which must be a positive one.
  Andrew Selous: Does the hon. Gentleman share Postwatch's concern that some senior Post Office managers are on commission in terms of the number of post offices that are closed in their areas? Is he aware of that development?
  Mr. Webb: If that is so it is truly shocking, because it rather suggests that a careful, case-by-case assessment of the merits of individual post offices is not the issue. No one is suggesting that the entire system should be set in stone, but the idea that managers should be rewarded for closing as many post offices as possible as fast as possible is totally unacceptable. It makes a mockery of the suggestion that serious attention is being paid to consulting the public.
  There can be, and has to be, a positive future for the post office network, but the key point is that it needs time to adjust. The Government are denying it that time by forcing the pace of transferral to payment into bank accounts. We recognise that people's views change and that, over time, there will be a gradual increase in the number who use bank accounts, with fewer using giros. If that gradual process were allowed to continue, post offices would have time to adjust to taking on the new services about which the Secretary of State has talked. Post offices could give people access to banking services in any case; there is no need to introduce direct payment, or to take away pensioners' right to payment by giro. The two elements are quite separate. We need to boost the post office network, to respect people's choices and to have genuine consultation. So far, the Government have failed to deliver on any of those fronts.
  2.45 pm
  Richard Burden: At the end of February, Post Office Ltd. announced the proposed closure of 29 of the 90 sub-post offices in the south Birmingham area. Five of the 14 post offices in Birmingham, Northfield were among those slated for closure—in other words, 35 per cent. of all the local post offices in my constituency.
  I do not dispute the fact that we need to recognise that Post Office Ltd. is going through a period of change. Its trade and the pressures to which it is subjected are massively different from those that existed 20 years ago. Not all post offices are sustainable, and as Conservative Members know, 3,500 unplanned closures occurred under the previous Government. So the current Government are right to require Post Office Ltd. to plan for the future. It needs to assess what is sustainable and

  923
  to maintain those post offices that are sustainable, but it also needs to consider the available opportunities rather than simply focusing on the threats facing individual post offices.
  Such an assessment is what the urban reinvention programme was supposed to be about, and we members of the Select Committee were certainly assured that the area plans were supposed not only to look at post offices in isolation, but to consider the needs of entire communities and how the post office service should fit into them. I have difficulty in relating that vision to the slating for closure of 29 of the 90 sub-post offices in south Birmingham.
  A number of problems have led to the way in which Post Office Ltd. is currently behaving. It uses a modelling system called Netspec to produce its area plans. Netspec has some strengths, but it is important to put it on the record that Postwatch has said that Netspec has been
  "a useful tool for assessing where customers will migrate once their 'old' post office has closed",
  but says that
  "it cannot be used as the only tool, as there are occasions when other factors—local geographic or social—may not have received due attention, and customers therefore migrate elsewhere or in different proportions than expected."
  I credit Postwatch for the way in which it has represented local views and acted as a watchdog over Post Office Ltd. In doing so, it has cast considerable doubt over the way in which Post Office Ltd. has used its modelling system.
  Post Office Ltd. has got the demographic characteristics of my constituency wrong, and has not checked its facts properly. It said that there was virtually no rented housing in one particular area, but it had looked behind the post office in question because of the ward in which was located, rather than across the road to the houses in front of it—presumably because they are in a different local government ward. That side of the road is stacked to the rafters with high-rise blocks of flats, and it is also a large council estate.
  Under the terms that Post Office Ltd. has agreed with the Government, it is also required to look properly at deprivation. In planning its changes, it is supposed to consider the 10 per cent. most deprived wards in the country, and the 20 per cent. of wards that contain pockets of severe deprivation. I do not believe that it has looked at the issue of deprivation in my area with sufficient rigour, and I have no reason to think that the situation is different anywhere else. It certainly has not considered the issue of pockets of deprivation. Members on both sides of the House will understand that the word "pocket" is something of a misnomer. The pockets of deprivation in each ward in south Birmingham probably consist of thousands of people, because the wards are very big. There is no sign that Post Office Ltd. is looking at the issue of deprivation sufficiently clearly.
  As a result of all this, Post Office Ltd. is not meeting the targets that it is required to meet, at least in the case of south Birmingham. It has promised that more than 95 per cent. of customers should be within a mile of a post office, and that most customers should be within half a mile of one following a closure. The calculation is made
  924
  not on the basis of where the customers are—I recognise that that can, for all sorts of technical reasons, be quite difficult—but on the basis of the distance between the closing post office and the so-called receiving branch. According to the figures, there is no receiving branch within half a mile of the closing branch in my constituency—not one, but most should be within that distance. About 60 per cent. of the receiving branches are a mile or more away from the closing branches. The required targets have simply not been met.
  Mrs. Calton: I should like to draw attention to the report of the performance and innovation unit of 2000. It states:
  "The PIU believes it would be better for the Government to dispense with the idea of numerical access criteria … Distance based access criteria take no account of the ability to reach a post office … The post office should adopt policies which are more closely targeted at achieving its aims in relation to the post office network."
  Richard Burden: The hon. Lady has a point. I presume that she, like me, welcomes the fact that the Government commissioned the PIU to examine the future of the Post Office. The report, which I believe the Liberal Democrats supported, made several important points. I believe that distance-based criteria are overly inflexible. My point is that, even according to those criteria, Post Office Ltd. has not met the targets that it is required to meet.
  Mrs. Calton: Perhaps I did not make my point clearly enough. Everything that flowed from the PIU report was supposed to be carried out, but it is clear that Post Office Ltd. has not followed the guidance that the report offered.
  Richard Burden: It would be fair to say that some of the actions taken by Post Office Ltd. have been consistent with the PIU report, but not others. My point is that, even where the recommendations were followed, there has been severe doubt about the extent to which they have.
  Why does Post Office Ltd. get it wrong? There is not too much fundamentally wrong with what the Government have requested, so why does the organisation seem to get things so wrong? One reason is the consultation procedure. I tabled an early-day motion last year on the subject and the Minister for Energy, E-Commerce and Postal Services guaranteed what Post Office Ltd. would be required to do: to consult local communities throughout the process of change, not just at the end of it. That has not happened.
  Area plans are constructed on the basis of discussion between Post Office Ltd. and local sub-postmasters. Communities and local authorities are not involved in drawing up the plans: they have their say only at the end of the process, when the plan is published. That is a fundamental flaw, because we could avoid many of the problems if we asked the experts—effectively, the people who live in or represent the area—at an early stage. I certainly welcome the fact that the leader of Birmingham city council, Sir Albert Bore, made that point very clearly to the Post Office in his response to the plan to close 29 sub-post offices in the area.

  925
  Another problem is that only the threats not the opportunities for business are considered. It is right for the Government to provide compensation for sub-postmasters where they are losing their business and the post office is simply not viable. However, as I said earlier, the Post Office's approach to the problem is so inflexible that it effectively forces a local sub-postmaster to quit the business and get out, because it makes more financial sense for the sub-postmaster to do that than to sell the business to another business person who might have a sustainable plan to keep it going. I believe that that is not only wrong but uneconomic.
  That position arose in my constituency, and I shall use mythical figures to illustrate the point. If a business is worth about £50,000 on the market, it is possible for the sub-postmaster to be offered £70,000 in compensation to get rid of the business, yet another business person could be willing to take it over on the basis of a viable business plan. In those circumstances, the sub-postmaster would have to be mad to sell to the new business person for £50,000 when he could receive £70,000 for shutting the branch down. The Government should know that that is how the Post Office is operating the plan, which I do not believe conforms to the spirit of what was agreed. I ask the Government to encourage Post Office Ltd. to be more flexible and to examine how it might be possible to save public money and sustain viable businesses on that basis.
  Andrew Selous: To illustrate the hon. Gentleman's very good point further, does he share my upset on learning from Postwatch that the Post Office has been instructed to reject other sources of funds that might have been available to keep a post office going? The concern was that there was a danger of establishing a precedent that might keep post offices in business. Does that not reinforce his point?
  Richard Burden: The problem is the approach of Post Office Ltd., which is not in keeping with the spirit of what was agreed with the Government. A closure of a sub-post office is properly a matter for Government intervention, the use of Government funds and so forth. The improvement of the funds of certain receiving branches may also be relevant. Post Office Ltd. regards someone knowing that a sub-postmaster wants to leave a business but believing that he, instead, can make a go of it as a matter only of a transaction between the sub-postmaster who is getting out and the new business person who wants to come in. It acts in a wholly hands-off way in that respect, which can lead to the crazy position described by the hon. Gentleman, whereby potential sources of funds are effectively ignored by Post Office Ltd.
  Mr. Weir: Is the situation not rather worse? Under the Post Office procedure, no one knows before the closure announcement is made that the business may be up for sale. That might be for good, confidential reasons, but by the time it becomes public knowledge that a post office may be going, it is too late for anyone to make an offer to take over the business.
  Richard Burden: The hon. Gentleman makes a fair point, which underlines the fact that the consultation should be structured differently. If Post Office Ltd.
  926
  recognises the need for change in a particular area because not all the post offices are sustainable, it should be prepared to sit down and work out who wants to stay and who wants to go, and to decide the right pattern of post office provision. Perhaps in one area all the sub-post offices should be closed and another one opened. It is theoretically possible that they are all in the wrong place to serve local people. If there were a willingness properly to plan the needs of an area, those problems could be tackled, but the way in which Post Office Ltd. goes about it means that that does not happen.
  Furthermore the Post Office approach undermines the laudable objectives that the Secretary of State mentioned earlier. She and the Government should be applauded for their searching and ambition to open up new business for the Post Office. They should also be applauded for their investment in making the Horizon project work more effectively. They are right to say that the Post Office should be trying to find new business, provide outlets on the high street for clearing banks, look towards the possibilities for insurance and so forth. All that is right but difficult to reconcile with the strictures that Post Office Ltd. has put on itself in carrying out the urban reinvention programme.
  I therefore ask my right hon. Friends to talk to Mr. Mills and his colleagues again to remind them that they are supposed to be reinventing the network on the basis of a vision, not simply implementing closures. I know that Ministers do not want the latter. They want a reinvented and sustainable network, but I have to say that Post Office Ltd. is not living up to that vision at present. That explains why there is a major campaign in my area of Birmingham against what Post Office Ltd. is proposing. I am pleased to say that the local paper, the Birmingham Evening Mail, is spearheading the campaign very effectively.
  David Cairns: It is why my hon. Friend is making his speech.
  Richard Burden: Indeed; it is why I am speaking in the debate. Some of my right hon. and hon. Friends in the area have tabled an early-day motion to ask Post Office Ltd. to think again. The only Birmingham Labour Member who has not signed the motion is the Minister for the Arts, my right hon. Friend the Member for Birmingham, Yardley (Estelle Morris), who has told me that she supports it and is on record as a supporter of it, but as a Minister is unable to sign it. There is unanimity among Birmingham Labour MPs that Post Office Ltd. should think again.
  Concern about the proposals crosses the political divide in Birmingham, so it is with some regret that I must report that the leader of the Liberal Democrats on the city council has taken the opportunity to spread what I have to call untruths about what I and other Labour Members have been doing. He has alleged that we voted for the closures in south Birmingham, on 13 January this year and on 20 October 2002. However, the calendar shows that the latter date was a Sunday. As far as I know, Parliament does not sit on a Sunday: if that vote took place, I missed it.
  There may be differences of view about the urban reinvention programme, the handling of the Post Office card account and the compensation issue, and it is right

  927
  to debate them, both in the House and elsewhere. However, people are worried about the loss of local post offices and have real fears about what the future holds. They expect local politicians to join together to represent their interests. It is not acceptable, therefore, to spread untrue allegations about members of other parties, when in fact we are all on the same side.
  If the leader of the Liberal Democrats on Birmingham city council acts as he has previously, I expect that a leaflet will be distributed in the next few days saying that, when I vote against the Conservative motion and in favour of the Government amendment tonight, that means that I have once again voted for post office closures. As the House knows, post office closures are not voted on in the House, so no hon. Member of any party can vote either for or against such closures.
  Mr. Stephen O'Brien: I can understand why the hon. Gentleman is frustrated and cross with the Liberal Democrat leader on his local council, but the Opposition motions of 13 January and today have attracted Liberal Democrat support. Moreover, and more importantly, today's debate gives the hon. Gentleman an opportunity to vote in line with his campaign. He may not want to join Opposition Members in the Lobby—although he would be more than welcome to do so, as a way to back up the rhetoric that he has used in his speech—but it is difficult to take his rhetoric at face value when he supports a Government amendment that is both self-congratulatory and uncritical. At the very least, he should consider abstaining.
  Richard Burden: The Opposition have blown it when it comes to the motion. It makes some reasonable points about how Post Office Ltd. has gone about the restructuring programme, but the punchline can be found in the motion's final couple of lines. They state that the House
  "condemns the Government's failure to deliver benefits and tax credits in a simple, easy to understand manner while at the same time jeopardising the future prosperity of the Post Office."
  I understand that the Opposition believe that, but they are wrong. As my right hon. Friend the Secretary of State said earlier, either we face the future by trying to plan for it and by requiring Post Office Ltd. to consult properly, or we opt for the free-for-all evident under the previous Conservative Government, when 3,500 sub-post offices closed.
  Mr. Jim Cunningham: Earlier, my hon. Friend mentioned the Horizon project. Does he recall that it was introduced by the previous Conservative Government, and that its aim of paying pensions and benefits by smartcard caused all sorts of problems? The difficulties faced by post offices stem from the actions of that Government, and Opposition Members will not get away with rewriting history. Does my hon. Friend also accept that the Horizon project cost £500 million, and that £50 million was needed to put it right?
  Richard Burden: My hon. Friend makes a very important point. That is a salutary lesson for Opposition Members. If they want to throw stones, they should realise that they do so from a rather fragile glasshouse.
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  It is important to put on the record the actions of the Liberal Democrat leader on Birmingham city council. Some modes of behaviour are acceptable in politics, and some are not. I believe that he has transgressed the line. Local people do not want politicians to behave like that. It is important for south Birmingham that politicians of all parties band together on this matter. We do not want to mislead people by claiming that every post office in every corner of Birmingham can be saved, but we can say that Post Office Ltd., in drawing up the plan, has fallen short of what the Government's requirements set out. It has identified the threats to local post offices, but not the opportunities open to them. It has also got its facts wrong, in a variety of ways.
  As I said, I am a member of the Select Committee on Trade and Industry, which has announced that it is to undertake another investigation of post offices and the urban reinvention programme. Given that, it would be madness for Post Office Ltd. to go ahead with the planned closure programme for south Birmingham. The plan should be withdrawn, and Post Office Ltd. should think again. It needs to sit down with people from the local communities, elected politicians and others to determine what sort of post offices people in south Birmingham need, and to decide how to plan for the future. Post offices that are not sustainable should be closed, but high-quality services to local people must be maintained. Post offices should be encouraged to take on new business, so that they can provide a much better service for local people in the future.
  3.7 pm
  Mr. Nigel Evans: I have been a Member of Parliament for 12 years, and have taken part in many debates on the importance of post offices. This is a vital subject. The Post Office is a recognised brand, for which people have great affection. I grew up in Swansea, very near to a post office. I used to go in with my mother, and it was probably one of the first shops I ever entered. Even then, I knew the importance of the post office network.
  When Ministers talk about restructuring, they are using an Orwellian code that means closure—a word they dare not use. In that context, using the word "restructuring" is like using the term "rightsizing" to explain why an employee has been sacked. What is happening is that the post office network as we understand it is being culled.
  I am the first to accept that post offices have been closed by previous Governments, of all political complexions. However, I remember sitting on the Government Benches—and I will sit there again very shortly and without crossing the Floor—and the then Labour Opposition of 1992–97 telling us that post offices were closing. They said that that was callous, and that the Government of the day needed to do something about it. There was a suggestion at that time that the Government were going to change the benefit system, and that benefits would be paid by means of a card.
  The Conservative Government considered the matter and listened to what the public had to say. Our proposals for the card system were never implemented, but this Government are going ahead with introducing their own version. Labour Opposition Members at the time said that the urban and rural post office networks were both vitally important, for different reasons.

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  In my Ribble Valley constituency, the towns of Clitheroe and Longridge have vibrant post offices. A number of villages still have post offices but, sadly, some have closed since 1997.
  Mr. John Horam: I am interested to hear what my hon. Friend says about the rural scene in his constituency. Does he recognise that in a suburban area such as Orpington, which I represent, the little parades of shops are dependent on the local post offices as a central component? If the post office goes, the parades often fold.
  Mr. Evans: With my retail hat on, I accept that point completely. To the grocer, butcher, fishmonger, pharmacist and other small retailers, the post office is part of the community of services available to the public. When a vital part of that community is taken away, the others start to struggle. When the boards go up outside the post office, it is often not long before the boards go up outside other retail outlets.
  We have always been told that the post office network is important. I was depressed when I saw in the Lancashire Evening Post the other day the headline "Nine post offices to shut". That included five in Preston, two in Chorley and two in Penwortham. Postwatch wrote to me on 18 March about those closures, and about the proposed closure of five post offices in Rotherham and 13 in Bury. Today we have heard about 29 closures in south Birmingham—from a Labour Member. Irrespective of party, if we wish to see a post office network of any worth survive into the future, we should speak up about it now and do something before it disappears completely—otherwise, a vital asset will be lost to this country for ever.
  Several hon. Members have mentioned the growth in the elderly population and how important the post office network is to that sector of the community. Some of them do not have access to cars or other transport, especially in rural areas where the bus service is not what it used to be. That is why they need local post offices, which often sell other items. They also enjoy the opportunity to chat to post office staff and meet other members of the community.
  Mrs. Gillian Shephard: Has my hon. Friend come across the problem that my elderly and rural constituents face because Powergen, with only three weeks' notice, has withdrawn the electricity token service from post offices? People without transport, and of necessity on low incomes—and many of them not very mobile—had been able to purchase tokens at the post office to feed their meters at home. However, after scant consultation, Powergen has decided to withdraw that service. Does my hon. Friend agree that that action weighs most heavily on the elderly and less well-off in rural areas?
  Mr. Evans: Of course it does, because the token system is designed to ensure that the less well-off are able to eke out their resources and maintain their supplies of power. I hope that Powergen will think again. I hope that it will consult properly with the post office network and their customers to see whether the service should continue. I hope that Powergen will also listen closely to what my right hon. Friend has said today. I suspect that
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  we are talking about another nail in the coffin. The withdrawal of that service might not, by itself, be the reason for closure, but alongside all the other changes that the Government have made it will make post offices less viable.
  I asked the Secretary of State for Trade and Industry whether she would consider becoming a postmistress and she said gleefully that she would if she lost her seat. I think that was a hollow reply, because the profitability of post offices is part of the problem. I agree with the hon. Member for Birmingham, Northfield (Richard Burden) about the incentives offered to postmasters and postmistresses to give up their post offices. If people are not making any money from their post office and somebody offers them a pot of cash, they will probably take it, because they are frightened of the future. They have seen the profitability of their post offices decline because of the withdrawal of services such as Powergen's, and the lack of footfall because so many benefits are now paid into bank and building society accounts. They take the cash and get out of the business, thus reducing the number of post offices further.
  I encourage the Government to consider what new services post offices might be able to provide, but some post offices in smaller areas are unable to expand. Will postmasters and postmistresses who see their profitability falling risk borrowing more money—if they even can—to expand the goods and services available in their post offices? If a post office is run by a husband and wife team, they are chained to it from the time it opens in the morning until it closes in the early evening. Because of the lack of profitability, they cannot afford to employ anyone to give them some time off. We have to consider the profitability of post offices, but as we have heard today fewer people are going into post offices and fewer transactions are taking place.
  The Secretary of State mentioned 25 million banking transactions, but how much profit do post offices receive, compared with the old system? The reality is that they are making less profit. There are fewer post offices, and they are not as viable as they used to be. Running a post office is also a huge responsibility, because it is a cash-based business. We heard about the introduction of ATMs to post offices, but many people resent the charges they impose for withdrawals. In the past, withdrawing money was free of charge, but now it costs £1.25 or £1.75. I can understand why people on fixed incomes feel so strongly about having to pay those charges.
  I pay tribute to one of my local post offices in Bolton by Bowland. It has added tea rooms to diversify its services, although that is a lot more effort for those in charge. During the rugby world cup, the post office opened at unsocial hours so that people could come together and enjoy England's great victory.
  Mr. Richard Bacon: How did Wales do?
  Mr. Evans: Well, we helped England to that great victory in some of the games we played in the world cup.
  As I was saying, opportunities for diversification are limited. I hope that the Minister, when he winds up, does not treat this as just another debate on post offices that has to be got through before the next debate on the same

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  issue in a few months' time. In the meantime, we will see yet more closures and more services withdrawn. I welcome the fact that banks are using the post offices as a resource. Banks used to have branches in villages, but they have now withdrawn from villages and smaller towns. I hope that all the banks will join in, including the Scottish banks, so that all customers benefit.
  This whole subject boils down to the question of choice. Some elderly people have received phone calls about how they would like their benefits to be paid, and they have been discouraged from opening a post office account. They are told that it is better for their money to be paid directly into their bank or building society, but that is no choice.
  Mr. Webb: I note that the Minister is shaking his head. Is he suggesting that the hon. Gentleman is lying? I do not understand why, given that all hon. Members have had constituents come to us about post office closures. What does it take to get the Government to realise that this is actually happening?
  Mr. Evans: The hon. Gentleman makes an important point. As he asked in his speech, what planet are the Government living on? Frankly, they are in a parallel universe. I have taken part in public meetings with pensioners in my constituency, and they told me that, when they sent back the forms that they had filled in, someone phoned them to encourage them to go to a bank or building society. Pensioners have stood up in a public meeting to tell me that that has happened.
  Towards the end of our period in government, we became arrogant—we stopped listening—but that took us 18 years. It has only taken a few years for that lot to succumb to the arrogance of power. They must listen to the facts. I am certainly not lying to the House when I say this, and I cannot believe that pensioners are lying to me when they say that they have received phone calls encouraging them not to take up Post Office accounts, but to go to banks and building societies.
  Mrs. Anne Campbell: Does the hon. Gentleman not think that it is very important that pensioners are given personal advice when they make an important decision such as how to draw their benefits or how to bank their money, and that it is difficult to apply one-size-fits-all rules to everyone? Surely he should welcome the fact that people are being telephoned and offered a personal and helpful advice service.
  Mr. Evans: I suspect that, if people choose banks and buildings societies, they do not get a phone call saying, "Have you perhaps considered opening a Post Office account?" No one has told me that that is part of the problem. Yes, I welcome the fact that they are given advice, given that they are taking an important decision, but they ought to be told as well that, if too many of them pull out of post offices completely, they will become less viable than they are currently and that the current post office network will completely disappear. Yes, by all means let us give people information, but let them make the decision. Let us not take the decision away from them or try to goad them into a direction that may be against their own long-term interests. I hope that
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  the Minister will accept that those things are going on, although they are anecdotal stories, and certainly that no one in the House today is lying when we say that those things are happening.
  Mr. Pond: I am not accusing any hon. Member of lying, either verbally or by my body language. I ask hon. Members to understand that we have a responsibility to help people to understand the full range of their choices. I ask them to consider what happens when a pensioner makes or receives a call and is told—perhaps after listening to this debate—by the sub-postmaster or mistress, "Look, they won't let you have a Post Office card account." The pensioner then makes a call to say, "I want a Post Office card account," and the person on the other end of the line rightly says, "Let me tell you about the different range of options first." That may be perceived as encouraging the pensioner away from the Post Office card account, but the person on the end of the line is simply making sure that the pensioner knows the full range of options.
  Mr. Evans: As I say, I very much hope that, when people are considering their options for banks and building societies, they receive similar phone calls to ensure that they know all the options. I look forward to the call-centre scripts being made available in the Library, so that we can see whether that goes on. However, perhaps it would be beneficial if the Minister were to issue guidelines to ensure the integrity of the system, so that elderly people or those in receipt of benefits are not led one way or the other before making an informed decision. I hope that he will consider the system again to ensure that there is no goading one way or the other.
  I have been an MP for 12 years and have been attending debates such as this throughout that time. The acceleration in the number of urban post offices that closed last year is a great worry, as is the number of rural post offices that are still closing, including in my constituency. We have seen rural banks close. We have seen the pubs in rural areas go into decline, and some of them have disappeared. Pharmacies have been mentioned. Small retail stores in villages are no longer profitable. Post offices are the last shops left in some villages and, when they go, a whole way of life—the rural community spirit—will completely disappear from those areas.
  We need to ensure that the consultation on such issues is fair. As the hon. Member for Birmingham, Northfield said, there must be options for other people to take over post offices. The Post Office must be far more vigorous in looking for fresh people to take them over. Perhaps people should be given an incentive to bring in new ideas about how those post offices can work. The consultation must not be rigged or prejudged. It must not be carried out with the intention that those involved were thinking of closing seven post offices, so they will do so irrespective of what the people say.
  Frankly, the supposed managed closure programme represents set-aside for our post offices. They are being put to one side. They are being put into the long grass. The post office network that we all love has become something of a Titanic: it is sinking fast, and instead of the Government shoring up the ship to try to ensure that it will not disappear, they have made the hole bigger. I

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  call on the Minister today to give a guarantee that he will do what he can to find ways to preserve the current network. No managed disappearance of post offices, please. Let us ensure that post offices—whether urban or rural—are valued for what they are. Let us look for ways to ensure that they have a future well into this century.
  3.26 pm
  Mr. Richard Bacon: The motion refers to
  "the significant role played by local post offices in both rural and urban areas".
  My hon. Friend the Member for Ribble Valley (Mr. Evans) has told us about the situation in rural areas, and the hon. Member for Birmingham, Northfield (Richard Burden) made a thoughtful speech about the situation in south Birmingham. Like my hon. Friend. I wish to concentrate on rural areas, and in doing so, talk about the problem facing people in Norfolk because of Powergen's actions, which my right hon. Friend the Member for South-West Norfolk (Mrs. Shephard) mentioned briefly in an intervention.
  People sometimes underestimate just how different things are in rural areas compared with urban areas. My constituency covers 350 square miles: Greater London, which contains 74 parliamentary constituencies, covers 650 square miles. My constituency is more than half the size of Greater London. My right hon. Friend, whose constituency neighbours mine, has a constituency some three times the size of mine—at about 1,300 square miles, I think. Post offices in rural areas are part of the social fabric of local communities, as the hon. Member for Birmingham, Northfield acknowledged when he was dealing with urban areas.
  Mrs. Shephard: I thank my hon. Friend for referring to the entirely different problems faced by people in far-flung rural areas. I have a letter from the postmaster at Banham in my constituency, who says that as a result of Powergen's decisions, residents will now have to travel nine miles to the nearest pay-point outlet and nine miles back. For many elderly, disabled or less well-off people, that is not an option.
  Mr. Bacon: I agree with my right hon. Friend. Such a journey is not an option for many people. That is why I have taken up the issue with Powergen and with the Post Office, to ask whether they can renegotiate. Indeed, I have also taken it up with Ofgem, to see whether it thinks that Powergen is acting against the public interest. I, too, represent constituents who will have to travel some distance to get electricity swipe cards topped up—to a neighbouring market town, in this case—as a result of Powergen's decision to withdraw the contract from the Post Office.
  People in Roydon in my constituency, some of whom are on limited incomes and do not have cars, can knock on the doors and Mr. and Mrs. West will open up after hours, even at 9.30 at night, so that a young mother with two children who has suddenly run out of electricity can be reconnected. Effectively, that is a social service, and there seems to be no reason why Powergen should unilaterally remove the contract from the Post Office.
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  I received from Powergen a letter of the sort that we all receive from time to time, explaining how it was enhancing its service. There is a German word, "Verschlimmbesserung", which, loosely translated, means the process by which, as things are improved, they get worse. We are familiar with that process from many different aspects of life, and it is certainly applicable in this case. I look forward to receiving a sensible reply from Powergen and hearing about a reconsideration of this ill-considered and ill-thoughtout policy.
  Mr. Stephen O'Brien: Is my hon. Friend aware of another relevant German expression that is difficult to translate into any other language? What is happening displays that Powergen has anything other than "Fingersptizengefuhl—a fingertip feel.
  Mr. Bacon: I am aware of that expression; my hon. Friend makes a good point, and Powergen needs to reconsider the issue with some care.
  The second issue that I want to raise involves a specific problem that arose some three years ago because of the decision of Mrs. Rogers, the then sub-postmistress at Coldham Green, Deopham, to retire from running the post office in Pie lane. As she was retiring, she requested that the post box in her front garden be taken away. Indeed, the parish council suggested that the box should be resited somewhere else, which seemed perfectly reasonable. It also seemed reasonable that Mrs. Rogers should no longer have a post box in her front garden when she was no longer running the post office.
  The problem that subsequently arose has endured for so long because of Royal Mail's failure locally—I stress the word "locally"—to understand, recognise or acknowledge the difference between resiting and removing. Thus, the local Royal Mail manager's response to concerned local residents, to the parish council and to me has been to ask why residents of Coldham Green should have an additional post box. In fact, all that local residents are asking for is the relocation of a previously existing box in a slightly different place. The local Royal Mail manager has gone so far as to allege that there is a post box in a place where there is none.
  I have gone to the chief executive and chairman of Royal Mail, who have been helpful, and I look forward to receiving a sensible response. I have walked the route that people must now take, and I can see how dangerous it is. Without a post box in their area, local people must walk to the other end of the village down a road that has a 60 mph speed limit—although it certainly should have a lower limit. Young mothers with prams must push their small children down the lane to the post box at the other end of the village, but there is no verge and there is nowhere for them to hide. That is not a practical option, and many people refuse to take it and are thus deprived of a service. I hope to get a sensible answer out of Royal Mail in due course, and also some indication that it will encourage its local managers to take a slightly more helpful and interested approach. Postwatch is also escalating the priority attached to the local complaint, and I hope that there will be a resolution.
  As for the so-called neutral position on the Post Office card account, a number of hon. Members have referred to the apparent difference between what we, and our

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  constituents, are experiencing in our daily lives and what is happening over there on Planet Hewitt, where there seems to be no difference between the treatment of the options on offer, and they are apparently being laid out in a neutral way. How can Age Concern, Citizens Advice, the National Consumer Council, the National Federation of Sub-Postmasters, the Communication Workers Union and the National Federation of Women's Institutes all have expressed concern about the obstacles and difficulties in opening a Post Office card account, yet the Government and Ministers on Planet Hewitt do not seem to think that there is a problem? The Minister should be careful before he takes on the National Federation of Women's Institutes. He should recall what happened to his boss when he tried to do that.
  It is absolutely clear that there is an issue. Indeed, the guidance given to Department for Work and Pensions staff, contains this statement:
  "We need to pay most of these customers into bank accounts which cost 1p, rather than into Post Office card accounts, which cost up to 30 times more. You should be aiming to get nine out of 10 new claimants into bank accounts, with a small proportion paid through Post Office card accounts."
  That does not sound very neutral to me.
  That prompts another question. Quite apart from the fact that there is not the neutrality that the Government allege, why should the card accounts cost so much more than bank accounts? After all, lottery terminals have been put into convenience stores, post offices and small shops throughout the country. The proposed payment system is relatively simple, and ought not to cost 30 times more than bank accounts. If one looked into the problem, I suspect that one would discover that, as is often the case with Government IT projects, the Government's IT advice has cost more than it should.
  As hon. Members, including my hon. Friend the Member for Havant (Mr. Willetts), who introduced the debate, have said, the key issue is choice. Theoretically, at least, the Government are in favour in choice. Indeed, the Prime Minister's Office of Public Services Reform, in the pamphlet, "Principles into Practice", published in March 2002, said:
  "Choice acknowledges that consumers of public services should increasingly be given the kind of options that they take for granted in other walks of life."
  Amen to that. The Government should back up their rhetoric and give our constituents in both urban and rural areas the kind of choice that they expect.
  3.36 pm
  Mr. Lindsay Hoyle: This is an important debate, in which we can air our views about the future of postal services—a subject that matters to older people, younger people and others who use post offices. In Chorley we face two closures—the Moor Road post office in Pall Mall and the post office on Eaves lane. I am worried about the criteria used for closure, and I would like genuine consultation. Anyone who has been through a closure programme knows that consultation is usually a charade. As we head into a consultation on those two crucial post offices in Chorley, I hope that there will be genuine dialogue, and
  936
  that geographical considerations will be taken into account. There is no post office in Chorley to the south of either of those post offices, and we cannot expect people who have to walk half a mile to use them to walk another half mile to use the next one. Older people cannot walk that far, and a journey of that distance is certainly not feasible for young mothers who may want to call at a post office on the way to school.
  I regret that the Post Office is considering closing those post offices, and there must be full genuine consultation. It should listen to local elected representatives and the people who use those post offices. If the Post Office listens to us and takes our views on board, I do not expect it to close them. If the sub-postmaster wishes to get out of the business, the Post Office should approach shopkeepers in the area and nearby supermarkets and say that, rather than allowing a local facility to be lost, it would like them to consider taking on the franchise. The Post Office should go out and look at other shops to try to see if they can facilitate a replacement. We do not want a Post Office that is determined to close sub-post offices but one that is determined to keep them open. That is a crucial point, and I hope that it will be taken on board.
  We have heard a lot of rhetoric today from the Opposition, and they have shed many crocodile tears. Under the previous Government, 3,500 post offices closed, but not once do Conservative Members refer to that. If they are genuine—and I expect people to be genuine in the Chamber—they should not try to make political gains but should make genuine arguments on behalf of their constituents. That is how debates should be conducted—[Interruption.] Hon. Members might ask, "Which way are you going to vote?" but that is not the way to proceed. We ought to tell the Minister that there are problems, and that we expect a listening Government to take our views on board. They should propose a solution, refine it and use their vote as shareholder in the Post Office to tell it that they do not like the way in which it is doing business, and they expect it to change. The Post Office should listen to hon. Members, and take our views on board.
  Andrew Selous: Does the hon. Gentleman accept that every Opposition Member who has spoken, as well as his hon. Friend the Member for Birmingham, Northfield (Richard Burden), has asked the Post Office to be more flexible and more creative and to look at the issue from the point of view of the whole community? That is the central point that has been made this afternoon.
  Mr. Hoyle: I understand what the hon. Gentleman is trying to say. He is slightly embarrassed because he knows the debate is a political one. I would have liked to believe that we could genuinely express our views and concerns, but apparently, the real purpose of the debate is to make political points. That is wrong. It should be an opportunity for Members to make our voices heard.
  Mrs. Anne Campbell: I do not know whether my hon. Friend's experience is the same as mine, but I discovered that when post offices were facing closure, surveys carried out among the local population made it clear that many people did not realise the full extent of the

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  services that post offices offer. The Post Office could do a great deal more to advertise the services that are available and would be of benefit to people.
  Mr. Hoyle: My hon. Friend is spot on. We ought to be telling people not only how good post offices are and how vital they are to a community, but about the services available to them. People have forgotten how many services post offices offer. I believe that the Post Office should offer even more services, and that they should be franchised.
  Mr. Evans: I hope that neither of the post offices in the hon. Gentleman's constituency is being incentivised to close. I agree that the consultation must be carried out properly, not rigged. The Lancashire Evening Post reports that there will be a six-week consultation, and that
  "Royal Mail bosses say the proposals are a direct reaction to declining custom and changes in the benefits system where cash is paid into the bank."
  Does the hon. Gentleman recognise that that is a problem, and that we must ensure that customers have the choice of collecting their benefits from the post office?
  Mr. Hoyle: Of course the hon. Gentleman is correct. I intended to come on to that point and say that my hon. Friend the Minister may not be aware of the difficulties faced by people who wish to keep to the old system. It is true that the legislation provides the right of choice for them. But somewhere in the bowels of the administration it is made difficult for people not to go into the banking system. That is what worries me.
  I do not believe there are many MPs who have not been approached by constituents—older pensioners—who say, "I don't want the new system. I want to stay with the old system." They fill in form after form, and as Members of Parliament, we get involved. It seems that somebody somewhere is blocking the system and not clearing the forms as quickly and effectively as they should. They are looking for a minor point on which to reject our constituents' requests. The Minister may not be aware of that. We need a thorough investigation to ensure that the process runs smoothly once people fill in the form, and that they do not have to go without the money they are entitled to for any length of time.
  A further issue on which I appeal to the Minister concerns people who may not be able to get to the post office because of illness. Someone has to collect the money for them, and that is a worry if they are ill for four or five weeks. We need to recognise that as a genuine concern and see how we can improve the situation. We all deal with big problems relating to post offices, but we all recognise that sub-postmasters and sub-postmistresses offer a superb service. The post office is the focal point of a community, urban or rural. It provides a service that we love and have enjoyed over many years. We want future generations to be able to enjoy the post office, as we have. I hope that the service can become more flexible and more creative, recognising that post offices should remain open and offer their services to the community.
  We do not want people to look at a map and say, "Let's take these post offices out, because we think there are too many." That is wrong. They should examine the
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  demographics of the area and the age profile of the people who live there. They should listen to the Member of Parliament and other local representatives in each constituency where closures are proposed. Please let us take that on board, and tell the Post Office that its ambitious plan to close so many post offices is unacceptable. Let us listen to the community and put the community interest first.
  3.45 pm
  Mrs. Patsy Calton: We have heard so much this afternoon, and I have spoken before on the matter in the Chamber, about the huge flaws in the network reinvention programme as it applies not just to my constituency but to those of my hon. Friend the Member for Hazel Grove (Mr. Stunell) and the hon. Member for Stockport (Ms Coffey). Flawed information was given to us on 17 December—which some of us did not receive until 18 December—the process itself was flawed, decision making was flawed and secretive, and the sum total of all the work that was put in was that four post offices were closed. Today and this week, post offices are closing and elderly and disabled people are being left without access.
  Of the respondents to our consultation, which we thought supported that of Post Office Ltd., 80 per cent. were over 55, and 40 per cent. had mobility problems. I was astonished at that figure. I expected it to be 10 or 15 per cent. I had no idea that it would be so high.
  To add insult to injury, as I said in an intervention earlier, we ended up being told during the decision-making process that, because it was recognised that the process was flawed, it would be altered for the future. But despite letters to Postwatch, Post Office Ltd. and the Minister, I have been able to obtain nothing other than sympathy, which is lovely but does nothing about the real problem. The process for my constituency and others involved in the same period should have been halted. I requested that of the Minister and Post Office Ltd., and I made my final appeals last week before the closures took place, but I have had no substantive response from either on those last-minute appeals. Postcomm and Postwatch told me that neither of them had any powers to halt the process even though it is recognised that it was flawed from beginning to end.
  The performance and innovation unit report, by which we are guided in the whole procedure, at chapter 8, page 2 on delivering objective 1, states that there should be convenient access for all to post offices—not just some of the population, but all. It states:
  "The Post Office network should offer people in all parts of the country convenient access to the services available in post offices."
  I highlight one of the post offices in my constituency that closed on Monday this week. The main receiving office is not on a bus route, the car park close to it is always full during daytime hours, and it is at the top of a steep hill. I do not understand how all the community can possibly have access to that receiving office.
  It has become clear that the process is being driven not by the strategic overview that we had all expected, but by a wish to close as many sub-post offices as possible as quickly as possible. It has been a case of the devil take the hindmost. The deal offered to sub-postmasters and mistresses has been one that many have simply been unable to refuse. The Government made

  939
  available £180 million for compensation. I do not argue with that. On average, £55,000 was paid out in the last quarter to December 2003 to individual sub-postmasters and mistresses. That is £38 million in one quarter of last year, and the figure is likely to be higher for the current quarter. What checks have been made on those payouts? Why is the payout based on takings six months before closure, when the closure information presented to Postwatch and others is based on takings including the past six months? Is that not an incentive to run down the business in the final six months?
  How many of those sub-postmasters and sub-postmistresses have owned their businesses for less than two to three years, having taken them on knowing that this process was in place? I am not suggesting that that is a factor in all cases, but I would like to think that the Government seek to ensure that taxpayers' money is spent on the purposes for which it was intended, and not simply used for handouts to close post offices that should be kept open because the sub-postmaster or sub-postmistress wants to go.
  My experience of Postwatch has not been as good as that of Labour Members, and I suspect that there are variations between different parts of the country. We have held four public meetings in my constituency, which were attended by Postwatch representatives. My constituents want to know Postwatch's purpose. Why does the Postwatch representative in the north-west, who attended the public meetings, report to Postwatch in London rather than to Postwatch in the north-west? Who authorises him to make derogatory remarks about public campaigns, or did he think of that for himself? Whose side is he on?
  Mrs. Anne Campbell: My experience of Postwatch has been extremely positive. Postwatch has done everything possible to help me to fight inappropriate post office closures in my area. In order to try to save a post office in my constituency, one case has been escalated up the ladder to the top of Postwatch. I cannot praise Postwatch highly enough, and I hope that the hon. Lady's experience is not replicated elsewhere.
  Mrs. Calton: I am happy to acknowledge that my experience occurred in my area. It was not only my experience, but that of members of the public, who asked, "Why did Postwatch bother to come?" I understand that time is short and that the summing-up speeches must begin shortly.
  I shall reiterate the health benefits of a vibrant post office network. It may seem a jump from this debate to health impacts, but the health of communities is a determinant of the health of individuals within those communities. Removing an important asset such as a post office has a huge impact on the health of a community. The other day, I heard that the best treatment for leg ulcers is to put three or four people with leg ulcers together to allow them to talk to each other, which makes them get better, along with the necessary medical work.
  Elderly people should not be left alone in our communities, but they are. A huge percentage of the public spend most of each week alone, and visits to the
  940
  post office and local shops make a big difference to their lives. The long-term cost to the community of post office closures will be huge. The PIU report states that "supporting vulnerable people" and
  "acting as a focal point for the community"
  are important parts of what a post office has to offer.
  I agree that there is an opportunity to reverse years of decline. In particular, it should be possible to offer post offices that open longer and that serve a broader customer base, but that is not the experience in my area, where there has been no attempt to combine retail with a post office to create a thriving local business. It could have been done, but it was not even tried. The question I have to ask is: where is the strategic vision? Those customers will not simply move from one place to another, mainly because they are not capable of doing so. If we turn post offices into banks, they compete with the banks—what about their customer base then? Network reinvention is destroying the customer base, tearing the heart out of communities, increasing car use and adding to social exclusion.
  3.55 pm
  Andrew Selous: I realise that time is short, so I want purely to repeat that it is extremely regrettable that Powergen has decided to discontinue selling electricity tokens. I quote from an email that I received yesterday from an ever-alert South Bedfordshire councillor, who said:
  "There appears to have been no consultation about this … They have given only one week's notice and having spoken to PayPoint it will take about 1 month to set up a new Paypoint station. Apart from this being another nail in the coffin of Village Post Offices if you examine the list of outlets within the Hockliffe vicinity there are 6 in Dunstable and 8 in Leighton Buzzard. None of these are on a direct bus route. Once again this will affect the elderly in particular."
  At a time when we should be encouraging the Post Office to take on an extra range of services to increase footfall, I hope that the Minister will take that matter seriously and speak to Powergen so that something can be done about it.
  3.56 pm
  Mr. Stephen O'Brien: During this debate, hon. Members on both sides of the House sought to express their views and concerns about post office services—as opposed to the post office network, which was the subject of the debate that took place, again in Opposition time, on 13 January. In doing so, we are motivated by our deep commitment to what characterises the communities that we are sent here to represent, be they rural, suburban or urban. As we know from our own experiences, from the representations that we receive day in, day out, and—ironically—from the volume of correspondence in our postbags, people in those communities feel that local post offices define not only their sense of belonging, but their ability to express that through their relationships with staff, particularly in terms of being known and identified. That gives great comfort to elderly and vulnerable people in particular.

  That is the context in which we are considering post office services and the developments that have taken place as a result of the actions and omissions of this Government. The key element in the debate was

  941

  identified by my hon. Friend the Member for Havant (Mr. Willetts) when he so ably, expertly and cogently opened the debate—[Interruption.] I am sure that his objective assessment will be confirmed by Ministers, who are properly subject to it.
  At the heart of the matter lies the element of customer choice, and the whole business of providing post office services must be motivated by what is right for them in making those choices. That is reflected by campaigns that have been going on up and down the land. In Broxtowe in Nottinghamshire, Councillors Sheila Foster, Joan Briggs and Tom Pettengell have raised petitions of more than 1,200 names to campaign against the closures of Chilwell and Attenborough post offices. Yet when we debated that matter on 13 January, the hon. Member for Broxtowe (Dr. Palmer) chose not to join us in the Lobby, although the motion gave him a perfect opportunity to confirm by voting some of the rhetoric that he and others had expressed during that campaign.
  The same could be said of the campaign to try to stop the closure of the Finchley Church End post office in the constituency of Finchley and Golders Green, and of the contributions of the hon. Member for Birmingham, Northfield (Richard Burden). However much Labour Members may not want to incur the wrath of their Whips, there comes a time when their votes must equal their rhetoric and campaigning in their constituencies. It is clear that the Conservative party spokesman in Finchley and Golders Green has been campaigning hard for the retention of that post office, having collected petitions containing more than 2,000 signatures. We are now offering the opportunity to Members across the House, in accordance with the campaigning sentiments that they have articulated both here and outside, to walk through the Lobby to give substance to those campaigns.
  This is our second debate in Opposition time on this subject. The debate on 13 January led the Minister with responsibility for post office services to make an announcement on 5 February, of which the Secretary of State sought to make a virtue. Curiously, she declined to say that that amounted to a large vote of thanks to us for having raised the issue and creating the opportunity for that debate, from which that statement resulted, although that is clearly what happened.
  That point was nailed by the intervention by my hon. Friend the Member for West Derbyshire (Mr. McLoughlin), who demonstrated that the "Westminster Newsletter" issued by the Post Office had stated, following the 13 January debate, that the Post Office would guarantee that it would
  "not make a decision until after the public consultation period, and will provide"
  Members of Parliament
  "with an explanation of the decision".
  That announcement resulted from the statement made by the Minister that there would be no contract to
  "create any binding arrangement for closure until the public consultation has been completed."—[Official Report, 5 February 2004; Vol. 417, c. 50WS.]
  By any definitional interpretation of that, it is difficult to see why that guarantee would have been presented as a new development in the 'Westminster Newsletter", unless there had been no guarantee before then. That is
  942
  precisely the argument that we have been making, and I am glad that the Minister responded to it at the time in relation to the post office network.
  All that we ask of the Secretary of State is that she listen again to the issues raised in this debate. It is jolly sporting of her to be with us today—
  Mr. Hoyle: Cheap shot.
  Mr. O'Brien: Labour Members might consider that a cheap shot, but the Secretary of State chose not to turn up to the last debate, although I, as her shadow, was leading it. The Minister both opened and wound up the debate on that occasion. There was clearly a mismatch there. More importantly, the Secretary of State should listen to the points being made in this debate on the way in which people experience post office services. We have heard countless examples from Members on both sides of the House of the deep concern and distress and of the grave inconvenience that has often been increased as a result of Government policy.
  It is important to recognise that this is not simply an attempt by Her Majesty's Opposition to oppose for opposition's sake, although I am sure that the Secretary of State and the Minister would like to portray it as such. There are now countless early-day motions on this subject. I fully expect all those Members of the Opposition parties who have signed early-day motions 58, 431, 375, 725, 814, 826, 850 and 859 to join us in the Lobby. I also believe that the tens, if not hundreds, of Labour Members who have put their names to early-day motions on these issues—namely early-day motions 236, 373, 389, 397, 628, 648, 689, 549 and 797—should now think very carefully. This is a genuine opportunity for them to give an honest earnest of their campaigning through early-day motions in the Lobby tonight, rather than attempting to curry favour with a Government whom they always wish to congratulate. They stand up to make speeches and suggest that they are campaigning on behalf of their constituents, but they usually vote for the Government who have caused the problem in the first place.
  Mr. Kelvin Hopkins: The hon. Gentleman is trying to entice us to vote for his motion, but it is really rather pathetic. It says nothing about post offices providing a vital public service or that they should be cross-subsidised in some kind of socialist way, which is what I believe. All that we have in the motion are proposals for more consultation and a bit of tinkering to try to make things work better. That is not enough.
  Mr. O'Brien: I am most grateful to the hon. Gentleman. Of course, we would have been interested to see his proposed amendment to the motion, suggesting that his Government should support, in all honesty, the essence of socialism, which he is so keen to promote. The most important point is that he has an opportunity to give expression to what he has been campaigning on.
  We have heard from many Members and it would be invidious, given the shortage of time, to try to mention them all, although, interestingly, my hon. Friend the Member for Ribble Valley (Mr. Evans) offered the

  943
  Secretary of State a job swap. In the resulting exchange, she appeared keen to have the opportunity to be a sub-postmistress if she were not re-elected to this place. We are interested to hear of the candidacy of Mrs. Patel, her local sub-postmistress, whom we would much enjoy seeing in the House.
  Apart from the community-led points and those on the criteria articulated by the hon. Member for Chorley (Mr. Hoyle)—we hope that he will join us in the Lobby this evening—the most important point is that the Government have made a series of attempts to change the way that people get their services, which is convenient to and focused on them.
  There is evidence of Government bias in terms of trying to force people to make a choice against their better instincts. The hon. Member for Northavon (Mr. Webb) made a telling point when he showed that the ready-for-work unemployed are not allowed to have the card account because, apparently, they have to be on the same basis as those who are waged in respect of bank accounts. Again, that is a restriction of choice. Given that the Secretary of State had no answer, that point rather nailed her.
  We are short of time and there are a lot of questions to answer in the 10 minutes remaining. Although many have referred to Planet Hewitt I am far from wanting to do so, given that the Minister will make the winding-up speech. We must consider the fact that in Pond World it is indeed dark and a bit creepy. Pond World is also very wet and blind to the world on earth, as the rest of us—our constituents and Conservative Members at least—recognise.
  What we see with our own eyes, through our constituency postbag, is deep concern about the restriction of choice and the Government's attempt to railroad people into behaving in a way that they feel is best for those people, rather than allowing people to behave in a way that they want to behave in and which they feel is best for them. They want certain services for themselves, and it is time that the Government listened. I hope that full account is taken of the debate so that we get another revision of Government policy, reflecting the will of the constituents whom we represent.
  4.7 pm
  The Parliamentary Under-Secretary of State for Work and Pensions: Never let it be said that the hon. Member for Eddisbury (Mr. O'Brien) lacks either wit or wisdom.
  We have had two parallel debates. The debate is entitled "Post Office Services", but almost all the contributions have been about direct payments. I want to address my initial remarks to that issue as we are going through a transfer to direct payment, which is a process of increasing customer choice, helping to address financial exclusion and improving access to financial services. That important point has hardly been mentioned this afternoon.
  Before Christmas, I met with a number of groups representing those most vulnerable to financial and social exclusion, such as Help the Aged, Mind, Citizens Advice and the Royal National Institute of the Blind. I can tell the House that all welcomed our attempts to bring more people into the financial mainstream.
  944
  One of the main reasons that I came into politics was to combat the poverty and social exclusion that were made so much worse by the previous Government. Financial exclusion is an important aspect of those. I had to smile when the hon. Member for Havant (Mr. Willetts) paraded himself as the friend of the poor and the pensioner. Labour Members remember precisely what he and the Conservative Government did in office.
  The nostalgia for the days of order books that we heard from the hon. Member for Northavon (Mr. Webb) is far removed from the drab reality that left 3.5 million of our citizens financially excluded. That is why Citizens Advice, which a number of Members, including my right hon. Friend the Secretary of State, referred to, points out that financial exclusion is one of the main mechanisms for creating that social exclusion in neighbourhoods and communities and for making it so much more difficult to deal with the eradication of child poverty. It also points out that where people suffer from financial exclusion they also suffer from more general exclusion.
  Mrs. Shephard: Will the Minister give way?
  Mr. Pond: No, I will make a little more progress.
  That is one of the reasons why we are introducing a more modern, efficient and reliable service that increases customer choice, provides better value for the taxpayer—[Interruption]—yes it does, and cuts fraud and boosts financial inclusion. More customers have opted to have their benefits and pensions paid into an account than by order book and cheque, including 6 million people who are now having their pensions paid into an account without problems. Is any Conservative Member seriously suggesting that we now withdraw that choice from people in the vain hope that somehow it will keep local post offices open?
  Andrew Selous: Will the Minister be good enough to acknowledge that no Conservative Member, or any Member, has called for everyone to go back to order books? We are calling for choice. We are just saying that those who want them should be able to keep them.
  Mr. Pond: Good. We have that on the record then.
  This Government believe very much in choice. We believe that post offices have a future as bright and welcoming places that provide high-quality services that people want to use and to which they want to return, not places to which people are tied in order to get their benefit or pension.
  Mrs. Shephard: Will the Minister give way?
  Mr. Pond: I am afraid that time is tight, and I cannot.
  Several hon. Members, including my hon. Friend the Member for Birmingham, Northfield (Richard Burden), the hon. Member for Cheadle (Mrs. Calton), the hon. Member for Ribble Valley (Mr. Evans) and my hon. Friend the Member for Chorley (Mr. Hoyle) made points about the importance of their local post offices to their local communities, which we believe to be very important. That is why we are investing £2 billion in the post office network, with £450 million going into rural post offices.

  945
  My right hon. Friend the Secretary of State and I have heard the concerns expressed about the consultation process. We have strengthened it, as she pointed out, but we recognise that people still have real concerns about the way in which those processes are being pursued. I advise hon. Members who are campaigning to maintain their post offices, as we are, to make absolutely sure that people continue to use those post offices, to encourage them to do so and to help them to recognize—
  Mr. Hoyle: I welcome my hon. Friend's comments. Will he please ensure that there is fair play over the proposed closures of the two post offices in Chorley, and that there is genuine consultation?
  Mr. Pond: We want to see genuine consultation. My right hon. Friend has confirmed that she is in favour of that.
  The challenge for post offices is to make sure that they can offer a range of financial services that allow them to have a vibrant future, which will encourage people to go back to them. By contrast, the Conservative motion is both misguided and opportunistic. Post Office card accounts can only be opened at post office branches—that is the fact. The Government have encouraged customers to use the account that best meets their needs and circumstances. Those who say that it is difficult for people to open a Post Office card account should explain why 2 million people have already done so. All of my Department's direct payment leaflets mention the Post Office card account and how to apply for one. The Post Office has its own leaflets—
  Mr. Bacon: Will the Minister give way?
  Mr. Pond: I have only two minutes and so am unable to do so.
  We are making sensible changes, offering customers a genuine choice. We have listened to customers and their representatives to ensure that we provide a system that meets their individual needs. All customers who want to continue receiving their pension benefit or tax credit through the post office can do so, and they will be able to continue to do so just as now. In recognition of the fact that a small proportion of people will not be able to operate an account, we are developing and designing an exceptions service, and I have been discussing its characteristics with those organisations representing the groups most directly affected.
  Mr. Bacon rose—Mr. Bacon rose—
  Mr. Pond: I cannot give way.
  A number of Members have made points about Powergen. I know that both Powergen and my right hon. Friend will have heard them. [Interruption.]
  Madam Deputy Speaker: Order. The Minister is replying.
  Mr. Pond: Thank you, Madam Deputy Speaker.
  My right hon. Friend and my hon. Friend the Member for Chorley suggested that there had been more crocodile tears from the Conservatives than would be necessary to raise the level of the Nile—
  Mr. Peter Luff rose in his place and claimed to move, That the Question be now put.
  Question, That the Question be now put, put and agreed to.
  Question put accordingly, That the original words stand part of the Question:—
  The House divided: Ayes 200, Noes 300.

  Division No. 107]

  [4:15 pm

  AYES

  Ainsworth, Peter (E Surrey)

  Field, Mark (Cities of London & Westminster)

  Allan, Richard

  Amess, David

  Forth, rh Eric

  Ancram, rh Michael

  Foster, Don (Bath)

  Arbuthnot, rh James

  Fox, Dr. Liam

  Atkinson, David (Bour'mith E)

  Francois, Mark

  Bacon, Richard

  Gale, Roger (N Thanet)

  Baker, Norman

  Garnier, Edward

  Baldry, Tony

  George, Andrew (St. Ives)

  Baron, John (Billericay)

  Gidley, Sandra

  Beggs, Roy (E Antrim)

  Gillan, Mrs Cheryl

  Beith, rh A. J.

  Goodman, Paul

  Bellingham, Henry

  Gray, James (N Wilts)

  Bercow, John

  Grayling, Chris

  Beresford, Sir Paul

  Green, Damian (Ashford)

  Blunt, Crispin

  Green, Matthew (Ludlow)

  Boswell, Tim

  Greenway, John

  Bottomley, Peter (Worthing W)

  Grieve, Dominic

  Bottomley, rh Virginia (SW Surrey)

  Gummer, rh John

  Hague, rh William

  Brady, Graham

  Hammond, Philip

  Brake, Tom (Carshalton)

  Hancock, Mike

  Brazier, Julian

  Harris, Dr. Evan (Oxford W & Abingdon)

  Breed, Colin

  Harvey, Nick

  Brooke, Mrs Annette L.

  Hawkins, Nick

  Browning, Mrs Angela

  Hayes, John (S Holland)

  Burns, Simon

  Heald, Oliver

  Burnside, David

  Heath, David

  Burstow, Paul

  Heathcoat-Amory, rh David

  Burt, Alistair

  Hermon, Lady

  Butterfill, Sir John

  Hoban, Mark (Fareham)

  Cable, Dr. Vincent

  Horam, John (Orpington)

  Calton, Mrs Patsy

  Howard, rh Michael

  Cameron, David

  Hughes, Simon (Southwark N)

  Campbell, Gregory (E Lond'y)

  Hunter, Andrew

  Carmichael, Alistair

  Jack, rh Michael

  Cash, William

  Johnson, Boris (Henley)

  Chapman, Sir Sydney (Chipping Barnet)

  Jones, Nigel (Cheltenham)

  Keetch, Paul

  Chope, Christopher

  Kennedy, rh Charles (Ross Skye & Inverness)

  Clappison, James

  Clarke, rh Kenneth (Rushcliffe

  Key, Robert (Salisbury)

  Clifton-Brown, Geoffrey

  Kirkbride, Miss Julie

  Collins, Tim

  Kirkwood, Sir Archy

  Conway, Derek

  Knight, rh Greg (E Yorkshire)

  Cormack, Sir Patrick

  Laing, Mrs Eleanor

  Cotter, Brian

  Lait, Mrs Jacqui

  Cran, James (Beverley)

  Lamb, Norman

  Curry, rh David

  Laws, David (Yeovil)

  Davey, Edward (Kingston)

  Leigh, Edward

  Davies, Quentin (Grantham &

  Stamford)

  Letwin, rh Oliver

  Liddell-Grainger, Ian

  Davis, rh David (Haltemprice &

  Howden)

  Llwyd, Elfyn

  Loughton, Tim

  Djanogly, Jonathan

  Luff, Peter (M-Worcs)

  Dodds, Nigel

  McIntosh, Miss Anne

  Donaldson, Jeffrey M.

  Mackay, rh Andrew

  Dorrell, rh Stephen

  Maclean, rh David

  Doughty, Sue

  McLoughlin, Patrick

  Duncan, Alan (Rutland)

  Malins, Humfrey

  Duncan Smith, rh lain

  Marsden, Paul (Shrewsbury & Atcham)

  Evans, Nigel

  Ewing, Annabelle

  Mawhinney, rh Sir Brian

  Fallon, Michael

  Mercer, Patrick

  Moore, Michael

  Stunell, Andrew

  Moss, Malcolm

  Swayne, Desmond

  Murrison, Dr. Andrew

  Swire, Hugo (E Devon)

  Norman, Archie

  Syms, Robert

  Oaten, Mark (Winchester)

  Tapsell, Sir Peter

  O'Brien, Stephen (Eddisbury)

  Taylor, Ian (Esher)

  Osborne, George (Tatton)

  Taylor, John (Solihull)

  Ottaway, Richard

  Taylor, Matthew (Truro)

  Page, Richard

  Taylor, Dr. Richard (Wyre F)

  Paterson, Owen

  Taylor, Sir Teddy

  Pickles, Eric

  Teather, Sarah

  Portillo, rh Michael

  Thomas, Simon (Ceredigion)

  Price, Adam (E Carmarthen &Dinefwr)

  Thurso, John

  Tredinnick, David

  Prisk, Mark (Hertford)

  Trend, Michael

  Randall, John

  Trimble, rh David

  Redwood, rh John

  Turner, Andrew (Isle of Wight)

  Reid, Alan (Argyll &Bute)

  Tyler, Paul (N Cornwall)

  Rendel, David

  Tyrie, Andrew

  Robathan, Andrew

  Viggers, Peter

  Robertson, Angus (Moray)

  Walter, Robert

  Robertson, Hugh (Faversham &M- Kent)

  Waterson, Nigel

  Watkinson, Angela

  Robertson, Laurence (Tewk'b'ry)

  Webb, Steve (Northavon)

  Rosindell, Andrew

  Weir, Michael

  Ruffley David

  Whittingdale, John

  Russell, Bob (Colchester)

  Widdecombe, rh Miss Ann

  Sanders, Adrian

  Wiggin, Bill

  Sayeed, Jonathan

  Willetts, David

  Selous, Andrew

  Williams, Hywel (Caernarfon)

  Shephard, rh Mrs Gillian

  Williams, Roger (Brecon)

  Shepherd, Richard

  Wilshire, David

  Simmonds, Mark

  Winterton, Ann (Congleton)

  Simpson, Keith (M-Norfolk)

  Winterton, Sir Nicholas (Macclesfield)

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

  Wishart, Pete

  Smyth, Rev. Martin (Belfast S)

  Yeo, Tim (S Suffolk)

  Soames, Nicholas

  Young, rh Sir George

  Spicer, Sir Michael

  Younger-Ross, Richard

  Spink, Bob (Castle Point)

  Spring, Richard

  Tellers for the Ayes:

  Steen, Anthony

  Gregory Barker and

  Streeter, Gary

  Mr. Peter Atkinson

  NOES

  Abbott, Ms Diane

  Brown, rh Gordon (Dunfermline E)

  Adams, Irene (Paisley N)

  Ainger, Nick

  Brown, rh Nicholas (Newcastle E Wallsend)

  Ainsworth, Bob (Cov'try NE)

  Alexander, Douglas

  Brown, Russell (Dumfries)

  Allen, Graham

  Browne, Desmond

  Anderson, Janet (Rossendale &Darwen)

  Buck, Ms Karen

  Burden, Richard

  Armstrong, rh Ms Hilary

  Burgon, Colin

  Atherton, Ms Candy

  Burnham, Andy

  Atkins, Charlotte

  Byers, rh Stephen

  Austin, John

  Caborn, rh Richard

  Bailey, Adrian

  Cairns, David

  Baird, Vera

  Campbell, Alan (Tynemouth)

  Banks, Tony

  Campbell, Mrs Anne (C'bridge)

  Barnes, Harry

  Campbell, Ronnie (Blyth V)

  Barron, rh Kevin

  Caplin, Ivor

  Battle, John

  Casale, Roger

  Bayley, Hugh

  Caton, Martin

  Beard, Nigel

  Cawsey, Ian (Brigg)

  Benton, Joe (Bootle)

  Challen, Colin

  Berry, Roger

  Chapman, Ben (Wirral S)

  Best, Harold

  Clapham, Michael

  Blackman, Liz

  Clark, Mrs Helen (Peterborough)

  Blears, Ms Hazel

  Clarke, rh Charles (Norwich S)

  Blizzard, Bob

  Clarke, rh Tom (Coatbridge &Chryston)

  Bradley, rh Keith (Withington)

  Bradley, Peter (The Wrekin)

  Clarke, Tony (Northampton S)

  Brennan, Kevin

  Clelland, David

  Coaker, Vernon

  Hope, Phil (Corby)

  Coffey, Ms Ann

  Hopkins, Kelvin

  Cohen, Harry

  Howarth, rh Alan (Newport E)

  Coleman, lain

  Howarth, George (Knowsley N &Sefton E)

  Colman, Tony

  Connarty, Michael

  Howells, Dr. Kim

  Cooper, Yvette

  Hoyle, Lindsay

  Corbyn, Jeremy

  Hughes, Beverley (Stretford &Urmston)

  Corston, Jean

  Cousins, Jim

  Hughes, Kevin (Doncaster N)

  Crausby, David

  Humble, Mrs Joan

  Cruddas, Jon

  Hurst, Alan (Braintree)

  Cryer, Ann (Keighley)

  Hutton, rh John

  Cummings, John

  Iddon, Dr. Brian

  Cunningham, rh Dr. Jack(Copeland)

  Ingram, rh Adam

  Irranca-Davies, Huw

  Cunningham, Jim (Coventry S)

  Jackson, Glenda (Hampstead &Highgate)

  Cunningham, Tony (Workington)

  Darling, rh Alistair

  Jenkins, Brian

  David, Wayne

  Jones, Jon Owen (Cardiff C)

  Davidson, Ian

  Jones, Kevan (N Durham)

  Davies, rh Denzil (Llanelli)

  Jones, Martyn (Clwyd S)

  Dawson, Hilton

  Jowell, rh Tessa

  Dhanda, Parmjit

  Keeble, Ms Sally

  Dismore, Andrew

  Keen, Ann (Brentford)

  Dobbin, Jim (Heywood)

  Kelly, Ruth (Bolton W)

  Dobson, rh Frank

  Kemp, Fraser

  Donohoe, Brian H.

  Khabra, Piara S.

  Doran, Frank

  Kidney, David

  Dowd, Jim (Lewisham W)

  Kilfoyle, Peter

  Drew, David (Stroud)

  King, Andy (Rugby)

  Drown, Ms Julia

  King, Ms Oona (Bethnal Green &Bow)

  Dunwoody, Mrs Gwyneth

  Eagle, Angela (Wallasey)

  Knight, Jim (S Dorset)

  Eagle, Maria (L'pool Garston)

  Kumar, Dr. Ashok

  Edwards, Huw

  Ladyman, Dr. Stephen

  Efford, Clive

  Lammy, David

  Ellman, Mrs Louise

  Lawrence, Mrs Jackie

  Farrelly, Paul

  Laxton, Bob (Derby N)

  Field, rh Frank (Birkenhead)

  Lazarowicz, Mark

  Fisher, Mark

  Lepper, David

  Fitzpatrick, Jim

  Leslie, Christopher

  Fitzsimons, Mrs Lorna

  Levitt, Tom (High Peak)

  Follett, Barbara

  Lewis, Ivan (Bury S)

  Foster, Michael (Worcester)

  Lewis, Terry (Worsley)

  Foster, Michael Jabez (Hastings&Rye)

  Liddell, rh Mrs Helen

  Linton, Martin

  Francis, Dr. Hywel

  Lloyd, Tony (Manchester C)

  Gapes, Mike (llford S)

  Love, Andrew

  George, rh Bruce (Walsall S)

  Lucas, Ian (Wrexham)

  Gerrard, Neil

  Luke, lain (Dundee E)

  Gibson, Dr. Ian

  Lyons, John (Strathkelvin)

  Gilroy, Linda

  McAvoy, Thomas

  Godsiff, Roger

  McCabe, Stephen

  Goggins, Paul

  McCartney, rh Ian

  Griffiths, Nigel (Edinburgh S)

  McDonagh, Siobhain

  Griffiths, Win (Bridgend)

  MacDonald, Calum

  Grogan, John

  McDonnell, John

  Hain, rh Peter

  MacDougall, John

  Hall, Patrick (Bedford)

  McFall, John

  Hamilton, David (Midlothian)

  McGuire, Mrs Anne

  Hanson, David

  Mclsaac, Shona

  Harman, rh Ms Harriet

  McKechin, Ann

  Harris, Tom (Glasgow Cathcart)

  McKenna, Rosemary

  Havard, Dai (Merthyr Tydfil &Rhymney)

  Mackinlay, Andrew

  McNulty, Tony

  Healey, John

  Mactaggart, Fiona

  Henderson, Doug (Newcastle N) McWalter, Tony

  Hendrick, Mark

  McWilliam, John

  Hepburn, Stephen

  Mahmood, Khalid

  Hesford, Stephen

  Mahon, Mrs Alice

  Hewitt, rh Ms Patricia

  Mallaber, Judy

  Heyes, David

  Mann, John (Bassetlaw)

  Hill, Keith (Streatham)

  Marris, Rob (Wolverh'ton SW)

  Hood, Jimmy (Clydesdale)

  Marsden, Gordon (Blackpool S)

  Hoon, rh Geoffrey

  Marshall-Andrews, Robert

  Martlew, Eric

  Singh, Marsha

  Meacher, rh Michael

  Skinner, Dennis

  Michael, rh Alun

  Smith, Jacqui (Redditch)

  Milburn, rh Alan

  Smith, Llew (Blaenau Gwent)

  Miller, Andrew

  Soley, Clive

  Moffatt, Laura

  Spellar, rh John

  Moonie, Dr. Lewis

  Squire, Rachel

  Moran, Margaret

  Steinberg, Gerry

  Morgan, Julie

  Stevenson, George

  Mountford, Kali

  Stewart, David (Inverness E &Lochaber)

  Mudie, George

  Munn, Ms Meg

  Stewart, Ian (Eccles)

  Murphy, Jim (Eastwood)

  Stinchcombe, Paul

  Naysmith, Dr. Doug

  Stoate, Dr. Howard

  Norris, Dan (Wansdyke)

  Strang, rh Dr. Gavin

  O'Brien, Bill (Normanton)

  Stringer, Graham

  O'Brien, Mike (N Warks)

  Stuart, Ms Gisela

  O'Hara, Edward

  Sutcliffe, Gerry

  O'Neill, Martin

  Tami, Mark (Alyn)

  Organ, Diana

  Taylor, Dan (Stockton S)

  Osborne, Sandra (Ayr)

  Taylor, David (NW Leics)

  Owen, Albert

  Thomas, Gareth (Clwyd W)

  Palmer, Dr. Nick

  Timms, Stephen

  Perham, Linda

  Tipping, Paddy

  Pickthall, Colin

  Trickett, Jon

  Pike, Peter (Burnley)

  Truswell, Paul

  Plaskitt, James

  Turner, Dennis (Wolverh'ton SE)

  Pond, Chris (Gravesham)

  Turner, Dr. Desmond (Brighton Kemptown)

  Pope, Greg (Hyndburn)

  Pound, Stephen

  Twigg, Derek (Halton)

  Prentice, Ms Bridget (Lewisham E)

  Twigg, Stephen (Enfield)

  Tynan, Bill (Hamilton S)

  Primarolo, rh Dawn

  Walley, Ms Joan

  Prosser, Gwyn

  Ward, Claire

  Purchase, Ken

  Wareing, Robert N.

  Purnell, James

  Watts, David

  Quin, rh Joyce

  White, Brian

  Quinn, Lawrie

  Whitehead, Dr. Alan

  Rapson, Syd (Portsmouth N)

  Wicks, Malcolm

  Reed, Andy (Loughborough)

  Williams, rh Alan (Swansea W)

  Robertson, John (Glasgow Anniesland)

  Williams, Betty (Conwy)

  Wills, Michael

  Robinson, Geoffrey (Coventry NW)

  Wilson, Brian

  Winnick, David

  Roche, Mrs Barbara

  Winterton, Ms Rosie (Doncaster C)

  Rooney, Terry

  Ross, Ernie (Dundee W)

  Wood, Mike (Batley)

  Ruane, Chris

  Woolas, Phil

  Ruddock, Joan

  Wright, Anthony D. (Gt Yarmouth)

  Ryan, Joan (Enfield N)

  Salter, Martin

  Wright, David (Telford)

  Savidge, Malcolm

  Wright, Tony (Cannock)

  Sawford, Phil

  Sedgemore, Brian

  Tellers for the Noes:

  Sheridan, Jim

  Gillian Merron and

  Simpson, Alan (Nottingham S)

  Mr. John Heppell

  Question accordingly negatived.
  Question, That the proposed words be there added,put forthwith, pursuant to Standing Order No. 31 (Questions on amendments):—
  The House divided: Ayes 297, Noes 196.

  Division No. 108]

  [4:29 pm

  AYES

  Abbott, Ms Diane

  Armstrong, rh Ms Hilary

  Adams, Irene (Paisley N)

  Atherton, Ms Candy

  Ainger, Nick

  Atkins, Charlotte

  Ainsworth, Bob (Cov'try NE)

  Austin, John

  Alexander, Douglas

  Bailey, Adrian

  Allen, Graham

  Baird, Vera

  Anderson, Janet (Rossendale &Darwen)

  Banks, Tony

  Barnes, Harry

  Barron, rh Kevin

  Edwards, Huw

  Battle, John

  Efford, Clive

  Bayley, Hugh

  Ellman, Mrs Louise

  Beard, Nigel

  Farrelly, Paul

  Benton, Joe (Bootle)

  Field, rh Frank (Birkenhead)

  Berry, Roger

  Fisher, Mark

  Best, Harold

  Fitzpatrick, Jim

  Blackman, Liz

  Fitzsimons, Mrs Lorna

  Blears, Ms Hazel

  Follett, Barbara

  Blizzard, Bob

  Foster, Michael (Worcester)

  Bradley, rh Keith (Withington)

  Foster, Michael Jabez (Hastings&Rye)

  Bradley, Peter (The Wrekin)

  Brennan, Kevin

  Francis, Dr. Hywel

  Brown, rh Nicholas (Newcastle E Wallsend)

  Gapes, Mike (llford S)

  Gardiner, Barry

  Brown, Russell (Dumfries)

  George, rh Bruce (Walsall S)

  Browne, Desmond

  Gerrard, Neil

  Buck, Ms Karen

  Gibson, Dr. Ian

  Burden, Richard

  Gilroy, Linda

  Burgon, Colin

  Godsiff, Roger

  Burnham, Andy

  Goggins, Paul

  Byers, rh Stephen

  Griffiths, Nigel (Edinburgh S)

  Caborn, rh Richard

  Griffiths, Win (Bridgend)

  Cairns, David

  Grogan, John

  Campbell, Alan (Tynemouth)

  Hain, rh Peter

  Campbell, Mrs Anne (C'bridge)

  Hall, Patrick (Bedford)

  Campbell, Ronnie (Blyth V)

  Hamilton, David (Midlothian)

  Caplin, Ivor

  Hanson, David

  Casale, Roger

  Harman, rh Ms Harriet

  Caton, Martin

  Harris, Tom (Glasgow Cathcart)

  Cawsey, Ian (Brigg)

  Havard, Dai (Merthyr Tydfil &Rhymney)

  Challen, Colin

  Chapman, Ben (Wirral S)

  Healey, John

  Clapham, Michael

  Henderson, Doug (Newcastle N)

  Clark, Mrs Helen (Peterborough)

  Hendrick, Mark

  Clarke, rh Charles (Norwich S)

  Hepburn, Stephen

  Clarke, rh Tom (Coatbridge &Chryston)

  Hesford, Stephen

  Hewitt, rh Ms Patricia

  Clarke, Tony (Northampton S)

  Heyes, David

  Clelland, David

  Hill, Keith (Streatham)

  Coaker, Vernon

  Hood, Jimmy (Clydesdale)

  Coffey, Ms Ann

  Hoon, rh Geoffrey

  Cohen, Harry

  Hope, Phil (Corby)

  Coleman, lain

  Hopkins, Kelvin

  Colman, Tony

  Howarth, rh Alan (Newport E)

  Connarty, Michael

  Howarth, George (Knowsley N &Sefton E)

  Cooper, Yvette

  Corbyn, Jeremy

  Howells, Dr. Kim

  Corston, Jean

  Hoyle, Lindsay

  Cousins, Jim

  Hughes, Beverley (Stretford &Urmston)

  Cranston, Ross

  Crausby, David

  Hughes, Kevin (Doncaster N)

  Cruddas, Jon

  Humble, Mrs Joan

  Cryer, Ann (Keighley)

  Hurst, Alan (Braintree)

  Cummings, John

  Hutton, rh John

  Cunningham, rh Dr. Jack(Copeland)

  Iddon, Dr. Brian

  Irranca-Davies, Huw

  Cunningham, Jim (Coventry S)

  Jackson, Glenda (Hampstead &Highgate)

  Cunningham, Tony (Workington)

  Darling, rh Alistair

  Jamieson, David

  David, Wayne

  Jenkins, Brian

  Davidson, Ian

  Jones, Jon Owen (Cardiff C)

  Davies, rh Denzil (Llanelli)

  Jones, Kevan (N Durham)

  Dawson, Hilton

  Jones, Martyn (Clwyd S)

  Dhanda, Parmjit

  Jowell, rh Tessa

  Dismore, Andrew

  Keeble, Ms Sally

  Dobbin, Jim (Heywood)

  Keen, Ann (Brentford)

  Dobson, rh Frank

  Kelly, Ruth (Bolton W)

  Donohoe, Brian H.

  Kemp, Fraser

  Doran, Frank

  Khabra, Piara S.

  Dowd, Jim (Lewisham W)

  Kidney, David

  Drew, David (Stroud)

  Kilfoyle, Peter

  Drown, Ms Julia

  King, Andy (Rugby)

  Dunwoody, Mrs Gwyneth

  King, Ms Oona (Bethnal Green &Bow)

  Eagle, Angela (Wallasey)

  Eagle, Maria (L'pool Garston)

  Knight, Jim (S Dorset)

  Kumar, Dr. Ashok

  Purnell, James

  Ladyman, Dr. Stephen

  Quin, rh Joyce

  Lammy, David

  Quinn, Lawrie

  Lawrence, Mrs Jackie

  Rapson, Syd (Portsmouth N)

  Laxton, Bob (Derby N)

  Reed, Andy (Loughborough)

  Lazarowicz, Mark

  Robertson, John (Glasgow Anniesland)

  Lepper, David

  Leslie, Christopher

  Roche, Mrs Barbara

  Levitt, Tom (High Peak)

  Rooney, Terry

  Lewis, Ivan (Bury S)

  Ross, Ernie (Dundee W)

  Lewis, Terry (Worsley)

  Ruane, Chris

  Liddell, rh Mrs Helen

  Ruddock, Joan

  Linton, Martin

  Ryan, Joan (Enfield N)

  Lloyd, Tony (Manchester C)

  Salter, Martin

  Love, Andrew

  Savidge, Malcolm

  Lucas, Ian (Wrexham)

  Sawford, Phil

  Luke, lain (Dundee E)

  Sedgemore, Brian

  Lyons, John (Strathkelvin)

  Sheridan, Jim

  McAvoy, Thomas

  Simpson, Alan (Nottingham S)

  McCabe, Stephen

  Singh, Marsha

  McCartney, rh Ian

  Skinner, Dennis

  McDonagh, Siobhain

  Smith, Jacqui (Redditch)

  MacDonald, Calum

  Smith, Llew (Blaenau Gwent)

  McDonnell, John

  Soley, Clive

  MacDougall, John

  Spellar, rh John

  McFall, John

  Squire, Rachel

  McGuire, Mrs Anne

  Steinberg, Gerry

  Mclsaac, Shona

  Stevenson, George

  McKechin, Ann

  Stewart, David (Inverness E &Lochaber)

  Mackinlay, Andrew

  McNulty, Tony

  Stewart, Ian (Eccles)

  Mactaggart, Fiona

  Stinchcombe, Paul

  McWalter, Tony

  Stoate, Dr. Howard

  McWilliam, John

  Strang, rh Dr. Gavin

  Mahmood, Khalid

  Stringer, Graham

  Mallaber, Judy

  Stuart, Ms Gisela

  Mann, John (Bassetlaw)

  Sutcliffe, Gerry

  Marris, Rob (Wolverh'ton SW)

  Tami, Mark (Alyn)

  Marsden, Gordon (Blackpool S)

  Taylor, Dari (Stockton S)

  Marshall-Andrews, Robert

  Taylor, David (NW Leics)

  Martlew, Eric

  Thomas, Gareth (Clwyd W)

  Meacher, rh Michael

  Timms, Stephen

  Michael, rh Alun

  Tipping, Paddy

  Milburn, rh Alan

  Trickett, Jon

  Miller, Andrew

  Truswell, Paul

  Moffatt, Laura

  Turner, Dennis (Wolverh'ton SE)

  Moonie, Dr. Lewis

  Turner, Dr. Desmond (Brighton Kemptown)

  M, oran Margaret

  Morgan, Julie

  Mountford, Kali

  Twigg, Derek (Halton)

  Mudie, George

  Twigg, Stephen (Enfield)

  Munn, Ms Meg

  Tynan, Bill (Hamilton S)

  Murphy, Jim (Eastwood)

  Walley, Ms Joan

  Naysmith, Dr. Doug

  Ward, Claire

  Norris, Dan (Wansdyke)

  Wareing, Robert N.

  O'Brien, Bill (Normanton)

  Watts, David

  O'Brien, Mike (N Warks)

  White, Brian Edward

  O, 'Hara

  Whitehead, Dr. Alan

  O'Neill, Martin

  Wicks, Malcolm

  Organ, Diana

  Williams, rh Alan (Swansea W)

  Osborne, Sandra (Ayr)

  Williams, Betty (Convey)

  Owen, Albert

  Wills, Michael

  Palmer, Dr. Nick

  Winnick, David

  Perham Linda

  Winterton, Ms Rosie (Doncaster C)

  Pickthall, Colin

  Pike, Peter (Burnley)

  Wood, Mike (Batley)

  Plaskitt, James

  Woolas, Phil

  Pond, Chris (Gravesham)

  Wright, Anthony D. (Gt Yarmouth)

  Pope, Greg (Hyndburn)

  Pound, Stephen

  Wright, David (Telford)

  Prentice, Ms Bridget (Lewisham E)

  Wright, Tony (Cannock)

  Primarolo, rh Dawn

  Tellers for the Ayes:

  Prosser, Gwyn

  Gillian Merron and

  Purchase, Ken

  Mr. John Heppell

  NOES

  Ainsworth, Peter (E Surrey)

  Gray, James (N Wilts)

  Allan, Richard

  Grayling, Chris

  Amess, David

  Green, Matthew (Ludlow)

  Ancram, rh Michael

  Greenway, John

  Arbuthnot, rh James

  Gummer, rh John

  Atkinson, David (Bour'mth E)

  Hague, rh William

  Bacon, Richard

  Hammond, Philip

  Baker, Norman

  Hancock, Mike

  Baldry, Tony

  Harris, Dr. Evan (Oxford W &Abingdon)

  Baron, John (Billericay)

  Beggs, Roy (E Antrim)

  Harvey, Nick

  Beith, rh A. J.

  Hawkins, Nick

  Bellingham, Henry

  Hayes, John (S Holland)

  Bercow, John

  Heald, Oliver

  Beresford, Sir Paul

  Heath, David

  Blunt, Crispin

  Heathcoat-Amory, rh David

  Boswell, Tim

  Hermon, Lady

  Bottomley, Peter (Worthing W)

  Hoban, Mark (Fareham)

  Bottomley, rh Virginia (SW Surrey)

  Horam, John (Orpington)

  Howard, rh Michael

  Brady, Graham

  Hughes, Simon (Southwark N)

  Brake, Tom (Carshalton)

  Jack, rh Michael

  Brazier, Julian

  Johnson, Boris (Henley)

  Breed, Colin

  Jones, Nigel (Cheltenham)

  Brooke, Mrs Annette L.

  Keetch, Paul

  Browning, Mrs Angela

  Kennedy, rh Charles (Ross Skye &Inverness)

  Burns, Simon

  Burnside, David

  Key, Robert (Salisbury)

  Burstow, Paul

  Kirkbride, Miss Julie

  Burt, Alistair

  Kirkwood, Sir Archy

  Butterfill, Sir John

  Knight, rh Greg (E Yorkshire)

  Cable, Dr. Vincent

  Laing, Mrs Eleanor

  Calton, Mrs Patsy

  Lait, Mrs Jacqui

  Cameron, David

  Lamb, Norman

  Campbell, Gregory (E Lond'y)

  Laws, David (Yeovil)

  Carmichael, Alistair

  Leigh, Edward

  Cash, William

  Letwin, rh Oliver

  Chapman, Sir Sydney (Chipping Barnet)

  Liddell-Grainger, Ian

  Lilley, rh Peter

  Chope, Christopher

  Llwyd, Elfyn

  Clappison, James

  Loughton, Tim

  Clarke, rh Kenneth (Rushcliffe)

  Luff, Peter (M-Worcs)

  Clifton-Brown, Geoffrey

  McIntosh, Miss Anne

  Collins, Tim

  Mackay, rh Andrew

  Conway, Derek

  Maclean, rh David

  Cormack, Sir Patrick

  McLoughlin, Patrick

  Cotter, Brian

  Malins, Humfrey

  Cran, James (Beverley)

  Marsden, Paul (Shrewsbury &Atcham)

  Curry, rh David

  Davey, Edward (Kingston)

  Mawhinney, rh Sir Brian

  Davies, Quentin (Grantham &Stamford)

  Mercer, Patrick

  Moore, Michael

  Davis, rh David (Haltemprice &Howden)

  Moss, Malcolm

  Murrison, Dr. Andrew

  Djanogly, Jonathan

  Norman, Archie

  Dodds, Nigel

  Oaten, Mark (Winchester)

  Donaldson, Jeffrey M.

  O'Brien, Stephen (Eddisbury)

  Dorrell, rh Stephen

  Osborne, George (Tatton)

  Doughty, Sue

  Ottaway, Richard

  Duncan, Alan (Rutland)

  Paice, James

  Duncan Smith, rh lain

  Paterson, Owen

  Evans, Nigel

  Pickles, Eric

  Ewing, Annabelle

  Portillo, rh Michael

  Fallon, Michael

  Price, Adam (E Carmarthen &Dinefwr)

  Field, Mark (Cities of London &

  Westminster

  Prisk, Mark (Hertford)

  Forth, rh Eric

  Randall, John

  Foster, Don (Bath)

  Redwood, rh John

  Francois, Mark

  Reid, Alan (Argyll &Bute)

  Gale, Roger (N Thanet)

  Rendel, David

  Garnier, Edward

  Robathan, Andrew

  George, Andrew (St. Ives)

  Robertson, Angus (Moray)

  Gidley, Sandra

  Robertson, Hugh (Faversham &M-Kent)

  Gillan, Mrs Cheryl

  Goodman, Paul

  Robertson, Laurence (Tewk'b'ry)

  Ruffley, David

  Tredinnick, David

  Russell, Bob (Colchester)

  Trend, Michael

  Sanders, Adrian

  Trimble, rh David

  Sayeed, Jonathan

  Turner, Andrew (Isle of Wight)

  Selous, Andrew

  Tyler, Paul (N Cornwall)

  Shephard, rh Mrs Gillian

  Tyrie, Andrew

  Shepherd, Richard

  Viggers, Peter

  Simmonds, Mark

  Walter, Robert

  Simpson, Keith (M-Norfolk)

  Waterson, Nigel

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

  Watkinson, Angela

  Webb, Steve (Northavon)

  Smyth, Rev. Martin (Belfast S)

  Weir, Michael

  Soames, Nicholas

  Whittingdale, John

  Spicer, Sir Michael

  Widdecombe, rh Miss Ann

  Spink, Bob (Castle Point)

  Wiggin, Bill

  Spring, Richard

  Willetts, David

  Steen, Anthony

  Williams, Hywel (Caernarfon)

  Streeter, Gary

  Williams, Roger (Brecon)

  Stunell, Andrew

  Willis, Phil

  Swayne, Desmond

  Wilshire, David

  Swire, Hugo (E Devon)

  Winterton, Ann (Congleton)

  Syms, Robert

  Winterton, Sir Nicholas(Macclesfield)

  Tapsell, Sir Peter

  Taylor, Ian (Esher)

  Wishart, Pete

  Taylor, John (Solihull)

  Yeo, Tim (S Suffolk)

  Taylor, Matthew (Truro)

  Young, rh Sir George

  Taylor, Dr. Richard (Wyre F)

  Younger-Ross, Richard

  Taylor, Sir Teddy

  Teather, Sarah

  Tellers for the Noes:

  Thomas, Simon (Ceredigion)

  Gregory Barker and

  Thurso, John

  Mr. Peter Atkinson

  Question accordingly agreed to.
  MADAM DEPUTY SPEAKER forthwith declared the main Question, as amended, to be agreed to.
  Resolved,
  That this House supports the Government's strategy to modernise the way benefits and pensions are paid, and to provide customers with a choice of accounts; welcomes the fact that with Direct Payment customers will still be able to collect their cash from the Post Office if they wish using a current account or basic bank account with Post Office access or the Post Office Card Account; notes the Government's plans for a cheque payment, cashable at post offices, for people who cannot be paid through an account; recognises that Direct Payment is a more modern, efficient and secure method of payment which will also help increase financial inclusion; welcomes the fact that more customers are now paid through an account than by order book without problems, including nearly six million pensioners; notes the previous government's attempt to introduce a Benefit Payment Card, which wasted millions of pounds of tax-payers' money; notes the fact that the Post Office had not until recently kept up with changes in customer demand and so had seen transaction volumes dropping and losses increasing; recognises the need for change and congratulates the Government for taking decisive action to help turn the business around; welcomes the record £2 billion investment in the Post Office network over a five-year period, including £450 million for the rural network and £210 million to modernise the urban network; and believes that this will help ensure a viable Post Office network that people will want to use.

  DEFERRED DIVISION
  Madam Deputy Speaker: I now have to announce the results of the Division deferred from a previous day on the question relating to Fisheries: Catch Quotas and Effort Limitation 2004. The Ayes were 255 and the Noes were 149, so the Question was agreed to.
  [The Division List is published at the end of today's debates.]

Orders of the Day
  European Parliamentary and Local Elections (Pilots) Bill
  Lords message considered [18 March)

  Lords amendment 1D
  4.42 pm
  The Parliamentary Under-Secretary of State for Constitutional Affairs: I beg to move, That this House disagrees with Lords amendment 1D to Commons amendment 1C.
  The amendment would abrogate the powers of this House of Commons and the Government to decide which regions to select for all-postal voting in the forthcoming local and European elections in June, and pass that decision to the Electoral Commission. It is yet another attempt by the other place to overturn the will of this House of Commons. It would be a nonsensical position for this House to adopt.
  Mr. Patrick McLoughlinrose
  Mr. Leslie: Speaking of nonsensical, I give way to the hon. Gentleman.
  Mr. McLoughlin: I am grateful to the Minister for giving way, although it is a pity that he cannot do so in the normal courteous way. I am sure that he was in his place earlier when the Deputy Prime Minister said that it was unacceptable for an unelected House to do what it is doing on this Bill. Why should we then rely so much, as the Government wish us to do, on the Electoral Commission, which is also unelected?
  Mr. Leslie: The hon. Gentleman aids my case. I do not want the House to accept Lords amendment I D. We should not give the decision to the Electoral Commission. We have the responsibility as legislators to listen to its advice, but ultimately it is for us to accept or reject its advice. Indeed, the Electoral Commission has itself made that point. It does not want to make the decision. Sam Younger wrote to the Deputy Prime Minister only yesterday to say that its role was to advise. The letter says:
  "the choice of pilot regions for all-postal voting is for Government and Parliament to decide. The Commission's role is … advisory and it is not for us to say yes or no to pilots in particular areas."
  The Electoral Commission disagrees with the Government about the scale of postal voting. It feels that four regions are too many. The Government disagree, but it is for the House of Commons to reach a final conclusion. We have made our view known time and again, and it is now time to reiterate it.
  Mr. John Redwood: I am grateful to the Minister for graciously giving way. What is the point of a reformed House of Lords, which we were told now had more authority, if every time that it comes up with a good idea, Ministers slap it down and vote it down?
  Mr. Leslie: If the right hon. Gentleman seriously thinks that he can explain to his constituents that, no matter what they may want or for whom they may vote, they will not be able to secure reforms because the other place takes a different view and if he feels that that is a legitimate way for us to govern the country, surely the dividing lines between the two parties have never been any clearer.
  As I have said, the Electoral Commission has made its views known about the scale of postal voting. We disagree with its view that four regions are too many and we feel that postal voting can go ahead in those regions. Yet the Electoral Commission has also said that, as well as the east midlands and the north-east proceeding, we should consider those regions that it defined as potentially suitable, including Yorkshire and the northwest. We wish to proceed with those two regions, thus making up the four regions that we recommend. The House has ratified that decision time and again.
  Returning officers, especially in Yorkshire and the north-west, are now more resolute and more certain that they want to proceed with all-postal voting. Surely they are in the best position to know the ability of those regions to proceed. If they are telling us that they want to move ahead, not on the conventional basis but with all-postal voting, we should listen to them.
  It would be remiss of us to neglect the fact that the referendums on elected regional government are approaching in October. The Electoral Commission has said that it welcomes postal voting in the three northern regions on that occasion, and we need to bear in mind the virtues of consistency between those referendums and what will take place in June. It would be wrong of us not to bear that in mind in the decisions that we take.
  Jon Trickett: Does my hon. Friend agree with the estimate that probably an extra 2 million people would vote under the postal voting system compared with the traditional system? Has it occurred to him that the governing party is clearly on the side of increasing the number of people who vote, whereas the Opposition parties might be seeking tactical advantage by encouraging a diminution in that number?
  Mr. Leslie: My hon. Friend makes a reasonable point, and we need to start asking the Opposition parties why they have been using the other place to block what I regard as a perfectly reasonable innovation in our democracy that will ensure that we make it more convenient and easy for people to express their views in our constitution.
  Mr. David Watts: Does my hon. Friend agree that we are hearing a lot about what the Electoral Commission and the Lords want, but not a lot about what voters want? Does he also agree that the vast majority of voters in Britain and in those regions want to use their postal votes, as my hon. Friend the Member for Hemsworth (Jon Trickett) has just suggested?
  Mr. Leslie: The point that my hon. Friend makes stands well. We are elected to the House of Commons, which is where we are accountable to the population for the decisions that we take. If we decide to proceed with
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  pilot all-postal voting in four regions, how can we explain to the electorate—our constituents—that we cannot manage to do so because the other place decides to thwart that view?
  David Winnick: Is it not outright impertinence for those in the unelected Chamber to try to set down voting procedures when the House of Commons has made its decision? Should we not tell them so now?
  Mr. Leslie: My hon. Friend makes his point so strongly that it could be heard in the other Chamber as we speak. Indeed, it needs to be heard in the other Chamber. It is about time that we faced up to the fact that this House of Commons has made its view known and repeated its view, and that we now need to resolve the issue. We should not let the issue drift further. The Lords need to back down on this matter.
  Mr. Lindsay Hoyle: It has quite rightly been stated that the matter before us is for this House to decide, because we are the elected House, we represent the people and we represent the electorate out there. Therefore, does my hon. Friend agree that this decision should be taken here, not by an unelected House, and certainly not by the Electoral Commission? I say to the Opposition—I think that my hon. Friend will confirm this—that Chorley has tried the pilot scheme for two years running and has doubled the number of people voting in wards by enfranchising them and allowing them to vote through a postal system. Why should they lose that right?
  Mr. Leslie: My hon. Friend hits the nail on the head. An important constitutional principle is at stake. The House of Commons has made its view known on a number of occasions, yet the second Chamber has been acting not in a revising capacity, but perhaps in a blocking capacity. He also made another point: if we are not careful and if the other place rows back from all-postal voting in four regions, fewer people might vote by all-postal means than in the 2003 local elections. Some 22 per cent. of the population voted by all-postal means in the 2003 elections. If we were to take the advice of some peers in the other place and drop the north-west, only 20 per cent. of the population would be proceeding in that way, which would obviously be seen as a retrograde step.
  Mrs. Angela Browning: Will the Minister explain why, when his party introduced the Bill that became the Political Parties, Elections and Referendums Act 2000, it introduced in the Lords more than 300 amendments that had not been considered by this House, but which came back to this Chamber in a debate on a guillotine and were barely considered by the Commons at all?
  Mr. Leslie: No legislation is enacted unless this House of Commons approves it. As the democratic Chamber, this House of Commons endorses all legislation. If the hon. Lady feels that any legislation has got on to the statute book without this House endorsing it, she can

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  write to me and give me her suggestions. I feel that it is quite clear that any basic study of the constitution would conclude that this House needs to make its views known. She may disagree with the length of debate on a particular measure, but no legislation is introduced without this House giving its assent.
  Angela Eagle: Will my hon. Friend take a little time to speculate on why both Opposition parties appear to be against making it as convenient as possible for people to vote?
  Mr. Leslie: I can imagine a number of possible reasons, as I know my hon. Friend could. We should indeed think about that issue, and I shall turn to it in a moment.
  Kali Mountford: Did my hon. Friend note that Baroness Hanham drew a comparison in her closing remarks between convenience and easiness in voting and increased turnout in elections? Is it not lamentable that someone who is neither elected nor accountable to anybody has such a contemptible view of democracy?
  Mr. Leslie: It would be dangerous indeed if the other place were perceived to be making the democratic process any more difficult. Various people from other parties have made statements that perhaps we should make it more difficult for people to express their opinion and make it harder for them to vote at elections. That is fundamentally anti-democratic and the wrong approach.
  Mr. John Gummer: Will the Minister explain how this House can give any opinion at all on amendments that are introduced in the other House and then subjected to a guillotine, ensuring that large numbers of them are not discussed at all? The guillotine is the means by which this Government have disfranchised large numbers of people.
  Mr. Leslie: The right hon. Gentleman does not have to vote for any measure that he does not support. All measures can be voted on, and if he opposes a measure, he can vote against it. That is the fundamental way in which we make decisions in this House of Commons. We are not talking about guillotines in respect of this Bill; we are talking about a fundamental attempt by the other place to block the will of this House of Commons.
  There are many good reasons why we should proceed with a pilot for four regions. We have the resources to do so, and a pilot involving 31 per cent. of the electorate is not excessive. Our decision is clear. We announced on 21 January that we wanted four regions, and the House of Commons ratified that decision on 8 March. It reconfirmed it on 16 March. so why are we debating it again? We have answered questions about fraud and malpractice, and made sure that we have answered questions about supported delivery points, where people can still vote in secret. New changes will aid voters in houses in multiple occupation, and teams of officials can visit such properties with special regard to the problems that can arise. Offences of personation and undue influence over voters are in place, and secrecy
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  warnings will be included in the literature. We have therefore managed to address all the concerns about fraud and malpractice.
  Regional returning officers have made their views very plain indeed, and want to proceed with all-postal voting. The Government want to proceed, and the House of Commons wants to proceed as well, so why are the Conservatives and the Liberal Democrats trying to use the other place to block what is evidently the will of the House of Commons? I shall take up the invitation of my hon. Friend the Member for Wallasey (Angela Eagle) and speculate on the reasons why.
  The Opposition may be afraid of a high turnout in the June elections, and therefore oppose all-postal voting in the pilot. It may be the age-old tactic of opportunism, with the Opposition seeking to derail the local and European elections in June. If that is the true reason why the Opposition are behaving in that way, that is a very dangerous game indeed. The hon. Member for Surrey Heath (Mr. Hawkins) and, in particular, the hon. Member for Somerton and Frome (Mr. Heath) must justify their use of the other place to block the will of the House of Commons. How am I to explain to my constituents in Yorkshire that, no matter how many people want all-postal voting and no matter who they vote for at those elections, they cannot have such a system because the minority parties, using the other place, have sought to block the will of the House of Commons?
  Richard Younger-Ross: The Minister referred to higher turnout and more people voting. Why is it not possible to have a nationwide postal vote? If there are pilot schemes for half the country, why are they in the north? What will the Minister say to people outside the House who will regard that as cynical manipulation?
  Mr. Leslie: The hon. Gentleman should know that we have debated the subject in the Chamber on numerous occasions, and he should be aware of the rationale for the Government's four-region proposal, which was supported by the Commons on a number of occasions. The selection partly reflects the advice of the Electoral Commission on the ranking of suitable regions, but takes into account the fact that in October we will hold referendums on elected regional government. It would be daft to ignore that.
  Joyce Quin: My hon. Friend mentioned the regional referendums in October and the use of all-postal ballots. Will he confirm that we will not necessarily have to accept the unhelpful amendment on regional referendums agreed in the House last week making extra requirements for witness signature? In the postal ballots in my area of Gateshead, we had no such requirement. The turnout was higher than it was in areas where the requirement was made, and the Electoral Commission gave us a clean bill of health regarding fraud—we had no problems of that kind. I therefore hope that my hon. Friend can give me that assurance.
  Mr. Leslie: I know that my right hon. Friend is disappointed that we were effectively forced to accede to the Lords on the declaration of identity, but we did so in

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  the spirit of trying to reach consensus, even though that does not appear to have been acknowledged by the other place. It is important to keep under review the issue of the declaration of identity. It will be used in the all-postal voting pilots in June, but we should revisit the issue.
  Mr. George Osborne: Labour Members seem to suggest that we are against high turnouts, but I dare that say every single Opposition Member was elected on a higher turnout than every single Labour Member. The Minister suggests that there is some mystery about why the Lords keep sending the Bill back and why the House of Commons cannot have its way. Will he address the Electoral Commission's letter of yesterday—not a month ago, not two months ago, but yesterday—in which it continues to say that it does not recommend holding postal votes in the northwest? The Government set up the Electoral Commission to guard the integrity of the electoral process. Will he address the specific concerns of the Electoral Commission and tell us why he thinks that it has got this wrong?
  5 pm
  Mr. Leslie: I apologise to the hon. Gentleman. I have the letter from Sam Younger, the chairman of the Electoral Commission. It does not contain the words that the hon. Gentleman attributed to it—that we should definitely not go ahead with the north-west. The Electoral Commission simply says that its views on all these matters have not changed from the previous occasion. We know very well that the Electoral Commission has said that the north-west is potentially suitable.
  The hon. Gentleman should be aware that the commission has reiterated its view. He knows that we disagree about a number of regions, and I do not demur from that, but it is important to remember that the Electoral Commission has reiterated that there are a number of regions that it considered "potentially suitable". The commission underlines the fact that it is for the Government, Parliament and the House of Commons to make decisions about what happens and which regions should be selected. It is not for the commission to say yes or no to particular regions. That is in the letter.
  Mr. Nick Hawkins: The Electoral Commission's letter of yesterday to the Deputy Prime Minister states:
  "For the reasons set out in my letter of 4 March we are not persuaded of the merits of piloting in 4 regions."
  It goes on to say:
  "The considerations as set out in our December Report regarding the North West have not changed."
  The Minister is indulging in his usual habit of selective quotation and misinterpretation. It is quite clear that the Electoral Commission was against a pilot in the northwest for all the reasons of fraud that it set out before. It still says that it is against the north-west. Will the Minister recognise that?
  Mr. Leslie: I can only sit at the feet of the master of selective quotation. That is certainly not what I understand from the Electoral Commission. I have said to the hon. Gentleman that we disagree with the Electoral Commission about its view of the number, the quantum, the scale of regions to proceed with, but that is an entirely different matter from which particular regions are selected. The Electoral Commission underlined the fact that it had a category of regions that were "potentially suitable", which include Yorkshire and the north-west. It has not changed its view. That remains the case. It is therefore open to us to recommend that we should proceed in four regions.
  We have been round these arguments before and I do not think many of the issues have changed. What has changed is the fact that the Opposition parties seek to justify using the blocking powers of the other place to thwart the will of the House of Commons. How can the hon. Member for Somerton and Frome, for example, call himself a Liberal Democrat but use the House of Lords as he has done to thwart the House of Commons' views and decisions? He should address that point when he speaks. [Interruption.]
  The benefits of all-postal voting are clear—
  Mr. Deputy Speaker: Order. I am sorry to interrupt the hon. Gentleman. May I say to the House as a whole that it would be better if the debate were conducted with one person speaking at a time?
  Mr. Leslie: Thank you, Mr. Deputy Speaker.
  The benefits of all-postal voting are crystal clear. It brings convenience and ease of voting to electors in those regions. We are talking merely about piloting. We should pilot in those four regions. The arguments are clear. I hope that the House stands firm in its view and supports the proposal for four regions, and I urge hon. Members to disagree with the Lords in their amendment.
  Mr. Hawkins: We are going around this track for the fifth or sixth time now, but there are always some new developments. The Government have conceded one of our main concerns about the anti-fraud measure of requiring a witness signature. I am sorry that they refused to concede on the sending of receipts by returning officers, but I suspect that the House will need to return to that in years to come, and I fear that, as the Electoral Reform Society has warned, the incidence of electoral fraud will require a reconsideration of that.
  Anyone who had heard only the Minister's speech this afternoon might mistakenly think that the Government's views on this matter were entirely clear and had never changed, but in fact the Government have changed their mind from three pilot regions to four, at the insistence, as we know, of the Deputy Prime Minister, who has been working the issue by remote control throughout the passage of the Bill.
  The main issue this afternoon, however, is the Government's refusal to trust the Electoral Commission, which they themselves set up. The Government have tried to bully their own Electoral Commission, and they have done so specifically and especially in the person of the Deputy Prime Minister. We always suspected that his involvement in this area

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  was for purely party political reasons, and we saw it for ourselves last week, when he spent the whole time on the Front Bench bellowing and seeking to interrupt and affect the debate.
  We have now all seen the letters that the chairman of the Electoral Commission, Sam Younger, sent to the Minister on 4 March, and to the Deputy Prime Minister yesterday. Significantly, what we have not seen are the letters that Ministers, specifically the Deputy Prime Minister, have sent to the Electoral Commission. I challenge the Minister to place in the Library the letters that all Ministers have sent to the Electoral Commission, because before the matter returns to another place, we all need to have a full picture. I also challenge the Minister, as I did last week, when he declined to respond, to place in the Library the minutes of all meetings that any Minister in this Government has attended with any returning officers. We need a full picture. At the moment we are seeing the responses of the chairman of the Electoral Commission to letters that we have not seen.
  We also fear that Labour has been leaning on returning officers—not only in the Deputy Prime Minister's home area of Yorkshire and the Humber—to seek to intimidate them into changing their views. It is not merely Conservative Members who express these views. As the noble Lord Rennard, speaking for the Liberal Democrats, said:
  "it is alarming that a Labour Government can engage so directly with returning officers charged with conducting the elections fairly, but who are the employees of Labour councils fearful of their re-election and who can exclude the independent Electoral Commission from those deliberations."—[Official Report, House of Lords, 18 March 2004; Vol. 1942, c. 345.]
  That is our concern.
  Mr. David Clelland: The hon. Gentleman referred in his opening remarks to incidents of fraud. Would he like to give some examples of where such incidents have taken place, because as my right hon. Friend the Member for Gateshead, East and Washington, West (Joyce Quin) pointed out earlier, in Gateshead council, where the ballot took place without the need for witness signatures, there was no evidence whatever of fraud. On the other hand, in Newcastle council, where the witness signature was required, 6,000 people were disfranchised because of the lack of a witness signature. Does he think that that is fair?
  Mr. Hawkins: I do not criticise the hon. Gentleman because I know that he has many responsibilities in the House, but I do not think that he took part in the earlier debates on this matter. Had he done so, he would be aware that I have referred at great length to the examples of fraud given by the noble Lord Greaves, not just on one but on several occasions when the matter was debated in another place. I have incorporated my concerns, which are set out fully by the Electoral Commission in its report, in my various speeches, so I respectfully refer the hon. Gentleman to what the Lord Greaves has said. The main concerns about fraud were in the north-west. The Electoral Commission says that one of its concerns about the north-west is that possible prosecutions for fraud might coincide with the period of
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  these elections; that has been one of the main reasons why it is not prepared to approve the north-west as a pilot area.
  Andy Burnham: Again, the hon. Gentleman comments on the north-west and the allegations made by Lord Greaves. Will he clear up the matter: has the Crown Prosecution Service taken forward any of the allegations made in Pendle?
  Mr. Hawkins: I do not know specifically about Pendle, but, as the hon. Gentleman would know if he had listened to earlier debates, Lord Greaves did not refer only to Pendle, and I, like him, gave about 10 different examples of areas of the north-west where fraud had been alleged. The Government's own Electoral Commission has said that it is not prepared to endorse the suggestion that the north-west should be a pilot because of concerns about fraud, and yesterday's letter from Sam Younger, the chairman of the Electoral Commission, repeats that point.
  Andy Burnham: Will the hon. Gentleman give way?
  Mr. Hawkins: I will not give way again. I simply refer the hon. Gentleman to yesterday's letter from Sam Younger. which is absolutely clear, no matter how the Minister tries to reinterpret it. In December, the Electoral Commission said that the north-west is inappropriate; it repeated the point in January; and it made it again as recently as yesterday.
  Mr. David Watts: Why does the hon. Gentleman take the view that we should take so much notice of the Electoral Commission, when the Lords and he rejected its suggestion on the verification of voting? He is keen to take notice of the Electoral Commission when he wants to. Why did he not take notice on both occasions?
  Mr. Hawkins: The Government must explain why they are ignoring their own Electoral Commission. It was not us who set it up. Having listened to the Minister this afternoon, one might think that it is Government policy to ignore the fact that we have a bicameral legislature. The Government want a one-party, one-Chamber state, where they can ram through their views without debate.
  In fairness, many of the noble Lords and Baronesses who have spoken about electoral matters in debates on this Bill have many more years of electoral experience than the Minister. Many of them are in another place precisely because they have long experience as councillors and party agents. [Interruption.] The Minister says that noble Lords and Baronesses have no electoral mandate, but many of them have been around in politics for a lifetime and sit in another place because of their experience. [Interruption.] He should recognise that it is a bit rich for somebody who only arrived in this House in 1997 to criticise as having no mandate those from whichever party who have been appointed to another place because of their political experience.
  Mr. Andrew Miller: On a point of order, Mr. Deputy Speaker. Is it not the case that every Member of this House, irrespective of age and experience, is of equal status?
  Mr. Deputy Speaker: Order. Hon. Members are, of course, of equal status, but they may have different experience in different ways. I do not want to get involved in a matter of debate—far worse things have been said in the House, and we can always seek to improve the standard of exchange. While I am on the subject, I want to hear less noise and more from the person who has the Floor of the House at the time.
  Mr. Hawkins: We must examine what independent commentators say about what the Government are up to in trying to railroad the Bill through. I refer any hon. Members who have not seen them yet to the views expressed by the distinguished and senior home affairs correspondent of The Daily Telegraph, Mr. Phillip Johnston, on Monday of this week. In a well-observed column headed, "Now they want to abolish polling day", Mr. Johnston says:
  "Surely this is a matter that requires all-party agreement. The electoral system is no more Labour's to tinker around with than is the constitution, whose ancient structures are being so casually dismantled in the name of 'modernisation Postal voting, while superficially attractive to politicians who think that we are all too bone idle to get off our backsides to go to a polling station, is wide open to fiddling, intimidation and fraud. It will mark the final disconnection between politicians and the electorate."
  Mr. Johnston also deals with the canard that we heard at Prime Minister's questions earlier this afternoon, when an hon. Member suggested to the Deputy Prime Minister that postal ballots might mean fewer votes for extremist parties. As Mr. Johnston points out,
  "The seats with the highest turnout in the 2001 general election were the three Northern Ireland constituencies where Sinn Fein candidates were elected."
  Does not that give the lie to the suggestion that an increase in turnout means less support for extremists?
  5.15 pm
  Mr. Miller: To correct the hon. Member for Tatton (Mr. Osborne), I had a bigger turnout and a bigger absolute vote than the hon. Member for Surrey Heath (Mr. Hawkins).
  Does the hon. Member for Surrey Heath agree that although the article from The Daily Telegraph is right inasmuch as the voting system is not Labour's to tinker with, it is for this House to make a decision, and this House must take precedence over the other place, where nobody is elected?
  Mr. Hawkins: I simply disagree with the hon. Gentleman. We take the view that the whole purpose of having a bicameral legislature is to give both Houses of Parliament a role. What we dislike is this Government's attempt to change the agenda as it suits them. During the debate on the Bill on 16 December, the Minister said—not once, not twice, not three times, but about six times—that the Government would have a third postal pilot. The volte face took place as soon as the Deputy Prime Minister got involved and insisted that both the north-west and Yorkshire and Humber be included. The Government have been completely inconsistent for party political reasons connected with the Deputy Prime Minister's obsession with the forthcoming referendums on regional government.
  Mr. Redwood: Does my hon. Friend agree that the Lords is particularly important when a strong majority party in this House wishes to twist or distort the constitution or the electoral system? That is when the minority interests and parties need a voice. I am delighted that the Lords will provide that; the Government should be ashamed that they will not.
  Mr. Hawkins: I am grateful to my right hon. Friend: he is absolutely right.
  We can rely on the Electoral Commission's firm view—despite the Minister's attempt to reinterpret it—that the north-west must be ruled out. The Electoral Commission is clear that it has not changed its mind from what it said in December or in January, and sticks to the reasons that it set out previously. That is why those in another place are absolutely right to continue to insist on backing the Electoral Commission. I am confident that in the end the Government will have to give up on this, because otherwise they will lose the Bill altogether. If they do, it will be entirely their own fault.
  Mr. Clelland: My hon. Friend the Minister is right to resist the amendments, especially in light of the damage that has already been done to the Bill by the other House. The amendment requiring witness signatures, which will disfranchise thousands of people—mainly the elderly and those with communication difficulties—has been forced on the Government because the other place is using up time which, because of the approaching elections, this House unfortunately does not have, in order to defeat the Bill. Last week, the Select Committee on the Office of the Deputy Prime Minister interviewed manufacturers of electoral materials who are telling the Government that time is running out in terms of producing those materials. The House of Lords is using that situation to force amendments on a reluctant Government.
  Much comment has been made about the unelected House having undue influence over a matter relating to elections and electors' rights. Some might say that that makes the case for an elected House stronger. I would argue against that, because one can imagine the situation if these decisions were being made by an elected House. It would be much more difficult for this House to get anything through at all—we would have this legislative gridlock time after time. The Government are right to go back to the drawing board on the constitution of the second Chamber. [Interruption.] One of my hon. Friends says, "Abolish them." I am becoming more attracted to that idea as the days go by. We need to consider the powers of the House of the Lords before we start to consider who should sit and exercise them. That is what should have been done in the first place. I hope that we will take this opportunity to do it and that we do not get into this ridiculous situation again.
  Mr. David Heath: Thank you, Mr. Deputy Speaker. That was a briefer contribution from the hon. Member for Tyne Bridge (Mr. Clelland) than I was expecting, but it was valued nevertheless.

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  These ping-pong episodes are among the most unedifying things that we do in the House. As I said when we last debated these matters, it is rare to hear any new arguments on these occasions. However, there is a new element this time, in the form of the letter from the Electoral Commission, which the Minister has chosen to misrepresent to the House, and whose contents he has chosen to ignore. [HON. MEMBERS: "Rubbish!"] Hon. Members may say "Rubbish", but I have the faculty of being able to read. No Member who has read the letter from the Electoral Commission can be in any doubt as to what its conclusions are, and that poses a huge problem for the Government. The Lords have not introduced a killer amendment to the Bill. All that they have done is to make the perfectly reasonable propositions that the Electoral Commission, which the Government set up in order to give advice on electoral matters, should be heard on this matter, and that the Government should not be able to ignore its advice when introducing electoral pilots. Indeed, "pilot" is an inappropriate word to use when the proposal involves nearly half the local authorities in England. That is not a pilot; it is half the country.
  We have heard the absurd argument that it would be a disgrace to democracy if there were no all-postal ballot in the north-west. However, we are not told that it would be a disgrace to democracy not to have one in the south-west. We are told that such a ballot is essential in the east midlands, but not the west midlands. [HON. MEMBERS: "Pilots!"] We now hear the word "pilots", but the three pilots that the Minister asked for in the first place are no longer sufficient. The Government, in the form of the Deputy Prime Minister, have determined that he wants half of England to be involved, and that just happens to be the half that lies to the north of the Trent.
  I do not understand why the Deputy Prime Minister is so adamant that he should use the majority in the House to push through an electoral reform against the consensus of the political parties represented in the House and against the advice of the Electoral Commission. There was a time when there was a pretence that the Deputy Prime Minister was not guiding this whole affair, but that pretence has been blown apart by the fact that the right hon. Gentleman has written to the Electoral Commission—we know not in what terms—and that he has had a rebuttal from it. The commission will not be persuaded that it should abandon its better judgment in this matter.
  Having made a careful study of Yorkshire and Humber, the commission has said that its view has changed, and that it is now prepared to accept that Yorkshire and Humber is an appropriate area. Very well. If that is the case, I accept that as well. I have no wish not to extend this voting experiment to those areas in which it is suitable to do so. Let me tell hon. Members from Yorkshire and Humberside that I am now on their side, because they have the imprimatur of the Electoral Commission.
  Mr. Watts: Is it Liberal Democrat policy that the Electoral Commission should be able to overrule the will of Parliament? Also, will the hon. Gentleman confirm that the view of the Liberal Democrat MEP,
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  Chris Davies, is that postal voting is for lazy people? Does the hon. Gentleman believe that anyone who wants a postal vote is a lazy person?
  Mr. Heath: No, I do not believe that. Frankly, it was an absurd thing for that Member of the European Parliament to say, and I wish he had not said it. Now that I have said that from the Front Bench, I hope that the hon. Gentleman will no longer try to use that argument in evidence against our party's apparent position. It is not the position of our party.
  Mr. George Osborne: Will the hon. Gentleman give way?
  Mr. Heath: In a moment. Let me answer one intervention at a time.
  The role of the Electoral Commission is crucial when designing pilot schemes for innovative ways of voting. I would never have had a problem with the Government had they said, "We are not having a pilot scheme for this innovation. We will have a UK-wide all-postal ballot." I would have said, "Okay, let's have a go and see what happens in the European elections." However, that is not what is on offer. We have the absurd pretence that, somehow, the Government are doing as is recommended when we know that they are not and that this is appropriate for one part of the country and not appropriate for the rest.
  Mrs. Browning: Does the hon. Gentleman agree that the Electoral Commission and its chairman are answerable not to Ministers but to the House? I sit on the Speaker's Committee on the Electoral Commission. The commission is called to our meetings to answer questions. If, as a member of that Committee, I discovered that the chairman had made a specific recommendation to the Government vis-à-vis fraud in the north-west and they had ignored it, they would be in very serious trouble with my Committee.
  Mr. Heath: Let that be a warning to the Minister, because he is clearly going to be in trouble with the Speaker's Committee on the Electoral Commission.
  Hyperbole apart, this is a serious matter. We are discussing this country's electoral system and that should command the respect and agreement, as far as that is possible, of the parties that are contesting those elections. It is simply not right that a party that has a majority in the House—owing to what I think is a corrupt electoral system, and certainly on a minority of the vote—can have its way irrespective of the views of the Electoral Commission that it appointed.
  Mr. Leslie: I have two brief comments to make. First, I hope that the hon. Gentleman withdraws his point about the House somehow being based on a corrupt democratic system. Secondly, will he justify the use of the House of Lords in persistently overturning the will of the House of Commons?
  Mr. Heath: Perhaps the Minister uses the House of Lords for his purposes; I do not use the House of Lords. I respect the judgment of those who sit in the House of

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  Lords at the moment, although I would like it to be reformed and given accountability through a proper electoral system.
  I say that the system is corrupt because it does not reflect the votes that people cast, as the Minister perfectly well knows. That is why he can pray in aid a massive majority in the House won on a minority of the votes cast and say that it should overrule not only Conservative and Liberal Democrat Members of this House, but the other House, which he has chosen not to reform, as well as the independent body that was set up precisely—
  Several hon. Members rose—Several hon. Members rose—
  Mr. Heath: Many Members want to intervene, but I give way to the right hon. Member for Gateshead, East and Washington, West (Joyce Quin), because I think I did her a disservice during a previous debate in not understanding the details of the pilot scheme in her constituency. I apologise to her for that.
  Joyce Quin: I am grateful to the hon. Gentleman, who did not realise that the pilots are different in different areas. In my area, there is no requirement for a witness signature. He has laid great emphasis on supporting the Electoral Commission, but is it not the case that last week the amendment from the other place, which he introduced and which was accepted, ran counter to the view of the Electoral Commission regarding the witness signature?
  Mr. Heath: You would rule us out of order, Mr. Deputy Speaker, if we re-ran a debate on an amendment that has been passed into the legislation. [Interruption.] If I may, I will respond to the right hon. Lady. I am clear in my mind that the advice from the Electoral Commission was that we should have a pre-registration identity system. We have not yet achieved that. I understand from her what the pilot scheme in her constituency involves, which I did not understand before. I admit my ignorance on that. However, it does not alter the fact that for the generality of elections around the country, and for all those that would have lain outside the pilot regions in the election that we are debating, exactly the same system would have persisted. It does not therefore invalidate my argument, although I was incorrect in the detail, which is why I am happy to offer my apologies.
  5.30 pm
  Andy Burnham: I think that the hon. Gentleman was beginning to develop an argument that he would accept Yorkshire but not the north-west. Can he therefore confirm that the only outstanding case of electoral fraud ongoing in the north-west is against a Liberal Democrat in a traditional election opportunity?
  Mr. Heath: I cannot confirm that, although I am sure that the hon. Gentleman is right, as he has a more intimate knowledge of electoral affairs in the north-west than I do. I have never used the argument used by others that the key issue in the north-west is fraud. My
  968
  argument has always related to one of the basic criteria set down by the Government, not me, that given the complexity of electoral arrangements in the north-west and that so many local authority elections are involved in the north-west, it is not an appropriate pilot. That is what the Electoral Commission said about the northwest, and that is the position to which it holds.
  The hon. Gentleman asked me whether my position was developing. In terms of identification of the regions, my position has always been that we accept the advice of the Electoral Commission, which originally proposed two regions, and has moved its position to accept Yorkshire and Humber. I am therefore happy to adopt that position today.
  Andy Burnham: Is it not the case that the Liberal Democrats are singing two different tunes from one end of the Corridor to the other? The noble Lord Greaves has made great play of fraud in the north-west elections, which is why the Liberal Democrats have opposed this Bill down the other end of the Corridor. The hon. Gentleman is now advancing a different argument. Which is it? Clearly, there is no evidence of fraud in postal ballots in the north-west. To what are the Liberal Democrats opposed?
  Mr. Heath: Again, the hon. Gentleman is referring to a previous debate. We are not talking about fraud today, because, I gently remind him, we have dealt with that issue. We are now talking about the selection of regions and only the selection of regions. The burden of our argument has always been that having set up an independent arbiter as to which region should be selected for a pilot and how many regions should be so selected, the Government are deciding that they know better than that independent arbiter, for whatever reason they wish to use.
  Mr. Watts rose—Mr. Watts rose—
  Mrs. Lorna Fitzsimons (Rochdale) (Lab) rose—Mrs. Lorna Fitzsimons (Rochdale) (Lab) rose—
  Mr. Heath: I have given way to the hon. Gentleman, but I will give way to the hon. Lady if she still wants to intervene on me.
  Mrs. Fitzsimons: As someone who shares the hon. Gentleman's support for electoral reform, may I ask whether he will accept my fundamental disappointment at the way in which Liberal Democrats in this place and the other place have handled this issue? First, they are saying that voters in Rochdale are too stupid to understand how a postal vote system would work. Secondly, what is the difference between the Yorkshire local government system and north-west local government system if he is seeking to say that it is more complicated, we are too stupid and we cannot understand it? And thirdly, does he not understand that there is just a tinge of hypocrisy to allowing the argument to be advanced in the other place, but not advancing it in this place, thereby allowing those in the other place to do your dirty work?
  Mr. Heath: The hon. Lady clearly did not listen to the reply that I just gave. We have had a debate on electoral fraud, which has now been resolved, and we are now

  969
  debating one amendment from the other place that deals only with the selection of regions. If she wants to say that accepting the advice of the Electoral Commission on Yorkshire and Humber in some way demeans or derides her constituents in the north-west, why are my constituents, who had an all-postal ballot at the elections last year, too stupid to have an all-postal ballot in these elections? Does she have an answer to that?
  Mrs. Fitzsimons: The problem was pointed out by one of my hon. Friends earlier. It suited your purposes when you tabled an amendment—
  Mr. Deputy Speaker: Order. The hon. Lady, in her excitement, is not using the right language. None of this has anything to do with the Chair.
  Mrs. Fitzsimons: I apologise, Mr. Deputy Speaker. I believe that there is some confusion among the Liberal Democrats. Last week, when they tabled an amendment, they disagreed with the Electoral Commission. This week, they have decided that its recommendations are their bible. Which is it?
  Mr. Heath: I am not gohng to keep replying to the same intervention ad nauseam. The hon. Lady really needs to talk to her hon. Friends about the internal contradictions in their own arguments. Then she can start talking to me.
  Mr. Kevin Barron: Will the hon. Gentleman give way? He said earlier that he would.
  Mr. Heath: Oh, did I? Well, in that case I had better.
  Mr. Barron: The hon. Gentleman just mentioned contradictions. Can he tell us why the Liberal Democrats accept the prospect of an all-out postal vote in the referendum that will take place in October, but do not accept the proposal for postal votes in the local government and European elections in the north-west in June?
  Mr. Heath: Can the right hon. Gentleman explain to me why this is called the European Parliamentary and Local Elections (Pilots) Bill? That is the crux of the matter. As I have said more times than I care to remember, I would have understood the Government's logic if they had applied their proposals to the European parliamentary elections as a whole.
  Kali Mountford: That is not a pilot.
  Mr. Heath: Half of England is not a pilot. That is the problem with the Government's position.
  Sadly, I do not think that we are making any progress. The reason for that is the Government's intransigence and incompetence. The proposal will now go to the other place, and a deal will be done. The Lords will accept Yorkshire and Humberside, or the Government will lose their Bill. Then we shall have the three regions that the Electoral Commission has identified as suitable, and the Government will have the three pilots that they said they wanted in the first instance. Why on earth
  970
  could they not have said that here this evening? Because they want the Lords to take the blame for their incompetence.
  Kali Mountford: I must start by agreeing with the hon. Member for Somerton and Frome (Mr. Heath). It is sad that we can agree on the fact that we are making no progress whatever. This House should be allowed to make progress, because this House has made its position clear. This House contains the democratically elected representatives of our constituents, and the other House does not. I should have thought that that was of some importance to this House.
  That is important to this House because we are discussing how it should formulate elections for the future, and what will happen when we change an electoral system that has a direct bearing on its work, and a less direct bearing on the work of the other place. The line has been revealed by statements made in the other place. The Lords do not object to a pilot, or even to the number of areas included in the pilot; they are against postal balloting per se. Their main objection is to the fact that elections would be more convenient. What an absurd objection! It is absurd to suggest that a disabled person, a person who works very hard or a person who works different shifts should not have the right to a postal vote.
  Incidentally, all those people can apply for a postal vote under the current system. As they can do that on an individual basis, with all the expense that that entails, why is it not sensible to think about what will happen when that convenience is extended to everyone, and the distortion caused by the requirement for applications is removed?
  Andy Burnham: We have heard of the great experience at the other end of the Corridor. Is my hon. Friend aware that the Lords vote was carried by the hereditary peers? What right have they to advise any Member of this House, whatever his or her age, about electoral practice?
  Mr. Deputy Speaker: Order. I remind both hon. Members of the precise terms of the amendment.
  Kali Mountford: I will limit myself to saying how much I agree with what my hon. Friend has said, Mr. Deputy Speaker.
  We must ask what benefit will accrue from the pilot, who will be included, and why this House should or should not take cognisance of what is said in the other place and what is said by the Electoral Commission. We are surely not saying in this debate that we should have government by commission. That would be absurd. It is for this House and this Government to take account of what advice the Electoral Commission gives, but then to make up our own minds on the value of that advice—with some of which we agree and with some of which we do not agree. It is perfectly sensible to say that we want the pilots to cover a larger area, and to include more circumstances against which we can check the outcome. The hon. Member for Somerton and Frome kept saying that half the electorate would be included in the pilot, but that is incorrect. If he cannot do his sums, he should look at the figures again. By my reckoning, 31 per cent. is not half.
  Mr. Watts: I agree with my hon. Friend. Does she share my lack of understanding of how the Liberal

  971
  Democrats can support postal voting in referendums on regional government, but not in European or local elections? Are not those two stances at odds with each other?
  Kali Mountford: It is hardly surprising that the Liberal Democrats are at odds on any issue. It is hardly surprising that they have hung themselves on a particular hook over the precise terms of this afternoon's debate. It suits them to forget the convenient arguments that they have used on other issues at other times. Nevertheless, let us examine what they have said. They have said that what is good enough for the goose is not good enough for the gander. I say that this gander will have its way.
  Mr. Redwood: The proposal from the House of Lords is a modest and reasonable compromise, when the Government are trying to ride roughshod over minority party interests and the interests of anyone who wishes to see sensible reform at a steady pace. I do not speak as one who is against postal ballots in principle; in theory, they are very good. The problem is the practice, because there are a number of genuine concerns about whether such ballots can be administered fairly and well, without corruption, pressure, personation and all the other problems that any true democrat abhors.
  It being one hour after the commencement of proceedings, MR. DEPUTY SPEAKER put forthwith the Question already proposed from the Chair, pursuant to Order [8 March].
  Question put, That this House disagrees with Lords amendment 1D to Commons amendment 1C:—
  The House divided: Ayes 308, Noes 185.

  Division No. 109]

  [5:42 pm

  AYES

  Abbott, Ms Diane

  Brown, rh Nicholas (Newcastle E Wallsend)

  Adams, Irene (Paisley N)

  Ainger, Nick

  Brown, Russell (Dumfries)

  Ainsworth, Bob (Cov'try NE)

  Browne, Desmond

  Alexander, Douglas

  Buck, Ms Karen

  Allen, Graham

  Burden, Richard

  Anderson, Janet (Rossendale &Darwen)

  Burgon, Colin

  Burnham, Andy

  Armstrong, rh Ms Hilary

  Byers, rh Stephen

  Atherton, Ms Candy

  Cairns, David

  Atkins, Charlotte

  Campbell, Alan (Tynemouth)

  Austin, John

  Campbell, Mrs Anne (C'bridge)

  Bailey, Adrian

  Campbell, Ronnie (Blyth V)

  Baird, Vera

  Casale, Roger

  Barnes, Harry

  Caton, Martin

  Barron rh Kevin

  Cawsey, Ian (Brigg)

  Battle, John

  Challen, Colin

  Bayley, Hugh

  Chapman, Ben (Wirral S)

  Beard, Nigel

  Clapham, Michael

  Berry, Roger Clark, Mrs Helen (Peterborough)

  Best, Harold

  Clarke, rh Tom (Coatbridge &Chryston)

  Blackman, Liz

  Clarke, Tony (Northampton S)

  Blears, Ms Hazel

  Clelland, David

  Blizzard, Bob

  Coaker, Vernon

  Blunkett, rh David

  Coffey, Ms Ann

  Boateng, rh Paul

  Cohen, Harry

  Bradley, rh Keith (Withington)

  Colman, Tony

  Bradley, Peter (The Wrekin)

  Connarty, Michael

  Brennan, Kevin

  Cooper, Yvette

  Corbyn, Jeremy

  Howarth, George (Knowsley N &Sefton E)

  Corston, Jean

  Cousins, Jim

  Hoyle, Lindsay

  Cranston, Ross

  Hughes, Beverley (Stretford &Urmston)

  Crausby, David

  Cryer, Ann (Keighley)

  Hughes, Kevin (Doncaster N)

  Cummings, John

  Humble, Mrs Joan

  Cunningham, Jim (Coventry S)

  Hurst, Alan (Braintree)

  Cunningham, Tony (Workington)

  Iddon, Dr. Brian

  Curtis-Thomas, Mrs Claire

  Ingram, rh Adam

  Dalyell, Tam

  Irranca-Davies, Huw

  David, Wayne

  Jackson, Glenda (Hampstead &Highgate)

  Davidson, Ian

  Davies, rh Denzil (Llanelli)

  Jamieson, David

  Dawson, Hilton

  Jenkins, Brian

  Denham, rh John

  Johnson, Miss Melanie (Welwyn Hatfield)

  Dhanda, Parmjit

  Dismore, Andrew

  Jones, Jon Owen (Cardiff C)

  Dobbin, Jim (Heywood)

  Jones, Kevan (N Durham)

  Dobson, rh Frank

  Jones, Lynne (Selly Oak)

  Donohoe, Brian H.

  Jones, Martyn (Clwyd S)

  Doran, Frank

  Jowell, rh Tessa

  Dowd, Jim (Lewisham W)

  Keeble, Ms Sally

  Drew, David (Stroud)

  Keen, Ann (Brentford)

  Drown, Ms Julia

  Kelly, Ruth (Bolton W)

  Eagle, Angela (Wallasey)

  Khabra, Piara S.

  Eagle, Maria (L'pool Garston)

  Kidney, David

  Edwards, Huw

  Kilfoyle, Peter

  Efford, Clive

  King, Andy (Rugby)

  Ellman, Mrs Louise

  King, Ms Oona (Bethnal Green &Bow)

  Ewing, Annabelle

  Farrelly, Paul

  Knight, Jim (S Dorset)

  Field, rh Frank (Birkenhead)

  Kumar, Dr. Ashok

  Fisher, Mark

  Ladyman, Dr. Stephen

  Fitzpatrick, Jim

  Lammy, David

  Fitzsimons, Mrs Lorna

  Lawrence, Mrs Jackie

  Follett, Barbara

  Laxton, Bob (Derby N)

  Foster, Michael (Worcester)

  Lazarowicz, Mark

  Foster, Michael Jabez (Hastings&Rye)

  Lepper, David

  Leslie, Christopher

  Francis, Dr. Hywel

  Levitt, Tom (High Peak)

  Gapes, Mike (Ilford S)

  Lewis, Ivan (Bury S)

  Gardiner, Barry

  Lewis, Terry (Worsley)

  George, rh Bruce (Walsall S)

  Linton, Martin

  Gerrard, Neil

  Lloyd, Tony (Manchester C)

  Gibson, Dr. Ian

  Llwyd, Elfyn

  Gilroy, Linda

  Love, Andrew

  Godsiff, Roger

  Lucas, Ian (Wrexham)

  Goggins, Paul

  Luke, lain (Dundee E)

  Griffiths, Nigel (Edinburgh S)

  Lyons, John (Strathkelvin)

  Griffiths, Win (Bridgend)

  McAvoy, Thomas

  Grogan, John

  McCabe, Stephen

  Hain, rh Peter

  McCartney, rh Ian

  Hall, Patrick (Bedford)

  McDonagh, Siobhain

  Hamilton, David (Midlothian)

  MacDonald, Calum

  Hanson, David

  McDonnell, John

  Harman, rh Ms Harriet

  MacDougall, John

  Harris, Tom (Glasgow Cathcart)

  McFall, John

  Havard, Dai (Merthyr Tydfil &Rhymney)

  McGuire, Mrs Anne

  Mclsaac, Shona

  Healey, John

  McKechin, Ann

  Henderson, Doug (Newcastle N)

  Mactaggart, Fiona

  Hendrick, Mark

  McWalter, Tony

  Hepburn, Stephen

  McWilliam, John

  Heppell, John

  Mahmood, Khalid

  Hesford, Stephen

  Mahon, Mrs Alice

  Hewitt, rh Ms Patricia

  Mallaber, Judy

  Heyes, David

  Mann, John (Bassetlaw)

  Hill, Keith (Streatham)

  Marris, Rob (Wolverh'ton SW)

  Hinchliffe, David

  Marsden, Gordon (Blackpool S)

  Hoey, Kate (Vauxhall)

  Marshall, Jim (Leicester S)

  Hood, Jimmy (Clydesdale)

  Marshall-Andrews, Robert

  Hoon, rh Geoffrey

  Martlew, Eric

  Hope, Phil (Corby)

  Merron, Gillian

  Hopkins, Kelvin

  Michael, rh Alun

  Howarth, rh Alan (Newport E)

  Milburn, rh Alan

  Miliband, David

  Smith, Geraldine (Morecambe &Lunesdale)

  Miller, Andrew

  Moffatt, Laura

  Smith, Jacqui (Redditch)

  Moonie, Dr. Lewis

  Smith, Llew (Blaenau Gwent)

  Moran, Margaret

  Soley, Clive

  Morgan, Julie

  Spellar, rh John

  Morris, rh Estelle

  Squire, Rachel

  Mountford, Kali

  Starkey, Dr. Phyllis

  Munn, Ms Meg

  Steinberg, Gerry

  Murphy, Jim (Eastwood)

  Stevenson, George

  Naysmith, Dr. Doug

  Stewart, David (Inverness E &Lochaber)

  O'Brien, Bill (Normanton)

  Stewart, Ian (Eccles)

  O'Brien, Mike (N Warks)

  Stinchcombe, Paul

  O'Hara Edward

  Stoate, Dr. Howard

  O'Neill Martin

  Strang, rh Dr. Gavin

  Organ, Diana

  Straw, rh Jack

  Osborne, Sandra (Ayr)

  Stringer, Graham

  Owen, Albert

  Stuart, Ms Gisela

  Palmer, Dr. Nick

  Sutcliffe, Gerry

  Perham, Linda

  Tami, Mark (Alyn)

  Pickthall, Colin

  Taylor, Dari (Stockton S)

  Pike, Peter (Burnley)

  Taylor, David (NW Leics)

  Plaskitt, James

  Taylor, Matthew (Truro)

  Pond, Chris (Gravesham)

  Thomas, Gareth (Clwyd W)

  Pope, Greg (Hyndburn)

  Thomas, Simon (Ceredigion)

  Pound, Stephen

  Timms, Stephen

  Prentice, Ms Bridget (Lewisham E)

  Tipping, Paddy

  Touhig, Don (Islwyn)

  Prescott, rh John

  Trickett, Jon

  Price, Adam (E Carmarthen &Dinefwr)

  Truswell, Paul

  Turner, Dennis (Wolverh'ton SE)

  Primarolo, rh Dawn

  Turner, Dr. Desmond (Brighton Kemptown)

  Prosser, Gwyn

  Twigg, Stephen (Enfield)

  Purchase, Ken

  Tynan, Bill (Hamilton S)

  Purnell, James

  Walley, Ms Joan

  Quin, rh Joyce

  Ward, Claire

  Quinn, Lawrie

  Wareing, Robert N.

  Rapson, Syd (Portsmouth N)

  Watts, David

  Raynsford, rh Nick

  Weir, Michael

  Reed, Andy (Loughborough)

  White, Brian

  Robertson, Angus (Moray)

  Whitehead, Dr. Alan

  Robertson, John (Glasgow Anniesland)

  Wicks, Malcolm

  Williams, rh Alan (Swansea W)

  Roche, Mrs Barbara

  Williams, Betty (Conwy)

  Rooney, Terry

  Wills, Michael

  Ross, Ernie (Dundee W)

  Winnick, David

  Ruane Chris

  Winterton, Ms Rosie (Doncaster C)

  Ruddock, Joan

  Wishart, Pete

  Ryan, Joan (Enfield N)

  Wood, Mike (Batley)

  Salter, Martin

  Woolas, Phil

  Savidge, Malcolm

  Wright, Anthony D. (Gt Yarmouth)

  Sawford, Phil

  Sedgemore, Brian

  Wright, David (Telford)

  Sheridan, Jim

  Wright, Tony (Cannock)

  Simpson, Alan (Nottingham S)

  Singh, Marsha

  Tellers for the Ayes:

  Skinner, Dennis

  Derek Twigg and

  Smith, rh Andrew (Oxford E)

  Mr. Fraser Kemp

  NOES

  Ainsworth, Peter (E Surrey)

  Bercow, John

  Allan, Richard

  Beresford, Sir Paul

  Amess, David

  Blunt, Crispin

  Arbuthnot, rh James

  Boswell, Tim

  Atkinson, David (Bour'mth E)

  Bottomley, Peter (Worthing W)

  Atkinson, Peter (Hexham)

  Brady, Graham

  Bacon, Richard

  Brake, Tom (Carshalton)

  Baker, Norman

  Brazier, Julian

  Baldry, Tony

  Breed, Colin

  Barker, Gregory

  Brooke, Mrs Annette L.

  Baron, John (Billericay)

  Browning, Mrs Angela

  Beggs, Roy (E Antrim)

  Burns, Simon

  Beith, rh A. J.

  Burnside, David

  Bellingham, Henry

  Burstow, Paul

  Burt, Alistair

  Knight, rh Greg (E Yorkshire)

  Butterfill, Sir John

  Laing, Mrs Eleanor

  Cable, Dr. Vincent

  Lait, Mrs Jacqui

  Calton, Mrs Patsy

  Lamb, Norman

  Cameron, David

  Laws, David (Yeovil)

  Campbell, Gregory (E Lond'y)

  Leigh, Edward

  Campbell, rh Sir Menzies (NE Fife)

  Letwin, rh Oliver

  Liddell-Grainger, Ian

  Carmichael, Alistair

  Lilley, rh Peter

  Cash, William

  Loughton, Tim

  Chapman, Sir Sydney (Chipping Barnet)

  Luff, Peter (M-Worcs)

  McIntosh, Miss Anne

  Chope, Christopher

  Mackay, rh Andrew

  Clappison, James

  Maclean, rh David

  Clarke, rh Kenneth (Rushcliffe)

  McLoughlin, Patrick

  Collins, Tim

  Malins, Humfrey

  Conway, Derek

  Marsden, Paul (Shrewsbury &Atcham)

  Cormack, Sir Patrick

  Cotter, Brian

  Mawhinney, rh Sir Brian

  Cran, James (Beverley)

  May, Mrs Theresa

  Curry, rh David

  Mercer, Patrick

  Davey, Edward (Kingston)

  Moore, Michael

  Davies, Quentin (Grantham &Stamford)

  Moss, Malcolm

  Murrison, Dr. Andrew

  Davis, rh David (Haltemprice &Howden)

  Oaten, Mark (Winchester)

  O'Brien, Stephen (Eddisbury)

  Djanogly, Jonathan

  Opik, Lembit

  Dodds, Nigel

  Osborne, George (Tatton)

  Donaldson, Jeffrey M.

  Ottaway, Richard

  Dorrell, rh Stephen

  Page, Richard

  Doughty, Sue

  Paterson, Owen

  Duncan, Alan (Rutland)

  Pickles, Eric

  Duncan Smith, rh lain

  Portillo, rh Michael

  Evans, Nigel

  Prisk, Mark (Hertford)

  Fallon, Michael

  Pugh, Dr. John

  Field, Mark (Cities of London &Westminster)

  Randall, John

  Redwood, rh John

  Forth, rh Eric

  Reid, Alan (Argyll &Bute)

  Foster, Don (Bath)

  Rendel, David

  Fox, Dr. Liam

  Robathan, Andrew

  Francois, Mark

  Robertson, Hugh (Faversham &M-Kent)

  Gale, Roger (N Thanet)

  Garnier, Edward

  Robertson, Laurence (Tewk'b'ry)

  George, Andrew (St. Ives)

  Rosindell, Andrew

  Gidley, Sandra

  Ruffley, David

  Gillen, Mrs Cheryl

  Russell, Bob (Colchester)

  Goodman, Paul

  Sanders, Adrian

  Grayling, Chris

  Sayeed, Jonathan

  Green, Damian (Ashford)

  Sheerman, Barry

  Green, Matthew (Ludlow)

  Shephard, rh Mrs Gillian

  Greenway, John

  Shepherd, Richard

  Gummer, rh John

  Simmonds, Mark

  Hague, rh William

  Simpson, Keith (M-Norfolk)

  Hammond, Philip

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

  Hancock, Mike

  Harris, Dr. Evan (Oxford W &Abington)

  Smyth, Rev. Martin (Belfast S)

  Soames, Nicholas

  Harvey, Nick

  Spicer, Sir Michael

  Hawkins, Nick

  Spink, Bob (Castle Point)

  Hayes, John (S Holland)

  Steen, Anthony

  Heald, Oliver

  Streeter, Gary

  Heath, David

  Stunell, Andrew

  Heathcoat-Amory, rh David

  Swayne, Desmond

  Hermon, Lady

  Swire, Hugo (E Devon)

  Hoban, Mark (Fareham)

  Syms, Robert

  Horam, John (Orpington)

  Tapsell, Sir Peter

  Howarth, Gerald (Aldershot)

  Taylor, Ian (Esher)

  Jack, rh Michael

  Taylor, John (Solihull)

  Johnson, Boris (Henley)

  Taylor, Sir Teddy

  Jones, Nigel (Cheltenham)

  Teather, Sarah

  Keetch, Paul

  Thurso, John

  Kennedy, rh Charles (Ross Skye &Inverness

  Tredinnick, David

  Turner, Andrew (Isle of Wight)

  Key, Robert (Salisbury)

  Tyler, Paul (N Cornwall)

  Kirkbride, Miss Julie

  Tyrie, Andrew

  Kirkwood, Sir Archy

  Viggers, Peter

  Walter, Robert

  Winterton, Ann (Congleton)

  Waterson, Nigel

  Winterton, Sir Nicholas(Macclesfield)

  Watkinson, Angela

  Webb, Steve (Northavon)

  Yeo, Tim (S Suffolk)

  Whittingdale, John

  Young, rh Sir George

  Widdecombe, rh Miss Ann

  Younger-Ross, Richard

  Wiggin, Bill

  Willetts, David

  Tellers for the Noes:

  Williams, Roger (Brecon)

  Mr. David Wilshire and

  Willis, Phil

  Mr. Geoffrey Clifton-Brown

  Question accordingly agreed to.
  Lords amendment disagreed to.
  Committee appointed to draw up a Reason to be assigned to the Lords for disagreeing to their amendment 1D to Commons amendment 1C; Mr. Nick Hawkins, Mr. David Heath, Mr. Christopher Leslie, Laura Moffatt and Ms Bridget Prentice; Mr. Christopher Leslie to be the Chairman of the Committee; Three to be the quorum of the Committee.—[Mr. Jim Murphy.]
  To withdraw immediately.
  A Reason for disagreeing to the Lords amendment reported, and agreed to; to be communicated to the Lords.

  Equitable Life Inquiry
  [Relevant document: the oral evidence taken before the Treasury Committee on Tuesday 16th March, on the Equitable Life Inquiry, HC 71-iv, Session 2003–04.]
  Motion made, and Question proposed, That this House do now Adjourn.—[Ruth Kelly.]
  5.59 pm
  The Financial Secretary to the Treasury: The House will recall that the origin of the Equitable Life inquiry carried out by Lord Penrose was the financial crisis experienced by the society in July 2001, when it closed to new business and cut policy values. The inquiry's terms of reference were to inquire into the circumstances of the Equitable Life assurance society, taking account of the relevant life market background, to identify the lessons to be learned for the conduct and administration of life assurance business, and to give a report thereon to Treasury Ministers.
  Richard Ottaway: On the lessons learned, the Financial Secretary will be aware that Lord Penrose found that regulatory failure was the fundamental reason for, if not the primary cause of, the company's financial crisis. Is it now Government policy never to consider compensation where there has been regulatory failure of any sort?
  Ruth Kelly: If the hon. Gentleman were to acquaint himself in greater depth with the contents of the report, he would see that Lord Penrose says specifically that regulatory system failures failed policyholders in this case. He does not point to operational failure. However, I shall deal with that point later.
  Mr. Eric Forth: Further to the question from my hon. Friend the Member for Croydon, South (Richard Ottaway), can the Financial Secretary envisage any circumstances in which there would be a case for the Government to pay compensation to policyholders? Or would she rule out the payment of compensation in any circumstances that she could foresee?
  Ruth Kelly: I have considered in great depth the contents of Lord Penrose's report. Lord Penrose makes no recommendation for compensation. He finds no instance of maladministration by the regulator, nor does he make any allegation of negligence by the regulator. The Treasury has also examined the contents of its report. We see no reason to think that the regulator was negligent or that there was any maladministration at any time while the society was being regulated by the Treasury or, indeed, under the previous regime.
  Clearly, the Treasury cannot underwrite every business in the country. No regulator can ever provide a 100 per cent. guarantee against failure. However, Lord Penrose says that blame would have to be apportioned through the court system. He says:
  "It was not for me to measure any person's actions against accepted standards of conduct defining the legal duties of other people performing comparable duties in other organisations and other similar circumstances."

  977
  He considers that
  "Breach of duty, and the financial consequences of breach, are properly matters for the established courts of justice and for other appropriate tribunals in the financial sector."
  That is not my analysis, but the analysis of Lord Penrose himself. He finds that, from the early 1970s, the society embarked on a growth strategy that resulted in the progressive financial weakening of the society, such that its ability to meet the long-term expectations of its policyholders was in doubt from the late 1980s onwards.
  Lord Penrose describes how the company deliberately ran down its inherited estate and then, in the 1980s, moved into deficit to keep up bonus levels and win market share. According to Lord Penrose, sustained growth became an independent objective pursued with something approaching missionary zeal. He adds:
  "Bonus policy became central to achieving the Society's marketing objectives"
  and that
  "the surplus published by the Society became a function of the desired level of bonus."
  He outlines how, in 1973, the society introduced the concept of a terminal bonus and then, in the 1980s, progressively shifted the bonus mix away from annual guaranteed reversionary bonuses towards terminal bonuses, which were not covered by reserves. That allowed the society to inflate bonus levels to a level higher than available assets would have implied.
  Mr. John Redwood: Does the Financial Secretary accept that the financial condition of Equitable Life was much worse in 1997, 1998 and 1999 than it was some years earlier and that that gave the regulators a much greater opportunity to intervene and take action to try to protect policyholders in the late 1990s than at any time earlier?
  Ruth Kelly: I could quote from Lord Penrose's report on that point, but I shall quote from the independent authority of the ombudsman, who considered that specific period. She says:
  "There is no doubt that in late 1998 the Treasury had briefed FSA in considerable detail about Equitable's weak regulatory solvency position and had indicated a possible need for the regulator to intervene … it is very evident … the prudential regulators' stated approach to their role … could not be criticised for a lack of concern about Equitable and the position of their policyholders nor could their approach in respect of Equitable be described as 'passive"
  Lord Penrose writes:
  "By disregarding accrued terminal bonus, the Society was able to over-allocate bonus beyond available assets at market value, and in particular to make payments on claims that exceeded the relative available assets at the time".
  By 1989, according to Lord Penrose:
  "the Society deliberately distributed a high proportion of the available return for market-related reasons, and entered the 1990s with a negative estate accordingly."
  The society was therefore unable to withstand the financial implications of the House of Lords judgment in the Hyman case.
  Lord Penrose says:
  "Superficially claims of £1.5 billion should not have brought down a society with funds of £32 billion."
  Mr. John McFall: My hon. Friend will know that Lord Penrose appeared before the Treasury Committee last week and said that the society was largely the author of its own misfortune. However, on the very point made by the right hon. Member for Wokingham (Mr. Redwood), I hope that my hon. Friend will be aware of Chris Headdon's interview on Radio 4 this morning, when he said that Lord Penrose did not find any evidence of concealment. She will also be aware of the financial reinsurance product—the side letter—that Chris Headdon had, of which the Financial Services Authority was not aware. Indeed, the FSA has said that, if it had been aware of the side letter, it would not have guaranteed anything with regard to the society. Does that not raise questions about a deliberate policy of concealment on behalf of the executive in Equitable Life?
  Ruth Kelly: My hon. Friend makes some very interesting points. Of course it is not for me to comment on any action that may be taken by the FSA, the prosecution wing of the Department of Trade and Industry or the Serious Fraud Office, although he will be aware that Lord Penrose has forwarded his report to the SFO. Lord Penrose is clear that a unique situation was developing at Equitable Life. He states:
  "The Society's uniqueness lay in the approach adopted by its management, not in the essential characteristics of its business."
  With regard to the reinsurance treaty, Lord Penrose is absolutely clear as well that
  "Those involved at the society were not in any doubt that a right for the reinsurer to cancel in those circumstances would undermine the regulatory value of the agreement."
  Mr. Jim Cousins: Did the regulators not require the reinsurance provision, and was not the response of the people who then had control of the society to threaten to sue the regulators?
  Ruth Kelly: Again, my hon. Friend makes an extremely valid point. Reinsurance treaties were granted relatively routinely, but he draws attention to, in effect, the difficult relationship that existed between the regulators and the society over quite a long period, under the stewardship of the FSA, the Treasury and, indeed, the DTI before that, particularly in relation to guaranteed annuity rates.
  I should make it clear to the House that the Government sympathise with the plight of policyholders who have suffered not only much worry and distress over the past few years, but significant reductions in their expected income in retirement as a result of those issues. As I outlined to the House in my statement on 8 March, Lord Penrose finds that that weakening of the society was made possible by a culture of manipulation and concealment on the part of the company's previous senior management. The report details how executive management failed to keep the board fully informed about the true state of the company's financial position.
  Mr. Mark Francois: The Financial Secretary will be aware that hundreds of thousands of people around the country are suffering as a result of

  979
  that extremely unfortunate situation. Those people acted in good faith and have done nothing wrong. What have the Government got to offer them, other than sympathy?
  Ruth Kelly: The key conclusion to draw from Lord Penrose's report is not only the one to which my hon. Friends have pointed—
  "Principally, the Society was the author of its own misfortunes"?
  as Lord Penrose says—but that, as he also says:
  "If the proposals in hand for the future of the new regulatory regime are implemented and if they are effective in practice, the major criticisms of the earlier regulatory regime will have been addressed both in relation to the general approach to regulation and in relation to the particular issues arising from discussion of regulation of the Society."
  So policyholders throughout the country, both in the society and in other life assurance societies, as well as in financial services more generally, can be reassured that Lord Penrose himself concludes that the FSA reforms introduced by this Government, which started in 1997, were the ones that have put the regulatory system on to a fair basis and that can address these issues.
  Mr. David Ruffley: Although Lord Penrose states that the society was the author of its own misfortunes, he goes on to say:
  "Regulatory systems failures were secondary".
  Does the Minister accept the proposition that a secondary cause can none the less be a significant issue? The fact that a cause is secondary does not mean that it is non-existent. Should not the Government take some responsibility for that secondary cause, which was a failure?
  Ruth Kelly: I shall deal with the regulatory system failure in great detail later in my speech. Profound lessons for the House arise from Lord Penrose's report, and I am sure that when the hon. Gentleman reflects on its contents, he will also reflect on his role in these affairs.
  Lord Penrose states:
  "Substantial amounts of technical and financial information were provided to the Board…These failed fully to present the overall financial position of the Society, and in particular the risks inherent in the policies that were pursued in relation to bonus allocation".
  He finds that
  "the Board's understanding of the annuity guarantee issue was at best limited until the Autumn of 1997, and some directors may not have had any understanding of the position."
  He also states:
  "Arguably the first and most significant failure in this report lay at the heart of the Society…The Board at no stage got fully to grips with the financial situation faced by the Society: information was too fragmented, their collective skills were inadequate for the task, and there were no effective arrangements for ensuring that there was detailed examination of, and onward reporting to the Board on, actuarial reports."
  Lord Penrose notes that there were
  "executive directors with relevant actuarial qualifications but little or no relevant experience".
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  As for the board's non-executive directors, he notes that they
  "were so wholly dependent on actuarial input from the chief executive/actuary that they were largely incapable of exercising any influence on the actuarial management of the Society".
  Furthermore, he finds:
  "None of the non-executive members of the Board had relevant skills or experience of actuarial principles or methodologies".
  He states:
  "the non-executive directors generally had a poor understanding of the Society's developing financial position."
  He goes on to describe the board as a
  "self-perpetuating oligarchy amenable to policyholder pressure only at its discretion."
  Mr. David Drew: The issue of the role of non-executive directors is not limited only to Equitable Life. We have seen numerous reports on what needs to happen with regard to that role. Are the Government now looking seriously at the matter, not necessarily in terms of legislation or regulation, but to seek to find some arrangement with the City so that we can sort things out once arid for all?
  Ruth Kelly: My hon. Friend makes a good point. The Department of Trade and Industry recently discussed in the course of preparing the Companies (Audit, Investigations and Community Enterprise) Bill the respective responsibilities that non-executive directors should be expected to have. The Government are actively taking that issue forward.
  Lord Penrose describes how the management also failed in its obligations to disclose full information to its own policyholders and to the regulators. He finds that the management of the society fixed on the differential terminal bonus policy as early as 1983, but did not inform policyholders for more than a decade. He says:
  "The policy was not disclosed to policyholders by direct communication, in any way, until 1996…Failure to disclose this intention must be regarded as a serious omission in communication to policyholders of relevant information about their prospective interests from at least 1988, and arguably from the time in the early 1980s that management first took that decision."
  Even when the company decided to inform policyholders in 1996, it was done badly. Penrose states:
  "Attempts were made to change expectations in 1996 and later years. These were ill-conceived, poorly expressed and confusing. The intimations to policyholders were generally uncommunicative."
  As for the society's approach to the regulators in that period, Lord Penrose notes that Mr. Ranson, the appointed actuary from 1982, and both chief executive and appointed actuary of the company between 1991 and 1997, was "frequently aggressive" in his dealings with regulators, "dismissive" of regulators' concerns and "obstructive" of scrutiny. The regulatory returns were, Lord Penrose says, "opaque and uncommunicative", and
  "failed to identify in value the growing guaranteed obligations that resulted from a combination of falling interest rates and lightening mortality."

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  Lord Penrose therefore argues that primary responsibility for the society's problems lies with the society and its former management, saying:
  "Principally, the Society was the author of its own misfortunes."
  Lord Penrose makes it clear that Equitable Life was unique. As I told my hon. Friend the Member for Dumbarton (Mr. McFall), Lord Penrose says:
  "The Society's uniqueness lay in the approach adopted by its management, not in the essential characteristics of its business."
  That unique management approach led to the fundamental weakening of the society, as its inherited estate was run down and ultimately became negative. Nevertheless, Lord Penrose's verdict on the regulatory system is perfectly clear.
  Mr. Andrew Love: Does my hon. Friend agree that the fact that the managing director, who directed the society, was also the appointed auditor led to a clear conflict of interest that should not have arisen?
  Ruth Kelly: My hon. Friend is right that a conflict of interest arises in that situation. It is precisely to avoid such a conflict of interest that reforms to the Financial Services Authority have been introduced to remove responsibility from the appointed actuary and place it firmly on the board of insurance companies, where it should properly be.
  Mr. Edward Garnier: I declare an interest as a former policyholder with Equitable Life. I still have one school fees policy, for the good that it does me.

  The Financial Secretary is giving us a précis of the Penrose report, which we can all read for ourselves, but she has not told us what the Government are going to do, having read the report. Will she do so, and if so, at what stage?
  Ruth Kelly: I shall tell the House about the way forward very shortly, but I thought it important to expose the contents of Lord Penrose's report to the House, as he makes some profound comments about the operation of the regulatory regime before the FSA was set up.
  Lord Penrose's verdict on the regulatory system is perfectly clear, as he says:
  "the regulatory system failed policyholders in this case".
  However, he adds:
  "regulatory system failures were secondary."
  He clearly states that it was
  "the system that failed to provide the regulation that changing circumstances in the industry required, not that there was failure to implement what was fundamentally a satisfactory system."
  He makes no allegation of maladministration or negligence against the regulator or individuals, and says:
  "I do not pin the blame on individuals, who in the main have operated in good faith and to the best of their abilities within the system as they found it."
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  Nor does he suggest that any individual regulatory decision led to economic loss by policyholders. Specifically, he notes that
  "it is not enough in this case to infer from the coincidence of systems deficiencies and loss that one caused or contributed to the other".
  The House should reflect carefully on the lessons that he draws about the nature of the reactive and underresourced regulatory system in place before 1997 and his key message that the regulatory system must be kept up to date to take account of industry developments. Lord Penrose states:
  "It seems not unreasonable to suggest that those in control of any supervisory regime have a duty…to take steps to ensure that the systems of regulation that are in force and enforced remain relevant to the changing requirements of the industry."
  Chris Grayling: The Financial Secretary is being careful to pin the blame on the regulatory regime before 1997, but is it not the case that in 1998 and 1999, after discussions had taken place in the Treasury and in the FSA about the financial viability of Equitable Life, Equitable Life salesmen were still visiting my constituents and selling them with-profits policies which ultimately caused them substantial loss? How can she therefore claim that all was well after 1997, after the reforms that her Government introduced, when palpably for my constituents that was not the case?
  Ruth Kelly: As Lord Penrose himself recognises, it is not possible to introduce a fundamental overhaul of a regulatory regime overnight. If the hon. Gentleman cares to consult the Penrose report he will see that it states that
  "the regulators persisted in a reactive stance in respect of PRE"—
  that is on page 722 of the report at paragraph 215. I quote further:
  "In day-to-day regulatory practice, officials operated within the constraints imposed by the existing system, and they had no alternative but to do so."
  The regulatory regime was in the process of being overhauled.
  As Lord Penrose says, the Equitable case argues strongly for a closer merging of
  "prudential and conduct of business regulation"
  and he says that while setting up the FSA
  "the need for greater regulatory resource had been identified for the Treasury."
  The House will no doubt be interested in the fact that whereas before 1997 there were 70 supervisors supervising 800 life companies, compared with 400 staff regulating 600 banks, that figure for the regulation of life companies has been doubled by the reforms that the Government introduced. The FSA has not only doubled the resources allocated to life insurance regulation, but significantly upgraded the personnel devoted to that task.
  Today I want to concentrate on the way forward, drawing on Lord Penrose's conclusions on the lessons learned from his investigation. We are continuing the process of regulatory reform that we began in 1997, pushing forward in particular the specific changes in the life insurance sector that the FSA has in train. In addition, we are acting on Lord Penrose's suggestions

  983
  for change in the areas of accounting standards, corporate governance of mutuals and the actuarial profession. Lord Penrose welcomes the FSA's regulatory reform, which, he says,
  "has sought to anticipate many of the lessons that might be drawn by this enquiry and it should come as no surprise that it has largely succeeded."
  Let me remind the House what has been achieved in this area over the past six years. On 20 May 1997, the Government announced major changes to the structure of financial services regulation in the United Kingdom. Those were implemented by means of the Financial Services and Markets Act 2000, which created a new framework for the regulation of financial services, providing clarity, fair competition and protection for consumers. The Act established the Financial Services Authority as the single regulator for the financial services industry, operating under a single coherent legislative framework, replacing nine different sectoral regulators. It also introduced a single ombudsman scheme to resolve consumer complaints and a single financial services compensation scheme. The major reforms that the FSA has since launched are in many cases changes that have been possible only because of the move to a fully integrated regulator combining prudential and conduct of business regulation.
  The main changes that the FSA has already introduced—apart from increasing the resource devoted to life insurance regulation—are first, moving to a single risk model to determine the allocation of the FSA's own resources, and secondly, breaking down the barriers between different types and areas of supervision. The largest companies are now supervised, whatever their principal line of business, on a group basis, so the major insurance groups are now handled by the FSA's major financial groups division, rather than by its insurance division.
  Moreover, the FSA has proposed significant changes to the role of the appointed actuary, some of which I have already outlined to the House. The FSA is also introducing, from this year and next, realistic reporting by life offices. The requirement to report assets and liabilities on a realistic basis includes a requirement to provide for accrued terminal bonus. Lord Penrose welcomes those proposals as
  "clear recognition of the importance of looking beyond a narrow concept of solvency".
  Bob Spink: That is all well and good, but my constituents want to know what the Government will do to give them the compensation that they both want and need. Lord Penrose said to the Treasury Committee that he did not consider it in his remit to discuss administration and compensation; he considers that to be the Government's remit. When will the Government come forward and offer the victims of Equitable Life some hope?
  Ruth Kelly: Lord Penrose definitely did not say in his evidence to the Treasury Committee that that was the Government's responsibility. He was clear that he accepted the conclusion that this was regulatory system failure, not operational failure. But as I outlined to the House, and have been outlining to the House, we have
  984
  set up a structure in which consumers have recourse, if they believe that they have an individual grievance, to the financial ombudsman service.
  Let me make it clear to the House that the issue that has been identified by Lord Penrose is not a simple one. It is an extremely complex legal and actuarial issue—about £3 billion of bonuses being paid out more than the company could afford over a period of 10 years or even longer. Lord Penrose says that his estimate is "crude", but he also says that the amount and whether this would lead to claims could be determined only by the courts. He is absolutely clear in his report on that point.
  Mr. James Plaskitt: Does my hon. Friend recall that when Lord Penrose gave evidence to the Treasury Committee a few days ago, he said that in order to prove blame it was essential to demonstrate breach of duty, and that that in his view was clearly the business of the courts?
  Ruth Kelly: My hon. Friend makes an extremely valuable point.
  Mr. Garnier: How does the Financial Secretary expect the damaged policyholders of Equitable Life to afford to get to the court?
  Ruth Kelly: The first point to make is that Lord Penrose considers this to be such a complex issue that it can be determined only by the court. He is absolutely clear on that point. I have described the structure set up, which includes the financial ombudsman service to adjudicate on individual policyholder complaints, and if people feel that they have an individual grievance, they could take advantage of the structure that we have set up to present their claim. It would then be up to the financial ombudsman to decide whether it was an issue that he could consider, or whether it would be better determined directly by a court of law.
  Mrs. Angela Browning: I realise that the Financial Secretary may not wish to comment on the solvency of Equitable Life at the moment. It says that it is solvent, but if all the policyholders follow the route that she suggests through the ombudsman, she must surely address the question, which is very real, that Equitable Life may not remain solvent if it has to meet all those demands. What is her assessment of the impact that that will have not just on Equitable Life, but on all the other life companies that may well have to contribute to the fund that will be needed to pay out?
  Ruth Kelly: Equitable Life—it is an important point—has made it clear that it disputes entirely the analysis and the factual basis of the content presented by Lord Penrose on the over-allocation of bonuses throughout this period. It is an extremely complex legal and actuarial issue, upon which different actuaries will undoubtedly have different views. Equitable Life is clear that it is currently solvent and the FSA has no basis on which to override that view.
  Mrs. Jacqui Lait: Will the Financial Secretary address herself to the issue of how this matter will get to the court? Who will be able to afford to take a case to the courts?
  Ruth Kelly: Clearly, it is up to individuals and categories of individuals to decide what they want to do on the basis of the analysis presented by Lord Penrose. As I have said, there are different interpretations both about the facts and the interpretation of those facts leading to his analysis that £3 billion of over-bonusing took place within that time scale. He says that the issue is so difficult that only the courts can determine it, but policyholders must decide on the basis of advice what is in their best interests.
  Sir Peter Tapsell: The paradox of the situation is that the policyholders would be better off if the society became insolvent, in which case, as I understand it, the Government would have to pay them 90 per cent. of their promised benefits. Is that not the case?
  Ruth Kelly: I was about to come on to the proposals set down by the Financial Services Authority, which are currently out for consultation, to ensure better treatment of customers by firms. The hon. Gentleman makes a point about what is currently in the best interests of customers, and the society is absolutely clear that its continuing in business is in the best interests of current policyholders. As I have said, the society is confident that it is solvent.
  From next month, firms must also publish a statement of their principles and practice in financial management, setting out how they manage their with-profits funds.
  Mr. Redwood: I am grateful to the Minister for giving way, because many people are concerned about the matter. Is it not the case that what she now says—that the company is solvent and that, as the regulator, the FSA is happy with it—means that she does not think that anybody has a legitimate claim against the company, and that she does not think that anything wrong has happened, because the Government are still not taking regulatory action?
  Ruth Kelly: I have said nothing of the sort. I have set out the facts as presented by Lord Penrose, who says that his estimates are necessarily "crude". Lord Penrose has also said that the issue could be determined only by a court of law. I do not want to pre-empt a judgment by a court of law or, indeed, any judgment made in another setting.
  Mr. Andrew Tyrie: The Minister says that the policyholders who have been hit should consider going to court. Let us suppose that they go to court and win: who would pay the bill and where would the money come from? In that case, the money would come straight from Equitable Life, so, in other words, it would be robbing Peter to pay Paul. Is she not, therefore, holding out false hopes to hundreds of thousands of policyholders?
  Ruth Kelly: I am not holding out false hopes; I am not saying anything of the kind—I am presenting the situation as Lord Penrose found it.
  Dr. Vincent Cable: Before the Minister develops her points about the need for litigation, is she aware that all the policy makers who were members of the with-profits scheme in February 2002—in other words, the people who ratified the scheme—were required to sign away their right to go to court or the financial ombudsman? None of those members has any possibility of pursuing legal action.
  Ruth Kelly: Although I do not like to get involved in legal matters—as the hon. Gentleman is no doubt aware—there are various legal interpretations of that point.
  I am confident that the root-and-branch reform of insurance regulation that I have described will result in the industry becoming more transparent and accountable, and with the financial resources to meet fully the reasonable expectations of its policyholders. I am also confident that the introduction of the stakeholder suite of more simple and transparent saving and investment products, which the Treasury is currently developing in conjunction with the FSA, will provide the life industry with products that are attractive to consumers and that will also help to improve the transparency and accountability of the industry.
  The reform of the regulatory system has been strongly endorsed by Lord Penrose, who said:
  "If the proposals in hand for the future of the new regulatory system are implemented, and if they are made effective in practice… the major criticisms of the earlier regulatory regime will have been addressed".
  Speaking of the FSA's response to the lessons learned from Equitable Life, Lord Penrose said in his recent evidence to the Treasury Committee:
  "my clear impression is that the approach now being adopted is a very considerable improvement on what there was before".
  Looking ahead, Lord Penrose points to the need to reform accounting standards for the life assurance sector, and states:
  "The fundamental problem with the statutory accounts of any life office is that the accounting professions have failed to develop acceptable accounting standards for the preparation and presentation of accounts of long-term business that require realistic accounting on a consistent basis…what is required are practical standards of general application."
  As I announced on 8 March, I have asked the Accounting Standards Board to carry out an urgent study of accounting for with-profits business within the accounts of life insurance companies. The study will address the accounting framework for with-profits business, including provision for disclosure of terminal bonus. The study is particularly timely, as it will enable an assessment to be made of with-profits accounting against the background of recent developments in realistic accounting within the FSA regulatory regime.
  Although, as Lord Penrose pointed out, the problems at Equitable Life arose as a result of particular circumstances in place during the inquiry period, the report raises important questions for the governance of mutual life offices in general. The Government see no reason in principle why boards of mutual life offices should not be as accountable to their members as those of comparable companies are to their shareholders. On 8 March, I announced that I have asked Paul Myners to

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  lead a review into the corporate governance arrangements applicable to mutual life offices. The review's terms of reference are to:
  "Consider the governance framework for mutual life offices in comparison with that for comparable companies (and, where relevant, for listed companies). Where appropriate, bring forward recommendations to ensure that boards of mutual life offices are as accountable to their members as boards of comparable companies are to their shareholders."
  Mr. Love: I welcome the Myners review. My hon. Friend will be aware that the articles of Equitable reflected company law in that 10 per cent. of the members were needed to requisition special business, but that was an impossible task because its membership was so large. Its memorandum and articles meant that it had a self-selecting board of directors. Does my hon. Friend agree that we need to ensure that policyholders are protected and that they are consulted before actions are taken in the society?
  Ruth Kelly: Although I do not want to prejudge the results of Paul Myners's inquiry into the accountability of mutual life offices, my hon. Friend draws attention to a particularly important point. We need to ensure that mutual life offices are as accountable to their policyholders as possible.
  The review will consult as widely as possible, taking into account the recent experience of other mutuals in this respect in developing its conclusions and recommendations. As the governance of mutual life offices has much in common with that of other mutual societies, the review may, where appropriate, develop general governance principles for other types of mutual, taking into account the particular characteristics of other parts of the mutual sector. The review will deliver a report, with recommendations, by the end of 2004.
  Mr. Geoffrey Clifton-Brown: Will the Financial Secretary give way?
  Ruth Kelly: I must continue with my speech.
  Actuaries play a vital role in the financial services industry and, as a profession, have placed admirable emphasis on high standards of technical ability, knowledge and integrity. However, Lord Penrose makes it clear in his report that it is not enough to rely on that. He makes a number of general criticisms of the actuarial profession, drawing on his findings in relation to Equitable Life. Clearly, a modern professional or regulatory framework is necessary. As I announced on 8 March, Sir Derek Morris will lead a wide-ranging review of the actuarial profession. It will start on 1 May, following his retirement from the Competition Commission. The review's terms of reference are:
  "Consider what professional and/or other regulatory framework would best promote recognised, high-quality and continuously developing actuarial standards, openness in the application of actuarial skills, transparency in the professional conduct of actuaries, accountability for their actions and an open and competitive market for actuarial advice in the UK."
  Mr. Clifton-Brown: Will the Financial Secretary give way?
  Ruth Kelly: On the subject of actuaries, I give way for the last time.
  Mr. Clifton-Brown: One of the items that Penrose identified was the obstructive nature of the actuary at Equitable Life. He also identified the paucity of function of the non-executive directors and the problems involving the auditor. Clearly, there were service failures by the regulator in relation to Equitable Life. Have the Government considered whether, instead of a protracted court procedure, it might be better to have a one-off payment for affected policyholders on the basis that the regulator would not be held liable?
  Ruth Kelly: I do not think that those were the conclusions drawn by Lord Penrose's report. He is absolutely clear that this is not a question of individual regulatory failure, but of regulatory system failure and the policy that prevailed. The House should reflect carefully on what Lord Penrose has written in that regard.
  Lord Penrose's report provides a full and detailed account of the developments at Equitable Life over a long period. In doing so, it has provided us with a clear explanation of how the society got itself into financial difficulties, and clear pointers to the way forward. One of the key lessons that he draws from his work, with the benefit of hindsight, is that the regulatory system in place before 1997 was inadequate and unable to keep pace with changes in the financial services industry. Since 1997, this Government have radically overhauled the regulatory system that we inherited. We will ensure that that system remains fit for the purpose.
  6.40 pm
  Mr. Oliver Letwin: I do not think that the many hundreds of thousands of people who have been adversely affected by this saga will take much comfort from what we have just heard. I shall begin by declaring an interest, as the member of a family that is among those affected. I intend to pursue this issue over the coming months and, for the avoidance of doubt, if at any time, now or under a future Government, any compensation becomes payable to my family, it will go to charity.
  I have to enter a note of surprise and regret that the Chancellor is not here this evening. It is a pity that he has not chosen to speak in this debate, and that he is not here to listen to it. It is also a pity that he has not taken any part in the proceedings, and that he has never been willing to have anything to do with the subject. The people who have suffered from these events will take their own note of that.
  Mr. Plaskitt: While we are on that point, will the right hon. Gentleman tell us why he was not here to reply to the statement on this matter?
  Mr. Letwin: I was here throughout those events, after about the first three minutes. I have chosen to reply to the Minister today precisely to indicate that we treat this matter with the greatest possible seriousness, although all my hon. Friends on the Front Bench are more than capable of answering the Minister. Indeed, my hon. Friend the Member for Chichester (Mr. Tyrie) will be

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  winding up. The Treasury Bench appears to have only one Minister interested in the subject; I believe that she will also be winding up. That is a disgraceful state of affairs, on which the hon. Member for Warwick and Leamington (Mr. Plaskitt) should reflect. [Interruption.] The Chief Secretary should not rumble from a sedentary position, as he was yesterday being remote controlled by the Chancellor, although not very effectively.
  The Minister has made an argument, of which I take note, and I shall recapitulate it briefly. Putting together what she said today with what she said in her statement, we see that the shape of that argument is perfectly clear. She argued that this failure happened primarily because of management, and that regulatory failure was therefore only a secondary cause. She then argued that all such regulatory failure was pre-1997, and that it was entirely due to a light-touch regime rather than to any operational failure. She argued that there was therefore no need for Lord Penrose, the ombudsman or anyone else other than the courts to look at the question of maladministration, and that there was therefore no need for anyone other than the courts to investigate whether anyone was owed compensation.
  As the courts will only award compensation against other policyholders and—as a fascinating earlier exchange revealed—people will probably need a lawyer to discover whether they can go to court in the first place, there is very little chance of their obtaining any compensation. The Minister has repeatedly argued in her statement and in public that all of that is utterly different from Barlow Clowes because there is now a compensation scheme. That is the Financial Secretary's argument, although it did not take me 40 minutes to put it to the House. That is all that she has ever said.
  Let us go through that argument step by step. Is it true that the Penrose report reveals that the primary cause of the failure was management? Yes. I hope that the Financial Secretary will take comfort from that; it is the one part of her argument that is perfectly accurate. Secondly, is it true that the Penrose report concludes that the regulatory failure was only secondary? No, it is not. The Penrose report indeed indicates that it was secondary, but what does it mean by secondary? It is very clear: had the management not mis-performed and had the society been in good shape, the existence of a regulatory problem would not have been a difficulty for policyholders. We accept this, of course.
  If a fragile piece of glass is not broken, the fact of its fragility is not a problem, but in this case the glass was broken and fragile. The reason, in part, for that fragility was regulatory failure. The regulatory failure was a necessary—[HON. MEMBERS: "System failure."] I shall come to the system question in a moment. I hope that Labour Members hold their fire, because they are about to hear what Lord Penrose has to say about that. Regulatory failure in this case contributed to the problem and it was a necessary cause of the problem. Had regulation been perfect—had it even been good—in Lord Penrose's view the outcome might have been different.
  Lord Penrose does not—in this, the Financial Secretary is quite right—say how much regulatory failure contributed to the appalling problems that arose or how responsible those problems are. He goes on to explain that that is because he was precluded from
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  making those judgments. That is very different from him having concluded that it was not of importance; he was precluded from considering that question.
  Next, is it true—this is the most dull and tedious of all the Financial Secretary's arguments—that all the failure was pre- 1997? No, that is not what Lord Penrose says. In relation to 1998, he says
  "GAD's approach over this period seems to me to have been persistently naive".
  In relation to 2000, he says that in
  "the specific circumstances of the Society at the time one might reasonably have expected that more would have been done to test the assumption that the profits would emerge."
  Again in relation to 2000, he says that
  "the FSA and GAD were incapable of making an independent assessment of the Society's prospects of sale because of their lack of knowledge and understanding of the totality of the Society's business."
  Finally, in relation to January to July 2000, he says that
  "little was done by the FSA in relation to the court case between the Court of Appeal judgment in January and whispers of the possible outcome in June and July of the House of Lords' hearings."
  Those are all events post-1997. Do I therefore conclude that this Government are the object of criticism? No, because unlike the Financial Secretary I have no interest here in playing politics. Do I conclude that pre-1997 there were no failures? I do not. I accept that there were failures before 1997. This is a failure of British government and a failure, regrettably, of government under two separate Administrations. On this, the only clean hands in the House, alas, belong to those who sit on the Liberal Democrat Benches, because they have not been in government. Very likely, had they been in government, they also would have been responsible for this failure, but I have to admit that they did not get the chance to be responsible.
  Mr. Nigel Beard: Does the right hon. Gentleman not recognise that Lord Penrose speaks of a system failure, not a failure of the operators, and that the system was put in place by the Government he supported and was supported by the majority in Parliament, who were Members from his party? That shows the barrenness of the philosophy of light-touch regulation, which did no service to the Equitable policyholders or to the financial services industry generally.
  Mr. Letwin: In a moment or two, the hon. Gentleman will regret those remarks. Let me deal with both in turn, because they indeed relate to the next point in the Financial Secretary's argument, and both are false.
  I will read the hon. Gentleman some passages from the report—there are many—that indicate that Lord Penrose, in clear and absolute contradiction to the Financial Secretary, repeatedly points to operational failures as opposed merely to system failures, though he indeed believes that there were also system failures for which our Government were partly responsible. I am not playing politics; I am telling the hon. Gentleman and his colleagues what is in the report, rather than inventing a further version of it.

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  At paragraph 240 in chapter 19, Lord Penrose tell us:
  "There was a general failure on the part of the regulators and GAD".
  At paragraph 158 in chapter 19, he describes the Department of Trade and Industry, the Treasury and the Government Actuary's Department as "complacent".
  In paragraph 171 of the same chapter, he describes the failure of the regulator
  "to appreciate that a change of valuation assumptions had real implications".
  In paragraph 187, he describes
  "short-term objectives related to support of solvency that should have alerted regulators to the Society's weakening position".
  In paragraph 209, he tells us that
  "information was not used to form a realistic appraisal of the society's financial position".
  In paragraph 228, he tells us that
  "unsatisfactory answers were accepted without follow up".
  The hon. Member for Bexleyheath and Crayford (Mr. Beard), whom I have encountered on various occasions in the House, is intelligent and honest enough to recognise that those are operational failures. They occurred partially under our regime, and partially under the regime of the Financial Secretary and her colleagues. They were operational failures, however, not ministerial failures, and not parliamentary failures.
  Mr. Redwood: Does my right hon. Friend accept that the Financial Secretary contradicted herself, because she said that this was a system failure by regulators? She then said that Equitable Life was unique it was the only one that went wrong, it was the only problem child. It is beyond belief that there could be a serious system failure of regulation, over a period of 10 years or more, and only one casualty. Surely it must be the case that the main regulatory failure was specific regulation failure of that company.
  Mr. Letwin: My right hon. Friend, as always, makes an extremely powerful point. Another fascinating point emerged today for the first time, I think. The Financial Secretary lauded the Government for having improved the personnel who were regulating. Why would it be necessary to improve the personnel who were regulating if there were no failures on the part of the personnel who were previously regulating? Those are obviously operational failures—[Interruption] The hon. Member for Warwick and Leamington chunters from a sedentary position about system failure. According to the Financial Secretary's statement, if personnel were implicitly not up to the job, that indicates that they were doing something wrong at the operational level.
  Ruth Kelly: The right hon. Gentleman is making a very interesting argument about operational failure. In the context of his remarks, however, can he explain to the House this quote—I do not paraphrase—from Lord Penrose, who says it was,
  "the system that failed to provide the regulation that changing circumstances in the industry required, not that there was failure to implement what was fundamentally a satisfactory system"?
  Mr. Letwin: The problem with the Financial Secretary's argument is that because she is playing party
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  politics, she refuses to acknowledge what is clear, and what I have acknowledged: there were system failures. Were I denying that there was a system failure, she would have something to say. But I have not denied it. There was system failure, and operational failure, and I have just listed six cases in which Lord Penrose points specifically to operational failure.
  Mr. Plaskitt: Will the right hon. Gentleman give way?
  Mr. Letwin: No, I am going to answer the other part of the point made by the hon. Member for Bexleyheath and Crayford, if I may. The next thing that he said was that it was all light-handed regulation that was at fault, which the Financial Secretary has said on repeated occasions. The fact that it was light-handed may have partially been at fault. It is therefore of great interest that the right hon. Member for Darlington (Mr. Milburn)—not a Conservative Member, and not a Minister in our regime, but a Minister at the time in the Financial Secretary's Government—said about the nature of the regulatory regime on 28 June 1999, at column 39:
  "There will be a light touch where possible…The Bill avoids over-burdensome regulation that would serve only to stifle innovation and to increase consumer costs. Instead…the FSA will be under a duty to demonstrate that the burdens that it seeks to impose are proportionate to the benefits that will result."—[Official Report, 28 June 1999; Vol. 334, c. 39.]
  It does not therefore pay to insult the many hundreds of thousands of people involved by engaging in the petty party politics of claiming that light-handed regulation, which may have been partly to blame, and system failure, which was certainly partly to blame, is exclusively the problem of one Government or the other.
  Mr. Beard rose—Mr. Beard rose—
  Mr. Letwin: The truth is that there was system failure, which occurred under both Governments, and there were operational failures, which occurred under both Governments. That is the conclusion to which any ordinary person reading the Penrose report would come.
  Mr. Barry Gardiner: Does the right hon. Gentleman want the Government to compensate Equitable Life policyholders? Is that his party's policy, and what does he think it would cost?
  Mr. Letwin: That is the point I was coming to—the question of maladministration. As I have said, the Financial Secretary's assertion is that because, as she wrongly asserts, there was no operational failure and because, as she wrongly asserts, it was all a long time ago, there is, in her wrong estimation, no reason for an investigation into whether there was maladministration, and hence no need for anyone to ascertain whether compensation is payable. Our view is that there should be such an investigation, that there needs to be such an investigation, that Lord Penrose did not conduct such an investigation because the remit under which he was operating specifically precluded him from doing so, and that it is therefore appropriate for the parliamentary ombudsman's remit to be extended to include the

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  Government Actuary's Department so that she can conduct a proper investigation and identify whether there was maladministration, or for the Government to ask Lord Penrose to extend his remit to engaging in an investigation. or for the Government to find another suitable means of conducting it.
  This is the Financial Secretary's position. She does not know whether there was maladministration, because she did not ask Lord Penrose to find out so he did not feel enabled to tell her, and she does not want to know whether there was maladministration because she does not want to know whether following maladministration there would be compensation. The reason she has been put up to present the specious argument that she has presented is that the Chancellor does not want to find out whether compensation would be payable.
  Ruth Kelly: How does the right hon. Gentleman react to a statement made by Lord Penrose to the Treasury Committee only last week? He said
  "I do not identify any respect in which I recognise limits on what I was able to do."
  Mr. Letwin: What is odd is that in the report Lord Penrose makes it perfectly clear that he had not the remit to investigate maladministration.
  Ruth Kelly: What about the courts?
  Mr. Letwin: We will return to the courts in a moment. As the Financial Secretary well knows, the courts are not an answer.
  Let us test the Financial Secretary's bona fides in a perfectly straightforward way. If it is the case that Lord Penrose was perfectly able to investigate maladministration and if the Financial Secretary has nothing to fear from an investigation of maladministration, will she now—by making a small change in a statutory instrument—allow the parliamentary ombudsman to investigate maladministration?
  Ruth Kelly: It cannot be done.
  Mr. Letwin: Ah! The Financial Secretary says, from a sedentary position, that it cannot be done. We will provide the Financial Secretary with the means of doing it in the House, and see whether she accedes to that. The fact is that the Financial Secretary and her colleagues do not want an investigation of maladministration, and I think that that is a disgrace.
  Mr. Garnier: The Library briefing paper on the matter reports
  "The Inquiry board did not have as part of its remit the responsibility of making recommendations about compensation, indeed the remit is quite narrowly restricted to, as Ruth Kelly's letter made clear:
  "identify any lessons to be learned for the conduct, administration and regulation of life assurance business; and to give a report thereon to Treasury Ministers."
  The Financial Secretary's letter was written to thank Lord Penrose for taking on the job of holding the inquiry.
  Mr. Letwin: I am grateful to my hon. and learned Friend, who with his normal forensic ability has pointed to the relevant evidence.
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  Finally, let us turn to the question of compensation and Barlow Clowes. This is one of the most extraordinary features of the Financial Secretary's argument. In fact, it is so extraordinary that as far as I could make out, although she spoke for a long time, she did not include it today. She included it in her original statement, however, and she has been making it in broadcasts repeatedly. It is the argument that somehow we need not worry about whether there is maladministration and we need not have an investigation into whether compensation is due as a result of maladministration, because there is a compensation scheme now in existence. Well, there is a compensation scheme now in existence, and it relates to insolvency.
  The effect of compensation following insolvency is to restore people to the position that is absolutely guaranteed to them, which is a great way below what people have a reasonable expectation of otherwise receiving. The Financial Secretary knows that very well, and she therefore knows that unless horrors strike the society, the existence of the compensation scheme is a complete irrelevance to the many people whose reasonable expectations have not been fulfilled. That, I fear, is another disgraceful aspect of the Government's position.
  Mr. Forth: Is it not the case that if policyholders followed the Financial Secretary's advice, they would end up, in effect, suing themselves?
  Mr. Letwin: Suing themselves or suing one another, which is not fair, right, just or decent. If there was
  regulatory failure and there was, because Lord Penrose shows it—and if there was operational failure, which Lord Penrose also shows, and if those occurred through two Administrations, as they did, it is reasonable that there should be a proper investigation of maladministration.
  Mr. Beard rose—Mr. Beard rose—
  Mr. Letwin: I shall not give way because I am just concluding.
  It is reasonable and possible to have a proper investigation into maladministration, and such an investigation would establish whether there were or were not grounds for compensation because it would establish the extent to which the maladministration caused the defect for policyholders. The Financial Secretary cannot reasonably debar that further investigation, and I hope that in some months' time, with whatever kicking and screaming, she will accede to that request.
  7 pm
  Dr. Vincent Cable: I express my appreciation for having the opportunity to speak on this subject on a somewhat more level playing field than we had at the time of the Minister's statement—she had then had 11 weeks to peruse the report, whereas we had had a couple of hours. I should like to say at the outset that I identify myself with the Conservative shadow Chancellor's comments on the absence of the Chancellor of the Exchequer. This is an important issue,

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  and he should be here. That is no reflection on the Financial Secretary, who is an able Minister who clearly understands the subject and debates the points well, but my point is that the Chancellor should be here.
  The Chancellor has shown a selective interest in issues of financial regulation. I recall responding to a statement that he made on Sandler products, which was not exactly at the front rank of public controversy on financial regulation, and when in opposition, he took a close interest in matters of financial regulation in relation to the BCCI and Barlow Clowes. His absence today suggests one of two things: he is very embarrassed, or he is not interested. Either of those reasons is unacceptable.
  Before we plunge further into the technicalities of Penrose, it is important to reinforce the basic message that we are talking about human beings who have suffered much distress and loss, many of whom are perfectly ordinary constituents. It works out on average that we all have about 1,500 affected constituents, many of whom were not sophisticated investors or they would not have been in Equitable Life in the first place. Equitable Life's reputation as a secure, reliable fund was what drew many people to it who wanted a source of security.
  The Penrose report raises two fundamental issues, and the right hon. Member for West Dorset (Mr. Letwin) dealt with one of them at length, very clearly and correctly. That is the distinction between the failure of the regulatory system and the operational failure of regulation. It is abundantly clear on any reading of the report—it was clear when the report was first published—that both are involved. We could debate endlessly whether their relative involvement was 50:50 or 75:25, but both were clearly involved. In the penultimate paragraph of the report, in which Lord Penrose brings his thoughts to a conclusion, he brings both those concepts together, making the point in one paragraph with admirable clarity. It says, and this was the point that the Financial Secretary made:
  "As for the regulatory system, I do believe that it has failed policyholders in this case."
  The system failed—Lord Penrose is absolutely right. However, he then goes on to make a point that clearly has weight in his mind, because these are almost the last words in the report:
  "But I do take the view that the system itself was not overseen, and in particular was not kept up-to-date, and operated in an ineffective manner."
  The system operated ineffectively—there was operational failure. The word is the same.
  The second key insight of Penrose, to which the right hon. Member for West Dorset did not refer, but which needs to be stressed, was that the main failure was not the failure created by guaranteed annuities in the House of Lords, although many of us had assumed all along that that was the ultimate source of the problem. The problem that Penrose and some action groups identified was that of prolonged large-scale over-bonusing. In effect, there was a pyramid selling scheme. I am not an expert in finance, but those who are tell me that there is a technical phrase for it: a Ponzi pyramid selling scheme. In terms of the broader argument, the significance of
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  that is that one can argue that it was just about understandable that the management—and certainly the regulators—did not guess correctly which way the House of Lords would jump in a highly contentious ruling. In fact, Penrose does not argue that case, but he could have. However, it was completely unforgivable and unacceptable for the management and those who were supposed to be overseeing and regulating the scheme to administer what was a pyramid selling scheme for 10 years.
  To reinforce the point that has already been made, the report is replete with references to operational failure. I need not read it in detail; rather, I shall pick out a few key summary passages, some specific and others general. I shall read verbatim one key conclusion from the final chapter, because it captures its spirit:
  "There was a general failure on the part of the regulators and the GAD to follow up issues that arose in the course of their regulation of the Society, and to mount an effective challenge of the management."
  How can that possibly be interpreted in any way other than as concluding that there was an operational failure? It is an explicit and completely unqualified conclusion.
  There are numerous instances of the Penrose report's picking up on particular operational failures on the part of the regulators. For example, it refers to the regulators failing to pick up on the company's admission that it was not reserving for its guarantees. It refers to
  "a serious lapse in regulation…Any reasonably diligent inquiry would have elicited"
  the necessary information. The report proceeds to discuss the episode following the period in which the regulators had been alerted to the existence of the annuities guarantee. It says that they knew about the problem in 1993, and states that
  "the approach of the GAD and regulators remained the same",
  even
  "when they were aware that the Society's financial position was weak and that there was a need for vigilance in scrutiny and supervision."
  This is all about operational matters and the way in which regulation was conducted; it is not about the system.
  Mr. Plaskitt: The report does indeed make these individual observations, but what does the hon. Gentleman makes of Lord Penrose's statement in paragraph 29 of chapter 20? He stands back and sums it all up as follows:
  "The thrust of my criticism is that…it was the system that failed to provide the regulation the changing circumstances in the industry required."
  Dr. Cable: I am not disputing that. Both the Conservative spokesman and I fully acknowledged at the outset that the system clearly failed, but it is also true that there were many incidents of very specific, as well as general, negligence. The issue is the importance of that in the overall scheme of things. We shall come later to the question, which has already been raised, of who is to decide whether that in its totality amounts to maladministration, because we have yet to reach that point.
  Chris Grayling: The hon. Gentleman is absolutely right to make that point, and in that regard I was

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  astonished by the Financial Secretary's intervention on my right hon. Friend the Member for West Dorset (Mr. Letwin). The hon. Gentleman will be aware that Lord Penrose says the following in the postscript to his report:
  "Many readers of this report will be frustrated that it has not provided answers to two questions: who is at fault for the problems encountered by the Society, and who deserves redress as a consequence. It has been no part of this inquiry to attempt to answer either question."
  Surely that alone puts a stamp of endorsement on the request from all sides for the ombudsman to look at this issue.
  Dr. Cable: Yes, although I am not sure that the ombudsman constitutes the right mechanism, the logic of what the hon. Gentleman says is right.
  Certain issues relating to regulatory failure were not even covered in the Penrose report because there was so much material around. One such issue was drawn to my attention by a consultancy company called Thesys, which attempted to brief Lord Penrose but did not succeed. It made the point that a series of insurance laws and regulations were issued in 1958, 1973 and 1983, as a result of which "schedule 5" provisions were established. Those provisions were an arrangement whereby the Department of Trade and Industry collected data with the specific purpose of enabling independent assessments of whether insurance companies were actuarially sound.
  In the early 1990s, the schedule 5 forms stopped being filled in. The regulators decided that it was inconvenient or too onerous to collect that information. If one wanted to be party political about it, one could say that Lord Heseltine was the Secretary of State for Trade and Industry at the time and so was somehow responsible for what happened. Indirectly, I suppose that he was. Clearly, however, an operational decision was taken to stop collecting data that were crucial to identifying the failures that subsequently emerged. It was essentially an operational failure—one that even Lord Penrose has not detected.
  We then come on to the question of maladministration—what it means, and its significance. I have been careful—I note that the right hon. Member for West Dorset was also careful—to make it clear that we are not asking the Government to get out their cheque books and sign blank cheques to large numbers of people because of their losses. That would be inappropriate, because we first need to establish whether maladministration has taken place. I do not yet know whether it did; the report did not reach a conclusion on that.
  Mr. Gardiner: I am trying to follow the hon. Gentleman's argument carefully. Would he not have to show not only that there had been maladministration, but that that maladministration had been relevant to the failure? It is not enough to say that there were operational errors in which those applying the regulations failed to apply them properly. It is necessary to show that they failed to apply relevant regulations in such a way as to precipitate the position with which we now have to deal.
  Dr. Cable: I would not dispute that perfectly sensible point. That would be the purpose of the next stage of the
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  inquiry—to establish whether the maladministration was indeed relevant and central to the failure or otherwise. I entirely accept the hon. Gentleman's valid point.
  We must be absolutely clear—the Financial Secretary was not—about Lord Penrose's assessment of his own role. At the end of the report, Lord Penrose clearly states:
  "The jurisdiction to adjudicate on regulatory failure in duty is not mine."
  He makes it absolutely clear that that was not his job. He has not exonerated the government—I mean with a little "g"—of maladministration; he did not reach a decision on it.
  There are different ways of following the report through. The normal procedure would be to go to the parliamentary ombudsman, which is what the right hon. Member for West Dorset suggested. That is what has happened in the past, but there are some practical reasons for not doing that. It would certainly take up much of the parliamentary ombudsman's time: the Barlow Clowes case took more than a year, and as the Chancellor said at the time, it took a year to establish what was already known. The ombudsman has already looked into this problem, but not with great success—indeed, many of the key points were subsequently contradicted by Penrose. I believe that there is a simpler way of dealing with it.
  Mr. Beard: Has not the parliamentary ombudsman said that she could find no instances of maladministration? That is why she found as she did. Surely that demolishes the elaborate case that the hon. Gentleman is attempting to build up.
  Dr. Cable: As I recall it, the parliamentary ombudsman was examining the period covered by the Baird report with respect to the role of the Financial Services Authority. Most of the maladministration seems to have occurred in the early and mid-1990s. That is the period that someone would have to investigate. If it were not to be the parliamentary ombudsman, who would it be?
  My suggestion is simple and practical. The Chancellor or the Financial Secretary could simply write to Lord Penrose, asking him—because he was immersed in the subject—to provide a judgment on whether or not maladministration took place. He could be asked to respond within three months. If the Financial Secretary is right, I suspect that he would reply, "I don't need three months. I don't need to spend my time and your money because I don't believe there is any maladministration." Why cannot the Financial Secretary take that small additional step to clarify and prove her point?
  Ruth Kelly: If the hon. Gentleman had spent more time on the concluding chapters of the report, he would have seen that Lord Penrose said:
  "An open adversarial process such as would have been necessary to replicate the litigation process over the longer period and the wider range of issues would have been beyond contemplation."

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  He also said that, if he had gone down the route that the hon. Gentleman suggests, he could not have concluded his inquiries within a time scale that had regard to the public interest.
  Dr. Cable: It is difficult to understand why Lord Penrose would have been constrained, as all the information is in the public domain and is set out at great length in the report. That is the raw material that would have been available to the parliamentary ombudsman, who also would not have been able to call on further information.
  Mr. Garnier: Is the hon. Gentleman not puzzled by the Financial Secretary's intervention? She has suggested that people should take their disputes to court, but would not that mean that she was multiplying—in spades—the adversarial nature of any inquiry that a court would engage in, not to mention the costs involved?
  Dr. Cable: The hon. and learned Gentleman is right, and I asked about the court in an earlier intervention. The Financial Secretary replied that that was a complicated legal argument that she did not wish to get into. The legal argument may be complicated, but Equitable Life has sent out a very large number of letters on this matter. I shall read an extract from a letter sent to my hon. Friend the Member for Cheadle (Mrs. Calton). The extract covers Equitable Life's response to the proposal that the matters be taken to the court and to the financial ombudsman.
  I suspect that the Minister is not entirely familiar with the idea that the financial ombudsman is a mediator who cannot mediate unless both sides are willing. The letter makes very clear the view of Equitable Life about litigation and the financial ombudsman. In respect of legal action, it states:
  "The issue you raise was…dealt with under the Scheme of Arrangement, also known as the Compromise Scheme, which applies to all with-profits policyholders with policies in force on 8 February 2002. Following approval of the Scheme by the members and the Court, certain rights were given up in exchange for an uplift in policy values. As a result, your claim cannot be upheld.
  Also included in the Scheme was the removal of your rights to pursue such complaints by legal or other means, including the Courts and the Financial Ombudsman Service."
  From the outset, Equitable Life denied that it would be willing to engage in any form of mediation through the financial ombudsman service. It made it clear that it had already covered itself in respect of action through the courts. The invocation of the courts is therefore a completely false trail, which would cost many people large amounts of money to no effect at all.
  Another issue in relation to compensation needs to be clarified.
  Mr. Gardiner: If it is a completely false trial, why does the hon. Gentleman think that Lord Penrose commented on it in his report?
  Dr. Cable: The report's conclusion is unsatisfactory in that respect. Lord Penrose does not suggest that he was aware of what Equitable Life had said about the limits of litigation but, if the hon. Gentleman knows the reference, I should be happy to take it.
  Mr. Gardiner: I do not know the reference, but I hope that the hon. Gentleman is not suggesting that Lord Penrose was not aware of the arrangement made between policyholders and Equitable Life about giving up their legal rights.
  Dr. Cable: I do not know whether he was aware of that or not, but he seems to have urged a course of action that the overwhelming majority of policy holders would not be able to pursue in any circumstances. To that extent, the recommendation—if that is what it was was not terribly helpful.
  The issue of the money is also important. If a compensation claim were to be made, through the courts or, in some other way, through the ombudsman, a basic question must be answered. How much have the policyholders lost—a lot, or a little? Penrose was clear that the loss had been substantial. He said:
  "However, whatever the position on compensation might prove to be in the end of the day, it is clear that many Equitable policyholders have suffered much worry and distress, and many…will continue to experience real financial hardship".
  How great is that real financial hardship? I tabled a question to the Financial Secretary some weeks ago to see whether she could put in the public domain some estimate of the costs. It is clear how they could be calculated. One would look at particular groups of policyholders on the basis of all the evidence that is now available, taking into account the different maturities and types of policy, and compare them with the average. I know that the Financial Secretary was happy, in principle, to put that information into the public domain.
  I have now been told that the information cannot be disclosed for reasons of commercial confidentiality invoked by Equitable Life. I was sufficiently concerned by that conclusion to ring the chief executive this lunchtime and ask him why the information could not be made available. I was told that it would be too difficult to provide it. However, it was not too difficult in the golden days when Equitable Life was outperforming the rest of the industry.
  The company is no longer willing to disclose the information, which leaves two worrying conclusions. It might be that there were no serious losses, which is possible but implausible. Certainly Lord Penrose did not think that. The alternative is that the current management is so embarrassed by its performance that it is not willing to release the information. However, that information is crucial to the policyholders in making their case, whether for a further inquiry by Penrose or the ombudsman, in the courts or by some other means. That is a serious dereliction of duty by the company now, let alone in the past.
  Chris Grayling: I agree that it is a dereliction of duty by the company. Moreover, an organisation that is no longer open for new business, and is therefore not

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  trading in the conventional way that other companies and organisations in the sector are trading, should not use commercial confidentiality as a defence, because it does not apply as it would to any other organisation competing in the financial services industry.
  Dr. Cable: That is a good point that I had not thought of, and it may be an avenue to pursue through the FSA or directly through the Financial Secretary. I thank the hon. Gentleman for that intervention.
  An important point was raised by the hon. Member for Tiverton and Honiton (Mrs. Browning), when she suggested that the company could now slide towards insolvency. I was worried when the Financial Secretary made her original statement, because on more than one occasion she referred to the possibility of compensation by that route. It would certainly be an easy way out for the Government if compensation had to be paid by the industry and not by the Government. However, it is important to reflect on the implications.
  If the industry scheme were to be brought into effect and had to provide substantial compensation in the event of insolvency, we have to ask where the money would come from. In principle, it could come from shareholders' funds in the insurance industry, but some of the leading insurers are mutuals and do not have any shareholders. Whatever happened, many individual policyholders in the insurance industry would end up footing the bill for the disaster. That would come at a time when some participants in the industry are struggling themselves with much tougher insolvency rules imposed by the FSA. My final thought is purely speculative. The Government think that they have drawn a neat line under the episode, but if they force the industry to fund compensation, we could see a cascade effect that caused far greater damage than the original Equitable Life disaster. That is why the Government must think much more constructively about examining the question of maladministration and the consequences of that.
  7.24 pm
  Mr. James Plaskitt: I have had quite an interest in the Equitable Life issue for some years, not only as a member of the Treasury Committee, but from my constituency experience. All hon. Members probably have constituents who are affected by this affair. I do not know how many of mine are affected, but about 50 of them have given the details of their cases to me, and I have found that information very helpful in pursuing the matter through my membership of the Treasury Committee.
  It is important to bear in mind the individual stories that lie behind what we are discussing. Many of the people involved do not have considerable means, but they invested significant sums in what they thought was a highly reputable company, and they are now in retirement in much reduced circumstances. Those people are closely following not only the Treasury Committee's deliberations, but what we say in the House. Many of them have been waiting for Lord Penrose to report. So we have reached a critical juncture in trying to unearth exactly what happened.
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  Lord Penrose appeared before the Treasury Committee on 16 March—I think that it was the first time for about 40 years that a judge had appeared before a Select Committee—and he gave us extremely important evidence. Of course we wanted to know whether, in his view, he had been given the right terms of reference, and he told us:
  "I was the tool that I was given to do the job."
  In other words, he set his own terms within his given remit. He has certainly not indicated to us that he was in any way restricted in undertaking the research and investigation that he was asked to do.
  Lord Penrose's report enables us to identify key moments in the history of the Equitable Life saga. He shows us that the company was using "actuarial techniques" to create what he calls "apparent surpluses" in the 1970s, that
  "the Society did not again get back to a position of having an excess of assets over the realistic policy values"
  in the early 1990s, and that the accumulation of all that, over 20 or 30 years, led the company to have a £3 billion shortfall by the end of 2000.
  After the Treasury Committee took evidence from members of Equitable Life when we opened our inquiry two years ago, we concluded:
  "Equitable Life's risky decision in 1993 not to build up a reserve to cover the costs of guaranteed annuity rate liabilities was a crucial turning point."
  So it is natural to focus on what Lord Penrose tells us in his report about regulatory system failure. When he was before us last week, commenting on his report, we asked him about regulatory systems failure and he said in evidence:
  "One has a growing divergence between what the regulatory system required in the way of information in the annual financial statements of life offices and what the life offices themselves were actually doing in the conduct of their business."
  He continued:
  "There would be no reaction to growing terminal bonus if terminal bonus was not a focus for regulatory attention…I think that critically is what went wrong."
  In considering the focus of Lord Penrose's report, the additional comments that he has made in summary form in evidence to the Treasury Committee help to clarify the situation as he finds it, and they bear out exactly what he says at paragraph 69 in chapter 20 of the report:
  "the thrust of my criticism is that for the most part it was the system that failed to provide the regulation that changing circumstances in the industry required".
  When Lord Penrose was before the Treasury Committee last week, we wanted to ask him to expand on the occasions during this story when key opportunities to reform the regulatory system were missed. The evidence increasingly focuses on the period 1990 to 1994, and discussions of the European Union's third life directive. When Lord Penrose appeared before the Treasury Committee, I put it to him that that was probably an important chance to align the regulatory system with developments in the industry. He answered with the simple word "Yes". He also added that the original formula made it an obligation to make proper provision for terminal bonuses.

  1003
  In this debate, it will be interesting to look briefly at the way in which the third life directive evolved. Lord Penrose gives all the evidence in his report. In 1990, when the original regulation was first put before the committees that dealt with it, it stated:
  "the valuation method shall take into account, either implicitly or explicitly, future bonuses of all kinds, in a manner consistent with the other assumptions on future bonuses of all kinds, in a manner consistent with the other assumptions on future experience and with the current method of distribution of bonus."
  Subsequently, there were four years of argument before the directive finally emerged and took its place. It in interesting to see how the wording changed. This was the wording that finally appeared in the directive in 1994:
  "The amount of the technical life-assurance provisions shall be calculated by a sufficiently prudent prospective actuarial valuation, taking account of all future liabilities as determined by the policy conditions for each existing policy".
  That represents a very significant watering down of the directive between 1990 and 1994, so one has to ask how it came to be watered down, and why it emerged in that form and not in the form in which it originally entered the negotiations. In the very chapter in which Lord Penrose looks at the evolution of the directive, he reminds us that it was the United Kingdom delegation that led the resistance to the original wording.
  That gives us strong evidence to support the view that there was unnecessarily light-touch regulation at that time, and it clearly points the finger towards why, in the 1990s, an important opportunity to bring the regulation into line with what was happening in the industry was missed.
  We have heard the suggestion, or accusation, that after 1997 and the change of Government, the Treasury was passive in relation to all these issues. It is hard to find the evidence to back up that suggestion. The ombudsman, from whom the Treasury Committee heard evidence, said that the Treasury was in no sense passive. He reminded us that in 1998, quite a vigorous battle went on between the Treasury and Equitable Life, with the Treasury threatening to close Equitable Life down, and Equitable Life threatening to take the Treasury to judicial review. That does not suggest that there was passivity on the part of the Treasury.
  When the Treasury Committee began to look into the matter back in 2001, it heard evidence about what had been happening immediately after 1997. The prudential insurance regulator became concerned about levels of reserves for the guaranteed annuity rate policies in 1997. The Government Actuary's Department subsequently undertook a survey, and it told us in evidence that Equitable Life stood out among all the other life assurance companies. Immediately afterwards, red letters, as they were called, circulated between the Treasury and the company, raising issues about Equitable Life's potential solvency.
  Mr. Letwin: The hon. Gentleman has certainly done his homework. Is he really arguing that if his current disquisition leads to a conclusion that all the failures occurred before 1997—he knows that I deny that that is the case, but we shall let that be for a moment—and if
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  it emerges that there was both systemic and operational failure before that time, it would affect in any way the issue at stake—the entitlement of current and lost policyholders to possible compensation if there was maladministration? Why does it matter whether the failure occurred before 1997 or afterwards?
  Mr. Plaskitt: What matters is unearthing exactly what happened, and that is what Lord Penrose was asked to do. It is essential to look at the totality of his findings, and he helps us to do so by standing back in the final chapter of the report, having looked in detail at events that took place over many years, and asking what basic conclusion one can draw about the causes of the problem. He says, as we know, that the company was first and foremost the architect of its own misfortune, and regulatory system failure played a secondary role.
  Mr. Letwin: Why does it matter when that took place? If the hon. Gentleman is making a serious argument about the possible rights of policyholders, is it not incumbent on him to address the question of whether the failure was partly operational, as the hon. Member for Twickenham (Dr. Cable) and I have amply shown is demonstrated in the report? Why does the date matter to the hon. Member for Warwick and Leamington (Mr. Plaskitt)—other than as a party political point?
  Mr. Plaskitt: I am not making a party political point at all. I am trying to extract from the dense, 800 page-plus Penrose report the essence of its findings, because that is what my constituents and the constituents of other right hon. and hon. Members affected by the affair want to know. They want to know what happened and how it happened.
  Mr. Harry Barnes: Surely the question to which our constituents, including the 50 who have been in touch with my hon. Friend, want an answer is: what is to be done now? It is important to understand the analysis and accept that the Conservatives and Equitable Life were to blame, but now we must decide what is to be done to get out of the mess that other people have created. There are avenues available to the Government that might assist with that process.
  Mr. Plaskitt: My hon. Friend is absolutely right. My constituents, and, I am sure, his constituents and others, want to know what happens now. However, unless we understand fully the history of how things happened, we cannot work out correctly what must happen next. That suggestion was put to Lord Penrose as part of his terms of reference. He was asked to advise on what lessons should be learned, and what action should be taken. Action is under way—the ombudsman is undertaking work and there may be court actions. Lord Penrose himself suggested that the situation would eventually lead to litigation. That will be a lengthy process, but without the facts and the history before us, we could never determine what the next steps should be.
  One important step is getting the regulatory system right, and the Financial Services Authority has introduced significant changes. Again, we asked Lord Penrose for his view because, having looked into the matter and unearthed important evidence of regulatory

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  system failure, he could judge the current regulatory system against previous shortcomings and determine whether things have improved. In his evidence he was clear that they have, and pointed to resource improvements. For example, there are now twice as many regulators working on the regulation of life insurance companies. I reflected on that when Opposition Members intervened on this subject—I wondered whether the bowler-hatted bureaucrats who feature in their party's recent campaign efforts included the additional regulators who were appointed. If they are suggesting that those people should be removed again, we will slide back to the excessively light-touch regulation that contributed to the problem in the first place.
  Secondly, Lord Penrose acknowledges that the organisational structure of regulation is now far better. Different skills are working together and are located in the life offices—a complete change from what happened before. Lord Penrose welcomes the regulatory system changes referred to as the "twin peaks" arrangement—traditional paper-based solvency investigation and measures allied to the broader factor. When he looks at the regulatory system in place now, he concludes:
  "My clear impression is that the approach now being adopted is a very considerable improvement on what there was before."
  That will reassure constituents who want to know whether the lessons have been learned from the whole tragic affair.
  Chris Grayling: The hon. Gentleman should go back and talk to his constituents who have been affected. I have no sense that constituents who have written to me have the slightest concern about the regulatory system. What they want to know is what is being done about their position. The Penrose report specifically states that compensation was not an issue that he considered or was asked to consider. If the hon. Gentleman is arguing that regulatory failure contributed to what happened—he is now explaining why the improvements that he says his Government introduced have made a difference to that—does he not therefore think that a proper investigation into the question of maladministration would now be appropriate?
  Mr. Plaskitt: We have had an investigation conducted by Lord Penrose into the regulatory system failure. The other questions are entirely separate. We have rehearsed many times in the course of this discussion how those will be taken forward. The hon. Gentleman is right. Our constituents want to know that, but I do not think he is suggesting that there should be a Government-underwritten compensation scheme. If he is suggesting that, he needs to explain how we will overcome the moral hazard issue that such a scheme would raise.
  To conclude, we have a story of manipulation, concealment and misrepresentation by Equitable Life. We have evidence of a domineering and manipulative chief executive, an inert board and institutional laziness and complacency, all underpinned by an inadequate regulatory system that was itself endorsed by policy decisions designed to prevent appropriate regulation coming into place. In the course of reading Lord Penrose's report one comes across a paper written by Mr. Ranson of Equitable Life delighting in the title,
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  "With Profits Without Mystery". From the perspective of Equitable Life's policyholders, it is more a case of "with losses without honesty".
  7.43 pm
  Chris Grayling: Despite the differences of emphasis in the debate tonight, hon. Members in all parts of the House are united in the view that the case of Equitable Life has been a tragic state of affairs that has caused problems not just for those who have lost money as a result of what happened, but for the whole country. The entire financial system on which the pensions of the future and the security of many of our people depend has been challenged and weakened by what happened with Equitable Life.
  I agree with the hon. Member for Warwick and Leamington (Mr. Plaskitt) that lessons need to be learned. We need to understand what went wrong and ensure that it cannot happen again. To that extent we may agree, but as for the rest of his comments, and the comments of the Minister and other Labour Members, I find it depressing and disappointing—and I know that my constituents who have suffered in the affair will find it equally depressing and disappointing—that the Government's only real response in the wake of the Penrose report is to try to focus the criticism on the regulatory regime before 1997, and thus on the Conservative Government.
  We need to set aside party politics, understand what went wrong and explore still further the questions that remain unanswered. We must provide real responses that our constituents will understand and that will leave them with a sense that their anxieties, questions and complaints are being properly addressed and not, as I fear, left to one side. As I listen to Labour Members, I am left with the sense that my constituents' concerns are being left to one side.
  I received a letter just this morning from one of my constituents and it is difficult to argue against the simplicity of what he says. He writes:
  "Equitable Life was at one time highly respected being the oldest mutual life office in the world. The management certainly made mistakes and behaved in an arrogant manner but it is up to the Regulator to protect the Public's interest. It is after all what he is there for!"
  It is clear that the regulator, in whatever shape, form or system, did not fulfil that remit. Ultimately, as I said to the Financial Secretary in my intervention, even up to the latter days before the House of Lords judgment, even when discussions were taking place between the Treasury, the FSA and Equitable Life, my constituents and others around the country were still being sold policies that would quickly turn into a disaster for them.
  The reality was that, throughout the process, from start to finish, people were let down by the system and the regulation, as well as by the management of the organisation itself. That the Financial Secretary should set her face against the simple question of whether there was maladministration is extraordinary and inexplicable. I cannot for the life of me see how she believes that she will benefit politically. Out there are thousands of people who are waiting upon her decisions, waiting upon the views and decisions of the House, who

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  believe that it would be right and appropriate for there to be an investigation into whether there was maladministration, and it is simply not happening.
  Lord Penrose is clear in what he says. The Financial Secretary intervened on the hon. Member for Twickenham (Dr. Cable) and quoted the last sentence of paragraph 77 of chapter 20 of the report, but at the beginning of that paragraph Lord Penrose states:
  "Many readers of this report will be frustrated that it has not provided answers to two questions: who is at fault for the problems encountered by the Society, and who deserves redress as a consequence? It has been no part of this inquiry to attempt to answer either question."
  He goes on to say:
  "The first inevitably involves issues of the scope of duty and of breach of duty that I was not asked to consider and that I would have been unwilling to consider as part of an inquisitorial process."
  So not only was Lord Penrose not asked to deal with, and did not deal with, those issues, he believed that that aspect of what went on should not have been part of his remit. Surely, if nothing else, he is arguing in support of the requests of my right hon. Friend the Member for West Dorset (Mr. Letwin) and of others inside the House and outside it for a simple process that asks the question: was there maladministration?
  There has been debate over the ombudsman's ability to provide a proper assessment of what happened. It has been suggested that the Government Actuary's Department is not within the ombudsman's remit and therefore there is nothing that the ombudsman can do. But as my hon. Friend the Member for Chichester (Mr. Tyrie) has made clear, the reality is that, if the House were united, those changes, adjustments to the system and changes to the remit of the ombudsman, could be pushed through quickly. The disappointing thing, of course, is that that united support does not exist within the House.
  I want to press the Financial Secretary on her challenging of the regulatory regime that existed before 1997. I looked back today at the letters that I have received from constituents about their experiences of what went wrong and I have read carefully the sections of the report that walk us through what happened after 1997. It is clear that discussions were taking place within the Treasury when it took over the role of regulator after 1998, and then within the FSA when it took over the job of regulation shortly after that. There were robust debates and serious questions were being asked about the solvency of Equitable Life.
  When the Minister made her statement to the House a couple of weeks ago, she referred several times to discussions that took place in the years up to 2000–01. She will remember referring to information about reinsurance being withheld from the regulator, which she said took place in the latter days of the last decade. That happened under the new regime, albeit in its infancy as an alternative system. Such questions as, "Where did the regulatory system fall down?" must, by definition, apply as much to what occurred after 1997 as to what took place before 1997.
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  I have read various sections of the report, which the Minister will know better than I do. Chapter 17, page 611, specifically refers to
  "a meeting called at HMT's request to discuss the Society's approach to the annuity guarantees and the solvency implication of reserving for them."
  The Government Actuary's Department addressed the solvency issue shortly afterwards in a document produced in December 1998, saying:
  "While this is reassuring it should be realised that publication of such a low solvency position is likely to severely undermine the company's reputation in the market and could threaten its survival as an independent entity."
  At that point in 1998, serious discussions were taking place within the Treasury about whether Equitable Life was founded on stone or sand. Yet, when I read the letters from my constituents, I found that a significant number of them began their involvement with Equitable Life at that time. Those people did not take out policies in the 1970s or 1980s but were sold policies right up until the turn of the decade, and even beyond, and they lost money.
  Among those letters, I found an example of a constituent who challenged some of Equitable Life's operational practices. He made a number of claims about how policies were sold to him, and, indeed, denied ever signing contracts with Equitable Life. None the less, he was placed under heavy selling pressure by Equitable Life salesmen in 1999 who were trying to persuade him to take up business with them. Some 25 to 30 per cent. of the people who wrote to me to complain took out policies at the end of the 1990s, and I cannot understand how the Minister can turn round to them and say, "There was a dodgy regime in place before we took office. We did something about it, and that is the end of the matter." That is essentially the message that the Government have given to my constituents. I ask the Minister to think again about the sole message that this House is sending to all the people affected in my constituency, her constituency and those of other hon. Members: "The regulatory regime did not work. We have changed it so it will all be fine for the future."
  There is also the question whether operational failure led directly to financial loss. I must say that I was surprised by Lord Penrose's comment that there was no direct connection between regulatory failure and financial loss. If that were the case, why, when the Treasury and the FSA were discussing the solvency of Equitable Life, was the society still permitted to go out and sell policies to my constituents, who, within a very few years, suffered substantial financial loss as a result? The Minister may shake her head and smile, but my constituents will not understand why the regulator was not involved in what happened to them. Surely the House has a duty to see the matter through to the end. We have a duty to all those who lost money to look in every corner for what may or may not have happened. They are asking us to send the case back to the ombudsman for a proper investigation into whether there was maladministration. Is there really any reason why the Government should not say yes to that investigation?
  I suggest to the Minister that there is a danger that, as she sits in her office in the Treasury considering regulatory issues, she may take her eye off the real ball—

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  the fact that thousands of pensioners out there have lost money and their retirements will not be the same. We have a duty to them to see this through to the end by granting the investigation to determine whether there was maladministration and whether they have a case for compensation. If she fails to do that, she will let down not only those people, but this whole place and the whole reputation of politics and Government. She must change her mind, she must send them the right message, and she must do it now.
  7.55 pm
  Mr. Adrian Bailey: Like every other Member, I have constituents whose pension plans and retirement aspirations are much reduced as a result of the Equitable Life fiasco. I have an interest as a representative of those constituents and a further interest as chair of the all-party group on building societies and financial mutuals.
  I join the Minister and other Members in expressing sympathy for those people affected by this fiasco. That was brought home to me today when I had coffee with a distinguished member of the local business community, who confided in me that he was still working only because Equitable Life had not delivered on his pension and, in turn, his retirement plans.
  On compensation, the Government's response is consistent with that which took place following other pension fiascos and, on some occasions, scandals. Nobody can argue that the Government cannot underwrite risks, then say that Equitable Life is a special case, given that Penrose himself blames the company, not the regulators. I look back to the Maxwell scandal at the Daily Mirror. I appreciate that the pensioners affected by Equitable Life have been badly hit—in some cases, the impact has been devastating—but it was exactly the same for the Daily Mirror pensioners. There were huge issues of corporate governance in that case, too, but the Government did not rush in to compensate.
  Another such episode, and another sorry legacy of the former Tory Government's regulatory regime, was that of pensions mis-selling. On that occasion, the industry itself had to compensate people who were sold pensions on false pretences. If the Government were to step in on this occasion, I wonder whether the companies that paid out that compensation would come to them to demand that they underwrite the bad management and mis-selling that took place all those years ago.
  Mr. Letwin: Of course, everybody recognises that in many cases no question of compensation arises, but does the hon. Gentleman recognise that the distinction lies in the question of whether there was maladministration? That distinction was recognised by Parliament and by the current Chancellor in relation to the Barlow Clowes case, in which compensation was payable because maladministration was ascertained.
  Mr. Bailey: Penrose says that there was no maladministration in this case. Frankly, many of the constituents whose perspective Conservative Members have assumed will not understand the subtleties and refinements of whether that is so. The fact is that they took up schemes that, one way or another, did not deliver on their pension aspirations.
  1010
  My hon. Friend the Member for Edmonton (Mr. Love) made a valuable point about the statement made earlier this month, when he noted that the Financial Times expert had said that, even after all the problems, some of Equitable Life's returns were no worse than those of some other companies, so how could we justify compensating those pension holders and not those in other companies that had failed to deliver for totally different reasons? That would be difficult to justify.
  I want to deal with my concerns about the mutual sector. It has been pointed out on a number of occasions that the problem at Equitable Life related to management. The quote often given from the Penrose report is that
  "The Society's uniqueness lay in the approach adopted by its management, not in the essential characteristics of its business."
  Central to that was the fact that the chief executive officer was also the actuary, and that the company pursued a policy of failing to keep adequate reserves, overpaying bonuses and failing to keep the board informed of the position and the risks involved.
  The report also makes it clear that the critical responsibility for valuing liabilities, assessing the liability implications of new products and identifying risk was discharged by a discrete part of the organisation that was not subject to effective scrutiny or challenge. Obviously, monitoring needs to be improved, and improvements are also needed in corporate governance. We must be clear, however, that because this organisation was a mutual, policyholders did not see their obligation as one of scrutiny, as might be the case for a shareholder in a conventional plc. This distinction was pointed out in Penrose. Most policyholders who take out a policy in a mutual see their obligation as simply to pay a premium, but to have no extra responsibility.
  Under the articles of Equitable Life, the policyholders were effectively powerless. My hon. Friend the Member for Edmonton made the point about their registration under the provisions of the Companies Act 1989, which provide for a 10 per cent. vote to get a special meeting. That is, of course, impossible if there is no adequate register or access to a register for policyholders. Mutuals have to find a means whereby they can provide for policyholder participation.
  I welcome, as do other mutuals, the Treasury initiative set up by Sir Paul Myners to look into corporate governance and policyholder representation in mutual life offices. The Minister has already set out the terms of reference, so I will not go over them again. It is fair to say that the mutual life assurance industry accepts the need to take action to improve representation by policyholders. We must make it clear, however, that the situation at Equitable Life arose not because it was a mutual but because the management policy was bad and, indeed, not even compatible with the basic principles of mutuality.
  The initiative raises the challenge to ensure that the corporate governance of mutual life offices provides the necessary checks and balances to ensure that a saga such as this is never repeated. I am sure that there will be a dialogue between Sir Paul Myners and the mutual sector to ensure that steps are taken to prevent any such repetition.

  1011
  I want to conclude by making these particular points. Equitable Life has reached this situation because of poor management, not the structural issue with mutual ownership. That could happen with plcs. Independent Insurance went bust, despite the fact that it was a plc. There is no guarantee, even with a plc, that shareholders will bail it out and there are plenty of examples of shareholders letting a plc collapse.
  The mutual life offices recognise the fact that this episode highlights issues of governance and involvement of policyholders, but we must make it clear that it is a one-off. Equitable Life is not representative of the mutual industry as a whole and it is as anxious as anybody to ensure that its rules and procedures prevent any repeat of this with a mutual company.
  8.6 pm
  Mr. Edward Garnier: If the only pension arrangements people have are with Equitable Life, they are likely to think that it is representative of the mutual system, so I am not at all sure that the perhaps not intentionally but none the less effectively complacent attitude with which the hon. Member for West Bromwich, West (Mr. Bailey) finished provides us with a helpful analysis of where we are.
  I want, if I may, to pick up, but not too seriously, a point made by the hon. Member for Warwick and Leamington (Mr. Plaskitt). He thought that Lord Penrose was the first judge to appear before a Select Committee for 40 years. I was on the Home Affairs Committee in 1992-93 and judges regularly appeared before it. Of course, judges chair Select Committees in the House of Lords.
  If this were the Court of Appeal, and it is not, and Lord Justice Letwin as opposed to my right hon. Friend the Member for West Dorset (Mr. Letwin) had given judgment as opposed to having made a speech, I could say, "I have heard what Lord Justice Letwin says and I have nothing further to add." However, he has not given judgment. We are in the House of Commons and I am here to represent my constituents and to say what I believe ought to be done in a political sense as a consequence of this fiasco.
  I have already declared my interest as the former holder of a number of Equitable Life policies. I continue to hold, I think, one further policy with it, so clearly I have been affected, and may continue to be affected, by what has happened. I have not yet reached the stage at which I am prepared to be as generous as my right hon. Friend in the event of compensation being provided, but I put that to one side.
  Many of my constituents, like those of other hon. Members, have been affected by this disaster. Some are members of the Equitable members action group and some are not, but all have been adversely affected. The number runs into the hundreds—we are not talking about just one, two or three isolated individuals.
  The dilemma that my constituents face is exacerbated when one considers that those people are not in a position to repair the damage done to them. They are, by and large, at the end of their working life or have finished it, so they do not have the economic ability to
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  get another job to refill their pension pot. I accept that not every injury commands a remedy. Plenty of people suffer accidents, be they financial, commercial or physical. Those do not require compensation, but we are considering rather different circumstances.
  I can say on behalf of my constituents that all who have been affected by this disaster welcomed the setting up of the Penrose inquiry and, to a greater or lesser degree, they have welcomed its findings. However, where they, and I on their behalf, complain is in respect of what the public authorities have done and propose to do. What they—my constituents—say about the management of Equitable Life is unprintable. Disquiet is growing, however, about the Government's response, and I regret, as I have huge respect for the Financial Secretary, that that disquiet will be in no degree lessened by her response in her statement on 8 March or in her opening speech today.
  The appearance—I can put it no higher than that—which comes not only from the Government but from other agencies, is that all is well, all the mistakes were in the past, and that that is all that needs to be done about it. I note that the Financial Services Authority's press release, which enclosed the letter that the chairman, Mr. McCarthy, wrote to the Financial Secretary on 8 March, says, under "Notes for editors":
  "The FSA regulates the financial services industry and has four objectives under the Financial Services and Markets Act 2000: maintaining market confidence; promoting public understanding of the financial system; the protection of consumers; and fighting financial crime. The FSA aims to maintain efficient, orderly and clean financial markets and help retail consumers achieve a fair deal."
  My constituents are entitled to ask whether the FSA, in its handling of this affair, has come up to its remit.
  The chairman of the FSA, in his letter to the Financial Secretary, says that Lord Penrose
  "makes clear that the issues on which he comments can be settled definitively only by resolution in the courts or by some other adjudicator."
  Some other adjudicator, as was pointed out by my right hon. Friend the shadow Chancellor and the hon. Member for Twickenham (Dr. Cable), could mean a reborn Penrose. He has already found facts, and he is tremendously well placed to be that other adjudicator. I am depressed, however, that the chairman of the FSA thinks it appropriate—as does the Financial Secretary, I fear—to require our constituents to go to court to seek redress.
  Mr. Barnes: Does the hon. and learned Gentleman feel that the Government could be involved in a compensation scheme that was in some way based on need? Different people are in different sets of circumstances—I am not sure whether I want to see him compensated, but numbers of his constituents might be much more deserving cases because their pensions and future provision have gone, and they might therefore be reasonably considered by the Government to be on a list for some percentage of compensation.
  Mr. Garnier: I was simply making my personal interest clear, and I do not wish to personalise this debate at all. I can see that there is some argument to be

  1013
  made, and the telling question from the Labour Benches was that asked by the hon. Member for North-East Derbyshire (Mr. Barnes): what are the Government going to do? Were it to involve some form of means-tested compensation scheme, let us look at it. That is an advance from him, however, which we have not yet heard from his right hon. and hon. Friends on the Front Bench. At least he is addressing his mind to the real moral and political questions which this debate throws up, and which I fear that the authorities and the Government are ignoring.
  It seems to me that the Government are hiding behind the Penrose report. The Financial Secretary quoted large chunks—she spent about 20 or 30 minutes doing so—of the report at the beginning of her speech. That is not difficult. The more difficult political and moral question is to ask what flows from the findings of fact that Lord Penrose has made. I have heard nothing from the Government other than that my constituents are urged to go to court, but this Government have removed access to legal aid, and therefore access to the courts, for these much-put-upon people. Any court case would take years to prepare, and if not a year, certainly months to reach a conclusion at trial.
  We need only look at the current court case involving the BCCI scandal, which took place some years ago, to realise that. It will take the High Court many months to dispose of that case—and given that one party is bound to be dissatisfied with the result, it will go to the Court of Appeal and, no doubt, to the House of Lords. So we are not looking at an easy way out, however easily the words "go to court" trip off the ministerial tongue.
  What else did the Minister say? She said "We have set up the Myners review and the Morris review." I should have thought that the House was fed up with hearing the Government talk about reviews. They have had more "reviews" than Raymond. It is time that they started to do something rather than pushing issues over the political horizon.
  We are all immensely grateful for what Lord Penrose has done, but what a judge cannot do is provide a Government with political answers. We saw that with the Scott inquiry and the Hutton inquiry, and we are seeing it with the Saville inquiry. We have four judges who have held, or are in the process of holding, well-organised and well-designed inquiries, and they do their job; but they do their job as finders of fact rather than as providers of political and economic answers. It is wrong of the Government to say "Penrose has reported: we need do no more."
  I believe that this saga points to a need to do away finally with the compulsory annuity system. The Minister and I debated that at some length last year, and I might remind her that my Retirement Income Reform Bill achieved a Second Reading by a majority of 101—not bad for a private Member's Bill, if I may say so.
  What this whole saga demonstrates is that the Government are failing to get a grip on the underlying problems of financial provision for the elderly. I have a number of elderly constituents who will be financially severely embarrassed as a consequence of this disaster. It highlights the need for liberalisation of the way in which people can invest for their retirement. The Government insist that people should be forced to buy annuities with their pension pot at 75. If the public are
  1014
  no longer prepared to trust financial institutions, for goodness' sake let them choose their own means of saving and investing for their retirement—and while they are about it, I urge the Government to listen very carefully indeed to what has been said by my right hon. Friend and the hon. Member for Twickenham. There they may find an escape route, and I urge them to burrow into it.
  8.18 pm
  Mr. Barry Gardiner: I know that others wish to speak, so I shall curtail my remarks.
  Rarely does the failure of a company have an impact on so many lives in such a personal way as has the mismanagement at Equitable Life. More than I million policyholders have been affected, and the reputation of a whole industry has been tarnished. The constituents of mine who were unlucky enough to be policyholders tell me of the financial difficulties that they suffer as a result of Equitable Life's mismanagement, and the financial insecurity that that brings them. Many had saved solely with Equitable Life because it had a good name and they believed that the Government of the day had put in place an effective regulatory system. In fact, as with many investors, they were wrong. Despite rapid change and evolution in the market, the then Government failed to make substantive changes to the regulatory system.
  In his detailed report, Lord Penrose notes that in 1988, nine years before the current Government took office, a Department of Trade and Industry Minister—the right hon. Member for Bromley and Chislehurst (Mr. Forth)—made a conscious decision not to update the regulation of life insurance. It was just one of a catalogue of decisions to continue that Government's light-touch regulatory system, which was in the end to have such a disastrous effect on my constituents and so many others throughout the country.
  The 1988 decision was compounded by decisions in the early '90s that saw Conservative Members lobbying against changes that would have made the Equitable fiasco at least remote, if not impossible. The Government of the day lobbied against a Brussels directive that would have placed a statutory responsibility on companies to set aside reserves for terminal bonuses. The then Government viewed that as overly cautious, and suggested that a tougher regulatory system would have created too much red tape. Perhaps Conservative Members could therefore explain to my constituents, who are indeed cautious and save diligently, what would have been over-cautious about offering them protection and asking companies to abide by the most basic process of reserving.
  Mr. Barnes: My hon. Friend is correct in pointing to the previous Conservative Government's errors and omissions. However, if the Conservatives were still in office now that Penrose has revealed all these errors, what would have to be done, and would that Government not be obliged to move towards compensation? What difference is there because we have a Labour Government? We have to pick up the mess that the Conservatives left us in.
  Mr. Gardiner: My hon. Friend makes his own points, but I would hazard that if it were the case that

  1015
  Opposition Members were now on the Government Benches, we would never have had a Penrose report, because they would have known full well what it would show.
  In some cases, it is possible to say that hindsight makes our vision somewhat clearer, but I do not believe that that was the case in the regulation of the financial services industry.
  Mr. Letwin rose—Mr. Letwin rose—
  Mr. Gardiner: I shall not give way, because I need to make progress. The right hon. Gentleman has had plenty of time to make his points this evening, and he was not as generous as my hon. Friend the Financial Secretary in taking interventions.
  I do not believe that that was the case with the regulation of the financial services industry, because it would be too generous to say that Tory failures properly to regulate the financial services industry could be explained only with hindsight. I say that because other financial services organisations had already realised the need for more effective regulation. By 1986, regulation was already in place to support the wish of the Association of Friendly Societies to offer a voluntary compensation scheme. That scheme, which guaranteed 90 per cent. of a guaranteed policy, was already operating successfully and could have been used as a role model, yet the then Government decided not to move forward with a similar scheme. I am pleased to say that the current Government saw the need for such a scheme and introduced the financial services compensation scheme as part of the Financial Services and Markets Act 2000. That scheme protects consumers if companies become insolvent now.
  In 1997, this Government inherited a hotch-potch of a regulatory system from the previous Government, who favoured cutting red tape over protecting consumers. Neither I nor this Government want more red tape, but I do want effective regulation. Conservative Members play a devious game when they portray all regulation as red tape, as they have recently in the Chamber. As someone who spent 10 years running a successful business, I understand the impact that red tape can have on a business and how it can stifle a company's competitive edge, but I also understand that with ineffective regulation it is usually the big firms that benefit, not the small consumers. Large investors can spread their risk and hedge their bets; small investors cannot and do not.
  In his report, Lord Penrose concluded:
  "Principally, the Society was the author of its own misfortunes."
  That was because the regulatory system that the Conservative Government had in place was weak and ineffective. Without an effective regulatory system, the rules were not there for Equitable to break, and there were few mechanisms to alert the authorities to Equitable's failures. The primary problem was not that the regulator did not implement existing regulations properly, but that the regulations that existed were not the proper ones.
  1016
  The Opposition's position is fundamentally this: they want to parade themselves as the champions of the policyholders, but they do not want to find themselves committed to compensating those policyholders should they ever be in government. That is why they have suggested the device of an inquiry to establish whether there was maladministration and whether compensation is therefore due. That, however, is a specious argument, which does them no credit—and I make my points because of the logic of the shadow Chancellor's own arguments. The Opposition claim not merely that there was an inadequate regulatory system, but that the operation of such a system as there was, was itself inadequate. If they are convinced that operational failure occurred, why do they not follow their own logic and say that there was also maladministration, and that compensation is therefore due? The answer is that it is difficult for them to justify a commitment to spending upwards of £3 billion in compensation to policyholders when they are already committed to cutting £18 billion off the police, defence, housing and education budgets.
  8.25 pm
  Norman Lamb: I should begin by declaring an interest as a former policyholder. I was one of the lucky ones: I did not have all my eggs in one basket, but the hon. Member for North-East Derbyshire (Mr. Barnes) has reminded us today of the many people who suffered great losses as a result of this debacle. As recently as this week, I received an e-mail from a constituent—he is of modest means—reminding me that he had lost 23 per cent. of his pension, with another 10 per cent. still to go.
  I want to draw attention to what many consider to be the misleading nature of the Government's response to the Penrose report, and to look at where we go from here. The Financial Secretary said in her statement to Parliament:
  "Lord Penrose makes no recommendation for the payment of compensation."
  The implication of that is that compensation should not flow from Lord Penrose's findings, but in fact the position is very different: such an outcome was simply beyond his remit. He was not asked to consider it, and he did not consider it. The Financial Secretary then said:
  "Nor does he conclude that economic loss was caused to policyholders by the regulatory system."—[Official Report, 8 March 2004; Vol. 418, c. 1258.]
  She then prayed in aid the report, which states that
  "it is not enough in this case, to infer from the coincidence of systems deficiencies and loss that one caused or contributed to the other."
  However, when Lord Penrose appeared before the Treasury Select Committee, I said to him,
  "but saying you cannot infer one from the other crucially is not the same"
  as saying that
  "you do not rule it out. It is simply not part of your remit".
  Lord Penrose replied:
  "That is so."
  I then said,
  "So you cannot rule out the possibility that compensation does flow from failures of the regulatory system?"

  1017
  That, of course, is the very issue that we are discussing this evening. Lord Penrose replied:
  "I have sought to avoid adjudicating one way or the other."
  In other words, the question remains to be asked, considered and determined.
  In her statement to Parliament, the Financial Secretary made great play of the fact that the regulatory system failures were secondary factors—an issue that the Conservative spokesman raised during his contribution this evening. The Financial Secretary pointed out the report's conclusion that
  "the Society was the author of its own misfortunes."
  Indeed, she repeated that point in her evidence to the Select Committee. But as Lord Penrose confirmed to the Committee, it is almost inevitably the case that regulatory failure is secondary. The initial problem is a company that is not behaving properly. It is then for the regulator to sort out that problem, and such action is secondary to the original problem. So to assert that regulatory failure is a secondary factor is merely to state the obvious. The conclusions that the Financial Secretary draws from the Penrose report are therefore not justified.
  What does the report tell us? It tells us that there were systemic failures, and it clearly points to a failure to modernise the system of regulation. But it also points in many paragraphs to failures on the part of regulators within a flawed system: in other words, operational failure. Mention has been made of several such examples this evening, and I shall not discuss them given the lack of time, save for one. In talking about the Government Actuary's Department, Penrose says that
  "the standards of scrutiny still impress me as complacent, lacking challenge and hesitant in criticism and in following up on any criticism made."
  That is a pretty damning criticism of how the Government Actuary's Department operated—a matter to which I shall return later.
  What has been the Government's response to the key issue of what should be done for policyholders? The hon. Member for North-East Derbyshire constantly reminded us of the centrality of that issue. The Financial Secretary referred to the financial services ombudsman, whose role is to consider individual claims, but also, crucially, to consider individual complaints of misselling. That process is wholly irrelevant to all those who have no specific complaints about mis-selling, but have simply suffered a substantial loss as a result of what has happened over the last few years. The more successful the claims pursued through the financial ombudsman service, the more likely it is that the company will be driven into insolvency.
  It seems to me that the Government could be accused of being reckless in standing by and allowing that to happen. Should the company become insolvent, the financial services compensation scheme will come into play, which will result in the rest of the industry—particularly the policyholders of other life companies—bearing the cost of this debacle. Is that any fairer than the taxpayer picking up the tab? It seems to me that the one option is no fairer than the other. The Government's response is a recipe for years of litigation and years of claims being made through the financial ombudsman service, with lawyers and no one else being
  1018
  the beneficiaries. Surely it would be better to find a more ordered way forward than that suggested by the Government's response.
  To establish what job is now required, I go back to what Lord Penrose said in his evidence to the Select Committee. He talked about the gates that one has to go through in law to establish compensation flowing from failure. He talked about establishing a duty of care—first establishing that a breach of that duty had taken place, then establishing what should flow from it. That is what now has to happen. We should attempt to determine what, if any, compensation flows from the regulatory failures identified by Lord Penrose. That is the essential next step, so how can we best achieve it?
  The Financial Secretary refers only to the courts as the place where those issues should be considered, but that is simply not an option for most policyholders. We can therefore reflect on three other options. First, the parliamentary ombudsman. It is already clear that in many respects the report already published on a narrow time period has been substantially undermined by Lord Penrose's findings. The parliamentary ombudsman should be prepared to recognise that now, and to reopen her inquiry.
  It is my belief that the Government Actuary's Department is arbitrarily excluded from the scope of the parliamentary ombudsman. There is no case in logic for its continuing exclusion. The report is riddled with findings of negligent regulatory failure in respect of how the Government Actuary's Department carried out its functions. That should be remedied by the Government without delay. Not to do so is a cynical exercise designed simply to prevent any challenge to the GAD's exercise of its functions.
  My hon. Friend the Member for Twickenham (Dr. Cable) referred to the second option of an extended remit for Lord Penrose. That should be seriously considered. Let us face it, he understands the subject, so he is in the best possible position to look again into the problem of compensation on the basis of the findings of fact that he produced.
  Finally, there is the proposal from Peter Martin, a former non-executive director of Equitable Life. He has put forward the possibility of a mediation process involving a retired Law Lord or Court of Appeal judge. In respect of the Penrose report, he suggests that that person would conduct an
  "'early neutral evaluation' of the legal liability aspects of its findings of fact and expressions of view with the purpose of bringing all parties into discussions to effect an overall disposal of all claims. This would have to be strictly confidential to the parties but all would have to 'buy in"'—
  and by that he means policyholders, the Equitable Life Assurance Society, the Treasury, the FSA, Ernst &Young and the former directors.
  Surely, that process deserves proper consideration. In the Treasury Committee last week, I asked the Financial Secretary two or three times whether she ruled out such an approach. She did not do so, and I hope that she will consider that option seriously, as it seems to me to be a way of avoiding years of uncertainty. Unless we find an orderly way forward, the impact of the Equitable Life disaster—on its victims, and on confidence in the industry in general—will be very severe.
  8.36 pm
  Mr. Andrew Tyrie: The only interest that I wish to declare is that I have a large number of constituents who have been deeply affected by this matter. Quite rightly, they remain in close touch with me about it.
  Tonight, we should be working out what is to be done for those who have been affected, and how to restore trust in the industry and in Britain's savings culture. We should do that together, and the debate should have been largely non-partisan. However, the problem for the House—and not just for those on the Opposition Front Bench—is that the Government, through their response to the report, have rejected working together to sort the matter out. I very much regret that.
  The Financial Secretary is an intelligent and thoughtful woman, and I was very surprised and disappointed by the disingenuity of her statement on 8 March. This evening's debate has restored some balance, and it is worth going through some of the key points that have been raised.
  grandcommitteereport
  Mr. Plaskitt: The hon. Gentleman is dwelling on when the regulatory system failed, but what does he make of Lord Penrose's comment in paragraph 162 of chapter 19? There, he says that, in the 1980s and 1990s, there were
  "specific proposals for change that Ministers did not pursue."
  Why was that?
  Mr. Tyrie: That is probably right. I do not know: I have not looked into enough of the detail in the back papers to be sure. Neither has the hon. Gentleman, as he is only reading Lord Penrose's conclusions. Further on in the report, he will find a litany of regulatory failure that happened after 1997. There are pages and pages of that, and failure at the operational level. The hon. Gentleman is making exactly the sort of partial and partisan remarks that do him and his party no credit. The hundreds of thousands of people who have been affected by the firm's collapse will take note.
  Opposition Members do not dispute Lord Penrose's conclusions about the early 1990s. It would be helpful if the Government abandoned their denial of the shortcomings of the regulatory system and of the operational regulatory failure evident after 1997.
  Secondly, the Financial Secretary sought to insert into the debate the question of light-touch regulation. She tried to attribute blame for the Equitable Life crisis to the light-touch approach of the previous Conservative Government. That may or may not be true, as the issue is very complicated. What is certainly not true is that the Labour Government abandoned that approach for something different when they came to power. On the contrary, as my right hon. Friend the Member for West Dorset (Mr. Letwin) has said, the
  1020
  right hon. Member for Darlington (Mr. Milburn), when he was Chief Secretary, endorsed light-touch regulation. He did not do so when he arrived at the Treasury and while he worked out what to do: he did so a full two years after Labour came to power. He said, in an even more forceful statement than that cited by my right hon. Friend, that the Financial Services Authority
  "will operate according to a philosophy based on light-touch regulation with protection where necessary and fairness throughout. The Bill"—
  the Financial Services and Markets Bill—
  "will reduce regulation".—[Official Report, 28 June 1999; Vol. 334, c. 35.]
  That does not sit squarely with the Financial Secretary's earlier portrayal of the Government's approach to regulation.
  Mr. Gardiner: Does not the hon. Gentleman appreciate the distinction between a light touch in a system of regulation that is wholly inadequate—as I am sure he would accept the previous system was—and a light touch in a system of regulation that is robust?
  Mr. Tyrie: I am afraid that I find that question incomprehensible. I shall look at it in Hansard and have another go at it, but for the moment I shall move on.
  The remarks by the then Chief Secretary sound like an endorsement of a regulatory system that failed. Indeed, that is exactly what the Financial Secretary appears to say about the regulatory system before 1997. The only problem is that it is a description of the system after 1997. Sleight of hand is everywhere. The Financial Secretary looks puzzled, but puzzlement is probably preferable to the knowing understanding of the issue that she has adopted so far.
  Mr. Gardiner: The hon. Gentleman is being partisan.
  Mr. Tyrie: We have been forced into making such remarks by the presentation of the Penrose report by the Financial Secretary on 8 March. On the compensation scheme, she told the House that
  "the Government have introduced the comprehensive financial services compensation scheme, which is ready, were problems to materialise in a company, to pay out 90 per cent. of guaranteed policy values."
  Several policyholders thought that that might help them, but the truth is that it is not a new scheme but an amalgam of two existing schemes. Moreover, it will not help existing Equitable policyholders, as the Financial Secretary well knows, because it underwrites only the guaranteed amount of any policy, not the terminal bonuses that have been lost. She held out false hopes to many people with those remarks. Some of them have written to me and I expect that they will write to her in due course.
  The hon. Member for Warwick and Leamington (Mr. Plaskitt) raised the issue of whether Lord Penrose could consider compensation. The Financial Secretary said
  "Lord Penrose makes no recommendation for the payment of compensation."—[Official Report, 8 March 2004; Vol. 418, c. 1270, 58.]

  1021
  Of course he did not do so: he was not asked to. Furthermore, he said only last week in Scotland that he did not make any recommendations about policyholder compensation because it formed
  "no part of my remit".
  Ruth Kelly: How does the hon. Gentleman respond to the comment by Lord Penrose in the foreword to the report that
  "There was no mechanism that could have been devised, and put into effect within a time scale that would have had regard to the wider public interest in obtaining the account of the developments of the Society's position, that could have accommodated in parallel the investigation and resolution of disputed contentions of conformity or non-conformity with generally accepted norms of practice in any of the fields that would have been relevant."?
  Mr. Tyrie: The Financial Secretary seems to say that the situation is so complicated that we cannot handle it and no scheme could be devised to do so. Of course it could, and Lord Penrose could be asked to consider that. I strongly agree with the hon. Member for Twickenham (Dr. Cable) on that point. Having spent two and a half years considering the issue, Lord Penrose could work up a scheme and a methodology for working out whether compensation should be paid—in other words, to establish liability—and then what that compensation should be. The fact is that Lord Penrose was not asked to do that. The Government did not want the answers, so they did not even ask the questions.
  Perhaps the worst misrepresentation involves the ombudsman's role. The Financial Secretary said that the parliamentary ombudsman
  "has cleared the Government of all cases of maladministration."
  That is like clearing the fox of killing the chickens without bothering to look at the hencoop. The ombudsman has only looked at one case. She has only been allowed to look at 18 months of a 20-year problem. Moreover, she made it clear that she was unable even to inquire into the workings of the key Department—the Government Actuary's Department—where most of the litany of regulatory failure cited in the Penrose report appears to have emanated. So the Government, particularly the Government Actuary's Department, have not been cleared of anything at all, but that has not stopped the Financial Secretary saying:
  "There is no issue after 1997 in Lord Penrose's report that has not been considered by the parliamentary ombudsman".—[Official Report, 8 March 2004; Vol. 418, c. 1270.]
  What an absurd remark. I leave that lying there for the people listening to the debate to judge its plausibility.
  At the start of the debate, my right hon. Friend the Member for West Dorset went carefully through each stage of the Financial Secretary's argument. We can now see more clearly why that line of argument has been developed: because it is the Government's best defence for doing nothing to help the policyholders who have been hit. First, she said that the management were to blame. Few hon. Members dispute that. She then said that the regulatory failure was secondary and systemic. Lord Penrose's report shows it to have been significant and operational. She then sought to create the impression that all the regulatory failures took place before 1997, but much of it took place after 1997—not
  1022
  that that distinction should matter to a responsible Government. She was chuckling away at that moment ago.
  The Financial Secretary sought to create the impression that light-touch regulation was an exclusively Conservative policy; but, as we know, it was the Government's policy when they framed the Financial Services and Markets Act 2000. Finally and most perniciously, she sought to imply that there was no maladministration. In fact, no systematic effort has been made to look for maladministration. The Government are preventing the ombudsman from looking in the one place where it is most likely to be found: the Government Actuary's Department.
  The Financial Secretary and the rest of the Government can do one simple and sensible thing now: they should get on with amending the Parliamentary Commissioner Act 1967, to enable the parliamentary ombudsman to examine the workings of the Government Actuary's Department. Only then will we know whether the litany of regulatory failure identified by Lord Penrose constitutes maladministration, and we can then get clear recommendations on compensation. The Government could make that amendment tomorrow if they chose to do so. They could get on with it right away. The Financial Secretary shakes her head in disagreement. Perhaps she would like to explain why she could not do that tomorrow.
  Ruth Kelly: The hon. Gentleman must realise that secondary legislation cannot be used to make retrospective changes of the kind that he advocates.
  Mr. Tyrie: If the Financial Secretary looks at the Parliamentary Commissioners Act 1967, she will find a specific section that enables her to do so, and it is absolutely incredible that she should be denying that. I hope that I can find it—oh I can—how convenient. It states:
  "A complaint under this Act may be made in respect of matters which arose before the commencement of this Act".
  I have been advised that a complaint can therefore be made that relates to matters that occurred before the commencement of an amendment to the Act.
  Another crucial passage in the Act says that
  "a complaint not made within that period"
  may none the less be considered if
  "there are special circumstances which make it proper to do so."
  So the ombudsman can make her own discretionary judgment on that matter.
  Ruth Kelly rose—Ruth Kelly rose—
  Mr. Tyrie: I should like the Financial Secretary to answer the point that has been made, instead of trying to interrupt, because hundreds of thousands of people want her to make an intelligent reply.
  8.49 pm
  Ruth Kelly: We have had an interesting debate with some passionate contributions on each side of the House, including from my hon. Friends the Members for Brent, North (Mr. Gardiner), for Warwick and Leamington (Mr. Plaskitt) and for West Bromwich,

  1023

  West (Mr. Bailey). Before responding to the debate, I should make it clear to the House that I have not presented my findings or the Government's findings, much as some hon. Members have tried to insinuate that that is the case; I have presented Lord Penrose's account. Tonight, I have found that the real position of the Liberal Democrats is that Lord Penrose's report is unsatisfactory, and that the position of the official Opposition is to try to attribute to Lord Penrose a view that he does not hold. I shall shortly deal with each point raised by the right hon. Member for West Dorset (Mr. Letwin).
  First, I must dispel some myths that have been raised during the debate. Lord Penrose is absolutely clear that it was not the guaranteed annuity problem that led to the society's financial crisis in 2001. He says that, superficially, a £1.5 billion additional liability
  "should not have brought down a society"
  with funds of £32 billion. The issues that he identifies are deep-rooted and go back 30 years into the history of the society. He says that, primarily,
  "the Society was author of its own misfortunes."
  Hon. Members in all parts of the House are agreed with Lord Penrose that, with hindsight, it was
  "the system that failed to provide the regulation that changing circumstances…required, not that there was failure to implement what was fundamentally a satisfactory system."
  Nevertheless, I believe that the House should reflect carefully on the fact that that was the system that Ministers and Parliament had intended.
  The difference between the two sides of the House tonight arises on whether there was operational failure that led to economic loss by policyholders. Lord Penrose has not presented in his report evidence of operational failure. I quote:
  "The deficiencies are not so obvious as some are inclined (or wish) to believe…and it is not enough in this case, to infer from the coincidence of systems deficiencies and loss that one caused or contributed to the other."
  He stresses that he examines the regulators with the benefit of hindsight and that they were operating under a system that was different in approach, resources and values from that which applies today. I think that the House should reflect carefully on the fact that it is a question of the laws that Parliament enacted and the context in which Ministers resolved how those laws should be implemented that Lord Penrose criticises, rather than the discrete actions of the regulator.
  Let me deal with the points raised by the right hon. Member for West Dorset. First, he tried to insinuate that because the level of skills needed to be upgraded after the FSA was instituted, that was itself a sign of operational failure. However, if he had done his homework and read the report more fully, he would have read Lord Penrose's view of that issue. I quote from chapter 13:
  "Ministers resolved…that scrutiny would continue to be based on the examination of the regulatory returns, and that action on the basis of policyholders' reasonable expectations would be reactive to what was found in the returns so as to restrict the workload that a less restrained approach would involve."
  1024
  It was that which led deliberately to the under-resourcing of the DTI. Lord Penrose goes on to make the link by stating that the DTI was
  "ill-equipped to participate in the regulatory process. It had inadequate staff, and those involved at line supervisor level in particular were not qualified to make any significant contribution to the process."
  Lord Penrose himself is clear that that was not operational failure but a deliberate decision taken by managers, and when he was asked in the Select Committee on the Treasury about systemic failure, he said that those issues were aspects of the same problem. He is absolutely clear about that point.
  Mr. Tyrie rose—Mr. Tyrie rose—
  Ruth Kelly: If the hon. Gentleman listened, he might hear the quotes from the Penrose report. I must put the points on the record before the end of the debate.
  The right hon. Member for West Dorset referred to chapter 19 and paragraph 187, which is about subordinated debt. If he read the Penrose report more closely, he would see that Lord Penrose says of that episode:
  "The authorisation was within the scope of the relevant regulations and guidance. I do not criticise any of the formal steps taken or the propriety of the order granted."
  The right hon. Gentleman went on to refer to paragraph 117, which is about the failure to appreciate a change of valuation assumptions in the regulatory returns. The practice adopted between 1990 and 1997 by Equitable Life of using different interest rates for valuing its assets and liabilities was within the regulations of the time. As they were within the regulations, regulators had no grounds to challenge the decision—again, there was no evidence of operational failure.
  Mr. Tyrie: Will the hon. Lady give way?
  Ruth Kelly: No, I must make my points before the end of the debate.
  The right hon. Member for West Dorset cited paragraphs 240 and 228 of chapter 19 about the general failure by regulators to follow up issues and the ineffectiveness of challenge. Again, we can trace Lord Penrose's comments back to under-resourcing—a decision was deliberately taken by Ministers in the DTI to restrict the work load that a less restrained approach would involve. As Lord Penrose says, individual regulators
  "operated in good faith and to the best of their abilities within the system as they found it".
  The right hon. Gentleman also cited paragraph 209 of chapter 19 about the information obtained, which was not used to form a realistic appraisal of the society's financial position. Had he looked back a couple of paragraphs he would have found that Lord Penrose deliberately makes a link to the Government's success in watering down the third life directive and the fact that a paper-based approach remained in place. He said that that approach had "other consequences" and made a link to the episode. Again, it was a policy decision, not an operational failure.

  1025
  Many hon. Members have raised the question of the ombudsman's remit and her inquiry. You will know, Mr. Deputy Speaker, as will hon. Members, that the parliamentary ombudsman is an Officer of the House, who reports to it and is independent of the Executive and Government. That is an important principle that all hon. Members should abide by. In her initial investigations, the ombudsman chose to examine the FSA's period of stewardship. She could have chosen to examine a different period, but did not. She chose to look at one lead case. She could have chosen a different case, but did not do so. She concluded that there was no case for the Government to answer, and that there was no maladministration that led to loss. The fact that hon. Members do not agree with her conclusion does not mean that they should reject it.
  Mr. Letwin: Will the hon. Lady give way?
  Ruth Kelly: No, I have two minutes left, and the right hon. Gentleman must let me make my point.
  We are determined to protect policyholders. Lord Penrose says that the FSA reforms
  "represent a major comprehensive re-assessment of the requirements of an efficient regulatory system".
  We are determined not to be complacent. There will be a programme of comprehensive reviews—a review of corporate governance of life mutuals will be led by Sir Derek Morris; a review of actuarial standards of performance will be led by Paul Myners; and a review of accounting standards will be led by the independent Accounting Standards Board. That work, alongside the FSA reforms welcomed by Lord Penrose, will develop the architecture of the life assurance industry for present and future policyholders, and will help to ensure that the regulatory system remains up to date.
  We have also pledged to consult shortly on legislation that will protect policyholders from unlimited liability—an issue raised in the Penrose report that we are determined to address. I have also spoken to the financial ombudsman to see whether he needs any additional resources or help from the Government to deal with any consequential claims that may, or may not, arise from Lord Penrose's report. We have learned the lessons—
  It being Three hours after the commencement of proceedings, the motion for the Adjournment of the House lapsed, without Question put, pursuant to Order [17 March].

  DELEGATED LEGISLATION
  Motion made, and Question put forthwith, pursuant to Standing Order No. 118(6) (Standing Committees on Delegated Legislation),

  FEES AND CHARGES
  That the draft Police Act 1997 (Criminal Records) (Fees) Order 2004, which was laid before this House on 23rd February, be approved.—[Margaret Moran.]
  Question agreed to.

  PUBLIC ACCOUNTS
  Ordered,
  That Mrs Cheryl Gillan be discharged from the Committee of Public Accounts and Mrs Angela Browning be added.—[Margaret Moran.]

PETITION

  Quiggins, Liverpool
  8.59 pm
  Mrs. Claire Curtis-Thomas: If you have never had the opportunity to visit Liverpool, Mr. Deputy Speaker, I suggest you try and get to see us as soon as possible. Liverpool is a great city of kindhearted, spirited people. We have marvellous museums, theatres and buildings that rival anything in the UK. After years of underinvestment, since 1997 Labour Government money has been helping to transform our city. In 2002 our glorious city received the ultimate accolade when it was awarded the status of European city of culture 2008.
  What a wonderful array of goodies we have to offer our visitors, including Quiggins, a marvellous retail mix with something for everyone. Motorbikes, antique furniture and the best 60s clothes on the planet are all available in this retail unit. But Quiggins is facing compulsory purchase as the mega Grosvenor empire seeks to close one of the best shopping experiences that Liverpool offers.
  I present to the House tonight a petition signed by 50,000 people, which includes the names of thousands of my constituents who are both customers and retailers of that lovely emporium. I ask the House to urge the Deputy Prime Minister to consider carefully the recommendations placed before him by the planning inspectorate, to support the retention of a great Liverpool institution and to support Quiggins.
  To lie upon the Table.

Participation in Elections
Motion made, and Question proposed, That this House do now adjourn.—[Margaret Moran.]
9.1 pm
Mark Tami: In the 2001 general election, voter turnout dropped to its lowest level since the advent of universal suffrage: just over half of those eligible to vote did so. There has been much discussion about low turnout and declining participation in elections. I am sure it is an issue that concerns us all. We speak and seek to govern for the majority, but we are fast approaching a situation in which the majority may not bother to vote at all.
The last general election saw a turnout of some 59.4 per cent.—a new record low, surpassing the previous low of 71.3 per cent. achieved in 1997. In local elections, particularly in local by-elections, we can only dream of such turnouts, as actual turnouts often average less than 40 per cent. In local authority by-elections, participation levels that were once unheard of, between 10 and 15 per cent., are pretty much run of the mill. The predictions for the future are that this trend of decline is set to continue, with pitiful turnouts predicted for the forthcoming European elections, which might be saved only by the fact that they are being held on the same day as the local elections, and probably a new low in the next general election.
We may well look back to the 1997 election, when 30 per cent. of the electorate did not vote, as some kind of golden age. That is a sad indictment of our current system, as we seem content that such a large proportion of our electorate did not take part in the process. We also seem content that a large and growing number of people do not even register in the first place. No doubt many hon. Members have looked at the electoral registers, as I have done, and seen examples of properties that we know are occupied, but which do not appear on the register. Some colleagues have seen quite sizeable drops in their electorate.
We require individuals by law to fill out registration forms and give correct information, yet we appear to do nothing about it if they do not. Arguably, we have never recovered from the effects of the poll tax and the huge numbers of people, particularly younger people, who left the register in an attempt to avoid the tax. A cynic might argue that that was one of the main aims of that Conservative policy.
What are we doing to encourage registration? Not a lot, I would say. Yes, the Electoral Commission has had poster campaigns and some councils are more diligent than others, but the reality is that we are only scratching the surface. Furthermore, when I asked the Department for Constitutional Affairs for an estimate of the extent of the problems that we face and what is being done about them, I was told that in the main, it does not keep such information. Why not? Unless we know the extent of the problem, we will never tackle it effectively.
Our last experience of elections in Wales was the Assembly elections last year. My party and I were pleased with the result, but I do not think that anyone could, or indeed should, find the turnout acceptable. My own seat held the unenviable record of the lowest turnout in Wales, of some 24.9 per cent.—less than a quarter of the electorate.
1028
Why was the turnout so poor? I am sure that we could all find reasons to explain away the lack of participation. In areas such as the north-east and the south-east of Wales, which voted against devolution in the first place, turnout was certainly lower than in the pro-devolution areas. Anglesey, Ynys Mon, had the highest turnout of just over 50 per cent., but still hardly a level that we can be pleased with.
The Assembly has an uphill battle to convince many people in the north that it is not just a Cardiff-based institution, and without doubt there is still a lack of understanding among the electorate as to exactly what its powers and responsibilities are. The method of election did not help, either, with a bizarre system of proportional representation that in many cases gave the losing candidates in the constituency election a seat in the Assembly through a back-door method of selection via the regional list.
In addition, there was the ludicrous situation of Clwyd, West, where the only candidate who stood a chance of not getting elected to the Assembly was the sitting Labour Member, as the Tory, Liberal Democrat and Plaid Cymru candidates were all No. 1 on their party lists, and barring some miracle were certain to be elected. Despite rejecting those three candidates at the ballot box, the voters of Clwyd, West—and, indeed, the rest of north Wales—find themselves supposedly represented by those individuals in the Assembly. Furthermore, despite the fact that people voted by a clear majority for Labour on the party list in north Wales, not a single Labour list member was elected. Apparently, that is democracy in action, but I think that most people find it rather difficult to understand—or, more to the point, to justify.
There are lessons that we can learn from the Assembly elections, but we would be making a grave mistake if we believed that simply addressing those factors would make a meaningful difference to turnout. The problem is that we look to explain away poor turnouts on an election-by-election basis, and do not look at the long-term trend, which is getting worse. We are in denial, and like anybody in denial we look for excuses rather than addressing the problem.
In the 1997 general election, turnout was apparently low because Tory voters stayed at home. In 2001 they apparently did it again, and many Labour voters thought it was a foregone conclusion, so they did not vote either. That may or may not be true, but it does nothing to address the problem that we face. Likewise, we find further comfort in blaming the press and the media for encouraging cynicism and complacency among the electorate.
We have all become used to the accusations—"They're all the same. It doesn't matter which lot get elected, because they won't change anything. It's hardly worth bothering. They're not interested in ordinary people. They can't relate to you, particularly if you're young, and they don't care about the old. They're only in it for themselves." Oh, and by the way, we all spend at least 95 per cent. of our time on holiday, as Nicky Campbell never tires of telling us on Radio 5. Again, with the press that we have, I cannot see that changing in the foreseeable future. We will not return to the reverence with which the media used to treat politicians in the 1950s, and we should not do so. We must live with that situation; we must get on with it.

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We face a simple choice: either we accept the growing disengagement with the political process or we do something about it. The situation will not change by itself, and all the evidence points to its getting worse in the future. As individual politicians, we can only do so much. We can make ourselves more accessible, hold more surgeries, knock on more doors, consult more and listen more, but that does not necessarily mean that we can improve matters on our own. Because of their hard work and public standing, some hon. Members may be able to count on higher levels of personal support than others, which may enable them to hold their seats in difficult times and difficult elections for their parties. However, there is little evidence that individual politicians have any real impact on turnout itself—at least in a positive way.
Our attempts to improve turnout have therefore focused on changes to the mechanism of voting itself. Experiments with postal voting have, without doubt, proved successful, and I welcome the changes that have made postal voting easier. Where we have had all-out postal voting in local elections, there have been sharp increases in turnout, and I personally regret that we will not have postal votes in Wales this year. However, it will be some time before we can judge whether that is a short-term change in voting patterns or a significant breakthrough.
With postal voting, there is also concern among us, as politicians, that we will somehow lose control of the election process and that our traditional forms of campaigning must change. We would no doubt all have sleepless nights at the thought of voters filling out ballot papers and sending them off before we have had a chance to canvass them. However, would that not be a price worth paying if we could significantly improve participation in our elections?
I am further encouraged and drawn to postal voting by the opposition of the Conservative party—there must be something in it, if the Conservative party is against it. It therefore comes as little surprise that Conservatives in the other place are doing their best to derail our proposals.
Some would argue that all we must do is change the method of election from first past the post to some form of proportional representation, and suddenly large numbers of people would flock to polling stations and take part in the democratic process. Our experience in Wales, and indeed in Scotland, demonstrates that that is unlikely to be the case.
Arguments over voting systems have always tended to be carried out among academics rather than among people. I have never come across a dedicated non-voter who quotes the electoral system as their reason for not voting. Equally, reform of the other place, and some of our other hobby-horses in this House, are low down on their lists too. Ultimately, we must decide whether we are serious about increasing voter participation. If we are not, we must carry on as we are—perhaps we can tinker a bit here and there, with voting on Sundays, using the internet, voting at supermarkets and votes at 16, but we are still likely to see decline.
If we are serious about making a change, we must consider compulsion. To some, that would be an acceptance that we have failed in all other means of voter re-engagement—perhaps it would—and no doubt
1030
it will upset the liberal elite. However, are we really comfortable with a situation in which turnouts for future general elections may be less than 50 per cent, and perhaps in the long term even less than 40 per cent.? Are we really saying that it is too much to expect and require the citizens of this country to go out and vote once every four or five years to take part in the political process? Even if they choose ultimately to vote for "none of the above" and spoil their vote, is it such a great infringement of civil liberties? I think not.
Experience from around the world shows us that compulsory voting works, and is accepted by the citizens of countries where it operates. Voting is regarded not only as a right, but as a civic duty. For example, Australia has had compulsory voting for many years. There is a small fine for those who do not take part without a valid reason, but the numbers are not great. Nobody would argue that Australia is anything other than an open and democratic country, yet over the past 30 years it has consistently achieved turnouts of around 95 per cent. of the electorate. Australia's lowest turnout since 1972 was 94.2 per cent.—a level that we have never achieved, and will never achieve, unless we are prepared to change our present system.
America, on the other hand, illustrates the dangers of the direction in which we may be heading. Turnout in the congressional elections in 2002 was just 52 per cent. of the registered electorate; but when one looks at the percentage of voting age population—an estimate of those eligible to register to vote—the percentage drops to a staggering 36.5 per cent.
Requiring people to take part in the democratic process is not the thin end of the wedge of a totalitarian society—on the contrary, it engages people who would otherwise not take part in, and be ignored by, the political process. Importantly, it makes politicians and political parties seek to engage with the electorate as a whole, rather than only with those who vote. We need only look to America, where in certain states whole sections of the population are effectively disfranchised and ignored by the political parties. After all, why appeal, or have policies that appeal, to people who are not on the register and do not vote?
Even in this country, the employed are twice as likely to vote as the unemployed, the old more likely than the young, and the middle class more likely than the working class. There is a real danger that we in Britain could go down that road. We need seriously to explore and study the options surrounding compulsory voting, including incentive-based and penalty-based systems. The international evidence is there. We must find a reliable and workable solution to this long-term problem.
The Government rightly talk about the rights and responsibilities of our citizens. It is a right—a precious right—to be able to vote. In many countries, people are still fighting and dying in the pursuit of that right, yet many in this country simply cast it aside. With rights come responsibilities, and the time is now right for us to enshrine that responsibility in law.
9.17 pm
The Parliamentary Under-Secretary of State for Constitutional Affairs: I congratulate my hon. Friend the Member for Alyn and

1031
Deeside (Mark Tami) on securing this opportunity to debate a vital issue that is essential to this Parliament namely, the degree to which we secure participation in our democratic system and in our elections. All hon. Members accept as a top priority the fact that if we do not have good levels of participation, that reflects ill on the nature of our society. A civilised society is one that has active citizenship and where, if elected representatives are to act with a strong mandate and to be held accountable for their actions, as many citizens as possible must be active and participating.
As my hon. Friend notes, turnout and participation varies enormously in many different ways. It varies from area to area and in terms of ethnicity, social class, educational background, occupational background and age. No matter which way one cuts the cake, there are different lessons to learn about the extent to which people are willing to participate. Of course, we as politicians have a key role—perhaps it is a burden on us all—in stimulating debate, making politics more interesting and presenting a real choice to the electorate. When we near general election periods, we naturally find that there is more interest among the population as they feel that their choice is more obvious. We do not do too badly in Britain in that respect.
By coincidence—or perhaps not, if my hon. Friend has timed his request for this Adjournment debate very well—the Electoral Commission and the Hansard Society launched a joint audit of political engagement today in Portcullis House. In it, they looked at a whole series of influences among the general population. A survey was undertaken, and my hon. Friend will be delighted to learn that the audit demonstrated that, for example, people who have recently had contact with their local Member of Parliament are much more likely to be satisfied with their performance than those who have not-62 per cent. were satisfied, as against 38 per cent. who were not. That is a nice thing to note. In fact, the audit report comments that
"familiarity with politicians…breeds favourability, not contempt."
That is something of which we can all be proud.
Among the good things in the audit was the finding that 41 per cent. of people were satisfied with their own Member of Parliament, while just 13 per cent. were dissatisfied. It also found that people view individual Members of Parliament more favourably than MPs as a collective, and that 74 per cent. agree that voting is a duty, while 75 per cent. said that they wanted to have a say in how the country was run. There were, however, less good aspects to the findings. Only 50 per cent. of people said that they were interested in politics, and less than half the public say that they are well informed about politics, in terms of both their perceived and assessed knowledge. So the audit presents a mixed picture. I pay tribute to the Hansard Society and the Electoral Commission for their work on it.
I think that my hon. Friend would be the first to acknowledge that first-time voters are especially important in ensuring that we maintain the momentum in democratic participation. Research has shown that those who vote at the first opportunity tend to continue to participate on later occasions. Conversely, those who
1032
do not bother see no reason to change that habit, and tend to stay away from the ballot box on a more permanent basis.
Our approach has therefore been to attack this issue in a number of different ways, not least through schools. Citizenship education is just one of the mechanisms for raising awareness and educating people about how decisions are made, who makes them, why decision makers make their decisions and how they can be influenced. In England, we already have a good level of compulsory citizenship education for 11 to 14-year-olds. That has been the case since Sept 2002. There is no statutory curriculum in Scotland, but I understand that the Scottish Executive have produced guidance to ensure that the breadth of the curriculum includes social and democratic responsibilities. In Wales, my hon. Friend will know that citizenship education forms part of the personal and social education framework that was implemented in September 2000. In regard to Northern Ireland, I understand that our ministerial colleagues are considering their own proposals for citizenship education.
Other useful initiatives have taken place in recent years. The creation of the Electoral Commission has been useful, as it has helped to lead and innovate in participatory democracy policy. It was set up in November 2000, and its remit includes voter education as well as keeping electoral law and processes under review. It also develops publicity and awareness materials, and there have been television advertisements to encourage registration in elections. The commission's innovations are constantly being proposed, and it is quite prodigious in producing reports, to which we are keen to respond as best we can.
There are other ways in which we can improve participation. Technically and administratively, through the mechanics of the electoral system, we can remove barriers to participation and we are trying to take action in many different ways in that regard. My hon. Friend mentioned the electoral registration process, and we have had a great deal more accuracy recently in that regard, although when certain population changes have come into play, they have made it appear as though the registers have shrunk in some areas. Obviously, such changes will always have an effect on the quantum of the register, but we now have increasingly accurate electoral registers. They are locally administered, and rightly so.
We also have new help for voters with disabilities. We are piloting electronic voting, and telephone voting has been piloted in local elections. There has also been postal voting on demand in the ordinary run of elections. Earlier today we debated yet again our attempt to achieve piloting of all-postal voting, which we know for a fact has a positive effect on turnout in general—there tends to be a considerable increase. Depending on the passage of that legislation, we hope that as many regions as possible of the four that we have identified can benefit from that.
My hon. Friend referred specifically to the experience in his locality of the 2003 Welsh Assembly elections. I know that the turnout, which was only 38 per cent., disappointed him and other colleagues. That is obviously a challenge, predominantly for the Welsh Assembly, and many of the remedies rest in its own hands. However, the Electoral Commission usefully

1033
published an official report commenting on turnout. While it says that this is not wholly a Welsh issue, it highlights specific areas in which it may be able to undertake extra activity. For example, it feels that there was an information deficit on the nature of the Welsh Assembly. Clearly, that is a matter for the Assembly to address.
The Electoral Commission feels that voters had particular views on the Welsh Assembly that did not necessarily encourage them to turn out and vote. However, the Government support the current devolution settlement and we do not think that there is any particular evidence that changing the settlement at that level would affect public engagement. The Electoral Commission also says that the election campaign was too low key. All the political parties have a role to play in ensuring that we pep things up a little to make the campaign more interesting for all concerned.
As usual, enthusiasm among younger voters was at a relatively low level, but the citizenship efforts being undertaken by the Welsh Assembly Government will help with that. In Wales, particularly for the Assembly elections, there may also be a need for more convenient voting methods. I assure my hon. Friend that we will discuss with the Welsh Assembly Government whether any powers are needed to enable innovation in voting mechanisms for Welsh Assembly elections. I hope that he will monitor that and keep a close eye on developments.
My hon. Friend also concludes that it is perhaps time that we started to consider the age-old question of compulsion—compulsory voting and whether the attraction of being able to remove at a stroke worries about turnout should come upon us. I see aspects of the attraction, but, as he knows—I read the Fabian Society pamphlet he wrote some time ago with a colleague of ours—there are disadvantages. I would worry about the sense of the voting process being criminalised. If people did not attend the polling station, would they be
1034
behaving in a criminal manner? That would be a big step for us to take in our civilised society. There are serious issues that need considering.
Turnout, of course, involves more than attendance at the polling station. Political disengagement is the deeper problem and failure to turn out is merely a symptom of it. As one of my officials helpfully pointed out when we were talking about the debate, "You can force school children to do cross-country running, but you cannot make them enjoy it." I do not think that compulsory voting would necessarily force everybody to engage with the political process. It is not wholly a solution. Of course, enforcing the process of compulsory voting would also be a mammoth task, and perhaps disproportionate to the nature of the offence. Therefore, while I hear what my hon. Friend says, some potential disadvantages would need to be overcome.
Nevertheless, I do not want to rain on my hon. Friend's parade completely. In 1998, the Home Affairs Committee reported that while compulsory voting might not be desirable, there should be a public debate on it. I gather that the Electoral Commission has said subsequently that it wants to examine the issue in more detail, and it may well be researching some of the wider international experience. He should therefore watch that space. In the meantime, however, I am afraid that the Government have no plans to pursue the possibility of compulsory voting.
Parliament is sensitive to the need to act to improve participation in the electoral process, however. As a Government, we have taken significant steps forward, and are working hard to take further steps. The more fundamental question is how we as politicians can enthuse the public and engage their interest further to make that political process work, but I at least congratulate my hon. Friend on raising the subject today.
Question put and agreed to.
Adjourned accordingly at half-past Nine o'clock.

Deferred Division

  FISHERIES: CATCH QUOTAS AND EFFORT LIMITATION 2004
  That this House takes note of European Union Document No. 15388/03, draft Regulation fixing for 2004 the fishing opportunities and associated conditions for certain fish stocks and groups of fish stocks, applicable in Community waters and, for Community vessels, in waters where catch limitations are required; and notes that the Government was successful in negotiating Total Allowance Catches which take full account of scientific advice while securing the best possible fishing opportunities for United Kingdom fishermen.
  The House divided: Ayes 255. Noes 149.

  Division No. 106]

  AYES

  Ainger, Nick

  Darling, rh Alistair

  Ainsworth, Bob (Cov'try NE)

  David, Wayne

  Alexander, Douglas

  Davidson, Ian

  Allen, Graham

  Dhanda, Parmjit

  Anderson, Janet (Rossendale &

  Dismore, Andrew

  Darwen)

  Dobbin, Jim (Heywood)

  Armstrong, rh Ms Hilary

  Dobson, rh Frank

  Atherton, Ms Candy

  Donohoe, Brian H.

  Atkins, Charlotte

  Doran, Frank

  Austin, John

  Dowd, Jim (Lewisham W)

  Bailey, Adrian

  Drown, Ms Julia

  Barnes, Harry

  Eagle, Angela (Wallasey)

  Barron, rh Kevin

  Eagle, Maria (L'pool Garston)

  Battle, John

  Edwards, Huw

  Bayley, Hugh

  Efford, Clive

  Beard, Nigel

  Ellman, Mrs Louise

  Benton, Joe (Bootle)

  Farrelly, Paul

  Berry, Roger

  Field, rh Frank (Birkenhead)

  Blackman, Liz

  Fitzpatrick, Jim

  Blizzard, Bob

  Fitzsimons, Mrs Lorna

  Blunkett, rh David

  Flynn, Paul (Newport W)

  Bradley, rh Keith (Withington)

  Follett, Barbara

  Bradley, Peter (The Wrekin)

  Foster, Michael (Worcester)

  Bradshaw, Ben

  Francis, Dr. Hywel

  Brennan, Kevin

  Gapes, Mike (llford S)

  Brown, Russell (Dumfries)

  Gardiner, Barry

  Browne, Desmond

  Gerrard, Neil

  Burnham, Andy

  Byers, rh Stephen

  Gibson, Dr. Ian

  Cairns, David

  Goggins, Paul

  Campbell, Alan (Tynemouth)

  Griffiths, Jane (Reading E)

  Campbell, Mrs Anne (C'bridge)

  Griffiths, Win (Bridgend)

  Caplin, Ivor

  Grogan, John

  Casale, Roger

  Hain, rh Peter

  Caton, Martin

  Hall, Patrick (Bedford)

  Cawsey, Ian (Brigg)

  Hanson, David

  Challen, Colin

  Harris, Tom (Glasgow Cathcart)

  Chapman, Ben (Wirral S)

  Havard, Dai (Merthyr Tydfil &

  Clark, Mrs Helen (Peterborough)

  Rhymney)

  Clark, Paul (Gillingham)

  Henderson, Doug (Newcastle N)

  Clarke, rh Tom (Coatbridge &

  Henderson, Ivan (Harwich)

  Chryston)

  Hendrick, Mark

  Clarke, Tony (Northampton S)

  Hepburn, Stephen

  Clelland, David

  Heppell, John

  Coaker, Vernon

  Hesford, Stephen

  Coffey, Ms Ann

  Hewitt, rh Ms Patricia

  Coleman, Iain

  Heyes, David

  Colman, Tony

  Hill, Keith (Streatham)

  Connarty, Michael

  Hinchliffe, David

  Corston, Jean

  Hodge, Margaret

  Cousins, Jim

  Hoey, Kate (Vauxhall)

  Cranston, Ross

  Hope, Phil (Corby)

  Crausby, David

  Hopkins, Kelvin

  Cruddas, Jon

  Howarth, rh Alan (Newport E)

  Cummings, John

  Howarth, George (Knowsley N &

  Cunningham, Jim (Coventry S)

  Sefton E)

  Cunningham, Tony (Workington)

  Hoyle, Lindsay

  1036

  Hughes, Beverley (Stretford &

  Naysmith, Dr. Doug

  Urmston)

  Norris, Dan (Wansdyke)

  Hughes, Kevin (Doncaster N)

  O'Brien, Bill (Normanton)

  Humble, Mrs Joan

  O'Hara, Edward

  Hurst, Alan (Braintree)

  Organ, Diana

  Iddon, Dr. Brian

  Osborne, Sandra (Ayr)

  Ingram, rh Adam

  Owen, Albert

  Irranca-Davies, Huw

  Palmer, Dr. Nick

  Jamieson, David

  Perham, Linda

  Johnson, Miss Melanie (Welwyn

  Picking, Anne

  Hatfield)

  Pike, Peter (Burnley)

  Jones, Jon Owen (Cardiff C)

  Plaskitt, James

  Jones, Kevan (N Durham)

  Pond, Chris (Gravesham)

  Jones, Lynne (Selly Oak)

  Pope, Greg (Hyndburn)

  Jones, Martyn (Clwyd S)

  Pound, Stephen

  Keeble, Ms Sally

  Prentice, Ms Bridget (Lewisham

  Kelly, Ruth (Bolton W)

  E)

  Kemp, Fraser

  Prescott, rh John

  Khabra, Piara S.

  Prosser, Gwyn

  Kidney, David

  Purchase, Ken

  King, Andy (Rugby)

  Purnell, James

  King, Ms Oona (Bethnal Green &

  Quinn, Lawrie

  Bow)

  Rapson, Syd (Portsmouth N)

  Knight, Jim (S Dorset)

  Reed, Andy (Loughborough)

  Kumar, Dr. Ashok

  Robertson, John (Glasgow

  Ladyman, Dr. Stephen

  Anniesland)

  Lawrence, Mrs Jackie

  Roche, Mrs Barbara

  Laxton, Bob (Derby N)

  Ross, Ernie (Dundee W)

  Lazarowicz, Mark

  Ruane, Chris

  Lepper, David

  Ryan, Joan (Enfield N)

  Leslie, Christopher

  Salter, Martin

  Levitt, Tom (High Peak)

  Savidge, Malcolm

  Lewis, Ivan (Bury S)

  Sawford, Phil

  Lewis, Terry (Worsley)

  Sheridan, Jim

  Liddell, rh Mrs Helen

  Simpson, Alan (Nottingham S)

  Linton, Martin

  Singh, Marsha

  Lloyd, Tony (Manchester C)

  Smith, Geraldine (Morecambe &

  Love, Andrew

  Lunesdale)

  Lucas, Ian (Wrexham)

  Smith, Jacqui (Redditch)

  Luke, Iain (Dundee E)

  Soley, Clive

  Lyons, John (Strathkelvin)

  Squire, Rachel

  McAvoy, Thomas

  Steinberg, Gerry

  McCabe, Stephen

  Stewart, David (Inverness E &

  McCartney, rh Ian

  Lochaber)

  McDonagh, Siobhain

  Stewart, Ian (Eccles)

  McDonnell, John

  Stoate, Dr. Howard

  MacDougall, John

  Strang, rh Dr. Gavin

  McFall, John

  Straw, rh Jack

  McGuire, Mrs Anne

  Stringer, Graham

  Mclsaac, Shona

  Stuart, Ms Gisela

  McKechin, Ann

  Sutcliffe, Gerry

  McKenna, Rosemary

  Tami, Mark (Alyn)

  Mackinlay, Andrew

  Taylor, David (NW Leics)

  McNulty, Tony

  Thomas, Gareth (Clwyd W)

  McWalter, Tony

  Timms, Stephen

  McWilliam, John

  Touhig, Don (Islwyn)

  Mahmood, Khalid

  Trickett, Jon

  Mahon, Mrs Alice

  Truswell, Paul

  Mallaber, Judy

  Turner, Dr. Desmond (Brighton

  Mendelson, rh Peter

  Kemptown)

  Mann, John (Bassetlaw)

  Twigg, Derek (Halton)

  Marris, Rob (Wolverh'ton SW)

  Twigg, Stephen (Enfield)

  Marsden, Gordon (Blackpool S)

  Tynan, Bill (Hamilton S)

  Marshall-Andrews, Robert

  Walley, Ms Joan

  Martlew, Eric

  Ward, Claire

  Merron, Gillian

  Wareing, Robert N.

  Michael, rh Alun

  Watts, David

  Miliband, David

  White, Brian

  Miller, Andrew

  Whitehead, Dr. Alan

  Moffatt, Laura

  Wicks, Malcolm

  Moran, Margaret

  Williams, rh Alan (Swansea W)

  Morgan, Julie

  Williams, Betty (Conwy)

  Morley, Elliot

  Winnick, David

  Mountford, Kali

  Winterton, Ms Rosie (Doncaster

  Munn, Ms Meg

  C)

  Murphy, Jim (Eastwood)

  Woolas, Phil

  1037

  Wright, Anthony D. (Gt

  Wright, David (Telford)

  Yarmouth)

  Wright, Tony (Cannock)

  NOES

  Ainsworth, Peter (E Surrey)

  Davey, Edward (Kingston)

  Amess, David

  Djanogly, Jonathan

  Arbuthnot, rh James

  Dodds, Nigel

  Atkinson, David (Bour'mth E)

  Donaldson, Jeffrey M.

  Atkinson, Peter (Hexham)

  Duncan, Alan (Rutland)

  Bacon, Richard

  Evans, Nigel

  Baker, Norman

  Ewing, Annabelle

  Baldry, Tony

  Field, Mark (Cities of London &

  Barker, Gregory

  Westminster)

  Baron, John (Billericay)

  Foster, Don (Bath)

  Beggs, Roy (E Antrim)

  Francois, Mark

  Bellingham, Henry

  Gale, Roger (N Thanet)

  Blunt Crispin

  Garnier, Edward

  Boswell, Tim

  George, Andrew (St. Ives)

  Bottomley, Peter (Worthing W)

  Gidley, Sandra

  Brady, Graham

  Gillen, Mrs Cheryl

  Brake, Tom (Carshalton)

  Goodman, Paul

  Brazier, Julian

  Gray, James (N Wilts)

  Breed, Colin

  Green, Damian (Ashford)

  Brooke, Mrs Annette L.

  Green, Matthew (Ludlow)

  Browning, Mrs Angela

  Greenway, John

  Burns, Simon

  Gummer, rh John

  Burnside, David

  Hague, rh William

  Burstow, Paul

  Hammond, Philip

  Burt, Alistair

  Harris, Dr. Evan (Oxford W &

  Cable, Dr. Vincent

  Abingdon)

  Calton, Mrs Patsy

  Hawkins, Nick

  Campbell, Gregory (E Lond'y)

  Heath, David

  Campbell, rh Sir Menzies (NE

  Heathcoat-Amory, rh David

  Fife)

  Hermon, Lady

  Carmichael, Alistair

  Hoban, Mark (Fareham)

  Chapman, Sir Sydney (Chipping

  Hughes, Simon (Southwark N)

  Barnet)

  Jones, Nigel (Cheltenham)

  Clifton-Brown, Geoffrey

  Key, Robert (Salisbury)

  Collins, Tim

  Kirkbride, Miss Julie

  Cormack, Sir Patrick

  Kirkwood, Sir Archy

  Cotter, Brian

  Knight, rh Greg (E Yorkshire)

  Cran, James (Beverley)

  Laing, Mrs Eleanor

  1038

  Lait, Mrs Jacqui

  Shephard, rh Mrs Gillian

  Lamb, Norman

  Shepherd, Richard

  Laws, David (Yeovil)

  Simmonds, Mark

  Liddell-Grainger, Ian

  Simpson, Keith (M-Norfolk)

  Lilley, rh Peter

  Skinner, Dennis

  Llwyd, Elfyn

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

  Loughton, Tim

  Kincardine)

  Luff, Peter (M-Worcs)

  Smyth, Rev. Martin (Belfast S)

  McIntosh, Miss Anne

  Spicer, Sir Michael

  Mackay, rh Andrew

  Spink, Bob (Castle Point)

  McLoughlin, Patrick

  Spring, Richard

  Malins, Humfrey

  Streeter, Gary

  Marsden, Paul (Shrewsbury &

  Stunell, Andrew

  Atcham)

  Swayne, Desmond

  Maude, rh Francis

  Swire, Hugo (E Devon)

  Mitchell, Andrew (Sutton

  Tapsell, Sir Peter

  Coldfield)

  Taylor, John (Solihull)

  Moss, Malcolm

  Taylor, Sir Teddy

  Murrison, Dr. Andrew

  Teather, Sarah

  Norman, Archie

  Thomas, Simon (Ceredigion)

  Opik, Lembit

  Tonge, Dr. Jenny

  Osborne, George (Tatton)

  Trend, Michael

  Ottaway, Richard

  Trimble, rh David

  Paterson, Owen

  Turner, Andrew (Isle of Wight)

  Pickles, Eric

  Tyler, Paul (N Cornwall)

  Portillo, rh Michael

  Tyrie, Andrew

  Pugh, Dr. John

  Walter, Robert

  Randall, John

  Waterson, Nigel

  Reid, Alan (Argyll &Bute)

  Watkinson, Angela

  Rendel, David

  Webb, Steve (Northavon)

  Robathan, Andrew

  Weir, Michael

  Robertson, Angus (Moray)

  Wiggin, Bill

  Robertson, Hugh (Faversham &

  Willetts, David

  M-Kent)

  Williams, Hywel (Caernarfon)

  Robertson, Laurence (Tewk'b'ry)

  Willis, Phil

  Robinson, Peter (Belfast E)

  Wilshire, David

  Rosindell, Andrew

  Winterton, Ann (Congleton)

  Ruffley, David

  Winterton, Sir Nicholas

  Russell, Bob (Colchester)

  (Macclesfield)

  Sanders, Adrian

  Wishart, Pete

  Selous, Andrew

  Younger-Ross, Richard

  Question accordingly agreed to.