Sitting of 23 March 2004

Preamble
The House met at half-past Eleven o'clock
PRAYERS
[MR. Speaker in the Chair]
PRIVATE BUSINESS
  LONDON LOCAL AUTHORITIES BILL [Lords]
  Read the Third time, and passed, with amendments.

Orders of the Day
Question accordingly agreed to.
Question accordingly agreed to.

Orders of the Day
  WAYS AND MEANS
  Order read for resuming adjourned debate on Question [17 March].

  AMENDMENT OF THE LAW
  Motion made, and Question proposed,

  That it is expedient to amend the law with respect to the National Debt and the public revenue and to make furl her provision in connection with finance.

  This Resolution does not extend to the making of any amendment with respect to value added tax so as to provide—

  for zero-rating or exempting a supply, acquisition or importation;

  for refunding an amount of tax;

  for any relief, other than a relief that—

  so far as it is applicable to goods, applies to goods of every description, and

  so far as it is applicable to services, applies to services of every description—[Mr. Gordon Brown.]

  Question again proposed.

  Budget Resolutions and Economic Situation
  12.43 pm
  The Secretary of State for Work and Pensions (Mr. Andrew Smith): This is a Budget built on stability I hat delivers for employment, pensioners, public services and sustained growth for the future. In each area, as I will show, there is the sharpest contrast between our record and prospects for the future and the alternatives put to us by the Opposition. That contrast presents a very clear choice for the country between continued investment and reform in public services and cuts in spending, and between continued economic stability and a return to boom and bust. We relish putting those choices before the country.
  On the economy as a whole, we have today the lowest inflation for 30 years, the lowest interest rates for 40 years and more people in employment than ever before. Let us compare that with the situation under the previous Government: 3 million unemployed, double-digit inflation, and interest rates of more than 15 per cent. for over a year. This change in Britain's performance has not come about by accident. but because of the tough economic decisions that we have taken: making the Bank of England independent, sticking to tough fiscal rules and introducing measures such as the sanctions of the new deal. Those decisions have ensured that growth in Britain over the past four years has been higher than that in Japan, Italy and the United States. In 2004, our growth is expected to be double that of France and Germany.
  It is right that with such hard-won stability, having accumulated surpluses at the start of the economic cycle, we continue investment and the big job of renewing the country's infrastructure, recognising that it is prudent to borrow to do so, in line with the fiscal rules. Unlike under the Conservative party, which let debt rise to 44 per cent. of gross domestic product, today it stands at
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  just 33 per cent. Whereas the Conservatives borrowed 8 per cent. of GDP, we have reduced that to just 3.4 per cent.
  As a result of the tough decisions that we have taken since 1997, we have been able to invest in active labour market policies— investment that is paying off. Employment has risen in every region of the country, and unemployment continues to fall most where previously it was highest. The UK now has one of the strongest labour markets in the world. We have the highest employment and the lowest unemployment of the major industrialised countries. More people are in jobs than ever before. We have tackled the legacy of long-term unemployment—the Tories "price worth paying"—so that long-term youth unemployment has been virtually eradicated.
  The new deal is a world-class labour market policy; it has helped more than 1 million people get back to work. The new deal for young people has benefited the economy to the tune of £500 million a year. The shadow Chancellor may laugh at the success of the new deal and the role that it has played in transforming the lives of the young and long-term unemployed people in this country, but he should recognise that an independent study by the National Institute of Economic and Social Research showed that the new deal is saving the economy £500 million a year. The new deal for lone parents is saving the Exchequer £40 million a year. We have a succession of overseas visitors who are keen to emulate the success of the new deal and Jobcentre Plus. The only people who turn their backs on that success are those in the Conservative party.
  Rob Marris: Is my right hon. Friend aware that the UK's productivity in output per person of working age is higher than that in France and Germany, precisely because of our wonderful employment record?
  Mr. Smith: My hon. Friend makes a very good point. Programmes such as the new deal and the benefits of our economic stability not only transform the lives of those who were cut out from opportunity and employment under the Conservative party, but benefit the whole economy in higher output and higher welfare for us all, as he suggests. The Conservatives call all that an expensive failure, but we know what was really the expensive failure: the 3 million unemployed under the Conservative party, whose leader, when he was masterminding employment policy, managed to increase unemployment by more than 1 million. Some 1,300 people were added to the claimant count every day, precisely because he did not invest in policies such as the new deal.
  Mr. Alex Salmond: The Tory economic record is fairly easy meat, but the Chancellor never talks these days about the balance of payments and the apparent structural balance of payments deficit that the Red Book shows continuing into the future. Does the Secretary of State think that that long-term balance of payments deficit has any implication? Is there any chance that the Government might be blown off course?
  Mr. Smith: No, and I will take no lecture on deficits from the Scottish National party. Of course it is

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  important that we continue to improve productivity, that we continue our infrastructural investment and that we invest in skills through the new deal for skills, as set out in the Budget book, so that we continue to improve our international competitiveness, which will result in improvements in our international trading policy. The hon. Gentleman and others should not talk down this country's success, whether in pharmaceuticals, aerospace, the automotive industry or financial services; nor should they ignore the fact that output in our manufacturing sector has been rising over the past four quarters.
  Mr. Kenneth Clarke: The question was about the current account deficit and the balance of trade. I understand the right hon. Gentleman saying that it does not matter, but did not quite catch why he said that it does not matter. It is the largest deficit for 300 years.
  Mr. Smith: I did not say that it does not matter. I said that the measures that we have put in place in terms of economic stability, investment in infrastructure and skills, and ensuring that successful sectors thrive is the best way. We take no lectures from the right hon. and learned Gentleman, whose policies were responsible for getting us into the situation to which I have referred.
  Mr. Salmond: If that is the case and the measures will bring improvements, why does the Red Book forecast that the balance of trade in goods and services over the next three years will deteriorate?
  Mr. Smith: The Red Book forecasts also that imports and exports will rise at the same rate. It should be evident from my remarks that the situation will be better than it would have been had the Government not made the investment and improvements in skills and competitiveness that we have. The situation would be much worse if the cuts in public spending and investment that the Conservative party wants to implement were put into effect.
  We will build on the success of our labour market and other policies, not dismantle them. By introducing the new deal for skills, we will equip people in and out of work with the training that they need to progress in the workplace and to lift themselves and their families out of poverty.
  Mr. Lindsay Hoyle: My right hon. Friend will be aware of the new deal's huge success in the north-west, and particularly in my constituency, where unemployment is at its lowest ever level—down to 1.9 per cent. It cannot get any better. Can we ensure that the skills found in traditional industries continue to be honed and that unemployment does not return to the levels of the 1980s?
  Mr. Smith: Nobody wants a return to the unemployment of the 1980s and the disastrous policies responsible for it. As a consequence of our policies, and demanding though it may be, we might do even better in my hon. Friend's constituency and get unemployment still lower. His point about traditional industries is well
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  made. All industries require investment in information technology and skills. It is no longer viable for smokestack industries to operate under outdated practices. Every industry and service must be high tech and Government policies will help my hon. Friend's constituents and others to succeed in competitively challenging world conditions.
  We want to build on our success and to go further in tackling inactivity. We have made strong progress in helping to improve opportunities for lone parents since 1997; 250,000 have been helped into work thanks to the new deal. The lone parent employment rate is above 50 per cent. for the first time, but we want to do more. The biggest barrier facing parents in returning to work is affordable and trusted child care. The Budget will roll out the extended schools pilots to a further four areas, making better use of school facilities to provide child care in areas of high lone parent unemployment.
  From October, we will pilot further ways to help lone parents find and stay in work. In eight areas, lone parents will get an extra £20 a week on top of their normal benefits, to cover the costs of more actively looking for work. When they start a job, we will also offer them £40 a week for the first year of employment in addition to other tax credits—making sure that it pays to look for and get a job.
  For persons on incapacity benefits, we will extend the pathways to work approach. From next year, we will bring in extra work-focused interviews for persons who have been on incapacity benefit for longer periods, and a new job preparation payment to help people who are taking steps to get a job. Whereas Conservative Governments trebled the numbers on incapacity benefit, we are taking action and investing to help people who want to get back to work—providing opportunities for those written off in the past.
  We have never shirked the tough challenge of modernising public services—challenges presented to us by years of under-investment by the previous Conservative Government. I pay tribute to staff throughout the country, who every day are responsible for the labour market successes that I have described—helping people to find work, getting extra money to pensioners and children, and delivering a valued service to the public.
  We are investing £2.2 billion in transforming Jobcentre Plus to make it the best welfare to work service in the world. There are new offices, new information technology and 10,000 17 per cent.—
  more personal advisers on the front line helping more people into work. That investment and the 𠂣2.8 billion being spent on my Department's IT systems are modernising the way that we do business and the service that we provide to our clients.
  Mr. Steve Webb: I echo the Secretary of State's praise for staff who do such a good job. Last week, the Chancellor gave the impression that his announcement about swingeing job cuts was news. How does the Secretary of State think his staff felt on turning on the television and hearing that they were going to be sacked?
  Mr. Smith: News of staff reductions is bound to cause some uncertainty and anxiety. The investment to which

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  I referred had already been set out in our departmental plans and announced. The Chancellor set out the total number, including a further 12,000 job reductions to 2008. To put that matter in context, mine is a big Department of some 130,000 staff. Implementation of the reforms will be spread over four years, and we will work closely with staff and trade unions in taking them forward. I hope that much can be achieved by natural turnover, which currently accounts for 9,000 staff each year leaving the Department.
  The result of our investment and reform will be a leaner, more effective organisation offering a better service to the customer, better value to the taxpayer and more rewarding jobs for our employees as we shift the emphasis from back-office and clerical processing to front-line personal advisory work. A number of personal advisers have told me that that was the job that they wanted when they first joined the service—helping clients, face to face, to move forward in their lives.
  Mr. Henry Bellingham: Having been to my local Jobcentre Plus, I endorse the right hon. Gentleman's comment that the staff do an excellent job. Is he aware, however, that the Government signed up to a European Union directive that insists on staff consultation in advance of announcements? Why has he breached that EU directive?
  Mr. Smith: I thank the hon. Gentleman for his praise in recognition of the accomplishments of Jobcentre Plus. It is for him to take issue with his Front Benchers, who want to abolish so many of the policies that he praises. Before any staff are made redundant, whether voluntarily or even compulsorily if necessary—which I have not ruled out—there will of course be full consultation with staff, in conformity with all relevant agreements and regulations. That will happen not just because that is required but because it is the right thing to do. We have to carry our staff with us during a difficult process of transformation, albeit one that will bring real benefits to customers, taxpayers and staff working conditions and satisfaction.
  The Chancellor also made important announcements for pensioners. We have taken action to tackle the inheritance of the last Conservative Government, under whom there were nearly 3 million pensioners in poverty, many of whom were expected to live on just £69 a week. The Conservatives increased the basic state pension once£and only because they simultaneously slammed value added tax on fuel. In contrast, we have increased the basic state pension by £5 for single pensioners and by £8 for couples in real terms; and we have introduced free TV licences for the over-75s, free eye tests, and a winter fuel payment that is worth £200 to every pensioner household and £300 for pensioners over age 80.
  In this Budget, we went even further. Recognising the impact that council tax increases have on the fixed incomes of older people, we will pay all households with someone aged over 70 an extra £100 this year. Taken together with the winter fuel payment, households with someone aged over 70 will receive a total of £300 this year, rising to £400 for the over-80s.
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  On top of that, we continue to make good progress in rolling out pension credit, which is now reaching more than 2.7 million people. The Budget extends the backdating period, and that means that any eligible pensioner making an application will have their credit backdated for up to a year. That is an important extra step to help ensure that pensioners get the money that is rightfully theirs.
  As a result of our reforms, we will spend an extra £10 billion next year on pensioners compared with 1997. On average, pensioner households will be £1,350 a year better off in real terms— that is around £26 extra a week. The poorest third will be, on average, £1,750 a year better off, ensuring that more than 1.6 million pensioners have been lifted out of absolute poverty since 1997.
  Whereas we have tackled pensioner poverty, the Tory proposals would ensure that the poorest fell further behind. We know that their policies are "wild and uncosted" and that there will have to be more painful cuts to make their sums add up, because the right hon. Member for West Dorset (Mr. Letwin) and the hon. Member for Havant (Mr. Willetts) have told us so. What they propose is unaffordable, unsustainable and above all unfair.
  We will keep up our drive to raise the living standards of all pensioners while helping the poorest most of all. We will also carry forward our programme of pension reform, increasing the rewards for those pensioners who want to work beyond the normal state pension age. We will bring forward the increase in the rate of accrual on deferred state pensions. That means that someone who on retirement at 65 would be entitled to £100 a week will now get £160 if they defer for five years. For the first time from April next year, those who work beyond state pension age will be able to take their deferred state pension as a lump sum.
  The forthcoming Finance Bill will also simplify the tax system on personal pension funds by replacing the eight tax regimes for pensions with a single lifetime allowance. That is a fundamental and radical reform that will be of enormous benefit to pension saving in this country. As my right hon. Friend the Chancellor said, we have listened to the concerns of employers who want to do more to support their employees in making decisions about their pensions. I am pleased that we are helping employers to make that advice available by making it tax free up to £150 per employee. That is a new incentive to strengthen the pension partnership.
  To conclude on the whole Budget, as I imagine we are about to hear, the Conservatives are clambering about, straining to find some points of argument that they can hang on to because they have been comprehensively outmanoeuvred on the argument, just as they have been comprehensively outperformed economically on their record in government. The Conservative party is now in total confusion—on core public services, its plans are in chaos. The Conservatives contradict themselves on education, because they are unable to decide whether the derided pupil passports will apply to private school fees. On health, we learned yesterday that they are trying to ditch their private health care subsidy. The Tories' spending plans do not stack up, so they are forced to ditch their flagship policies. The party is in disarray and has nothing to offer the British people.

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  In contrast, this Budget locks in the economic stability that we have created since 1997. With inflation, interest rates and unemployment low, we are able to invest for the future with more money for health, education and security. Our investment and reform are delivering better value to the taxpayer, better services to the public and an economy that is the envy of the world. I commend our Budget to the House.
  1.4 pm
  Mr. David Willetts: I draw the House's attention to my interests that appear in the Register of Members' Interests. I shall begin by identifying issues on which I shall disappoint the Secretary of State by agreeing with some measures in the Budget. Let me take him through one or two of the measures that I welcome. In fact, I welcome some measures that he did not even refer to in his rather thin speech.
  For example, I welcome the Chancellor's final abandonment of his obsession with delivering tax credits through the payroll. Five years ago, he believed that it was essential to deliver tax credits through the payroll to transform incentives to get people into jobs. He first abandoned that with the child tax credit, and in his Budget last week, he finally abandoned it with the working tax credit as well. All that metaphysical stuff about how it was essential that these benefits be delivered through the payroll has now been abandoned, and I very much welcome that.
  There was something else in the Budget that I welcomed: the simplification of the pension tax regime is an improvement on the current regime. The Chancellor again made a significant concession, but did not want to admit to it. In the face of the protests about the £1.4 million cap and its potential effect on senior managers, he has increased the value of the cap significantly for people with defined benefit schemes. However, instead of doing that in the straightforward way, by increasing the capital sum, he has introduced an ingenious formula for converting the value of a defined benefit pension into a notional sum—the one in 20 formula. No one can actually convert their capital into a pension at a rate of one to 20, but for the purposes of his cap, the Chancellor will assume that they can. To get the sort of pension that would be covered by the scheme, the calculation is that the cap is now up to £2 million, if not more, for people in defined benefit schemes. It is, of course, worth much less for people with personal pensions and defined contribution schemes. Because the Chancellor did not want to make a concession in an open and honest way, he has created a new anomaly in which his provision is more generous for defined benefit than for defined contribution schemes.
  Angela Eagle: I am grateful to the hon. Gentleman for giving way while he is on the theme of abandonment. Will he clarify a confusion that has arisen about the Conservative party's policy on tax relief for private medical insurance? In a speech last year, the leader of the Conservative party, the right hon. and learned Member for Folkestone and Hythe (Mr. Howard), said that it fully intended to give private tax
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  relief for medical insurance to the tune of £1 billion. However, yesterday, the hon. Member for South Suffolk (Mr. Yeo) said:
  "I can announce that it will not be the policy of the next Conservative Government to offer tax relief to people who take ow private medical insurance."—[Oficial Report, 22 March 2004; Vol. 419, c. 595.]
  Which is right?
  Mr. Willetts: It is not, and has not been, our policy to reinstate the tax relief for private medical insurance. I ant happy to place that on the record.
  The hon. Lady interrupted me in my paean of praise for the Budget. There is a third item to which I was about to give a grudging welcome. I refer to the £100 for pensioners that, admittedly, is being provided to help them out of the mess of the Chancellor's own creating—the escalation in their council tax bills. That problem has been compounded yet again by the complexity of the means-tested benefit that is supposed to help pensioners.
  The take-up of council tax benefit has been declining. and more than I million pensioners who are entitled to it do not receive it. In fact, when the Chancellor recognised in his Budget speech the failure of means-tested benefits to help pensioners with high council tax bills and introduced a universal payment for all pensioners over 70, I wondered whether he had recognised a wider strategic point. In the words of Help the Aged:
  "There would be no need for gifts like this if the government was to review its fixation with means-testing."
  Mr. Geoffrey Robinson: While the hon. Gentleman is in the unusual mood of agreeing with the Government, does he agree with them, and me, that at this time of heightened terrorism in the world, we need maximum defences on all fronts to combat it? Does he agree with his own party, which has announced a freeze on defence expenditure in cash terms? If so, which element would he cut at this terrible time?
  Mr. Willetts: The hon. Gentleman ought to be aware of the distinction between outputs and inputs. We are committed to efficiency in the public services—the Prime Minister used to talk about that in the old days. My right hon. Friend the Member for West Dorset (Mr. Letwin) has not made a specific statement on defence spending, but we are committed overall to ensuring the efficient delivery of public services.
  My attempt to find common ground with the Government on the Budget does not seem have to have met much of a welcome.
  Mr. Andrew Smith rose—
  Mr. Willetts: I was going to move on to some criticisms of the Budget, but of course I shall give way to the Secretary of State.
  Mr. Smith: The hon. Gentleman made a point about inputs and outputs in response to my hon. Friend the Member for Coventry, North-West (Mr. Robinson),

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  but will he give us a clear yes or no answer? Is it the policy of those on the Conservative Front Bench to keep defence spending flat in cash terms?
  Mr. Willetts: My right hon. Friend the Member for West Dorset set out our public spending plans clearly in his statement a few weeks ago. He set out the areas in which we would be able to increase spending in real terms—on health and education and outlined an overall framework for total public expenditure. However, he did not make a statement specifically on the defence budget.
  On pensions, I am afraid that I found the Budget sadly lacking. The Chancellor failed yet again to recognise the scale of the crisis in funded pensions. Just about everyone recognises that we cannot carry on with more and more pensioners on means-tested benefits, and the erosion of funded pensions. Everyone from the Adam Smith Institute to Mr. Alan Pickering recognises that the way forward is to reform benefits so as to reverse the spread of means-testing and to produce new incentives to save, so that people are encouraged to build up more funded occupational pensions. Under this Government, the country is heading in the opposite direction, with more means-testing and a decline in funded pension savings, and nothing in the Budget will reverse that trend.
  The Chancellor is being optimistic in assuming that corporation tax receipts will increase to the extent suggested by table C8 of the Red Book—the light reading to which we have all been turning in the midnight hour. He assumes that corporation tax receipts will increase from £28.7 billion this year to £34.8 billion next year. It would be interesting to hear why he believes that there will be such an extraordinary recovery in corporation tax receipts, given that many companies will have to put more money into their pension funds to rescue them from the effects of the £5 billion tax that the Chancellor has imposed on them.
  There was nothing in the Budget on wind-ups. We wanted it to include measures to tackle the problems facing the 60,000 people who had hoped that after the collapse of their pensions and the disappearance of their hopes for a decent retirement, the Government would examine ways of assisting them out of serious financial distress. Several rumours went round. For example, the Chancellor was reported to be interested in a proposal made by the right hon. Member for Birkenhead (Mr. Field), in which we have also been interested, to use some of the unclaimed assets held by building societies and banks to set up a fund to help people in such circumstances. We read that the Chancellor is targeting the unclaimed assets, but, sadly, not to help with the problem of pension wind-ups. There could be no better use of the unclaimed assets than in helping to tackle that problem, and it will be a great pity if the Chancellor takes money from the unclaimed assets but does not use it for that purpose.
  James Purnell: I am worried that the hon. Gentleman might have inadvertently—I stress the word "inadvertently"—misled the House. I was looking at the Conservative party website last night—honestly, I am that sad—and the quote from the shadow Chancellor is very clear. He says that there would be increases in the budgets for
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  health and education but that those of all other Departments would be frozen in cash terms for two years. He admits that that would mean tough decisions. Will the hon. Gentleman correct what he said if it turns out to be wrong?
  Mr. Willetts: My right hon. Friend the Member for West Dorset was setting out an overall framework for those Departments. In his announcement on public spending the other week, he specifically stated that there would be scope for reallocating money among specific Departments. The hon. Gentleman would have been better occupied in studying the fine print in the Chancellor's Red Book than in making up such questions on the basis of our website.
  Mr. Geoffrey Robinson rose—
  Mr. Willetts: I have given way to the hon. Gentleman once, but I am in a generous mood, so I shall give way to him once more.
  Mr. Robinson: The hon. Gentleman is most generous. We are trying to get at some of the detail of what the Conservatives have in mind for defence. A copy of "Community News" put out by the Conservatives says that we should not have put as much money as we have—£ 20 billion—into the Eurofighter. I can make the article available to the hon. Gentleman. Would he scrap the Eurofighter? Would that be one of the specific cuts?
  Mr. Willetts: Let me quote from the authoritative statement made by my right hon. Friend the Member for West Dorset to calm Labour Members' anxieties, given that, just for once, they are troubled about defence. He said:
  "I recognise, moreover, that there will inevitably be cases in which particular programmes, or even the expenditure of whole departments, will need to rise at a rate faster than this."
  Those words are from his original statement. He set out an overall envelope, but he did not set figures for individual Departments.
  I now turn to what the Government are doing to encourage saving, because not a word on that subject passed the Chancellor's lips throughout his statement. He has not referred to saving in his last two Budgets; in fact, he has been attacking saving. He has attacked the form of savings that many people have been using, and that the Secretary of State previously encouraged people to take out.
  Let me quote what the Secretary of State said in a debate on the subject in 2002, when a Conservative Member asked him a question about individual savings accounts. Asked what vehicle he would recommend people to save with and how he would encourage people to save, he replied:
  "The hon. Lady specifically asked what we could offer to younger people to ensure that they were saving, and I quite reasonably pointed to ISAs".
  He recommended ISAs. He added:
  "The answer is the ISA, a more flexible vehicle which is attracting more savings, especially from younger people."—[Official Report, 2 July 2002; Vol. 388, c. 103.]
  The Budget, however, represents an attack on the ISA. There has been an abolition of tax credits on ISA dividends, and a cut in the size of equity ISAs from

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  £7,000 to £5,000. The cash mini-ISA will also be cut from £3,000 to £1,000. Does the Secretary of State stand by the advice that he would have given a young person 18 months ago, in the light of the depredations that the Chancellor has made in the specific form of saving in which the right hon. Gentleman was trying to encourage people to participate?
  Let me also ask the Secretary of State about his welfare-to-work initiatives. As he knows, when I am not reading the fine print of the Chancellor's Red Book, I plough through the Department for Work and Pensions' evaluations of its welfare-to-work schemes. Ministers always come to the House to announce new programmes, but they never admit to the House what their evaluations show about the performance of existing programmes. If Ministers take any account of what used to be called evidence-based policies—they used to be proud of those—why does the Secretary of State not explain the latest research report to the House?
  The report, published last month, is entitled "Evaluation of Lone Parent Work Focused Interviews: Final findings from administrative data analysis"; it is a light read if ever there was one. It says on page 12:
  "The introduction of Lone Parent Work Focused Interviews"
  the Jobcentre Plus stuff that the Secretary of State has just been talking about again—
  "brought no detectable change in exit rates from"
  income support
  "for eligible new or repeat claimants".
  It has had no effect. Why does the Secretary of State keep on churning out new initiatives that endlessly require further extension of compulsory interviews, when his own evidence shows that most of them have had no discernable effect? That is the challenge to which he needs to respond.
  Mr. Barry Gardiner: The hon. Gentleman has just suggested that it is important to review recent documentation and assess it properly. Would he therefore care to review the statement by the shadow Chancellor on 16 February, in which he said that there should be a "zero per cent. growth" in the defence and Home Office budgets? Would he care to compare that with the view of the shadow Defence Secretary, who said that that would be a savage cut? Which is it? Is the shadow Chancellor going to cut the defence budget or the Home Office budget?
  Mr. Willetts: I have already clearly explained what my right hon. Friend the shadow Chancellor said in his statement on our public expenditure plans. We can see from the Secretary of State's brief speech, and from interventions, that the Government do not have a programme to reform public services, to tackle the crisis in our pensions or to avert the tax rises that would be inevitable if they were in office for a third term. Instead, we have spin, spin, spin from the Government.
  Mr. Webb: Before he was interrupted, the hon. Gentleman was saying that the Government's programmes to get lone parents off welfare to work had been unsuccessful. To fill the hole in his pensions policies
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  he aims to save £400 million a year by getting lone parents with secondary school-age children back into work. What research evidence makes him think that he can raise £400 million by doing that?
  Mr. Willetts: We have clear evidence that when lone parents are older and their children are of secondary school age, for them to go out to work is in the best interests of the children, as outcomes for them are better We know from the introduction of jobseeker's allowance that nothing beats a simple, clear requirement that people should actively seek work. The Government have skirted that issue ever since they took office, but we would address it directly with our reform. That is the difference, and it is an important one.
  I turn to the main activity in which the Chancellor has been engaged in his Budget, and in which he has engaged again today—
  Mr. Patrick McLoughlin: Before my hon. Friend moves on, will he say something more about savings, the issue that he has just addressed? It is disturbing that people are not being encouraged to save. Why, despite all the words used by the Chancellor in I he past, are there no measures to encourage saving in the Budget?
  Mr. Willetts: My hon. Friend is right. We have just about the lowest savings ratio on record, and the Red Book shows that there is no prospect of improvement. The Budget documents show the savings ratio as 5.25 per cent. in 2003, 5 per cent. in 2004 and 5.5 per cent. in 2005–06. Those are historically low levels.
  Mr. Andrew Smith: Does the hon. Gentleman accept that in 1989 it was 4.9 per cent., which is the lowest level of all?
  Mr. Willetts: The Secretary of State knows that the savings ratio under this Government has fallen from the 10 per cent. that they inherited from us to approximately 5 per cent. now. There are no measures in the Budget to do anything to reverse that. The average savings ratio since 1997 is lower than it was during our period in office, and that serious problem needs to be tackled.
  I shall challenge the Chancellor on the new sport in which he is engaged—fox hunting. He wishes to shoot our fox; that was the spin put on the Budget. We were told that that was its purpose: it had nothing to do with improving the performance of the British economy or avoiding future tax increases, but was all to do with shooting our fox. The Chancellor is engaged in an activity more redolent of my hon. Friend the Member for Mid-Sussex (Mr. Soames) than of Labour Members, but they are all engaged in fox hunting.
  Let us get on the trail and see whether, by suddenly discovering the importance of reducing the overhead costs of government, they have carried out the brilliant political manoeuvre that they think they have. For years, the Chancellor has denied that there is a problem with waste and inefficiency; it is Opposition Members who have pressed for action on the problem of waste and inefficiency in our public services. Now, the Chancellor takes great pride in turning up and announcing in the Budget that he has suddenly realised

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  that there is a great problem with waste, overhead costs and excessive numbers of civil servants, which he is going to reduce.
  Will the Secretary of State for Work and Pensions provide a little more information about the announcements that were made? On the day of the Budget, he announced that he would reduce the number of civil servants, and said on the radio:
  "I haven't ruled out the possibility of some compulsory redundancies."
  The Chancellor said in his Budget statement that
  "the Secretary for Work and Pensions is announcing today for his Department a gross reduction of 40,000 staff posts, a redeployment of 10,000 posts to new priorities, and thus an overall reduction over four years of 30,000 posts."—[Official Report, 17 March 2004; Vol. 419, c. 331.]
  That is what many civil servants heard on their radios, but we know what the Government think about such sudden announcements of redundancies, as the Secretary of State for Trade and Industry said:
  "I am not prepared to have our workers hear on the radio that they will lose their jobs or find that they have already lost their jobs through a text message."—[Official Report, 14 January 2004; Vi 416, c. 822.]
  The Secretary of State for Trade and Industry is so het up about such announcements that she will penalise employers who do such appalling things. The Government have introduced legislation to fine employers who announce redundancies without proper consultation, and she said:
  "I want these changes to lead to a 'no surprise' culture"—
  the Chancellor has not caught up with that, has he?—
  "where employers and employees discuss common ground and find solutions to mutual problems. I want to see an end to the climate where people only hear about job losses from the media over their breakfast."
  What, then, is the Chancellor up to, announcing redundancies in this way?
  Mr. Stephen Pound: Like many honest citizens, I was immensely impressed by a recent photo opportunity involving the Leader of the Opposition in which great phalanxes of cardboard cutouts wearing bowler hats symbolising imminently redundant civil servants were paraded for the cameras. Would the hon. Gentleman disassociate himself from that?
  Mr. Willetts: That was a recruitment freeze. We know how to do these things properly, which is the point that we are making—but I am afraid that the Government do not. The Secretary of State for Work and Pensions has the defence that the announcement was not new. The Chancellor did not say so, but that is what we have discovered. I have been digging in the departmental spending plans, and in the latest annual report the Secretary of State said:
  "The strategic aim is to reduce the Department's workforce from just 131,000 whole-time equivalents in post at April 2003"—
  the figure is about the same now—
  "to around 112,000 by March 2006 as the benefits of a significant programme of change and modernisation are realised."
  That is what the Government were going to do 18 months ago, but we now know that those plans date back as far as 2002, which is when savings were first
  718
  announced. What have they been doing in the two years since they first announced that 18,000 jobs were to be cut? A departmental spokesman was asked how many of those 18,000 job losses had been implemented since 2002, and she replied:
  "That 18,000 was only a proposal."
  The cut was "only a proposal", so the Government have not done anything about it. The Secretary of State must tell us why we should believe him this time when he claims that he is going to do something about it. He says that the savings are all due to the miraculous use of IT, but I warn him that his Department's record on saving money and staff through the effortless and efficient introduction of IT system leaves something to be desired.
  The new computers at the Child Support Agency are still not working. Are we going to save money in that way? Will we make savings with the computers that delivered the new child tax credits so smoothly? The national insurance recording system did not send out any notification to people telling them to pay their voluntary national insurance contributions. Will the superb efficiency of that IT system be the means by which money is saved? The Government do not know how they are going to save the money, which is why for the past two years they have been announcing 18,000 staff reductions, yet have not achieved a single one.
  Mr. Salmond: I have been listening closely to this part of the hon. Gentleman's speech, and I am still not clear whether those on the Tory Front Bench think the Minister is sacking too few civil servants, or too many.
  Mr. Willetts: We want an efficient civil service, and I believe that it is possible to reduce staff numbers in the Department for Work and Pensions. Let me tell the hon. Gentleman, and Ministers, how it can be done. The only real way is not through gimmicks, proposals from which no action follows, or empty hopes based on IT systems. The only way is to reform the benefits system. That is how to save money. I shall give the hon. Gentleman some figures.
  The average weekly administrative cost of delivering a payment of income support—one of those complicated means-tested benefits that the Chancellor loves so much—is £4.20. The administrative cost of delivering the basic state pension per week is 55p. The cost is hardly more than one tenth, if instead of complicated means-tested benefits, straightforward and simple benefits are paid through the basic state pension. The reason why the Chancellor cannot deliver savings is that he is always making the benefits system more complicated and spreading means-tested benefits. If he reformed the benefits system as we propose, it would indeed be possible to make savings. One makes savings by making tough decisions on the reform of benefits.
  Rob Marris: rose—
  Mr. Tom Watson: rose—
  Mr. Willetts: No. I should like the Secretary of State to explain to the House why we should believe that this time, Ministers will be able to save money on the

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  overhead costs of government, when we know from their own evidence how they have failed before. I have the targets that they set in 2000 for "modernising welfare delivery". The aim was to
  "introduce an improved, integrated modern service for delivering benefits".
  Those were their 2000 objectives. What happened?
  One target was to
  "reduce the average cost of processing retirement pension claims and maintaining the caseload by 20 per cent."
  The response was that the Department would not meet that target. Another target was to
  "reduce the average cost of processing Minimum Income Guarantee claims".
  The outcome was that the Department would not meet that target, either. The Department also aimed to
  "ensure that 90 per cent. of MIG claims are processed within 13 days".
  The outcome was that the Department would not meet that target.
  The Government have failed to meet their targets in the past. There is no evidence that they have taken the measures necessary to deliver the targets they have now set. The only way to do that is by serious reform of benefits. The only way to save money on the overhead costs of government is to engage in a serious process of public service reform. There is nothing about that in the Budget. That is why the Budget fails to rise to the challenge of the growing costs of government. That is why the Opposition have the correct approach and Ministers do not.
  James Purnell: On a point of order, Mr. Deputy Speaker. May I have your guidance'? If I believe the shadow spokesman inadvertently misled the House, and I have a quote that shows that, but he was not able to take an intervention from me during his speech, what recourse do I have to enable him to correct the record?
  Mr. McLoughlin: Further to that point of order, Mr. Deputy Speaker. Would it be a good idea if the hon. Gentleman came to Prime Minister's questions, where we see that every week?
  Mr. Deputy Speaker: Let me respond to the first point of order. The point that the hon. Member for Stalybridge and Hyde (James Purnell) raises is largely a matter for debate. The words that an hon. Member chooses to use in the Chamber must be the ones that he decides to use, and he must take great care with those words.
  1.33 pm
  Mr. Geoffrey Robinson: I congratulate the Government on yet another fine Budget in a long series, and I congratulate my right hon. Friend the Chancellor on his intellectual and sheer physical stamina as he completed his eighth Budget. I think that it is true to say that come July this year he will have overtaken Lloyd George in the office of Chancellor, and looking a little further ahead he might even have Gladstone in his sights, who under Lord
  720
  Derby's Administration, I think, did seven years and succeeded him as Prime Minister in the eighth. I am not sure my right hon. Friend would wish me to pursue that scenario any further on this occasion, but it is already clear that the Chancellor is entering the record books for the length of his chancellorship.
  The Chancellor's achievements are much more than that. This is the longest period of growth that we have had. We have stability, and all the benign aspects of the present economic situation—jobs, interest rates, growth, low inflation—are derived from that overriding objective. We have avoided stop-go, which is a particularly vicious form of economic development. It leads to lost output and makes for terrible inefficiency as businesses wind down when they have only just wound up with investment that can no longer be used. A third aspect of stop-go that is particularly pernicious is that in the stop phase, it is always the capital projects that bear the heaviest burden of the cut. That has led to the progressive decline in our infrastructure.
  We tried to deal with that. Some of us remember—some of us were even in the House in the '60s and '70s—under successive Labour and Tory Administrations the Wilson attempt through planning and the Heath attempt through the dash for growth. Both tried to get away from stop-go and, sadly for the country, both failed to do so. Then came the '80s and the '90s and the abandonment of any pretence of credence in investment in the public sector. It was left to deteriorate, with the result that as we enter the new century we must pick up the pieces and try to put back together again not just British Rail, but the outdated infrastructure in our hospitals, our schools and all of our transport. Those are the three prime areas.
  Uniquely now we have achieved stability. Uniquely now we have a forward programme. Judging by the Chancellor's Budget arithmetic, there is every chance that we can sustain it and make a real difference. That could not be done in the year or two since we got going. It is no good expecting that after two years of high spending in the health service, we will suddenly reach the European level, the French level or whatever is considered the optimum that we should reach, at least in terms of the service provided. That cannot be achieved so rapidly, but we seem to have the prospect of it.
  Just as we are about to sustain that programme and get a national effort behind it—and get the CBI behind it, as well as the unions—the Opposition mount an attack on it. We have hardly got going, but already they want to prove it is not working. On the basis of some tentative, experimental and sometimes quite absurd analysis, they are trying to undermine the national programme of rejuvenation and reinvestment.
  Rob Marris: My hon. Friend mentioned earlier his concerns about the Opposition's plans regarding defence spending. and my hon. Friend the Member for Stalybridge and Hyde (James Purnell) mentioned the Conservative party website. May I remind my hon. Friend briefly what that website says? The right hon. Member for West Dorset (Mr. Letwin) is quoted as saying:
  "The fifth component of the Medium Term Expenditure Strategy relates to all programme expenditure covered by departmental expenditure limits outside the NHS and school budgets.

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  I have agreed with my Shadow Cabinet colleagues that the baseline for spending across all of these departmental budgets will be 0 per cent. growth for the first two years".
  He goes on:
  "I fully accept that holding programme spending within departmental expenditure limits other than the NHS and schools to a zero increase for the first two years and to what amounts to a zero real terms increase thereafter is a tough constraint."
  Is that what my hon. Friend was talking about as regards defence expenditure and the Opposition proposals for that?
  Mr. Robinson: I am grateful to my hon. Friend for that telling and pertinent intervention. I tried in vain to get either of the Opposition spokesmen in today's debate to tell us what they meant. One of my hon. Friends pointed out that they were threatening to axe the Eurofighter project to save £20 billion. If only they would come clean with the House, we would know where they stood. I am less concerned about those proposals, however, because I do not think that the Conservatives are ever going to get the chance to implement them. They are muddled, contradictory and impractical, and I think that they will be exposed as such during the months leading up to the general election.
  I am seriously concerned about the Conservatives' mentality: as soon as they see the Government's success in investing to restore our schools, hospitals and transport systems, they try to prove that because our approach involves the public sector, it will not work. What grounds do they cite for those criticisms? One is the Office for National Statistics report. Normally, an ONS report would be taken very seriously and checked, but this one was never intended to be such a document. It was put out to provide an experimental look at the issues—and it is correct that we should monitor expenditure programmes that involve huge sums. I agree that we should get value for money and ensure that we are achieving the targets on which our money is being spent.
  Let me just point out a few aspects of the ONS report to which the hon. Member for Havant (Mr. Willetts) and the shadow Chancellor referred. The measurements used in the report are "new" and "experimental"— that suddenly seems to have become the holy gospel—and they use a measure of output which is absurd. The hon. Member for Havant mentioned measuring outputs instead of inputs, so he will agree with that. The measurements also invite us to equate success with having bigger class sizes, more fires and more disease. That seems to be the way it 'works. The suggestion is that that methodology is bound to work. In fairness, the hon. Gentleman was trying to make this point. Quality is not mentioned, but what could be more vital to all our public services than quality?
  When the shadow Chancellor tries to suggest that the difference between the investment going in and the output is equivalent to an inflation rate five times the national rate, he is of course using the same flawed methodology to reach that conclusion. His argument therefore has no intellectual legitimacy whatever. I hope that a better effort will be made by Sir Tony Atkinson, who has rightly been appointed by the Chancellor to examine these issues. I look forward to his report being produced in the summer. Let us hope that we can make sensible progress in that direction.
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  In yesterday's debate, my right hon. Friend the Secretary of State for Health made some telling points against those who were trying to suggest that the investment that we are making is much greater than any output that is being achieved. I shall not read out all the figures that my right hon. Friend gave to the House yesterday, but some are well worth repeating. He drew attention to the fact that there were 113,000 more cataract operations last year than in 1997—a 70 per cent. increase.—and 19,000 more knee operations—a 69 per cent. increase. There were 950,000 more planned hospital admissions last year than in 1997—a 22 per cent. increase—and 6,000 extra heart operations will have been carried out by April. All that seems to be a very good indicator of the improvements that are being made.
  Let us forget what the precise objectives were—I hope that we can also get away from the distortions that they can lead to in clinical priorities and in the organisation of hospitals—and consider the increases that are being achieved, even without referring to the 6.3 million people dealt with by NHS Direct and the 400,000 operations. I speak anecdotally when I say that many people in my constituency and elsewhere are finding a great improvement in the promptness, cleanliness and up-to-dateness of NHS care, along with the new hospitals resulting from the record hospital break-in programme. So there is no need to listen to the Conservatives' rubbishing, pessimism and downright irresponsible criticism. All we need to do is go out, look at the hospitals, and talk to the nurses.
  There is a problem with consultants and with the European working time directive, which I shall come to in a moment. First, however, I want to say a word demolishing the argument about the European Central Bank paper, of which the Leader of the Opposition made much and in respect of which he published a plea in a national newspaper for help in solving the £70 billion mystery. That seems like a waste of money to me, but Tory party funds are obviously being replenished at a rate of knots. I am not sure that I can help him in terms of the way he posed his question, but I can help him in a different way.
  The European Central Bank study is not an official bank study; the bank publishes side papers such as these which are written by people who happen to work for the bank. In no sense does it carry the imprimatur—let alone the authority—of the World Bank. It shows, among other things, that the UK, compared with about 20 countries —all the major European ones, America and the rest—has the most efficient transport system. That must give us a resounding sense of confidence. It also states that we come third, in terms of public sector figures, in administration, health, education and infrastructure. If the Leader of the Opposition has identified a mystery surrounding £70 billion, let me tell him how to find a $700 billion one. If we take the conclusion of the report on transport and apply it to the United States, we discover that, if the US were as efficient as we are, there would be a $700 billion problem for the right hon. and learned Gentleman to go after. Why is it that we are so much more efficient, and why are the United States wasting resources that, on that basis, could be calculated at roughly $700 billion?
  Those examples, the ONS and ECB reports, do not give any objective grounds at this stage for suggesting that the huge investment that we are putting into the

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  three priority areas is not producing the results that it must produce. We all have a deep national and personal responsibility to see that those results are achieved. I hope that the Tory attitude to this will soon be exposed as irresponsible. However, I would say to my right hon. and hon. Friends on the Treasury Front Bench that, in terms of getting ahead with the proper analysis and monitoring of what we are getting for our public investment—now that it is on such a scale and can be sustained for a period that would really make an impact after the years of neglect—they should set up a small monitoring team in the Department, along the lines of whatever Tony Atkinson comes up with, to ensure that we have authoritative grounds to prove not only that the programme is delivering as we expect it to but to expose the hypocrisy and shallowness of the Tory Opposition towards this major national input.
  I should like to put to my Front-Bench colleagues one final point on the health service. It was not mentioned yesterday, and I want to take the opportunity to raise it now. There is a problem with the European working time directive, in relation to junior doctors and to the earlier changes that were made, which will pose a great challenge to the health service that could result in a drop in the level of service that it can provide. I would like my right hon. Friend the Secretary of State for Health to consider the provisions that we have in place to meet the requirements of the working time directive in relation to junior doctors, the spread of the provision and the worry among many consultants about the speed at which the changes are happening following the earlier structural changes. It is possible that, despite the money going in, we shall not do as well as we could if we could find a way of minimising the effect of the working time directive. That is a major consideration, and a personal worry of mine. I have many friends who are surgeons who never stop lecturing me on it, so I hope I am allowed to lecture my right hon. and hon. Friends in turn.
  I am very pleased that, for the first time since the war, we can look forward to a sustained programme to put things right that have been wrong for so long. The Government can take great pride in that, and I would simply say to them, "Hold your nerve, and make sure that everything is clearly explained and justified as we go forward."
  1.49 pm
  Mr. Steve Webb: When my hon. Friend the Member for Twickenham (Dr. Cable) responded to the Chancellor's Budget statement last week he began in characteristically generous fashion. I propose to do the same. He begin by saying that
  "the Chancellor's finest hour came in his first week in office in 1997, when he made the Bank of England independent"—[Official Report, 17 March 2004; Vol. 419, c. 340.]
  My hon. Friend is too much of a statesman to make the partisan point that that proposal came in the Liberal Democrat, not the Labour or Tory, manifesto, but I feel no such compunction. I am certainly happy to argue that the Chancellor's finest decision was taken from our manifesto, a lesson that all Departments would do well to learn from.
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  I welcome aspects of the Budget that have had relatively little attention, including potential simplification of tax treatment of pensions. Sweeping away eight different tax treatments must in principle be right. We have quibbles about the detail, but the idea of a simple method of assessing tax relief for pensions is a step in the right direction. We welcome the proposal, for which Liberal Democrats have long pressed, that people should be able to draw a pension and carry on working for the same employer, perhaps part-time, with no penalty. That seems entirely right and is very much in the spirit of flexible retirement, whereby retirement is not a cliff edge but a process. Those are the sort of things that we have wanted for some time. That sort of change needs to be allied with action on age discrimination, which, yet again, is sadly lacking in the Government's programme this year. Even so, one out of two is not too bad.
  I want to focus on what I used to think was a Labour value: fairness. If Budgets are about tax, a Labour Budget ought surely to be about fair tax, yet this one failed to do anything to redress the fact that the poorest people in our society pay higher and higher proportions of their income in tax, while the highest earners pay smaller proportions. People simply cannot believe that the poorest in our society pay a bigger proportion of their income in tax, and not merely more than the national average but more than the richest pay. What sort of tax system can possibly lead to that?
  The Office for National Statistics has produced estimates of the proportion of income taken in tax from the poorest 10 per cent. in society. In 1996–97—these are the figures inherited by the Government—the poorest 10 per cent. paid 44 per cent. of their income in tax. That is astonishing. Who would have thought, however, that five years later, under a Labour Government, 44 per cent. would have risen to 53 per cent? That is incredible. What, meanwhile, has happened to the richest tenth? They paid 33 per cent. of their income in tax, and they still pay 33 per cent. The lowest income earners in society are therefore paying a bigger proportion of their income in tax. How can that be right?
  The Chancellor put his finger on one reason for that in his Budget speech. He mentioned council tax and how unfair it is, and he said that he would do something about it. Liberal Democrats thought that he might actually do something about it—that he had heeded not only our warnings, at last, but those from other organisations, which say that it is time the council tax was replaced by a fair tax related to ability to pay. Local taxes make a major contribution to the heavy tax burden of the lowest paid and pensioners. Out of the 53 per cent. of their income that goes in tax, 12 per cent. goes in local tax after rebates: even after council tax benefit has been taken into account, the poorest people in our society pay 12 per cent. of their income in local taxes. How can that possibly be sensible?
  In a Budget debate, it is appropriate to look at what has happened to our tax system over the longer term. Over the past couple of decades, direct taxes, which relate to people's ability to pay, have gone down. The standard rate of income tax was 33 per cent., I think. when Mrs. Thatcher came to power, and it has fallen by a third. National insurance rates have gone down and come back up again, and are broadly what they were about two decades ago. As a result, the overall balance

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  is that direct taxes, which reflect what one can afford to pay, have gone down, but indirect taxes have shot up. VAT has more than doubled. The balance of the tax system has therefore shifted. Those on lower incomes pay more tax, while those on higher incomes pay less. Who in this Chamber thinks that that is fair?
  Mrs. Patsy Calton: Mr. Blair.
  Mr. Webb: My hon. Friend suggests from a sedentary position that the Prime Minister might feel that it is.
  The Budget was a missed opportunity to reduce the tax burden on those who are least able to pay. What did we get from the Chancellor? We got a pre-election bribe of £100. According to his spending plans, that £100 is not factored into any future spending plans. We can therefore assume only that it is intended to keep him going up to the next Budget. Britain's pensioners do not want to have to wait for the annual rabbit from the hat that the Chancellor produces at the end of his Budget to get headlines. Pensioners deserve more respect than is shown by their having to wait for the annual gimmick to get a decent income. They should have a decent income as of right, and we should have a fair local tax system, under which that £100 would not have been necessary.
  Mr. Watson: Is that a different £100 to the £100 that the Liberal Democrats promised to cut off council tax bills at the recent Brent, East by-election?
  Mr. Webb: The hon. Gentleman will find that the £100 proposed by the Liberal Democrats in our last alternative Budget was not just for pensioners but for all council tax payers, as part of the transition to a local income tax. If he is saying that he supports that transition to a fair local tax system, he and I are probably of one mind.
  Mr. Watson: To clarify matters, I will send the hon. Gentleman the "Focus" leaflet from the Brent, East by-election, in which the Liberal Democrats said that they would cut council tax bills by £100. If that was not a bribe, what is?
  Mr. Webb: I have just pointed out that the £ 100 from the Chancellor will not continue beyond one year. The departmental spending plans are for £475 million for one year, then a general election, then nothing. That looks a bit like a bribe. We want to cut the burden of local taxation on those least able to pay, every year, through moving to a local income tax system. That has been our consistent policy for a long time.
  There was something odd about the way in which the Chancellor presented the argument for the £100. He was saying, "Because council tax is such a burden on pensioners and others, we will put in £100 this year." But this was the year in which we were told that the Government had given extra largesse to local authorities and in which increases in council tax would be far lower. Why, therefore, if the £100 is needed now, was it not given last year, when council tax went up far more than it did this year? Well, of course, the answer is that that was two years before the election, not one.
  The Chancellor not only offered the £100 but planned a 7 per cent. council tax rise for next year. Is not that a classic example of giving with one hand and taking with
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  the other? For someone paying council tax of about £1,000, the 7 per cent. will be about £70, so it will not be long before the increase that has just been given is taken away.
  The Chief Secretary to the Treasury (Mr. Paul Boateng): Will the hon. Gentleman tell the House how those least able to pay will benefit from the £934 average council tax per dwelling this year charged by Liberal Democrat councils, which compares with £818 for Labour councils and £1,008 for Conservative councils?
  Mr. Webb: It is sad when a senior Treasury Minister must resort to such implausible comparisons. [HON. MEMBERS: "Answer."] I will answer the question. Council tax fills the difference between what councils spend and what they get from central Government, which determines about three quarters of the amount. We all know that the Government have reordered grant allocations to favour, as I recollect —I am a bit hazy—urban authorities or Labour authorities. As the National Audit Office found when it looked at last year's large council tax rises, when grants went up substantially, council taxes did not have to increase by so much.
  Mr. Willetts: Does the hon. Gentleman agree that one reason why the Chief Secretary's figures were so misleading was that he did not allow for different bands and different composition of properties in different areas? If he looks at the average band D council tax in relation to control of different local authorities, he will get a rather different picture.
  Mr. Webb: The hon. Gentleman is right. In my local authority area, the average house is in band B, but that is not reflected in the figures that are normally quoted, which can be used to support almost any argument. The truth is that council tax is an unfair tax. The Chancellor acknowledged that in coming up with a one-off gimmick at the end of his Budget statement. The real answer, though, is a decent pension for pensioners and a fair system of local taxation.
  Let me say something about staff cuts at the Department for Work and Pensions. What has not been mentioned so far, although I think the hon. Member for Havant (Mr. Willetts) alluded to it, is that the Department employed 97,000 people in the Government's first year in office, whereas it will employ 130,000 in the current year. The number of staff has risen by a third, and we are expected to applaud the Department for making tough choices in reducing it by about a quarter. Why has staffing risen so much, given that the Department is always telling us that unemployment is down and fewer lone parents are on income support? Surely that should mean that the Department needs fewer people to administer all the benefit claims.
  As the hon. Member for Havant said, the fact is that the Government have made the system so complicated that numerous people are needed to do all the sums. Moreover, the Government highlight the claimant count in relation to unemployment, while glossing over the fact that the number of people claiming disability-related benefits is on the increase. Many young people who are not included in the claimant count may not be

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  in paid employment but are economically active in some other way. The Government claim that everything in the garden is rosy, but that does not translate into less administration for the Department because there are an awful lot of people on benefits to whom they do not refer.
  Mr. Andrew Smith: I apologise for missing the first part of the hon. Gentleman's speech. I was called out of the Chamber. Does he accept that the rate of flow on to disability benefits has fallen by a quarter since the Government came to power? The total number of people on benefits has continued to rise, but it has done so at a diminishing rate because of the length of time for which people stay on those benefits. That is why our pathway to work proposals to help people out of inactivity and into work are so important.
  Mr. Webb: It is always gratifying when the second derivative is raised in the House. When that happens, I feel that calculus was worth it after all. The Secretary of State is right in saying that the rate of inflow has slowed, but it is a question not of when people go on to benefits, but of how long they stay on them; the outflow rate is critical. I realise that the Government have a programme to tackle the difficulty of getting some of these folk off benefits, but successive Governments have experienced the problem of folk flowing on to incapacity benefit and its predecessors and then getting stuck. The Government are overselling what has happened, especially in the case of young people for whom sickness is less of an issue.
  Mr. Willetts: As the hon. Gentleman knows, the Secretary of State's figures were misleading. The average time on incapacity benefit has increased since the so-called reform involving the introduction of means-testing for new claims. People are reluctant to go off the benefit, because they fear that if they start claiming it again, they will be means-tested. The Secretary of State mentioned the linking rules, but those must be applied for in advance, and many people do not do so.
  Mr. Webb: The hon. Gentleman is right in every particular, although I seem to recall that he was very influential when means-testing was applied to what was then invalidity benefit, when company pensions were offset against invalidity pensions, so he is not entirely blameless on that front.
  Mr. Willetts: I was trying to help the hon. Gentleman.
  Mr. Webb: Yes, and that is all the thanks the hon. Gentleman gets.
  The hon. Gentleman was entirely right when he spoke about the savings in staff numbers at the DWP that were supposed to have been made through technology. Excuse me, as my children say, but where are these efficient computer systems? Are they in the Child Support Agency, where even Ministers are beginning to despair of the system ever working?
  Mr. Watson: Will the hon. Gentleman give way?
  Mr. Webb: I have already given way twice to the hon. Gentleman.
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  Are the efficient computer systems in the tax credit system, which was a complete shambles at the outset? I have not seen a single efficient computer system in the Department, yet the cost of tens of thousands of workers has supposedly been saved. Our principal concern is the welfare of those receiving benefits and pensions. They are entitled to an efficient service. If the Secretary of State plans staff cuts on the basis of efficient computers that do not exist, our constituents will suffer in terms of their pensions, benefits and tax credits.
  Mark Tami: Is the hon. Gentleman really telling us that he would cut the n umbers by far more?
  Mr. Webb: No. We are saying that we do not support cuts unless it can be demonstrated that efficiency has been delivered to our constituents. We do not support the idea of cutting staff when IT systems are not producing a more efficient service.
  Our proposals for reform of tax and pension credit would reduce the need for bureaucracy. If we provided a better state pension and reduced dependence on means-testing, the administrative burden would be smaller. We propose to cut administration and bureaucracy, but we will make no hypothetical assumptions that computer systems will be improved.
  Rob Marris: The hon. Gentleman implied that the number of DWP staff—97,000—had risen by 30 per cent. in three years. Since the Department has existed for only three years, perhaps he could clarify that. As for computerisation—my right hon. Friend the Secretary of State will correct me if I am wrong—I believe that the Department has 36 computerisation projects on the go, as well as those established since 1997. The hon. Gentleman mentioned two or three that have undoubtedly had problems—I speak as a member of the IT Sub-Committee of the Select Committee on Work and Pensions— but many DWP computer systems are working well. I suggest that the hon. Gentleman has not heard about those simply because they are working well.
  Mr. Webb: As the hon. Gentleman is knowledgeable about these matters, I am sure he will agree that the computer projects that affect the vast majority of our constituents are the tax credit computer, which affects every family in the land, and the pension credit computer, which will probably affect every pensioner in the land if the Chancellor has his way and which affects half of them already. The Child Support Agency computer affects 1 million parents with care, and probably a further million. These are substantial computer systems, all of which have a track record of being a shambles. The national insurance recording system, which applies to every man, woman and child as well as several million dead people, is a shambles too. I am delighted to learn that another 30 systems may be working, but I think that the record is bad enough as it stands.
  The hon. Gentleman asked about my statistics relating to staff numbers. According to table 6 of the DWP report, headed "Staff numbers 1997ߝ98 to 2005–06", which includes whole-time equivalents, the figure for 1997–98 is 97,000 and the one for the current

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  year is 130,000.[Interruption.] Those figures are in the Department's own report. I do not know where the Department got the numbers from if they did not exist.
  As the hon. Member for Havant observed, one thing that was mentioned only briefly in the Budget statement—we should probably be grateful that it was mentioned at all—was the Government's U-turn in deciding that paying the working families tax credit through the pay packet was a mistake. One of the first Bills whose progress through the House I followed was the one that introduced that credit in 1998 or thereabouts. The only difference between working families tax credit and family credit is payment through the pay packet. When we opposed that, we were patted on the head and told that we did not understand that people needed to learn a lesson. As the hon. Member for Havant says, that is a metaphysical argument. It was suggested that people were capable of understanding that work pays only if the money was in their pay packets. First child tax credit was taken out of the pay packet because the Government accepted our argument that mothers were the best recipients of benefit for their children. Then the Government finally accepted the "burden on business" argument that leaving the fag-end of tax credit in the pay packet—often £6 or £7 a week—was simply not worth it.
  Business, families and parents would have been saved an awful lot of hassle if the Government had only listened to the Liberal Democrats in the first place—I am glad to see the hon. Member for Havant nodding at that—and to others who supported us.
  The working families tax credit has been changed, but the child tax credit has received almost no attention. It was frozen in the Budget —the amounts for families and the thresholds were frozen. Will it he one of those things that is nibbled away every year so that families on middle incomes do not necessarily spot what is going on but realise, as time goes by, that their support is being eroded? Perhaps the Chief Secretary will tell us whether that is a deliberate policy. Is it the Government's policy to freeze the family element and thresholds indefinitely so that the tax credit is more heavily concentrated on families on lower incomes? That would not necessarily be a bad policy; it could provide a fairer structure However, the Government should be open and up front about it rather than simply forgetting to index the credit each year.
  At the end of the financial year, our constituents will discover, if they have not done so already, that their family finances are on a rollercoaster. The Government will examine people's child tax credit assessment for 2003–04 and try to validate it. They will ask for income information in the following six months and check whether the amount paid in 2003–04 was right. Many people's circumstances will have changed since they filled in the form in January 2003, on the basis of their 2001–02 income. Many people will get a letter or a knock at the door and be told that they were paid the wrong amount in 2003–04, that the amount that they had started to receive in 2004ߝ05 was also wrong, because the figure continued at the same rate as for 2003–04 and that the overpayment for 2003–04 and the first part of 2004–05 will therefore be recovered. That will be so severe that families will probably face hardship. They can then claim a hardship payment that will reduce the clawback but leave a larger amount to be
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  clawed back at the end of 2004–05. That will be carried over into the award for 2005–06, when circumstances will have changed and the fiasco will continue.
  Incomes will go up and down, as if on a rollercoaster, and people will never have certainty. They will never know whether what they currently receive is theirs to spend without someone trying to claw it back. Assessment over a year means that every change of circumstances has the potential to affect the award. Both partners' incomes, the number of children, whether partners stay together or get different jobs, and suchlike changes must be documented and perhaps reported because they might affect the award. Has not bureaucracy gone too far? Is not it time to go back to fixed awards—possibly with some flexibility for extreme changes of circumstances—which would save massively on bureaucracy and have the great beauty of ensuring that our constituents knew where they stood? At the moment, they do not. I hope that the Chancellor and the Government will consider that.
  In his introductory remarks last week, my hon. Friend the Member for Twickenham (Dr. Cable) mentioned imbalances in the economy, referring to personal debt and credit. He calculated that the personal sector owes a trillion pounds and that that equals the combined external debt of Africa, Asia and Latin America put together. That suggests the scale of the debt mountain, but we heard precious little from the Chancellor about tackling personal debt.
  Let me give one example that has arisen today. My researcher approached me for a pay rise—a common experience for me. She had received a letter from Barclays bank—her bank—offering her a pre-approved loan of £20,700. The bank suggested that she might spend it on a holiday or a car. I grant that she has expensive tastes, but that would pay for a pretty nice holiday or car. Her bank, which knows how much she earns, pre-approved the loan. The monthly repayments would be £934. I shall not say what percentage of her take-home pay that is, but it is more than half.
  Those who want to save money are confronted by bureaucracy. I recently wanted to put some money into a cash individual savings account. I had not contributed any money for a year and I had to fill in all sorts of forms to justify being allowed to save in that ISA. However, anyone who wants to borrow money simply waits until an offer lands on the doormat.
  Mr. Salmond: I accept that the subject is serious, but I hope that the hon. Gentleman will not leave us hanging: did she get the pay rise?
  Mr. Webb: We are still in negotiation.
  The example highlights the absurdity of the position. Although I only employ staff who are discerning about financial matters, and my researcher will obviously reject the loan, the ready availability of such loans underlines the problem.
  My hon. Friend the Member for Twickenham suggested a 10-point plan for tackling personal debt. I shall not go through it in detail—hon. Members have already heard it but I emphasise a few simple
  suggestions. Every year, the Government publish an assessment of the sustainability of Government debt. What about the sustainability of personal debt? Should

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  not the debt bubble form part of the annual assessment? My hon. Friend suggested a curb on the tidal wave of unsolicited credit promotion and attaching some sort of credit health warning to offers such as that which I have described. That is a pretty good idea. He suggests that we should stop penalties for people who pay back their debts early. People who currently pay their debts early can effectively be fined for doing so.
  The Budget should have dealt with such issues, which affect the long-term structure of the economy, but it did not. The Chancellor produced a rabbit from a hat instead of serious reform of local taxation. There was no action on the unfairness of the tax system overall, and a failure to tackle the fundamental imbalances of the economy. Liberal Democrats were, to say the least, disappointed with the Budget.
  2.15 pm
  Mr. Martin O'Neill: I was unfortunately absent for the Chancellor's statement because I was in south-east Asia with the Select Committee on Trade and Industry. We all know that organising such events takes time and their dates tend to be set in concrete, so it is difficult to avoid missing occasions such as the Budget statement. From reading the debates and anticipating what would happen, it is fair to say that the Government got the expected response from those who support us, and expressions of frustration from those who oppose us because the Chancellor delivered so much of what he promised.
  It is interesting to go abroad and talk to people about one's country's economy when the annual health check or MOT that constitutes the Budget is published. We visited Malaysia, Thailand and Singapore —the tiger economies, the sharpness of whose claws has been honed and which are now back in business in a big way. It was interesting to note that their agendas are similar to ours in several respects. They attempt to control public spending and use the money as wisely and effectively as possible. They spend money on knowledge-based industries and are committed to science. In this country, that is evidenced by the commendable agreement that the Chancellor reached with the Secretary of State for Education and Skills.
  Mr. John Hayes: Such prudent spending of public money depends on its effectiveness being measured. It depends on a test of productivity. Does the hon. Gentleman acknowledge that that is singularly lacking in the Chancellor's analysis? The Chancellor made many statements about input but few about output. Surely it is productivity that really counts—bang for the bucks, one might say.
  Mr. O'Neill: One of the problems that the Government experienced was that, at least for the first two years, they did riot spend nearly as much as we would have liked because they set themselves the priority of getting public finances under control. Since then, we have begun to spend more money. As has already been said, the performance and outputs in, for example, the health service are beginning to show consequent improvements. There have been considerable advances in primary education but the
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  secondary sector and some aspects of higher education have yet to experience them. The jury is still out on several aspects of public expenditure and we have to work at greater efficiency. No Labour Member would deny that that was one of our priorities. Indeed, 10 years ago, when John Smith died and we were assessing his career, we remembered that one of the points that he repeatedly made was that economic efficiency and social justice must go hand in hand. They are two sides of the one coin, he said. Creating wealth in order that we can spend it on desirable and necessary social improvements is only part of it. The other part is ensuring, as we are doing, that we invest heavily over the next decade in science, science education and the application of science. That is the only way in which we can make the quantum leap from the kind of economy that we have now to the kind that we need to sustain ourselves.
  I find no echo of that among Conservative Members. There is not much in the shadow Chancellor's controlled spending plans to encourage knowledge-based industries or to achieve improvements in areas that require substantial advances if we are to ensure that the economic growth that we have already achieved is sustained.
  Mr. Hayes: The hon. Gentleman is right to say that economic success is the prerequisite of delivering social justice. A prosperous society can invest in improving the lot of all its people, but I hope that he is not suggesting that social justice, for which I share his enthusiasm, needs to be measured in economic terms. Social justice is about delivering far nobler objectives.
  Mr. O'Neill: A number of my constituents are happy when social justice includes a bit of economic assistance and advance. When we had 20 per cent. unemployment in my constituency. it was a far less happy place than now, when unemployment is between 4 and 5 per cent. Labour Members argue that we cannot have economic efficiency unless we have a socially just society in which the divisions and difficulties are diminished. It is perhaps part of the fragility of some of the Asian economies that insufficient attention has been given to the move towards a more socially just society. It is clear that they are making tremendous advances in areas such as the development of the biotech industry, in respect of which we are in as good a position as any other country apart from the United States, and in a better position than most. That applies in a number of IT sectors as well, but we need more of that.
  Equally, we need to ensure that, when we spend money on training, it does not merely get people into apprenticeships. One thing that Professor Porter identified in his studies is the need to look at the fact that, once people have tradesmen's qualifications and have completed the apprenticeships, there needs to be subsequent improvement in those skills across the work force. That is not happening. We are getting people out of university into what remains of manufacturing but we are not getting sufficient numbers of people trained beyond the basic requirements to do the job. If we are going to have the kind of investment that we want in new equipment and machinery, we have to have skilled, trained people who are capable of using it.

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  That is one of the areas to which the Government will have to give more attention. We are making the necessary start and improving the position but we have to go further. We have continually and constantly to replenish the capabilities of the work force to meet the new challenges. It is through that that we will get quality improvements, and that is as applicable in the public services as in the private sector. If we are going to put new equipment, new scanners and new forms of clinical working into hospitals, we have to ensure that there are people there who are capable of utilising that equipment. If we are going to put computer systems into the Department for Work and Pensions, we have to ensure that they are the right ones and that people use them.
  If one thing is evident, it is that across the United States and indeed in some parts of Britain, the introduction of computerisation to clerical working has resulted in massive increases in productivity. Indeed, it could be argued that the improvement in the American economy is in no small way due to the introduction of sophisticated IT systems. Not all of them work first time but they work eventually and, when they do, they make fantastic improvements, which can be seen not just in the output per worker but in the reduction in the need for many workers.
  An incredible amount of worthwhile, important work is undertaken by low-paid civil servants. None the less, it is drudgery. It would be better if we could get them out of that drudgery into jobs that could better utilise their capabilities. I have no great problem with the reduction in the numbers of people that we are seeking in areas of the civil service. However, I want to ensure that that is done sensibly. I take the point that the hon. Member for Havant (Mr. Willetts) made about the need for proper systems, so that arrangements are in place and people can leave in a decent and orderly fashion. I am confident that, in most instances, those people will be able to secure employment elsewhere. The shift of resources from the public to the private will create the kind of job opportunities that those people will be able to pick up. However, I am a wee bit worried when I hear the old story that it will be all right, turnover will take care of it and there will be no compulsory redundancies. There is always a downside to no compulsory redundancies: we find that there are square pegs in round holes and that they are there merely because they are there.
  Often, one finds that, when people hear that their jobs are going to go, the ambitious and effective ones leave and others hang on until the last minute because, perhaps correctly, they anticipate being able to secure reasonable redundancy arrangements, although I cannot imagine that the civil service redundancy arrangements will be particularly generous. I would like to think that they will be better than the state minimum but I am not sure that they will be much in excess of that.
  There is no easy way of reducing staffing, but there is a danger in believing that if we do not make it compulsory it will be all right. We have seen in too many areas that the wrong people stay and sometimes the better people leave early. There is a danger there, but Ministers have raised the issue openly and transparently. Let us face it—there is a long way to go before the figures are achieved. I am happy that, with good will, we can deal with that issue. At the same time, the civil servants who perhaps need less attention paid to
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  them than they have received already are those in Customs and Excise who have been suggesting the strip stamp scheme.
  I represent a constituency in which, sadly, whisky is no longer produced. For many years, we distilled grain whisky there, which hon. Members will know is the rather less sexy constituent of a blend. It is actually not that potable without malt alongside it. I have had it and it is not the best alcoholic experience I have ever had. I think that one can say that grain whisky involved more of a chemical process. It is like vodka and other such drinks. One can produce it pretty easily in what is akin to a chemical plant.
  In my area, we no longer distil but we produce virtually 60 per cent. of all the bottles into which the Scotch goes. About 65 per cent. of the whisky in cask storage in Scotland is in my constituency, so I have more than a passing interest in the matter. I also have the Diageo laboratories and a number of fascinating attendant parts of the whisky process. They depend on a healthy Scotch whisky industry, as do many workers across Scotland. At present, I am not convinced that the rejection of the Scotch Whisky Association's proposals is necessarily the best way of dealing with the leakage of duty from the warehouses. That is a serious problem: it is as if people were opening the bottles and pouring the whisky away, although they are not doing that but selling the bottles in dodgy places. There must be far greater security. The proposals put forward by the Scotch Whisky Association identified that issue and sought to deal with it by trying to create a more secure system for the warehousing of bottles.
  Although the whisky industry is dominated by big players, it is also quite fragmented. Many bottling operations are conducted by firms that might not at the moment have the security facilities in place for the storing of strips, or that are perhaps not equipped to have the strips put on the bottles in the first place. I know that it has been suggested that money will be available, and one can only hope that it will be sufficient to fund the scheme, but I have my doubts. I do not think that there will be the backing that is needed.
  What disturbs me is that the Chancellor, quite reasonably, issued a challenge to the industry in the autumn statement. The industry has come up with a scheme that has intrinsic attractions: it could be implemented relatively quickly, savings could be made quickly and it could be tested even before the Government's scheme is in place. It would have been more sensible for the Government to accept the Scotch Whisky Association's offer, to scrutinise its proposal and to screw it down. Even if they had made it as damn difficult as possible for that proposal to be introduced, they should nevertheless have given it a chance, and perhaps delayed the stamp scheme for another year.
  I recognise that there is a problem that must be addressed, but the whisky industry's option should have been considered more seriously than it has been. It was rejected rather more quickly than I should have wished. I am not wedded to the association's proposals, nor do I necessarily think that we must never have strips, but if we do not need them, let us not have them. Another year's delay would have given both sides in this argument the chance to address the issues.

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  I am disappointed, because a good rapport had been established. The Chief Secretary to the Treasury was instrumental in rejecting the strip scheme in a previous Parliament, so I am sorry that there has been a change in attitude, and particularly sorry that my right hon. Friend has handled the matter as he has. I thought that he handled it previously with considerable tact and diplomacy. He has been listening to people—this is the point with which I started—whose evidence to the Select Committee on Scottish Affairs was, to say the least, of unimpressive quality. I chair a Select Committee, and I know that when a Committee uses the word "unimpressive", it is usually talking about something that is awful with several other adjectives in front of it—although I put it no more strongly than that. My right hon. Friend has been sold a pup if he has accepted some of the evidence put before the Scottish Affairs Committee, and I hope that he will re-examine the issue between now and the introduction of the Finance Bill. I do not think that anyone was impressed by the strength of the arguments that certain people put before the Committee, and I would like to think that, as the reasonable man that he is, he might look at the matter again.
  That is a relatively small complaint in the context of what has been—[Interruption.] The hon. Member for Banff and Buchan (Mr. Salmond) has nothing else to complain about in the Budget. That is the truth of the matter, although if he contributes later, I shall read his comments with interest.
  Angus Robertson (Moray) (SNP)rose—
  Mr. O'Neill: I shall not give way because I have almost finished.
  The Budget, which I heard about in headline form when I was out of the country and whose details I read when I returned, is evidence of the tremendous achievements of this Government and particularly of my right hon. Friend the Chancellor. With his grit and determination, he has refused to be deflected from his purpose. We know that he can be an awkward so-and-so at times, and he is certainly determined, but he has built up a foundation for the British economy that is envied across the world. It is certainly envied in Europe, and it has been built up on the basis of the shrewdness, grit and courage that we know that he and his colleagues posses.
  I hope that next year, we will have the opportunity to have a Budget of a similar order. As I said earlier, it meets the challenges set down by John Smith of social justice and economic efficiency. If we can sustain that effort, we can sustain the unity of our people and our sense of purpose, and move towards the achievement of the knowledge-based economy that will ultimately be the cornerstone of Britain's future economic success.
  2.35 pm
  Mr. Kenneth Clarke: I begin by referring the House to the register of my business interests, which I have placed in the Register of Members' Interests. My interests do not include the Scotch whisky industry, except as a satisfied consumer,
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  and I wish the hon. Member for Ochil (Mr. O'Neill) well in looking after the best interests of that great British industry. However, I do not otherwise agree with him, and my judgment on the Budget contrasts rather starkly with his.
  The Budget poses one overriding question to the British public and to this House: when will the Chancellor next raise taxation rates, as he will be forced to do if he and his party stay in office? The public and the House should also ask what the impact of the next stage in the raising of the tax burden and our tax rates would be on this country's medium and longer-term performance. Those questions are left open, and the Chancellor deliberately avoided them in his presentation to this House. Not only are we right to press the question of tax; recent opinion polls suggest that the public are realising that that is the big question facing the country after this Budget.
  The Chancellor used all kinds of means to try to obfuscate that question, such as crazy attempts to open differences between the parties, suggesting that there would be a tremendous cornucopia of goodies for the public sector if he stayed in office and ruthless and appalling cuts if he did not. Those matters are not the issue at all. The question is how we should now address the problem in public finances, which, above all, is what a Budget should be concerned with. What is the responsible and prudent way of proceeding if we are to keep intact the long period of sustained growth with low inflation? The Chancellor is so proud to preside over the last two thirds of that achievement, although unless he is very careful, he will find that he is presiding over its smouldering embers.
  The Chancellor has misrepresented the background. He is actually going in for the toughest spending round that new Labour has ever experienced, and has decided that the extraordinary rate of growth in public spending that we have seen since 2000 is not sustainable, as some of us on this side of the House have been repeatedly pointing out to him for the past few years. He is therefore slowing the rate of growth in public spending to a level that new Labour Ministers have never experienced before. He is, however, exempting health and education from that, largely because, in the case of health, he has already recklessly committed himself to enormous further increases for the period ahead; and, in the case of education, because he read an article, I think in The Independent, that pointed out that he was in danger of reducing the share of gross domestic product spent on education unless he announced something rapidly in the Budget.
  In my judgment, the Chancellor is going to find that there is blood all over the carpet in the Departments of Whitehall between now and this summer, when the House will hear his most important decisions about the allocation of priorities among the Departments. There is not a new Labour Minister in office who has any experience of having to restrain the demands of his Department or resist the more left-wing and compelling single-issue lobbies, but that is what many of them will now have to do. I see that the Chief Secretary to the Treasury is looking enigmatic, as Chief Secretaries always must at this stage of the operation.
  To say that there is no problem on the Labour side but that there is a huge problem on ours is to create an artificial divide. The actual difference between us is that

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  the Chancellor claims that it is good enough to reduce the public spending growth rate to about 3.2 per cent. a year in real terms, while my right hon. Friend the shadow Chancellor suggests that it is desirable to reduce the continued growth in public spending to a somewhat lower figure. Both methods pose certain difficulties.
  Mr. Watson: Will the right hon. and learned Gentleman give way?
  Mr. Clarke: In a moment.
  If the current Chancellor were still a prudent Chancellor, and if he truly could not slow down the growth in public spending beyond his projection, he should—if he were behaving responsiblyߞhave increased taxes in this Budget. That is what the Finance Minister of a benign dictatorship would do—if he accepted the Chancellor's proposition that it is impossible to slow down the growth in public spending below his proposed envelope. Opposition Front Benchers say that the slowdown must go further, although even doing that will still not prevent public spending from growing. My right hon. Friend the shadow Chancellor, should he take office—I wish him well if he does—thereby hopes to avoid the tax increases that would otherwise inevitably be forced upon him by the current Chancellor's legacy.
  What is not sustainable is the Chancellor's current position. He says that he can maintain the growth in spending, and simply denies that that poses any tax-raising problems. Let me be fair to him: he seems to believe what he says, and he has acquired from the Prime Minister the technique of firing himself up with—in his case—sincere passion. But I find it surprising that he believes what he says, which is why I say that the true question is: when will he face up to the fact that he is heading firmly on a course that will require further increases in the rate of taxation? I shall now give way to the hon. Member for West Bromwich, East (Mr. Watson), who has been waiting patiently.
  Mr. Watson: I am grateful to the right hon. and learned Gentleman, for whose experience I have great admiration, for giving way. The shadow Chancellor said that he will match our spending commitments in respect of health and schools, but he also said:
  "I have agreed with my Shadow Cabinet colleagues that the baseline for spending across all of these departmental budgets will be 0 per cent. growth for the first two years".
  Can the right hon. and learned Gentleman interpret that sentence for me, and does he regard that commitment as a real-terms cash freeze?
  Mr. Clarke: It is, and as I understand it, an envelope has been proposed that aims at a cash freeze. My right hon. Friend the Member for West Dorset (Mr. Letwin) was teased earlier about what such a cash freeze would mean for particular Departments. In my opinion, which is based on some experience of public spending rounds. one has to get below cash in some Departments in order to achieve real-terms growth in others. I do not know how far the current Chief Secretary will be allowed to go in the run-up to an election, but my personal preference—subject to the qualification that I have not seen the documents or heard the arguments advanced by the various Departments —would he to go straight to
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  the Department of Trade and Industry, which is spending vast sums at little benefit to trade and industry. The £2 billion budgets—and rising—of the regional development agencies are of questionable value, and there are other parts of Whitehall that could benefit from a zero-based budget. They should be asked to begin by justifying why we are engaging in public expenditure on this scale in the first place. Instead, for next year we should return to those policies that appear to be achieving in practice a worthwhile and measurable benefit to the general public.
  Mr. Oliver Letwin: I hope that my right hon. and learned Friend will note that we shall seek his advice on these matters, and that the advice he is giving to the House is music to the ears of some of us.
  Mr. Clarke: I look forward to my right hon. Friend and his colleagues having a go at a public spending round, because that will certainly be needed.
  The reason why the Chancellor will not answer these questions is obvious. Not surprisingly, the Blair Government are following exactly the same course as the Bush Administration, albeit a few months behind. Both are allowing a somewhat unsustainable period of economic growth to run, with their fingers crossed. The Bush Administration are trusting that they will be reelected in November, and it is a matter for American politicians, rather than for me, as to how one then begins to sort out the fiscal mess.
  In the Chancellor's Budget speech, this Government signalled more clearly than ever before that they hope that the economy will get them to May or June 2005, that they will still be being praised in the terms used by the hon. Member for Ochil, and that they will win the election. They hope then to sort out the mess, but I hope my right hon. Friend the Member for West Dorset will have the chance to do so, because mess there certainly will be as a result of such irresponsibility.
  The Chancellor is very selective in his use of history, in that the only historical comparisons that he ever makes are with the late 1980s. That is his benchmark for everything, and he blames our party interminably for everything in that context. The entire history of economic policy since the war shows that once the public finances start to deteriorate—once we start sliding into debt that appears unsustainable—the longer one delays the necessary remedy, the more powerful the later consequences. That is exactly what this Chancellor is experiencing.
  Total disaster has not hit the Chancellor because he got his economic growth forecasts right. I said that he would be lucky if he achieved them, and he has. As the Government keep their fingers crossed and move towards the finish line in June, it is a case of "So far, so good.? Growth has held up better than practically every independent expert in the country expected, but it is neither healthy nor sustainable growth. Although we have been doing quite well, such growth is still not as balanced as it ought to be.
  Everybody in the House knows that we are sustaining our current level of economic growth because the consumer is still spending heavily. On average, consumers are increasing spending faster than their incomes are rising; indeed, real incomes have declined

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  slightly recently, as a result of the increase in national insurance contributions. Household borrowing is reaching record-breaking levels that are quite unsustainable. As the Bank of England has confirmed, that needs gently to be slowed down.
  Economic growth is also being sustained by the amazing increase in public expenditure. That is injecting a deal of growth in the short term, not least because most of it is being spent on increased payrolls and rising levels of public sector pay, which increases some people's consuming power. But one cannot base an economic recovery on that. The private sector in general, and manufacturing in particular, is not doing so well. As the Red Book shows, business investment actually fell by 1 per cent. last year. Our productivity record in the private service sector and the manufacturing sector is deplorable—indeed, it is worse in the public sector—and it certainly is not comparable with that of our chief private sector rivals. That is not a sustainable basis for recovery. Of course, the actual rate of growth will depend on unknown factors in respect of the global economy, which is currently being sustained by a pre-election boom in the United States and a bubble in China. Otherwise, there are some signs of healthy cyclical recovery, but there remains considerable risk.
  One measure of this uncertainty was dismissed by the Secretary of State for Work and Pensions earlier today. He talked about the current account deficit, but I can remember the days—they were pretty mad days—when the political debate in this country was determined entirely by the balance of payments figures. The newspapers used to be full of them daily, and the Wilson Government fell, I am glad to say, in 1970 because of one month's balance of payments figures, which proved to be not that bad in retrospect—after the electorate had given their judgment. What we used to call our balance of payments—the balance of trade and the current account deficit—is at staggering, record-breaking levels. That matters because it shows how far our consumption is outrunning our capacity to produce, and to meet that consumption. Such a situation is totally unsustainable. It may be "so far, so good" on growth, but we should not rely on that.
  The Chancellor left all those matters untouched in his Budget. He delivered his Budget speech with as much élan, self-confidence and robustness as he ever does, but I do not remember him or any other Chancellor delivering a speech with less content in terms of measures. I have never heard a Budget speech with so few tax changes of any significance to announce. The Chancellor filled up the available time, still managing to take up an hour—commendably brief by the standards of most Chancellors of the Exchequer—with a rant saying that he had been right all along and that because he was right on growth, there were no real problems with public expenditure.
  In his conclusion, he returned to the political points to kill time, referring to a series of horrendous suggestions that had been made to him. It was not too subtly implied that they had been suggested by my right hon. Friend the shadow Chancellor and the Conservative party. None of it was true. The Chancellor said that it was his patriotic duty to reject all those outrageous solutions. In
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  between all that, there was supposed to be a Budget, but long gone are the days when we used to hear about monetary aggregates and be told about tax changes. There were not many of them; they did not fill up much time.
  What is important to me is the Chancellor's claim that he had no problems whatever. As I said, whatever party is in office after the next election—this is my key point—it will probably find itself having to deal with a fiscal crisis early in the next Parliament. That is the background that we should all have in the back of our minds, even if it is not in the forefront of our speeches when we seek to get re-elected. The country has had a more than 10-year run of growth with low inflation, but I believe that, unless we are either very lucky or adopt the right measures, it will come to an end in a traditional British fashion.
  The Chancellor always boasts about that long run and his only reference to his predecessors is to what happened during the late 1980s and to the interest rates of 1990 before we went into the European monetary system. In fact, I was responsible for about a third of the period: I had four Budgets; the Chancellor has had eight. However, it is extremely reckless of Chancellors to claim credit for any of it. Much depends on what is going on in the world. The only duty of a Chancellor is to provide the stable and predictable circumstances in which other people deliver the wealth and jobs.
  Much of the credit should go to Lord Lamont, whose reputation is less high than mine and—sometimes—the Chancellor's, because his introduction of inflation targeting in 1992 started the whole thing off and brought us back to a stable basis of policy: monetary policy based on achieving stable prices and low inflation, and fiscal policy based on achieving healthy public finances. The Chancellor's neglect of the latter is, in my opinion, the cause of our problems today.
  Monetary policy worked well since Norman Lamont's inflation target setting, and the Chancellor has slightly improved the target. The Chancellor also reinforced it against all the political pressures from the social democrats around him in the Government by making the Bank of England independent and leaving it to carry on. At the moment, however, the Chancellor is not making the task of the present Governor of the Bank of England very easy, because I am sure that the Governor wants to set limits to how far he will have to put up interest rates, and that fiscal indiscipline will make the problems even worse.
  The Chancellor has never had a consistent or sensible approach to fiscal policy—the tax and spending problems that he should tackle. At first he did nothing, saying that he was relying on my figures. As a result of doing nothing, he got carried to a balanced Budget very rapidly—within a couple of years. He overdid it on the spending front and by introducing many stealth taxes, including a shocking one that affected the tax treatment of pension funds. Quite unexpectedly and contrary to forecasts, he then began to run up massive surpluses in the public finances, which he now clings to like a life raft. He is trying to demonstrate that, because he did that in the past, he is entitled to run massive deficits now.
  It all changed in the year 2000. Governments are ever-nervous running up towards elections, and the Prime Minister lost his head on the Frost programme,

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  promising health spending up to the levels of European averages. Before we knew where they were, they had become an old tax-and-spend Government with vast outpourings of public expenditure across all Departments, with which we have had to live ever since. The Chancellor forecast how much it would cost and how it could be financed. From 2000–01 onwards, those forecasts have been consistently wrong. That is the problem we have to deal with now.
  The Governor of the Bank of England is tackling his part of the problem responsibly, which means that interest rates are already rising—a background worth reflecting on. I know very few people who do not believe that interest rates are going to carry on rising. The more the markets react to what is perceived to be the irresponsibility of the Chancellor, the more the upward pressure on the monetary authorities. The current account deficit in our balance of payments might, if the markets suddenly panic about it, even cause a sharp fall in the value of sterling, which will drive interest rates up further. That much is already happening, but taxes will have to go up after an election as well.
  I say to the public that they should reflect on the consequences of that sort of policy. When interest rates are going up because monetary policy is tightening, and when taxes are going up because fiscal policy is tightening, it leads to a severe slowdown in economic activity and growth—and the prospects for growth and jobs are undoubtedly damaged.
  The Chancellor says that all that is wrong: he will not break his rules, because he is still a man of fiscal discipline with the golden rule and the debt rule, so all is well. I do not believe that. He produces yet more forecasts, but they have been wrong year in, year out. His forecasts for borrowing are £10 billion more than they were 12 months ago. In 2001, he was predicting that total borrowing between 2001 and 2006 would be £30 billion; but it now seems likely to be close to £150 billion. Many of my right hon. and hon. Friends have rightly suggested that his forecasts for further in the future are unreliable.
  In fact, the Chancellor is already rejecting some of the discipline rules and saying that they do not matter. He entirely rejects my rule—he regards me as a fiscal conservative—of maintaining a balanced budget over the cycle. I accept that there are wobbly bits even to that rule; it is possible to move the cycle a bit, but I opted for a balanced budget over the cycle that is tougher than the present Chancellor's rule. He says that terrible things would happen if we did that, and that only wicked people like the International Monetary Fund recommend that approach to fiscal policy.
  The Chancellor also rejects the Maastricht criteria. I am not going to debate the single currency—I shall avoid it like the plague—but I will use the Maastricht criteria as an example, because the Chancellor and I used to be in fond agreement on them. I used to defend the growth and stability pact as a Tory, even to my Eurosceptic friends, saying, leaving aside the single currency, no responsible Chancellor in the UK is going to want a deficit of more than 3 per cent. of gross domestic product in any one year. This Chancellor used to agree with me; he used to point out how he was complying with all that. Now, it is all wrong, but the only reason it is wrong is that the British Chancellor, in
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  common with the French and German Finance Ministers, lacks the political clout, will and ability to hit the fiscal objectives to the rules.
  The Chancellor relies on his own golden rule and he is apparently going to visit the continent to explain why it is the best approach to which all should move. His golden rule is not a golden rule, in my opinion, but merely gilded with a touch of EPNS about it. It all depends on what is defined as investment and it assumes that all public investment is essential and of high value so that future generations of taxpayers should be happy to pay for it. I regard public investment, unfortunately, as invariably less efficient—sometimes very much less efficient and valuable—than other forms. In any case, the Chancellor is now close to the golden rule. As many have pointed out, he has had slightly to redefine how the golden rule is calculated, to provide himself with a further tiny cushion.
  I have the Red Book with me, so let me sum up how the Chancellor can claim that he can still hit the golden rule without tax increases. It is by making more implausible forecasts. The most implausible forecast is the Chancellor's estimate of revenue growth. His estimate of GDP growth as a whole remains as optimistic as ever, but he was right this year and might be right again. We shall see whether the global economy will continue to revive, but the forecast has to be right for the Chancellor to have any chance at all.
  The revenue growth forecasts are quite implausible, however. I do not understand how corporation tax revenues are meant to rise faster than the growth of the economy as a whole. I do not think that that has ever happened. When briefing the newspapers about income tax returns, the Chancellor's unfortunate officials seem to have been reduced to pointing to recent City bonuses. The suggestion has been that they reinforce the notion that income tax returns are about to recover very rapidly. Because the Chancellor has had to deny that there will be any increase in tax rates, he has claimed that measures to tackle tax avoidance will produce —925 million a year. I do not believe that. In recent years, the thinking has been that a structural problem affected what Governments received from corporation tax and income tax. I therefore do not think that the Chancellor's proposals are at all plausible, or that he will hit his golden rule. I think that he is being irresponsible, and that he should raise taxes.
  Not only is the Chancellor failing to control public spending, he will not even admit that the slowdown for which he is heading will have any effect on the Government's plans. He has suddenly discovered that it is necessary to try to make public spending more efficient. He chose to win headlines by saying that he would cut more than 50,000 civil service jobs, 40,000 of them in the Department for Work and Pensions. Sacking bureaucrats is supposed to ensure that more money goes to front-line services. I regard that as extremely lightweight and ridiculous politics.
  We have a serious problem with the productivity and value for money achieved by the huge surge in public spending since 2000. Opposition. Members warned the Chancellor that sudden and massive public spending increases would not produce value for money. To get

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  proper value from public spending, reform is essential. The reform that has been applied, belatedly, has been confined to matters such as foundation hospitals and top-up fees. Those policies have been so messed about by political campaigning that they are valueless, or worse.
  The 40,000 civil servants are symbolic victims. By the most generous calculation, those staff reductions will save about £2 billion a year. The Chancellor assumes that he will save about £20 billion, and is silent about where the balance will come from. I would tell the civil servants not to fear: as my right hon. Friend the Member for West Dorset has said, we have heard the same thing many times before.
  The Government do not have many targets these days. When the time comes to see whether any target was ever achieved, no one will remember. In three or four years' time, I have no doubt that some Minister will ask, "Did the 40,000 jobs go?" Sir Humphrey will say, "Oh, yes, Minister. The 40,000 jobs went." The Minister will then ask, "So why are there still so many people in the building?" The answer will be, "Minister, 38,000 of them have been moved to new tasks and new Government initiatives. They are no longer administrators, they are now deliverers."
  At any rate, the people will still be there. That is not how to achieve the value for money in public expenditure that we need. Productivity in the public sector is difficult to measure, but it has been falling like a stone in recent years. The money that has been put in has gone largely on increased pay rates and on hugely increased payrolls. There are 500,000 more state employees than there were in 1997, yet many public servants have reduced work loads and the best job security and pension schemes in the country. In those circumstances, it is very difficult to drive up productivity.
  We must reform the delivery of health care, education, social care and welfare benefits. In that way, productivity improvements can be achieved, but the Government's record in that respect is woeful.

  Although I have celebrated the fact that there was no time limit on speeches on this final day of the Budget debate, I now come to my conclusion. Overall, the Chancellor's target that the state should take 42 per cent. of gross domestic product is too high. It is not healthy for the long-term good of the economy, even if the Chancellor were to succeed in stabilising the proportion taken at that level. The Opposition target is 40 per cent. of GDP, and that is undoubtedly the maximum that can be afforded over the next two or three years. I think that even that is a bit on the high side, but I am a little old fashioned. My target was 35 per cent. of GDP, and I managed to get the level down to 38 per cent.
  When he was prudent, the present Chancellor took the level down to 37 per cent. He now tells us that the level can be 42 per cent., and that that is still prudent. What is actually happening is that the state is getting bigger and is consuming more wealth, while the private sector is getting smaller, as a proportion of the whole. Yet the private sector is what creates wealth, and it will be damaged by the Chancellor's policies.
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  The Chancellor should have tackled some other long-term problems. He said nothing on savings, and that is a disgrace. Pensions will benefit from the simplification of the tax system. but nothing is being done to tackle the pensions crisis that all hon. Members know exists.
  Our problems in the housing market stem from more than merely supply and demand: they have arisen because the British have gone back to believing that their houses are the only form of savings that they trust. People buy houses and borrow money on them for financial reasons, not just to meet accommodation needs. They think that their pensions will be worthless, they do not trust insurance companies and they do not want to go to the stock market. They have had enough of fund managers, and their individual savings accounts are losing their tax advantages. As a result, people have piled into property in a dangerous way.
  Something must be done to boost other forms of saving. In an earlier exchange, the Minister claimed that the savings ratio was lower in 1988 than it is now. That is true, and it was one of the many problems that we faced in that disastrous year. Since the Government came to power, the savings ratio has halved. It was at 10 per cent. when the Chancellor took over in 1997, and it is a disgrace that the Budget contained no proposals on savings that would have addressed that problem.
  The first duty of any Chancellor of the Exchequer is to provide the stable economic conditions in which entrepreneurs, managers and those who work in business and commerce at every level can create wealth for the nation. This Chancellor is failing in that duty. In my opinion, the proposals of my right hon. Friend the Member for West Dorset are the minimum necessary to get us back on course and to return the economy to growth. The Chancellor has shot none of my right hon. Friend's foxes, nor those of anyone else.
  So far, the Chancellor has been lucky. He had a very good inheritance, and then lived through a period of American boom, when the dotcom nonsense and the concomitant bubble made the world economy grow to a staggering extent. He has got as far as he has by limping along on with his plans for public spending and for borrowing, while relying on a very dangerous bubble in private consumption and debt.
  The bubble is coming to an end. If we are not very careful, we will enter a fiscal crisis, and this Chancellor is not being careful at all. I hope that the reckoning at the next election will be his: if he is not removed then, the reckoning will come thereafter, when a more responsible Government will have to sort out the mess that he is very likely to leave.
  3.8 pm
  Mr. Tom Clarke: It is always a pleasure to follow my namesake, the right hon. and learned Member for Rushcliffe (Mr. Clarke). He always makes entertaining speeches, and the longer he goes on, the more entertaining he becomes. However, I hope that he will forgive me when I say that I was not persuaded by his Cassandra-like predictions. We have heard them before—in 1997. The British people heard them too, and they made their judgment. I do not want to hurt the right hon. and learned Gentleman's feelings, but they made up their minds about his four Budgets, just as they are doing this week about the Budget that we

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  are debating today. People who expected a counterblast to the Chancellor's Budget speech will be considerably disappointed by what Opposition Members have said.
  It is fair to say that the most robust representations on behalf of the Scottish whisky industry were made by my hon. Friends the Members for Ochil (Mr. O'Neill) and for Dumbarton (Mr. McFall), the latter of whom is the chairman of the all-party Scotch whisky group. I agree with what they said. They accepted, as do I, that the Budget should be judged in context and in perspective, but they sought to encourage Treasury Ministers to listen to the representations that are being made. I shall do the same.
  Just before I left for the Chamber, I heard from the Inver House distillery. It is in a neighbouring constituency, but many of my constituents work there. Such a good Budget would be all the better if my right hon. and hon. Friends on the Front Bench listened to our views on the Scottish whisky industry. If they did, we could have even greater celebrations than those already taking place on other aspects of the Budget.
  When the rhetoric of the past few days of debate in the House is over and people examine what took place, they will conclude—as did my hon. Friend the Member for Ochil—that it was an impressive Budget. Its very impressiveness was one reason why the right hon. and learned Member for Rushcliffe managed to get himself into a lather. Few have really challenged the assertion that the Budget represents success. It is successful not only because my right hon. Friend the Chancellor has met his various targets, important though they are, but because of his unshakeable commitment to sustained economic growth—something that numerous Conservative Chancellors failed to achieve over 18 years, to the great cost of my constituents and many others.
  The response to the Budget, especially from Opposition Front Benchers, was not a considered criticism of its main thrust. Indeed, we heard Opposition Members taking credit for some of the announcements in the Budget. I had not expected them to be joined by the right hon. and learned Member for Rushcliffe, a former Chancellor, in paying tribute to Lord Lamont. In my constituency, we still remember black Wednesday, and we have no desire to return to those days or to the negative equity, high unemployment and high inflation that we experienced under the previous Government but which have not been a feature of this Chancellor's stewardship.
  Time after time, Opposition Members have tried to take credit for the Budget's contents. For example, the hon. Member for Havant (Mr. Willetts) complained that he was being interrupted during his paean of praise for the Budget. The hon. Member for Northavon (Mr. Webb) took credit, typically, for the fact that my right hon. Friend the Chancellor had the confidence to grant autonomy to the Bank of England, especially on interest rates. However, even those hon. Gentlemen were put in the shade by the hon. Member for Westmorland and Lonsdale (Mr. Collins), who said in the debate on education that he was
  welcoming all the wonderful things that the Government have accepted from Conservative suggestions.—[Official Report, 18 March 2004; Vol. 419, c. 466.]
  If wonderful things are happening, it cannot be such a bad Budget. That is why I want to be positive about it.
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  The Budget is about success and real, tangible achievement. As my right hon. Friend the Secretary of State for Work and Pensions said earlier, the Chancellor's targets on employment, inflation, interest rates and—most importantly—economic growth are more accurate than those of his critics. They are more accurate than those of economists and financial journalists. To the credit of the latter, they have conceded that that is the case. In the spirit of reality, I remind the House that we are now seeing the benefits of the stability and economic growth to which my right hon. Friend has been committed. Unemployment now costs £3 billion a year less than in 1997. Debt interest payments cost £7 billion a year less. That is £10 billion a year saved, not by market forces or the use of a magic wand, but because the Chancellor set priorities and made sure that he stuck to them rigidly.
  Economic growth has enabled the Government to encourage greater investment and the benefits have been felt in many areas, including jobs, training, skills, education, health and transport. I cannot be the only hon. Member who can say that I see the benefits of that investment bearing fruit day after day in my constituency, in a way that did not happen during the 18 years of the previous Government.
  I welcome what my right hon. Friend the Secretary of State for Work and Pensions said about apprenticeship courses and skills. In my constituency, the number of people claiming jobseeker's allowance in 1997 was 2,375. Last year, the figure was 1,504—a more than 30 per cent. reduction. That might not matter in debates in the House, but it matters to the young people in my constituency who have found jobs. I welcome the Government's commitment to apprenticeship courses, and the marvellous work of the Department for Work and Pensions in my area. For example, North Lanarkshire council is embarking on the largest ever public investment programme to rebuild and refurbish every school in my constituency. We want apprenticeships that are demand led, so that local employers—small and large—can benefit.
  I also welcome what the Department for Work and Pensions is doing for people with disabilities. As my good friend Bert Massie said, on behalf of the Disability Rights Commission,
  I hope that there will be a significant access dividend with increased resources contributing to a reduction in inequalities. But clear targets need to be set. Similarly the new deal for skills needs to be more focussed on closing the qualifications gap between disabled and non-disabled people.
  I welcome his views, as will my hon. Friend the Minister for Disabled People, who has dealt so well with disability matters in her Department.
  We have our concerns about the private sector, of course, despite the growth in jobs. The Chancellor was right to say that
  our belief is that British manufacturing and service industries will rise to the challenge?
  but there is one specific area of manufacturing where we have been let down. Companies such as Sheffield Forgemasters in my constituency have gone into liquidation, and former employees have no guarantee of receiving their full pension entitlement, even though some of them have worked for the same company for more than 30 years. Despite the Government's new

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  Pensions Bill, which, of course, I very much welcome, I am not alone as a Member of Parliament in calling for more assistance to ensure that people who have worked all their lives and paid into their pension schemes receive their full pension entitlement.
  The Chancellor seeks
  excellence in education, science and enterprise."—[Official Report, 17 March 2004; Vol. 419, c. 321-2.]
  A very good example of that is the success of the new deal in my constituency. Our share of almost 500,000 young people finding jobs is nearly 2,000 in my constituency. I welcome the announcement last week that, for the first time ever, 16 and 17-year-olds will benefit from the minimum wage. The economic growth that we are seeing has also brought benefits such as pension credit, whereby 3,775 households in my constituency will gain. In all, 4,563 individuals will experience an average award of £41.50, which otherwise was simply not available.
  In this Budget, the Chancellor has once again enhanced his reputation for challenging poverty at home and abroad. Having taken 1.5 million children out of poverty in Britain, it was with pride that Labour Members heard him say in his Budget statement:
  I can tell the House that in the spending review this Government will not freeze or cut international development aid, but we will increase it."—[Official Report, 17 March 2004; Vol. 419, c. 330.]
  Whatever criticism might be made of the Government, it is to their eternal credit that they refused to live with the obscenity of 3 million unemployed people. We are now seeing the benefits in the economy, in our social fabric and in the regeneration of our communities, including opportunities for people to work and to exercise their skills. That is why the Chancellor was right to claim that we are nearer full employment than we have been for a generation, and why he was right to reflect, as I hope the House will today, on the words of William Beveridge:
  "If full employment is not won and kept, no liberties are secure, for to many they will not seem worthwhile.?
  3.23 pm
  Mr. Alex Salmond: After the last two speeches, I now have an embarrassment of riches about which Clarke to agree with. I will probably pursue my normal moderate course in carefully negotiating my way between their two positions. I am struck, however, by the lack of Labour Back-Bench support for the Chancellor's Budget. I recall that, a few years ago, when the right hon. Member for Monklands, East was trying to explain a particular by-election result when the Labour party did very badly and no one turned out, she said that it was sign of contentment with the Government's policies. I dare say that, in the same world of explanation, this vast expanse of empty green Benches is a sign of total contentment with the Chancellor's Budget.
  Mr. Tom Clarke: I am grateful to the hon. Gentleman for giving way—I am glad that he, too, is showing such generosity of spirit—but for the record, may I remind
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  him that he is, I believe, referring to my right hon. Friend the Member for Airdrie and Shotts (Mrs. Liddell)?
  Mr. Salmond: I thank the right hon. Gentleman for the correction. Of course the constituency has changed—I had not caught up with that—but my point about the right hon. Lady's argument that if no one turns up, it means that hon. Members are content, remains valid. In some ways, that is a dangerous sign for the Chancellor and the Government. I would expect a bit more enthusiasm from Labour Members.
  Whatever else we might say about the Budget, the shadow Chancellor's fox has been shot pretty devastatingly, in a Budget that was unremarkable for any great economic measures. It was pretty shrewd politically, in directing some hostile fire at the developing Conservative position. Incidentally, there is an object lesson for the shadow Chancellor: it is probably not the greatest idea in the world to unveil a complete economic plan a few weeks before a Budget. It allows the real Chancellor to make some adjustments to the Budget, making the shadow Chancellor's position look rather foolish. So I suspect that it is back to the drawing board for the shadow Chancellor.
  As I said, I want to steer a careful course between the two previous speeches. I do not believe that a Budget deficit of 3.4 per cent. is unsustainable. I agree that it is high—it is, of course, above the Maastricht criteria—and that it is not what the Chancellor said in the past, but when compared internationally or even historically, it is not unsustainable. However, it all depends on whether a number of the Chancellor's forecasts will prove reasonable.
  I want to talk about some of the risks and imbalances in those forecasts. I also want to talk about the international environment—and about something that the Chancellor is only now beginning to address after seven years in the job: the regional imbalances in the United Kingdom that represent a major constraint on growth. I also want to talk about the external account, about which I totally share the opinion of the right hon. and learned Member for Rushcliffe (Mr. Clarke). No one talks about that great subject any more, as if it were of no moment in a world of floating exchange rates, when the chickens do not come home to roost as quickly as they used to. None the less, they will come home to roost, and the fact that the present Chancellor never mentions the external account should be a substantial indication to others that it should be explored and examined very carefully.
  Finally I shall turn to what I, unlike the hon. Member for Ochil (Mr. O'Neill), believe is a very important subject: tax stamps for whisky. After making some substantive points about his constituency and a crucial industry, the hon. Gentleman said that, given the overall Budget, such a tax was unimportant. On the contrary, it is symptomatic of what is becoming a pattern of behaviour for the Chancellor, who represents a Scottish constituency, towards some of Scotland's great industries, such as oil and whisky. Therefore, I shall speak about that important matter in the Budget debate.
  I shall speak first about the international environment. The Chancellor's forecasts depend on optimistic estimates of continuing international growth.

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  There is a currently a vigorous rebound in the world's economy, but it is subject to uncertainties. The red book anticipates high real growth in the G7 this year—3.75 per cent.—and a doubling of world trade growth to 7 per cent., which would be sustained at the high level of 8 per cent. next year. The UK's own export market growth of 6.25 per cent. this year is forecast to be almost double last year's figure.
  Those ambitious forecasts are subject to great uncertainty. We hear daily of the incompetence and deception of the US Administration—including from the revelations of Mr. Richard Clarke, the former terrorism tsar, which explain the extraordinary diversion of international effort to the Iraq campaign over the past year. A little more than a year ago, a united world community focused on a campaign against terrorism. Today, we have a divided world community that is not focused, and a situation that is much more dangerous than previously. The economic impact can be felt in the forecasts.
  The deception practised by the United States Administration was aided and abetted by the Prime Minister and supported by members of the Conservative Front-Bench team. Without question, the Foreign Secretary's forecast of almost a year ago that the world would be a safer place after the Iraq campaign has not come to fruition.A Bloomberg report published today says that
  The unadjusted confidence index fell to 97.2 per cent. after the Madrid bombings from 101.4 per cent before … More indications of slowing growth in Europe may come in a report from Belgium's central bank at 3 pm today. Belgium's business confidence index, regarded by some economists as a leading indicator for Europe, may have dropped to minus 6.5 from minus 5.9.
  That may be the immediate impact of the Madrid atrocity, but it indicates that hopes and expectations of vigorous world growth have been overshadowed by the climate of enduring uncertainties that will affect the economy. The Chancellor's hopes of vigorous international growth and of sustained growth in the UK are subject to considerable doubt.
  As for imbalances in the UK economy, I must not be too vigorous, because last year for the first time, the Chancellor pointed to an examination of the impact of differential growth throughout the UK—and we can find the outcome in the Budget. That investigation was not mentioned in the Budget speech, but if one looks hard enough in the documents, one finds the statement:
  These geographical economic disparities present a cost to the UK economy both in terms of efficiency and equity.
  They do—but there is an absence of any policy measures to tackle the disparities identified. There is no substantial fiscal initiative for the regions of England or the nations of Scotland, Wales and Northern Ireland. There is no attempt at making monetary policy different. There is no great campaign to improve the infrastructure of the English regions or the other nations of the United Kingdom. Most of the major infrastructure projects are in the very area that is too congested—south-east England.
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  Almost seven years into the Chancellor's tenure, an attempt is being made to undertake a major relocation of public sector, civil service jobs outwith London and the south-east—which strikes me as a belated effort to tackle one of the issues behind imbalances in growth.
  Mr. Kenneth Clarke: The hon. Gentleman obviously follows regional and national matters closely, so he will recall that in the last Budget the Chancellor placed heavy emphasis on the end of national pay bargaining and the introduction of regional variations in public sector pay as an answer to regional imbalances and recruiting difficulties. The hon. Gentleman may be more up to date, but the Chancellor did not seem to mention that issue this year. Can he enlighten us as to whether that policy is progressing in Scotland?
  Mr. Salmond: There is no formal, on-the-surface processing of that policy, although I suspect that it might be included in some of the anticipated savings mentioned by the Chancellor in respect of public sector workers in Scotland and the English regions. We are talking not about London weighting, but about differences in the basic rate for the job. Public sector workers would be wise to pay close attention to the emergence of that plan—not so much in the Chancellor's speeches but in relocation policy. I thank the right hon. and learned Gentleman for anticipating the next point that I was going to make.
  Despite the mention in the Budget documents, and despite the acceptance that there is a problem—even if the Budget is totally devoid of a substantive approach to it—I resent the boastful, broad-brush claim that we have never had it so good for the past 200 years. There have been two technical recessions in Scotland in this Chancellor's term of office. I have to say to the right hon. Member for Coatbridge and Chryston (Mr. Clarke)—I have got the constituency name right this time—that to point to an overall growth forecast for the United Kingdom while apparently oblivious to the disappointing relative economic performance in Scotland over the past seven years does not seem to me to fulfil the duty that I would expect of a Scottish Member of Parliament.
  Over the past few years, and for the first time in recent memory, a major earnings gap has opened between Scotland and the rest of the United Kingdom. In 1984 there was no difference in earnings between Scotland and the UK average. Now the difference stands at £2,000. The latest employment rate in Scotland is 74 per cent., which is substantially—almost a full percentage point—below the UK average. The unemployment rate in Scotland, which only a few years ago was in parity with that in the rest of the UK, is 5.7 per cent. compared with a UK average of 4.8 per cent. The Registrar General's forecast is for a decline of 10 per cent. in the Scottish population over the next 40 years, but the corresponding forecast for the UK is for a rise of 10 per cent. Last week, a health report said that in some areas of Glasgow, male life expectancy is actually less than that in Baghdad.
  Against that background, there is no need for further pats on the back in addition to the pats that the Chancellor has already given himself when boasting of the growth record. Members from Scotland, Wales, Northern Ireland and the English regions should be

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  looking at whether this attitude of "We've never had it so good in 200 years" is reflected in their constituencies. They should look at the lack of substantive measures from the Treasury team to tackle the major imbalance that is costing us all so much.
  My third point is about the imbalances on the external account. When the Secretary of State introduced the debate, he waved this issue away; he was not going to mention it at all. When it was pointed out to him that we were running a deficit of £35 billion or £36 billion in trade in goods and services, he said that that would all be subject to improvements that were on the way as a result of the Chancellor's wise policies. However, the forecast for this year is a deficit of £35.75 billion, and next year will be the same. In 2006, the Red Book forecast increases to a £36.25 billion deficit in the balance of trade in goods and services.
  I saw the Chancellor frenetically whispering to the Secretary of State, as he tends to do. He usually does it to the Prime Minister, but he was whispering to the Secretary of State as we spoke about Scotland and deficits. Let me quote the Red Book:
  The BCC survey for the final quarter of 2003 showed that every region except Yorkshire and Humberside recorded growth in export sales, with Scotland recording the strongest balance.
  Even with the strong balance in Scotland and the continuing recovery of export sales from Scotland anticipated, the overall forecast is for an enduring deficit in the balance of trade in goods and services.
  The historical performance of the UK economy was that normally in times of economic slowdown, the balance of trade in goods and services went into surplus. This time we went through a slowdown and it remained in deficit. If the Chancellor is correct in his forecast of continuing buoyant growth, we cannot expect the improvement that he is looking for. Indeed, despite what the Secretary of State said, that improvement is not even forecast in the Red Book documents.

  These issues are important. They are a sign of a fundamental imbalance in the economy and of bills that sooner, rather than later, will have to be accounted for. It would be somewhat more honest and mature of the Treasury team if it addressed in detail the expected results of the great plans to address the fundamental imbalance in the external account.
  Finally, I turn to the important issue of tax stamps for whisky. The Treasury team should reflect on the fact that the hon. Member for Ochil is a loyal Government Back Bencher—far too loyal, in my view. The right hon. Member for Coatbridge and Chryston is an informed speaker for whom I have enormous respect on a range of issues. They are not natural rebels, so if they choose to criticise the Government—even if they couch that within overall praise for the Budget—their points should be listened to in detail. The all-party view of the Select Committee on Scottish Affairs should also be listened to, because it thought that the Customs and Excise evidence in favour of tax stamps on whisky was fundamentally flawed.
  There is an example of the Chancellor ignoring Scottish opinion on a major taxation issue affecting Scotland. Two years ago, the Finance Bill proposed a 10 per cent. increase in corporation tax on North sea
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  companies. Warnings were given on an all-party basis that the measure might have a damaging effect on exploration and appraisal in the North sea. Two years later, the damaging effect has come to pass, and despite last year's welcome relief on certain aspects of the taxation and further relief this year, we are still faced with the fact that exploration and appraisal drilling in the North sea is at basement levels. That is despite the ironic fact that oil prices are high, as is the success rate from what little drilling goes on, which is exemplified by a further discovery this morning by Oilexco of a new field—the Brenda field—in the Moray firth, consisting of 150 million barrels or more. Although we should have a boom environment, the Chancellor has created a bust through the ill thought out tax measure that he introduced two years ago. He was warned against introducing it, but he chose to ignore the warning signs.
  Angus Robertson: My hon. Friend will be aware that more than 50 per cent. of all Scotland's distilleries are in my constituency, and that many thousands of jobs in Moray depend on the success of the whisky industry. Is he aware that people from leading companies—small, medium and large—have already been to see me since the announcement? They say that the measure will have an impact on jobs and the competitiveness of their businesses. They do not understand why a Chancellor who represents a Scottish constituency would not even listen to the advice of the Labour Chair of the Scottish Affairs Committee on the Friday before the Budget when she said that bringing in the stamps would be "hasty and unwise". Does my hon. Friend agree that the Chancellor has indeed acted hastily and unwisely?
  Mr. Salmond: Yes, and I know from speaking to the hon. Member for Paisley, North (Mrs. Adams) that she would have added a few more adjectives before the words that my hon. Friend mentioned.
  The Treasury team should take on board the analogy that I am making with the oil industry. Having spoken to Ministers, I think that they would have approached the tax changes two years ago in a different way if they had their time again. The tax changes affecting oil and gas could have been introduced in a way that would not have damaged exploration and appraisal drilling yet would still have secured the Government the additional revenue that they wanted. They chose to ignore advice, and the consequence of that has been lost jobs, lost opportunities, and unnecessarily lost investment in the oil and gas industry.
  We are in exactly the same position now. The unions, the companies and the whisky industry have put forward an alternative proposal, but it cannot have been subject to serious consideration, because it was made only recently. The evidence from Customs and Excise has been shot to pieces in front of a Select Committee of the House, and members of the Scottish Affairs Committee from every single party agree about deficiencies in the evidence presented. In those circumstances, why not take the wise advice, consider the matter again and at least try out the industry and union proposals before going on to introduce a measure that might damage investment and jobs in, and prospects for, another of Scotland's great industries, as happened with the oil and gas industry?

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  As I said at the outset, there seems to he a pattern of behaviour. During the Chancellor's term in office, the oil industry has been responsible for some £30 billion of Government revenue. As we know, the whisky industry is a huge earner for the Government, and the revenue from it runs to many billions of pounds a year. Is the Chancellor trying to demonstrate—as he hopes for higher office in the years to come—that he will not be thirlled to his Scottish background nor show an unwanted pro-Scottish bias? If that is the case. I give a message to the Chancellor of the Exchequer: we accept that although he represents a Scottish constituency, the measures that he is introducing show no signs of Scottish bias. Relieved of that burden, perhaps the Treasury team will look again at the prospects for that major industry in Scotland and not inflict unnecessary damage on an industry that contributes so much to our economy and, like the oil industry, bankrolls the Chancellor of the Exchequer and the Treasury team.
  3.45 pm
  Mr. Edward Leigh: It is always a pleasure to follow the hon. Member for Banff and Buchan (Mr. Salmond). I may not always agree with him, but he is a noteworthy parliamentarian, and we always enjoy his speeches very much indeed.
  A number of Budget announcements have a deep resonance with the Public Accounts Committee, which I have the honour of chairing. I want to highlight the relevance of our work in driving through the efficiency improvements that the Chancellor expects and that, indeed, the British people deserve. I also want to sound a warning note about the ability of Departments to achieve their objectives in making large planned increases in public expenditure. I shall say a few words about the Comptroller and Auditor General's work in auditing the Budget assumptions, and finally, I shall address ways in which we can promote private sector involvement and solutions for Government efficiency and economy.
  The PAC is not political, but is concerned about achieving value for the taxpayer. It does not matter whether its members are Labour, Liberal or Conservative—in theory, at least, they should hate and detest waste. We have an important role to play in encouraging efficiency across Government. Most people, including the taxpayer and the man in street—the people who matter—agree that we are not getting full value for money at the moment. I would argue that rapid increases in spending in any country in any historical era always result in less economy and efficiency. A recent report by the independent National Audit Office, which does not have a political axe to grind, stated that there is a risk that if more money is put into public services, it will simply be wasted. Given that, we are told, there are fewer qualified nurses in the NHS than there are support staff and managers, that is a definite and worrying possibility.
  Angus Robertson: The hon. Gentleman will certainly have seen the NAO report on Customs and Excise warnings about fraud on spirits. Will he confirm that it concluded that Customs and Excise statistics were unreliable and that it would not be right to introduce expensive and fraud-prone strip stamps on that basis?
  Mr. Leigh: The NAO is careful not to come to any conclusion about whether a new tax is right or not, as
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  that is a policy matter. However, it found that although the Customs and Excise assumptions were made in good faith, as were those of the Scotch Whisky Association, there was an enormous difference, ranging from £10 million to £1 billion. The hon. Gentleman is therefore right that the jury is out, and it is for the Government to make a policy decision.
  Central Government administration costs have already increased from £14 billion to £21 billion in the past six years. It is not surprising that the NAO says that just a 1 per cent. improvement in the way in which money already voted by Parliament is spent over the next three years would give us £14.5 billion more for essential public services, which is why the battleground of politics is now how we can reduce waste, incompetence and inefficiency in the public services. The Public Accounts Committee and the National Audit Office have together published a wide range of reports making recommendations to secure greater efficiency, well over 90 per cent. of which have been accepted by the Government. It is true that improvements have been made following our recommendation, but there is still far more to be done. I could spend the next 10 minutes detailing examples of waste, incompetence and inefficiency in Government Departments.
  Waste in government is legion. I shall give one or two well known examples. Forty brand-new Apache helicopters, worth more than £1.2 billion, are waiting around on Salisbury plain unused, costing the taxpayer £6 million, because the Ministry of Defence did not train enough new pilots. The Libra project—the national IT project for magistrates courts handled by the former Lord Chancellor's Department—has in four years more than doubled in cost to almost £400 million. The project management was a catalogue of disasters and, needless to say, the magistrates courts still do not have the IT system that they deserve. That is unacceptable.
  We have heard a great deal about the Department for Work and Pensions, one of the worst offenders. No one has yet mentioned, though, that just one computer project£a failed project: the benefits payment card—cost more than £1 billion. The new Child Support Agency computer does not work properly. Unbelievably, the Department for Work and Pensions loses between £3 billion and £7 billion every year in fraud and error. Neither the Department nor the Committee has any idea whether the sum is £3 billion or £7 billion. The accounts have had to be qualified every year for the past 13 years.
  Let us consider a future project: the plans for a new supreme court. How much will that cost the man in the street? Lord Woolf says it will cost about £50 million, which is already a great increase on the Government's estimate. I make one prediction—that the costs of the new supreme court, like the costs of the Scottish Parliament, will rise remorselessly.
  That is as it may be. We all know that there is waste and incompetence in government, and there always has been. But the Chancellor, we are told, has set the agenda—5 per cent. real-terms cuts in departmental administration costs across the board by 2008—and we wish him well. Sir Peter Gershon is working to identify how new technology, changing working practices and better procurement could free up resources for the front line. We all eagerly await his report, which is due to be published in June. So far, we have had only leaks and a

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  predictable furious reaction from the public service unions, which have spoken of it as a cut-and-paste job. One can dismiss that reaction as typical and obvious, but it does not say much for the ease with which the cuts can be carried out.
  My Committee, supported by the NAO, has already identified many specific areas in which savings can be made, and it will continue to do so. Departments should take that into account in driving through efficiency measures. I shall take a few recent examples. The National Audit Office reported a fortnight ago on the work of the Office of Government Commerce to improve procurement in Whitehall. I am pleased to say that the OGC has had a beneficial impact. Since March 2003, savings have totalled £1.6 billion, well over the target of £1 billion set for that period. Indeed, the ease with which the target was exceeded makes one wonder whether the target was too easy.
  Among other things, the OGC's guidance and advice has led to an increased emphasis on professional procurement skills and the development of framework agreements for purchasing goods and services. I will say one thing about Sir Peter Gershon, whom I have got to know reasonably well over the past two or three years: he is an object lesson in the new type of public servant that we need—someone brought in from the private sector who is willing and prepared to get a grip on a difficult problem. But much more can be done. The NAO has identified a possible £300 million in savings that could be generated quickly if there were greater take-up by Departments of the OGC's advice. When the PAC considers the subject next month, we will look hard at why some Departments are much better than others at making savings.
  Under the Government's plans, the Department for Work and Pensions will be subject to the largest reduction in staff posts, as we know. In order to achieve that without affecting front-line services, it will be necessary to eliminate duplication and inefficiency in all the Department's work. I must sound a warning, however. History tells us that, to achieve such cuts, civil servants will inevitably push some of them on to front-line services. That will happen, as sure as night follows day, whatever the good intentions of Ministers.
  Later this week, my Committee will highlight how greater reconsideration of benefits decisions could reduce the number of cases taken to appeal, with consequential administrative savings. That is all good solid work, but it is often on the margins, and we have to get to the root of the problem. For example, savings in one Department can often be achieved elsewhere. The NAO identified more than £3 million that could be saved by reducing the cost of processing application forms for driving licences and attendance allowance. Similar improvements across Departments could save hundreds of millions of pounds.
  In his Budget speech, the Chancellor pointed to spending increases across a range of Departments and programmes, including continued and substantial increases in health, education and transport. The NAO recently published a progress report on preparations by those three Departments to spend that extra money. The
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  NAO is, of course, completely independent, but I have always tried to encourage it in this area, which represents a valuable new part of its work.
  Our Committee will hold a hearing on these issues in a month's time. Managing resources on this scale requires of Departments highly developed skills, robust systems and comprehensive, reliable information management. As the Committee has pointed out in many previous Administrations, if those are not in place, there is not only a risk but a certainty that waste and inefficiency will follow. I stress, as I did when I questioned the Prime Minister in the Liaison Committee a few weeks ago, that this is not a party political point. We must be confident that the extra money will make its way to front-line services and lead to better performance, and that it will not be consumed by extra bureaucracy or regulation, or by over-targeting, as has clearly happened in the past.
  When I put those questions to the Prime Minister, it was interesting to hear him come out with the defence that we have employed so many more nurses, doctors and people in front-line services. We all accept that. Of course, if we spend an extra £61 billion, we are going to get more nurses, doctors and operations. Immediately, however, the Chairman of the Liaison Committee, who is not a member of my party, butted in on the Prime Minister and said, "We're not interested in what you have achieved, Prime Minister. We're interested in what you haven't achieved, given the amount of extra money that you are spending." I believe that that is the key battleground of politics.
  Extra resources must be used to bring beneficial changes across the public service. The Chancellor said that 99 per cent. of cancer patients are now seen within two weeks of urgent referral to a specialist. That is excellent news, as early specialised care greatly improves chances of survival. However, not everyone with cancer is benefiting. A recent NAO survey of GPs showed that one third of those eventually diagnosed with cancer were referred "routinely", rather than urgently, and were therefore not seen so quickly.
  Improvements in public services must be sustainable. Spending on early education and child care will continue to rise until 2007–08, and there is no doubt that that is leading to real improvements. How could it not, given the huge increases in spending on child care? I warned in February, however, that half the 600,000 additional places created since 1998 had subsequently closed. We have, therefore, created a huge amount of churning with this increased spending. Worse still, the children and families who have the greatest needs and the most to gain still have the worst access. There are too few child care places for children living in the most deprived areas of the UK, and too few services available to children with disabilities.
  The Chancellor announced ambitious plans to reduce administration and to cut civil service jobs. He hopes that these proposals, together with other measures, will realise efficiency savings of £20 billion a year. That is his target, and it is very ambitious indeed. I believe that it will require a massive sea change in Whitehall of a kind that we have never seen before, either in wartime or in peacetime. I welcome the cuts, but they must reduce administrative bureaucracy, rather than cutting front-line staff such as doctors, nurses, teachers and policemen.

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  Cuts in so-called back office administration, which has become a cliché, to which we all sign up, must not lead to poor performance and inadequate capacity in any one part of the delivery chain. The civil service will always have a tendency to make a political point to its political masters by passing on those cuts quickly to front-line services.
  I want to draw the attention of the Treasury Bench to the work of my Committee and the NAO on Departments' management of resources and their capacity to spend. I hope that they will ensure that it is read widely in Whitehall. To avoid waste and inefficiency on the huge scale to which, sadly, we have already borne witness, the NAO should be free to conduct detailed and continuous audits of each and every Department. It should register staff numbers and efficiency levels, and the resultant information and recommendations should be freely available in a publication, including a league table format as is the case for local authorities. Departments should be rated for their work, as local authorities are, as poor, good or weak. Permanent secretaries should be held accountable to Parliament, as accounting officers, in the same way that directors are held accountable to shareholders. In the private sector, managers are given performance incentives, bonuses if they do well and the sack if they do badly. That still does not happen in the public sector.
  I no longer believe, having been involved in this field for a few years, that mere ministerial instruction, however well intentioned, even with the backing of a huge majority in Parliament, will ever deliver fewer civil servants or a more effective civil service. There must be incentives on senior managers.
  Mr. Geoffrey Clifton-Brown: When I was a member of my hon. Friend's august Committee, before he was Chairman, I suggested that the promotion hierarchy for senior civil servants should be dependent on their ability to manage satisfactorily the budgets in their Department. Does my hon. Friend have any sympathy with that idea?
  Mr. Leigh: Yes, I have enormous sympathy with that idea. Civil servants should be assessed on how they run projects. We must move away from a culture in the civil service whereby promotion has depended too much on one's ability to advise Ministers and deal with policy, and too little on running projects. Again and again, we see permanent secretaries—senior civil servants—who have never run a project in their lives, and never been assessed on that. That is simply not acceptable in the modern world.
  I want to comment briefly on the Comptroller and Auditor General's budget assumption work. Under the Finance Act 1998, the National Audit Office audits those parts of the Budget for which the Chancellor sees fit—that is the important part. This year, one of the assumptions newly audited by the NAO related to the growth of the VAT gap. Mention has already been made of the different estimates on fraud and error used as part of a new method for forecasting VAT receipts, which is a vital part of the Chancellor's arithmetic and of how he informs us that he can keep to his golden rule.
  The NAO found that the rate of growth in the VAT gap exceeds the historic average, and is therefore duly cautious. The NAO brings independence to its work
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  and, clearly, expertise—not just financial, economic and statistical expertise but the expertise that comes from being able to do its core audit work across Departments. I use the VAT gap assumption as an example of precisely that. As we have been told, the NAO recently published a report on work by Customs and Excise to tackle VAT fraud and losses. It shows that Customs and Excise is stepping up its efforts against VAT fraudsters, but it is too early to be optimistic about the impact on the VAT gap. The important point, which I have not yet heard emphasised in this debate, is whether it can secure a sustained reduction in fraud and error, which currently run at a staggering £12 billion. The jury is still out on that. On those assumptions alone, we can see what a difference—billions of pounds—can be made in revenues coming into government.
  As I said, the National Audit Office audits those parts of the Budget that the Chancellor sees fit for audit. Some assumptions have been audited in the past, others this year. A valid assumption made last year and audited as such will not necessarily be valid this year. The fact that something has been audited in the past does not make it right today or tomorrow.
  I believe that we should assert, or rather reassert, the traditional independence of our auditor. He is, after all, our auditor. He reports to us—to Parliament—not to the Government. Surely it is time for the Treasury to consider amending the Finance Act to give the Comptroller and Auditor General the unfettered freedom—I emphasise those words—that he enjoys in all other aspects of his work, so that he rather than the Chancellor decides which assumptions to audit.
  I am pleased to see both the shadow Chancellor and the Chief Secretary to the Treasury present. This is not a party political point, and I hope that both sides can agree that if the main parliamentary auditor is asked to audit something, he must have freedom to do the work that he wants to do. I believe that that—coupled with the implementation of my earlier suggestion that the NAO should conduct value-for-money audits of Departments—would produce more confidence, more transparency and more accountability. Surely we as parliamentarians are interested in confidence, transparency and accountability. We should at least be able to agree on the parameters of political debate. We can have an argument across the Chamber about a policy decision on whether to spend more or less on a particular aspect of government, but let us at least agree on the assumptions.
  I am very cautious about the ability of any Government—I am thinking of historical examples—to reduce waste and incompetence in the public sector. I have no doubt that each month during the next 140 years—just as happened during the last 140 years—the NAO will produce a coruscating report on waste and incompetence in the public sector. I believe that we must ultimately move towards private sector solutions. I give the Government credit for having grasped the nettle, or bitten the bullet, in terms of the private finance initiative. That met with some opposition on their own Benches, but involving the private sector in the delivery of public sector solutions has enabled us to produce more hospitals and other buildings to budget and on time.
  Mr. David Cameron: Does my hon. Friend think that we are transferring as much risk from

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  the public to the private sector as was originally intended through the PFI? Or is it too much of an exercise in trying to take finance off the Government's balance sheet?
  Mr. Leigh: That is an interesting point. Some of my hon. Friends, in particular, believe that that is what lies behind it, which is worrying. A couple of weeks ago, I had an interesting conversation with the former Chief Secretary in the French Government. Members of that Government are coming to study what we are doing with the PFI. There is amazement throughout Europe that there is so little political debate about the fact that so much debt is being transferred to future generations. There is little understanding of that in Parliament, and we engage in little debate about the whole PFI issue, which I think should be a central element of financial debate. Our debates should be better informed so that we can resolve the issue one way or another.
  I believe—it is a purely personal belief that we shall have to adopt more PFI-type solutions in other areas of public sector work, including the management of hospitals, schools, DWP projects and perhaps entire benefits systems. The debate on all that has hardly begun.
  Mr. Clifton-Brown:: I am grateful to my hon. Friend for being so generous in giving way. Part of the purpose of the PFI was to transfer risk, but many companies involved in such schemes tell me that the risk is considerably reduced because their lawyers spend so much time trawling through contracts and including exceptions in them. Does my hon. Friend agree that the Government need to become much smarter in their specifications?
  Mr. Leigh: Yes. That is a good point on which to end. If we are to move towards more private sector involvement in delivering Government programmes, we must be much cannier, smarter and more ruthless when we deal with the private sector. Private companies take no prisoners. I do not blame them for that because they are there to make a profit. The Public Accounts Committee has witnessed too many examples of the risk not being transferred.
  Let us consider only one such example-1 could cite numerous others. The Government decided to build an armouries museum in Leeds. Hugely over-optimistic assumptions were made, and it went bottom up. The Government immediately bailed it out. Did the private sector suffer? Of course not. It never suffers in such circumstances. That is why we must bring more private sector people into government so that they work for us.
  Let us forget for a moment the normal party political divide and unite as the guardians of the taxpayer. We represent the taxpayers, who pay for everything in this Building, all PFI projects and everything that we do. Why do we allow so many instances of the private sector, which we want as a partner, taking us for a ride because it employs better lawyers and is more ruthless and vigorous in dealing with projects?
  There was one recent example in a Committee hearing of a project that the Government delivered well. I believe that it was a new call centre in the NHS. I asked
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  one question of the lady who ran it: "How long have you been in this job?" She replied that she had been running the project for five or six years. That was a unique example of somebody in the public sector who had not been moved from job to job but was there, on the ball, and had run a project for not just a few months or a year or two, but for five or six years. She had the expertise to run it and to deal with the private sector.
  That is a good note on which to end. I hope that, at the end of the Budget debate, we can unite in trying to get the best deal for the taxpayer.
  4 12 pm
  Mr. Paul Goodman: It is a pleasure to follow my hon. Friend the Member for Gainsborough (Mr. Leigh), who gave a persuasive exposition of the way in which it is possible to reduce the rate of increase in spending—he specifically referred to the Department for Work and Pensions—without cutting front-line services. I intend to draw on my experience as a member of the Select Committee on Work and Pensions to speak about poverty and the Budget.
  I want to make three preliminary remarks. First, I am determined, in a moderate and irenic spirit of good will, to welcome something in the Budget. I shall therefore join my hon. Friend the Member for Havant (Mr. Willetts) in welcoming the £100 payment to pensioners. I am not sure that my constituents in High Wycombe and Buckinghamshire will be as generous-minded without expressing some reservations. The payment follows the transfer two years ago of some £11 million out of Buckinghamshire to other counties. The preceding year, my constituents paid an increase of more than 15 per cent. in the county council element of the council tax.
  Mr. Cameron: I hope that my hon. Friend has read page 256 of the Red Book when studying the Budget. It states that the Chancellor is already planning an increase of 6 per cent.—three times the rate of inflation—in the council tax. For my hon. Friend's constituents in Buckinghamshire, will not the £100 be given with one hand while money is taken away with the other through the increase of 6 per cent. in their council tax bill, which is roughly £1,000? My hon. Friend should be careful to warn his constituents that what the Chancellor giveth, the Chancellor taketh away.
  Mr. Goodman: My hon. Friend is right. I am several hundred pages behind him in my perusal of the Red Book.
  Mr. Cameron: I skipped.
  Mr. Goodman: My hon. Friend says that he skipped, but I was about to make the same point as he did. The 15 per cent. rise that I mentioned was followed by a 5 per cent. increase last year. Those increases have hit pensioners on fixed incomes who receive low annuity payments. That group of people has suffered real cuts in income in the past few years. As my hon. Friend the Member for Witney (Mr. Cameron), who looked ahead in the Red Book, said, what the Chancellor gives with one hand, he takes back with the other.

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  Secondly, I want to make a brief point about Equitable Life.
  Mr. Clifton-Brown: Does my hon. Friend agree that it was a mean payment with strings? As I understand it, the £100 payment will be only £100 per household, it will apply to pensioners only when they reach the age of 70 and it is a one-off payment, not an ongoing payment to meet the considerable increases in council tax.
  Mr. Goodman: In the light of my hon. Friends' remarks, I am already beginning to regret my generosity to Government Front Benchers. My hon. Friend is, of course, absolutely right.
  Mr. John Bercow: I have warned my hon. Friend before, and now have reason to do so again, against the tendency towards excessive generosity to those on the Treasury Bench. I hope that he will hold it in check. Does he agree that, in addition to the depredations from which pensioners in Buckinghamshire have long suffered under this Government, there is real grievance at the failure to pay child tax credit to all too many people in our respective constituencies who are entitled to it but have been deprived of it on account of Government incompetence?
  Mr. Goodman: My hon. Friend is absolutely right to warn me of excessive generosity to the Government. I must in turn warn him that when he says, as he often does, that it is important to combine social justice and economic efficiency, he, like me, must be wary of echoing too much the language used by Government Front Benchers, but the point that he made was right.
  Secondly, on the subject of Equitable Life, those on the Treasury Front Bench will not be surprised to hear that many of my constituents have expressed dissatisfaction with the recent statement on that subject by the Financial Secretary to the Treasury. That is why I wish to commend on their behalf the early-day motion tabled by my right hon. Friend the Member for West Dorset (Mr. Letwin), the shadow Chancellor, which calls on the Government
  to find a way in which either the Parliamentary Ombudsman or Lord Penrose himself can now examine possible maladministration by the Government Actuary's Department and other regulatory bodies, in order to make recommendations on compensation.
  I hope that those on the Treasury Bench will bear that in mind. I believe that such a move by the Government would have been an admirable feature of the Budget. Sadly, it was not to be.
  Thirdly, I want to make some brief remarks about the Budget in relation to health spending. Many of my constituents in Buckinghamshire will be asking where all the money has gone. A consultation paper has been published in relation to children's services at Wycombe hospital and to other services. It is proposed that the children's ward, maternity services and the special baby care unit all be moved to Aylesbury. That is in the context of a £15 million deficit across health bodies in Buckinghamshire.
  I realise that all health bodies and other bodies have to live within their budgets but there are some startling figures against which those proposals must be seen.
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  Health spending in Bucks is some £400 a head. In Liverpool, for example, it is some £900 a head. It is legitimate to ask whether the assumption that we truly have a national health service is right because what the Government are effectively saying to my constituents in High Wycombe and Marlow is that, in health terms, they are worth less than half what the people of Liverpool are worth. It is in that context that we must see those plans.
  I say to those on the Treasury Bench that, whatever the Chancellor may have said in his Budget statement about health care spending, we face a danger in Bucks. I want to put it no higher than this. It is possible that babies could die because of the extra length of the journey from the middle of High Wycombe, where deprivation is concentrated in the town, to Aylesbury. It is a deeply worrying prospect and I heard nothing in the Budget that will do anything to address that.
  I turn to poverty in the light of my work on the Select Committee on Work and Pensions. At the risk of rousing the wrath of my hon. Friends, I point out that I have before in the House paid tribute to the Government's intentions in relation to poverty. I think that they are admirable and that it does no one in the House any good when political parties impugn each other's motives unfairly. I am, however, a little more critical and questioning of the means to be used. We now know that the Government are likely to meet their 2004 child poverty target, which is welcome, but like many of my hon. Friends I am a little dubious about the value of relative poverty measures, because they produce perverse results—a point that was not cleared up in the Budget. If there was a collapse in median incomes, we would have the perverse outcome that we could be said to have solved our poverty problem because incomes at the top had fallen. That is the difficulty with all relative poverty figures, so I have always been dubious about the measure on which the 2004 target is based.
  The Government could have answered in the Budget several questions that surround the 2010 target. First, they say consistently that they are committed to eradicating child poverty, but I have never heard Treasury Ministers clearly explain what that noble objective means. Does it mean eradicating absolute poverty, eradicating severe or persistent poverty, or eradicating relative poverty? The latter is surely impossible without complete equality of outcome, a task that even old Labour would have found extremely ambitious.
  Secondly, the Chancellor could have cleared up ambiguity in the new measure.
  Mr. Webb: I am listening with care to the hon. Gentleman's comments. He says that to eliminate relative poverty we would need absolute equality. However—and this is not just a nit-picking point—the relative poverty line is generally at 60 per cent. of the median, whereas there are Scandinavian societies in which deviation from the median of greater than 40 per cent. is regarded as extreme. That sort of relative poverty is much narrower. Such a modern society is conceivable, even in the west, and does not require absolute equality.
  Mr. Goodman: The hon. Gentleman is right to say that relative poverty can be interpreted in several ways,

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  and it could be interpreted as it is in Scandinavia. However, I put it to him that if we spoke to the man or woman in the street, who perhaps does not study the arcana of these matters as he does, about the abolition of relative poverty, they might indeed believe that any Government who sought that were aiming at absolute equality of outcome.
  Mr. Clifton-Brown: Again, my hon. Friend is being too kind to the Government in relation to child poverty. The number of families with children who are homeless continues to rise substantially and, in particular, the number of families with children living in bed-and-breakfast accommodation has almost doubled under the Government. For a family with children to be in such accommodation is a miserable way of living.
  Mr. Goodman: I completely agree, and when I have finished my canter through the Government's rather dubious and undefined measures, I intend to come to such points; but I am grateful to my hon. Friend for making that point now.
  Mr. Bercow: I agree with my hon. Friend that it is unwise to focus on relative conceptions of poverty. We are all familiar with W. G. Runciman's "Relative Deprivation and Social Justice", which is an interesting thesis but does not, I think, advance the cause. Is it not wiser to focus on absolute poverty and the significant number of people in our country today who still lack the basic essentials, to one of which my hon. Friend the Member for Cotswold (Mr. Clifton-Brown) alluded? It is that phenomenon with which the Government should principally be occupied.
  Mr. Goodman: My hon. Friends are putting me to shame: my hon. Friend the Member for Witney is familiar with the Red Book and my hon. Friend the Member for Buckingham (Mr. Bercow) has read even more widely. He is absolutely right. That was the very point that I was about to make, because in relation to the 2010 target, the Government have replaced their single measure with a triple measure. They intend to measure relative low income, absolute low income and material deprivation and low income combined, and I join him in agreeing that the second and third of those measures are far better than the first. However, my point is that the Government have not made it clear in the Budget whether they will hit their target only if they move in the right direction on all three of those measures at once. The Chief Secretary might be able to tell us something about that later.
  Mr. Tony McWalter: In a way, the hon. Gentleman has shot my fox, as I was about to say that the Government's measurements of poverty involve those three ingredients. The Library paper on child poverty makes it clear that that is the context for the Budget debate. As he might know, the paper begins by quoting a previous Conservative Chancellor of the Exchequer, who said that defining poverty was so hard that he was not going to bother. As a result, he certainly did nothing about it.
  Mr. Goodman: All Governments are very wary of defining poverty, as our Select Committee discovered
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  when we asked Ministers about this issue. The hon. Gentleman is right to draw attention to those measurements, and I hope that, like me, he wants to know more about how they will work in respect of the 2010 target.
  I had hoped that the Chancellor would say something about housing costs. Previously, the Government have attempted to hit their target on the basis of incomes before and after housing costs. But we now know that, although they will continue to publish the "after housing costs" figure, they tend to make the calculation on a "before housing costs" basis. With due respect to the Government—many of my Labour colleagues on the Select Committee share this view—if one makes the calculation on a "before housing costs" basis in London and the south-east, where such costs are extremely high, one gets an artificially good result. So we need to be sure that the 2010 measurement is fair in that regard.
  Neither the Chancellor nor the Secretary of State for Work and Pensions has taken the opportunity to say whether Northern Ireland, where child poverty is extraordinarily high, will be included in the figures in 2010. The Government did not have to hand—or so they tell us—the family resources survey information that they needed to include Northern Ireland in the measurements in 2004. But that information is to hand in such a way as to enable them to measure poverty in Northern Ireland, as well as elsewhere in the United Kingdom, for the 2010 target, so perhaps the Minister could make it clear whether the Government intend to do so.
  It is important to look very closely at the figures on child poverty, but I hope that the House agrees that, in the end, measuring child poverty and poverty in general is not everything. What we really need to know—such information is not always to hand—is whether the money that the Government have put into reducing child poverty and the rise in the incomes of poorer people, which cannot be dissociated from worldwide economic growth, are actually improving life chances. On the basis of the evidence available, we seem not to know the answer. We cannot be sure that such income increases are boosting health and happiness, improving relationships and parenting, raising educational attainment, breaking the cycle of crime, and improving not just standards of living, but quality of life.
  I want to conclude by considering three groups of people whose life chances were not improved by last week's Budget, the first of which is pensioners. The Government must now accept that they have a very deep problem with their pensions policy. From trawling voluntary groups. industry and business, it has become clear that only the Government support an approach that concentrates on means-testing as a way of relieving pensioner poverty. According to the most recent figures that I have seen. someone who draws the state second pension in full will not have enough money to float themselves off means-tested benefits. By 2025 and 2050, a huge proportion of pensioners will be entirely dependent on such benefits. That will damage savings and pensioners consider it an affront to their dignity. I have drawn attention before, in the context of Select Committee reports, to the extremely poor take-up figures. We knew in the days before the minimum income guarantee had been replaced with pension credit, that the non-take-up rate for the MIG

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  was approximately a third. We now know that the non-take-up rate for pension credit is about half. That means that half of our poorest pensioners are gaining nothing whatever from pension credit, and nothing in the Budget or the Pensions Bill will put right the mis-structuring of the Government's pension policy.
  Mr. Tom Harris: Does the hon. Gentleman accept that there is some benefit in targeting money on the less-well-off pensioner? Surely the Conservative policy of re-establishing the link between the basic state pension and earnings would simply give additional funds to every single pensioner in the country, including perhaps Baroness Thatcher and others like her who do not need it. Is it not better to target the money to where it will be most effective?
  Mr. Goodman: I am not aghast in horror at the prospect of paying a higher state pension to Baroness Thatcher, but I put it to the hon. Gentleman that, among sections of Labour Back Benchers, our pensions policy is more popular than the Government's. The essential problem with the means-testing policy is the take-up. If the hon. Gentleman's constituency is typical, half the poorest pensioners living in it are not receiving pension credit. For reasons that I have already explained, that is wrong.
  The second group who will not benefit from the Budget are people with disabilities who are out of work, and I have some new information to share with the House about them. We are familiar with some of the figures and we know that there are something like 2.7 million people on incapacity benefit and that about 1.3 million of them want to work if they can find it. We also know—the Secretary of State for Work and Pensions said it earlier—that the only group of people on incapacity benefit whose numbers are rising are those with mental health problems.
  I tabled some questions to the Secretary of State to ascertain more information about that group. As I have said, I do not believe that the Budget will greatly help them. These are the figures on men with affective disorders who are drawing benefit. In 1997, there were approximately 150,000; there are now some 235,000 drawing incapacity benefit. Turning to those with neurotic and stress-related disorders, there were about 119,000 in 1997; last year it had risen to about 135,000.
  For women, the overall figures have gone up. In 1997, there were 1,032,000; last year, staggeringly, there were 1,120,000. In 1997, there were about 145,000 women with mood affective disorders, in comparison with about 232,000 last year. In 1997, there were about 101,000 women with neurotic and stress-related disorders, in comparison with 114,000 last year. The group of people drawing incapacity benefit whose numbers are rising are those with mental disorders of one sort or another.
  Our criticism of the new deal has always been that too much money has gone into helping people who are likely to get employment in the labour market anyway, and not enough into helping those who find it difficult to get work and then to keep it. I believe that the Budget
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  provides nothing to help that particular group of people. If the Chancellor were more creatively and imaginatively minded, he would want to reflect on the proposals that we made in our last election manifesto for an incapacity benefit fundholder that could reach this hard-to-find group of people, help them into work and keep them there.
  The final group is young mums who want child care choice. The Budget proposals on child care essentially built on last year's proposals, which helped working parents. We have to see those proposals in the context of another Government target—that of getting 17 per cent. of lone parents into work by 2010. However, some mothers and fathers want to stay at home and look after their children when they are very young. Naturally, they will receive no benefit from employer-related measures in respect of people who work.
  That has been acknowlegded by no less a figure than the Secretary of State for Trade and Industry. An article in The Daily Telegraph some months ago was excitingly headlined "We Failed Mothers Who Stay At Home, Admits Hewitt". In it, the right hon. Lady said:
  I do think we have given the impression that we think all mothers should be out to work.
  I am therefore disappointed that the Chancellor did not build on the proposals in the recent report on child care by the Select Committee on Work and Pensions. The Committee is dominated by Labour Members, but its report set out a choice-based model.
  Finally, it will not be possible to reduce poverty effectively in the long term if family life is not stable. There is far greater equality on the continent, but the paradox is that far more payments are made there to families on high incomes. In France, parents have choice, and in Denmark women are encouraged to enter the labour market, but the key is that payments are made much higher up the income scale. I am worried by two elements in the Budget—the freezing of the family element of the child tax credit, and the fact that child benefit will not be changed. In fact, that has not increased in real terms since 1999.
  Child care is a key theme for the future. I am sorry that it was not approached in the Budget in the choice-based way that some Select Committee members would prefer. In conclusion, the Budget was political in nature, rather than financial. Many of my constituents will agree with me that it offers them very little.
  4.36 pm
  Ms Candy Atherton: I apologise to you, Mr. Deputy Speaker, and to the House for not being present for the earlier speeches in today's debate. The Select Committee on Environment, Food and Rural Affairs, of which I am a member, has been taking evidence on gangmasters in relation to the Morecambe bay tragedy and is sitting later than normal.
  I want to talk about those elements of the Budget that I consider to be good for Cornwall. The first of the specific matters that I want to raise is the reduction of VAT on heat pumps. That might seem obscure to many hon. Members, but my constituency delights in being home to the remains of the "hot rocks" project, which

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  the House may recall was closed by Mrs. Thatcher in the 1980s. The project was a pioneering scheme that drew heat from the ground to provide what was effectively free heating for homes, buildings and factories. Although the scheme did not last, a number of pioneering firms that were committed to the technology carried the work on, in co-operation with the Camborne School of Mines.
  One of the firms involved is called Geoscience, and is based near Falmouth. Heat pumps can produce five units of heat from one unit of energy derived by using the geothermal technology. The firm was concerned about the fact that it was paying VAT on heat pumps at the normal rate. I lobbied my hon. Friend the Economic Secretary about that, and I am glad to say that he listened. As a result, the rate was reduced in the Budget to 5 per cent. The people at Geoscience are delighted at that change. Although the Budget debate may seem fairly obscure to many, people in Cornwall who have a specific answer to the world's climate problems were listened to by Ministers, and I am very grateful for that.
  The Economic Secretary to the Treasury (John Healey): That is because they have a good MP.
  Ms Atherton: My hon. Friend is very kind.
  Another issue exercising many of my constituents also has to do with VAT—this time as it applies to church repairs. The saga has been a long one, and most hon. Members will have heard from constituents about it. The database that my office holds of constituents who have written to ask that the Government listen to their proposals about VAT on church repairs contains a list of names that runs into four figures. I suspect that that reflects Cornwall's strength of community feeling and its tradition of church attendance. People are very closely involved in their communities and parishes. The county has some fantastic churches, but they cost a huge amount of money to repair. They are a source of great pride to the community. They grew out of the mining communities and had to be big, because they had congregations of many thousands of people. Now they may serve only a few hundred people in each village, but they are still an important part of the community. I am grateful that Ministers listened on that point, too.
  I also represent many pensioners. I was out in my constituency last weekend and an older pensioner said to me, "I want you to tell them up there that for the first time in my life I have some money left in my purse at the end of the week. Now we are going to have an extra £100 and I am absolutely delighted." Older pensioners are often women who did not have pension provision when they were younger. The extra help that they will get from the Government is welcomed. They do not want the extra added to their pension, as the Opposition propose. They like having a lump sum, whether in the form of the winter fuel payment or the extra £100 to address council tax rises, because it gives them flexibility. The extra £100 was warmly welcomed in my constituency. In a debate on my local radio station, pensioners said clearly that it was what they wanted.
  Sir Robert Smith: Does the hon. Lady agree that
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  pensioners are welcoming a payment that will be paid to them all, without any need to fill in any application forms? As the hon. Member for Wycombe (Mr. Goodman) pointed out, the problem with some Government pension policy is that many people—by—definition, the poorest pensioners, because they were the ones who were eligible for pension credit—do not claim pension credit and so miss out, whereas if the sum were part of their pension they would be guaranteed it.
  Ms Atherton: That is the problem. There are two options. One either gives a small amount to everyone, or one targets the money on those pensioners who most need it. They must also be given the assistance they need to tackle the applications. In my area, a representative from Kerrier district council will visit pensioners' homes and fill in the forms with them. Pensioners can also apply by telephone. They do not have to stand around in front of other people in some building to fill in the form. The forms have also been significantly improved. One pensioner asked me, "Why does it ask me if I have children?" As I told her, I have a family friend who is 88 and has a 13-year-old daughter. We can debate whether 88 is the age to be charging around with a 13-year-old, but that is the reality. Our lifestyles have changed and many pensioners have child care responsibilities. The forms can be complicated, but assistance is available. Pensioners in my constituency are delighted with the Budget and I thank my Front-Bench colleagues for that.
  The money for schools will also be warmly welcomed. The head of Penryn school, Marie Hunter, will use some of the extra money for her fantastic summer scheme for children in the Penryn area. Last year, hundreds of young people took part in the scheme, and as a result not one of them came to the attention of the police. She is very proud of that and it is fantastic that young people who might not otherwise have the opportunity get the chance to do things. Marie Hunter lobbied me for more money to be paid directly to schools and I am sure that she will use the extra to assist with the summer scheme.
  We do have problems in Cornwall, and I must raise them with Ministers. They will know that Cornwall has achieved objective 1 status—the highest level of structural funds—to tackle its long-standing economic problems. Despite the fantastic work that has been done, we still have only 59 per cent of the European average for gross domestic product. That puts us on a par with Greek islands. We are the poorest region in northern Europe, and that is tragic. It is a challenge for all of us to tackle those longstanding problems.
  I do not want give the impression that the Government have not been tackling those problems in Cornwall. We are tackling the infrastructure problems. The Government are dualling the A30 at Gossmoor. Any hon. Member who has ever come to Cornwall in the summer and has tried to go from east to west will know that that huge bottleneck has been a nightmare for many years. That work is being fast-tracked by the Highways Agency. Almost everyone except Swampy agrees that that is absolutely fantastic. The Government, through Social Research Associates, are dualling the A30, and we are using objective I funds to assist us in that. That work will decrease journey times by 30 minutes. That may not sound much to most hon. Members, but that makes a huge difference to a five or six-hour journey.

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  We have the largest number of small and medium-sized businesses in the country. I often laugh when we talk about SMEs, given that when we talk about a small business, we may be talking about one person; that when we talk about a medium-sized business, we may mean a business that employs five people; and that, to some, a business with 30 employees is a large business. The definition of an SME depends on where you come from, but the money in the Budget to help small businesses will be welcomed.
  As I say, we are doing a lot. We have the Eden project, which I hope many hon. Members have visited. The maritime museum in Falmouth has the small boats collection from Greenwich. What is happening with that museum, the Tate at St. Ives and our gardens is that people are coming to the county, not for the six weeks of the bucket-and-spade season, but all year round. One hotelier told a colleague, "I've got a bone to pick with you"—as every politician knows, people stand back when someone says that—"I have had to put central heating in my hotel because I've got visitors coming all year round." I think it is a real success when hoteliers have to put in central heating because tourists are visiting the country all year round.
  My constituency has one of the few urban regeneration companies in the country. It is conserving the Camborne, Pool and Redruth community. The closure of the coal mines was pretty dramatic and, as result, there were dramatic responses from the Government. The situation with tin was very different. Tin mines closed over hundreds of years. There were times when the decline was sharp, but it was usually gradual and, as result, it slipped by—no one really noticed, except for people in Cornwall. As a result, there was never a sense that we had to tackle the problem, until now. In the Budget, we have money that will help the Camborne, Pool, Redruth urban regeneration company to make a difference to the lives of the people in that community.
  We have the largest amount of derelict land in the country. When people think of Cornwall, the last thing they think of is derelict land. In fact, west Cornwall is full of derelict land. The money for housing in the Budget will really help us.
  We are working hard in Cornwall. We are trying to tackle the problems that we have inherited. The people are committed to working for the county. The Government are working for the country. A lot of good things are happening. I ask the Government to help us with the next round of objective 1. We want quality jobs, quality homes and quality skills. There was more for us in that respect in the Budget. I thank the Government and ask them please to keep helping us.
  4.48 pm
  Mr. Tony McWalter: It is pleasure to follow my hon. Friend the Member for Falmouth and Camborne (Ms Atherton) in the debate, particularly as I had the pleasure of visiting the Eden project very recently. I commend that project to all hon. Members and, indeed, all members of the public, as a marvellous place to visit.
  I rise to speak as a member of the Science and Technology Committee, so I shall concentrate on the Budget's implications for science. In doing so, I want to
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  dwell on a general theme of whether the Budget will help to procure what might be called fair contracts between generations. Earlier, members of the Conservative Front Bench suggested that the Government have a tendency to profligacy and to consume the seed corn of future generations. The implication was that an unsustainable deficit today would have to be paid for by our children tomorrow.
  The Budget's vision and long-term approach to science gives the lie to that accusation. It is no accident that the Chancellor used the word "science" 13 times in his speech. Investing now in science will not simply enhance the lifestyles of tomorrow but of generations to come. I worry about whether there is in Government sufficient understanding of science and enough of a scientific culture to get that investment right. Time after time, when the Science and Technology Committee seeks out the person in a Department who ought to know about mathematical models, understand a certain third world engineering project or appreciate all the other ways in which science impacts on government, it is often the case that no one can be found to deal with such matters. When the director general of the Natural Environment Research Council addressed the Committee last week, he stated that when he tried to find someone in Government to discuss matters that concerned him, he could not find anybody sensible to address.
  The Government's emphasis on science is to be greatly welcomed—as is some collateral reconfiguration of the civil service. However, that must go hand in hand with intelligence, foresight and appropriate information—to retain the expertise needed in government to protect our country's productivity and affluence for generations to come.
  What prospects are there of an enhanced science budget?The Committee is worried that there does not seem to be much of a vision of how energy is to be procured in decades ahead. Laudable targets for carbon reductions by the year 2020 are all very well but we must ensure that non-carboniferous energy generating systems are in place. The Committee found that the Government must take some real risks if they are to deliver a non-carboniferous or reduced carbon energy system, and thought that wave and tidal power offers the potential for an extraordinary payoff in meeting targets and reconfiguring energy systems in a non-carboniferous, non-nuclear way.
  We began to get somewhere with the Department of Trade and Industry, but—truth to tell—we need the instruments for securing huge investment in a technology that is of dubious return and which perhaps involves building something a bit like the millennium dome but on its side and in the sea. For some strange reason, such a project did not appeal to people who were asked to put their hands in their pockets now for a dubious outcome in terms of a working project in, say, 2011. That money is difficult to raise through venture capital and the private system, but a Government with a vision of how we will generate energy in future really need to look at priming the pump of such enterprises. We are not talking here of the £5 million or £10 million that the Government have vouchsafed—that money is welcome—but of an awful lot more if such ideas are to go from trial to something like empirical proof.

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  Apart from energy, the general issue with the science budget relates to the huge difficulties in the education system. One of the great strengths in the British economy has been the extraordinary extent to which we have been able to generate science graduates, particularly in those subjects that require a high degree of mathematical attainment. There has been an astonishing fall in the number of people doing advanced level maths and continuing to develop those skills. However, wherever one looks in the world of science, those skills have a premium. Indeed, some might say that those skills should have a higher premium in Parliament itself, and particularly in Budget debates.
  Losing the trained people that we need in many sectors becomes an issue when we face a crisis, as we did with foot and mouth disease, and find that the mathematical models of disease spread are, unfortunately, ill developed and ill defined. I suppose that we have to make policy almost quite literally on the hoof. It is a bad day when this country lacks the capacity to invest in science and its future.
  We have also asked the Government to consider following the Taylor report's recommendations on investment in two new nano-fabrication facilities that involve cutting-edge nanotechnology and materials that are 10-9 of a centimetre. The Taylor report says that many advanced industrial countries will make their living out of such technology for the next decade or two or more. We want the capacity for people to take an idea about a system that may, for example, replace ball bearings through to manufacture, test and experiment, to see whether it is possible to turn an idea into an industry that employs people and pays our way in the world.
  I say with regret that, so far, there has been decided reticence on the part of the Government to back such initiatives, but I believe that the Budget signals, in its appraisal of science, a willingness to go beyond the hesitant pussyfooting that has sometimes characterised Government responses to recommendations such as those made by Taylor. Instead, it signals the potential to secure investment that might go wrong. After all, that is the nature of this business—things can go wrong, so one might invest and get a bloody nose. However, if several such investments are made, out of the experiments and initiatives come ideas and industries for the future. Many in our society do not give much thought to the energy supply in 2015, the industrial structure of 2015 or the extent to which global warming will damage our country in 2015, but it is nevertheless in their interests to invest now for that future.
  One example of a possible investment that the inventors would wish me to mention is what is called Beagle 2A, although one might call it Beagle 3, because it will follow Beagle 2 as an effort to try to understand Mars—that is, the planet—by using robotic systems. Those systems involve tremendous ingenuity, and it is possible that they have the capacity to be developed on an industrial scale. For example, a small-scale spectrometer was an integral part of the Beagle 2 project. The new project cannot be called "Beagle 3", because someone has already appropriated the name with a view to using it as a marketing ploy. That situation illustrates in a microcosm the extent to which
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  we can invent things in Britain and have fantastic ideas—even though it must be said that Professor Pilkington had enormous difficulty raising the £25 million that he needed to get Beagle 2 under way—but then seem to lack the capacity to move from the idea, or spark, and relatively modest investment toward a system in which there is a real programme to develop volume, workers and capacity.
  I know of a nanotechnology project involving a company that remains pre-revenue after six years and is in danger of dying and being taken over by the United States because the last chunk of capital and support for its 15 workers is being denied. We must try to ensure that the tremendously welcome science budget is actually converted into projects that will be of real benefit for generations to come.
  I began by saying that I would emphasise the science side of the Budget quite a lot, but I also said that I would comment on the contract between the generations. If the Budget is displaying long-sightedness about the extent to which we are trying to look after the interests of future generations, it is also vital that we look after the generation in the here and now. I did not agree with the hon. Member for Northavon (Mr. Webb) when he said that the £100 council tax contribution was a bribe. I wrote a letter to the Prime Minister before Christmas in which I said that the matter was one of the most vexatious issues in my constituency. I asked him to do. something, so I do not think that the measure is a bribe—it is sheer responsiveness. It shows that if the burden of council tax has reached a stage at which it is no longer seen as fair and manageable—
  Angus Robertson: It is a backhander, not a bribe.
  Mr. McWalter: The hon. Gentleman mutters about backhanders rather than bribes. What do Opposition Members want? Do they want us to say that we will not address the issue because if we do, people will think that we are doing so for awful motives? We should tackle it because that is the right thing to do.
  Sir Robert Smith: The hon. Gentleman is right—at least the Government have, at the very last moment, recognised the seriousness of the problem that people have been telling them about for a considerable time. However, it is a sticking-plaster solution and it is only available this year—it is not promised for future years. Surely, the Government should promise to reform the way in which we fund local government and, in particular, make sure that taxation for local government is based on people's ability to pay.
  Mr. McWalter: I agree with the hon. Gentleman, although I suspect that I disagree with him about the way in which those funds are to be procured. The most difficult issue in the Budget to address is ability to pay. The hon. Member for Wycombe (Mr. Goodman) made an excellent speech about the way in which we understand and deal with poverty, which is a problem in Wycombe and my constituency of Hemel Hempstead. I am constantly sounding off to the Chancellor about HIND—high income, none disposable—people. Some individuals do not have any disposable income because their housing costs are so high that de facto they are in poverty, even if on paper they do not appear to be.

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  I dealt with a case in my constituency involving a single mum with two children. She drove a fairly new BMW 5 series, but in fact she had almost no disposable income, and her company required her to drive that car because it wanted her to portray a certain image to clients. The taxation that she paid on her income and the car meant that the family—and I visited their home—were in desperate straits. What constitutes poverty is therefore not always clear, and we must look at disposable income. I am not chastising the Government—it is a hugely difficult issue. My right hon. Friend the Secretary of State for Work and Pensions has pointed out in the past that it is difficult to make benefits sensitive to housing costs, which contribute to the problem of achieving a fair system. As those housing cost difficulties are addressed—and I welcome the emphasis in the Budget on the Barker report and the Miles report—the housing system will become more manageable and housing costs will bear down less harshly on people in Wycombe, Hemel Hempstead and other constituencies. The contract between generations, the emphasis on housing and the attempt to provide appropriate resources will be important in future and are integral virtues of the Budget.
  I touched on the current difficulties facing the older generation when I spoke about relief on council tax, but it would not be right not to say something about the pensioners, particularly in my constituency, of the Dexion company who are victims of a measure that I call the "The Dangerous Dogs (Pensions) Act 1995". It came into force on 6 April 1997, less than a month before the Government took office, and established a system in which pensioners of companies that went bust got their pension if the fund could manage it. If, however, people were not quite pensioners, they would be at the end of the line and might well end up with nothing. That is a most extraordinary injustice.
  I have a constituent who is a pensioner now but was not yet a pensioner at the time the company went into liquidation. He had paid for 38 years and was two days away from getting his pension when the foul Pensions Act 1995 bit him. Progress has been made on the issue and, as the debate continues, I hope people will see that just as we must do the right thing by future generations to protect their interests—I have suggested that there are various ways in which the Budget does that we must do the right thing also by the current generation who have been the victims of a major injustice.
  I shall conclude by saying something about the resources that the Budget generates. I have spoken about science and welcomed the tremendous new initiative, but suggested that there should be close parliamentary monitoring to ascertain whether those resources are used wisely and well or foolishly and badly. The Opposition always assume that if we set out to raise money, that is the propaedia to throwing it all in the bin. We must ensure here in Parliament—all of us, Opposition, Back Benchers and Front Benchers—that the money is used wisely and well.
  I welcome the Chancellor's emphasis on resource accounting, but I sometimes wonder whether we do it well enough. I am particularly worried about some of the things that are going on in the health service, and I hope that those on the Front Bench will take heed of the fact that a Labour Back Bencher sometimes worries about whether the money coming into the system is
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  being spent as effectively as it might be. I have in mind the fact that the budget of my local strategic health authority is scheduled to go up from £900 million a year to £1.6 billion. That is a huge increase, which takes us out of a condition of deficit financing, to which the hon. Member for Wycombe referred—a condition of always being in debt and of people always making decisions based on the fact that the books do not quite balance and we must make more cuts. We are not in that position now, I am told. The debt-ridden health system should finally be a thing of the past and we should have the resources to tackle the recommendations of the Wanless report.
  I very much welcome that, but the question is whether we are making the best use of the resources, the capital, the investment and the people we have. If we do the resource account badly, we could end up with the situation that we experienced at Hemel Hempstead hospital. For all I know, my right hon. Friend the Chief Secretary to the Treasury may have been born there. His mother still lives in Hemel Hempstead. The new maternity unit is nine years old and still sparkling new, with a wonderful special care baby unit. What did management do? They said, "Well, it's very nice and it cost us quite a bit of money, but unfortunately we're a bit debt ridden and it's very hard to get staff these days. It's an expensive part of the country and people always want to go somewhere else because their quality of life would be better, so sorry about this, but we are going to put the slammers on it. We're going to shut it."
  If we have built up resources costing millions of pounds and we shut them early, that is as close to stupidity as policy making ever could be. We must ensure that, if we are going to do resource accounting, it is not merely a technical exercise that we do on a piece of paper with a quill but something that we do in practice by using the judgment of those who understand the bricks and mortar., who see the capacity, and who talk to the people involved. We also need active Members of Parliament and those who assist them to try to monitor all this expenditure, to ensure that it is used wisely and well.
  On my own patch, I want to see the Wanless agenda introduced. I welcome the extra money because, once we get away from a deficit health system, the issues that are never addressed, such as mental health, geriatric help or dementia—issues that are always right down at the far end of the food chain under a deficit health system—can now be addressed. However, they will not be addressed if we do not do our resource accounting properly.
  Mr. Mark Francois: Will the hon. Gentleman give way?
  Mr. McWalter: I was just about to give up, but I would be happy to take the hon. Gentleman's intervention.
  Mr. Francois: I thank the hon. Gentleman for giving way just before he sits down. Does he agree that a particular problem associated with NHS expenditure is the fact that private finance initiative projects are often so bureaucratic that it takes a long time for the system to spend the money, and that a great deal of that money

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  is therefore wasted because of the time that it takes to get through it? Surely something can be done to make the system more efficient.
  Mr. McWalter: I am amazed that the hon. Gentleman's intervention was so tame and tender. I agree with what he says, but there has also been a lot of talk from Members on his own Benches about how wonderful PFI is. In my local health trust, the local PFI outgoings for this year are zero, but it still has a huge problem managing its resource base. I hate to think what would happen in grandiose systems in which such outgoings were quite substantial. The problem of being in chronic debt would simply be regenerated all over again. I understand why the Government sometimes want these projects to be managed at so-called arm's length. The trouble is, however, that if the arms get too long, the projects end up out of sight of those who are committed to the process of parliamentary scrutiny. We must make very sure that that never happens.
  I began by making certain points about science and about justice between the generations. This is a wise Budget, in that much of what it does seeks a balance of interest between the generations. I welcome the resources that it proposes and I look forward to the intensive process of scrutinising in great detail all the projects that will emerge from those extra resources.
  5.18 pm
  Mr. Geoffrey Clifton-Brown: It is a pleasure to follow the hon. Member for Hemel Hempstead (Mr. McWalter). I was interested to hear that he was about to give up, as I am sure the Conservative prospective parliamentary candidate in his constituency, Mike Penning, will be interested. His comment was really just a confirmation of what the rest of the House, particularly Opposition Members, knew already.
  It is a characteristic of Chancellors that they claim credit for everything that goes right and blame everyone else for everything that goes wrong. This Budget went in for fiscal tightening and monetary loosening, but that state of affairs cannot go on indefinitely. I suspect that it was arrived at bearing in mind the date at which the British people will be able to give their verdict on it. That is why it would be useful to point out to them why we believe that it is unsustainable in the long run.
  Certain aspects of the Budget are to be warmly welcomed. I give the Chancellor credit for achieving his predicted growth rate this year—contrary to the predictions of many well informed economic commentators, and, indeed, to my own forecast. I suppose that it was that, alongside the relatively full employment of which the Chancellor made much, that allowed him to proceed with what I believe to be his unsustainable expenditure increases. Indeed, were it not for those two factors, I suspect that those expenditure increases would become reckless rather than unsustainable.
  Other aspects of the Budget are to be welcomed. Many Members have paid tribute to the £100 one-off payment to pensioners, but it is a bit mean giving with one hand and taking more away with the other. We have
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  all seen the considerable increases in council tax this year, and there were even bigger increases last year. I am sure that we have all had difficult cases in our surgeries. For example, a man told me in my surgery the other day that his small occupational pension takes his income above all benefit entitlements, but that the increase in his occupational pension and state pension this year is much less than the increase in the council tax. It is because of the increase in council tax, therefore, that his standard of living will be reduced. That is unsustainable and unsatisfactory, and we must consider how the money raised locally in council tax reflects more accurately local government functions. One main reason why council tax has got out of control is that the Government keep giving local authorities more and more duties and responsibilities without providing the proper funding.
  I want to comment on the fiscal side of the Budget, and then on the monetary side. As I said, this is a fiscal-tightening Budget, which is due largely to not indexing the relief on most taxes, as table A3.1 on page 210 of the Red Book shows. As a result, we will have fiscal tightening of about £750 million which, taking into account enforcement and compliance, will total about £1 billion. Those are fairly small figures in historical terms for this Government, because the previous economic situation must be taken into account. They have already introduced 60 extra taxes, which is a doubling of the rate of tax take, costing the average family some £5,000. I am sure that, when it comes to the next general election, the British public will not be slow to take on board those tax increases.
  The only exception to the indexing of relief was small: relief on inheritance tax was raised from £255,000 to £263,000. That is small beer for many families. In many cases, particularly in the south of England, and especially in a constituency such as mine, the value of the house alone will use up nearly all inheritance tax relief. Nevertheless, the rise was welcome.
  That is completely overshadowed by the many other forms of relief that the Government have not indexed over seven years, such as stamp duty. When we left office in 1997, stamp duty raised a few hundred million pounds in revenue; today, it raises several billion pounds. That is because seven years ago the relief of £60,000 used to buy a reasonable, small house, but today, in most constituencies in the south of England, it would be impossible to buy much more than a box for £60,000. The stamp duty imposed by this Government is becoming a significant cost to many people who have to move house for their job.
  I want to comment on strip stamps, which are not what some hon. Members might suppose, but are related to the fraud and evasion of tax on spirits. I declare an interest as the chairman of the all-party wine group. I have made a spirited speech on this subject in Westminster Hall. The Government—I spoke to the Economic Secretary last night on the subject, and I am grateful to him for offering to talk further to members of the trade—say that £600 million a year is lost in fraud, and that strip stamps, which are duty-paid stamps to be put over corks or caps of bottles of spirits, will cost only £50 million to introduce. That is an overestimate followed by an underestimate. The trade reckons that roughly £250 million in revenue is lost, and that the

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  measure could cost as much as £150 million to implement. The Government therefore still have a lot of thinking to do on strip stamps.
  Sir Robert Smith: It is clear from evidence given by Customs and Excise to the Scottish Affairs Committee that it has not got to grips with the current ways of trying to tackle fraud before imposing a bureaucratic nightmare that could, in fact, open the door to other forms of fraud.
  Mr. Clifton-Brown: I agree. The all-party wine group went to Dover to observe the work of Her Majesty's Customs and Excise, and found that what I have called on the Government to do in the Finance Bill for seven years has now been done. Customs and Excise has installed a large machine that can X-ray an entire heavy goods vehicle in one go, and more customs officers have been employed. When the Government came to power, they said that they would cut the number of customs officers.
  All those are helpful enforcement measures, but I think that the Government should consider all possible means of enforcement rather than imposing a bureaucratic burden on the spirits industry. I do not even think that it will necessarily work, because the strip stamp system is inherently open to fraud. It has not worked in Poland, or in other countries.
  Let me now say something about the Government's monetary policy. Table C1 on page 244 of the Red Book shows that the Government are borrowing £37.5 billion this year, and the amount is rising. It also tells us that gross gilt sales this year will amount to £49.8 billion. If those amounts continue to rise, they will become unsustainable—and we should take into account not just the figures above the line, which are shown in the Red Book, but those accumulating below the line, which are not. I am thinking of, for example, the £20 billion debt accumulated by the Strategic Rail Authority. The Government hardly bought a rail, hardly opened a new station, to build up that debt. The money was largely spent on consultants and lawyers in the process of putting Railtrack into administration—a shocking mismanagement of Government funds.
  There are several hundred billion pounds in the private finance initiative. My hon. Friend the Member for Gainsborough (Mr. Leigh) referred to the PFI, which we, the Conservative Government, introduced. It was an excellent idea, and the Government are taking great credit—the Chancellor did it again in the Budget statement—for building a tremendous number of new hospitals through it. The problem is that many of the contracts are let inadequately by the Government. My hon. Friend mentioned some of the problems, prompted by an intervention from me. The Government must become much smarter in letting those contracts and in wording them, so that some of the risk really is passed to the private sector. Otherwise they could borrow the money more cheaply themselves, and might as well fund projects directly.
  On page 271 of the Red Book, the Government say all the right things. They say that the public sector contracts to buy services from the private sector
  so as to take advantage of private sector management skills incentivised by having private finance at risk.
  778
  They go on to say, in the same paragraph,
  With PFI, the public sector defines what is required to meet public needs and ensures, by contract, delivery of the outputs it sets. It has rights under those contracts to change the output required from time to time.
  The trouble is that it does not do that. There are so many exceptions in the contracts, and the private sector is so much smarter at negotiating the exceptions, that the contracts are often extremely weak, and in some cases could be funded more cheaply by the public purse.
  As for the Government's so-called efficiency savings, there were great headlines in the press on Thursday morning suggesting that the Chancellor had somehow shot the Conservative fox. That was nonsense. The Government have taken on 390,000 civil servants, and will secure efficiency savings by making 40,000 redundant. They have been taking on civil servants at a rate of 511 a week for the past year. They are far too timid. They are doing too little too late. In any case, as always, they are adopting Conservative policies without having the necessary reasons or philosophy to follow them through.
  In the past, the Government and indeed the Chancellor have made great play of public service agreements. The Chief Secretary grins; he may wish to consider this carefully, as he has negotiated public service agreements in the past. The Chancellor abolished 130 of them in the Budget. Having taken great trouble to negotiate with Secretaries of State for other Departments, he finds that they cannot live up to the agreements and has to abolish them. I praise the Government for at least beginning to think about efficiency savings. It is too little, too late, but perhaps it is a good start.
  Others wish to speak, so I shall not take long. The Government are beginning at long last to consider outputs rather than inputs. Whenever the Prime Minister hears a criticism during Prime Minister's Question Time of the malfunction or dysfunction of any Department, his only answer is that the Government are spending so many more hundreds of millions or billions on the problem. He does not say that the money buys, for example, so many more operations. In recent years, expenditure on the health service has increased by 37.5 per cent., but in the same period, output in terms of operations has increased by only 4.8 per cent. Those figures clearly demonstrate that expenditure in Departments is not as good as it should be.
  Let us consider the social security budget. We are spending approximately £60 billion to £70 billion on the NHS, but it is predicted that we shall spend £150 billion on social security by 2005—06. In 2000—01, that budget broke the £100 billion mark for the first time. It has increased by 50 per cent. in five years. One does not begrudge giving people a hand up rather than a handout when they need it, but we must ascertain whether the money is being spent wisely.
  Until last week, I was a housing spokesman for our party. When in an official capacity, I join the ranks of the silent ones, but when I am on the Back Benches, I can make speeches. It is a shocking indictment of the Government—[Interruption.] If the Chief Secretary would listen to me instead of gesticulating amusingly, he might like to take account of this shocking statistic. After seven years of a Labour Government, the Select

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  Committee on the Office of the Deputy Prime Minister has confirmed that we have the highest number of homeless families that the country has ever experienced. That is a shocking indictment of the Government. I intervened on my hon. Friend the Member for Wycombe (Mr. Goodman) to emphasise that the hard facts in those global statistics are that the number of homeless families with children has increased and the number of those living in bed-and-breakfast accommodation has more than doubled from 4,500 to more than 10,000. Putting people in bed and breakfast is a huge waste of human and financial resources. They have a miserable life.
  We were building almost double the amount of social housing when we left office in 1997—some 35,000 houses compared with approximately 20,000 that the Government are building today. They are not building enough social and affordable houses. We have suggested extending the right to buy and using the proceeds to fund a considerable increase in affordable and social housing without any cost to the taxpayer.
  Table C13 on page 269 of the Red Book shows that the ODPM's capital budget will increase from £1.5 billion to only £2.4 billion. How will the Government start to solve some of the housing problems, let alone fund the huge sustainable communities plans under which they have committed themselves to spending a great deal? The Prime Minister chairs the Cabinet Committee that deals with the Thames gateway community project. It is called Misc 22 and likes to remain secret because it produces neither a sustainable plan nor communities worthy of the name. It certainly has not managed to attract the very large amount of private finance that it will need to attract to build the infrastructure to accompany the 140,000 houses that are predicted for the Thames gateway over the next 12 to 14 years.
  The Government have a problem with their housing policy. They have a problem with their communities plans. They are putting the wrong houses in the wrong places. We do not have joined-up government. They are not committing themselves to the infrastructure that is needed for the communities plans. There is much to be done. Although, as always with this Chancellor, the Budget glittered on the day, once one starts to get into the detail, one begins to see a number of black holes.
  Several hon. Members rose
  Madam Deputy Speaker: Order. Several hon. Members are hoping to catch my eye. If contributions are brief, more may be successful in doing so.
  5.35 pm
  Ms Joan Walley: I can agree with the hon. Member for Cotswold (Mr. Clifton-Brown) on one thing: we need to take action urgently on housing. In that respect, I am pleased that in Budget 2004 the Chancellor paid such regard to Kate Barker's report. Housing is featuring now, and will feature in future. I am particularly pleased about that. It means that in my constituency in north Staffordshire, there will be a £2 billion housing investment programme over 15 years, and we shall invest in housing as we need to do.
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  Listening to the Budget debate, including the golden oldie that we heard from the former Chancellor of the Exchequer, the right hon. and learned Member for Rushcliffe (Mr. Clarke), about the golden rule, I was pleased that the current Chancellor has produced a Budget that will really deal with the economic situation and with investment in jobs, which we desperately need, especially in areas such as mine, where we have the huge legacy of Conservative Governments—the destruction of many of our traditional industries. We must now provide the employment opportunities.
  The Budget commends itself to me because the Chancellor is genuinely dealing with environmental issues. Only months ago, we heard from the Government's chief adviser that the threat of global warming was as great as the threat of terrorism. It is important that the Chancellor is at last setting out ways to address global warming. We have environmental issues and we have the prospect at long last of action on energy efficiency. Those of us who have campaigned over many years can now see that there will be real improvement that will make a difference. Many environmental groups will welcome that move in the Budget.
  My hon. Friend the Member for Ochil (Mr. O'Neill) talked about the Scotch Whisky Association, and that reminded me that Budgets in the past were often just about smoking and drinking. Whatever he might say about the changes that he would like for Scotch whisky, I have read the small print of the Budget and I am pleased. The Campaign for Real Ale has campaigned alongside the Titanic brewery in my constituency to extend the small breweries relief. It is good that we have a listening Chancellor who is looking at the issues in regional economies. It is important that we listen to what people are saying to us.
  I see in his place my hon. Friend the Member for Leigh (Andy Burnham), who has done so much work on football. In the Budget there is at long last an undertaking to look at the role of football supporters trusts. Many of my hon. Friends, and Opposition Members, have had to deal with the prospect of football clubs going into administration. The Chancellor and the Inland Revenue needed to think about that issue, and there it is—a small welcome paragraph saying that the Chancellor will look at the work of football supporters trusts.
  The Budget is about jobs, pensions and, more importantly, education. It recognises that, if we are to provide the boost to the economy that is desperately needed and to build on the success that the Chancellor has had so far, we need to concentrate on employment and ensuring that people have a proper, fair wage for the work that they do. That is why the improvements to the minimum wage, particularly for 16 and 17-year-olds, will be so welcomed in my constituency. No action is ever enough, but the Chancellor has shown that the Government care about people receiving a decent wage, work being made to pay, and local economies being boosted, so that we can have that sense of well-being that does so much to improve our areas.
  One key aspect of the Budget is the huge investment in education. I have to say a word of thanks to the Chancellor, because Stoke-on-Trent is again to be at the

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  forefront of the programme to allocate extra money to the rebuilding of secondary schools. We could never even have dreamt of such a programme under the Conservative Government.
  The Government are not merely dealing with schools, but are starting with early years provision, and have given a commitment that every deprived ward will have a children's centre by 2008. Only last week my right hon. Friend the Minister for Children visited my constituency and saw how desperately we need a children's centre at Chell Heath. I must tell the Chancellor and my right hon. Friend the Chief Secretary that it is critical that the investment outlined in the Budget be made to work on the ground.
  My right hon. Friend the Member for Coatbridge and Chryston (Mr. Clarke) mentioned people with disabilities. There are elements in the Budget that will make ours a fairer society for people with disabilities, which will be welcomed throughout the country.
  Bearing in mind that you wish us to be brief in this closing part of the Budget debate, Madam Deputy Speaker, I shall concentrate on just one issue, which I hope the Chief Secretary will address when he replies to the debate. The Budget has given a real commitment to put into practice the findings of Sir Michael Lyons's review. if we are to build on all the investment in the economy, it is important to ensure that in any relocation, civil service jobs go not only to the larger "premiership" cities such as Liverpool, Manchester and Birmingham, but to other urban areas that have so far not had their fair share of Government jobs. I put in a particular plea for north Staffordshire to feature in the work that the Chancellor does in the coming months, so that new jobs will be brought to our area.
  The two back-up reports for Sir Michael Lyons's review—undertaken by Evian and King Sturge—do not really take account of the extent of deprivation in areas such as north Staffordshire. They tend to see the benefits of taking jobs away from the south-east as flowing from possible synergy with investment that has already been made in certain other parts of the country—for example, in the health jobs already in Sheffield or the passport office already in Liverpool. In transferring those jobs, location is all-important: location, location, location. North Staffordshire should be one of those locations.
  My colleagues who represent other north Staffordshire constituencies feel as strongly as the North Staffordshire chamber of commerce, the local authorities and I do that the jobs that are brought to north Staffordshire should not be just back-street jobs, but the professional and managerial jobs that will help to regenerate the area. The introduction of such jobs would sit side by side with the housing pathfinder work that is bringing in £2 billion over 15 years, and would match the investment in learning and skills spearheaded by our learning and skills council and by Advantage West Midlands in the north Staffordshire regeneration zone.
  We have to make certain that when the Government tell us how they will proceed with the relocation of jobs, they have a transparent procedure. If the so-called consultants, who have looked at some 102 cities around the country, have not bothered to flag up north Staffordshire as an area that can benefit, I will want to know why. I want the Chief Secretary to get back to the
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  people of north Staffordshire and start top-level talks to ensure that everything that we want to do on the ground will be reinforced by a proper relocation of jobs to the area.
  I hope that the Government can take away that message from this debate. We in north Staffordshire are very keen and eager in that regard, and we want nothing more than to work as closely as possible with the Government to regenerate our economy not only nationally, but in north Staffordshire, where this issue matters so much.
  5.46 pm
  Mr. David Cameron: It is a pleasure to follow the hon. Member for Stoke-on-Trent, North (Ms Walley), who spoke very powerfully for her constituents. I shall talk about whether the Labour tax and spend experiment of the past four years has actually worked, but first I want to make a couple of preliminary remarks. I start where my hon. Friend—and neighbour—the Member for Cotswold (Mr. Clifton-Brown) began, with the so-called shot fox of cost savings and waste in government. I suspect that he is not really in favour of shooting foxes in any event, but as far as I can see this fox is alive and well and living in Whitehall.
  We Conservatives have been saying that there is a lot of Government waste and bad spending, and suddenly the Chancellor has said, "Yes, we're wasting £20 billion a year, and 40,000 jobs in the civil service are surplus to requirements." That is a big change in the terms of trade in the debate on tax and spend, because until now, we have been told that every pound that we attempt to save in public services is a pound off the nurses' pay bill, or a pound off front-line services. Now we know that, as we have been saying all along, it is possible to save money in central Government without hitting front-line services.
  As I listened to the Budget speech, three points struck me straight away that bear repeating. First, the Budget was highly political. Almost all of it was about us: about Conservative policies that the Chancellor has rejected, and about others—those involving saving money—that he has accepted; he had very little of merit to say for himself. Secondly, he made that last point clear by repeatedly talking about tax rates that he had decided to freeze, as if such taxes normally went up every year and such a freeze somehow constituted generosity. He said that he was generously freezing inheritance tax, income tax and capital gains tax, which proves how little he had to say.
  The third point that rang out from the Chancellor's speech is that tax is to come: if Labour gets in again, there will be third-term tax rises. The two figures that jumped out of the Budget speech were the £120 billion that the Chancellor plans to spend over the next five years, and the £140 billion that he plans to borrow.
  Mr. Bercow: My hon. Friend is making a characteristically robust contribution. In the context of taxes, is he aware of the sage verdict of the noble Lord Hattersley? In an article in The Guardian of 13 June 1995, he said that Labour could be either the party of higher taxes and proud of it, or the party of higher taxation that it is ashamed to describe, afraid to admit to and incapable of calculating with any accuracy.
  Mr. Cameron: I am afraid that, as someone who writes a column for The Guardian website, I take the

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  view that The Guardian is something to write for rather than to read. So I did not read that article, but I shall look it up.
  In the time remaining, I shall try to answer two questions: has most of the extra money spent by Labour on our public services been wasted, and if so, why? Those are the two most important questions in British politics today, and the answers to them will probably determine the outcome of the next general election.
  Of course, no one would claim that all the money has been wasted, but the case for saying that tax and spend, as an approach to improving our public services, has failed is overwhelming. We know that tax revenue has increased from £271 billion in 1996–97 to £429 billion in the forthcoming year. That amounts to an extra £6,300 for every family in this country. It has not all gone on paying off debt, because Government spending has increased from £317 billion in 1997 to £488 in the forthcoming year—a similar increase. Of course, the Government can and do point to building projects either completed or under way, and some successes on outcomes. I grant that in some respects, notably for primary school results, but the overall picture, as we have heard from many Conservative Members, is pretty dire.
  In our hospitals, there are a million people still on waiting lists, with mean and median waiting times for inpatient treatment up over the last four years. In our schools, truancy is up by a fifth since 1997, with 33,000 children leaving school each year without a GCSE. On our streets, violent crime is up by two-thirds, with gun crime doubled, yet the Home Office budget has increased by two-thirds over the Government's period of office.
  I believe that anger against the Government has been sharpened by three distinct questions being formed in the public mind. The first is a question about price. When inflation is low and the price of some goods in the shops is falling, people are asking why the cost of government and the public services is rising so rapidly.
  The second question is about quality. Families enjoy ever greater choice, and usually greater quality, in the areas of expenditure that they control, such as the family holiday or the family car. They are asking why the quality in the areas that they do not control—usually in the public sector—is often so poor.
  The third question is about how the moneys to pay for Labour's tax and spend experiment have been raised. Put simply, the question people ask is why Labour never admitted to plans for a tax and spend programme before introducing one. Before the last election, we heard nothing about national insurance increases and nothing about council tax increases. There was never any admission that we were moving into a tax and spend era, yet we all know that there have been 60 tax rises.
  For a while, the stealth tax approach of raising money through ever more ingenious routes actually worked. The raid on the pension funds was not felt immediately. The hikes in stamp duty were felt by those who moved house, but not by those who did not. It was the increase in council tax—up 70 per cent. since 1997—that affected every family in the country. Interestingly, opinion polls show that almost everyone accepts that the principal
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  cause of the increases is central Government. The same goes for national insurance contributions, because people see the money coming out of their pay packets.
  Conservative Members aim to prove that much of the extra money raised in taxes has been wasted. I would argue that when even the Chancellor himself admits that 40,000 jobs can be cut out of the public sector, and £20 billion saved, without cuts to front-line services, we are well on our way. I commend my right hon. Friend the shadow Chancellor for his work on those problems.
  We also have to explain why the Chancellor has failed in his mission to transform public services through tax and spend. Such a "narrative", to use a new Labour term, is not important for presentational reasons alone; it should form an important part of winning the intellectual argument about how we would do things differently and why a different approach would work.
  The Prime Minister's mantra about public services is "investment plus reform". He has a neat addendum when he says that Conservatives are against the investment, and that Liberal Democrats—and most of his own Back Benchers—are against reform. That is his neat mantra, but in order to explain why the money has been wasted, we have to prove that the reform has been a chimera and has not happened. I believe that it is easy to demonstrate that, which is exactly what I shall do in my remaining time.
  A key part of the task is to explain the different stages of Labour's reform since 1997. The Opposition have not said nearly enough about that, but the fact is that since taking office, Labour has completely changed direction on public services. Stage one was ruthless centralisation, scrapping almost every area of Conservative devolution and choice: nursery vouchers, trust hospitals, fundholding GPs, the internal market and grant-maintained schools. Anything that devolved power in the public services went.
  The second stage, which took place under the right hon. Member for Holborn and St. Pancras (Mr. Dobson) when he was Secretary of State for Health, and the current Home Secretary, who was then Secretary of State for Education and Employment, was rigorous centralisation and control from Whitehall. Stage three, now under way, is a complete reversal of stage two, with a new emphasis on decentralisation. The rhetoric accompanying that decentralisation was powerful. The Prime Minister's rhetoric is always extremely powerful, I find, but the reality is rather more flimsy. Foundation hospitals are a sort of return to trust hospitals, but the concept does not have much meaning. Financial flows are the new thing in the health service, but they are like a half-baked return to the internal market.
  The best example of new Labour's lack of clear thinking on how to reform the public services is the Education Act 2002. The House will recall that that legislation was about earned autonomy—that is, giving successful schools the right to manage more of their affairs. We debated it for months: it was passed two years ago, but the earned autonomy powers have never been introduced. Apparently, the Government have decided to give all schools more autonomy, so earned autonomy has gone out of the window. Have schools got more autonomy now? Of course not.
  Another element in explaining the Government's failure over public services is the web of bureaucracy on which their reforms rely. That is a subject that deserves

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  more comment. Any major piece of new Labour reforming legislation has at its heart the requirement that plans and strategies be drawn up and published. Such plans include those for policing and for combating antisocial behaviour; indeed, local government now has more plans than Soviet Russia used to have. To rephrase the John Lewis slogan, local government is never knowingly underplanned.
  Individually, the plans sound harmless, or even quite attractive. Taken together, however, they have spawned a culture of paperwork and bureaucracy in the public services. The best example is in policing, where every stop and search has to be recorded, and the paperwork involved in processing one arrest now takes up to five hours.
  A third element in an explanation of why the waste has happened is more widely understood. It is the over extension of targets set by central Government. As my hon. Friend the Member for Cotswold said earlier, many of those targets and public service agreements have been scrapped. The Government are now in headlong retreat, scrapping the targets that they introduced with such fanfare only a few years ago. However, the damage has already been done: the Government set off in one direction, they are now heading in another, and the taxpayer has been wholly ripped off meanwhile.
  A fourth and little noticed element in the story of waste, and of why Government reform has not worked, is the continuing strength of trade union influence. That may surprise people in this day and age. but anyone involved in the purchase or provision of private finance initiative projects will explain how schemes have been stalled while unions seek guarantees that they will be wholly staffed by public sector workers. I know one or two people in that area of work, and they tell me that rumours abound that the Chancellor tends to bend to such requests, in return for pledges of union support in a future Labour leadership contest. Who are we to question—
  Mr. Watson: indicated dissent.
  Mr. Cameron: I see that the hon. Member for West Bromwich, East (Mr. Watson) is chuckling at that. I believe that he has something of a trade union past. He probably knows more about it than I do.
  Mr. Watson: I know that it is complete nonsense.
  Mr. Cameron: My fifth point in explaining Labour waste, and why Government money has been wasted, is that an analysis of what I can only call "the new salariat" is needed. A vast new industry has been created, made up of regulatory bodies and agencies carved out of Government Departments. For instance, the Department for Environment, Food and Rural Affairs spawned the Food Standards Agency, the Department for Culture, Media and Sport produced Ofcom, and the
  786
  Department of Transport gave birth to the Strategic Rail Authority. Those are three examples, but I am sure that Opposition Members could name another 33.
  Andy Burnham: Will the hon. Gentleman give way?
  Mr. Cameron: Certainly, and I hope that the hon. Gentleman will give me another example of these new regulatory agencies in his intervention.
  Andy Burnham: The hon. Gentleman used to work in broadcasting. How many bodies were merged to form Ofcom?
  Mr. Cameron: A number of bodies were merged to form Ofcom, but what is interesting is the salaries paid to the people who work there. The new regulatory body industry is growing in size and scale all the time. Staff numbers and salary levels at all the agencies are on the increase, as is the incidence of "mission creep", yet none of the mother Departments—the Department for Culture, Media and Sport, the Department of Health or the Department of Trade and Industry, and so on—has ever seemed to get any smaller.
  Most important of all is the fact that Labour's reforms have included no significant element of consumer choice. My right hon. Friend the Member for West Dorset (Mr. Letwin) is fond of making the point—and it is a good one—that introducing an element of consumer choice into the public services means that the people who work in those services will tend to look downwards at the customer, rather than upwards at the bureaucracy. That point is wholly lost on the members of the Treasury Bench.
  Mr. Webb: I thought that the Conservatives had proposed that Ofcom's scope should be increased to take on the BBC as well.
  Mr. Cameron: Certainly, and that would mean that the BBC would no longer regulate itself, which would be an improvement. My point is straightforward. All those Departments have spawned new agencies. The Department for Transport is the best example, with all the different regulatory bodies and now the Strategic Rail Authority, which does what the Department used to do. Is the Department for Transport now smaller? I bet it is not.
  We have all read reports about the Labour party's support for freedom of choice, but virtually nothing has been done to introduce or extend it in the public sector. That is the real reason for the Government's failure to reform the public services adequately and for the waste of money that we have seen. That last part of the explanation for Labour's failure leads most clearly to our own prescription of choice and decentralisation. However, I urge my right hon. Friend the Member for West Dorset not to ignore the other parts. It may be a rather complex chain of interlocking arguments about changes in direction, waste, bureaucracy, unionisation, targets and central control, but it is the truth. In any event, it leads to a relatively simple conclusion that anyone can grasp: the Government have taken taxpayers' money and wasted it, and they have failed to tell the truth about that.
  6.1 pm
  Mr. Jim Cunningham: I was interested in the analysis made by the hon. Member for Witney (Mr. Cameron) of the past six or seven years, but he did not say how he would solve some of the problems that he outlined. It is worth recalling what happened when his party was in power. He talked about money being wasted on the public services, but I remember hospital closures. I remember people having to lie on trolleys because they could not get a bed. That is the Conservative legacy, and the hon. Gentleman seems to want to take us back to those days. We do not want to go back.
  People still remember school closures under the previous Administration and cuts in teacher numbers. No new schools were built. The hon. Gentleman wants to take us back to those days, in the name of what he calls waste, but there will always be an element of waste, as he well knows. To use that to justify taking the country back six or seven years is disgraceful. The hon. Gentleman should be honest and open and say that that is what he intends.
  I remember the years when waiting lists were long. We have reduced them. I remember when few new doctors were trained, but we are producing thousands of new doctors. In the Tory years, the number of nurses fell, but under us, it has increased. That is what we should be talking about, and I am glad that the Budget will continue those trends. The hon. Gentleman said that 1 million people are on the waiting list, but under this Government the number is falling. Under the Conservatives' policies, there would be 2 million, 3 million or 4 million people on the waiting list, and we would have hospital closures.
  The hon. Gentleman also mentioned the PFI, but the benefits of that initiative are debatable. It is like the Bible: everyone has a different view of it. I remind the hon. Gentleman that it was his party that introduced the PFI, and that was when the problems started, not in 1997. The Conservatives did not even manage to build a new hospital under the PFI, but they want to take the credit for the good aspects and none of the blame for the bad. They cannot rewrite history, no matter how often they try.
  I welcome the Pensions Bill. I am not ashamed to say that I have been a trade unionist for many years, and we have campaigned for the Bill, which is now in Committee. It will be amended, but it is a good Bill. In Coventry, we have suffered the closure of Massey Ferguson, which saw people put on the scrapheap, and they did not get a decent occupational pension. The issue is going to the House of Lords, so we cannot say too much about it, but it is worth reminding the Opposition that they introduced the Pensions Act 1995, which created many of the present problems with occupational schemes. We do not need any lessons from them.
  Mr. Letwin: Does the hon. Gentleman agree with us that unclaimed assets should be available to help to resolve those problems?
  Mr. Cunningham: Before I agreed with the right hon. Gentleman, I would want to know the value of the unclaimed assets and how long it would take to realise
  788
  them because we could be buying a pig in a poke if we listened to him. I would want to know the answer to that, what sums are involved and a bit more about what he is proposing.
  Rob Marris: On the sums involved, some schemes, notably that proposed by Professor Ros Altmann, have been touted as costing ?100 million a year. I have corresponded with her by e-mail, and the total package that she proposes involves, on average, £100 million a year over 60 years—?6 billion of Government money.
  Mr. Cunningham: I am glad that my hon. Friend has reminded me of that, and I am equally glad that I did not answer the right hon. Gentleman's question in the way that he wanted me to.
  The increase in the minimum wage is another part of the Budget that I obviously welcome. Lots of my hon. Friends would like it to be a little higher, but any increase is bound to be welcome.
  Mr. Letwin: I am most grateful to the hon. Gentleman for giving way again, as we seem to be having an interesting trilateral discussion. To handle the point made by the hon. Member for Wolverhampton, South-West (Rob Marris), if there were £6 billion of proved, unclaimed assets, would the hon. Gentleman agree to using that money for this purpose£
  Mr. Cunningham: I am not going to answer hypothetical questions; I repeat that I have not seen the figures, so it is pointless trying to push that argument.
  The business rate change is something else that I certainly welcome in the Budget. For the first time in many years, local authorities will be able to share out the rate, and they are bound to see that as being just. We must remember that the Conservative Government used the business rate to justify introducing the poll tax in the first place, but the business rate accounted for only 1.5 per cent. of any company's turnover.
  Mr. James Plaskitt: My hon. Friend mentions the minimum wage. Does he recall the Conservative party's forecasts that the minimum wage would destroy jobs? Can he confirm that many jobs have been created in his constituency, as in mine, since the introduction of the minimum wage?
  Mr. Cunningham: I can certainly confirm that. If my memory serves me correctly—I am sure that my hon. Friend would put me right if not—the Conservative party forecast that about 1 million jobs would be lost.
  Mr. David Borrow: Does my hon. Friend agree that the advantages of the minimum wage and good wages for workers are that they encourage employers to invest in their work force, so we get away from a low-wage, low-skill economy, which is the last place that Britain needs to be in the 21st century?
  Mr. Cunningham: I am glad that my hon. Friend raises that issue. I work in industry, and from time to time the House debates the lack of skills and, in some instances, people's lack of ability to acquire skills. Decent wages encourage people to take jobs in, for

  789
  example, manufacturing. In the past, young people have not always seen manufacturing as a way forward and a secure future because of upturns and downturns in the economy. Decent wages always act as an incentive, and we are looking for incentives to get young people back into industry and to acquire the necessary skills. Again, they can use decent wages, with further education and ultimately university, as a stepping stone, so that their knowledge and quality of life are increased. It is welcome that the Government have introduced the minimum wage.
  Opposition Members have talked about homelessness. I do not know the current homelessness figures, but I certainly remember that, under the Conservative Government, hon. Members did not have to walk very far from the House to find a lot of homeless people living in cardboard boxes. We do not see so much of that today. However, we must be concerned if a homeless problem is building up. It is worth reminding ourselves that councils were not allowed to build council houses under the previous Government. Opposition spokesmen say that that problem could be solved by allowing more council house sales and using the proceeds, but I seem to remember that local authorities were not allowed to use the proceeds. Once again, the Conservative party is back to the policies that it had when it was in government, and we know where that took us. Unemployment is now the lowest in our country's history, which says a lot about how to tackle poverty. High unemployment makes more demands on the National Health Service, benefits and other public services.
  Once again, the Chancellor's forecasts of growth have been correct. All the pundits admitted that they got it wrong and that my right hon. Friend got it right, but then they said he might be proved wrong nine month down the road. Anyone who can forecast growth nine months ahead must be good. I am sure that most companies would agree.
  Mr. Borrow: Over the past five or six years, businesses large and small in my constituency have appreciated the economic stability provided by Labour Governments, which allows them to plan and invest for the future, in contrast to 18 years of Conservative Government, under various Chancellors.
  Mr. Cunningham: In an interview on Budget day or not long after, Digby Jones, director general of the Confederation of British Industry, welcomed the fact that businesses could plan their costs and wages. Anything in the Budget that stabilises, reinforces and encourages businesses, large or small, must be a good thing.
  This is the second Budget in which the Chancellor has given extra impetus to the development of brownfield sites. In many inner cities, particularly in parts of Coventry, many brownfield sites that have been derelict for many years are now being developed. Equally, though, we must achieve a balance. If every brownfield site is developed, factories might be built on greenfield sites.
  790
  As a movie fan, I also welcome the assistance to the film industry. Many of the special effects used in Hollywood movies have been developed by talents in the British industry.
  Mr. Letwin: Does that mean that the hon. Gentleman regrets the passing of the film tax break, which threatened to cost the Treasury £1 billion a year, or does he welcome the Chancellor going back on his original scheme?
  Mr. Cunningham: The right hon. Gentleman is entitled to his opinion, but I welcome the Chancellor's measures. Given the pre-Budget predictions by some pundits that all was gloom and doom for the British film industry, I am glad that step was taken.
  I welcome the Chancellor's steady-as-she-goes Budget, which maintains investment in health, education and other public services, and I welcome the measures proposed on occupational pensions.
  Rob Marris: From his long history of trade union activities, my hon. Friend will be well aware of the manufacturing sector, and he, like me, represents a west midlands constituency—a key manufacturing area. Certain measures in this year's Budget, as in last year's, assist manufacturing, although there is more to do. Will my hon. Friend say more about manufacturing, particularly in the west midlands, and ways in which the Budget will assist venture capital, research and development, and so on?
  Mr. Cunningham: Research and development was underfunded in the past. When Rolls-Royce needed R and D aid, it was provided in the form of a loan—not a tax concession—that created many difficulties. Research and development also keeps universities on their toes. The universities of Warwick and Coventry are among many that undertake R and D for companies. R and D support also brings comfort to small employers with 10 to 20 staff, who have families and mortgages to pay and who want to sustain the standard of living that they have achieved through steady employment.
  Mr. Desmond Swayne: Before the hon. Gentleman took the intervention, he mentioned the impact that the Budget would have on pensions. Can he see any impact that the Budget measures will have on the Government's declared target to have 60 per cent. of pensions fully funded by 2050?
  Mr. Cunningham: I would not like to make any forecasts on the basis of that sort of question.
  Mr. David Ruffley: I am surprised that the hon. Gentleman has not said anything about the £28 billion savings gap. Can he explain what the Budget does to close it?
  Mr. Cunningham: We are all aware of the £28 billion savings gap, and the Chancellor certainly looked at that when he considered the tax situation. Many companies, particularly public utilities, were not reinvesting in their industries; they were taking the profits. They were

  791
  encouraged to reinvest, and the hon. Gentleman can get an independent report on that issue from the House of Commons Library.
  Mr. Bercow: Will the hon. Gentleman give way?
  Mr. Cunningham: I will give way for the last time, but I must then move on.
  Mr. Bercow: I am extremely grateful to the hon. Gentleman. Given his long-standing interest in the manufacturing sector and the extreme importance that all of us should attach to small and medium-sized enterprises within that sector, will he tell the House what assessment he has made of the Regulatory Flexibility Act 1980 and the Small Business Regulatory Enforcement Fairness Act 1996 in the United States?
  Mr. Cunningham: The hon. Gentleman can do his own analysis of that; I am certainly not going to.
  I welcome the Budget. It should be supported as it covers many of our concerns.
  6.16 pm
  Mr. Oliver Letwin: I must begin with a tribute to the hon. Member for Coventry, South (Mr. Cunningham). He held the House magnificently for longer than one might have supposed.
  This has been a most interesting debate, but I shall restrict myself to commenting on the speeches of Conservative Members. No doubt the Chief Secretary will comment on those made by Labour Members. My hon. Friend the Member for Havant (Mr. Willetts) illustrated brilliantly the impossibility of making administrative savings on a serious scale in the Department for Work and Pensions without simplifying the welfare system. My right hon. and learned Friend the Member for Rushcliffe (Mr. Clarke) identified with his customary clarity and mastery the key issue raised by the Budgetߞnamely Labour's third-term tax rises.[Interruption.] The Chancellor correctly identifies himself as the cause of that and enters the Chamber at the right moment.
  My hon. Friend the Member for Gainsborough (Mr. Leigh), from his lofty position as Chairman of the Public Accounts Committee, told the House about the horror stories of wasted money and made enormously valuable suggestions about how to reduce that waste. My hon. Friend the Member for Wycombe (Mr. Goodman) exposed with extreme lucidity the deficiencies of the Government's well-intentioned but misguided policies on poverty. My hon. Friend the Member for Cotswold (Mr. Clifton-Brown) surprised the House, because he made clear the remarkable fact that, although official borrowing this year is £37.5 billion, the Government are actually programmed to borrow £44 billion of cash. I owe him a profound debt for pointing that out. My hon. Friend the Member for Witney (Mr. Cameron) accurately pinpointed the causes why so much money has been wasted.
  792
  Today and on previous days, the Chancellor's Budget has been described as very political and very clever. It was certainly very political. Indeed, so far as I am aware, it is the first time in recent memory that the Chancellor has used his Budget speech almost entirely to respond to a speech by the shadow Chancellor. Perhaps further historical research in the Treasury will show that it was the most political Budget for more than 200 years. I doubt whether, in a few months' time, it will look very clever.
  Andy Burnham: The right hon. Gentleman began by commending his colleague the hon. Member for Havant (Mr. Willetts), who, I believe, began the debate by saying that the right hon. Gentleman had not made any specific statements on the defence budget but that the Opposition were committed overall to ensuring the efficient delivery of public services. That is how the hon. Gentleman began. Does the right hon. Gentleman agree that, only a few weeks ago, he said:
  "I have agreed with my Shadow Cabinet colleagues that the baseline for spending?
  Madam Deputy Speaker: Order. Interventions should be brief.
  Andy Burnham: The right hon. Gentleman said that the
  "baseline spending across all of these departmental?—
  Madam Deputy Speaker: Order. I call Mr. Letwin.
  Mr. Letwin: I am grateful to you, Madam Deputy Speaker, but I wish that the hon. Gentleman had finishing reading that out. I did indeed say that, and I went on to say something else. If he had been in the Chamber during the debate, he would have heard this being read out, too:
  "I recognise, moreover, that there will inevitably be cases in which particular programmes, or even the expenditure of whole departments, will need to rise at a rate faster than this. To fund such increases beyond the baseline, specific savings against the baseline will need to be found elsewhere within the non-NHS and non-schools departmental expenditure limits.
  I do not know whether he has had the experience in his household budget of having to save money somewhere to spend it on something else. Believe me, if the Chancellor is re-elected, he will have that experience after taxes have gone up.
  The Budget was founded on a startling admission. For the first time in new Labour's brief and so far, I fear, rasher inglorious history, the Chancellor admitted that he and his colleagues have been happily wasting £20 billion a year of people's money. In 1998, he said that he was
  "determined to get value for every penny we spend?.
  He now tells us that 2 trillion of the pennies that he has been spending each year are valueless. In 2001, the Prime Minister told The Guardian that it was impossible to save that sort of money without taking it out of the schools and hospital programme. Will the Chancellor tell us whether the Prime Minister was wrong then or whether he himself is wrong now?[Interruption.] I thought that he might not, Madam Deputy Speaker.
  Rob Marris: I venture to suggest that I might be able to help the right hon. Gentleman on that point. The Chancellor made it clear in his Budget that the savings from moving staff from the back office to the front office would come because of the Government's investment in information technology. That investment had not been made in 2001, and it had not been put in place by the Conservatives in 1997; that is the situation that we inherited.
  Mr. Letwin: I hope desperately that the hon. Gentleman will be given a job because he certainly will not get one as a spin doctor. I assure him that the Chancellor's purported savings have nothing to do wit h investment.
  Parts of the Chancellor's savings are meant to come from cutting the civil service by 40,000 between now and 2008. I understand that the Chancellor's spin doctors—not the hon. Member for Wolverhampton, South-West (Rob Marris), but his genuine spin doctors—have been busy explaining that it was with that very reduction in mind that he increased civil service numbers by 52,361 over the past four years. That sounds enormously clever, does it not? One increases the civil service by 50,000 precisely so that one can reduce it by 40,000. If Labour Members have difficulty identifying the logic behind the strategy, or even if there are hesitations in some quarters about the reduction in civil service numbers, let me reassure them. They do not need to worry because under a Labour Government, there may well be no net reduction whatsoever in civil service numbers.
  The Chancellor intends to remove 40,000 from the civil service between now and 2008, but at the present rate of hiring the Government, if re-elected, will add 65,450 civil servants over the same period. The Chancellor's policy on the civil service is admirably clear. His aim is to hire people in order to sack them, just as long as he hires a few more than he sacks. I hope that his spin doctors will have a fine time explaining that proposition over the coming months. [HON. MEMBERS: "Balls!"] Let us not worry about who, or what, the name may be.
  The Chancellor's cleverness is not, of course, meant to reside only in the brilliance of his plans for the civil service. It is also meant to be demonstrated by his new-found attachment to 2.5 per cent. per year efficiency savings throughout the public sector. The savings certainly cannot come from reducing numbers of public sector employees, because the Gershon report states clearly that the number of people employed in the public sector as a whole is meant to rise by 300,000 during the next few years. The efficiency savings, which the Chancellor said in 1998 would not be needed and the Prime Minister said in 2001 could not be achieved, will be brought about by adding more than 300,000 new public sector workers. I have to admit that if that can be done, it is very clever indeed. I doubt that a combination of Newton and Einstein could match it for cleverness.
  Mr. Watson: There is no point in the right hon. Gentleman spluttering out his speech while he is surrounded by his laughing boys. Will he confirm that
  794
  he intends to freeze in real terms the defence budget and the law and order budget for the United Kingdom? If not, where are the rest of the cuts going to come from?
  Mr. Letwin: Oh dear, I do not know whether the hon. Gentleman has been in the Chamber. I thought that he was, but it may have been a shadow of him. A moment ago, I read a passage that made it perfectly clear that I have made no such commitment and have no intention of doing so.
  I fear that the nation will not gain much from efficiencies that never take place, and in which neither the Prime Minister nor the Chancellor had the slightest belief or interest until the Opposition pointed out the colossal and shameful waste that is currently taking place. However, I remind my hon. Friends that there is one large advantage in the Chancellor's admission that he is wasting £20 billion a year and in his new-found belief that he can make 2.5 per cent. efficiency savings a year. If there is waste on that scale and if efficiencies of 2.5 per cent. a year are possible, a Conservative Government who believe in cutting waste could do so without affecting front-line services.
  James Purnell: Will the right hon. Gentleman give way?
  Mr. Letwin: No, the hon. Gentleman should listen so that he understands a bit of the logic even if his hon. Friends cannot.
  A Conservative Government who plan a gross recruitment freeze to cut the civil service by 100,000 with genuine net reductions rather than fiddled figures, and who are not shackled by a commitment to increase the public sector by more than 300,000, can truly make the savings that the Chancellor just wants to talk about. By the logic of the Chancellor's own admission, a Conservative Government can do so without touching front-line services. I do not want to stretch the arithmetical capacities of Government Members, but they will surely see that if a departmental budget of ?100 is possible this year, and there is inflation of 2.5 per cent. and offsetting efficiency savings of 2.5 per cent., it is possible to have a departmental budget next year of ?100 without a real-terms cut in front-line services. The Treasury Bench have not yet realised that, but by allowing himself to be trapped into admitting £20 billion a year of waste and by allowing himself to admit the potential for 2.5 per cent. efficiency savings a year, the Chancellor has removed completely any slight credibility from his much loved attack on so-called Conservative cuts. If a 2.5 per cent. a year efficiency saving is possible, a cash freeze with no real-terms cuts whatsoever in front-line services is possible.
  Once people begin to accept the force of that argument they will stop thinking that the Chancellor's Budget was so very clever, but will not stop thinking it was political. It was very political in every sense. It was political because it was aimed solely at scoring a short-term political point; it contained no measures whatsoever to deal with the massive and growing economic imbalances to which the Chancellor's misguided policies have given rise.

  795
  I want to do something unusual and pay tribute to our friends on the Liberal Benches, who rightly alluded to those economic imbalances—[Interruption.] My right hon. and learned Friend the Leader of the Opposition says, "Steady", but I pay tribute where it is due. I wish that I could pay tribute to the Chancellor's measures to address those imbalances in the Budget, but I cannot. There was nothing to tackle the problem of household indebtedness, which now stands at almost £1 trillion. There was nothing to tackle the problem of the decline in savings—the savings ratio has halved, and the Chancellor proposes to do nothing whatsoever about it. There was nothing to tackle the problem of productivity—the productivity growth rate has halved, and the Chancellor proposes to do nothing whatsoever about it. Most of all, however, the Budget was political because it aimed to hide the Chancellor's rising taxes from the British public.
  The Budget provides for the nation's tax bill to rise by almost 8 per cent. next year, and again by almost 8 per cent. the year after. That is what the Chancellor, in a resort to the definitions of the economists, called "fiscal neutrality", but I doubt that the families and businesses who are paying that 8 per cent. increase in tax will regard it as neutral. The Budget locks in huge increases in the burden of tax under Labour. Taxes have increased by £5,000 per household per year since 1997. The Red Book now projects a tax burden in 2008—I hope that my hon. Friends will go to the country and tell people this—that will be the highest for a quarter of a century. Almost no one except the Chancellor himself doubts that tax rates need to rise to fill the Treasury's coffers in the way that his plans demand.
  Mr. Wayne David: I have been listening carefully to the right hon. Gentleman. Is he aware that the director general of the CBI said that he commends the Chancellor on producing a Budget that protects economic stability and curbs waste?
  Mr. Letwin: The director general of the CBI correctly points out that the Chancellor did no damage in a Budget that did nothing at all about business. It is the first time in many years that that can be said. Unfortunately, however, the tax rises that the Budget augurs will be tax rises for businesses as much as for everybody else. They have been to date and they will be again.
  James Purnell: Will the right hon. Gentleman give way?
  Mr. Letwin: No, I will not give way again.
  Almost no one except the Chancellor doubts that there will be tax rises if Labour is re-elected. It took just 24 hours for the Institute for Fiscal Studies to calculate that the Budget sets us on course for Labour's third-term tax rises, and that only Conservative plans would avoid those tax rises. It took just 72 hours for the Ernst and Young ITEM Club to confirm that this is a borrow now, tax later Budget.
  796
  The Chancellor, who prides himself on his forecasts with huge self-confidence, has miscalculated his own borrowing on six successive occasions over three years. He is now predicting borrowing of more than £140 billion over the next five years, despite the fact that he is predicting economic growth at or above trend in each of those years. He knows as well as the rest of us, as well as the Institute for Fiscal Studies and as well as the ITEM Club, that if he borrows that much on the nation's credit card, he will have to raise taxes.
  The Chancellor's plan is clear. Up to the election he proceeds entirely by stealth. There are, in fact, six extra stealth taxes in the Budget—the new small business tax, the new company vans tax, the new tax on trusts, the new tax on red diesel and the new tax on other road fuels. That brines the number of stealth taxes to 66. We have before us the clickety-click Chancellor. After the election, if Labour wins, it will all be different. The layers of stealth technology will be swept away in one glorious efficiency saving. The new taxes will be there for all of us to see—£10 billion or £15 billion a year of them, to judge by the independent forecasts, gleaming new taxes that families and businesses will be called upon to pay as a tribute to the Chancellor's great cleverness. Perhaps if the people of this country see that happening to them, they will indeed think it clever, but I suspect it is more likely that they will think it too clever by half.
  6.12 pm
  The Chief Secretary to the Treasury (Mr. Paul Boateng): This has been a good debate, during which a range of varied opinions has been expressed in all parts of the House, as one would expect. Over the different days of the debate, Members across the House have reflected a range of specific interests and areas of expertise.
  There is one issue that I wish to deal with at the outset. I know it is a matter of concern to hon. Members in all parts of the House because they have raised it with met—the issue of whisky, alcohol and tax stamps. Whisky and alcohol are matters of interest in all parts of the House, but tax stamps are a serious matter. I undertake to reply in person to all those who raised specific issues relating to tax stamps, and to pass their views on to my hon. Friend the Economic Secretary, who I know takes these matters very seriously.
  Angus Robertson: Scotland's First Minister Jack McConnell is well known for following the orders of London Labour. Is he right to say that he was disappointed by the Chancellor's announcement on strip stamps?
  Mr. Boateng: I am sorry that the hon. Gentleman makes such an overtly party political point. He knows that the Government have sought at every stage to involve the industry and that we have set aside some £3 million in a fund for assistance with capital investment targeted at the smallest firms, in order to cover up-front costs. Of course there is a range of opinions about tax stamps and we seek to respond and take them on board, as is appropriate.
  Mr. O'Neill: I wonder whether my right hon. Friend can help us. It is not that long ago since he rejected proposals for strip stamps, but he has now changed his mind. What is the reason for this Damascene conversion?
  Mr. Boateng: We had to take into account the findings of the Rogues committee and the evidence of increasing fraud and evasion. Of course I respect the views of my hon. Friend and others on both sides of the House who have genuine concerns about this issue. However, I should point out that by 2005–06, as a result of the duty freeze announced by my right hon. Friend the Chancellor, the tax on a standard bottle of spirits will be 36p a bottle lower in real terms than now, and £1.33 lower in real terms than if the duty had risen in line wit h expected inflation since 1997. That is a record that the Conservatives never matched when they were in government.
  I shall move on to the main substance of the Budget, and I would like to address a number of the concerns raised by my right hon. and hon. Friends. First, however, let me make a passing reference to some of the points made by Opposition Members. It would be true to say that they set a number of hares running. It would also be true to say that they sought to revive some dead foxes. To say that they added anything to the substance of today's debate, however, would be false. They said absolutely nothing of value about the real issues confronting the British people.
  That brings to mind the record of the Conservatives when they were in government. The Leader of the Opposition was Employment Secretary when unemployment doubled—[Interruption.] He laughs. The Conservatives do not like to hear about their own record. He was Environment Secretary when the poll tax was introduced. And who was the man who dreamed up the poll tax in his eyrie at No. 10? It was the right hon. Member for West Dorset (Mr. Letwin), the shadow Chancellor. That is the Conservatives' record.
  The fact is that the Tory Front Bench has not changed since those days. The personalities have not changed; they have just got bigger, one way or another, and so have their mistakes. There is a real difference between them and us, and this Budget demonstrates that fact. Only a Labour Government are capable of taking the hard decisions, the right decisions, on the economy and public services. Only this Government are up to the challenge of building on our hard-won record of economic stability and our enviable record of growth. That is the difference between them and us. Only this Government are going to do what we have to do to secure and maintain the stability and growth of the economy, and to invest in the education, skills, science and innovation that will drive the growth and prosperity of our nation.
  My hon. Friend the Member for Falmouth and Camborne (Ms Atherton) was right to raise Cornwall's interests. My hon. Friend the Member for Hemel Hempstead (Mr. McWalter) was right to raise the issue of science and innovation. Only this party can be guaranteed to invest in those areas, and to meet the needs of the people of Cornwall.
  James Purnell: On that point about science and innovation, did my right hon. Friend hear the shadow Chancellor say that he was going to cut by more than zero per cent.—[interruption.] He is going to cut in cash terms all budgets other than those in schools and hospitals. Those cuts could involve science, home affairs or defence.
  Mr. Boateng: We will come in due course to analyse the pledges made by the shadow Chancellor.
  Only the Labour party in government can be relied on to invest in our vital health service, our housing and transport infrastructure. That was the very point made by my hon. Friend the Member for Stoke-on-Trent, North (Ms Walley) when she spoke movingly of the housing needs of her constituents and the need to make sure that we invest in the economy of Stoke-on-Trent. In an uncertain world, we must also invest in law and order, security and defence, to protect our citizens at home and our interests abroad. And we must meet our global responsibilities to others by investing in international development and the achievement of the millennium development goals. In that regard, I think particularly of my right hon. Friend the Member for Coatbridge and Chryston (Mr. Clarke) and his distinguished record on matters related to overseas development.
  Not only could the Conservative party not deliver the economic stability to match our investments: it does not even have the desire to do so. It is a party driven by commitment to cuts in public services and lower investment as a matter of blind dogma—[Interruption.] I was not listening, and I will tell the House what to.
  Last month, the shadow Chancellor announced a two-year cash freeze in spending —he can deny it at any time. That is a 5 per cent. real terms cut in 2005–06 and 2006–07, with immediate implementation of £18 billion worth of real terms cuts. There was much gnashing of teeth by his disgruntled colleagues, and much wringing of hands, but the policy of the shadow Chancellor and his party is clear—to cut investment at the very time in the economic cycle when it is right to invest, and yet to continue to make spending pledges that simply cannot be funded. In that, they share a great deal with the Liberal Democrats.
  Mr. Cameron: Will the Chief Secretary give way?
  Mr. Boateng: Not at the moment.
  That, of course, left the shadow Chancellor's shadow Cabinet colleagues in a state of abject disarray.
  Mr. Cameron: Will the Chief Secretary give way?
  Mr. Boateng: I was hoping that the hon. Member for Buckingham (Mr. Bercow), who sits strangely silent in front of the hon. Gentleman, would defend those cuts at this stage. Apparently not, however, so I will give way to the hon. Member for Witney (Mr. Cameron).
  Mr. Cameron: If inflation is at 2.5 per cent., and efficiency gains are at 2.5 per cent., how can a freeze be a cut?
  Mr. Boateng: Well, the hon. Gentleman should tell that—[HON. MEMBERS: "Answer."] 1 will. What the Conservatives have promised is a cash cut. That is why the hon. Member for Mid-Sussex (Mr. Soames), who, sadly, is not in his place, said of that cut:
  "It is outrageous. You cannot possibly go into an election with this pledge.?
  The shadow International Development Secretary, the hon. Member for Buckingham, said:
  "If we are to be taken seriously as a party of government which cares about the most vulnerable people on the planet, there has to be a public spending commitment.
  I see that he is nodding. But the promise is not a commitment; it is a cut.
  Rob Marris: Will my right hon. Friend note that the mathematics of the shadow Chancellor and the hon. Member for Witney, who taunted Labour Members for their mathematics, are faulty— If we have growth from 100—to use the figure used by the shadow Chancellor—with inflation, to 102.5, and we then cut that by 2.5 per cent., we will end up with a figure of less than 100. That is a cut, and that is the mathematics.
  Mr. Boateng: Well, the reality is that it is all down in black—
  Mr. Letwin: Will the right hon. Gentleman give way?
  Mr. Boateng: Of course.
  Mr. Letwin: I am delighted that the Chief Secretary has given way. Will he return to the question asked by my hon. Friend the Member for Witney (Mr. Cameron), which is very simple? Given that the Chancellor believes that efficiency cuts amounting to 2½ per cent. are being made, how can a freeze of a departmental budget at 100 conceivably constitute a real-terms cut in front-line services? The Chief Secretary has to answer that, because the Chancellor has made him answer it.
  Mr. Boateng: What the right hon. Gentleman has offered is a cash freeze. This is what he said:
  "I have agreed with my Shadow Cabinet colleagues that the baseline for spending across all of these departmental budgets will be 0 per cent. growth for the first two years.?
  "I fully accept that holding programme spending within departmental expenditure limits other than the NHS and schools to a zero increase for the first two years and to what amounts to a zero real terms increase thereafter is a tough constraint.?
  You bet it is a tough constraint. That is why they were squealing and whining when they heard about it.
  Mr. Letwin: I am most grateful to the Chief Secretary for giving way again. It is a tough constraint. The Chancellor said that he had tough choices to make; so have we. We can have his tax rises, or our constraint. Will the Chief Secretary answer the
  800
  question? If you have 2½ per cent. efficiency and 2½ per cent. inflation, do you or do you not have to make real-terms cuts in front-line services? Yes or no?
  Mr. Boateng: Let the right hon. Member tell that to the shadow Secretaries of State for Defence, International Development and Transport. Or let us return to the quotation—[Interruption.]
  Mr. Speaker: Order. I cannot hear the Minister. It is no fault of his; there is a lot of shouting.
  Mr. Boateng: What the Conservatives would do is freeze expenditure The Chancellor of the Exchequer (Mr. Gordon Brown): In each of their Departments.
  Mr. Boateng: In each of their Departments. If that is not what the Conservatives are going to do, let the right hon. Gentleman say so. Answer comes there none. This Labour Government—[Interruption.]
  Mr. Speaker: Order. I cannot hear the Chief Secretary. The Chief Secretary is addressing the Chair.
  Mr. Boateng: In contrast, this Labour Government are in a position to invest more, not less, and they will do so in areas that will enable the United Kingdom to grow and prosper in the global economy of the future. In this Budget the Government reject the approach of our political opponents. who, faced with tough choices, have consistently shirked them. Let me take them through those choices. The right hon. Gentleman can rise and protest if I misrepresent his position.
  We recognise that international terrorism puts additional pressures on law and order, so to keep the country safe and secure the Government are making real-terms increases in spending on our police and other forms of security at home. Will the right hon. Gentleman do likewise? That is the answer that the British people will be waiting for, and the answer that they will note. In contrast. our party has seen the provision of an additional 11,000 police officers. If the Conservatives had their way they would impose cuts amounting to £669 million, the equivalent of 13,000 police officers—and theirs is the party under which crime doubled. There is no commitment from the Opposition to increase expenditure on the police or on all the priorities that are those of the British people.
  Let us consider defence. That will give the Opposition another opportunity to clarify their position. We recognise the pressures that are caused by commitments in Kosovo, Afghanistan and Iraq and in the wider fight against terrorism. We will not leave our troops ill equipped or unsupported and we have therefore allocated real-terms increases in defence spending. Will the Opposition do likewise? [HON. MEMBERS: "Answer."] We are entitled to know the Conservative defence policy. Opposition Members would freeze spending on defence and that would amount to cuts of £1.5 billion by 2008—the equivalent of 40,000 personnel. If that is not true, let them now say so. [HON. MEMBERS: "Answer."]

  801
  Furthermore, the Government intend to sustain real-terms increases in spending on international development while the Opposition advocate a spending freeze.[Interruption.] One Conservative Front-Bench Member says, "Absolutely" and another says, "No.? Such a freeze would mean a real-terms cut of £229 million in the first two years—the equivalent of eliminating the United Kingdom's programmes for Sudan, Sierra Leone and Ethiopia. If that is not true, let Conservative Members now say so. [HON. MEMBERS: "Answer."]
  At the heart of this year's Budget, as enunciated by my right hon. Friend the Chancellor, was the announcement of resources for education, skills, science and technology. They are vital for business, as the CBI recognised, and will drive our future prosperity. It is imperative that we invest in them now. That is why my right hon. Friend announced an extra £8.5 billion for UK education in 2007–08 compared with 2005–06—an average annual increase of 4.4 per cent. across the 2004 spending review period. Are the Opposition prepared to match that?
  The reality is that, in contrast to the spending freeze that the Opposition propose, we intend to ensure that we maintain progress in education and children's services. We intend to spend approximately £900 million on children's services. If the Opposition had their way, there would be £900 million of cuts. That would mean 36,000 fewer social workers working with the most vulnerable children. That would be the result of their spending plans.
  Huw Irranca-Davies: My right hon. Friend is cruelly taunting the Opposition, which is highly enjoyable. Perhaps one figure could succour them. How many years does my right hon. Friend believe that it will take for the electorate to forget the Conservative party's record of sheer economic incompetence?
  Mr. Boateng: They will never forget it and we will never allow them to forget it.
  I want to give the Opposition the opportunity to explain the patient's passport. We have heard many different stories about what it is. What is their commitment? Is it, as we believe, to subsidise private medicine? Does not the patient's passport, as the Opposition describe it, mean taking money out of the NHS and giving it to BUPA? They would prefer one extra patient to be treated by BUPA than tens of thousands of patients to be treated by the NHS.
  What exactly is the pupil's passport? On 22 February, the shadow Chancellor said that the pupil's passport could be topped up and used for cheap private schools—St. Trinian's and St. Cuthbert's rather than Eton and Roedean. On 6 March, the Conservative website confirmed that but on 7 March, it claimed that the statement on 6 March was an error and that parents could not top up the pupil's passport. Is the pupils passport on or off? What is the Conservatives' policy on education? The truth is that they simply have not yet worked it out. On health, employment and welfare—
  Mr. Kenneth Clarke: As the Chief Secretary seems to be getting a bit lost in this political diatribe, may I remind him that he is about to embark on what will be the most difficult public spending round that the Government have faced since they came to office, because they are seeking to slow the growth of public spending. When one of his colleagues tells him that a particular service needs 2.5 per cent. growth, will he tell him that that can be achieved by 2.5 per cent. efficiency savings with no increase in the cash settlement?
  Mr. Boateng: Of course I would because we have made it clear where our priorities are. They are on education.
  Mr. Eric Forth: On a point of order, Mr. Speaker. Can you confirm that, even at this stage of the debate, you are allowed to call a different Member on the Government Front Bench to speak? The Chancellor is constantly prompting the Chief Secretary, who is obviously completely lost. Can you call the Chancellor instead, so that we can get a proper version of the Government's policies instead of a second-hand one?
  Mr. Speaker: Chancellors are entitled to prod—[Interruption.] Order. I would not dream of stopping the Chancellor from doing that.
  Mr. Boateng: It is called teamwork. When we listen to the dissonant voices of right hon. and hon. Members in the Opposition, we realise that, until they start to act like a team, they will never be fit for Government.
  The reality is, as the Secretary of State for Work and Pensions outlined, that the Budget delivers proposals to tackle unemployment and inactivity. It builds on the success of the new deal, which has already enabled 1 million people to get back into work since 1997. What is the proposal of Conservative Members in relation to the new deal? It is to scrap it. It is to fly in the face of the reality of their constituents and our constituents who have been helped back into gainful employment as a result of the new deal. When the Conservatives last had stewardship of the economy, unemployment topped 3 million. We have created 1.7 million new jobs and we continue to create new jobs. That is good news. That is the difference between them—[Interruption.]
  Mr. Speaker: Order. Mr. Bercow, I have told you before about getting too excited. I will not allow it.
  Mr. Boateng: That is the difference between the Conservatives and us. We care about jobs. We care about people. We are delivering to people. We are delivering jobs. Business recognises that it is Labour that works and it will be a disaster were the Tories ever again to get stewardship of the economy. To support our spending plans, the public sector will be seeking— we are entitled to expect it and we will deliver it—value for money to maximise efficiency and to minimise waste.
  The choice is clear. In the Budget statement, the Chancellor explained how our hard-won economic stability and sustained growth allow the Government to

  803
  commit more investment in the areas that matter to the country, not less, as the Conservative party would have it. The dividing lines between the Conservatives and us are clear. The choice of two futures for Britain is plain: sustained economic stability, or a return to boom and bust, stop and go and deep recession; investment and reform in health, education, transport and tackling crime, or cuts, charges and privatisation; expansion of the new deal, or its abolition; investment in science, or a failure to invest in science. We condemn the cuts and commend the Budget.
  Question put and agreed to.
  Resolved,

  That it is expedient to amend the law with respect to the National Debt and the public revenue and to make further provision in connection with finance.

  This Resolution does not extend to the making of any amendment with respect to value added tax so as to provide—

  for zero-rating or exempting a supply, acquisition or importation;

  for refunding an amount of tax;

  for any relief, other than a relief that—

  so far as it is applicable to goods, applies to goods of every description, and

  so far as it is applicable to services, applies to services of every description.

  MR. SPEAKER then, pursuant to Standing Order No. 51(3) (Ways and Means Motions), put forthwith the Questions necessary to dispose of the further motions

  2. RATES OF TOBACCO PRODUCTS DUTY
  Resolved,
  That—
  (1) For the Table of rates of duty in Schedule 1 to the Tobacco Products Duty Act 1979 there shall be substituted—

  Table

  1. Cigarettes

  An amount equal to 22 per cent of the retail price plus £99.80 per thousand cigarettes.

  2. Cigars

  £145.35 per kilogram.

  3. Hand-rolling tobacco

  £104.47 per kilogram.

  4. Other smoking tobacco and chewing tobacco

  £63.90 per kilogram.

  (2) This Resolution shall have effect as from 6 o'clock in the evening of 17th March 2004.
  And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.

  3. RATE OF DUTY ON BEER
  Resolved,
  That—
  (1) In section 36(1AA)(a) of the Alcoholic Liquor Duties Act 1979, for "£12.22" there shall be substituted "£12.59".
  (2) This Resolution shall have affect as from midnight on 21st March 2004.
  And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.

  4. RATES OF DUTY ON WINE AND MADE-WINE
  Resolved,
  That—
  (1) For Part 1 of the Table of rates of duty in Schedule 1 to the Alcoholic Liquor Duties Act 1979 there shall be substituted—

  PART 1

    WINE AND MADE-WINE OF A STRENGTH NOT EXCEEDING 22 PER CENT
    Description of wine or made-wine

    Rates of duty per hectolitre

    £

    Wine or made-wine of a strength not exceeding 4 per cent

    50.38

    Wine or made-wine of a strength exceeding 4 per cent but not exceeding 5.5 per cent

    69.27

    Wine or made-wine of a strength exceeding 5.5 per cent but not exceeding 15 per cent and not sparkling

    163.47

    Sparkling wine or sparkling made-wine of a strength exceeding 5.5 per cent but less than 8.5 per cent

    166.70

    Sparkling wine or sparkling made-wine of a strength of 8.5 per cent or of a strength exceeding 8.5 per cent but not exceeding 15 per cent

    220.54

    Wine or made-wine of a strength exceeding 15 per cent but not exceeding 22 per cent

    217.95

    (2) This Resolution shall have effect as from midnight on 21st March 2004.
    And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.

  5. ALCOHOLIC LIQUOR DUTIES (DUTY STAMPS)
  Motion made, and Question put,
  That provision may be made about stamps to be purchased for, affixed to and carried by retail containers of certain alcoholic liquors.
  The House divided: Ayes 309, Noes 205.

  Division No. 97]

  [7:00 pm

  AYES

  Abbott, Ms Daine

  Barron, rh Kevin

  Ainswoth, Bob(Cov'try NE)

  Battle, John

  Alexander, Douglas

  Bayley, Hugh

  Allen, Graham

  Beard, Nigel

  Anderson, Janet(Rossendale &

  Begg, Miss Anne

  Darwen)

  Bell, Sir Stuart

  Armstrong, rh Ms Hilary

  Benton, Joe(Bootle)

  Atherton, Ms Candy

  Berry, Roger

  Atkins, Charlotte

  Best, Harold

  Austin, John

  Blackman, Liz

  Bailey, Adian

  Blears, Ms Hazel

  Baird, Vera

  Blizzard, Bob

  Banks, Tony

  Blunkett, rh David

  Barnes, Harry

  Boateng, rh Paul

  805

  Borrow, David

  Farrelly, Paul

  Bradley, rh Keith(Withington)

  Field, rh Frank(Birkenhead)

  Bradley, Peter(The Wrekin)

  Fisher, Mark

  Bradshaw, Ben

  Fitzpatrick, Jim

  Brennan, Kevin

  Fitzsimons, Mrs Lorna

  Brown, rh Gordon(Dunfermline

  Flint Caroline

  E)

  Flynn, Paul(Newport W)

  Brown, rh Nicholas(Newcastle E

  Follett, Barbara

  Wallsend)

  Foster, rh Derek

  Brown, Russell(Dumfries)

  Foster, Michael(Worcester)

  Buck, Ms Karen

  Foster, Michael Jabez(Hastings

  Burden, Richard

  &Rye)

  Burgon, Colin

  Francis, Dr. Hywel

  Burnham, Andy

  Gapes, Mike(IIford S)

  Byers, rh Stephen

  Gardiner, Barry

  Caborn, rh Richard

  George, rh Bruce(Walsall S)

  Cairns, David

  Gerrard, Neil

  Campbell, Alan(Tynemouth)

  Gibson, Dr. Ian

  Campbell, Mrs Anne(C'bridge)

  Gilroy, Linda

  Campbell, Ronnie(Blyth V)

  Godsiff, Roger

  Caplin, Ivor

  Goggins, Paul

  Casale, Roger

  Griffiths, Jane(Reading E)

  Caton, Martin

  Griffiths, Nigel(Edinburgh S)

  Cawsey, Ian(Brigg)

  Griffiths, Win(Bridgend)

  Challen, Colin

  Grogan, John

  Chapman, Ben(Wirral S)

  Hain, rh Peter

  Clapham, Michael

  Hall, Patrick(Bedford)

  Clark, Mrs Helen(Peterborough)

  Hanson, David

  Clark, Dr. Lynda(Edinburgh

  Harman, rh Ms Harriet

  Pentlands)

  Harris, Tom(Glasgow Cathcart)

  Clark, Paul(Gillingham)

  Havard, Dai(Merthyr Tydfil &

  Clarke, rh Charles(Norwich S)

  Rhymney)

  Clarke, rh Tom(Coatbridge &

  Healey, John

  Chryston)

  Henderson, Doug(Newcastle N)

  Clelland, David

  Henderson, Ivan(Harwich)

  Coaker, Vernon

  Hendrick, Mark

  Coffey, Ms Ann

  Hepburn, Stephen

  Cohen, Harry

  Heppell, John

  Coleman, lain

  Hewitt, rh Ms Patricia

  Colman, Tony

  Heyes, David

  Connarty, Michael

  Hill, Keith(Streatham)

  Cook, Frank(Stockton N)

  Hinchliffe, David

  Cooper, Yvette

  Hoey, Kate(Vauxhall)

  Corston, Jean

  Hoon, rh Geoffrey

  Cousins, Jim

  Hope, Phil(Corby)

  Cranston, Ross

  Hopkins, Kelvin

  Crausby, David

  Howarth, George(Knowsley N &

  Cruddas, Jon

  Sefton E)

  Cryer, John(Hornchurch)

  Howells, Dr. Kim

  Cummings, John

  Hoyle, Lindsay

  Cunningham, rh Dr. Jack

  Hughes, Kevin(Doncaster N)

  (Copeland)

  Humble, Mrs Joan

  Cunningham, .Jim(Coventry S)

  Hutton, rh John

  Cunningham, Tony(Workington)

  Iddon, Dr. Brian

  Dalyell, Tam

  Ingram, rh Adam

  Darling, rh Alistair

  lrranca -Davies, Huw

  David, Wayne

  Jackson, Glenda(Hampstead &

  Davidson, Ian

  Highgate)

  Davies, rh Denzil(Llanelli)

  Jamieson, David

  Davies, Geraint(Croydon C)

  Jenkins, Brian

  Dawson, Hilton

  Johnson, Alan(Hull W)

  Dean, Mrs Janet

  Johnson, Miss Melanie(Welwyn

  Dhanda, Parmjit

  Hatfield

  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

  Joyce, Eric(Falkirk W)

  Dowd, Jim(Lewisham W)

  Keen, Ann(Brentford)

  Drew, David(Stroud)

  Kelly, Ruth(Bolton W)

  Dunwoody, Mrs Gwyneth

  Kemp, Fraser

  Eagle, Angela(Wallasey)

  Khabra, Piara S.

  Eagle, Maria(L'pool Garston)

  Kidney, David

  Edwards, Huw

  Kilfoyle, Peter

  Efford, Clive

  King, Ms Oona(Bethnal Green &

  Ellman, Mrs Louise

  Bow)

  806

  Knight Jim(S Dorset)

  Rammell, Bill

  Kumar, Dr. Ashok

  Rapson, Syd(Portsmouth N)

  Ladyman, Dr. Stephen

  Reed, Andy(Loughborough)

  Lammy, David

  Reid, rh Dr. John(Hamilton N &

  Lawrence, Mrs Jackie

  Bellshill)

  Luton, Bob(Derby N)

  Robinson, Geoffrey(Coventry

  Lazarowicz, Mark

  NW)

  Leslie, Christopher

  Roche, Mrs Barbara

  Lewis, Terry(Worsley)

  Rooney, Terry

  Liddell, rh Mrs Helen

  Ruane, Chris

  Linton, Martin

  Ruddock, Joan

  Lloyd, Tony(Manchester C)

  Salter, Martin

  Love, Andrew

  Savidge, Malcolm

  Luke, lain(Dundee E)

  Sawford, Phil

  McAvoy, Thomas

  Sedgemore, Brian

  McCabe, Stephen

  Sheridan, Jim

  McCafferty, Chris

  Short, rh Clare

  McCartney, rh Ian

  Simon, Skin(B ham Erdington)

  McDonagh, Siobhain

  Simpson, Alan(Nottingham S)

  MacDonald, Calum

  Singh, Marsha

  McDonnell, John

  Skinner, Dennis

  McFall, John

  Smith, rh Andrew(Oxford E)

  McGuire, Mrs Anne

  Smith, Geraldine(Morecambe &

  Mclsaac, Shona

  Luresdale)

  McKenna, Rosemary

  Smith, Jacqui(Redditch)

  McNulty, Tony

  Smith, Llew(Blaenau Gwent)

  Mactaggert, Fiona

  Soley, Clive

  McWalter, Tony

  Southworth, Helen

  McWilliam, John

  Squire, Rachel

  Mahmood, Khalid

  Steinberg, Gerry

  Mahon, Mrs Alice

  Stewart, David(Inverness E &

  Mallaber, Judy

  Lochaber)

  Mendelson, rh Peter

  Stewart, Ian(Eccles)

  Mann, John(Bassetlaw)

  Stoate, Dr. Howard

  Marris, Rob(Wolverh'ton SW)

  Strang, rh Dr. Gavin

  Marsden, Gordon(Blackpool S)

  Straw. rh Jack

  Marshall-Andrews, Robert

  Stringer, Graham

  Martlew, Eric

  Sutcliffe, Gerry

  Merron, Gillian

  Tami, Mark(Alyn)

  Michael, rh Alun

  Taylor, Dan(Stockton S)

  Milburn, rh Alan

  Taylor, David(NW Leis)

  Miliband, David

  Thomas, Gareth(Clwyd W)

  Miller, Andrew

  Timms, Stephen

  Moffatt, Laura

  Tipping, Paddy

  Moonie, Dr. Lewis

  Todd, Mark(S Derbyshire)

  Moran, Margaret

  Touhig, Don(Isiwyn)

  Morgan, Julie

  Trickett, Jon

  Morley, Elliot

  Truswell, Paul

  Mudie, George

  Turner, Dennis(Wolverh'ton SE)

  Munn, Ms Meg

  Turner, Dr. Desmond(Brighton

  Murphy, Denis(Wansbeck)

  Kernptown)

  Murphy, Jim(Eastwood)

  Twigg, Derek(Halton)

  Naysmith, Dr. Doug

  Twigg, Stephen(Enfield)

  Norris, Dan(Wansdyke)

  Tynan, Bill(Hamilton S)

  O'Brien, Bill(Normanton)

  Walley, Ms Joan

  O'Neill, Martin

  Ward, Claire

  Organ, Diana

  Wareing, Robert N.

  Osborne, Sandra(Ayr)

  Watson, Tom(W Bromwich E)

  Owen, Albert

  Watts, David

  Palmer, Dr. Nick

  White, Brian

  Perham, Linda

  Whitehead, Dr. Alan

  Pickthall, Colin

  Wicks, Malcolm

  Pike, Peter(Burnley)

  Williams, rh Alan(Swansea W)

  Plaskitt, James

  Williams, Betty(Conwy)

  Pond, Chris(Gravesham)

  Wills, Michael

  Pope, Greg(Hyndburn)

  Wood, Mike(Batley)

  Pound, Stephen

  Woodward, Shaun

  Prentice, Ms Bridget(Lewisham

  Woolas, Phil

  E)

  Wright, Anthony D.(Gt

  Prescott, rh John

  Yalmouth)

  Primarolo, rh Dawn

  Wright, David(Telford)

  Prosser, Gwyn

  Wright, Tony(Cannock) Purchase, Ken

  Purnell, James

  Tellers for the Ayes:

  Quin, rh Joyce

  Mr. Nick Ainger and

  Quinn, Lawrie

  Joan Ryan

  807

  NOES

  Ainsworth, Peter(E Surrey)

  Gamier, Edward

  Allan, Richard

  George, Andrew(St. Ives)

  Amess, David

  Gidley, Sandra

  Ancram, rh Michael

  Gillan, Mrs Cheryl

  Arbuthnot, rh James

  Goodman, Paul

  Atkinson, David(Bour'mth E)

  Gray, James(N Wilts)

  Atkinson, Peter(Hexham)

  Grayling, Chris

  Bacon, Richard

  Green, Damian(Ashford)

  Baker, Norman

  Green, Matthew(Ludlow)

  Baldry, Tony

  Greenway, John

  Barker, Gregory

  Grieve, Dominic

  Baron, John(Billericay)

  Gummer, rh John

  Beggs, Roy(E Antrim)

  Hague, rh William

  Beith, rh A. J.

  Hammond, Philip

  Bellingham, Henry

  Hancock, Mike

  Bercow, John

  Harris, Dr. Evan(Oxford W &

  Beresford, Sir Paul

  Abingdon)

  Blunt Crispin

  Harvey, Nick

  Boswell, Tim

  Hawkins, Nick

  Bottomley, Peter(Worthing W)

  Hayes, John(S Holland)

  Bottomley, rh Virginia(SW

  Heald, Oliver

  Surrey)

  Heath, David

  Brady, Graham

  Heathcoat-Amory, rh David

  Brake, Tom(Carshalton)

  Hermon, Lady

  Brazier, Julian

  Hoban, Mark(Fareham)

  Breed, Colin

  Horan, John(Orpington)

  Brooke, Mrs Annette L.

  Howard, rh Michael

  Browning, Mrs Angela

  Howarth, Gerald(Aldershot)

  Burns, Simon

  Hughes, Simon(Southwark N)

  Burnside, David

  Hunter, Andrew

  Burstow, Paul

  Jack, rh Michael

  Burt, Alistair

  Johnson, Boris(Henley)

  Butterf ill, Sir John

  Jones, Nigel(Cheltenham)

  Cable, Dr. Vincent

  Keetch, Paul

  Calton, Mrs Patsy

  Kennedy, rh Charles(Ross Skye

  Cameron, David

  Inverness)

  Campbell, Gregory(E Lond'y)

  Key, Robert(Salisbury)

  Campbell, rh Sir Menzies(NE

  Kirkbride, Miss Julie

  Fife)

  Kirkwood, Sir Archy

  Cash, William

  Knight, rh Greg(E Yorkshire)

  Chapman, Sir Sydney(Chipping

  Laing, Mrs Eleanor

  Barnet)

  La it, Mrs Jacqui

  Chope, Christopher

  Lamb, Norman

  Clappison, James

  Lansley, Andrew

  Clarke, rh Kenneth(Rushcliffe)

  Laws, David(Yeovil)

  Collins, Tim

  Leigh, Edward

  Conway, Derek

  Letwin, rh Oliver

  Cotter, Brian

  Liddell-Grainger, Ian

  Cran, James(Beverley)

  Lidington, David

  Davey, Edward(Kingston)

  Lilley, rh Peter

  Davies, Quentin(Grantham &

  Llwyd, Elfyn

  Stamford)

  Loughton, Tim

  Davis, rh David(Haltemprice &

  Luff, Peter(M-Worcs)

  Howden)

  McIntosh, Miss Anne

  Djanogly, Jonathan

  Mackay, rh Andrew

  Dodds, Nigel

  Maclean, rh David

  Donaldson, Jeffrey M

  McLoughlin, Patrick

  Dorrell, rh Stephen

  Malins, Humfrey

  Doughty, Sue

  Marsden, Paul(Shrewsbury &

  Duncan, Alan(Rutland)

  Atcham)

  Duncan, Peter(Galloway)

  Maude, rh Francis

  Duncan Smith, rh lain

  Mawhinney, rh Sir Brian

  Evans, Nigel

  May, Mrs Theresa

  Ewing, Annabelle

  Mercer, Patrick

  Fallon, Michael

  Mitchell, Andrew(Sutton

  Field, Mark(Cities of London &

  Coldfield)

  Westminster)

  Moore, Michael

  Flight, Howard

  Moss, Malcolm

  Forth, rh Eric

  Murrison, Dr. Andrew

  Foster, Don(Bath)

  Norman, Archie

  Fox, Dr. Liam

  Oaten, Mark(Winchester)

  Francois, Mark

  O'Brien, Stephen(Eddisbury)

  Gale, Roger(N Thanet)

  Õpik, Lembit

  808

  Osborne, George(Tatton)

  Syms, Robert

  Ottaway, Richard

  Tapsell, Sir Peter

  Page, Richard

  Taylor, John(Solihull)

  Paice, James

  Taylor, Matthew(Truro)

  Paterson, Owen

  Taylor, Dr. Richard(Wyre F)

  Pickles, Eric

  Taylor, Sir Teddy

  Portillo, rh Michael

  Teather, Sarah

  Prisk, Mark(Hertford)

  Thomas, Simon(Ceredigion)

  Pugh, Dr. John

  Thurso, John

  Randall, John

  Tonge, Dr. Jenny

  Reid, Alan(Argyll & Bute)

  Tredinnick, David

  Bendel, David

  Trimble, rh David

  Robathan, Andrew

  Turner, Andrew(Isle of Wight)

  Robertson, Angus(Moray)

  Tyler, Paul(N Cornwall)

  Robertson, Hugh(Faversham &

  Tyrie, Andrew

  M-Kent)

  Viggers, Peter

  Robertson, Laurence(Tewk'b'ry)

  Walter, Robert

  Robinson, Peter(Beffast E)

  Waterson, Nigel

  Rosindeli, Andrew

  Watkinson, Angela

  Russell, Bob(Colchester)

  Webb, Steve(Northavon)

  Salmond, Alex

  Weir, Michael

  Sanders, Adrian

  Wiggin, Bill

  Sayeed, Jonathan

  Wilkinson, John

  Selous, Andrew

  Willetts, David

  Shepherd, Richard

  Williams, Hywel(Caernarfon)

  Simmonds, Mark

  Williams, Roger(Brecon)

  Simpson, Keith(M-Norfolk)

  Willis, Phil

  Smith, Sir Robert(W Ab'crns &

  Wilshire, David

  Kincardine)

  Winterton, Ann(Congleton)

  Smyth, Rev. Martin(Belfast S)

  Winterton, Sir Nicholas

  names, Nicholas

  (Macclesfield)

  Si ricer, Sir Michael

  Wishart, Pete

  Si rink, Bob(Castle Point)

  Yeo, Tim(S Suffolk)

  Si 'ring, Richard

  Young, rh Sir George Steen, Anthony

  unell, Andrew

  Tellers for the Noes:

  Svvayne, Desmond

  Mr. David Ruffley and

  Swire, Hugo(E Devon)

  Mr. Geoffrey Clifton-Brown

  6. HYDROCARBON OIL ETC DUTIES (RATES)
  Motion made, and Question put,
  That provision may be made amending rates of duty and rebate in the Hydrocarbon Oil Duties Act 1979.
  The House divided: Ayes 311, Noes 205.

  Division No. 98]

  [7:16 p

  AYES

  Abbott, Ms Diane

  Blackman, Liz

  Adams, Irene(Paisley N)

  Blears, Ms Hazel

  Ainsworth, Bob(Cov'try NE)

  Blizzard, Bob

  Alexander, Douglas

  Blunkett, rh David

  Allen, Graham

  Boateng, rh Paul

  Anderson, Janet(Rossendale &

  Borrow, David

  Oarwen)

  Bradley, rh Keith(Withington)

  Armstrong, rh Ms Hilary

  Bradley, Peter(The Wrekin)

  Atherton, Ms Candy

  Bradshaw, Ben

  Atkins, Charlotte

  Brennan, Kevin

  Austin, John

  Brown, rh Nicholas(Newcastle E

  Bailey, Adrian

  Wallsend)

  Baird, Vera

  Brown, Russell(Dumfries)

  Banks, Tony

  Buck, Ms Karen

  Barnes, Harry

  Burden, Richard

  Barron, rh Kevin

  I3urgon, Colin

  Bartle, John

  Burnham, Andy

  Bayley, Hugh

  l3yers, rh Stephen

  Bedrd, Nigel

  Caborn, rh Richard

  Berg. Miss Anne

  Cairns, David

  Bell, Sir Stuart

  Campbell, Alan(Tynemouth)

  Benton, Joe(Bootle)

  Campbell, Mrs Anne(C'bridge)

  Berry, Roger

  Campbell, Ronnie(B/yth V)

  Best, Harold

  Caplin, Ivor

  NOES

  Ainsworth, Peter(E Surrey)

  Bacon, Richard

  Allan, Richard

  Baker, Norman

  Amess, David

  Baldry, Tony

  Ancram, rh Michael

  Barker, Gregory

  Arbuthnot, rh James

  Baron, John(Billericay)

  Atkinson, David(Bour'mth E)

  Beggs, Roy(E Antrim)

  Atkinson, Peter(Hexham)

  Beith, rh A. J.

  Casale, Roger

  Goggins, Paul

  Caton, Martin

  Griffiths, Jane(Reading E)

  Cawsey, Ian(Brigg)

  Griffiths, Nigel(Edinburgh S)

  Challen, Colin

  Griffiths, Win(Bridgend)

  Chapman, Ben(Wirral S)

  Grogan, John

  Clapham, Michael

  Hain, rh Peter

  Clark, Mrs Helen(Peterborough)

  Hall, Patrick(Bedford)

  Clark, Dr. Lynda(Edinburgh)

  Hamilton, David(Midlothian)

  Pentlands)

  Hanson, David

  Clark, Paul(Gillingham)

  Harman, rh Ms Harriet

  Clarke, rh Charles(Norwich S)

  Harris, Tom(Glasgow Cathcart)

  Clarke, rh Tom(Coatbridge &

  Havard, Dai(Merthyr Tydfil &

  Chryston)

  Rhymney)

  Clelland, David

  Healey, John

  Coaker, Vernon

  Henderson, Doug(Newcastle N)

  Coffey, Ms Ann

  Henderson, Ivan(Harwich)

  Cohen, Harry

  Hendrick, Mark

  Coleman, lain

  Hepburn, Stephen

  Colman, Tony

  Heppell, John

  Connarty, Michael

  Hewitt, rh Ms Patricia

  Cook, Frank(Stockton N)

  Heyes, David

  Cooper, Yvette

  Hill, Keith(Streatham)

  Corbyn, Jeremy

  Hinchliffe, David

  Corston, Jean

  Hoey, Kate(Vauxhall)

  Cousins, Jim

  Hoon, rh Geoffrey

  Cranston, Ross

  Hope, Phil(Corby)

  Crausby, David

  Hopkins, Kelvin

  Cruddas, Jon

  Howarth, George(Knowsley N &

  Cryer, John(Hornchurch)

  Sefton E)

  Cummings, John

  Howells, Dr. Kim

  Cunningham, rh Dr. Jack

  Hoyle, Lindsay

  (Copeland)

  Hughes, Kevin(Doncaster N)

  Cunningham, Jim(Coventry S)

  Humble, Mrs Joan

  Cunningham, Ton(Workington)

  Hutton, rh John

  Dalyell, Tam

  Iddon, Dr, Brian

  Darling, rh Alistair

  Ingram, rh Adam

  David, Wayne

  Irranca- Davies, Huw

  Davidson, Ian

  Jamieson, David

  Davies, rh Denzil(Llanelli)

  Jenkins, Brian

  Davies, Geraint(Croydon C)

  Johnson, Alan(Hull W)

  Dawson, Hilton

  Johnson, Miss Melanie(Welwyn

  Dean, Mrs Janet

  Hatfield)

  Dhanda, Parmjit

  Jones, Jon Owen(Cardiff C)

  Dismore, Andrew

  Jones, Kevan(N Durham)

  Dobbin, Jim(Heywood)

  Jones, Lynne(Selly Oak)

  Dobson, rh Frank

  Jones, Martyn(Clwyd S)

  Donohoe, Brian H.

  Joyce, Eric(Falkirk W)

  Doran, Frank

  Keen, Ann(Brentford)

  Dowd, Jim(Lewisham W)

  Kelly, Ruth(Bolton W)

  Drew, David(Stroud)

  Kemp, Fraser

  Dunwoody, Mrs Gwyneth

  Khabra, Piara S.

  Eagle, Angela(Wallasey)

  Kidney, David

  Eagle, Maria(L'pool Garston)

  Kilfoyle, Peter

  Edwards, Huw

  King, Ms Oona(Bethnal Green &

  Efford, Clive

  Bow)

  Ellman, Mrs Louise

  Knight, Jim(S Dorset)

  Farrelly, Paul

  Kumar, Dr. Ashok

  Field, rh Frank(Birkenhead)

  Ladyman, Dr. Stephen

  Fisher, Mark

  Lammy, David

  Fitzpatrick, Jim

  Lawrence, Mrs Jackie

  Fitzsimons, Mrs Lorna

  Laxton, Bob(Derby N)

  Flint, Caroline

  Lazarowicz, Mark

  Flynn, Paul(Newport W)

  Leslie, Christopher

  Follett, Barbara

  Lewis, Ivan(Bury S)

  Foster, rh Derek

  Lewis, Terry(Worsley)

  Foster, Michael(Worcester)

  Liddell, rh Mrs Helen

  Foster, Michael Jabez(Hastings)

  Linton, Martin

  & Rye)

  Lloyd, Tony(Manchester C)

  Francis, Dr. Hywel

  Love, Andrew

  Gapes, Mike(Ilford S)

  Luke, lain(Dundee E)

  Gardiner, Barry

  Lyons, John(Strathkelvin)

  George, rh Bruce(Walsall S)

  McAvoy, Thomas

  Gerrard, Neil

  McCabe, Stephen

  Gibson, Dr. Ian

  McCafferty, Chris

  Gilroy, Linda

  McDonagh, Siobhain

  Godsiff, Roger

  MacDonald, Calu

  McDonnell, John

  Ruane, Chris

  MacDougall, John

  Ruddock, Joan

  McFall, John

  Salter, Martin

  McGuire, Mrs Anne

  Savidge, Malcolm

  Mclsaac, Shona

  Sawford, Phil

  McKechin, Ann

  Sedgemore, Brian

  McKenna, Rosemary

  Sheridan, Jim

  McNulty, Tony

  Short, rh Clare

  Mactaggart, Fiona

  Simon, Sion(B ham Erdington)

  McWalter, Tony

  Simpson, Alan(Nottingham S)

  McWilliam, John

  Singh, Marsha

  Mahmood, Khalid

  Skinner, Dennis

  Mahon, Mrs Alice

  Smith, rh Andrew(Oxford E)

  Mallaber, Judy

  Smith, Geraldine(Morecambe &

  Mandelson, rh Peter

  Lunesdale)

  Mann, John(Bassetlaw)

  Smith, Jacqui(Redditch)

  Marris, Rob(Wolverh"ton SW)

  Smith, Llew(Blaenau Gwent)

  Marsden, Gordon(Blackpool S)

  Soley, Clive

  Marshall-Andrews, Robert

  Southvvorth, Helen

  Martlew, Eric

  Squire, Rachel

  Merron, Gillian

  Steinberg, Gerry

  Michael, rh Alun

  Stewart, David(Inverness E &

  Miliband, David

  Lochaber)

  Miller, Andrew

  Stewart, Ian(Eccles)

  Moffatt, Laura

  Stoate, Dr. Howard

  Moonie, Dr. Lewis

  Strang, rh Dr. Gavin

  Moran, Margaret

  Straw, rh Jack

  Morgan, Julie

  Stringer, Graham

  Morley, Elliot

  Sutcliffe, Gerry

  Mudie, George

  Tami, Mark(Alyn)

  Munn, Ms Meg

  Taylor, Dan(Stockton S)

  Murphy, Jim(Eastwood)

  Taylor, David(NW Leics)

  Naysmith, Dr. Doug

  Thomas, Gareth(Clwyd W)

  Norris, Dan(Wansdyke)

  Timms, Stephen

  O'Brien, Bill(Normanton)

  Tipping, Paddy

  O'Neill, Martin

  Todd, Mark(S Derbyshire)

  Organ, Diana

  Touhig, Don(IsIwyn)

  Osborne, Sandra(Ayr)

  Trickett, Jon

  Owen, Albert

  Truswell, Paul

  Palmer, Dr, Nick

  Turner, Dennis(Wolverh'ton SE)

  Perham, Linda

  Turner, Dr. Desmond(Brighton

  Picking, Anne

  Kemptown)

  Pickthall, Colin

  Twigg, Derek(Halton)

  Pike, Peter(Burnley)

  Twigg, Stephen(Enfield)

  Plaskitt, James

  Tynan, Bill(Hamilton S)

  Pond, Chris(Gravesham)

  Ward, Claire

  Pope, Greg(Hyndburn)

  Wareing, Robert N.

  Pound, Stephen

  Watson, Tom(W Bromwich E)

  Prescott, rh John

  Watts, David

  Primarolo, rh Dawn

  White, Brian

  Prosser, Gwyn

  Whitehead, Dr. Alan

  Purchase, Ken

  Wicks, Malcolm

  Purnell, James

  Williams, rh Alan(Swansea W)

  Quin, rh Joyce

  Williams, Betty(Conwy)

  Quinn, Lawrie

  Wills, Michael

  Rammell, Bill

  Wood, Mike(Batley)

  Rapson, Syd(Portsmouth N)

  Wooclward, Shaun

  Reed, Andy(Loughborough)

  Woolas, Phil

  Reid, rh Dr. John(Hamilton N &

  Wright Anthony D.(Gt

  Bellshill)

  Yarmouth)

  Robertson, John(Glasgow)

  Wright, David(Telford)

  Anniesland)

  Wright, Tony(Cannock)

  Robinson, Geoffrey(Coventry

  NW)

  Tellers for the Ayes:

  Roche, Mrs Barbara

  Mr. Nick Ainger and

  Rooney, Terry

  Joan Ryan

  Bellingham, Henry

  Hawkins, Nick

  Bercow, John

  Hayes, John(S Holland)

  Beresford, Sir Paul

  Heald, Oliver

  Blunt, Crispin

  Heath, David

  Boswell, Tim

  Heathcoat-Amory, rh David

  Bottomley, Peter(Worthing W)

  Hermon, Lady

  Bottomley, rh Virginia(SW)

  Hoban, Mark(Fareham)

  Surrey)

  Horam, John(Orpington)

  Brady, Graham

  Howard, rh Michael

  Brake, Tom(Carshalton)

  Howarth, Gerald(Aldershot)

  Brazier, Julian

  Hughes, Simon(Southwark N)

  Breed, Colin

  Hunter, Andrew

  Brooke, Mrs Annette L.

  Jack, rh Michael

  Browning, Mrs Angela

  Johnson, Boris(Henley)

  Burns, Simon

  Jones, Nigel(Cheltenham)

  Burnside, David

  Keetch, Paul

  Burstow, Paul

  Kennedy, rh Charles(Ross Skye &

  Burt, Alistair

  Inverness)

  Butterfill, Sir John

  Key, Robert(Salisbury)

  Cable, Dr. Vincent

  Kirkbride, Miss Julie

  Calton, Mrs Patsy

  Kirkwood, Sir Archy

  Cameron. David

  Knight, rh Greg(E Yorkshire)

  Campbell, Gregory(E Londy)

  Laing, Mrs Eleanor

  Campbell, rh Sir Menzies(NE

  Lait, Mrs Jacqui

  Fife)

  Lamb, Norman

  Carmichael, Alistair

  Lansley, Andrew

  Cash, William

  Laws, David(Yeovil)

  Chope, Christopher

  Leigh, Edward

  Clappison, James

  Letwin, rh Oliver

  Clarke, rh Kenneth(Rushcliffe)

  Liddell-Grainger, Ian

  Collins, Tim

  Lidington, David

  Conway, Derek

  Lilley, rh Peter

  Cotter, Brian

  Llwyd, Elfyn

  Gran, James(Beverley)

  Loughton, Tim

  Davey, Edward(Kingston)

  Luff, Peter(M-Worcs)

  Davies, Quentin(Grantham &

  McGrady, Eddie

  Stamford)

  McIntosh, Miss Anne

  Davis, rh David(Haltemprice &

  Mackay, rh Andrew

  Howden)

  Maclean, rh David

  Djanogly, Jonathan

  McLoughlin, Patrick

  Dodds, Nigel

  Malins, Humfrey

  Donaldson, Jeffrey M.

  Marsden, Paul(Shrewsbury &

  Dorrell, rh Stephen

  Atcham)

  Doughty, Sue

  Maude, rh Francis

  Duncan, Alan(Rutland)

  Mawhinney, rh Sir Brian

  Duncan, Peter(Galloway)

  May. Mrs Theresa

  Duncan Smith, rh lain

  Mercer, Patrick

  Evans, Nigel

  Mitchell, Andrew(Sutton

  Ewing, Annabelle

  Coldfield)

  Fallon, Michael

  Moore. Michael

  Field, Mark(Cities of London &

  Moss, Malcolm

  Westminster)

  Murrison, Dr. Andrew

  Flight, Howard

  Norman, Archie

  Forth, rh Eric

  Oaten, Mark(Winchester)

  Foster, Don(Bath)

  O'Brien, Stephen(Eddisbury)

  Fox, Dr. Liam

  Opik, Lembit

  Francois, Mark

  Osborne, George(Tatton)

  Gale, Roger(N Thanet)

  Ottaway, Richard

  Gamier, Edward

  Page, Richard

  George, Andrew(St. Ives)

  Paice, James

  Gidley, Sandra

  Paterson, Owen

  Gillan, Mrs Cheryl

  Pickles, Eric

  Goodman, Paul

  Portillo,rh Michael

  Gray, James(N Wilts)

  Prisk, Mark(Hertford)

  Grayling, Chris

  Pugh. Dr. John

  Green. Damian(Ashford)

  Randall, John

  Green, Matthew(Ludlow)

  Reid, Alan(Argyll & Bute)

  Greenway. John

  Rendel, David

  Grieve, Dominic

  Robathan, Andrew

  Gummer, rh John

  Robertson, Angus(Moray)

  Hague, rh William

  Robertson, Laurence(Tewk'b'ry)

  Hammond, Philip

  Robinson, Peter(Belfast E)

  Hancock, Mike

  Rosindell, Andrew

  Harris, Dr. Evan(Oxford W &

  Ruffley, David

  Abingdon)

  Russell, Bob(Colchester)

  Harvey, Nick

  Salmond, Alex

  Sanders, Adrian

  Trimble, rh David

  Sayeed, Jonathan

  Turner, Andrew(Isle of Wight)

  Selous, Andrew

  Tyler, Paul(N Cornwall)

  Shepherd, Richard

  Tyrie, Andrew

  Simmonds, Mark

  Viggers, Peter

  Simpson, Keith(M-Norfolk)

  Walter, Robert

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

  Waterson, Nigel

  Kincardine)

  Watkinson, Angela

  Smyth, Rev. Martin(Belfast S)

  Webb, Steve(Northavon)

  Soames, Nicholas

  Weir, Michael

  Spicer, Sir Michael

  Wiggin, Bill

  Spink, Bob(Castle Point)

  Wilkinson, John

  Spring, Richard

  Willetts, David

  Steen, Anthony

  Williams, Hywel(Caernarfon)

  Stunell, Andrew

  Williams, Roger(Brecon)

  Swayne, Desmond

  Willis, Phil

  Swire, Hugo(E Devon)

  Wilshire, David

  Syms, Robert

  Winterton, Ann(Congleton)

  Tapsell, Sir Peter

  Winterton, Sir Nicholas

  Taylor, John(Solihull)

  (Macclesfield)

  Taylor, Matthew(Truro)

  Wishart, Pete

  Taylor, Dr. Richard(Wyre F)

  Yeo, Tim(S Suffolk)

  Taylor, Sir Teddy

  Young, rh Sir George Teather, Sarah

  Thomas, Simon(Ceredigion)

  Tellers for the Noes:

  Tonge, Dr. Jenny

  Mr. Geoffrey Clifton-Brown

  Tredinnick, David

  and Hugh Robertson

  7. HYDROCARBON OIL ETC DUTIES (ROAD FUEL GAS)
  Resolved,
  That provision may be made amending the Hydrocarbon Oil Duties Act 1979 in respect of road fuel gas.

  8. HYDROCARBON OIL ETC DUTIES (FUEL OIL)
  Resolved,
  That provision may be made enabling the amendment of the definition of "fuel oil" for the purposes of the Hydrocarbon Oil Duties Act 1979.
  Question accordingly agreed to.
  Question accordingly agreed to.

  8. HYDROCARBON OIL ETC DUTIES (FUEL OIL)

    9. HYDROCARBON OIL ETC DUTIES (MIXING)
    Resolved,
    That provision may be made imposing an excise duty on mixtures containing fully-rebated or partially-rebated hydrocarbon oil.

    10. HYDROCARBON OIL ETC DUTIES (BIOETHANOL)
    Resolved,
    That provision may be made—

    imposing an excise duty on bioethanol and mixtures containing bioethanol,

    for the application in relation to bioethanol of the provisions of the enactments relating to hydrocarbon oil or any description of hydrocarbon oil,

    for the modification in relation to bioethanol of the provisions of the enactments relating to hydrocarbon oil or any description of hydrocarbon oil, and

    defining bioethanol for those purposes and conferring power to amend the definition by order.

    11. HYDROCARBON OIL ETC DUTIES (SULPHUR-FREE PETROL AND DIESEL)
    Resolved,
    That provision may be made amending the Hydrocarbon Oil Duties Act 1979 in respect of "sulphur-free petrol" and "sulphur-free diesel".

    12. HYDROCARBON OIL ETC DUTIES (BIODIESEL)
    Resolved,
    That provision may be made amending the provisions of the Hydrocarbon Oil Duties Act 1979 in relation to biodiesel.

    13. HYDROCARBON OIL ETC DUTIES (FUEL SUBSTITUTES)
    Resolved,
    That provision may be made amending section 6A of the Hydrocarbon Oil Duties Act 1979.

    14. HYDROCARBON OIL ETC DUTIES (WAREHOUSING)
    Resolved,
    That provision may be made enabling the application of Part VIII of the Customs and Excise Management Act 1979 to certain substances.

    15. HYDROCARBON OIL ETC DUTIES (TREATMENT OF ENERGY PRODUCTS)
    Resolved,
    That provision may be made amending section 10 of the Finance Act 1993 so as to permit the treatment of certain energy products as hydrocarbon oil or road fuel gas.

    16. BETTING DUTIES (TREATMENT OF POOL BETS ETC)
    Resolved,
    That provision may be made about the charging of duty under the Betting and Gaming Duties Act 1981 in respect of pool betting and certain other betting.

    17. AMUSEMENT MACHINE LICENCE DUTY (RATES)
    Resolved,
    That—
    (1) In section 23 of the Betting and Gaming Duties Act 1981 for the Table in subsection (2) there shall be substituted—

    Table

    (1) Period (in months) for which license granted

    (2) Category

    (3) Category

    (4) Category

    (5) Category

    (6) Category

    A

    B

    C

    D

    E

    £

    £

    £

    £

    £

    1

    30

    80

    85

    170

    230

    2

    50

    155

    165

    330

    445

    3

    75

    225

    245

    480

    650

    4

    95

    295

    315

    625

    845

    5

    120

    355

    380

    755

    1,020

    6

    140

    410

    445

    875

    1,185

    7

    160

    465

    500

    990

    1,340

    8

    185

    515

    555

    1,095

    1,480

    9

    205

    560

    600

    1,190

    1,610

    10

    225

    600

    645

    1,275

    1,725

    11

    240

    635

    680

    1,350

    1,825

    12

    250

    665

    715

    1,415

    1,915

    (2) This resolution shall have effect in relation to any amusement machine licence for which an application is received by the Commissioners of Customs and Excise on or after 22nd March 2004.
    And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.

    18. VALUE ADDED TAX (GROUPS OF COMPANIES)
    Motion made, and Question put,
    That provision may be made about the grouping of companies for the purposes of value added tax.
    The House divided: Ayes 358, Noes 146.

    Division No. 99]

    [7:32 pm

    AYES

    Abbott, Ms Diane

    Challen, Colin

    Adams, Irene(Paisley N)

    Chapman, Ben(Wirral S)

    Ainsworth, Bob(Cov'try NE)

    Clapham, Michael

    Alexander, Douglas

    Clark, Mrs Helen(Peterborough)

    Allan, Richard

    Clark, Dr. Lynda(Edinburgh)

    Allen, Graham

    Pentlands)

    Anderson, Janet(Rossendale &

    Clark, Paul(Gillingham)

    Darwen)

    Clarke, rh Tom(Coatbridge &

    Armstrong, rh Ms Hilary

    Chryston)

    Atherton, Ms Candy

    Clelland, David

    Atkins, Charlotte

    Coaker, Vernon

    Austin, John

    Coffey, Ms Ann

    Bailey, Adrian

    Cohen, Harry

    Baird, Vera

    Coleman, lain

    Baker, Norman

    Colman, Tony

    Banks, Tony

    Connarty, Michael

    Barnes, Harry

    Cooper, Yvette

    Barron, rh Kevin

    Corbyn, Jeremy

    Battle, John

    Corston, Jean

    Bayley, Hugh

    Cotter, Brian

    Beard, Nigel

    Cousins, Jim

    Begg, Miss Anne

    Cranston, Ross

    Beith, rh A. J.

    Crausby, David

    Bell, Sir Stuart

    Cruddas, Jon

    Benton, Joe(Bootle)

    Cryer. John(Hornchurch)

    Berry, Roger

    Cummings, John

    Best, Harold

    Cunningham, rh Dr. Jack

    Blackman, Liz

    (Copeland)

    Blears, Ms Hazel

    Cunningham, Jim(Coventry S)

    Blizzard, Bob

    Cunningham, Tony(Workington)

    Blunkett, rh David

    Dalyell, Tam

    Boateng, rh Paul

    Darling, rh Alistair

    Borrow, David

    Davey, Edward(Kingston)

    Bradley, rh Keith(Withington)

    David, Wayne

    Bradley, Peter(The Wrekin)

    Davidson, Ian

    Brake, Tom(Carshalton)

    Davies, rh Denzil(Llanelli)

    Breed, Colin

    Davies, Geraint(Croydon C)

    Brennan, Kevin

    Dawson, Hilton

    Brooke, Mrs Annette L.

    Dean, Mrs Janet

    Brown, rh Nicholas(Newcastle E

    Dhanda, Parmjit

    Wallsend)

    Dismore, Andrew

    Brown, Russell(Dumfries)

    Dobbin, Jim(Heywood)

    Buck, Ms Karen

    Dobson, rh Frank

    Burden, Richard

    Donohoe, Brian H.

    Burgon, Colin

    Doran, Frank

    Burnham, Andy

    Doughty, Sue

    Burstow, Paul

    Dowd, Jim(Lewisham W)

    Byers, rh Stephen

    Drew, David(Stroud)

    Cable, Dr. Vincent

    Eagle, Angela(Wallasey)

    Caborn, rh Richard

    Eagle, Maria(L'pool Garston)

    Cairns, David

    Edwards, Huw

    Calton, Mrs Patsy

    Efford, Clive

    Campbell, Alan(Tynemouth)

    Ellman, Mrs Louise

    Campbell, Mrs Anne(C'bridge)

    Ewing, Annabelle

    Campbell, rh Sir Menzies(NE

    Farrelly, Paul

    Fife)

    Field, rh Frank(Birkenhead)

    Campbell, Ronnie(Blyth V)

    Fisher, Mark

    Caplin, Ivor

    Fitzpatrick, Jim

    Carmichael, Alistair

    Fitzsimons, Mrs Lorna

    Casale, Roger

    Flint, Caroline

    Caton, Martin

    Flynn, Paul(Newport W)

    Cawsey, Ian(Brigg)

    Follett, Barbara

    NOES

    Ainsworth, Peter(E Surrey)

    Brazier, Julian

    Amess, David

    Browning, Mrs Angela

    Aricram, rh Michael

    Burns, Simon

    Arbuthnot, rh James

    Burnside, David

    Atkinson, David(Bour'mth E)

    Burt, Alistair

    Atkinson, Peter(Hexham)

    Butterfill, Sir John

    Bacon, Richard

    Cameron, David

    Baldry, Tony

    Campbell, Gregory(E Lond'y)

    Barker, Gregory

    Cash, William

    Baron, John (Billericay)

    Beggs, Roy(E Antrim)

    Chapman, Sir Sydney(Chipping

    Bellingham, Henry

    Barnet)

    Bercow, John

    Chope. Christopher

    Beresford, Sir Paul

    Clappison, James

    Blunt, Crispin

    Clarke, rh Kenneth(Rushcliffe)

    Boswell, Tim

    Collins, Tim

    Bottomley, Peter(Worthing W)

    Conway, Derek

    Bottomley, rh Virginia(SW

    Cran, James(Beverley)

    Surrey)

    Davies, Quentin(Grantham &

    Brady, Graham

    Stamford)

    Foster, rh Derek

    King, Ms Oona(Bethnal Green &

    Foster, Don (Bath)

    Bow)

    Foster, Michael(Worcester)

    Kirkwood, Sir Archy

    Foster, Michael Jabez(Hastings

    Knight, Jim(S Dorset)

    & Rye)

    Kumar, Dr. Ashok

    Francis, Dr. Hywel

    Ladyman, Dr. Stephen

    Gapes, Mike(Ilford S)

    Lamb, Norman

    Gardiner, Barry

    Lammy, David

    George, Andrew(St Ives)

    Lawrence, Mrs Jackie

    George, rh Bruce(Walsall S)

    Laws, David(Yeovil)

    Gerrard, Neil

    Laxton, Bob(Derby N)

    Gibson, Dr. Ian

    Lazarowicz, Mark

    Gidley, Sandra

    Leslie, Christopher

    Gilroy, Linda

    Lewis, Ivan(Bury S)

    Godsiff, Roger

    Lewis, Terry(Worsley)

    Goggins, Paul

    Liddell, rh Mrs Helen

    Green, Matthew(Ludlow)

    Linton, Martin

    Griffiths, Jane(Reading E)

    Lloyd, Tony(Manchester C)

    Griffiths, Nigel(Edinburgh S)

    Llwyd, Elfyn

    Griffiths, Win(Bridgend)

    Love, Andrew

    Grogan, John

    Luke, lain(Dundee E)

    Hain, rh Peter

    Lyons, John(Strathkelvin)

    Hall, Patrick(Bedford)

    McAvoy, Thomas

    Hamilton, David(Midlothian)

    McCabe, Stephen

    Hancock, Mike

    McCafferty, Chris

    Hanson, David

    McDonagh, Siobhain

    Harman, rh Ms Harriet

    McDonnell, John

    Harris, Dr. Evan(Oxford W &

    MacDougall, John

    Abingdon)

    McFall, John

    Harris, Tom(Glasgow Cathcart)

    McGuire, Mrs Anne

    Harvey, Nick

    Mclsaac, Shona

    Havard, Dai(Merthyr Tydfil &

    McKechin, Ann

    Rhymney)

    McKenna, Rosemary

    Heath, David

    McNulty, Tony

    Henderson, Doug(Newcastle N)

    Mactaggart, Fiona

    Henderson, Ivan(Harwich)

    McWalter, Tony

    Hendrick, Mark

    McWilliam, John

    Hepburn, Stephen

    Mahmood, Khalid

    Heppell, John

    Mahon, Mrs Alice

    Hewitt, rh Ms Patricia

    Mallaber, Judy

    Heyes, David

    Mandelson, rh Peter

    Hill, Keith(Streatham)

    Mann. John(Bassetlaw)

    Hinchliffe, David

    Marris, Rob(Wolverh'ton SW)

    Hoey, Kate(Vauxhall)

    Marsden, Gordon(Blackpool S)

    Hoon, rh Geoffrey

    Marsden, Paul(Shrewsbury &

    Hope, Phil(Corby)

    Atcham)

    Hopkins, Kelvin

    Marshall-Andrews, Robert

    Howarth, George(Knowsley N &

    Martlew, Eric

    Sefton E)

    Merron, Gillian

    Hoyle, Lindsay

    Michael, rh Alun

    Hughes, Kevin(Doncaster N)

    Miliband, David

    Hughes, Simon(Southwark N)

    Miller, Andrew

    Humble, Mrs Joan

    Moffatt, Laura

    Hutton, rh John

    Moonie, Dr. Lewis

    Iddon, Dr. Brian

    Moore, Michael

    Ingram, rh Adam

    Moran, Margaret

    Irranca-Davies, Huw

    Morgan, Julie

    Jamieson, David

    Morley, Elliot

    Jenkins, Brian

    Mudie, George

    Johnson, Alan(Hull W)

    Munn, Ms Meg

    Johnson, Miss Melanie(Welwyn

    Murphy, Jim(Eastwood)

    Hatfield)

    Naysmith, Dr. Doug

    Jones, Jon Owen(Cardiff C)

    Norris, Dan(Wansdyke)

    Jones, Kevan(N Durham)

    Oaten, Mark(Winchester)

    Jones, Lynne(Selly Oak)

    O'Brien, Bill(Normanton)

    Jones, Martyn(Clwyd S)

    O'Neill, Martin

    Jones, Nigel(Cheltenham)

    Opik, Lembit

    Joyce, Eric(Falkirk W)

    Organ. Diana

    Keen, Ann(Brentford)

    Osborne, Sandra(Ayr)

    Keetch, Paul

    Owen, Albert

    Kemp, Fraser

    Palmer, Dr. Nick

    Kennedy, rh Charles(Ross Skye &

    Perharn, Linda

    Inverness)

    Picking, Anne

    Khabra, Piara S.

    Pickthall, Colin

    Kidney, David

    Pike, Peter(Burnley)

    Kilfoyle, Peter

    Plaskitt, James

    Pond, Chris(Gravesham)

    Stoate, Dr. Howard

    Pope, Greg(Hyndburn)

    Strang, rh Dr. Gavin

    Pound, Stephen

    Stringer, Graham

    Prescott, rh John

    Stunell, Andrew

    Primarolo, rh Dawn

    Sutcliffe, Gerry

    Prosser, Gwyn

    Tami, Mark(Alyn)

    Pugh, Dr. John

    Taylor, Dari(Stockton S)

    Purchase, Ken

    Taylor, David(NW Leics)

    Purnell, James

    Taylor, Matthew(Truro)

    Quin, rh Joyce

    Taylor, Dr. Richard(Wyre F)

    Quinn, Lawrie

    Teather, Sarah

    Rammell, Bill

    Thomas, Gareth(Clwyd W)

    Rapson, Syd(Portsmouth N)

    Thomas, Simon(Ceredigion)

    Reed, Andy(Loughborough)

    Timms, Stephen

    Reid, Alan(Argyll & Bute)

    Tipping, Paddy

    Reid, rh Dr. John(Hamilton N &

    Todd, Mark(S Derbyshire)

    Bellshill)

    Tonge, Dr. Jenny

    Rundel, David

    Touhig, Don(IsIwyn)

    Robertson, Angus(Moray)

    Trickett, Jon

    Robertson, John(Glasgow

    Truswell, Paul

    Anniesland)

    Turner, Dennis(Wolverh'ton SE)

    Robinson, Geoffrey(Coventry

    Turner, Dr. Desmond(Brighton

    NW)

    Kemptown)

    Roche, Mrs Barbara

    Twigg, Derek(Halton)

    Rooney, Terry

    Twigg, Stephen(Enfield)

    Roane, Chris

    Tyler, Paul(N Cornwall)

    Ruddock, Joan

    Tynan, Bill(Hamilton S)

    Russell, Bob(Colchester)

    Ward, Claire

    Salmond, Alex

    Wareing, Robert N.

    Salter, Martin

    Watson, Tom(W Bromwich E)

    Sanders, Adrian

    Watts, David

    Savidge, Malcolm

    Webb, Steve(Northavon)

    Sawford, Phil

    Weir, Michael

    Sedgemore, Brian

    White, Brian

    Sheridan, Jim

    Whitehead, Dr. Alan

    Short, rh Clare

    Wicks, Malcolm

    Simon, Sion(B'ham Erdington)

    Williams, rh Alan(Swansea W)

    Simpson, Alan(Nottingham S)

    Williams, Betty(Conwy)

    Singh, Marsha

    Williams, Hywel(Caernarfon)

    Skinner, Dennis

    Williams, Roger(Brecon)

    Smith, rh Andrew(Oxford E)

    Willis, Phil

    Smith, Geraldine(Morecambe &

    Wills, Michael

    Lunesdale)

    Wishart, Pete

    Smith, Jacqui(Redditch)

    Wood, Mike(Batley)

    Smith, Llew(Blaenau Gwent)

    Woodward, Shaun

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

    Woolas, Phil

    Kincardine)

    Wright, Anthony D.(Gt

    Soley, Clive

    Yarmouth)

    Southworth, Helen

    Wright, David(Telford)

    Squire, Rachel

    Wright, Tony(Cannock)

    Steinberg, Gerry

    Stewart, David(Inverness E &

    Tellers for the Ayes:

    Lochaber)

    Mr. Nick Ainger and

    Stewart, Ian(Eccles)

    Joan Ryan

    Davis, rh David(Haltemprice &

    Mawhinney, rh Sir Brian

    Howden)

    May, Mrs Theresa

    Djanogly, Jonathan

    Mercer, Patrick

    Dodds, Nigel

    Mitchell, Andrew(Sutton)

    Donaldson, Jeffrey M.

    Coldfield)

    Dorrell, rh Stephen

    Moss, Malcolm

    Duncan, Alan(Rutland)

    Murrison, Dr. Andrew

    Duncan, Peter(Galloway)

    Norman, Archie

    Duncan Smith, rh lain

    O'Brien, Stephen(Eddisbury)

    Evans, Nigel

    Osborne, George(Tatton)

    Fallon, Michael

    Ottaway, Richard

    Field, Mark(Cities of London &

    Page, Richard

    Westminster)

    Paice, James

    Flight, Howard

    Paterson, Owen

    Forth, rh Eric

    Pickles, Eric

    Fox, Dr. Liam

    Portillo, rh Michael

    Francois, Mark

    Prisk, Mark(Hertford)

    Gale, Roger(N Thanet)

    Randall, John

    Gamier, Edward

    Robathan, Andrew

    Gillan, Mrs Cheryl

    Robertson, Hugh(Faversham &

    Goodman, Paul

    M-Kent)

    Gray, James(N Wilts)

    Robertson, Laurence(Tewk'b'ry)

    Grayling, Chris

    Robinson, Peter(Belfast E)

    Green, Damian(Ashford)

    Rosindell, Andrew

    Greenway, John

    Sayeed, Jonathan

    Grieve, Dominic

    Selous, Andrew

    Gummer, rh John

    Shepherd, Richard

    Hague, rh William

    Simmonds, Mark

    Hammond, Philip

    Simpson, Keith(M-Norfolk)

    Hawkins, Nick

    Smyth, Rev. Martin(Belfast 5)

    Hayes, John(S Holland)

    Spicer, Sir Michael

    Heald, Oliver

    Spink, Bob(Castle Point)

    Heathcoat-Amory, rh David

    Spring, Richard

    Hermon, Lady

    Steen, Anthony

    Hoban, Mark(Fareham)

    Swayne, Desmond

    Horam, John(Orpington)

    Swire, Hugo(E Devon)

    Howard, rh Michael

    Syms, Robert

    Howarth, Gerald(Aldershot)

    Tapsell, Sir Peter

    Hunter, Andrew

    Taylor, John(Solihull)

    Jack, rh Michael

    Taylor, Sir Teddy

    Johnson, Boris(Henley)

    Tredinnick, David

    Key, Robert(Salisbury)

    Trimble, rh David

    Kirkbride, Miss Julie

    Turner, Andrew(Isle of Wight)

    Knight, rh Greg(E Yorkshire)

    Tyrie, Andrew

    Laing, Mrs Eleanor

    Viggers, Peter

    Lait, Mrs Jacqui

    Walter, Robert

    Lansley, Andrew

    Waterson, Nigel

    Leigh, Edward

    Watkinson, Angela

    Letwin, rh Oliver

    Wiggin, Bill

    Liddell-Grainger, Ian

    Wilkinson, John

    Lidington, David

    Willetts, David

    Lilley, rh Peter

    Wilshire, David

    Loughton, Tim

    Winterton, Ann(Congleton)

    Luff, Peter(M-Worcs)

    Winterton, Sir Nicholas

    McIntosh, Miss Anne

    (Macclesfield)

    Mackay, rh Andrew

    Young, rh Sir George

    Maclean, rh David

    McLoughlin, Patrick

    Tellers for the Noes:

    Malins, H umfrey

    Mr. David Ruffley and

    Maude, rh Francis

    Mr. Geoffrey Clifton-Brown

    19. VALUE ADDED TAX (GAS AND ELECTRICITY SUPPLIED BY PERSONS OUTSIDE UK)
    Resolved,
    That provision may be made for the purposes of value added tax about gas and electricity supplied by persons outside the United Kingdom.

    20. VALUE ADDED TAX (PRIVATE USE OF STOCK IN TRADE CARS BY EMPLOYEES ETC)
    Resolved,
    That provision may be made for the purposes of value added tax in relation to a supply which is a supply of services by virtue of paragraph 5(4) of Schedule 4 to the Value Added Tax Act 1994 where—

    the goods in question consist of a motor car,

    the person making the supply is a motor dealer or motor manufacturer,

    the supply is for a consideration, and

    the value of the supply for the purposes of value added tax is less than its open market value.

    21. INCOME TAX (CHARGE AND RATES FOR 2004–05)
    Resolved,
    That income tax shall be charged for the year 2004–05, and for that year–

    the starting rate shall be 10%;

    the basic rate shall be 22%;

    the higher rate shall be 40%.

    And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.

    22. INCOME TAX (PERSONAL ALLOWANCES FOR THOSE AGED 65 OR MORE)
    Resolved,
    That—

    For the year 2004–05—

    the amount specified in section 257(2) of the Income and Corporation Taxes Act 1988 shall be £6,830; and

    the amount specified in section 257(3) of that Act shall be £6,950.

    Accordingly, section 257C(1) of that Act, so far as it relates to the amounts so specified, shall not apply for that year.
    And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.

    23. CORPORATION TAX (CHARGE AND RATE FOR 2005)
    Motion made, and Question put,
    That corporation tax shall be charged for the financial year 2005 at the rate of 30%.
    The House divided: Ayes 342, Noes 16.

    Division No. 100]

    [7:46 pm

    AYES

    Abbott, Ms Diane

    Barnes, Harry

    Adams, Irene(Paisley N)

    Barron, rh Kevin

    Ainsworth, Bob(Cov'try NE)

    Battle, John

    Alexander, Douglas

    Bayley, Hugh

    Allan, Richard

    Beard, Nigel

    Allen, Graham

    Begg, Miss Anne

    Anderson, Janet(Rossendale &

    Beith, rh A. J.

    Darwen)

    Bell, Sir Stuart

    Armstrong, rh Ms Hilary

    Benton, Joe (Bootle)

    Atherton, Ms Candy

    Berry, Roger

    Atkins, Charlotte

    Best, Harold

    Austin, John

    Blackman, Liz

    Bailey, Adrian

    Blears, Ms Hazel

    Baird, Vera

    Boateng, rh Paul

    Baker, Norman

    Borrow, David

    Banks, Tony

    Bradley, rh Keith(Withington)

    NOES

    Beggs, Roy(E Antrim)

    Shephard, rh Mrs Gillian

    Burnside, David

    Smyth, Rev. Martin(Belfast S)

    Dodds, Nigel

    Taylor, Dr. Richard(Wyre F)

    Donaldson, Jeffrey M.

    Trimble, rh David

    Ewing, Annabelle

    Williams, Hywel(Caernarfon)

    Hermon, Lady

    Wishart, Pete

    Llwyd, Elfyn

    Robertson, Angus(Moray)

    Tellers for the Noes:

    Robinson, Peter(Belfast E)

    Mr. Simon Thomas and

    Salmond, Alex

    Mr. Michael Weir

    Bradley, Peter(The Wrekin)

    Eagle, Angela(Wallasey)

    Brake, Tom(Carshalton)

    Eagle, Maria(L'pool Garston)

    Breed, Cohn

    Edwards, Huw

    Brennan, Kevin

    Efford, Clive

    Brooke, Mrs Annette L.

    Ellman, Mrs Louise

    Brown, rh Gordon(Dunfermline

    Farrelly, Paul

    E)

    Field, rh Frank(Birkenhead)

    Brown, rh Nicholas(Newcastle E

    Fisher, Mark

    Wallsend)

    Fitzpatrick, Jim

    Brown, Russell(Dumfries)

    Fitzsimons, Mrs Lorna

    Buck, Ms Karen

    Flint, Caroline

    Burden, Richard

    Flynn, Paul(Newport W)

    Burgon, Colin

    Follett, Barbara

    Burnham, Andy

    Foster, rh Derek

    Burstow, Paul

    Foster, Don(Bath)

    Byers, rh Stephen

    Foster, Michael(Worcester)

    Cable, Dr. Vincent

    Foster, Michael Jabez(Hastings)

    Cairns, David

    & Rye)

    Calton, Mrs Patsy

    Francis, Dr. Hywel

    Campbell, Alan(Tynemouff,)

    Gapes, Mike(IIford S)

    Campbell, Mrs Anne(C'bridge)

    Gardiner, Barry

    Campbell, rh Sir Menzies(NE)

    George, Andrew(St. Ives)

    Fife)

    George, rh Bruce(Walsall S)

    Campbell, Ronnie(Blyth V)

    Gerrard, Neil

    Caplin, Ivor

    Gibson, Dr. Ian

    Carmichael, Alistair

    Gidley, Sandra

    Casale, Roger

    Gilroy, Linda

    Caton, Martin

    Godsiff, Roger

    Cawsey, Ian(Brigg)

    Goggins, Paul

    Challen, Colin

    Green, Matthew(Ludlow)

    Chapman, Ben(Wirral S)

    Griffiths, Jane(Reading E)

    Clapham, Michael

    Griffiths, Nigel(Edinburgh S)

    Clark, Mrs Helen(Peterborough)

    Griffiths, Win(Bridgend)

    Clark, Dr. Lynda(Edinburgh

    Grogan, John

    Pentlands)

    Hain. rh Peter

    Clark, Paul(Gillingham)

    Hall, Patrick(Bedford)

    Clarke, rh Tom(Coatbridge &

    Hamilton, David(Midlothian)

    Chryston)

    Hancock, Mike

    Clelland, David

    Hanson, David

    Coaker, Vernon

    Harman, rh Ms Harriet

    Coffey, Ms Ann

    Harris, Dr. Evan(Oxford W &

    Cohen, Harry

    Abingdon)

    Coleman, lain

    Harris, Tom(Glasgow Cathcart)

    Colman, Tony

    Harvey, Nick

    Connarty, Michael

    Havard, Dai(Merthyr Tydfil &

    Cooper, Yvette

    Rhymney)

    Corbyn, Jeremy

    Heath, David

    Corston, Jean

    Henderson, Doug(Newcastle N)

    Cotter, Brian

    Henderson, Ivan(Harwich)

    Cousins, Jim

    Hendrick, Mark

    Cranston, Ross

    Hepburn, Stephen

    Crausby, David

    Heppell, John

    Cruddas, Jon

    Hewn, rh Ms Patricia

    Cryer, John(Hornchurch)

    Heyes, David

    Cummings, John

    Hill, Keith (Streatham)

    Cunningham, rh Dr. Jack

    Hinchliffe, David

    (Copeland)

    Hoey, Kate(Vauxhall)

    Cunningham, Tony(Workington)

    Hope, Phil(Corby)

    Dalyell, Tam

    Hopkins, Kelvin

    Darling, rh Alistair

    Howarth, George(Knowsley N &

    Davey, Edward(Kingston)

    Sefton E)

    David, Wayne

    Hoyle, Lindsay

    Davidson, Ian

    Hughes, Kevin(Doncaster N)

    Davies, rh Denzil(Llanelli)

    Hughes, Simon(Southwark N)

    Davies, Geraint(Croydon C)

    Humble, Mrs Joan

    Dawson, Hilton

    Hutton, rh John

    Dean, Mrs Janet

    Iddon, Dr. Brian

    Dhanda, Parmjit

    Ingram, rh Adam

    Dismore, Andrew

    Irranca-Davies, Huw

    Dobbin, Jim(Heywood)

    Jamieson, David

    Dobson, rh Frank

    Jenkins, Brian

    Donohoe, Brian H.

    Johnson, Alan(Hull W)

    Doran, Frank

    Johnson, Miss Melanie(Welwyn

    Doughty, Sue

    Hatfield)

    Dowd, Jim(Lewisham W)

    Jones, Jon Owen(Cardiff C)

    Drew, David(Stroud)

    Jones, Kevan(N Durham)

    Jones, Lynne(Selly Oak)

    Organ, Diana

    Jones, Martyn(Clwyd S)

    Osborne, Sandra(Ayr)

    Jones, Nigel(Cheltenham)

    Owen, Albert

    Joyce, Eric(Falkirk W)

    Palmer, Dr. Nick

    Keen, Ann(Brentford)

    Perham, Linda

    Keetch, Paul

    Picking, Anne

    Kemp, Fraser

    Pickthall, Cohn

    Kennedy, rh Charles(Ross Skye &

    Pike, Peter(Burnley)

    Inverness)

    Plaskitt, James

    Khabra, Piara S.

    Pond, Chris(Gravesham)

    Kidney, David

    Pope, Greg(Hyndburn)

    Kilfoyle, Peter

    Pound, Stephen

    King, Ms Oona(Bethnal Green &

    Prescott, rh John

    Bow)

    Primarolo, rh Dawn

    Kirkwood, Sir Archy

    Prosser, Gwyn

    Knight, Jim(S Dorset)

    Pugh, Dr. John

    Kumar, Dr. Ashok

    Purchase, Ken

    Lamb, Norman

    Purnell, James

    Lawrence, Mrs Jackie

    Quin, rh Joyce

    Laws, David(Yeovil)

    Quinn, Lawrie

    Laxton, Bob(Derby N)

    Rapson, Syd(Portsmouth N)

    Lazarowicz, Mark

    Reed, Andy(Loughborough)

    Leslie, Christopher

    Reid, Alan(Argyll & Bute)

    Lewis, Ivan(Bury S)

    Bendel, David

    Lewis, Terry(Worsley)

    Robertson, John(Glasgow

    Liddell, rh Mrs Helen

    Anniesland)

    Linton, Martin

    Robinson, Geoffrey(Coventry)

    Lloyd, Tony(Manchester C)

    NW)

    Love, Andrew

    Roche, Mrs Barbara

    Luke, lain(Dundee E)

    Rooney, Terry

    I.yons, John(Strathkelvin)

    Ruane, Chris

    McAvoy, Thomas

    Ruddock, Joan

    McCabe, Stephen

    Russell, Bob(Colchester)

    McCafferty, Chris

    Salter, Martin

    McDonagh, Siobhain

    Sanders, Adrian

    McDonnell, John

    Savidge, Malcolm

    MacDougall, John

    Sawford, Phil

    McFall, John

    Sedgemore, Brian

    McGuire, Mrs Anne

    Sheridan, Jim

    Mclsaac, Shona

    Short, rh Clare

    McKechin, Ann

    Simon, Siôn(B'ham Erdington)

    McKenna, Rosemary

    Simpson, Alan(Nottingham S)

    McNulty, Tony

    Singh, Marsha

    Mactaggart, Fiona

    Skinner, Dennis

    McWalter, Tony

    Smith, rh Andrew(Oxford E)

    McWilliam, John

    Smith, Geraldine(Morecambe &

    Mahmood, Khalid

    Lunesdale)

    Mahon, Mrs Alice

    Smith, Jacqui(Redditch)

    Mallaber, Judy

    Smith, Llew(Blaenau Gwent)

    Mann, John(Bassetlaw)

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

    Marris, Rob(Wolverh'ton SW)

    Kincardine)

    Marsden, Gordon(Blackpool 5)

    Soley, Clive

    Marsden, Paul(Shrewsbury &

    Southworth, Helen

    Atcham)

    Spellar, rh John

    Marshall-Andrews, Robert

    Squire, Rachel

    Martlew, Eric

    Steinberg, Gerry

    Meacher, rh Michael

    Stewart, David(Inverness E &

    Merron, Gillian

    Lochaber)

    Michael, rh Alun

    Stewart, Ian(Eccles)

    Miliband, David

    Stoate, Dr. Howard

    Miller, Andrew

    Strang, rh Dr. Gavin

    Moffatt, Laura

    Stringer, Graham

    Moonie, Dr. Lewis

    Stunell, Andrew

    Moore, Michael

    Sutcliffe, Gerry

    Moran, Margaret

    Tami, Mark(Alyn)

    Morgan, Julie

    Taylor, Dad(Stockton S)

    Morley, Elliot

    Taylor, David(NW Leics)

    Mudie, George

    Taylor, Matthew(Truro)

    Munn, Ms Meg

    Teather, Sarah

    Murphy, Jim(Eastwood)

    Thomas, Gareth(Clwyd W)

    Naysmith, Dr. Doug

    Timms, Stephen

    Norris, Dan(Wansdyke)

    Tipping, Paddy

    Oaten, Mark(Winchester)

    Todd, Mark(S Derbyshire)

    O'Brien, Bill(Normanton)

    Tonge, Dr. Jenny

    O'Neill, Martin

    Touhig, Don(lslwyn)

    Õpik, Lembit

    Trickett, Jon

    Truswell, Paul

    Williams, rh Alan(Swansea W)

    Turner, Dennis(Wolverh'ton SE)

    Williams, Betty(Conwy)

    Turner, Dr. Desmond(Brighton)

    Williams, Roger(Brecon)

    Kemptown)

    Willis, Phil

    Twigg, Derek(Halton)

    Wills, Michael

    Twigg, Stephen(Enfield)

    Wood, Mike(Batley)

    Tyler, Paul(N Cornwall)

    Woodward, Shaun

    Tynan, Bill(Hamilton S)

    Woolas, Phil

    Ward, Claire

    Wright Anthony D.(Gt

    Wareing, Robert N.

    Yarmouth)

    Watson, Torn(W Bromwich E)

    Wright, David(Telford)

    Watts, David

    Wright Tony(Cannock)

    Webb, Steve(Northavon)

    White, Brian

    Tellers for the Ayes:

    Whitehead, Dr. Alan

    Mr. Nick Ainger and

    Wicks, Malcolm

    Joan Ryan

    Question accordingly agreed to.

    24. CORPORATION TAX (SMALL COMPANIES' RATE FOR 2004)
    Resolved,
    That for the financial year 2004—

    the small companies' rate shall be 19%, and

    the fraction mentioned in section 13(2) of the Income and Corporation Taxes Act 1988 shall be 11/400ths.

    And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.

    25. CORPORATION TAX (STARTING RATE FOR 2004)
    Resolved,
    That for the financial year 2004—

    the corporation tax starting rate shall be 0%, and

    the fraction mentioned in section 13AA of the Income and Corporation Taxes Act 1988 shall be 19/400ths.

    And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.

    26. CORPORATION TAX (NON-CORPORATE DISTRIBUTION RATE)
    Motion made, and Question put,
    That—

    provision may be made for a special rate of corporation tax (the "non-corporate distribution rate") where a company makes, or is treated as making, a distribution to a person other than a company, and

    the non-corporate distribution rate for the financial year 2004 shall be 19%.

    The House divided: Ayes 290, Noes 191.

    Division No. 101]

    [7:58 pm

    AYES

    Abbott, Ms Diane

    Cryer, John(Hornchurch)

    Adams, Irene(Paisley N)

    Cummings, John

    Ainger, Nick

    Cunningham, Jim(Coventry S)

    Ainsworth, Bob(Cov'try NE)

    Cunningham, Tony(Workington)

    Alexander, Douglas

    Dalyell, Tam

    Allen, Graham

    Darling, rh Alistair

    Anderson, Janet(Rossendale &

    David, Wayne

    Darwen)

    Davidson, Ian

    Armstrong, rh Ms Hilary

    Davies, rh Denzil(Llanelli)

    Atherton, Ms Candy

    Davies, Geraint(Croydon C)

    Atkins, Charlotte

    Dawson, Hilton

    Austin, John

    Dean, Mrs Janet

    Bailey, Adrian

    Dhanda, Parmjit

    Baird, Vera

    Dismore, Andrew

    Banks, Tony

    Dobbin, Jim(Heywood)

    Barnes, Harry

    Dobson, rh Frank

    Barron, rh Kevin

    Donohoe, Brian H.

    Battle, John

    Doran, Frank

    Bayley, Hugh

    Dowd, Jim(Lewisham W)

    Beard, Nigel

    Drew, David(Stroud)

    Begg, Miss Anne

    Eagle, Angela(Wallasey)

    Bell, Sir Stuart

    Eagle, Maria(L'pool Garston)

    Benton, Joe(Bootle)

    Edwards, Huw

    Berry, Roger

    Efford. Clive

    Best, Harold

    Ellman, Mrs Louise

    Blackman, Liz

    Farrelly, Paul

    Blears, Ms Hazel

    Field, rh Frank(Birkenhead)

    Blizzard, Bob

    Fisher, Mark

    Boateng, rh Paul

    Fitzpatrick, Jim

    Borrow, David

    Fitzsimons, Mrs Lorna

    Bradley, rh Keith(Withington)

    Flynn, Paul(Newport W)

    Bradley, Peter(The Wrekin)

    Follett, Barbara

    Brennan, Kevin

    Foster, rh Derek

    Brown, rh Gordon(Dunfermline

    Foster, Michael(Worcester)

    E)

    Foster, Michael Jabez(Hastings)

    Brown, rh Nicholas(Newcastle E

    & Rye)

    Wallsend)

    Francis, Dr. Hywel

    Brown, Russell(Dumfries)

    Gapes, Mike(IIford S)

    Buck, Ms Karen

    Gardiner, Barry

    Burden, Richard

    George, rh Bruce(Walsall S)

    Burgon, Colin

    Gerrard, Neil

    Burnham, Andy

    Gibson, Dr. Ian

    Byers, rh Stephen

    Gilroy, Linda

    Cairns, David

    Godsiff, Roger

    Campbell, Alan(Tynemouth)

    Griffiths, Jane(Reading E)

    Campbell, Mrs Anne(C'bridge)

    Griffiths, Nigel(Edinburgh S)

    Campbell, Ronnie(Blyth V)

    Griffiths, Win(Bridgend)

    Casale, Roger

    Grogan, John

    Caton, Martin

    Hain, rh Peter

    Cawsey, Ian(Brigg)

    Hall, Patrick(Bedford)

    Challen, Colin

    Hamilton, David(Midlothian)

    Chapman, Ben(Wirral S)

    Hanson, David

    Clapham, Michael

    Harman, rh Ms Harriet

    Clark, Mrs Helen(Peterborough)

    Harris, Tom(Glasgow Cathcart)

    Clark, Dr. Lynda(Edinburgh

    Havard, Dai(Merthyr Tydfil &

    Pentlands)

    Rhymney)

    Clark, Paul(Gillingham)

    Healey, John

    Clarke, rh Tom(Coatbridge &

    Henderson, Doug(Newcastle N)

    Chryston)

    Henderson, Ivan(Harwich)

    Clelland, David

    Hendrick, Mark

    Coaker, Vernon

    Hepburn, StephenCoffey, Ms Ann

    Heppell, JohnCohen, Harry Heyes, DavidColeman, lain

    Hill, Keith (Streatham)Colman, Tony

    Hinchliffe, DavidConnarty, Michael

    Hoey, Kate (Vauxhall)

    Cooper, Yvette

    Hope, Phil(Corby)

    Corbyn, Jeremy

    Hopkins, Kelvin

    Corston, Jean

    Howarth, George(Knowsley N &

    Cousins, Jim

    Sefton E)

    Cranston, Ross

    Hoyle, Lindsay

    Crausby, David

    Hughes, Kevin(Doncaster N)

    Cruddas, Jon

    Humble, Mrs Joan

    NOES

    Ainsworth, Peter(E Surrey)

    Fox, Dr. Liam

    Allan, Richard

    Francois, Mark

    Amess, David

    Gale, Roger(N Thanet)

    Ancram, rh Michael

    Gamier, Edward

    Arbuthnot, rh James

    George, Andrew(St. Ives)

    Atkinson, David(Bour'mth E)

    Gidley, Sandra

    Atkinson, Peter(Hexham)

    Gillan, Mrs Cheryl

    Bacon, Richard

    Goodman, Paul

    Baker, Norman

    Gray, James(N Wilts)

    Baldry, Tony

    Grayling, Chris

    Barker, Gregory

    Green, Damian(Ashford)

    Baron, John(Billericay)

    Green, Matthew(Ludlow)

    Beggs, Roy(E Antrim)

    Greenway, John

    Beith, rh A. J.

    Grieve, Dominic

    Bellingham, Henry

    Gummer, rh John

    Bercow, John

    Hague, rh William

    Beresford, Sir Paul

    Hammond, Philip

    Blunt, Crispin

    Hancock, Mike

    Boswell, Tim

    Harris, Dr. Evan(Oxford W &

    Bottomley, Peter(Worthing W)

    Abingdon)

    Bottomley, rh Virginia(SW

    Harvey, Nick

    Surrey)

    Hawkins, Nick

    Brady, Graham

    Hayes, John(S Holland)

    Brake, Tom(Carshalton)

    Heald, Oliver

    Brazier, Julian

    Heath, David

    Breed, Colin

    Heathcoat-Amory, rh David

    Brooke, Mrs Annette L.

    Hermon, Lady

    Browning, Mrs Angela

    Hoban, Mark(Fareham)

    Burnside, David

    Howard, rh Michael

    Burstow, Paul

    Howarth, Gerald(Aldershot)

    Burt, Alistair

    Hughes, Simon(Southwark N)

    Cable, Dr. Vincent

    Hunter, Andrew

    Calton, Mrs Patsy

    Jack, rh Michael

    Cameron, David

    Johnson, Boris(Henley)

    Campbell, Gregory(E Lond'y)

    Jones, Nigel(Cheltenham)

    Campbell, rh Sir Menzies(NE

    Keetch, Paul

    Fife)

    Kennedy, rh Charles(Ross Skye

    Carmichael, Alistair

    Inverness)

    Cash, William

    Key, Robert(Salisbury)

    Chapman, Sir Sydney(Chipping

    Kirkbride, Miss Julie

    Barnet)

    Kirkwood, Sir Archy

    Chope, Christopher

    Knight, rh Greg(E Yorkshire)

    Clappison, James

    Laing, Mrs Eleanor

    Clarke, rh Kenneth(Rushcliffe)

    Lait, Mrs Jacqui

    Collins, Tim

    Lamb, Norman

    Conway, Derek

    Lansley, Andrew

    Cotter, Brian

    Laws, David(Yeovil)

    Cran, James(Beverley)

    Letwin, rh Oliver

    Davey, Edward(Kingston)

    Liddell-Grainger, Ian

    Davies, Quentin(Grantham &

    Lilley, rh Peter

    Stamford)

    Llwyd, Elfyn

    Davis, rh David(Haltemprice &

    Loughton, Tim

    Howden)

    Luff, Peter(M-Worcs)

    Dianogly, Jonathan

    McIntosh, Miss Anne

    Dodds, Nigel

    Mackay, rh Andrew

    Donaldson, Jeffrey M.

    Maclean, rh David

    Dorrell, rh Stephen

    McLoughlin, Patrick

    Doughty, Sue

    Malins, Humfrey

    Duncan, Alan(Rutland)

    Marsden, Paul(Shrewsbury &

    Duncan, Peter(Galloway)

    Atcham)

    Evans, Nigel

    Maude, rh Francis

    Ewing, Annabelle

    Mawhinney, rh Sir Brian

    Fallon, Michael

    May, Mrs Theresa

    Field, Mark(Cities of London &

    Mercer, Patrick

    Westminster)

    Moore, Michael

    Flight, Howard

    Moss, Malcolm

    Forth, rh Eric

    Murrison, Dr. Andrew

    Foster, Don(Bath)

    Norman, Archie

    Hutton, rh John

    Palmer, Dr. Nick

    Iddon, Dr. Brian

    Perham, Linda

    Ingram, rh Adam

    Picking, Anne

    Irranca-Davies, Huw

    Pickthall, Colin

    Jamieson, David

    Pike, Peter(Burnley)

    Jenkins, Brian

    Plaskitt, James

    Johnson, Alan(Hull W)

    Pond, Chris(Gravesham)

    Johnson, Miss Melanie(Welwyn

    Pope, Greg(Hyndburn)

    Hatfield)

    Pound, Stephen

    Jones, Kevan(N Durham)

    Primarolo, rh Dawn

    Jones, Lynne(Selly Oak)

    Prosser, Gwyn

    Jones, Martyn(Clwyd S)

    Purchase, Ken

    Joyce, Eric(Falkirk W)

    Purnell, James

    Keen, Ann(Brentford)

    Quin, rh Joyce

    Kemp, Fraser

    Quinn, Lawrie

    Khabra, Piara S.

    Rammell, Bill

    Kidney, David

    Rapson, Syd(Portsmouth N)

    Kilfoyle, Peter

    Reed, Andy(Loughborough)

    King, Ms Oona(Bethnal Green &

    Robertson, John(Glasgow

    Bow)

    Anniesland)

    Knight, Jim(S Dorset)

    Robinson, Geoffrey(Coventry

    Kumar, Dr. Ashok

    NW)

    Lawrence, Mrs Jackie

    Roche, Mrs Barbara

    Laxton, Bob(Derby N)

    Rooney, Terry

    Lazarowicz, Mark

    Ruane, Chris

    Leslie, Christopher

    Ruddock, Joan

    Lewis, Ivan(Bury S)

    Ryan. Joan(Enfield N)

    Lewis, Terry(Worsley)

    Salter, Martin

    Liddell, rh Mrs Helen

    Savidge, Malcolm

    Linton, Martin

    Sawford, Phil

    Lloyd, Tony(Manchester C)

    Sedgemore, Brian

    Love, Andrew

    Sheridan, Jim

    Luke, lain(Dundee E)

    Short, rh Clare

    Lyons, John(Strathkelvin)

    Simon, Siôn(B'ham Erdington)

    McAvoy, Thomas

    Simpson, Alan(Nottingham S)

    McCabe, Stephen

    Singh, Marsha

    McCafferty, Chris

    Skinner, Dennis

    McCartney, rh Ian

    Smith, rh Andrew(Oxford E)

    McDonagh, Siobhain

    Smith, Geraldine(Morecambe &

    McDonnell, John

    Lunesdale)

    MacDougall, John

    Smith, Jacqui(Redditch)

    McFall, John

    Smith, Llew(Blaenau Gwent)

    McGuire, Mrs Anne

    Soley, Clive

    Mclsaac, Shona

    Southworth, Helen

    McKechin, Ann

    Spellar, rh John

    McKenna, Rosemary

    Squire, Rachel

    McNulty, Tony

    Steinberg, Gerry

    Mactaggart, Fiona

    Stewart, David(Inverness E &

    McWalter, Tony

    Lochaber)

    McWilliam, John

    Stewart, Ian(Eccles)

    Mahmood, Khalid

    Stoate, Dr. Howard

    Mahon, Mrs Alice

    Strang, rh Dr. Gavin

    Mallaber, Judy

    Stringer, Graham

    Mann, John(Bassetlaw)

    Sutcliffe, Gerry

    Marris, Rob(Wolverh'ton SW)

    Tami, Mark(Alyn)

    Marsden, Gordon(Blackpool S)

    Taylor, Dan(Stockton S)

    Marshall-Andrews, Robert

    Taylor, David(NW Leics)

    Martlew, Eric

    Tipping, Paddy

    Meacher, rh Michael

    Todd, Mark(S Derbyshire)

    Michael, rh Alun

    Touhig, Don(IsIwyn)

    Miliband, David

    Trickett, Jon

    Miller, Andrew

    Truswell, Paul

    Moffatt, Laura

    Turner, Dennis(Wolverh'ton SE)

    Moonie, Dr. Lewis

    Turner, Dr. Desmond(Brighton

    Moran, Margaret

    Kemptown)

    Morgan, Julie

    Twigg, Stephen(Enfield)

    Morley, Elliot

    Tynan, Bill(Hamilton S)

    Mudie, George

    Ward, Claire

    Munn, Ms Meg

    Wareing, Robert N.

    Naysmith, Dr. Doug

    Watson, Tom(W Bromwich E)

    Norris, Dan(Wansdyke)

    Watts, David

    O'Brien, Bill(Normanton)

    White, Brian

    O'Neill, Martin

    Whitehead, Dr. Alan

    Organ, Diana

    Wicks, Malcolm

    Osborne, Sandra(Ayr)

    Williams, rh Alan(Swansea W)

    Owen, Albert

    Williams, Betty(Conwy)

    Wills, Michael

    Wright, David(Telford)

    Wood, Mike(Batley)

    Wright, Tony(Cannock)

    Woodward, Shaun

    Woolas, Phil

    Tellers for the Ayes:

    Wright, Anthony D.(Gt

    Gillian Merron and

    Yarmouth)

    Mr. Jim Murphy

    Oaten, Mark(Winchester)

    Swire, Hugo(E Devon)

    O'Brien, Stephen(Eddisbury)

    Syms, Robert

    Opik, Lembit

    Tapsell, Sir Peter

    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

    Prisk, Mark(Hertford)

    Thomas, Simon(Ceredigion)

    Pugh, Dr. John

    Tonge, Dr. Jenny

    Randall, John

    Trimble, rh David

    Reid, Alan(Argyll & Bute)

    Turner, Andrew(Isle of Wight)

    Rendel, David

    Tyler, Paul(N Cornwall)

    Robathan, Andrew

    Tyrie, Andrew

    Robertson, Angus(Moray)

    Viggers, Peter

    Robertson, Hugh(Faversham &

    Walter, Robert

    M-Kent)

    Waterson, Nigel

    Robertson, Laurence(Tewk'b'ry)

    Watkinson, Angela

    Robinson, Peter(Belfast E)

    Webb, Steve(Northavon)

    Rosindell, Andrew

    Weir, Michael

    Russell, Bob(Colchester)

    Widdecombe, rh Miss Ann

    Wiggin, Bill

    Salmond, Alex

    Wilkinson, John

    Sanders, Adrian

    Willetts, David

    Sayeed, Jonathan

    Williams, Hywel(Caernarfon)

    Shepherd, Richard

    Willis, Phil

    Simmonds, Mark

    Wilshire, David

    Simpson, Keith(M-Norfolk)

    Winterton, Ann(Congleton)

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

    Winterton, Sir Nicholas

    Kincardine)

    (Macclesfield)

    Smyth, Rev. Martin(Belfast S)

    Wishart, Pete

    Spink, Bob(Castle Point)

    Young, rh Sir George

    Spring, Richard

    Steen, Anthony

    Tellers for the Noes:

    Stunell, Andrew

    Mr. David Ruffiey and

    Swayne, Desmond

    Mr. Geoffrey Clifton-Brown

    question accordingly agreed to.

    27. SPECIAL RATES OF TAX APPLICABLE TO TRUSTS
    Resolved,
    That in relation to the year 2004–05 and any subsequent year of assessment for which income tax is charged—

    the Schedule F trust rate shall be 32.5 per cent, and

    the rate applicable to trusts shall be 40 per cent.

    And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.

    28. SUMS PAID TO SETTLOR OTHERWISE THAN AS INCOME
    Resolved,
    That provision may be made amending section 677 of the Income and Corporation Taxes Act 1988.

    29. PROVISION NOT AT ARM'S LENGTH
    Resolved,
    That provision may be made amending Schedule 28AA to the Income and Corporation Taxes Act 1988.

    30. COMPANY DISTRIBUTIONS (PAYMENTS OF EXCESSIVE INTEREST ETC)
    Resolved,
    That provision may be made for the repeal of section 209(2)(da) of the Income and Corporation Taxes Act 1988.

    31. INVESTMENT COMPANIES AND COMPANIES WITH INVESTMENT BUSINESS
    Resolved,
    That provision may be made for the purposes of corporation tax in relation to companies which are or have been—

    investment companies, as defined in section 130 of the Income and Corporation Taxes Act 1988, or

    companies whose business consists wholly or partly in the making of investments.

    32. INSURANCE COMPANIES
    Resolved,
    That provision may be made about insurance companies and companies which have ceased to be insurance companies after a transfer of business.

    33. LOAN RELATIONSHIPS ETC
    Resolved,
    That provision (including provision having retrospective effect) may be made for the purposes of corporation tax in relation to—

    loan relationships; and

    other relationships where a company stands, or is treated as standing, in the position of a creditor or debtor in relation to a debt.

    34. DERIVATIVE CONTRACTS
    Resolved,
    That provision (including provision having retrospective effect) may be made in relation to derivative contracts for the purposes of corporation tax.

    35. ACCOUNTING PRACTICE
    Resolved,
    That provision may be made as to the meaning of generally accepted accounting practice and otherwise amending provisions of the Tax Acts that operate by reference to accounting practice.

    36. CONSTRUCTION INDUSTRY SCHEME
    Motion made, and Question put,
    That provision may be made in relation to sub-contractors in the construction industry.
    The House divided: Ayes 341, Noes 127.

    Division No. 102]

    [8:14 pm

    AYES

    Abbott, Ms Diane

    Barnes, Harry

    Adams, Irene(Paisley N)

    Barron, rh Kevin

    Ainger, Nick

    Battle, John

    Ainsworth, Bob(Cov'try NE)

    Bayley, Hugh

    Alexander, Douglas

    Beard, Nigel

    Allan, Richard

    Begg, Miss Anne

    Allen, Graham

    Beith, rh A. J.

    Anderson, Janet(Rossendale &

    Bell, Sir Stuart

    Darwen)

    Benton, Joe(Bootle)

    Atherton, Ms Candy

    Berry, Roger

    Atkins, Charlotte

    Best, Harold

    Austin, John

    Blackman, Liz

    Bailey, Adrian

    Blears, Ms Hazel

    Baird, Vera

    Boateng, rh Paul

    Baker, Norman

    Borrow, David

    Banks, Tony

    Bradley, rh Keith(Withington)

    NOES

    Ainsworth, Peter(E Surrey)

    Hammond, Philip

    Amess, David

    Hawkins, Nick

    Ancram, rh Michael

    Hayes, John(S Holland)

    Arbuthnot, rh James

    Heathcoat-Amory, rh David

    Atkinson, David(Bour'mth E)

    Hermon, Lady

    Bacon, Richard

    Hoban, Mark(Fareham)

    Baldry, Tony

    Howard, rh Michael

    Barker, Gregory

    Howarth, Gerald(Aldershot)

    Baron, John(Billericay)

    Hunter, Andrew

    Beggs, Roy(E Antrim)

    Jack, rh Michael

    Bellingham, Henry

    Johnson, Boris(Henley)

    Bercow, John

    Key, Robert(Salisbury)

    Beresford, Sir Paul

    Kirkbride, Miss Julie

    Blunt, Crispin

    Knight, rh Greg(E Yorkshire)

    Bottomley, Peter(Worthing W)

    Laing, Mrs Eleanor

    Bottomley, rh Virginia(SW

    Lait, Mrs Jacqui

    Surrey)

    Lansley, Andrew

    Brady, Graham

    Letwin, rh Oliver

    Brazier, Julian

    Liddell-Grainger, Ian

    Browning, Mrs Angela

    Lilley, rh Peter

    Burnside, David

    Loughton, Tim

    Burt, Alistair

    Luff, Peter(M-Worcs)

    Cameron, David

    McIntosh, Miss Anne

    Campbell, Gregory(E Lond'y)

    Mackay, rh Andrew

    Cash, William

    Maclean, rh David

    Chapman, Sir Sydney(Chipping

    McLoughlin, Patrick

    Barnet)

    Malins, Humfrey

    Chope, Christopher

    Maude, rh Francis

    Clappison, James

    Mawhinney, rh Sir Brian

    Clarke, rh Kenneth(Rushcliffe)

    May, Mrs Theresa

    Clifton-Brown, Geoffrey

    Mercer, Patrick

    Collins, Tim

    Moss, Malcolm

    Conway, Derek

    Murrison, Dr. Andrew

    Davies, Quentin(Grantham &

    Norman, Archie

    Stamford)

    O'Brien, Stephen(Eddisbury)

    Davis, rh David(Haftemprice &

    Osborne, George(Tatton)

    Howden)

    Ottaway, Richard

    Djanogly, Jonathan

    Paterson, Owen

    Dodds, Nigel

    Prisk, Mark(Hertford)

    Donaldson, Jeffrey M.

    Randall, John

    Dorrell, rh Stephen

    Robathan, Andrew

    Duncan, Peter(Galloway)

    Robertson, Hugh(Faversham &

    Evans, Nigel

    M-Kent)

    Fallon, Michael

    Robertson, Laurence(Tewk'b'ry)

    Field, Mark(Cities of London &

    Robinson, Peter(Belfast E)

    Westminster)

    Rosindell, Andrew

    Flight, Howard

    Ruffley, David

    Forth, rh Eric

    Sayeed, Jonathan

    Fox, Dr. Liam

    Shepherd, Richard

    Francois, Mark

    Simmonds, Mark

    Gale, Roger(N Thanet)

    Smyth, Rev. Martin(Belfast S)

    Gamier, Edward

    Spicer, Sir Michael

    Gillan, Mrs Cheryl

    Spink, Bob(Castle Point)

    Goodman, Paul

    Steen, Anthony

    Gray, James(N Wilts)

    Swayne, Desmond

    Grayling, Chris

    Syms, Robert

    Green, Damian(Ashford)

    Tapsell, Sir Peter

    Greenway, John

    Taylor, John(Solihull)

    Grieve, Dominic

    Taylor, Sir Teddy

    Bradley, Peter(The Wrekin)

    Edwards, Huw

    Brake, Toni(Carshalton)

    Efford, Clive

    Breed, Colin

    Ellman, Mrs Louise

    Brennan, Kevin

    Ewing, Annabelle

    Brooke, Mrs Annette L.

    Farrelly, Paul

    Brown, rh Gordon(Dunfermline

    Field, rh Frank(Birkenhead)

    E)

    Fisher, Mark

    Brown, rh Nicholas(Newcastle E

    Fitzpatrick, Jim

    Wallsend)

    Fitzsimons, Mrs Lorna

    Brown, Russell(Dumfries)

    Flynn, Paul(Newport W)

    Buck, Ms Karen

    Follett, Barbara

    Burden, Richard

    Foster, rh Derek

    Burgon, Colin

    Foster, Don (Bath)

    Burnham, Andy

    Foster, Michael(Worcester)

    Burstow, Paul

    Foster, Michael Jabez(Hastings

    Byers, rh Stephen

    & Rye)

    Cable, Dr. Vincent

    Francis, Dr. Hywel

    Cairns, David

    Gapes, Mike(Ilford S)

    Calton, Mrs Patsy

    Gardiner, Barry

    Campbell, Alan(Tynemouth)

    George, Andrew(St. Ives)

    Campbell, Mrs Anne(C'bridge)

    George, rh Bruce(Walsall S)

    Campbell, rh Sir Menzies(NE

    Gerrard, Neil

    Fife)

    Gibson, Dr. Ian

    Campbell, Ronnie(Blyth V)

    Gidley, Sandra

    Carmichael, Alistair

    Gilroy, Linda

    Casale, Roger

    Godsiff, Roger

    Caton, Martin

    Green, Matthew(Ludlow)

    Cawsey, Ian(Brigg)

    Griffiths, Jane(Reading E)

    Challen, Colin

    Griffiths, Nigel(Edinburgh S)

    Chapman, Ben(Wirral S)

    Griffiths, Win(Bridgend)

    Clapham, Michael

    Grogan, John

    Clark, Mrs Helen(Peterborough)

    Hain, rh Peter

    Clark, Dr. Lynda(Edinburgh

    Hall, Patrick(Bedford)

    Pentlands)

    Hamolton, David(Midlothian)

    Clark, Paul(Gillingham)

    Hancock, Mike

    Clarke, rh Tom(Coatbridge &

    Hanson, David

    Chryston)

    Harman, rh Ms Harriet

    Clelland, David

    Harris, Tom(Glasgow Cathcart)

    Coaker, Vernon

    Harvey, Nick

    Coffey, Ms Ann

    Havard, Dai(Merthyr Tydfil &

    Cohen, Harry

    Rhymney)

    Coleman, lain

    Healey, John

    Colman, Tony

    Heath, David

    Connarty, Michael

    Henderson, Doug(Newcastle N)

    Cooper, Yvette

    Henderson, Ivan(Harwich)

    Corbyn, Jeremy

    Hendrick, Mark

    Cotter, Brian

    Hepburn, Stephen

    Cousins, Jim

    Heppe, John

    Cranston, Ross

    Heyes, David

    Crausby, David

    Hill, Keith(Streatham)

    Cruddas, Jon

    Hinchliffe, David

    Cryer, John(Hornchurch)

    Hoey. Kate(Vauxhall)

    Cummings, John

    Hope, Phil(Corby)

    Cunningham, Jim(Coventry S)

    Hopkins, Kelvin

    Cunningham, Tony(Workington)

    Howarth, George(Knowsley N &

    Curtis-Thomas, Mrs Claire

    Sefton E)

    Dalyell, Tam

    Hoyle, Lindsay

    Darling, rh Alistair

    Hughes, Kevin(Doncaster N)

    Davey, Edward(Kingston)

    Hughes, Simon(Southwark N)

    David, Wayne

    Humble, Mrs Joan

    Davidson, Ian

    Hutton, rh John

    Davies, rh Denzil(Llanelli)

    Iddon, Dr. Brian

    Davies, Geraint(Croydon C)

    Ingram, rh Adam

    Dawson, Hilton

    Irranca-Davies, Huw

    Dean, Mrs Janet

    Jamieson, David

    Dhanda, Parmjit

    Jenkins, Brian

    Dismore, Andrew

    Johnson, Alan(Hull W)

    Dobbin, Jim(Heywood)

    Johnson, Miss Melanie(Welwyn

    Dobson, rh Frank

    Hatfield)

    Donohoe, Brian H.

    Jones, Jon Owen(Cardiff C)

    Doran, Frank

    Jones, Kevan(N Durham)

    Doughty, Sue

    Jones, Lynne(Selly Oak)

    Dowd, Jim(Lewisham W)

    Jones, Martyn(Clwyd S)

    Drew, David(Stroud)

    Jones, Nigel(Cheltenham)

    Eagle, Angela(Wallasey)

    Joyce, Eric(Falkirk W)

    Eagle, Maria(L'pool Garston)

    Keen, Ann(Brentford)

    Keetch, Paul

    Picking, Anne

    Kemp, Fraser

    Pickthall, Colin

    Kennedy, rh Charles(Ross Skye &

    Pike, Peter(Burnley)

    Inverness)

    Plaskitt, James

    Khabra, Piara S.

    Pond, Chris(Gravesham)

    Kidney, David

    Pope, Greg(Hyndburn)

    Kilfoyle, Peter

    Pound, Stephen

    King, Ms Oona(Bethnal Green &

    Primarolo, rh Dawn

    Bow)

    Prosser, Gwyn

    Kirkwood, Sir Archy

    Pugh, Dr. John

    Knight, Jim(S Dorset)

    Purchase, Ken

    Kumar, Dr. Ashok

    Purnell, James

    Lamb, Norman

    Quin, rh Joyce

    Lawrence, Mrs Jackie

    Quinn, Lawrie

    Laws, David(Yeovil)

    Rapson, Syd(Portsmouth N)

    Laxton, Bob(Derby N)

    Reed, Andy(Loughborough)

    Lazarowicz, Mark

    Reid, Alan(Argyll & Bute)

    Leslie, Christopher

    Rendel, David

    Lewis, Ivan(Bury S)

    Robertson, Angus(Moray)

    Lewis, Terry(Worsley)

    Robertson, John(Glasgow

    Liddell, rh Mrs Helen

    Anniesland)

    Linton, Martin

    Robinson, Geoffrey(Coventry

    Lloyd, Tony(Manchester C)

    NW)

    LIwyd, Elfyn

    Roche, Mrs Barbara

    Love, Andrew

    Rooney, Terry

    Luke, lain (Dundee E)

    Ruane, Chris

    Lyons, John(Strathkelvin)

    Ruddock, Joan

    McAvoy, Thomas

    Russell, Bob(Colchester)

    McCabe, Stephen

    Ryan, Joan(Enfield N)

    McCafferty, Chris

    Salmond, Alex

    McCartney, rh Ian

    Salter, Martin

    McDonagh, Siobhain

    Sanders, Adrian

    McDonnell, John

    Savidge, Malcolm

    MacDougall, John

    Sawford, Phil

    McFall, John

    Sedgemore, Brian

    McGuire, Mrs Anne

    Sheridan, Jim

    Mclsaac, Shona

    Short, rh Clare

    McKechin, Ann

    Simon, Siôn(B'ham Erdington)

    McKenna, Rosemary

    Simpson, Alan(Nottingham S)

    McNulty, Tony

    Singh, Marsha

    Mactaggart, Fiona

    Skinner, Dennis

    McWalter, Tony

    Smith, rh Andrew(Oxford E)

    McWilliam, John

    Smith, Geraldine(Morecambe &

    Mahmood, Khalid

    Lunesdale)

    Mahon, Mrs Alice

    Smith, Jacqui(Redditch)

    Mallaber, Judy

    Smith, Llew(Blaenau Gwent)

    Mann, John(Bassetlaw)

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

    Marris, Rob(Wolverh'ton SW)

    Kincardine)

    Marsden, Gordon(Blackpool S)

    Soley, Clive

    Marsden, Paul(Shrewsbury &

    Southworth, Helen

    Atcham)

    Speller, rh John

    Marshall-Andrews, Robert

    Squire, Rachel

    Martlew, Eric

    Steinberg, Gerry

    Meacher, rh Michael

    Stewart, David(Inverness E &

    Michael, rh Alun

    Lochaber)

    Miliband, David

    Stewart, Ian(Eccles)

    Miller, Andrew

    Stoate, Dr. Howard

    Moffatt, Laura

    Strang, rh Dr. Gavin

    Moonie, Dr. Lewis

    Stringer, Graham

    Moore, Michael

    Stunell, Andrew

    Moran, Margaret

    Sutcliffe, Gerry

    Morgan, Julie

    Tami, Mark(Alyn)

    Morley, Elliot

    Taylor, Dan(Stockton S)

    Mudie, George

    Taylor, David(NW Leics)

    Munn, Ms Meg

    Taylor, Matthew(Truro)

    Naysmith, Dr. Doug

    Teather, Sarah

    Norris, Dan(Wansdyke)

    Thomas, Simon(Ceredigion)

    Oaten, Mark(Winchester)

    Tipping, Paddy

    O'Brien, Bill(Normanton)

    Todd, Mark(S Derbyshire)

    O'Neill, Martin

    Tonge, Dr. Jenny

    Opik, Lembit

    Touhig, Don(Islwyn)

    Organ, Diana

    Trickett, Jon

    Osborne, Sandra (Ayr)

    Truswell, Paul

    Owen, Albert

    Turner, Dennis(Wolverh'ton SE)

    Palmer, Dr. Nick

    Turner, Dr. Desmond(Brighton

    Perham, Linda

    Kemptown)

    Twigg, Stephen(Enfield)

    Williams, Hywel(Caernarfon)

    Tyler, Paul(N Cornwall)

    Willis, Phil

    Tynan, Bill(Hamilton S)

    Wills, Michael

    Ward, Claire

    Wishart, Pete

    Wareing, Robert N.

    Wood, Mike(Batley)

    Watson, Tom(W Bromwich E)

    Woodward, Shaun

    Watts, David

    Woolas, Phil

    Webb, Steve(Northavon)

    Wright Anthony D.(Gt

    Yarmouth)

    Weir, Michael

    Wright, David(Telford)

    White, Brian

    Wright, Tony(Cannock)

    Whitehead, Dr. Alan

    Wicks, Malcolm

    Tellers for the Ayes:

    Williams, rh Alan(Swansea W)

    Gillian Merron and

    Williams, Betty(Conwy)

    Mr. Jim Murphy

    Trimble, rh David

    Willetts, David

    Turner, Andrew(Isle of Wight)

    Wilshire, David

    Tyrie, Andrew

    Winterton, Ann(Congleton)

    Viggers, Peter

    Winterton, Sir Nicholas

    Walter, Robert

    (Macclesfield)

    Waterson, Nigel

    Young, rh Sir George

    Watkinson, Angela

    Widdecombe, rh Miss Ann

    Tellers for the Noes:

    Wiggin, Bill

    Mr. Peter Atkinson and

    Wilkinson, John

    Mr. Hugo Swire

    37. EMPLOYMENT INCOME ETC
    Resolved,
    That provision (including provision having retrospective effect) may be made amending, or making amendments connected with, the Income Tax (Earnings and Pensions) Act 2003.

    38. INCOME TAX (PROPERTY HELD JOINTLY BY SPOUSES)
    Motion made, and Question put,
    That provision may be made amending section 282A of the Income and Corporation Taxes Act 1988.
    The House divided: Ayes 334, Noes 130.

    Division No. 103]

    [8:30 pm

    AYES

    Abbott, Ms Diane

    Burnham, Andy

    Adams, Irene(Paisley N)

    Burstovv, Paul

    Ainger, Nick

    Byers, rh Stephen

    Ainsworth, Bob(Cov'tly NE)

    Cable, Dr. Vincent

    Alexander, Douglas

    Cairns, David

    Allan, Richard

    Calton, Mrs Patsy

    Allen, Graham

    Campbell, Alan(Tynemouth)

    Anderson, Janet(Rossendale &

    Campbell, Mrs Anne(C'bridge)

    Darwen)

    Campbell, rh Sir Menzies(NE

    Atherton, Ms Candy

    Fife)

    Atkins, Charlotte

    Campbell, Ronnie(Blyth V)

    Austin, John

    Carmichael, Alistair

    Bailey, Adrian

    Casale, Roger

    Baird, Vera

    Caton, Martin

    Baker, Norman

    Cawsey, Ian(Brigg)

    Banks, Tony

    Challen, Colin

    Barnes, Harry

    Chapman, Ben(Wirral S)

    Barron, rh Kevin

    Clapham, Michael

    Battle, John

    Clark, Mrs Helen(Peterborough)

    Bayley, Hugh

    Clark, Dr. Lynda(Edinburgh

    Beard, Nigel

    Pentlands)

    Begg, Miss Anne

    Clark, Paul(Gillingham)

    Beith, rh A. J.

    Clarke. rh Tom(Coatbridge &

    Bell, Sir Stuart

    Chryston)

    Benton, Joe(Bootle)

    Clellarid, David

    Berry, Roger

    Coaker, Vernon

    Best, Harold

    Coffey, Ms Ann

    Blackman, Liz

    Cohen, Harry

    Blears, Ms Hazel

    Coleman, lain

    Blizzard, Bob

    Colman, Tony

    Boateng, rh Paul

    Connarty, Michael

    Borrow, David

    Corby n, Jeremy

    Bradley, rh Keith(Withington)

    Cotter, Brian

    Bradley, Peter(The Wrekin)

    Cousins, Jim

    Brake, Tom(Carshalton)

    Cranston, Ross

    Breed, Cohn

    Crausby, David

    Brennan, Kevin

    Cruddas, Jon

    Brooke, Mrs Annette L.

    Cryer, John(Hornchurch)

    Brown, rh Gordon(Dunfermline

    Cummings, John

    E)

    Cunningham, Jim(Coventry S)

    Brown, rh Nicholas(Newcastle E

    Cunningham, Tony(Workington)

    Wallsend)

    Curtis-Thomas, Mrs Claire

    Brown, Russell(Dumfries)

    Dalyell, Tam

    Buck, Ms Karen

    Darling, rh Alistair

    Burden, Richard

    Davey, Edward(Kingston)

    Burgon, Colin

    David, Wayne

    NOES

    Ainsworth, Peter(E Surrey)

    Bottomley, rh Virginia(SW

    Ainess, David

    Surrey)

    Arbuthnot, rh James

    Brady, Graham

    Atkinson, David(Bour'mth E)

    Brazier, Julian

    Atkinson, Peter(Hexham)

    Browning, Mrs Angela

    Bacon, Richard

    Burnside, David

    Baldry, Tony

    Burt, Alistair

    Barker, Gregory

    Cameron, David

    Baron, John(Billericay)

    Campbell, Gregory(E Lond'y)

    Beggs, Roy(E Antrim)

    Cash, William

    Bellingham, Henry

    Chapman, Sir Sydney(Chipping

    Bercow, John

    Barnet)

    Beresford, Sir Paul

    Chope, Christopher

    Blunt, Crispin

    Clappison, James

    Boswell, Tim

    Clarke, rh Kenneth(Rushcliffe)

    Bottomley, Peter(Worthing W)

    Collins, Tim

    Conway, Derek

    Davidson, Ian

    Iddon, Dr. Brian

    Davies, rh Denzil(Llanelli)

    Ingram, rh Adam

    Davies, Geraint(Croydon C)

    Irranca-Davies, Huw

    Dawson, Hilton

    Jamieson, David

    Dean, Mrs Janet

    Jenkins, Brian

    Dhanda, Parmjit

    Johnson, Alan(Hull W)

    Dismore, Andrew

    Johnson, Miss Melanie(Welwyn

    Dobbin, Jim(Heywood)

    Hatfield)

    Dobson, rh Frank

    Jones, Jon Owen(Cardiff C)

    Donohoe, Brian H.

    Jones, Kevan(N Durham)

    Doran, Frank

    Jones, Lynne(Selly Oak)

    Doughty, Sue

    Jones, Martyn(Clwyd S)

    Dowd, Jim(Lewisham W)

    Jones, Nigel(Cheltenham)

    Drew, David(Stroud)

    Joyce, Eric(Falkirk W)

    Eagle, Angela(Wallasey)

    Keen, Ann(Brentford)

    Eagle, Maria(L'pool Garston)

    Keetch, Paul

    Edwards, Huw

    Kemp, Fraser

    Efford, Clive

    Kennedy, rh Charles(Ross Skye &

    Ellman, Mrs Louise

    Inverness)

    Farrelly, Paul

    Khabra, Piara S.

    Field, rh Frank(Birkenhead)

    Kidney, David

    Fisher, Mark

    Kilfoyle, Peter

    Fitzpatrick, Jim

    King, Ms Oona(Bethnal Green &

    Fitzsimons, Mrs Lorna

    Bow)

    Flynn, Paul(Newport W)

    Kirkwood, Sir Archy

    Follett, Barbara

    Knight, Jim(S Dorset)

    Foster, rh Derek

    Kumar, Dr. Ashok

    Foster, Don(Bath)

    Lamb, Norman

    Foster, Michael(Worcester)

    Lammy, David

    Foster, Michael Jabez(Hastings

    Lawrence, Mrs Jackie

    & Rye)

    Laws, David(Yeovil)

    Francis, Dr. Hywel

    Laxton, Bob(Derby N)

    Gapes, Mike(Ilford S)

    Lazarowicz, Mark

    Gardiner, Barry

    Leslie, Christopher

    George, Andrew(St. Ives)

    Lewis, Ivan(Bury S)

    George, rh Bruce(Walsall S)

    Lewis, Terry(Worsley)

    Gerrard, Neil

    Liddell, rh Mrs Helen

    Gibson, Dr. Ian

    Linton, Martin

    Gidley, Sandra

    Lloyd, Tony(Manchester C)

    Gilroy, Linda

    Love, Andrew

    Godsiff, Roger

    Luke, lain(Dundee E)

    Green, Matthew(Ludlow)

    Lyons, John(Strathkelvin)

    Griffiths, Jane(Reading E)

    McAvoy, Thomas

    Griffiths, Nigel(Edinburgh S)

    McCabe, Stephen

    Griffiths, Win(Bridgend)

    McCafferty, Chris

    Grogan, John

    McCartney, rh Ian

    Hain, rh Peter

    McDonagh, Siobhain

    Hall, Patrick(Bedford)

    McDonnell, John

    Hamilton, David(Midlothian)

    MacDougall, John

    Hancock, Mike

    McFall, John

    Hanson, David

    McGuire, Mrs Anne

    Harman, rh Ms Harriet

    Mclsaac, Shona

    Harris, Dr. Evan(Oxford W &

    McKechin, Ann

    Abingdon)

    McKenna, Rosemary

    Harris, Tom(Glasgow Cathcart)

    McNulty, Tony

    Harvey, Nick

    Mactaggart, Fiona

    Havard, Dai(Merthyr Tydfil &

    McWalter, Tony

    Rhymney)

    McWilliam, John

    Healey, John

    Mahmood, Khalid

    Heath, David

    Mahon, Mrs Alice

    Henderson, Doug(Newcastle N)

    Mallaber, Judy

    Henderson, Ivan(Harwich)

    Mann, John(Bassetlaw)

    Hendrick, Mark

    Marris, Rob(Wolverh'ton SW)

    Hepburn, Stephen

    Marsden, Gordon(Blackpool S)

    Heppell, John

    Marsden, Paul(Shrewsbury &

    Heyes, David

    Atcham)

    Hill, Keith(Streatham)

    Marshall-Andrews, Robert

    Hinchliffe, David

    Martlew, Eric

    Hoey, Kate(Vauxhall)

    Meacher, rh Michael

    Hope, Phil(Corby)

    Michael, rh Alun

    Hopkins, Kelvin

    Miliband, David

    Hoyle, Lindsay

    Miller, Andrew

    Hughes, Kevin(Doncaster N)

    Moffatt, Laura

    Hughes, Simon(Southwark N)

    Moonie, Dr. Lewis

    Humble, Mrs Joan

    Moore, Michael

    Hutton, rh John

    Moran, Margaret

    Morgan, Julie

    Smith, Jacqui(Redditch)

    Morley, Elliot

    Smith, Llew(Blaenau Gwent)

    Mudie, George

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

    Munn, Ms Meg

    Kincardine)

    Naysmith, Dr. Doug

    Soley, Clive

    Norris, Dan(Wansdyke)

    Southworth, Helen

    Oaten, Mark(Winchester)

    Spellar, rh John

    O'Brien, Bill(Normanton)

    Squire, Rachel

    O'Neill, Martin

    Steinberg, Gerry

    Opik, Lembit

    Stewart, David(Inverness E &

    Organ, Diana

    Lochaber)

    Osborne, Sandra(Ayr)

    Stewart, Ian(Eccles)

    Owen, Albert

    Stoate, Dr. Howard

    Palmer, Dr. Nick

    Strang, rh Dr. Gavin

    Perham, Linda

    Stringer, Graham

    Picking, Anne

    Stunell, Andrew

    Pickthall, Cohn

    Sutcliffe, Gerry

    Pike, Peter(Burnley)

    Tami, Mark(Alyn)

    F'laskitt, James

    Taylor, Dari(Stockton S)

    Pond, Chris(Gravesham)

    Taylor, David(NW Leics)

    Pope, Greg(Hyndburn)

    Taylor, Matthew(Truro)

    Pound, Stephen

    Taylor, Dr. Richard(Wyre F)

    Primarolo, rh Dawn

    Teather, Sarah

    Prosser, Gwyn

    Tipping, Paddy

    Pugh, Dr. John

    Todd, Mark(S Derbyshire)

    Purchase, Ken

    Tonge, Dr. Jenny

    Purnell, James

    Touhig, Don(IsIwyn)

    Quin, rh Joyce

    Trickett, Jon

    Quinn, Lawrie

    Truswell, Paul

    Rammell, Bill

    Turner, Dennis(Wolverh'ton SE)

    Rapson, Syd(Portsmouth N)

    Turner, Dr. Desmond(Brighton

    Feed, Andy(Loughborough)

    Kemptown)

    Reid, Alan(Argyll & Bute)

    Twigg, Stephen(Enfield)

    Rendel, David

    Tyler, Paul(N Cornwall)

    Robertson, John(Glasgow

    Tynan, Bill(Hamilton S)

    Anniesland)

    Ward, Claire

    Robinson, Geoffrey(Coventry

    Wareing, Robert N.

    NW)

    Watson, Tom(W Bromwich E)

    Roche, Mrs Barbara

    Watts, David

    Rooney, Terry

    Webb, Steve(Northavon)

    Ruane, Chris

    White, Brian

    Ruddock, Joan

    Whitehead, Dr. Alan

    Russell, Bob(Colchester)

    Wicks, Malcolm

    Ryan, Joan(Enfield N)

    Williams, rh Alan(Swansea W)

    Salter, Martin

    Williams, Betty(Conwy)

    Sanders, Adrian

    Willis, Phil

    Savidge, Malcolm

    Wood, Mike(Batley)

    Sawford, Phil

    Woodward, Shaun

    Sedgemore, Brian

    Woolas, Phil

    Sheridan, Jim

    Wright, Anthony D.(Gt

    Simon, Siôn(B'ham Erdington)

    Yarmouth)

    Simpson, Alan(Nottingham S)

    Wright, David(Telford)

    Singh, Marsha

    Wright, Tony(Cannock)

    Skinner, Dennis

    Smith, rh Andrew(Oxford E)

    Tellers for the Ayes:

    Smith, Geraldine(Morecambe &

    Gillian Merron and

    Lunesdale)

    Mr. Jim Murphy

    Davies, Quentin(Grantham &

    Mercer, Patrick

    Stamford)

    Moss, Malcolm

    Djanogly, Jonathan

    Murrison, Dr. Andrew

    Dodds, Nigel

    Norman, Archie

    Donaldson, Jeffrey M.

    O'Brien, Stephen(Eddisbury)

    Dorrell, rh Stephen

    Osborne, George(Tatton)

    Duncan, Peter(Galloway)

    Ottaway, Richard

    Evans, Nigel

    Page, Richard

    Ewing, Annabelle

    Paterson, Owen

    Fallon, Michael

    Prisk, Mark(Hertford)

    Field, Mark(Cities of London &

    Randall, John

    Westminster)

    Robathan, Andrew

    Flight, Howard

    Robertson, Angus(Moray)

    Forth, rh Eric

    Robertson, Hugh(Faversham &

    Francois, Mark

    M-Kent)

    Gale, Roger(N Thanet)

    Robertson, Laurence(Tewk'b'ry)

    Gamier, Edward

    Robinson, Peter(Belfast E)

    Gillan, Mrs Cheryl

    Rosindell, Andrew

    Goodman, Paul

    Salmond, Alex

    Gray, James(N Wilts)

    Sayeed, Jonathan

    Grayling, Chris

    Shepherd, Richard

    Green, Damian(Ashford)

    Simmonds, Mark

    Greenway, John

    Smyth, Rev. Martin(Belfast S)

    Grieve Dominic

    Spicer, Sir Michael

    Hammond, Philip

    Spink, Bob(Castle Point) Nick

    Hawkins, Nick

    Steen, Anthony

    Hayes, John(S Holland)

    Swayne, Desmond

    Heathcoat-Amory, rh David

    Swine, Hugo(E Devon)

    Hermon, Lady

    Syms, Robert

    Hermon, Lady

    Taylor, John(Solihull)

    Taylor, Sir Teddy

    Howard, rh Michael

    Thomas, Simon(Ceredigion)

    Howarth, Gerald(Aldershot)

    Trimble, rh David

    Hunter, Andrew

    Turner, Andrew(Isle of Wight)

    Jack, rh Michael

    Tyrie, Andrew

    Johnson, Boris(Henley)

    Viggers, Peter

    Key, Robert(Salisbury)

    Walter, Robert

    Kirkbride, Miss Julie

    Waterson, Nigel

    Knight, rh Greg(E Yorkshire)

    Watkinson, Angela

    Laing, Mrs Eleanor

    Weir, Michael

    Lait, Mrs Jacqui

    Widdecombe, rh Miss Ann

    Lansley, Andrew

    Wiggin, Bill

    Liddell-Grainger, Ian

    Wilkinson, John

    Lilley, rh Peter

    Willetts, David

    Llwyd, Elfyn

    Williams, Hywel(Caernarfon)

    Loughton, Tim

    Winterton, Ann(Congleton)

    Luff, Peter(M-Worcs)

    Winterton, Sir Nicholas

    McIntosh, Miss Anne

    (Macclesfield)

    Mackay, rh Andrew

    Wishart, Pete

    McLoughlin, Patrick

    Young, rh Sir George

    Malins, Humfrey

    Maude, rh Francis

    Tellers for the Noes:

    Mawhinney, rh Sir Brian

    Mr. David Batley and

    May, Mrs Theresa

    Mr. Geoffrey Clifton-Brown

    Question accordingly agreed to.

    39. ENTERPRISE INVESTMENT SCHEME
    Resolved,
    That provision may be made amending Chapter 3 of Part 7 of the Income and Corporation Taxes Act 1988 and Schedule 5B to the Taxation of Chargeable Gains Act 1992.

    40. VENTURE CAPITAL TRUSTS
    Resolved,
    That provision may be made amending Schedule 28B to the Income and Corporation Taxes Act 1988 and repealing section 151 A(3) of, and Schedule 5C to, the Taxation of Chargeable Gains Act 1992.

    41. CORPORATE VENTURING SCHEME
    Resolved,
    That provision may be made amending Schedule 15 to the Finance Act 2000.

    42. CHARGEABLE GAINS (GIFTS RELIEF ETC)
    Motion made, and Question put,
    That provision (including provision having retrospective effect) may be made—

    in relation to relief under section 165 or 260of the Taxation of Chargeable Gains Act 1992, and

    as to the meaning of "arrangements" in section 79(5) that Act.

    The House divided: Ayes 287, Noes 163.

    Division No.104]

    [8.46 p

    AYES

    Abbott, Ms Diane

    Coffey, Ms Ann

    Adams, Irene(Paisley N)

    Cohen, Harry

    Ainger, Nick

    Coleman, lain

    Ainsworth, Bob(Cov'try NE)

    Colman, Tony

    Alexander, Douglas

    Connarty, Michael

    Allen, Graham

    Corbyn, Jeremy

    Anderson, Janet(Rossendale &

    Cousins, Jim

    Darwen)

    Cranston, Ross

    Atherton, Ms Candy

    Crausby, David

    Atkins, Charlotte

    Cruddas, Jon

    Austin, John

    Cryer, John(Hornchurch)

    Bailey, Adrian

    Cummings, John

    Baird, Vera

    Cunningham, Jim(Coventry S)

    Banks, Tony

    Cunningham, Tony(Workington)

    Barnes, Harry

    Curtis-Thomas, Mrs Claire

    Barron, rh Kevin

    Dalyell, Tam

    Battle, John

    Darling, rh Alistair

    Bayley, Hugh

    David, Wayne

    Beard, Nigel

    Davidson, Ian

    Begg, Miss Anne

    Davies, rh Denzil(Llanelli)

    Bell, Sir Stuart

    Davies, Geraint(Croydon C)

    Benton, Joe(Bootle)

    Dawson, Hilton

    Berry, Roger

    Dean, Mrs Janet

    Best, Harold

    Dhanda, Parmjit

    Blackman, Liz

    Dismore, Andrew

    Blears, Ms Hazel

    Dobbin, Jim(Heywood)

    Blizzard, Bob

    Dobson, rh Frank

    Boateng, rh Paul

    Donohoe, Brian H.

    Borrow, David

    Doran, Frank

    Bradley, rh Keith(Withington)

    Dowcl, Jim(Lewisham W)

    Bradley, Peter(The Wrekin)

    Drew, David(Stroud)

    Brennan, Kevin

    Eagle, Angela(Wallasey)

    Brown, rh Gordon(Dunfermline

    Eagle, Maria(L'pool Garston)

    E)

    Efford, Clive

    Brown, rh Nicholas(Newcastle E

    Ellman, Mrs Louise

    Wallsend)

    Farrelly, Paul

    Brown, Russell(Dumfries)

    Field, rh Frank(Birkenhead)

    Buck, Ms Karen

    Fisher, Mark

    Burden, Richard

    Fitzpatrick, Jim

    Burgon, Colin

    Fitzsirnons, Mrs Lorna

    Burnham, Andy

    Flynn, Paul(Newport W)

    Byers, rh Stephen

    Follett, Barbara

    Cairns, David

    Foster, rh Derek

    Campbell, Alan(Tynemouth)

    Foster, Michael(Worcester)

    Campbell, Mrs Anne(C'bridge)

    Foster, Michael Jabez(Hastings

    Campbell, Ronnie(Blyth V)

    & Rye)

    Casale, Roger

    Francis, Dr. Hywel

    Caton, Martin

    Gapes, Mike (//ford S)

    Cawsey, Ian (Brigg)

    Gardiner, Barry

    Challen, Colin

    George, rh Bruce (Walsall S)

    Chapman, Ben (Wirral S)

    Gerrard, Neil

    Clapham, Michael

    Gibson, Dr. Ian

    Clark, Mrs Helen(Peterborough)

    Gilroy, Linda

    Clark, Dr. Lynda(Edinburgh

    Godsiff, Roger

    Pentlands)

    Griffiths, Jane(Reading E)

    Clark, Paul(Gillingham)

    Griffiths, Nigel(Edinburgh S)

    Clarke, rh Tom(Coatbridge &

    Griffiths, Win(Bridgend)

    Chryston)

    Grogan, John

    Clelland, David

    Hain, rh Peter

    Coaker, Vernon

    Hall, Patrick(Bedford)

    835

    Hamilton, David(Midlothian)

    Mann, John(Bassetlaw)

    Hanson, David

    Marris, Rob(Wolverh'ton SW)

    Harman, rh Ms Harriet

    Marsden, Gordon(Blackpool S)

    Harris, Tom(Glasgow Cathcart)

    Marshall-Andrews, Robert

    Havard, Dai(Merthyr Tydfil &

    Martlew, Eric

    Rhymney)

    Meacher, rh Michael

    Healey, John

    Michael, rh Alun

    Henderson, Doug(Newcastle N)

    Miliband, David

    Henderson, Ivan(Harwich)

    Miller, Andrew

    Hendrick, Mark

    Moffatt, Laura

    Hepburn, Stephen

    Moonie, Dr. Lewis

    Heppell, John

    Moran, Margaret

    Heyes, David

    Morgan, Julie

    Hill, Keith(Streatham)

    Morley, Elliot

    Hinchliffe, David

    Mudie, George

    Hoey, Kate(Vauxhall)

    Munn, Ms Meg

    Hope, Phil(Corby)

    Naysmith, Dr. Doug

    Hopkins, Kelvin

    Norris, Dan(Wansdyke)

    Hoyle, Lindsay

    O'Brien, Bill(Normanton)

    Hughes, Kevin(Doncaster N)

    O'Neill, Martin

    Humble, Mrs Joan

    Organ, Diana

    Hutton, rh John

    Osborne, Sandra(Ayr)

    Iddon, Dr. Brian

    Owen, Albert

    Ingram, rh Adam

    Palmer, Dr. Nick

    Irranca-Davies, Huw

    Perham, Linda

    Jamieson, David

    Picking, Anne

    Jenkins, Brian

    Pickthall, Cohn

    Johnson, Alan(Hull W)

    Pike, Peter(Burnley)

    Johnson, Miss Melanie(Welwyn

    Plaskitt, James

    Hatfield)

    Pond, Chris(Gravesham)

    Jones, Jon Owen(Cardiff C)

    Pope, Greg(Hyndburn)

    Jones, Kevan(N Durham)

    Pound, Stephen

    Jones, Lynne(Selly Oak)

    Primarolo, rh Dawn

    Jones, Martyn(Clwyd S)

    Prosser, Gwyn

    Joyce, Eric(Falkirk W)

    Purchase, Ken

    Keen, Ann(Brentford)

    Purnell, James

    Kemp, Fraser

    Quin, rh Joyce

    Khabra, Piara S.

    Quinn, Lawrie

    Kidney, David

    Rammell, Bill

    Kilfoyle, Peter

    Rapson, Syd(Portsmouth N)

    King, Ms Oona(Bethnal Green &

    Reed, Andy(Loughborough)

    Bow)

    Robertson, John(Glasgow

    Knight Jim(S Dorset)

    Anniesland)

    Kumar, Dr. Ashok

    Robinson, Geoffrey(Coventry

    Lammy, David

    NW)

    Lawrence, Mrs Jackie

    Roche, Mrs Barbara

    Laxton, Bob(Derby N)

    Rooney, Terry

    Lazarowicz, Mark

    Ruane, Chris

    Leslie, Christopher

    Ruddock, Joan

    Lewis, Ivan(Bury S)

    Ryan, Joan(Enfield N)

    Lewis, Terry(Worsley)

    Salter, Martin

    Liddell, rh Mrs Helen

    Savidge, Malcolm

    Linton, Martin

    Sawford, Phil

    Lloyd, Tony(Manchester C)

    Sedgemore, Brian

    Love, Andrew

    Sheridan, Jim

    Luke, lain(Dundee E)

    Simon, Siôn(B'ham Erdington)

    Lyons, John(Strathkelvin)

    Simpson, Alan(Nottingham S)

    McAvoy, Thomas

    Singh, Marsha

    McCabe, Stephen

    Skinner, Dennis

    McCafferty, Chris

    Smith, rh Andrew(Oxford E)

    McCartney, rh Ian

    Smith, Geraldine(Morecambe &

    McDonagh, Siobhain

    Lunesdale)

    McDonnell, John

    Smith, Jacqui(Redditch)

    MacDougall, John

    Smith, Llew(Blaenau Gwent)

    McFall, John

    Soley, Clive

    McGuire, Mrs Anne

    Southworth, Helen

    Mclsaac, Shona

    Speller, rh John

    McKechin, Ann

    Squire, Rachel

    McKenna, Rosemary

    Steinberg, Gerry

    McNulty, Tony

    Stewart, David(Inverness E &

    Mactaggart, Fiona

    Lochaber)

    McWalter, Tony

    Stewart, Ian(Eccles)

    McWilliam, John

    Stoate, Dr. Howard

    Mahmood, Khalid

    Strang, rh Dr. Gavin

    Mahon, Mrs Alice

    Stringer, Graham

    Mallaber, Judy

    Sutcliffe, Gerry

    836

    Tami, Mark(Alyn)

    White, Brian

    Taylor, Dari(Stockton S)

    Whitehead, Dr. Alan

    Taylor, David(NW Leics)

    Wicks, Malcolm

    Tipping, Paddy

    Williams, rh Alan(Swansea W)

    Todd, Mark(S Derbyshire)

    Williams, Betty(Conwy)

    Touhig, Don(IsIwyn)

    Wills, Michael

    Trickett, Jon

    Wood, Mike(Batley)

    Truswell, Paul

    Woodward, Shaun

    Turner, Dennis(Wolverh'ton SE)

    Woolas, Phil

    Turner, Dr. Desmond(Brighton

    Wright, Anthony D.(Gt

    Kemptown)

    Yarmouth)

    Twigg, Stephen(Enfield)

    Wright, David(Telford)

    Tynan, Bill(Hamilton S)

    Wright, Tony(Cannock)

    Ward, Claire

    Wareing, Robert N.

    Tellers for the Ayes:

    Watson, Tom(W Bromwich E)

    Gillian Merron and

    Watts, David

    Mr. Jim Murphy

    NOES

    Ainsworth, Peter(E Surrey)

    Forth, rh Eric

    Allan, Richard

    Foster, Don(Bath)

    Amess, David

    Gale, Roger(N Thanet)

    Atkinson, David(Bour'mth E)

    Gamier, Edward

    Atkinson, Peter(Hexham)

    George, Andrew(St Ives)

    Bacon, Richard

    Gidley, Sandra

    Baker, Norman

    Goodman, Paul

    Baldry, Tony

    Gray, James(N Wilts)

    Baron, John(Billericay)

    Grayling, Chris

    Beggs, Roy(E Antrim)

    Green, Matthew(Ludlow)

    Beith, rh A. J.

    Greenway, John

    Bellingham, Henry

    Grieve, Dominic

    Bercow, John

    Hammond, Philip

    Beresford, Sir Paul

    Hancock, Mike

    Blunt, Crispin

    Harris, Dr. Evan(Oxford W &

    Bottomley, Peter(Worthing W)

    Abingdon)

    Bottomley, rh Virginia(SW

    Harvey, Nick

    Surrey)

    Hawkins, Nick

    Brady, Graham

    Hayes, John(S Holland)

    Brake, Tom(Carshalton)

    Heath, David

    Brazier, Julian

    Hermon, Lady

    Bieed, Colin

    Hoban, Mark(Fareham)

    Biooke, Mrs Annette L.

    Howarth, Gerald(Aldershot)

    Browning, Mrs Angela

    Hughes, Simon(Southwark N)

    Burnside, David

    Johnson, Boris(Henley)

    Barstow, Paul

    Jones, Nigel(Cheltenham)

    Burt, Alistair

    Keetch, Paul

    Cable, Dr. Vincent

    Kennedy, rh Charles(Ross Skye S

    Calton, Mrs Patsy

    Inverness)

    Cameron, David

    Kirkbride, Miss Julie

    Campbell, Gregory(E Lond'y)

    Kirkwood, Sir Archy

    Campbell, rh Sir Menzies(NE

    Knight, rh Greg(E Yorkshire)Fife)

    Lait, Mrs Jacqui

    Carmichael, Alistair

    Lamb, Norman

    Cash, William

    Lansley, Andrew

    Chope, Christopher

    Laws, David(Yeovil)

    Clappison, James

    Liddell-Grainger, Ian

    Clarke, rh Kenneth(Rushcliffe)

    Llwyd, Elfyn

    Clifton-Brown, Geoffrey

    Loughton, Tim

    Collins, Tim

    Luff, Peter(M-Worcs)

    Conway, Derek

    McIntosh, Miss Anne

    Cotter, Brian

    Mackay, rh Andrew

    Davey, Edward(Kingston)

    Maclean, rh David

    Davies, Quentin(Grantham &

    McLoughlin, Patrick

    Stamford)

    Malins, Humfrey

    Djanogly, Jonathan

    Marsden, Paul(Shrewsbury &

    Dodds, Nigel

    Atcham)

    Donaldson, Jeffrey M.

    Maude, rh Francis

    Dorrell, rh Stephen

    Mawhinney, rh Sir Brian

    Doughty, Sue

    Mercer, Patrick

    Duncan, Peter(Galloway)

    Moore, Michael

    Evans, Nigel

    Moss, Malcolm

    Ewing, Annabelle

    Murrison, Dr. Andrew

    Fallon, Michael

    Norman, Archie

    Field, Mark(Cities of London &

    Oaten, Mark(Winchester)

    Westminster)

    O'Brien, Stephen(Eddisbury)

    Flight, Howard

    Õpik, Lembit

    837

    Osborne, George(Tatton)

    Syms, Robert

    Ottaway, Richard

    Taylor, John(Solihull)

    Paterson, Owen

    Taylor, Matthew(Truro)

    Prisk, Mark(Hertford)

    Taylor, Dr. Richard(Wyre F)

    Pugh, Dr. John

    Taylor, Sir Teddy

    Randall, John

    Teather, Sarah

    Reid, Alan(Argyll & Bute)

    Thomas, Simon(Ceredigion)

    Rendel, David

    Tonge, Dr. Jenny

    Robathan, Andrew

    Trimble, rh David

    Robertson, Angus(Moray)

    Turner, Andrew(Isle of Wight)

    Robertson, Hugh(Faversham &

    Tyler, Paul(N Cornwall)

    M-Kent)

    Tyrie, Andrew

    Robertson, Laurence(Tewk'b'ry)

    Viggers, Peter

    Robinson, Peter(Belfast E)

    Walter, Robert

    Rosindell, Andrew

    Waterson, Nigel

    Ruffley, David

    Watkinson, Angela

    Russell, Bob(Colchester)

    Webb, Steve(Northavon)

    Salmond, Alex

    Weir, Michael

    Widdecombe, rh Miss AnnSanders, Adrian

    Wiggin, Bill

    Sayeed, Jonathan

    Wilkinson, John

    Shepherd, Richard

    Willetts, David

    Simmonds, Mark

    Williams, Hywel(Caernarfon)

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

    Willis, Phil

    Kincardine)

    Winterton, Ann(Congleton)

    Smyth, Rev. Martin(Belfast S)

    Winterton, Sir Nicholas

    Spicer, Sir Michael

    (Macclesfield)

    Spink, Bob(Castle Point)

    Wishart. Pete Steen, Anthony

    Stunell, Andrew

    Tellers for the Noes:

    Swayne, Desmond

    Gregory Barker and

    Swire, Hugo(E Devon)

    Mr. Mark Francois

    Question accordingly agreed to.

    43. CHARGEABLE GAINS (PRIVATE RESIDENCES)
    Resolved,
    That provision (including provision having retrospective effect) may be made in relation to relief under section 223 of the Taxation of Chargeable Gains Act 1992.

    44. INDIVIDUALS BENEFITED BY FILM RELIEF
    Resolved,
    That provision (including provision having retrospective effect) may be made in relation to cases where relief is or has been claimed in respect of losses sustained in a trade whose profits or losses were computed in accordance with any of—

    sections 40A to 40C of the Finance (No. 2) Act 1992;

    sections 41 to 43 of that Act;

    section 48 of the Finance (No. 2) Act 1997.

    45. PARTNERSHIPS (INCOME TAX)
    Resolved,
    That provision (including provision having retrospective effect) may be made for the purposes of income tax in relation to individuals who are or have been members of partnerships.

    46. PARTNERSHIPS (CORPORATION TAX)
    Resolved,
    That provision may be made for the purposes of corporation tax in relation to companies which are or have been members of partnerships.

    47. LEASEBACK OF ASSETS
    Resolved,
    That provision may be made for the purposes of income tax and corporation tax about arrangements for the sale and leaseback of assets or the lease and leaseback of assets.

    48. MANUFACTURED DIVIDENDS
    Resolved,
    That provision (including provision having retrospective effect) may be made in relation to cases where payments are or have been made, or treated as made, which are representative of dividends on shares of companies resident in the United Kingdom.

    49. STRIPS OF GOVERNMENT SECURITIES
    Resolved,
    That provision (including provision having retrospective effect) may be made in relation to strips, within the meaning of Schedule 13 to the Finance Act 1996.

    50. LIFE POLICIES ETC
    Resolved,
    That provision (including provision having retrospective effect) may be made restricting the amount allowable as a deduction under section 549(1) of the Income and Corporation Taxes Act 1988.

    51. OFFSHORE FUNDS
    Resolved,
    That provision (including provision having retrospective effect) may be made amending the provisions of the Income and Corporation Taxes Act 1988 relating to offshore funds.

    52. OFFSHORE INSTALLATIONS
    Resolved,
    That provision may be made amending provisions of the Tax Acts referring to offshore installations and oil rigs.

    53. IMMEDIATE NEEDS ANNUITIES
    Resolved,
    That provision may be made in relation to contracts for life annuities (whenever entered into).

    54. CORPORATION TAX: HEALTH SERVICE BODIES
    Resolved,
    That provision may be made amending section 519A of the Income and Corporation Taxes Act 1988.

    55. PENSION SCHEMES ETC
    Resolved,
    That provision may be made in relation to pension schemes and similar schemes under which benefits are provided to or in respect of employees or former employees.

    56. PETROLEUM REVENUE TAX (ALLOWABLE EXPENDITURE, RECEIPTS ETC)
    Resolved,
    That provision (including provision having retrospective effect) may be made—

    in relation to expenditure allowable under the Oil Taxation Act 1975 or the Oil Taxation Act 1983,

    in relation to disposal receipts, within the meaning of section 7 of the Oil Taxation Act 1983,

    amending section 98 of the Finance Act 1999.

    57. OIL EXTRACTION ACTIVITIES (TAX-EXEMPT TARIFFING RECEIPTS)
    Resolved,
    That provision (including provision having retrospective effect) may be made amending section 496 of the Income and Corporation Taxes Act 1988.

    58. PETROLEUM REVENUE TAX (ALLOWABLE EXPENDITURE
    Resolved,
    That provision may be made amending paragraph 2 of Schedule 4 to the Oil Taxation Act 1975.

    59. PETROLEUM REVENUE TAX (TERMINAL LOSSES)
    Resolved,
    That provision may be made in place of paragraph 15 of Schedule 17 to the Finance Act 1980.

    60. CLIMATE CHANGE LEVY (SUPPLIES TO PRODUCERS OF COMMODITIES)
    Resolved,
    That provision may be made for the purposes of climate change levy about supplies to producers of commodities.

    61. AGGREGATES LEVY (TRANSITIONAL TAX CREDIT IN NORTHERN IRELAND: EXISTING SCHEME)
    Resolved,
    That
    (1) In section 30A of the Finance Act 2001 after subsection (3) insert—
    "(4) The Treasury may by order made by statutory instrument amend subsection (2) above so as to—

    change the period in relation to which the amount of a tax credit is to be reduced;

    change the amount by which a tax credit is to be reduced.

    (5) An order under subsection (4) above shall not be made unless a draft of the order has been laid before Parliament and approved by a resolution of the House of Commons."
    (2) This Resolution has effect on and after 1st April 2004.
    And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.

    62. AGGREGATES LEVY (TRANSITIONAL TAX CREDIT IN NORTHERN IRELAND: NEW SCHEME)
    Resolved,
    That provision (including retrospective provision) may be made about tax credits in respect of aggregates levy charged on aggregate subjected to commercial exploitation in Northern Ireland.

    63. STAMP DUTY LAND TAX AND STAMP DUTY
    Motion made, and Question put,
    That provision may be made amending Parts 4 and 5 of the Finance Act 2003.
    The House divided: Ayes 322, Noes 15.

    Division No. 105]

    [9:01 pm

    AYES

    Abbott, Ms Diane

    Allen, Graham

    Adams, Irene(Paisley N)

    Anderson, Janet(Rossendale &

    Ainger, Nick

    Darwen)

    Ainsworth, Bob(Cov'try NE)

    Atherton, Ms Candy

    Alexander, Douglas

    Atkins, Charlotte

    Allan, Richard

    Austin, John

    Bailey, Adrian

    840

    Baird, Vera

    Davidson, Ian

    Banks, Tony

    Davies, rh Denzil(Llanelli)

    Barnes, Harry

    Davies, Geraint(Croydon C)

    Barron, rh Kevin

    Dawson, Hilton

    Battle, John

    Dean, Mrs Janet

    Bayley, Hugh

    Dhanda, Parmjit

    Beard, Nigel

    Dismore, Andrew

    Begg, Miss Anne

    Dobbin, Jim(Heywood)

    Beith, rh A. J.

    Dobson, rh Frank

    Bell, Sir Stuart

    Donohoe, Brian H

    Benton, Joe(Bootle)

    Doran, Frank

    Berry, Roger

    Doughty, Sue

    Best, Harold

    Dowd, Jim(Lewisham W)

    Blackman, Liz

    Drew, David(Stroud)

    Blears, Ms Hazel

    Eagle, Angela(Wallasey)

    Blizzard, Bob

    Eagle, Maria(L'pool Garston)

    Boateng, rh Paul

    Efford, Clive

    Bradley, rh Keith(Withington)

    Ellman, Mrs Louise

    Bradley, Peter(The Wrekin)

    Farrelly, Paul

    Brake, Tom(Carshalton)

    Field, rh Frank

    (Birkenhead)Breed, Colin

    Fisher, Mark

    Brennan, Kevin

    Fitzpatrick, Jim

    Brooke, Mrs Annette L.

    Fitzsimons, Mrs Lorna

    Brown, rh Gordon(Dunfermline

    Flynn, Paul(Newport W)

    E)

    Follett, Barbara

    Brown, rh Nicholas(Newcastle E

    Foster, rh Derek

    (Wallsend)

    Foster, Don(Bath)

    Brown, Russell(Dumfries)

    Foster, Michael(Worcester)

    Buck, Ms Karen

    Foster, Michael Jabez(Hastings

    Burden, Richard

    & Rye)

    Burgon, Colin

    Francis, Dr. HywelBurnham, Andy

    Gardiner, Barry

    Burstow, Paul

    George, Andrew(St. Ives)

    Byers, rh Stephen

    George, rh Bruce(Walsall S)

    Cable, Dr. Vincent

    Gerrard, Neil

    Cairns, David

    Gibson, Dr. Ian

    Calton, Mrs Patsy

    Gidley, Sandra

    Campbell, Alan(Tynemouth)

    Gilroy, Linda

    Campbell, Mrs Anne(C'bridge)

    Godsiff, Roger

    Campbell, rh Sir Menzies(NE

    Green, Matthew(Ludlow)

    Fife)

    Griffiths, Jane(Reading E)

    Campbell, Ronnie(Blyth V)

    Griffiths, Nigel(Edinburgh S)

    Carmichael, Alistair

    Griffiths, Win(Bridgend)

    Casale, Roger

    Grogan, John

    Caton, Martin

    Hain, rh Peter

    Cawsey, Ian(Brigg)

    Hall, Patrick(Bedford)

    Challen, Colin

    Hamilton, David(Midlothian)

    Chapman, Ben(Wirral S)

    Hanson, David

    Clapham, Michael

    Harman, rh Ms Harriet

    Clark, Mrs Helen(Peterborough)

    Harris, Dr. Evan(Oxford W &

    Clark, Dr. Lynda(Edinburgh

    Abingdon)

    Pentlands)

    Harris, Tom(Glasgow Cathcart)

    Clarke, rh Tom(Coatbridge &

    Harvey, Nick

    Chryston)

    Havard, Dai(Merthyr Tydfil &

    Clelland, David

    Rhymney)

    Coaker, Vernon

    Healey, John

    Coffey, Ms Ann

    Heath, David

    Cohen, Harry

    Henderson, Doug(Newcastle N)

    Coleman, lain

    Henderson, Ivan(Harwich)

    Colman, Tony

    Hendrick, Mark

    Connarty, Michael

    Hepburn, Stephen

    Corbyn, Jeremy

    Heppell, John

    Cotter, Brian

    Heyes, David

    Cousins, Jim

    Hill, Keith(Streatham)

    Cranston, Ross

    Hinchliffe, David

    Crausby, David

    Hoey, Kate(Vauxhall)

    Cruddas, Jon

    Hope, Phil(Corby)

    Cryer, John(Hornchurch)

    Hopkins, Kelvin

    Cummings, John

    Hoyle, Lindsay

    Cunningham, Jim(Coventry S)

    Hughes, Kevin(Doncaster N)

    Cunningham, Tony(Workington)

    Humble, Mrs Joan

    Curtis-Thomas, Mrs Claire

    Hutton, rh John

    Dalyell, Tam

    Iddon, Dr. Brian

    Darling, rh Alistair

    Ingram, rh Adam

    Davey, Edward(Kingston)

    Irranca Davies, Huw

    David, Wayne

    Jamieson, David

    841

    Jenkins, Brian

    Norris, Dan(Wansdyke)

    Johnson, Alan(Hull W)

    O'Brien, Bill(Normanton)

    Johnson, Miss Melanie(Welwyn

    O'Neill. Martin

    Hatfield)

    Opik, Lembit

    Jones, Jon Owen(Cardiff C)

    Organ, Diana

    Jones, Kevan(N Durham)

    Osborne, Sandra(Ayr)

    Jones, Lynne(Selly Oak)

    Owen, Albert

    Jones, Martyn(Clwyd S)

    Palmer, Dr. Nick

    Jones, Nigel(Cheltenham)

    Perham, Linda

    Joyce, Eric(Falkirk W)

    Pickthall, Colin

    Keen, Ann(Brenfford)

    Pike, Peter(Burnley)

    Keetch, Paul

    Plaskitt, James

    Kemp, Fraser

    Pond, Chris(Gravesham)

    Kennedy, rh Charles(Ross Skye &

    Pope, Greg(Hyndburn)

    Inverness)

    Pound, Stephen

    Khabra, Piara S.

    Primarolo, rh Dawn

    Kidney, David

    Prosser, Gwyn

    Kilfoyle, Peter

    Pugh, Dr. John

    King, Ms Oona(Bethnal Green &

    Purchase, Ken

    Bow)

    Purnell, James

    Kirkwood, Sir Archy

    Quin, rh Joyce

    Knight, Jim(S Dorset)

    Quinn, Lawrie

    Kumar, Dr. Ashok

    Rammell, Bill

    Lamb, Norman

    Rapson, Syd(Portsmouth N)

    Lammy, David

    Reed, Andy(Loughborough)

    Lawrence, Mrs Jackie

    Reid, Alan(Argyll & Bute)

    Laws, David(Yeovil)

    Rendel, David

    Laxton, Bob(Derby N)

    Robertson, John(Glasgow

    Lazarowicz, Mark

    Anniesland)

    Leslie, Christopher

    Roche, Mrs Barbara

    Lewis, Ivan(Bury S)

    Rooney, Terry

    Lewis, Terry(Worsley)

    Ruane, Chris

    Linton, Martin

    Ruddock, Joan

    Lloyd, Tony(Manchester C)

    Russell, Bob(Colchester)

    Love, Andrew

    Ryan, Joan(Enfield N)

    Luke, lain(Dundee E)

    Salter, Martin

    Lyons, John(Strathkelvin)

    Sanders, Adrian

    McAvoy, Thomas

    Savidge, Malcolm

    McCabe, Stephen

    Sawford, Phil

    McCafferty, Chris

    Sedgemore, Brian

    McCartney, rh Ian

    Sheridan, Jim

    McDonagh, Siobhain

    Simon, Siôn(B'ham Erdington)

    McDonnell, John

    Simpson, Alan(Nottingham S)

    MacDougall, John

    Singh, Marsha

    McFall, John

    Skinner, Dennis

    McGuire, Mrs Anne

    Smith, rh Andrew(Oxford E)

    Mclsaac, Shona

    Smith, Geraldine(Morecambe &

    McKechin, Ann

    Lunesdale)

    McKenna, Rosemary

    Smith, Jacqui(Redditch)

    McNulty, Tony

    Smith, Llew(Blaenau Gwent)

    Mactaggart, Fiona

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

    McWalter, Tony

    Kincardine)

    McWilliam, John

    Soley, Clive

    Mahmood, Khalid

    Southworth, Helen

    Mahon, Mrs Alice

    Spellar, rh John

    Mann, John(Bassetlaw)

    Squire, Rachel

    Marris, Rob(Wolverh'ton SW)

    Steinberg, Gerry

    Marsden, Gordon(Blackpool S)

    Stewart, David(Inverness E &

    Marsden, Paul(Shrewsbury &

    Lochaber)

    Atcham)

    Stewart, Ian(Eccles)

    Marshall-Andrews, Robert

    Stoate, Dr. Howard

    Martlew, Eric

    Strang, rh Dr. Gavin

    Meacher, rh Michael

    Stringer, Graham

    Merron, Gillian

    Stunell, Andrew

    Michael, rh Alun

    Sutcliffe, Gerry

    Miliband, David

    Tami, Mark(Alyn)

    Miller, Andrew

    Taylor, Dan(Stockton S)

    Moffatt, Laura

    Taylor, David(NW Leics)

    Moonie, Dr. Lewis

    Taylor, Matthew(Truro)

    Moore, Michael

    Teather, Sarah

    Morgan, Julie

    Tipping, Paddy

    Morley, Elliot

    Todd, Mark(S Derbyshire)

    Mudie, George

    Touhig, Don(Islwyn)

    Munn, Ms Meg

    Trickett, Jon

    Murphy, Jim(Eastwood)

    Truswell, Paul

    Naysmith, Dr. Doug

    Turner, Dennis(Wolverh'ton SE)

    842

    Turner, Dr. Desmond(Brighton

    Williams, Betty(Cowny)

    Twigg, Stephen(Enfield)

    Wills, Michael

    Tyler, Paul(N Cornwall)

    Wood, Mike(Batley)

    Tynan, Bill(Hamilton S)

    Woodward, Shaun

    Ward, Claire

    Woolas, Phil

    Wareing, Robert N.

    Wright, Anthony D.(Gt

    Watson, Tom(W Bromwich E)

    Yarmouth)

    Watts, David

    Wright, David(Telford)

    Webb, Steve(Northavon)

    Wright, Tony(Cannock)

    White, Brian

    Whitehead, Dr. Alan

    Tellers for the Ayes:

    Wicks, Malcolm

    Margaret Moran and

    Williams, rh Alan(Swansea W)

    Paul Clark

    NOES

    Beggs, Roy(E Antrim)

    Robinson, Peter(Belfast E)

    Burnside, David

    Salmond, Alex

    Campbell, Gregory(E Lond'y)

    Smyth, Rev. Martin(Belfast S)

    Dodds, Nigel

    Trimble, rh David

    Donaldson, Jeffrey M.

    Weir, Michael

    Williams, Hywel(Caernarfon)

    Ewing, Annabelle

    Hermon, Lady

    Tellers for the Noes:

    Llwyd, Elfyn

    Mr. Simon Thomas and

    Robertson, Angus(Moray)

    Pete Wishart

    Question accordingly agreed to.

    64. STAMP DUTY LAND TAX (MISCELLANEOUS AMENDMENTS)
    Resolved,
    That—
    Part 4 of the Finance Act 2003 shall be amended in accordance with the following provisions of this Resolution.
    In section 43—

    (1) in paragraph (c) of subsection (3), after "interest" there shall be inserted "(other than a lease)";

    (2) after that paragraph there shall be inserted—

    "(d) the variation of a lease is an acquisition and disposal of a chargeable interest only where it takes effect, or is treated for the purposes of this Part, as the grant of a new lease."
    (3) After subsection (9) of section 44 there shall be inserted—
    (9A) Where—

    paragraph 12A of Schedule 17A applies (agreement for lease), or

    paragraph 19(3) to (6) of Schedule 17A applies (missives of let in Scotland),

    it applies in place of subsections (4), (8) and (9)."
    (4) After that section there shall be inserted—
    "44A Contract providing for conveyance to third party
    (1) This section applies where a contract is entered into under which a chargeable interest is to be conveyed by one party to the contract (A) at the direction or request of the other (B)—

    to a person (C) who is not a party to the contract, or

    either to such a person or to B.

    (2) B is not regarded as entering into a land transaction by reason of entering into the contract, hut the following provisions have effect.
    If the contract is substantially performed B is treated for the purposes of this Part as acquiring a chargeable interest, and accordingly as entering into a land transaction.
    The effective date of the transaction is when the contract is substantially performed.
    Where the contract is (to any extent) afterwards rescinded or annulled, or is for any other reason not carried into effect, the tax paid by virtue of subsection (3) shall (to that extent) be repaid by the Inland Revenue.
    Repayment must be claimed by amendment of the land transaction return made in respect of the contract.
    Subject to subsection (6), section 44 (contract and conveyance) does not apply (except so far as it defines "substantial performance") in relation to the contract.
    Where—

    this section applies by virtue of subsection (1)(b), and

    by reason of B's direction or request, A becomes obliged to convey a chargeable interest to B,

    section 44 applies to that obligation as it applies to a contract for a land transaction that is to be completed by a conveyance.
    (7) Section 44 applies in relation to any contract between B and C, in respect of the chargeable interest referred to in subsection (1) above, that is to be completed by a conveyance.
    References to completion in that section, as it so applies, include references to conveyance by A to C of the subject matter of the contract between B and C.
    In this section "contract" includes any agreement and "conveyance" includes any instrument.".
    In section 45—

    after paragraph (b) of subsection (1) there shall be inserted ", and

    (c) paragraph 12B of Schedule 17A (assignment of agreement for lease) does not apply.";

    at the end of that subsection there shall be inserted ", and references to the transferor and the transferee shall be read accordingly.";

    for subsection (5) there shall be substituted

    "(5) Where a transfer of rights relates to part only of the subject-matter of the original contract ("the relevant part")—

    subsection (8)(b) of section 44 (restriction of charge to tax on subsequent conveyance) has effect as if the reference to the amount of tax chargeable on that contract were a reference to an appropriate proportion of that amount, and

    a reference in the second sentence of subsection (3) above to the original contract, or a reference in subsection (4) above to the secondary contract arising from an earlier transfer of rights, is to that contract so far as relating to the relevant part (and that contract so far as not relating to the relevant part shall be treated as a separate contract).";

    after that subsection there shall be inserted—

    "(5A) In relation to a land transaction treated as taking place by virtue of subsection (3)—

    references in Schedule 7 (group relief) to the vendor shall be read as references to the vendor under the original contract;

    other references in this Part to the vendor shall be read, where the context permits, as referring to either the vendor under the original contract or the transferor.".

    (6) After section 45 there shall be inserted—
    "45A Contract providing for conveyance to third party: effect of transfer of rights
    This section applies where—

    a contract ("the original contract") is entered into under which a chargeable interest is to be conveyed by one party to the contract (A) at the direction or request of the other (B)—

    to a person (C) who is not a party to the contract, or

    either to such a person or to B,

    and

    there is an assignment or other transaction (relating to the whole or part of the subject-matter of the original contract) as a result of which a person (D) becomes entitled to exercise any of B's rights under the original contract in place of B.

    References in the following provisions of this section to a transfer of rights are to any such assignment or other transaction.
    (2) D is not regarded as entering into a land transaction by reason of the transfer of rights, but section 44A (contract providing for conveyance to third party) has effect in accordance with the following provisions of this section.
    (3) That section applies as if—

    D had entered into a contract (a "secondary contract") in the same terms as the original contract except with D as a party instead of B, and

    the consideration due from D under the secondary contract were—

    so much of the consideration under the original contract as is referable to the subject-matter of the transfer of rights and is to be given (directly or indirectly) by D or a person connected with him, and

    the consideration given for the transfer of rights.

    (4) The substantial performance of the original contract shall be disregarded if—

    it occurs at the same time as, and in connection with, the substantial performance of the secondary contract, or

    it occurs after the transfer of rights.

    (5) Where there are successive transfers of rights, subsection (3) has effect in relation to each of them.
    (6) The substantial performance of the secondary contract arising from an earlier transfer of rights shall be disregarded if—

    it occurs at the same time as, and in connection with, the substantial performance of the secondary contract arising from a subsequent transfer of rights, or

    it occurs after that subsequent transfer.

    (7) Where a transfer of rights relates to only part of the subject matter of the original contract, or to only some of the rights under that contract—

    a reference in subsection (3)(a) or (4) to the original contract, or a reference in subsection (6) to the secondary contract arising from an earlier transfer, is to that contract so far as relating to that part or those rights, and

    that contract so far as not relating to that part or those rights shall be treated as a separate contract.

    (8) The effective date of a land transaction treated as entered into by virtue of subsection (3) is not earlier than the date of the transfer of rights.
    (9) In relation to a such a transaction—

    references in Schedule 7 (group relief) to the vendor shall be read as references to A;

    other references in this Part to the vendor shall be read, where the context permits, as referring to either A or B.

    (10) Section 839 of the Taxes Act 1988 (connected persons) applies for the purposes of subsection (3)(b).
    In this section "contract" includes any agreement.".
    (7) After subsection (6) of section 48 there shall be inserted—
    "(7) This section has effect subject to subsection (3) of section 44A (contract and conveyance to third party).".
    (8) After subsection (4) of section 77 there shall be inserted—
    "(5) A land transaction that a person is treated as entering into by virtue of subsection (3) of section 44A (contract and conveyance to third party) is notifiable.".
    (9) In section 57A—

    for paragraph (b) of subsection (3) there shall be substituted—

    (aa) that the sale transaction is entered into wholly or partly in consideration of the leaseback transaction being entered into,

    that the only other consideration (if any) for the sale is the payment of money or the assumption, satisfaction or release of a debt (or both),";

    after paragraph (c) of that subsection there shall be inserted—

    that the sale is not a transfer of rights within the meaning of section 45 (contract and conveyance: effect of transfer of rights) or 45A (contract providing for conveyance to third party: effect of transfer of rights), and

    where A and B are both bodies corporate at the effective date of the leaseback transaction, that they are not members of the same group for the purposes of group relief (see paragraph 1 of Schedule 7) at that date.";

    subsection (4) shall be omitted.

    (10) In section 79(2), for the words from "other than" to the end of paragraph (b) there shall be substituted "other than a transaction treated as taking place—

    under subsection (4) of section 44 (contract and conveyance) or under that section as it applies by virtue of section 45 (contract and conveyance: effect of transfer of rights), or

    846

    under subsection (3) of section 44A (contract providing for conveyance to third party) or under that section as it applies by virtue of section 45A (contract providing for conveyance to third party: effect of transfer of rights).".

    (11) In section 119(2)—

    after the entry for section 44(4) there shall be inserted—

    "section 44A(3) (contract providing for conveyance to third party),
    section 45A(8) (contract providing for conveyance to third party: effect of transfer of rights),";

    at the end there shall be inserted—

    "paragraph 12A(2) of Schedule 17A (agreement for lease followed by substantial performance),
    paragraph 12B(3) of that Schedule (assignment of agreement for lease occurring after agreement substantially performed), and
    paragraph 19(3) of that Schedule (missives of let in Scotland followed by substantial performance).".
    (12) In section 122, in the entry for "vendor" there shall be inserted at the end "(see too sections 45(5A) and 45A(9))".
    (13) In Schedule 4—

    after sub-paragraph (2) of paragraph 10 there shall be inserted—

    "(2A) Where subsection (8) of section 44 (contract and conveyance) applies, so that there are two notifiable transactions (the first being the contract and the second being the transaction effected on completion), the condition in sub-paragraph (2)(a) is treated as met in relation to the second transaction if it is met in relation to the first.";

    after sub-paragraph (4) of paragraph 17 there shall be inserted—

    "(4A) Sub-paragraphs (3) and (4) shall be disregarded for the purposes of determining whether the land transaction in question is notifiable.".
    (14) After paragraph 1 of Schedule 5 there shall be inserted—
    "Amounts payable in respect of periods before grant of lease
    1A For the purposes of this Part "rent" does not include any chargeable consideration for the grant of a lease that is payable in respect of a period before the grant of the lease."
    (15) After paragraph 7 of Schedule 17A there shall be inserted—
    "First rent review in final quarter of fifth year
    7A Where—

    a lease contains provision under which the rent may be adjusted,

    under that provision the first (or only) such adjustment—

    is to an amount that (before the adjustment) is uncertain, and

    has effect from a date (the "review date") that is expressed as falling five years after a specified date,

    and

    the specified date falls within the three months before the beginning of the term of the lease,

    this Schedule has effect as if references to the first five years of the term of the lease were to the period beginning with the start of the term of the lease and ending with the review date.
    References to the fifth year of the term of the lease shall be read accordingly.".
    (16) In paragraph 9(1) of that Schedule, at the end of paragraph (b) there shall be inserted ", or
    (c) a person claiming relief against re-entry or forfeiture as under-lessee in relation to the original sub-lease ("the old lease") is granted a lease ("the new lease") in pursuance of an order of a court".
    (17) After paragraph 12 of that Schedule there shall be inserted—
    "Agreement for lease
    12A(1) This paragraph applies where in England and Wales or Northern Ireland—

    an agreement for a lease is entered into, and

    the agreement is substantially performed without having been completed.

    (2) The agreement is treated as if it were the grant of a lease in accordance with the agreement ("the notional lease"), beginning with the date of substantial performance.
    The effective date of the transaction is that date.
    (3) Where a lease is subsequently granted in pursuance of the agreement—

    the notional lease is treated as if it were surrendered at that time, and

    the lease itself is treated for the purposes of paragraph 9 (rent for overlap period in case of grant of further lease) as if it were granted in consideration of that surrender.

    (4) Where sub-paragraph (1) applies and the agreement is (to any extent) afterwards rescinded or annulled, or is for any other reason not carried into effect, the tax paid by virtue of that subparagraph shall (to that extent) be repaid by the Inland Revenue.
    Repayment must be claimed by amendment of the land transaction return made in respect of the agreement.
    (5) In this paragraph "substantially performed" and "completed" have the same meanings as in section 44 (contract and conveyance).
    Assignment of agreement for lease
    12B (1) This paragraph applies, in place of section 45 (contract and conveyance: effect of transfer of rights) where in England and Wales or Northern Ireland a person assigns his interest as lessee under an agreement for a lease.
    (2) If the assignment occurs without the agreement having been substantially performed, section 44 (contract and conveyance) has effect as if—

    the contract were with the assignee and not the assignor, and

    the consideration given by the assignee for entering into the contract included any consideration given by him for the assignment.

    (3) If the assignment occurs after the agreement has been substantially performed—

    the assignment is a separate land transaction, and

    the effective date of that transaction is the date of the assignment.

    (4) Where there are successive assignments, this paragraph has effect in relation to each of them.".
    (18) At the end of paragraph 16 of that Schedule there shall be inserted—
    "Paragraph 5 (exchanges) of Schedule 4 (chargeable consideration) does not apply in such a case.".
    (19) For paragraph 19(2) of that Schedule there shall be substituted—
    "(2) Where in Scotland there is a lease constituted by concluded missives of let ("the first lease") and at some later time a lease is executed ("the second lease")—

    the first lease is treated as if it were surrendered at that time, and

    the second lease is treated for the purposes of paragraph 9 (rent for overlap period in case of grant of further lease) as if it were granted in consideration of that surrender.

    (3) Where in Scotland—

    there are concluded missives of let that do not constitute a lease, and

    the agreement represented by the missives of let is substantially performed without a lease having been executed,

    the missives of let are treated as if they did constitute a lease ("the notional lease").
    The effective date of the transaction is when the agreement is substantially performed.
    (4) Where sub-paragraph (3) applies and at some later time a lease is executed—

    the notional lease is treated as if it were surrendered at that time, and

    the lease itself is treated for the purposes of paragraph 9 as if it were granted in consideration of that surrender.

    (5) References in sub-paragraphs (2) to (4) to the execution of a lease are to the execution of a lease that either—

    is in conformity with the missives of let, or

    relates to substantially the same property and period as the missives of let.

    (6) Where subsection (3) applies and the agreement is (to any extent) afterwards rescinded or annulled, or is for any other reason not carried into effect, the tax paid by virtue of that sub-paragraph shall (to that extent) be repaid by the Inland Revenue.
    Repayment must be claimed by amendment of the land transaction return made in respect of the agreement".
    (20) For paragraph 3(3)(c) of Schedule 19 there shall be substituted—
    " if on or after that date there is an assignment, subsale or other transaction (relating to the whole or part of the subject-matter of the contract) as a result of which a person other than the purchaser under the contract becomes entitled to call for a conveyance to him.".
    (21) Paragraphs (4), (7) and (8) of this Resolution, and paragraphs (10) and (11) so far as relating to the section 44A inserted by paragraph (4), shall apply in relation to any contract entered into after 17th March 2004.
    (22) Paragraphs (5), (6) and (12) of this Resolution, and paragraphs (10) and (11) so far as relating to the section 45A inserted by paragraph (6), shall apply in relation to any transfer of rights occurring after that date.
    (23) Subject to paragraph (24) of this Resolution, the amendments made by the other provisions of this Resolution shall apply in relation to any transaction of which the effective date is after 17th March 2004.
    (24) Paragraph (20) of this Resolution shall not apply in relation to a contract that was substantially performed before 17th March 2004.
    (25) In this Resolution—
    "effective date" and "substantially performed" have the same meaning as in Part 4 of the Finance Act 2003 (as amended by this Resolution);
    "transfer of rights" has the same meaning as in section 45 of that Act or, as the case may require, section 45A of that Act (inserted by paragraph (6) of this Resolution).
    And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.

    65. STAMP DUTY LAND TAX (SHARED OWNERSHIP LEASES)
    Resolved,
    That—
    After paragraph 4 of Schedule 9 to the Finance Act 2003 there shall be inserted—
    "Shared ownership lease: treatment of staircasing transaction
    4A (1) This paragraph applies where under a shared ownership lease—

    the lessee or lessees have the right, on the payment of a sum, to require the terms of the lease to be altered so that the rent payable under it is reduced, and

    by exercising that right the lessee or lessees acquire an interest, additional to one already held, calculated by reference to the market value of the dwelling and expressed as a percentage of the dwelling or its value (a "share of the dwelling").

    (2) Such an acquisition is exempt from charge if—

    an election was made for tax to be charged in accordance with paragraph 2 or, as the case may be, paragraph 4 and any tax chargeable in respect of the grant of the lease has been paid, or

    immediately after the acquisition the total share of the dwelling held by the lessee or lessees does not exceed 80%.

    (3) In this paragraph "shared ownership lease" means a lease granted—

    by a qualifying body, or

    in pursuance of the preserved right to buy,

    in relation to which the conditions in paragraph 2(2) or 4(2) are met.
    (4) Section 118 (meaning of "market value") does not apply in relation to the references in this paragraph to the market value of the dwelling.".
    (2) In sub-paragraph (1) of paragraph 5 of that Schedule, for "2 and 4" there shall be substituted "2, 4 and 4A".
    (3) In Schedule 19 to that Act, for sub-paragraph (2) of paragraph 7 there shall be substituted—
    "(2) In paragraph 3 of Schedule 9 (relief for transfer of reversion under shared ownership lease where election made for market value treatment) and paragraph 4A of that Schedule (shared ownership lease: treatment of staircasing transaction) as they apply in a case where the original lease was granted before the implementation date—

    a reference to a lease to which paragraph 2 of that Schedule applies shall be read as a reference to a lease to which section 97 of the Finance Act 1980 applied (which made provision for stamp duty corresponding to that paragraph), and

    a reference to an election having been made for tax to be charged in accordance with paragraph 2 or 4 of that Schedule shall be read as a reference to the lease having contained a statement of the parties' intention such as is mentioned in section 97(2)(d) of the Finance Act 1980 or, as the case may be, paragraph (d) of section 108(5) of the Finance Act 1981 (which made provision for stamp duty corresponding to paragraph 4).".

    (4) The amendments made by paragraphs (1) and (2) of this Resolution shall apply in relation to an acquisition after 17th March 2004.
    (5) Paragraph (3) of this Resolution shall be deemed to have come into force on 1st December 2003.
    And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.

    66. PERIOD WITHIN WHICH CERTAIN CLAIMS MAY BE MADE
    Resolved,
    That provision (including provision having retrospective effect) may be made as to the period within which a claim may be made in respect of a mistake of law relating to a taxation matter under the care and management of the Commissioners of Inland Revenue.

    67. RELIEF FOR SHIPBUILDERS (ABOLITION)
    Resolved,
    That provision (including provision having retrospective effect) may be made ending the availability of relief under section 2 of the Finance Act 1966.

    68. RELIEF FROM TAX (INCIDENTAL AND CONSEQUENTIAL CHARGES)
    Resolved,
    That it is expedient to authorise any incidental or consequential charges to any duty or tax (including charges having retrospective effect) that may arise from provisions designed in general to afford relief from taxation.

    PROCEDURE (AMOUNTS DEDUCTED FROM PAYMENTS TO SUB-CONTRACTORS)
    Resolved,
    That, notwithstanding anything to the contrary in the practice of the House relating to the matters that may be included in Finance Bills, any Finance Bill of the present Session may include provision authorising sums—

    deducted from payments to or for sub-contractors in the construction industry, and

    paid to the Commissioners of Inland Revenue,

    to be treated as paid in respect of, or on account of, liabilities of the sub-contractor other than liabilities in respect of income tax or corporation tax.

    PROCEDURE (SAVINGS INCOME)
    Resolved,
    That, notwithstanding anything to the contrary in the practice of the House relating to the matters that may be included in Finance Bills, any Finance Bill of the present Session may contain provision for implementing—

    Article 14 of Council Directive 2003/48/EC of 3rd June 2003 on taxation of savings income in the form of interest payments, or

    any corresponding provision of arrangements made in relation to a territory other than a member State.

    PROCEDURE (MINIMUM CONTRIBUTIONS TO PERSONAL PENSION SCHEMES)
    Resolved,
    That, notwithstanding anything to the contrary in the practice of the House relating to the matters that may be included in Finance Bills, any Finance Bill of the present Session may make provision for the payment of sums out of the National Insurance Fund or the Northern Ireland National Insurance Fund in connection with provisions relating to the payment of minimum contributions under section 43 of the Pension Schemes Act 1993 or section 39 of the Pension Schemes (Northern Ireland) Act 1993.

    PROCEDURE (MUTUAL ASSISTANCE IN CONNECTION WITH CUSTOMS UNION WITH ANDORRA)
    Resolved,
    That, notwithstanding anything to the contrary in the practice of the House relating to the matters that may be included in Finance Bills, any Finance Bill of the present Session may include provision to give effect to arrangements concerning mutual assistance made for the purposes of the Customs Union between the European Community and the Principality of Andorra.

    PROCEDURE (FUTURE TAXATION)
    Resolved,
    That, notwithstanding anything to the contrary in the practice of the House relating to the matters that may be included in Finance Bills, any Finance Bill of the present Session may contain the following provisions taking effect in a future year—

    provision for corporation tax to be charged for the financial year 2005;

    provision about childcare or childcare vouchers provided for an employee;

    provision amending Parts 3 and 4 of the Income Tax (Earnings and Pensions) Act 2003 in relation to vans;

    provision about the enjoyment by an individual of property which is or represents property in which he previously owned an interest;

    provision about Lloyd's underwriters;

    provision in relation to pension schemes and similar schemes under which benefits are provided to or in respect of employees or former employees.

    FINANCE (MONEY)
    Queen's recommendation having been signified—
    Resolved,
    That, for the purposes of any Act of the present Session relating to finance ("the Act"), it is expedient to authorise—

    the deduction of sums from the gross revenues of the department of the Commissioners of Inland Revenue for the purpose of paying amounts in the implementation of—

    Article 14 of Council Directive 2003/48/EC of 3rd June 2003 on taxation of savings income in the form of interest payments, or

    any corresponding provision of arrangements made in relation to a territory other than a member State;

    the payment out of money provided by Parliament of any increase attributable to the Act in the sums paid out of the National Insurance Fund and the Northern Ireland National Insurance Fund under the Pension Schemes Act 1993 and the Pension Schemes (Northern Ireland) Act 1993;

    the payment out of money provided by Parliament of sums required by the Treasury and the Director of Savings to meet expenditure incurred with a view to securing—

    that the Treasury would be able to exercise their functions under sections 12 to 20A of (and Schedule 5A to) the National Loans Act 1968, and

    that the Director of Savings would be able to exercise his functions,

    if the United Kingdom were to adopt the single currency in accordance with the Treaty establishing the European Communities.

    Bill ordered to be brought in upon the foregoing resolutions: And that the Chairman of Ways and Means, Mr. Chancellor of the Exchequer, Mr. Secretary Prescott, Mr. Secretary Blunkett, Mr. Secretary Reid. Mr. Secretary Smith, Ms Secretary Hewitt, Mr. Secretary Clarke, Mr. Paul Boateng, Ruth Kelly, John Healey and Dawn Primarolo.

    FINANCE BILL
    Dawn Primarolo accordingly presented a Bill to grant certain duties, to alter other duties, and to amend the law relating to the National Debt and the Public Revenue, and to make further provision in connection with Finance: And the same was read the First time; and ordered to be read a Second time tomorrow, and to be printed [Bill 79].

    DELEGATED LEGISLATION
    Madam Deputy Speaker (Sylvia Heal): With the leave of the House I will take the motions on delegated legislation together.
    Motion made, and Question put forthwith, pursuant to Standing Order No. 118(6) (Standing Committees on Delegated Legislation),

    DELEGATED LEGISLATION
      ANIMALS
      That the Mink Keeping (Prohibition) (England) Order 2004 (S.I., 2004, No. 100), dated 19th January 2004, a copy of which was laid before this House on 20th January, be approved.
      ELECTRICITY
      That the draft Renewables Obligation (Amendment) Order 2004, which was laid before this House on 24th February, be approved.
      EMPLOYMENT
      That the draft Paternity and Adoption Leave (Amendment) Regulations 2004, which were laid before this House on 9th February, be approved.

      SOCIAL SECURITY
      That the draft Statutory Paternity Pay and Statutory Adoption Pay (Weekly Rates) (Amendment) Regulations 2004, which were laid before this House on 9th February, be approved.
      That the draft Social Security (Contributions) (Re-rating and National Insurance Funds Payments) Order 2004, which was laid before this House on 4th February, be approved.
      That the draft Child Benefit and Guardian's Allowance Up-rating Order 2004, which was laid before this House on 23rd February, be approved.

      SOCIAL SECURITY (NORTHERN IRELAND)
      That the draft Child Benefit and Guardian's Allowance Up-rating (Northern Ireland) Order 2004, which was laid before this House on 23rd February, be approved.
      That the draft Tax Credits Up-rating Regulations 2004, which were laid before this House on 23rd February, be approved.

      SUPREME COURT OF ENGLAND AND WALES
      That the draft Courts Boards Areas Order 2004, which was laid before this House on 26th February, be approved.
      That the draft Courts Boards (Appointments and Procedure) Regulations 2004, which were laid before this House on 26th February, be approved.

      CONSTITUTIONAL LAW
      That the draft Primary Medical Services (Scotland) Act 2004 (Consequential Modifications) Order 2004, which was laid before this House on 25th February, be approved.
      That the draft Local Government in Scotland Act 2003 (Destination of Fixed Penalties in Scotland) Order 2004, which was laid before this House on 25th February, be approved.

      GOVERNMENT TRADING FUNDS
      That the draft Driver and Vehicle Licensing Agency Trading Fund Order 2004, which was laid before this House on 25th February, be approved.

      NORTHERN IRELAND
      That the draft Agricultural Statistics (Northern Ireland) Order 2004, which was laid before this House on 12th February, be approved.—[Mr. Heppell.]
      Question agreed to.

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

      FISHERIES: CATCH QUOTAS AND EFFORT LIMITATION
      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.—[Mr. Heppell.]
      Madam Deputy Speaker: I think the Ayes have it.
      Hon. Members: No.
      Division deferred till Wednesday 24 March, pursuant to Orders [28 June 2001 and 6 November 2003].

    ADJOURNMENT (EASTER)
    Ordered,
    That this House, at its rising on Thursday 1st April, do adjourn till Monday 19th April 2004.—[Mr. Heppell.]

    PARLIAMENTARY CONTRIBUTORY PENSION FUND
    Ordered,
    That Mr Eric Martlew, Ms Gisela Stuart and Dr Nick Palmer be discharged as Managing Trustees of the Parliamentary Contributory Pension Fund and Mr David Borrow, Mr Terry

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    Rooney and Mr Andrew Love be appointed as Managing Trustees in pursuance of section 1 of the Parliamentary and other Pensions Act 1987.—[Mr. Heppell.]

    PETITION

      Council Tax
      9.15 pm
      Mr. Paul Goodman: I wish to present a petition on behalf of 1,000 readers of The Star newspaper in my constituency about the council tax. It reads as follows:
      To the honourable the Commons of the United Kingdom of Great Britain and Northern Ireland in Parliament assembled,
      The humble petition of the readers of The Star newspaper sheweth
      That levels of council tax are too high and should be reduced.
      Wherefore your Petitioners pray that your Honourable House will urge the Deputy Prime Minister to reduce the levels of council tax in Buckinghamshire.
      And your Petitioners, as in duty bound, will ever pray, etc.
      To lie upon the Table.

    Health Services (Northavon)
    Motion made, and Question proposed, That this House do now adjourn.—[Mr. Heppell.]
    9.16 pm
    Mr. Steve Webb: After two and a quarter hours of voting, it is good to have the opportunity to raise the future of hospital and community health services in my constituency. I particularly welcome the Under-Secretary of State for Health, the hon. Member for Welwyn Hatfield (Miss Johnson), to her place, because I understand that she grew up in Northavon, or at least spent 10 very happy years there. She will therefore appreciate some of the issues that I seek to raise about the need for health care not merely for those living in inner-urban areas, but for those who live in market towns and rural villages.
    The future of hospitals and community health services in my constituency is in a state of flux, and it feels as though it has been like that for as long as I have been a Member of this House, and probably for a very long time before that. The local strategic health authority is preparing something called the Bristol health services plan, and it is indicative of the approach being taken that it is seen as a Bristol-driven process to look at the needs of the urban community. The fact that it also serves the more rural communities of south Gloucestershire and north Somerset does not seem to feature quite as strongly on the agenda of the strategic health authority as I would wish.
    At present, the local health trusts are involved in what they call "engagement" with the local communities, rather than consultation, as they do not yet know what they want to do. Public meetings are being held, some of which are well attended, some of which are sparsely attended. I could have saved the trusts a good deal of trouble in that regard. As the Minister knows, I undertook my own "engagement" with my constituents, in which I issued a detailed and careful health survey to every household in the constituency. I received more than 8,000 replies, and I have supplied the Minister with a copy of the report of the survey.
    Sometimes such surveys can be a bit dodgy, involving questions such as "Do you want your local hospital to he closed: yes or no?" We all know the value of the response to surveys such as those. I like to think that the exercise that I undertook was a bit more serious. It put to local residents some of the hard choices that have to be made and asked them whether, if local health professionals advocated a particular reconfiguration, they would endorse it, whether or not it was driven by clinical guidance.
    I should like to report some of the survey results to the House. The most striking was that 81 per cent. of the constituents who responded felt that the residents of south Gloucestershire—as distinct from the residents of Bristol—were not being fully taken into the process. To give an example of that, the local national health service trust, North Bristol NHS trust, recently reported a massive financial deficit and invited local MPs to a meeting to tell them about it. I discovered on the day of the meeting that I had not been invited. The meeting was being held at Frenchay hospital, in my constituency. When I rang the hospital to ask why I had not been invited, I was told that the Bristol MPs had been invited,

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    and that I was not in Bristol but in south Gloucestershire. This may sound like parochial nitpicking, but it goes to the heart of my concerns. Health care decisions are often driven by an urban agenda, and by the needs of the big city and the big conurbation. Areas such as south Gloucestershire can sometimes be marginalised in the decision-making process. When I turned up to the meeting, I asked whether local councillors had been invited, and I was told, "Yes, the Bristol city councillors are here," so I said, "Have any south Gloucestershire councillors been invited?" The reply was, "Oh, no, we didn't think about that." It is indicative that the Bristol health services plan has not paid attention to the needs of south Gloucestershire residents, and that is why I am pleased to raise the issue.
    Not only did 81 per cent. of my constituents feel that south Gloucestershire's residents were not being listened to properly in this process, but there was substantial opposition to one of the key ideas coming forward. That idea was that of the two principal sites currently run by North Bristol NHS trust—Frenchay and Southmead—the current drift of thinking is that Frenchay should be at best downgraded, perhaps lose its A and E department, perhaps be no more than a community hospital, or even have nothing at all on the site. Some 81 per cent. of my constituents said that they would not accept that outcome, even if the trust said that that was on medical grounds. The public are very sceptical. They have heard about the financial position of the trust, and they are sceptical about the proposals being driven by health considerations rather than financial ones. One of the difficulties that the trust faces is that at the same time as trying to make long-term plans, it is trying to deal with a massive deficit. Short-term cuts are therefore going on at the same time as it tries to set out a long-term vision. That sends confusing messages to the local public about cuts.
    Dr. Doug Naysmith: Will the hon. Gentleman give way?
    Mr. Webb: I will not at the moment. If I have time, I will do so later.
    I put to my constituents the idea of some community-. based facilities. One idea that I put to them was that of a walk-in minor injuries centre, perhaps at Yate, one of the principal population centres in my constituency. That idea was quite well received, but it was clear that people did not regard that as an adequate substitute for a properly resourced 24-hour accident and emergency unit at a proper hospital. My constituents will not be satisfied if they end up with somewhere to deal with bumps and bruises locally but lose access to a high-. quality casualty unit 24 hours a day at a local major hospital, which they currently have at Frenchay.
    I put some options to my constituents as to community facilities that they would like to see. The three that came out top were: first, a minor injuries unit, particularly in the Yate and Sodbury area, but there was also support in the Thornbury area: secondly, being able to have out-patient appointments nearer home, which obviously would be popular and, given the lamentable state of public transport in the area, very sensible; and thirdly, intermediate care beds. Certainly, the existing provision in my constituency at Thornbury hospital, which people are able to use nearer to home, rather than a big, slightly impersonal hospital, is very much valued.
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    Under the current process, local trusts are preparing what are known as strategic outline cases. Those are nearly finalised and will be submitted to the strategic health authority in the next few weeks. They will be sent on, assuming that they are approved by the strategic health authority, and will reach the Government by the end of April. I understand from talking to North Bristol NHS trust today that it is anticipated that the Department of Health will receive 11 of those strategic outline cases and is likely to approve five. The broad time scale to which it is working is by the summer. If that is not right, I hope that the Minister will correct me.
    I want to ask the Minister what criteria the Department of Health will use in assessing those bids, which, I presume, will be from health authorities all around Britain. I want to suggest three criteria that I would like to see used. First, I do not want cuts in capacity. The current plan envisages cuts. At present, once minor adjustments have been made, North Bristol NHS trust has 1,563 beds. The draft strategic outline case that I have seen envisages cutting that by nearly 200 beds. That is at a time when demand, as a result of a rise in the population, would imply an increase of 281 beds. If we add those two numbers together, there is an implied shortfall, compared with present provision, of nearly 500 beds. In south Gloucestershire, the number of people over 65 will rise by half in the next decade or so, and the number of people over 75 will rise by a similar proportion. Given the huge growth in demand for hospital services, the idea that any strategic outline case would contain fewer beds than at present seems totally unacceptable.
    We have seen what happens when hospitals do not have enough beds. Now we are confronted with the idea that we should plan on the basis of fewer beds. The theory is that the hospital will become more efficient, will drive people through more quickly, and will progress from being one of the worst to one of the best performers, freeing bed space and allowing the provision of care. Let us see the evidence. Let us see the hospital deliver improved throughput. Then we might look at how many beds are needed. The idea that we should plan on the basis of cutting hundreds of beds when population pressures imply that we should be adding hundreds of beds is totally unacceptable.
    The Bristol Evening Post recently ran a front-page story about cancelled operations at North Bristol, another big problem for my local trust. The main reason given was lack of beds. If that is the situation now, what will it be like when 200 beds are taken away, given population pressures that should add a further 300? I simply do not accept that a strategic outline case based on bed cuts will be acceptable to my constituents.
    The second thing that my constituents want is access to world-class facilities, including accident and emergency. Access is a key issue. The Minister knows, having been to school in a village in my constituency, that reaching Frenchay hospital works for many of my constituents, particularly in the main area of Yate and Sodbury. If casualty services were taken out of Frenchay hospital, which is mooted in the medium term, I think it unlikely that people would be able to travel from my constituency up towards the Cotswolds, from villages such as Charfield, where the Minister grew up, Wickwar or Hawkesbury to Southmead hospital in a decent period. It may be possible at some times of day,

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    but at others, when the north of Bristol and the south of south Gloucestershire are clogged and the ring road is clogged, people could get stuck. I am not convinced that any strategic outline plan that removes 24-hour access to A and E from my constituents will be acceptable to them. I hope that the Government will take that into account when responding to the strategic outline case.
    Dr. Naysmith: I thank the hon. Gentleman for giving way, especially as I did not observe protocol and ask him beforehand, and he has very little time. When consulting his constituents, did he ask them what they felt about the potential downgrading of Southmead rather than Frenchay? I ask because all three district acute hospitals in the Bristol-south Gloucestershire area serve the population of south Gloucestershire.
    Mr. Webb: Every question I asked invited people to reply "Yes, just Southmead" or "Yes, just Frenchay", or yes to both or no to either. All the questions were framed on that basis. I must be straight with the hon. Gentleman: most of the population in my constituency are on the Frenchay side. While Thornbury residents look somewhat more to Southmead, they still look to Frenchay as well. I chose to refer to Northavon in choosing a title for the debate because I wanted to represent the interests of my constituents. They want quality provision that is accessible, and for them that means Frenchay. I am saying nothing against Southmead: my wife used to work there and my children were born there, and it is a good hospital. What I am saying is that to withdraw A and E and, indeed, perhaps more from Frenchay would be seriously detrimental to my constituents.
    The third element that I think the strategic outline case should contain is scope for improvement in community facilities. Here I think we have the potential for more agreement. We have an excellent if small community hospital in Thornbury, in my constituency. Recently, and sadly, a friend of mine died there. The care that he, and particularly his family, received at that community hospital was second to none. Relatives and friends could just pop in. The hospital was small and friendly enough to enable his favourite armchair to be brought from home. That is a quality of care that cannot be found in some huge hospitals.
    I hope that whatever emerges from the strategic outline plan will build on those strengths and will not undermine them. What that means to me is that Thornbury hospital must stay and, at the very least, continue what it is doing, even if not necessarily in exactly the same way: I do not want to give the impression that everything must be set in stone. My constituents and I accept that some hospital buildings are inadequate, that facilities are inadequate and that serious investment is needed. However, the idea that that should involve bed cuts, cutting access to A and E or any cut in community facilities is unacceptable to me.
    The biggest area where new community facilities are needed is Yate and Chipping Sodbury. There was a big response to my survey in favour of that. The idea has been discussed and kicked around, and although I do not get a clear sense of how it will look, my constituents want new community facilities there.
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    My constituents have sent a clear message. I have engaged with them and reported their findings to the House and to local health professionals. We do not say that things must not change—nobody in their right mind would say that. We want capital funding from the Government to upgrade, to keep Frenchay hospital in particular at the forefront of developments, and to see it move forward. I hope that, if the local trust can present a plan to the Department of Health for increased capacity, better access to quality accident and emergency services and better community facilities, the Government will reward it in the summer by accepting its proposals. If the trust does not present such ideas, I hope that the Department will tell it that it is not serving the local community as it should.
    9.30 pm
    The Parliamentary Under-Secretary of State for Health (Miss Melanie Johnson): I congratulate the hon. Member for Northavon (Mr. Webb) on securing the debate. I have listened to and appreciated his comments, not least because, as he remarked, I grew up in the area and know something of the local terrain. I pay tribute to all the staff in the local health economy area who, as he said, are committed to improving the local national health service.
    In north Bristol, the health economy has already benefited from additional investment, and I shall give a few examples of that. A new children's high dependency unit opened at Frenchay hospital last November. It was funded by a grant of £858,000 from the Department of Health plus £800,000 a year from the local primary care trusts. A three-year project to improve and redevelop radiology services at Southmead has recently been completed at a cost of £2.5 million, including new equipment and building works. Now more than 130,000 examinations every year can take place using state-of-the-art diagnostic equipment. It is perhaps worth mentioning that the services provide more generally for the area because they are specialist facilities. I am sure that the hon. Gentleman acknowledges that they cover not only Thornbury residents but a wider scope of people from his constituency.
    In January 2003, a new £600,000 satellite unit opened at Southmead hospital to improve the quality of life for renal dialysis patients. It provides 3,000 extra treatments a year for patients from a wide area.
    I shall deal with the local issues that the hon. Gentleman raised shortly, but first I should like to point out that we all acknowledge the pressures on the NHS, not only in his constituency but throughout the country. We want not only to increase capacity but to improve clinical standards generally. We do not want more of the same but a radical re-examination of the provision of services. We want to design services around the needs of the patients and I was interested by the hon. Gentleman's comments about, for example, the strength of the cottage hospital experience.
    It is our policy, in the framework in the NHS plan and in the "Shifting the Balance of Power" initiative to devolve more funding decisions to the front line. It is for primary care trusts, in partnership with strategic health authorities and other local stakeholders to determine the best use of their funds to meet national and local priorities for improving health, tackling health

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    inequalities and modernising services. They are in the best position to decide how to do that because of their specialist knowledge of the local economy.
    I am sure that the hon. Gentleman agrees that we all acknowledge that hospital and community services need to change if we are to continue to fulfil patients' needs and improve access. Services should not remain static for ever; they need to be responsive to local needs and changing needs. There are several different pressures on the service. However, providers of health and community services have a responsibility to live within their means. Those issues and many others need to be taken into consideration. Biggest is not always best. Indeed, we have already had an example of that. We need to recognise that patients want more, not fewer local services. We need to focus on redesigning, not relocating.
    Perhaps it is worth mentioning the quality of the building stock at both hospitals in north Bristol, which the hon. Gentleman did not touch on. Frenchay and Southmead hospitals both have serious needs in building terms that must be addressed. They both have accident and emergency departments. There is a hospital with a major A and E department in the centre of Bristol, the Bristol royal infirmary.
    The hospitals are between four and seven miles apart. Services are duplicated and fragmented across the two sites of the North Bristol NHS trust. They are cramped and rundown health centres. The current configuration makes it difficult to work effectively with primary and social care.
    The current configuration means that there are particular difficulties in complying with national standards for clinical services, in particular for emergency patients, children, cancer patients, cardiac patients and those requiring specialist care. Therefore, the status quo is not an option—it cannot remain. There is clear scope for improving performance and, as I have said, the way in which health and community services in the 21st century are to be provided is less focused on hospitals than may have been the case in the past.
    I come to the point that the hon. Gentleman made about the strategic outline case and the process. The outline case will be considered by all local NHS boards in April and the proposals will then go out to public consultation later this year. Although he talked about engagement and mentioned consultation, a very informal stage of the process has taken place in his area, in which he has been actively engaged recently. As part of that process, the local overview and scrutiny committee board will consider the matter as well. The plans will be transferred under normal processes to the strategic health authorities, which will ensure that a fair process is followed. They will not necessarily come to Ministers or to the Department. That is under the "Shifting the Balance of Power" arrangements that I mentioned earlier.
    Mr. Webb: Just for clarification, central Government presumably need to decide which strategic health authorities get the very large amounts of capital funding that we are talking about, or is it the case that every strategic health authority gets a big capital budget and will then make the decision on the local projects?
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    Clearly, the local trust was under the impression that the Department of Health would determine which five of the 11 bids went forward. Has it got that wrong?
    Miss Johnson: As I understand it—this may prove not to be as accurate as it could be—it will be for those bodies to decide under normal circumstances. If there were some contest, as it were, there could be a question of a ministerial decision but normally the decision would be made at strategic health authority level.
    The hon. Gentleman talked about his own survey and the future discussions and consultation. The local NHS in Northavon has embarked, with the local NHS in Bristol, on developing a Bristol health services plan. We need to have a range of options, and it is important to be able to engage the wider public in those discussions. Those will include developing acute services on either Southmead hospital or Frenchay hospital, with an associated development of a range of primary care and community-based services, as he mentioned. About six options are being canvassed.
    The hon. Gentleman raised some real concerns about the proposals and has obviously taken a lot of time to compile the results of his survey. That is why I am grateful for the opportunity to assure him that no decisions have yet been made about the configuration of services. Indeed, the proposals are still being discussed as part of the engagement exercise that I mentioned, and that is being undertaken locally. Any decision will be made only once formal consultation has been completed. That is expected to start later this year.
    Dr. Naysmith: The Minister will have gathered from my earlier intervention that I like to think that the aim of the changes that are taking place in Bristol and the south Gloucestershire area is to make the whole health community, as she described it, more efficient and work more effectively. That means that there will be no loss of any clinical specialties that are currently there, but that they may be moved from one site to another. I understand much of what the hon. Member for Northavon (Mr. Webb) said and agree with a lot of it, but does she agree that the important thing is that patients in south Gloucestershire and Bristol as a health community end up with a much better service, irrespective of where the changes have to take place?
    Miss Johnson: I am grateful to my hon. Friend for his comments. I can certainly confirm that there is considerable scope in existing arrangements for services to local patients to be much improved as a result of whatever changes are made to the existing configuration. The hon. Member for Northavon and my hon. Friend the Member for Bristol, North-West (Dr. Naysmith) will understand that there are various possibilities, all of which contain scope for improvement. We would not expect to see any loss of service at all from the changes.
    To address my hon. Friend's point on the health economy and the need for balance in it, it is envisaged that the time scale in which the changes are likely to take place will take us beyond existing financial issues in the area. Those will be dealt with before those changes, as a precursor to them. The changes will not be a response to any financial deficit issues in the local economy, but are about considering with excitement the possibilities for

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    better service provision for patients to ensure that they receive not just the same but better services in the future. Those services should not only remain the same in quantity, but should he improved in quality.
    When the hon. Member for Northavon conducted his questionnaire, residents may have responded to it without necessarily having the full benefit of the facts on the current services or future proposals. That is partly because the local NHS has been undertaking an extensive public engagement exercise since the end of January, and has been promoting its proposals through the local media, including papers, television and radio. About 10 public meetings have been scheduled, and five have already taken place—one of them, I believe, in the hon. Gentleman's constituency. I have heard his remarks about the invitation list at various meetings, and I am sure that the strategic health authority wants to manage the process as sensitively as possible. It will have listened to his views on the possibility of extending the invitation list on appropriate occasions to ensure that the wider picture is reflected.
    It is welcome that the hon. Gentleman has conducted an exercise, but the local NHS is also conducting a series of wide engagements, in which the local media are playing a major part. Following those exercises, the results will be collated in a public report, due to be published in June. I understand that the early results show high levels of satisfaction with the format of the public engagement meetings, notwithstanding the points that the hon. Gentleman has raised.
    As I mentioned earlier, it is our policy that primary care trusts, in partnership with other local NHS trusts and the strategic health authority, decide the priorities
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    for the NHS locally. That is where specific local knowledge and expertise lie, and it is not appropriate for Ministers to decide on that direction of travel, or on how services should be configured. We have made that clear in general, and I want to make it clear again in this particular context.
    Mr. Webb: Where is the democratic accountability if the strategic health authority decides to close my local hospital? Whom do the electors hold accountable for that decision?
    Miss Johnson: In the exercising of its powers, the strategic health authority is accountable to the Department and ultimately, therefore, to this place. I should make it clear, however, that the view that the hon. Gentleman has just expressed—that Frenchay hospital might close completely—is nothing other than a suggestion on his part at this stage.
    It is right that the local NHS should take such decisions, and it is important that those Members who have attended this debate continue to work with the local NHS to build a better future for residents in the area. Whatever the decisions that are reached locally, they will have been made after full and public consultation, and after much consideration and open debate. The strategic health authority will listen carefully, because that is one of its roles; indeed, it is important that it do so.
    I cannot comment further on this matter. In case—
    The motion having been made after Seven o'clock, and the debate having continued for half an hour, MADAM DEPUTY SPEAKER adjourned the House without Question put, pursuant to the Standing Order.
    Adjourned at fifteen minutes to Ten o'clock.

Preamble
[SIR NICHOLAS WINTERTON in the Chair]

Access to Justice (Rural Areas)
Motion made, and Question proposed, That the sitting be now adjourned.—[Derek Twigg.]
9.30 am
Gareth Thomas (Clwyd, West) (Lab): Good morning, Mr. Deputy Speaker. It is a pleasure to take part once again in a debate under your most able and courteous chairmanship. It is also a pleasure to see my hon. Friend the Minister, as well as the hon. Member for Woking (Mr. Malins), who shadows the Department for Constitutional Affairs as the Conservative spokesman on legal issues, and the hon. Member for Somerton and Frome (Mr. Heath), who is the Liberal Democrat spokesman. Other hon. Members are also present.
I hope that the debate will focus on topical and important issues. Although I declare an interest at the outset as a member of the Bar, the debate is not about the need for lawyers to have their own trade union. Of course, they are not always the most popular section of the community, and there has been a fair amount of propaganda against them—not least, I am afraid to say, from Government Front Benchers. Some of that criticism is justified, but the issue of access to justice and legal aid is not about lawyers—it is about real, vulnerable people who are in difficulties. Regardless of whether those people have divorce, employment, or mental health problems, or are involved in civil or debt disputes, they are vulnerable and need help, and lawyers are still the main suppliers of legal help and representation.
I welcome the Government's reform of legal aid, which they introduced through the Access to Justice Act 1999; I sat on the Standing Committee that debated the Bill. However, we need to review the impact of those changes, including the introduction of the contract culture, particularly in more peripheral areas, such as my rural and semi-rural constituency in north Wales.
The Select Committee on Constitutional Affairs is currently conducting an inquiry into the issue, and various relevant parties have provided substantial evidence. Furthermore, in February, the National Association of Citizens Advice Bureaux published an important and rather critical report called "Geography of Advice", of which I am sure that the Minister is aware. It revealed that 40 per cent. of citizens advice bureaux thought that they were operating in an "advice desert", and my contribution will focus on that issue. In some parts of the country it is very difficult, if not impossible, to get a legal aid solicitor. That is causing hardship, and I want the Department to consider how its policies are being implemented.
There was a need to reform the old system, under which civil legal aid was demand led. There was also a need to control the budget and to ensure a more strategic approach to the provision of legal services so that need matched what suppliers could offer.
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Furthermore, there was a need to reconsider the issue of who provided those legal services. I entirely agree with the Government that we need a mixed economy of providers, to use the jargon. In other words, it is not just lawyers who should be able to give advice. In some cases, those involved in giving benefits advice should provide it. There is scope for giving advice over the telephone. There are different ways to go about it.
Expenditure had to be controlled. A bureaucracy was needed—after all, bureaucracy is essentially just a method of ensuring that public money is spent correctly, in accordance with a set of rules. However, I question whether it is proportionate. There has been much criticism of the dead hand of bureaucracy; many solicitors are said to find the auditing and reporting requirements a huge burden.
I welcome the philosophy behind the Access to Justice Act 1999. That is my starting point, and the debate is, from my point of view, primarily about civil legal aid, although there has been concern—and I know that the hon. Member for Caernarfon (Hywel Williams) will refer to this—about magistrates court closures. I suppose that the title of the debate is wide enough to encompass them. They have caused difficulties in north Wales, although I accept the Government's case for some element of rationalisation. However, it needs to be done more flexibly and sensitively.
There has been a significant decline in the number of solicitors doing legal aid work. For example, 8,900 such solicitors practised family law—the backbone of civil legal aid—just before the implementation of the Access to Justice Act 1999, and the figure has now dropped to 3,800. That in itself is not alarming. It was to be expected. In so far as I accept that there has been an improvement in the quality of service offered by solicitors' firms, what has happened is none the less a warning signal. Perhaps the number of people leaving legal aid work has reached the stage at which it is becoming a bit of a crisis. The Government need to take notice.
I have already mentioned the NACAB "Geography of Advice" report, which refers to the figure that I have mentioned and states:
"In the economic context of cost cutting and contracting, solicitors have found cities the easiest and most profitable areas to serve because the greatest numbers of potential clients are concentrated within the smallest travelling distance. The consequence has been that the number of access points into the legal aid system has reduced."
I want the Minister to deal with that issue. Does he acknowledge that there is a problem, and that there are advice deserts?
The report goes on to say that the new contract regime appears to be ineffective at filling what are described as advice gaps, where there are shortages of competent advisers in specialist areas of law such as immigration and asylum. Therefore, over and above replying to my general point about the lack of practitioners providing civil legal aid, will the Minister tell me whether he has any worries about specialist areas of work?
The report also states that
"the trend towards clustering of services in urban centres combined with trends towards the increasing specialisation and economies of scale in legal business, has been accompanied by a decline in the number of legal practitioners bidding for CLS

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contract work. Within this broad analysis there are significant regional variations. However, the trend is clear—significant parts of the country are inadequately serviced by legal aid lawyers or other appropriate services, and this is likely to intensify."
I ask the Minister again to respond to those points. I share the concerns of the report's authors.
I conclude my references to the report by quoting from paragraph 2.39:
"There are critical problems in gaining access to legal services in rural areas with dispersed and small populations, which means that pockets of poverty are difficult to identify when planning services and poor and expensive public transport provides a significant barrier."
Rurality is difficult to assess. There are some sparsely populated areas in north Wales and other parts of the country: the west country, mid-Wales and north Yorkshire in particular. However, there are also reasonably sizeable market towns with a population of anything between 4,000 and 15,000, which are certainly not conurbations. The way in which the system operates tends to take work away not only from purely rural areas but from those market towns. A reasonably sized solicitors' practice for such a community might be anything between eight or 10 partners. That is small in the context of the bigger picture, and very small in comparison with larger practices.
The fact that such practices are small and generalist in nature, doing both legal aid and private work—indeed the legal aid work has traditionally been subsidised by the private work—means that the generalist high street practitioners in reasonably sized market towns such as Colwyn Bay and Abergele in my constituency, and I am sure that hon. Members could mention others, are being squeezed out. I would like the Minister to accept that that is an issue. I am asking for greater flexibility in the way in which the Legal Services Commission lets contracts and controls the budgets. I accept the need to control the budget.
While I am on the question of the budget, I would like the Minister to comment on the bigger picture. There are serious question marks over the extent to which the great idea of a community legal service is financially sustainable. The Minister will know that the service has operated under what is euphemistically called a standstill budget for the past three years. There has been a freeze on payment rates to legal aid solicitors. I am not weeping crocodile tears for solicitors; I am concerned about the economic effect. The freeze means that fewer solicitors are confident that they can make a sustainable business out of legal aid and they are getting out of it. We then have a social problem, as people cannot get legal aid easily.
Bearing in mind that the budget has been frozen for the past three years, can the Minister tell us whether it is likely to increase? The Minister has been on the record on the issue. If problems of a legal nature—domestic violence is a classic example, or problems with housing—are dealt with expeditiously by a competent solicitor and a remedy is sought. all sorts of difficulties can be avoided later on. That can have a benign effect on other budgets, not least that of the Department for Work and Pensions.
Lembit Öpik (): The hon. Gentleman makes an interesting point about saving money. A magistrate in my area by the name of Lynette Kretchner, who is the chair of the youth courts, is concerned that children from special schools constantly keep turning up in the youth courts. It seems that the special schools are referring those children to the youth courts for quite inappropriate matters. That is damaging to children in the long term. Does the hon. Gentleman agree that if access to justice in rural areas was effectively resourced and properly planned, we could perhaps do something about that? At the moment, we are investing in a long-term problem—irreparable damage to those young people.
Gareth Thomas: I note what the hon. Gentleman has said, and I am sure that the Minister will respond to that.
To re-emphasise the point, the community legal service is a vital part of the Government's agenda to combat social exclusion. There is a good case for the Minister to go to the Treasury and ask for quite a lot more money. That would be prudence. Surely it is part of the Government's cross-cutting approach? While we are on the subject of cross-cutting approaches and joined-up government, does the Minister accept that there is a need for greater co-operation between his Department and other Departments, not least the Department for Work and Pensions, in providing legal advice and advice on benefits, particularly in this context? Does it not follow that the DWP and other Departments should be prepared to provide subventions to his Department? I make that point because several people involved in this matter believe that the Government should take note of it, particularly if they are committed to an holistic approach—if I may use that jargon—to the provision of legal advice and representation.
The other major question to ask the Minister is whether the Government acknowledge that there is a need to cut bureaucracy. I am sure that other hon. Members are also concerned about the disproportionate amount of bureaucracy. The Minister will be aware that the legal aid civil contract has no fewer than 250 pages, and that the guidance to it has 1,000 pages. Dealing with that and the auditing requirements is eating into solicitors' time—time that could be spent more effectively dealing with the vulnerable people who come to solicitors' offices, sometimes in despair, for immediate legal advice and representation.
Is the Minister satisfied that the community legal services partnerships are working effectively? I doubt that they are in north Wales. I want the local authorities to be more supportive. The community legal service needs to provide more financial assistance to the committees. The CLS partnerships, the profession and other providers do not communicate well enough with each other. Should local authorities have a duty to cooperate with a CLS partnership, which are, after all, critical to the objective of matching need and demand to the supplier base?
I am concerned about the lack of transparency of CLS decision-making. I recently met several legal aid solicitors who practise family law in my constituency and who received a terse letter from the Legal Services

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Commission dated 25 November 2003. I will quote from the letter sent to Mr. Dylan Rhys Jones of J. R. Williams, which is based in Abergele. It says:
"Thank you for your application to be included on the bid panel.
"The Legal Services Committee for Wales identified your zone as having a higher number of case starts than average in Wales and therefore as a zone where we could consider a reduction in the number of case starts authorised in order to free up some funding towards areas of higher priority.
"You will therefore have to be assessed against specified criteria so that we can give priority to certain areas of work and to the best suppliers."
That letter offended the solicitors who received it. They deal with a large number of family cases, only to be told that the LSC is prepared to pull the plug on them because they are busy doing their job as effectively as possible. That is unacceptable. I met Linda Summers, the chief executive of the Legal Services Commission in Wales, who told me that the decision had been reversed. I will, however, quote from a letter that I recently sent her following my meeting with the solicitors in my constituency, who said that there was a pressing need for stability of funding from the LSC to enable them to provide an effective service to the community. Will the Minister comment on the need for stability of funding? In my letter, I asked the LSC in Wales:
"In relation to the L.S.C.'s strategy, how are the 'priorities' established? Are you satisfied that the local partnerships are working effectively? You will recall that the solicitors present were very sceptical and I share that scepticism."
Other points were made, but the general feeling among solicitors in the part of Wales that I represent is that there is a problem with the provision of legal aid services in rural, semi-rural and peripheral areas outside the main conurbations.
I should like the Minister to acknowledge that that is a problem and to say that the Government will deal with it and will be flexible and imaginative in their approach. We will never achieve completely unrestricted access to justice in the real world, but the Government are striving to provide that and are on the right track, although they must consider specifically what is happening in rural areas.
9.51 am
Hywel Williams: I congratulate the hon. Member for Clwyd, West (Gareth Thomas) on securing this debate on a very important subject. I also convey to him congratulations from my hon. Friend the Member for Meirionnydd Nant Conwy (Mr. Llwyd). Unfortunately, he has been detained in Committee elsewhere this morning, but he would have liked to be here to discuss this extremely important subject on a normal rainy Tuesday. If I were the hon. Member for Clwyd, West, I would be pleased to have secured the debate, but I think that its importance will demand a more prominent slot if we return to the subject in future.
There has been a major programme of closures of magistrates courts in rural north Wales during the past 10 years; for example, I think that seven courts have closed in the past 10 years in the constituency of my hon. Friend the Member for Meirionnydd Nant Conwy. His constituency is approximately 100 miles north to south and 100 miles north-east to south-west. In the late 1970s, there were seven magistrates courts in the area, at
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Penrhyndeudraeth, Blaenau Ffestiniog, Barmouth, Bala, Llanrwst, Tywyn and Dolgellau. Those are small communities, but they are significant to that large rural area, and all the courts closed. Currently, there is only one court—at Dolgellau—and local people and legal professionals believe that it has been retained only because it is occasionally used as a Crown court. Meirionnydd Nant Conwy is the third-largest constituency in terms of geography, but it has only one magistrates court. Clearly, people are not well served by that situation.
I remember well the case that was made when the last magistrates court was closed, at Blaenau Ffestiniog. My hon. Friend made representations to the Lord Chancellor's Department, although he told me at the time that he believed that that was a waste of time. Many sensible arguments were proposed by members of various benches in Meirionnydd, but the then Under-Secretary at the Lord Chancellor's Department seemed to pay no heed whatever to those arguments.
The case for closing the magistrates court at Blaenau Ffestiniog was as thin as it could be. Two years before the closure, £20,000 had been spent to upgrade the facilities. Then came the debate about closure. The best case for closure proposed by the clerk was that £12,000 would be saved directly. However, that case did not take into consideration the cost of transport and of solicitors, defendants, who were perhaps on legal aid, and magistrates having to travel many miles. In north-west Wales, we are in the unfortunate position whereby justices sometimes have to travel to my constituency and the town of Pwllheli from south Meirionnydd. That is a round trip of between 150 and 160 miles, which is a long way for justices to travel, as they are not always the youngest of people, nor in the best of health for that matter.
Lembit Öpik: Is not the irony of closing magistrates courts for accessibility reasons that those enormously long return journeys make justice far less accessible? Perhaps the Government should think about investing some of the £350 million of unpaid parking tickets and court costs in reopening some of those courts, which would at least show that they are serious about access to justice.
Hywel Williams: The hon. Gentleman makes a good point. We must ask ourselves what is economic in the delivery of justice to people in those dispersed and rural communities. I suspect that large pots of money are secreted in various parts of the system that could be more usefully deployed.
There is a serious point to be made about the delivery of justice. The justice of the peace system was devised to deliver justice locally through people who know the community well, but that is largely going by the board due to the closure programme. The hon. Gentleman will know that a similar process has being going on for several years in other parts of Powys and in rural Dyfed.
I propose the concept of justice miles. If it is unjustified—on both economic and environmental grounds—to transport green beans from Zimbabwe to a supermarket in Caernarfon, surely it is equally unjustified to transport defendants, witnesses and justices from the furthest reaches of Cwm Croesor to

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Dolgellau, or Caernarfon. That would take a day by bus, which is impractical. While we are on the subject of green beans, what about the baby sweetcorn that is transported from Colombia? I could go on, Mr. Deputy Speaker, but I think that might try your patience.
Suffice it to say, it is difficult for people taking part in cases to arrive at the courts by 10 am, or even by 2 pm. My party is not against change for change's sake, but in this case the economic argument has been deployed insensitively and indiscriminately in rural areas of north Wales and elsewhere in the UK, as I am sure that other hon. Members will attest. Were we to accept that argument, it could then be applied elsewhere: there is a nice piece of real estate at the end of the Strand—I believe that it is called the royal courts of justice—that could easily be fashioned into a nice hotel. What if the royal courts of justice were to be relocated to north Wembley? I do not say that there is anything wrong with north Wembley, but I had the unfortunate experience of travelling there recently on the Bakerloo line—albeit with only a few changes.
We do not want members of the judiciary to trek to north Wembley, however easy that is. No one is seriously suggesting that, yet it seems just as reasonable as expecting defendants, lawyers and members of the bench to travel huge distances in rural areas. That is not access to justice, but the dismantling of a perfectly good system to cut costs, and it is detrimental to everyone involved.
9.59 am
Mr. John Grogan: I, too, congratulate my hon. Friend the Member for Clwyd, West (Gareth Thomas) on initiating this debate. I will try to bring a little Yorkshire influence to the debate, to balance the Welsh influence. There have always been good relations between Yorkshire and Wales, and I am sure that that will be true this morning.
First, I want to address a point that my hon. Friend mentioned: he said that he is a little shy about promoting the cause of solicitors and their importance in rural areas. However, in many market towns such as Selby—one of the market towns that I represent—solicitors are an important part of the local economy. People take great pride in the fact that local legal advice is available.
I, too, intend to concentrate on magistrates courts. Often in Westminster Hall, I have to bring bad news from Selby, whether it be about floods or the closure of mines, but today I want to tell hon. Members about a successful campaign to save a magistrates court. I also want to draw out one or two general lessons and to ask my hon. Friend the Minister some questions.
The steady national decline of magistrates courts to which other hon. Members have referred has been reflected locally in North Yorkshire. The list of court closures during the past decade under successive Governments reads like an ode to the train stations closed by Beeching—Market Rasen, Newmarket, Christchurch, Windsor, Thirsk, Dover, Blyth and Loughborough. They are all small, market towns that took great pride in their courts. The court closure programme has gone on for 10 years, and it has had a massive impact on the delivery of local justice.
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The question of closing Selby magistrates court was first mooted in 2001—the year in which the Auld report into our criminal justice system was published. One reference to North Yorkshire was buried deep in the report. Auld referred to the notion of local justice being unreal in many rural counties, quoting North Yorkshire as an example:
"Similarly, in North Yorkshire, nine magistrates' courts serve a population of 742,000 spread over 3,000 square miles."
There have been three court closures in North Yorkshire since then, so we are now below the rump that in 2001 Auld said already made unreal any notion of local justice.
There was a massive campaign in Selby to try to save the courthouse. Most of the good citizens of Selby need never go near the court, yet local justice has an amazing resonance, and not just among solicitors. Local reporters and newspapers want justice delivered locally so that they can report it, which is sometimes a neglected aspect of the importance of local justice, and I received hundreds of letters from people to say that they could not possibly attend court in York, which would have been the alternative.
For example, I received a letter from someone in the village of Kirk Smeaton, who had recently been a witness in a case heard in Selby. They had been asked to arrive at the court in Selby at 10 o'clock. To get from Kirk Smeaton to York for that time, they would have had to take the 6.40 am bus to Pontefract, which arrives at 7.23. They would then have had to change to get to Selby at 8.10, before getting a bus to York at about half past 8, arriving at almost 10 o'clock. That person would have had to take three buses to get to York, and the proposed new courthouse would not even be in the city centre. Those practical reasons made people campaign strongly to keep the courthouse in Selby.
On 9 March, the North Yorkshire magistrates courts service issued a press release; it sounds a bit prosaic, but in Selby history it will be regarded like the Gettysburg address. It will resonate down the decades and centuries. The justices' chief executive, Paul Bradley, said that the magistrates courts committee's preferred option was to have
"two courthouses to serve the York/Selby area—a new courthouse in York and a separate courthouse in Selby."
He also said:
"In the coming months, I intend to hold discussions with officials in the Department for Constitutional Affairs to see how this can be achieved—either by the provision of a new courthouse in Selby or, probably more likely, by adapting and refurbishing the present courthouse."
I realise that we have been fortunate locally in many ways, but I want to end by making some points to my hon. Friend the Minister. Will he take a personal interest in the discussions that will be initiated by North Yorkshire to ensure that the story will have a happy ending for Selby? He is a high-flying Minister with a reputation for rethinking policy, and I detect that Ministers are starting to pause for thought and consider whether the process of efficiency and closing magistrates courts in rural areas has gone too far. On the one hand, Departments send me a leaflet a week on rural proofing and how we must consider services in terms of rural delivery, yet on the other hand, there has for years been a policy of magistrates court closures in rural areas.

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I get the impression that Ministers are allowing one or two more appeals and that there are signs of a rethink. This is an excellent opportunity for the Minister to nuance the policy and to state that it is worth making appeals because the Government recognise the importance of local magistrates courts in delivering local justice in rural areas in England and Wales.
10.5 am
Mr. Roger Williams: I apologise for being slightly late. I did not realise the severity of the affliction that had overcome my hon. Friend the Member for Montgomeryshire (Lembit Öpik), but I assure hon. Members that it is not stage fright—he has never been known to suffer from that.
I pay tribute to the hon. Member for Clwyd, West (Gareth Thomas) for securing the debate. The issue of access to justice in rural areas has affected my constituency and much of rural Wales over the past year or so, and I was privileged to secure a short debate in Westminster Hall, which was answered by the Under-Secretary of State for Constitutional Affairs, the hon. Member for Shipley (Mr. Leslie), in which I raised court closures in my constituency. I may refer to that debate later.
We all welcome the Government's commitment to making justice accessible to everyone. That lies at the heart of people's rights and of civil justice, but I fear that it is under threat in rural areas. There is no better deterrent to criminals than the certainty of detection and conviction, but many cases in rural areas are not pursued because of the difficulty of getting witnesses, and sometimes even victims—despite the assistance that they receive from Victim Support, to which I pay tribute—to attend court. Notwithstanding that support, it is often difficult for victims to attend court to see that justice is done and give evidence, because it is a stressful occasion and because of the difficulty of making the journey on public transport, if they do not have private transport.
As well as those problems, it has come to my attention lately that a number of rural solicitors firms have stopped accepting legal aid work. I spoke this week to a solicitor in my county town whose firm—the oldest established in the area—has regrettably decided against taking legal aid work despite realising the need for it. Therefore, people have less choice and less access to such support.
Yesterday morning, I was detained in my constituency by a lady who rang up and travelled 45 miles to my office because she could not get legal aid. She is the respondent in a divorce case and wanted advice on how to fill out forms. I did not feel able to give such advice, but I did what I could. She is on a low income, but has been refused legal aid because of the value of her house. Some people in rural areas who are on a low income live in relatively expensive residences.
My constituent was more concerned about the care of and contact with her children because she wants them educated at home, but her husband wants them to be educated in school. That is obviously not a run-of-the-mill situation and she desperately needed legal advice, but she was, as far as she could see, unable to get any. She asked me whether there is some system of pro bono work to help people facing such issues. I have great
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sympathy with the hon. Member for Clwyd, West on this: people in rural areas cannot get the specialised legal support that they need.
I am involved in an ongoing consultation with the Minister, and we are still fighting the closure of Ystradgynlais and Llandrindod magistrates courts. Things have become quite interesting. It was put to the local authority that unless it opposed the closure of Ystradgynlais and Llandrindod magistrates courts we could end up with no magistrates courts at all in Powys. That is recorded in the county council minutes. When the magistrates court committee presented its proposals that phrase was used. This is intolerable and the more I see of it, the more I am appalled.
Just across the border in Ceredigion, the council opposed the closure of Aberystwyth magistrates court. The Department, to its credit, overturned the decision and a new magistrates court will be built in Aberystwyth. The necessary funding has already been found. I congratulate the Department. I am fighting a rearguard action for the magistrates court system in my constituency and in Powys. I am pleased that the magistrates court in Newtown will go ahead shortly, subject to some planning problems being resolved and funding being found. Powys is the most sparsely populated local government area of England and Wales. People talk about Cumbria being sparsely populated, but Powys is three times more sparsely populated than that county, and people in Powys have to travel a huge distance to court and there is little public transport.
The debate is a wonderful opportunity to raise issues with the Minister. We all look forward to watching his career progress. Perhaps something he can do today will drive it forward.
Hywel Williams: A milestone.
Mr. Roger Williams: Yes, a milestone. We have raised two issues: legal aid, particularly in rural areas, and how we can strengthen the system while ensuring that it is readily available, and magistrates courts. I am pleased that the hon. Member for Selby (Mr. Grogan) was able to report on how a decision was overturned in his constituency. We look forward to the Government responding to our concerns about access to justice in rural areas and making similar decisions in future.
10.13 am
Mr. David Heath: I congratulate the hon. Member for Clwyd, West (Gareth Thomas) on securing the debate. It is an extraordinarily important debate. As the hon. Member for Caernarfon (Hywel Williams) said, it is a matter to which we hope to be able to return on a larger stage. The principle of local justice is fundamental to our legal system. It goes back to the great charter and the idea that people are tried by their peers and that justice is administered locally by the people and the community affected by the crime.
There is a danger that that principle will be lost for the best possible reasons, reasons of efficiency, effectiveness and so-called rationalisation, while completely ignoring the impact on local, and especially rural, communities. Rural areas often seem to be forgotten in the formation of policy, but the real effect of court closures is on communities in rural areas, who feel that the criminal

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justice system is retreating from them and that the police services do not recognise their needs because for good, operational reasons they concentrate their activities on the higher empirical levels of crime in the big cities. Court closures make people in the rural communities feel abandoned by the criminal justice system, which is a dangerous position for them to be in.
Gareth Thomas: The hon. Gentleman may want to make a stab at defining a rural area. Does he agree that lots of people live in rural communities of one sort or another? Does he accept that the issue of access to justice embraces many different types of communities in rural areas, not necessarily those in the back of beyond?
Mr. Heath: The hon. Gentleman is absolutely right. I will not attempt a definition because I do not think that there is a satisfactory one; it will vary in different parts of the country. I entirely embrace his position, that the key to the issue is the market town, which is the hub of rural areas. Of course, people do not expect every village to have its own court, but they expect every community, in the wider sense, to have one, and that is what is being lost.
There are two principal strands to this well-informed and passionate debate: first, the provision of legal services, the main bone of contention in the speech of the hon. Member for Clwyd, West, which I commend; and secondly, the closure of magistrates courts, to which the hon. Members for Caernarfon and for Selby (Mr. Grogan) and my hon. Friend the Member for Brecon and Radnorshire (Mr. Williams) drew attention.
I am not a lawyer, but I agree with the hon. Member for Clwyd, West on the provision of legal services. I am sick and tired of the easy and rather lazy caricature of all lawyers as fat-cat, city types who make a packet from legal aid. I see lawyers working at the other end of the system—not fat cats, but general practitioners of the legal service working in family practices in rural areas, and trying to provide a service to their community. They are unfortunately being caught in the backwash of an attitude that is increasingly shown by Ministers, who should know better, and peddled in the press, that the entire legal profession is simply trying to maximise its profits at the expense of others. I put it on the record that I do not believe that that is the case. It worries me that there is a contraction of those practices.
The hon. Member for Clwyd, West mentioned family law, which needs to be bound up with, and close to, rural communities if it is to be effective. It is no good if those who provide advice on family law and other specialist matters are remote from those communities, as that simply does not work. He also talked about advice deserts, which, perversely, are common in rural areas and in some of the most affluent parts of the country. The worst news is for people who do not have much money but live in an area that is considered affluent, because they will be cut off from every sort of support. They will not have the advantages that people who live in urban areas receive.
The hon. Member for Woking (Mr. Malins) may be able to expand on the fact that some parts of Surrey, which are thought of as desirable, affluent areas, are
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precisely those where the provision of advice support is at its lowest, because no one imagines that people living there may be in trouble and unable to afford legal advice.
What worries me—I do not think it has been mentioned yet—is the contraction of criminal defence work. The availability of criminal defence lawyers is a problem in large parts of the country; in an area such as mine, very few are willing to undertake criminal defence work. In Frome, a single practitioner—a partner in a local firm—does 99 per cent. of the criminal defence work in the local courts. He freely admits that he is cross-subsidised by his partners' work, because they are prepared to humour him by allowing him to continue what he thinks—as do I—is important work in providing defence services for the local community. However, any monopoly provider in any area poses problems. He often has prospective conflicts of interest, because if one young thug beats up another, he can bet his life that he has represented them both in the same courts. It is difficult—I am not sure that he accepts this—to make the same speeches before the same magistrates in support of the same individuals time after time. That is not good for the interests of justice either. He has said, worryingly, that if the local court closes, it will no longer be sustainable for him to make a 30 or 40-mile trip to a court to represent his clients, and he will not do it. That means that nobody will be providing criminal defence work in my area.
Mr. Humfrey Malins: The hon. Gentleman has made a good point about travel. He will know that under legal aid rates, the money paid to lawyers for travelling time is so poor that it utterly discourages them from travelling for more than, say, 20 minutes to anywhere.
Mr. Heath: The hon. Gentleman is right. Other professionals are not put in that position. There is a direct analogy between the provision of general legal and general medical services. Every town with a medical practice should have a legal practice providing a range of services to local people, but that is not currently the case. Sadly, it is increasingly not the case because there has been an unfortunate continuation, and in some cases acceleration, of court closure programmes across the country.
Since the Government came to power, 115 courts have been closed. That is not unique to this Government—it happened under the previous one, too—but it is a continuation of a trend that has not abated until a recent policy change. It would be welcome if the Minister could confirm that there has been a change of policy. The hon. Member for Caernarfon and my hon. Friend the Member for Brecon and Radnorshire talked about Wales, which, with 10 court closures since 1997, has been worst hit of all.
With the closure of a court, not only do the services go, but the physical entity is closed. That has huge symbolic importance: the court in a market town is often a prominent building, and is the community's guarantee that crimes committed locally are dealt with locally. Sometimes, the buildings themselves are equally important, and some closures have left fine buildings empty. The court in Keswick comes to mind: it is a listed building and has stood empty for four years. Presteigne,

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in the constituency of my hon. Friend the Member for Brecon and Radnorshire, has another fine building that now has no effective use. I do not think that sufficient attention has been paid to how those courts are made usable. I accept the argument that courts should have easy access and be safe for the users, as nobody should be forced to use buildings that are entirely unsuitable, but we should make them appropriate for use, rather than making the easy and lazy assumption that the best solution is to close a court and replace it with a concrete monstrosity on the edge of the nearest big city.
There are also practical reasons why courts need to be kept open—transport, for instance, has already been mentioned. Convenience for court users is a key factor. It is not acceptable to have to travel long distances to act as a witness, solicitor, social worker or defendant.
Mr. Roger Williams: The magistrates court committee in Powys tried to use the Disability Discrimination Act 1995 to close Llandrindod court. However, it was told firmly that the purpose of the Act was to make facilities accessible, not to close them when it is difficult to do so.
Mr. Heath: That is a clear illustration of what I have in mind. The fact that the police must travel long distances to get to courts has operational significance. There are already far too few police officers in many rural areas, because of operational reasons to which I have alluded. If the magistrates court is 30 miles away, the police are also 30 miles away attending court cases, which takes them out of area. That is not acceptable, and the same goes for the other professionals involved.
The hon. Member for Selby made an important point about reporting. If justice is to be seen to be done, reports of proceedings in the magistrates court need to be in the local newspaper. We need to be able to see that X has received a fine, a community sentence or a spell in prison for the crimes that he has committed in that community. That will not happen if the magistrates court is in a nearby big city that the local newspaper does not cover.
I want to refer to some parochial matters. My hon. Friend the Member for Brecon and Radnorshire talked about Ystradgynlais court and the hon. Member for Selby talked about Selby. I want to talk, briefly, about Frome. My constituency covers about 900 square miles but has only one magistrates court, which is under threat of closure, as is the court in the city of Wells, which is not in my constituency. The magistrates court committee firmly believes that the new unified courts system will result in the loss of both courts. The committee argues that it would therefore be better to pre-empt that by closing two courts and opening another court, which would not be convenient for the people of Frome, Wells or Shepton Mallet, as an alternative.
I cannot speak for Wells, but Frome court serves a town of about 20,000 or 22,000 and a large rural hinterland. It is the only court remaining in my constituency, which is large by English standards, if not by Welsh or Scottish standards. It is not in the interests of justice for that court to close. I hope that, with the new unified courts system, we shall take a new look not only at magistrates courts but, where appropriate, at the
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Crown court, and most importantly, family courts and the youth court system. We should start from a different basis and ask how such communities can best be served. How do we ensure that there is a network of courts in the unified court system that will help access in rural areas, maintain the presence of the criminal justice system and employ rural-proofing? We hear so much about that, but it don't mean a thing if it ain't got that swing. Often we do not see the effect of rural-proofing on the Government's policies.
I hope that I am not being unkind to either civil servants or the Minister here, but at times I think that some civil servants and Ministers simply do not understand what it is like to live in a village in the middle of Somerset and have huge difficulties in moving about, because there is no public transport system. They do not appear to understand the problems in relating to a criminal justice system that even now seems remote, even before the further depredations that we expect. I hope that he will say explicitly that the Government's policy will be to maintain a courts presence in rural areas, and that they will support those courts. I hope that we will not see further closures without replacement, and that the courts will continue to serve the communities that need to be served by our criminal justice system.
10.30 am
Mr. Humfrey Matins: I congratulate the hon. Member for Clwyd, West (Gareth Thomas) on securing the debate and on the thoughtful way in which he introduced the subject. I also thank the hon. Members for Caernarfon (Hywel Williams), for Selby (Mr. Grogan), for Brecon and Radnorshire (Mr. Williams) and for Somerton and Frome (Mr. Heath) for their contributions to this excellent debate.
I declare an interest. My background is as a solicitor, a recorder of the Crown court, and a district judge operating in magistrates courts—formerly a stipendiary magistrate. The topic is therefore close to my heart. I agree with the hon. Member for Somerton and Frome and with other hon. Members who have said that justice is better justice when it is local. The less local it is, the worse it becomes in many respects.
The hon. Member for Somerton and Frome, through a series of questions, has elicited the fact that since 1997, 115 magistrates courts in England and Wales have closed, a fact that I regret greatly. However, it is right not to make too much of a party political point of the matter, because it is a world trend, even though it has accelerated somewhat since 1997.
The hon. Member for Brecon and Radnorshire referred to his Adjournment debate in February 2004, during which the Under-Secretary of State for Constitutional Affairs, the hon. Member for Shipley (Mr. Leslie) made a statement with which we would all agree, saying
"we expect magistrates to have a strong local connection and to live or work in the area in which they serve."—[Official Report, Westminster Hall, 3 February 2004; Vol. 417, c. 235WH.]
I say hear, hear to that. However, I am not sure that it fits the current trend.
I am very disappointed that so many magistrates courts are closing. I am not remotely persuaded by the argument that some of the buildings are slightly old-

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fashioned and that a more modern building 30 miles away would bring better justice. I preferred the days when the court was local, even if the interview arrangements were not ideal, and there were local magistrates. Moreover, in those days, there was a fair chance that the clerk to the justice would be legally qualified, whereas currently few of them are. Such clerks to the justices often did a splendid job in representing the interests of the unrepresented defendant in the courts—one does not see that so often now.
If we close courts, we lose a great deal. We lose magistrates who know their own area like the back of their hand. Magistrates who know an area well are a real plus. We lose magistrates who know the prevalent crimes in their area, which is important when it comes to sentencing. Currently, when I sit as a judge, I look at local guidelines on prevalent crime, because there may be a sentencing proposal that is slightly off the norm to deal with the prevalence of a crime in a particular area. We would lose that expertise.
If we close courts, we also lose magistrates who know, for example, their pubs and licensed premises well, which is often important in relation to licensing matters and crime. We also lose magistrates who know the local police force and local advocates well, and know which advocates they can trust and rely on.
Gareth Thomas: It is interesting that the subject of the debate has moved from access to justice to access to courts, which is a different concept. The hon. Gentleman has mentioned that he is a district judge—what used to be called a stipendiary magistrate. What is his view on the trend towards the greater use of stipendiaries rather than lay magistrates? What effect is that having on the delivery of local justice by lay people?
Mr. Malins: I was going to make that point, and the hon. Gentleman is right to raise it. Having declared an interest, I should say that magistrates and justices of the peace play a vital role, and I would be unhappy if the long-term trend were towards placing district judges in remote centres to deal with crime. The role of the magistracy is very important, especially in rural areas.
To return to an earlier point, if one closes local courts, one loses the vital connection between the crime and the local newspaper. Currently, when someone commits a crime on Monday, they are in court on Wednesday, the story is in the local newspaper by Thursday, and everyone knows about it. That is an important aspect of community life.
What problems confront judges and magistrates when local courts close, and defendants and witnesses have to travel vast distances? I can tell hon. Members that the problems are immense. In truth, many defendants simply will not travel a long way to court, and, indeed, many cannot afford to do so. The same applies to witnesses, who are critical to trials, because many are reluctant or unable to travel great distances.
More often than not, I grant bail. When I grant it to defendants who live 30 miles from the court, it is my practice to tell them that I will bail them not until 10 am the following day but until 12 noon or even 2 pm. That is the only way in which I can give them a real chance of
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making it back to court. My mind boggles at the prospect of a defendant being bailed for 10 am, when the magistrates court is in a remote area 30 miles from where he or she lives. There will be no rural transport, so, for many people, the chance of getting there for 10 am is almost zero. That would not be the case for you or me, Mr. Deputy Speaker, because, to be blunt, we could afford a taxi and ensure that we got there. However, many disadvantaged people—whether defendants or witnesses—cannot do that, and a defendant would commit an offence under the Bail Act 1976 if they did not appear in court. Trials are cracked or collapse because people do not turn up, and thousands of pounds are wasted when they could have been better used elsewhere.
What does the community lose if there is no local court? It loses a lot. It probably will not have in its midst quite as many trainee solicitors as it used to. Does that matter? Well, many of those young men and women contribute to their communities in different ways. They take an active role in church life, local government and sporting clubs. They take an interest in and are committed to local matters. Between them, they would probably do more pro bono work if they were present in numbers. If courts are closed, however, there will be fewer such people in the community.
There will also be fewer local probation staff and fewer people interested in joining Victim Support. In addition, people will be much discouraged from joining the magistracy, particularly if they are told that they will have to travel 20 or 30 miles for their sittings. As the hon. Member for Clwyd, West said, the long-term trend is potentially damaging not only to local communities and those affected by the administration of justice but to the lay bench. Finally, as I mentioned in passing, another result of such changes is that fewer people will be interested in joining the clerks profession, and the role of the qualified justice's clerk is a vital aspect of our society.
So, local courts are good news for reasons of expense, justice and sheer efficiency and high standards. Courts a long way from where defendants and witnesses live are bad news.
Legal aid rates and money are an aspect of local justice, and access to justice, that has been mentioned in several speeches. I think that it was the hon. Member for Somerton and Frome who drew an analogy between health provision and legal provision in a town, and it was a good one. Every town should have lawyers who are capable of giving advice to the underprivileged. It is all very well for me to get in my motor car and travel 40 miles to London. I can do that.
However, the people who need the system are, more often than not, those who cannot jump into a smart motor car to travel 40 miles for advice. Those are the sort of people we should look after. They need advice on housing and benefits; and what about matrimonial matters, including the urgent injunctions that are quite often needed? Thirty years ago, when I was in practice, when someone under the threat of attack—usually a woman—came to the office, she could see a partner in the legal firm under the green form legal aid scheme. How good it was then, to be able to be at court in 10 minutes, to get her some form of relief. However, all that disappears in areas where people cannot find access to justice.

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Much of the change boils down to money. Legal aid rates have been held and cut in successive years. The National Association of Citizens Advice Bureaux has referred to legal aid as a postcode lottery. One in four bureaux apparently now operates in an "advice desert" and the availability of competent legal advice around the country is extraordinarily patchy. That is not a surprise—for the principal reason that legal aid rates have been cut dramatically, in real terms, in the past few years.
My father, who is 86, sent for a plumber a month ago. The plumber who turned up had travelled for an hour and was at my father's house for an hour before travelling home for another hour. My father paid £180 for that. Now, one might have thought that a solicitor's rate would be as good as a plumber's£far from it. My understanding is that a solicitor receives £12 an hour for travel and approximately £60 for the time spent with the client. In truth, there is heavier and heavier discouragement to lawyers to undertake legal aid work, and few are doing it. If fewer do it, who suffers? The poor, not the rich, suffer more than anyone else.
I have lost count of the number of times I have talked to solicitor friends who have said that one of their other major problems is the bureaucracy and form-filling that they must deal with all the time. Compliance audits and form-filling make for such a depressing life, they say, because they cannot spend enough of their time doing what they should be doing at a proper rate.
My advice to the Government is please ease up on solicitors' bureaucracy; please ensure that towns have properly paid local firms to give local advice; please make sure that everyone in the country has reasonably easy access to the courts; and please get across to the Home Secretary and other Ministers the fact that not all lawyers are bad, and that lawyer-bashing is not the answer to everything. Much of the answer is to respect the legal profession and try to send a message that it is appreciated, and, more importantly, needed in today's society.
10.44 am
The Parliamentary Under-Secretary of State for Constitutional Affairs (): I am grateful to my hon. Friend the Member for Clwyd, West (Gareth Thomas) for securing this morning's excellent debate. We have had good contributions on access to justice and to courts.
I have a little time in which to deal with all the points that have been raised, but the issue is vital throughout the country, including rural areas. I am glad that it is the subject of this morning's debate and it is also important in urban and suburban areas. I represent an urban area, but I went to school in East Anglia and I remember small towns and villages such as Wisbech, Stamford, Eastry and Peakirk. Access to justice is vital in such areas, and I am glad that we have the opportunity to discuss it.
In legal terms, access to justice is not an abstract idea. We discuss it every month or so in this place in debates on health services, education, rural bus services and transport, but it is also important in the legal context. It can mean the difference between having a roof over one's head or being evicted, and between being properly defended in court or being wrongly sent to prison. It
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means receiving quality advice in the local citizens advice bureau. Access to justice is very important to many people living on the periphery, as my hon. Friend suggested, but it is also important to people who live in rural communities.
Only three or four years ago, access to justice was a hit-and-miss affair. It was unplanned and there was no real concept of the fair allocation of scarce resources. Since the introduction of the community legal service in 2000, however, we have begun to see the change that people need in their areas. The Legal Services Commission, which replaced the old Legal Aid Board, operates throughout England and Wales, and plans carefully to ensure that the most pressing needs for legal services are met first and that local voices are heard when assessing legal problems and issues.
It is important to state for the record that this debate relates to what the public think of as legal aid. Legal aid was a fantastic invention of the Attlee Government and an important contribution to the life of this country. It stands alongside universal education and universal health provision as a cornerstone of a civilised democracy.
I will talk about modern legal aid and the community legal service, but before I do so, it is right that I should spend a little time talking about court closures, which hon. Members on both sides of the Chamber have mentioned. Hon. Members will know that magistrates courts are managed locally by magistrates courts committees, which throughout the country comprise local people, as set out in the Justices of the Peace Act 1997. Each committee is solely responsible for the efficient and effective administration of magistrates courts in its area. Hon. Members will also know that local authorities sometimes dispute those decisions, which must be taken locally. If decisions are disputed, they may end up on the Minister's desk. Only then may a decision be taken to stop a court closure.
On 3 February, we had a very good debate, which the hon. Member for Brecon and Radnorshire (Mr. Williams) secured, on court closures in mid-Wales.Hansard recorded the debate, and I will not discuss it today. However, I want to put it on record that the Government strongly support the notion of local justice. The essential feature of local justice is that magistrates live or work in the locality, but it cannot follow that each community across the country will have its own courthouse. The Government can consider those matters if a local authority refers them to us.
Hywel Williams: Will the Minister give the Government's definition of locality?
Mr. Lammy: The hon. Gentleman knows that those issues depend on local circumstances. A unified courts service, towards which he knows we are progressing, will not only enable magistrates courts committees to deal with magistrates courts and the Court Service to deal with county courts, but allow local people to look locally to courts that are fit for purpose, can accommodate modern technology and ensure access for disabled people.
I want to clarify what the Government have done, although I do not want to be partisan. I am grateful that hon. Members have outlined the context, as 21

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magistrates courts were closed in 1996 under the previous Administration, although that number diminished considerably in the last few years. In the last few months, Ministers have allowed appeals against court closures in London—Kingston, Sutton, Harrow, Barking and Dagenham—as well as in Grays, Aberystwyth, Caernarfon and Sutton Coldfield. We look at the circumstances and we are prepared to keep our courts open.
Mr. Heath: The difficulty for many of us is that a lot of magistrates courts committees formed the view that they were required, if not because of resource limitations then for some other reason, to "rationalise" their courts. Will the Minister give a clear undertaking that under the unified courts procedures, a key element underlying policy will be maintaining that service for and in the local community? If that element is present, we will start with the right basis for policy making at local level.
Mr. Lammy: Local justice must involve flexibility, which is key. Flexibility cannot mean that the Minister in Whitehall starts to tie people's hands over what happens locally. Decisions must be made locally, but if a local authority is unhappy with a decision it may come to a Minister's desk. The recent past demonstrates that we are able to stand up for local issues.
Let me move on, importantly due to the time available, to focus most of my remaining comments on legal aid. I have made two trips to Wales recently. I visited the Riverside advice centre and the headquarters of Shelter Cymru to see for myself the excellent ongoing work to address problems in Wales. I put on record the Government's thanks to the many legal aid practitioners across the country who do publicly-funded work on behalf of the taxpayer for poor people who really need that service. I know that there is a lot of debate about legal aid lawyers and I am afraid that there are areas of practice—I will not go into them today—in which we have not seen the quality that we have come to associate with legal aid lawyers. However, by and large, they do a tremendous service across the country.
The CLS budget has come a long way in a short time. Spending on legal help in Wales has increased from £9.3 million in 2001–02 to £11.4 million in 2002–03. Over the same period, CLS partnerships have spread rapidly across England and Wales, with more than 99 per cent. of the population now covered by a partnership. CLS partnerships bring together local funders and providers of legal services to help in the planning and development of local services. They do that by producing strategic plans that consider all aspects of need and provision in the area. Those plans are fully taken into account when the LSC makes its decisions on where the funding goes.
Let us be clear about what that means. We previously had advice services and legal aid lawyers throughout the country, but the service was patchy and unco-
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ordinated—people did not know where to access it—until we introduced the CLS, which has set the standard with the quality mark provision and organised strategic plans for local areas. Of course, the needs in Wales will be different from those in my inner-London constituency. Until we introduced the CLS, uncoordinated legal services were provided ad hoc by lawyers, pro bono law students and advisers, but in 2000 this Government provided that co-ordination through the CLS. In Wales in particular, the Legal Services Commission is engaged in the CLS partnerships in all 22 local authority areas.
All that is encouraging, but, better still, it is good news for those who need good quality legal services. Quality is another major advance that the Government have brought to legal services. With the introduction of the CLS came the quality mark, in which I have believed strongly since I saw it taking shape in my constituency when I was a Back Bencher. The mark has meant that the poor and socially excluded people who need legal services can bank on their quality. Just because someone was sat behind a desk in a suit, it did not mean that they knew what they were saying, so I am glad that the Government have brought the quality mark to bear.
My hon. Friend the Member for Clwyd, West spoke about gaps in provision in our local areas. The Legal Services Research Centre, which is the research arm of the LSC, recently published a report called "Causes of Action", which provides a lot of assistance in strengthening the CLS. It gives us the clearest picture yet of the legal problems that people face and of unmet need. The Government acknowledge that unmet need exists in our communities, and that we must ensure that people are getting advice at the right stage and from those who are appropriately trained.
We are running a family advice and information networks—FAINs—project with family law practitioners. It encourages lawyers to consider other local services such as social welfare, as well as the legal advice that they provide, to ensure that the vulnerable women who turn up at their practices are not directed solely down the legal path. I saw a FAINs project in Swansea, and those are the type of project that the Government want to continue with. That is why we commenced an independent review of the CLS, which is due to report in April.
The report will give us the opportunity to develop the CLS, building on its success and ensuring that we are dealing with any gaps. Comments were made on contracts, and we have also undertaken research on the development of the supply and purchasing of legal aid arrangements. We have done that because it is important for us to understand what is going on in our law firms and centres.
I have not been able to deal with all my hon. Friend's points, but I will write to him to cover them. I say to him also that where there is bureaucracy, I will seek to deal with it. I know that the LSC is ensuring that its next round of contracts is shorter, and I hope that he is pleased about that.

Access to Justice (Rural Areas)

  School Meals
  11 am
  Mr. Stephen McCabe: Health, particularly that of children, is currently a hot issue that is endlessly discussed in newspapers and magazines and on radio and television. The Government treat it seriously, and various Departments play their part: the Department for Environment, Food and Rural Affairs, the Department of Health, the Department for Education and Skills, the Food Standards Agency and dozens of other non-Government organisations across the country. I recognise the serious commitment of all those involved. A recent Food Standards Agency report linked children's diets with television advertising, and the Secretary of State for Culture, Media and Sport, my right hon. Friend the Member for Dulwich and West Norwood (Tessa Jowell) has asked the advertisers to consider their role. The Department of Health is currently examining the issue of food labelling, particularly where fat, salt and high sugar contents are involved. There can be no doubt about our common objectives.
  I was particularly stuck to read recently about Sue Seabrook, a secondary school catering manager in Gloucester, who made the startling confession that for the last two years, she has been guilty of force feeding pupils with vitamins by surreptitiously adding pureed vegetables to their school dinners. She probably deserves a medal. Despite all the activity, our children's health continues to deteriorate, and obesity appears to rise almost in direct relation to the number of Government warnings about health and nutrition. In far too many areas, school meals have become virtually nutrition-free. The food value on the plate is about 35p, despite an average charge of £1.60. All too often the meal of the day is reheated pizza or burger and chips. Some staff and governors have argued that they do not pursue healthy eating in schools because feel no incentive to do so.
  Let us consider what is happening. One in seven 15-year-olds and one in 12 16-year-olds are now so overweight that their health is already under threat. The long-term implications of lost school days, extra costs to the health service, and eventual loss of earning potential are catastrophic. We should be concerned not only with individual health problems, but with the growing problem of unacceptable behaviour in our schools. Studies in Spain have found that children with behavioural difficulties, such as attention deficit hyperactivity disorder, have low levels of vitamin B—folic acid—which is normally found in green vegetables and breakfast cereals. Many experts are now beginning to link the growth in ADHD with child nutrition.
  Lord Winston wrote recently about the effect of good nutrition on behaviour, citing research from the USA and Oxford university. In one example, children were given nutritional supplements, which appeared to lead to a reduction in cognitive problems, behavioural problems and anxiety. Poor behaviour does not affect only the child who is behaving badly; it has a knock-on effect on every other child in the class. If the youngster is then excluded, that leads to further personal difficulties and adds to the overall cost of education without any discernable gain. If the youngster is then
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  excluded, that leads to further personal difficulties and adds to the overall cost of education without any discernable gain.
  I am conscious that poor nutrition is not recognised as a contributory factor to behavioural problems in our schools. I read in a recent DFES circular that the Department recognises that attendance and behaviour are fundamental and can make or break our school system. The circular went on to acknowledge that bad behaviour had a range of explanations and sources and that there was not a single quick fix but that there should be more tools in the box for staff and teachers to use.
  It seems obvious that we need to try to do more to tackle such problems. If a youngster has a poor diet and is consuming products stuffed with highly refined sugar, it cannot be a great surprise that their attention span is poor and that their behaviour is characterised by a sudden energy rush followed by lethargy, lack of concentration and inattentiveness. There are already links between poverty, obesity and child behaviour. We provide free school meals for a great many children in this country. Would it not make sense to ensure the nutritional value of those meals?
  Finland is often cited in debates such as this as a country that has sorted out school meals and exercise programmes for its youngsters. In so doing, it has tackled a great many health and behaviour problems. Someone recently suggested to me that the Finns are a biddable nation who accept expert advice and support Government measures put in place for their own good. I understand that in some Finnish villages it is common to compete to see which village can reduce overall cholesterol levels the fastest, and that schools regularly weigh pupils and advise parents if there is a problem with the youngster's weight.
  Try as I might, I cannot see that happening here. We seem to be a population who revel in ignoring expert advice and resent being told how to behave. Choice is obviously important in our society, but offering a youngster a choice between chips and doughnuts and a tuna salad strikes me as a bit tricky. I have thought for some time that we should maybe persuade the big chain outlets to give the toys away with the apple and the salad rather than with the chips and chicken nuggets. I have tried to persuade my own children that they should think about that, but they are not desperately keen at the moment.
  About 20 programmes are spread across the various Departments, all tackling issues of diet or nutrition aimed at children. In addition, we have health action zones, Sure Start, healthy living centres and others. To cite just one example, the New Opportunities Fund commitment of £42 million pounds for the national fruit scheme provides about 800,000 children with one piece of fresh fruit a day. I am told that that same money could provide about 26 million nutritious school meals.
  Funding in this area across Departments—excluding local and regional programmes—is worth about £173 million. I wonder whether the time has come to have a serious debate on our children's health and to consider what proactive measures we could take. I would recommend a national audit of all the current funding. Personally, I think that we should explore the notion of free, nutritious school meals for all primary children. A

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  poll on Channel 4's "Richard and Judy" programme yesterday showed that at least 70 per cent. of their viewers supported that idea.
  At the very least we should ensure that the 2 million primary school children whose parents pay for school dinners or who already receive them free are guaranteed one healthy nutritious meal a day. I am not calling for blue skies thinking or excessive radicalism; rather, I am calling for a rational and sensible debate. We must recognise the huge long-term cost if we do not get to grips with such problems. School meals could be a vital tool in transforming our children's health and behaviour.
  11.10 am
  The Parliamentary Under-Secretary of State for Education and Skills (): I congratulate my hon. Friend the Member for Birmingham, Hall Green (Mr. McCabe) on securing this debate, which, despite the absence of any other Member from any other party, is of great significance for all our constituents and our country. I welcome his call for a rational and sensible debate and I concur that it is vital that we have one. My hon. Friend referred at the beginning of his speech to the Government's clear commitment to promoting healthy eating and encouraging pupils to be physically active. An important part of fulfilling that commitment is a greater focus on physical education and sport in our schools.
  It is essential that we practise what we preach about joined-up approaches to government at all levels. My hon. Friend referred to the different Departments and institutions that have an interest in making that objective a success, such as the Department for Education and Skills, the Department of Health, the Department for Environment, Food and Rural Affairs, the Department for Culture, Media and Sport, the Food Standards Agency and external organisations. My hon. Friend's challenge, which is reasonable, is for each Department to have a coherent approach. He cited the example of advice from the Department for Education and Skills about attendance and the impact on children's behaviour of the diet and food options available in schools. I am sure that, like me, my hon. Friend has visited schools where teachers and governors have made that case powerfully, as have the children and young people themselves, in their meetings.
  We spend a lot of money on children's health and it is vital that the money is used to the greatest effect. My hon. Friend talked about an audit of where the money is spent—I shall return to that at the end of my remarks. He described the national school fruit scheme, which is a £42 million scheme that is now funded through the New Opportunities Fund, but which will in future be funded by the Department of Health. The scheme followed the manifesto commitment, on which my hon. Friend and I were both elected in 2001, to provide a free piece of fruit each day to children between the ages of four and six. More than 1 million children now receive their fruit. The programme is under review and I understand that carrots are to be designated as a fruit, because the feedback that we have received suggests that they would be particularly popular, as well as nutritious.
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  From my visits as a Minister and as a constituency MP, I know that the scheme is popular. I remember knocking on a door in my constituency and meeting an eight-year-old girl who said that she was upset that the scheme applied to infant schools but not to her junior school. Her five-year old brother then appeared and said that he would be quite happy if the scheme did not apply to his school, because he was not keen on the fruit that he was getting. However, the feedback has been overwhelmingly positive. Some 99 per cent. of staff at schools that have been part of the scheme welcome and support it, and 97 per cent. of those schools say that it supports teaching and learning. Almost every school involved is in favour of continuing the scheme.
  In learning lessons from that scheme, we need to consider the implications for our broader work. In my hon. Friend's closing remarks he talked about the possibility of free school meals for all primary age children. Kingston upon Hull city council was recently granted permission for precisely such a scheme. Free school meals will be introduced for primary age children in schools there. It will be interesting to consider the impact of that proposal and the take-up of the meals on the children's education, their health, and their behaviour. I shall be attending an event in Hull next week at which such proposals will be considered. Hon. Members will want to keep a close eye on how such schemes develop and to consider their implications for policy throughout the country.
  It is critical that school meals have high nutritional standards. My hon. Friend rightly focused on the dilemma of choice and whether it was possible to provide a choice, and still to bring about a healthy outcome. I accept that that can be a tricky matter, but such decisions are best taken locally. I especially welcome what Hull has done, because it decided locally to introduce the free school meals scheme. Although there is clear guidance from the Government, the situation varies from school to school; we must ensure that the basic standard is higher than it is at present in some schools.
  I am impressed by the schools that have successfully engaged with their pupils about the options that are available, with the result that they have healthier menus, contrary to what we might think about what pupils say they prefer. Recently, I visited Barking Abbey, a specialist sports college in the London borough of Barking and Dagenham, which decided to change its school meal contract and to source all its meals from a local organic farm, at no extra cost. That is most encouraging, as there will be a higher take-up by the pupils, who will have healthier options.
  The Department for Education and Skills and the Food Standards Agency are undertaking a joint exercise involving about 80 secondary schools in England to consider the extent to which schools adhere to the standards. It is important to see whether schools are following the recommendations issued by the Department in "Healthy School Lunches—Guidance for Caterers on Implementing the Nutritional Standards". The study will also consider broader issues such as the dining room layout and space, lunchtime activities, vending machines—that is a big issue that has been subject to public debate—seasonal produce, and the nature of catering and contracts.

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  My hon. Friend asked us to look at the example from Finland in the context of strategies for primary schools, and several primary school heads have made the same suggestion. Selflessly, I have agreed to visit Finland and I undertake to look at school meals as well as primary school policy. I was very impressed by the quality of the food provided for primary-age children at a school that I visited in Madrid a couple of months ago. My hon. Friend cited evidence from Spain in his speech. We can learn from positive examples elsewhere in the world, as well as in this country.
  My hon. Friend said that he was proposing not blue-sky thinking or extreme radicalism but simply getting the balance right. It has been suggested that some foods and vending machines should be banned, and there has been a broad public debate about such proposals. We are cautious about the matter, as such decisions are better taken by the head teacher and governors of the schools themselves. It has been suggested that vending machines could provide water and healthier food such as fruit, and we have a role in encouraging the take-up of those options.
  I should like to say something about the broader role that education and schools can play in encouraging healthy living and healthy eating. Clearly, the curriculum itself has a part to play. While food and nutrition is not a discrete subject, there are many opportunities across the curriculum to encourage healthy living and an active lifestyle, for example through personal, social and health education in science and in food technology. We are constantly looking at ways in which we can ensure that these areas of the curriculum support the important work that is going on in that respect.
  An area for which I have direct responsibility is personal, social and health education and citizenship education in our schools. An important part of that is encouraging healthy lifestyles and ensuring that healthy eating is embedded in the ethos of our schools. Five years ago, we launched the national healthy schools standard. I am impressed with the numbers of schools that have achieved that standard and the real enthusiasm that there is for it. I should like all our schools to sign up to that and to obtain a kite mark for being a healthy school both in terms of the food that they provide at lunchtime and, more broadly, their curriculum and wider work.
  One subject on the school curriculum is the food and nutrition strand within design and technology. It is not compulsory, but I am pleased to report that it is growing in popularity, particularly among boys. Around 100,000 14 to 16-year-olds take GCSE food technology and we are investing an additional £500,000 in professional development for this important part of the school curriculum. We are also encouraging primary schools to consider this.
  Finally, we have the food in schools programme, which is a joint programme between our Department and the Department of Health. The aim is to bring
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  together the different initiatives, some of which my hon. Friend mentioned. We have been working with the British Nutrition Foundation and the Design and Technology Association to draw up guidance on establishing a whole school food policy that links together all the different aspects I have described, so that the messages that are available throughout the school are consistent.
  A number of different projects have been set up including healthier breakfast clubs. Breakfast clubs can contribute to all of the outcomes that my hon. Friend rightly emphasised in respect of lunches. Healthier breakfast clubs can have the same impact on behaviour. Tuck shops and what is available there and through vending machines is another element. The availability of water also makes a difference to the health and behaviour of children. Other projects involve the dining room environment, cookery clubs and growing clubs for the outside areas. We are seeking to provide best practice and to learn from the best practice that is available in schools and communities across the country.
  Last year my right hon. Friend the Secretary of State made a speech at the Institute of Public Health in which he announced that the Department for Education and Skills and the Department of Health would work together on a healthy living action plan. That plan is of critical importance. It enables us to learn from schools that are implementing successful whole school food policies and to look at what works and what does not. It gives us the opportunity, to which my hon. Friend alluded, to engage those who may be apathetic, uncertain or even resistant to these changes and to examine what motivates teachers, heads and governors in this respect.
  The potential benefits to be gained from a healthy living action plan that brings together all the different resources in government, in schools, local communities and the wider world are well worth striving for. It will draw together the key areas of work from the different Departments to create a healthy living blueprint for improving pupils' diet and nutritional knowledge. That important work is under way, and my right hon. Friend the Secretary of State has made it clear that it is a vital part of our work in the Department for Education and Skills. This is an important debate on a subject that is close to the hearts of all our constituents and hon. Members on both sides of the House. For that reason, I thank my hon. Friend the Member for Birmingham, Hall Green for securing the debate, which will make an important contribution to the discussion as it progresses. I hope that we can engage hon. Members on both sides of the House and the wider public, so that we get things right and establish the very best practice with regard to healthy living and healthy meals in our schools and the broader education community.
  11.25 am
  Sitting suspended until Two o'clock.

Primary School Redundancies
2 pm
Mr. Graham Brady: I am grateful for the opportunity to raise this important matter today. I was prompted to seek this debate by the particular plight of one local school, Woodheys primary school, in Sale in my constituency. The problems to which I want to draw attention affect many of my local schools and many more around the country. Laura Daniels, the head of Woodheys, wrote this to the Minister for School Standards:
"At Woodheys we decided"—
she was referring to last year—
"to set a realistic budget. Some heads 'balanced' their budgets by allocating negligible amounts to supply 'cover' or 'training' and have had to deny staff their entitlement to professional development. We did not. Also we refused to lose support staff at that late stage (it was July before we were given final information on our under or over spends from the previous year), and decided not to use Devolved Capital for buildings as we felt that although we had been given 'permission' by the government, this was not an avenue we supported. Also perhaps, naively, I believed that the government would rectify its mistake in 04–05. We were horrified to find that this has not happened. Against our principles and under pressure, as we only had until November 30th to change our decision, we have now decided to use Devolved Capital to 'clear' our deficit. Unfortunately, with no real increase in funding, we are back to 'square one' for September 2004. I have spent hours and hours agonising over an impossible task— I am supposed to give staff more support time, release and a better work/life balance (as promised by the government) and through no fault of my own or my governors, we will have to lose all support staff, many trained in-house, in September 04."
The Department for Education and Skills replied to Laura Daniels on 16 February, seeking to transfer blame to Trafford borough council. Trafford is a Labour-controlled authority, which has for two successive years been described as "weak" by the Audit Commission, so I am not altogether averse to some blame attaching to the local authority. The Department wrote:
"The Regulations governing LEAs' formulae, as I have said, still give LEAs a considerable measure of freedom to determine the detail of their formulae, so if your concern lies with the operation of Trafford's school funding formula, then you will need to follow-up matters at the local level."
This Government have taken massive powers to control the funds that local education authorities pass on to schools and the criteria by which funds are distributed between schools. Surely Ministers must therefore take some responsibility for the depressing picture of job cuts and service reduction that is beginning to emerge. However, instead of taking responsibility, they are showing complacency and giving excuses. Labour's 2001 manifesto promised explicitly that there would be more classroom assistants and claimed that primary schools' problems had already been tackled. It said:
"We plan a radical improvement in secondary schools",
then, in bold print,
"building on our success in primary schools."
All the problems in the primary school sector had apparently been tackled in the first Parliament of the Labour Government, so it was time to move on to secondary schools.
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The Chancellor, in his Budget statement last week, gave a similar impression that everything in the educational garden is rosy. He said:
"Having, in the last spending round, tackled under-investment in schools and in teaching staff, the primary focus of this spending round must be on excellence and improving standards for all."—[Official Report, 17 March 2004; Vol. 419, c. 334.]
The picture that I have gained from my local schools is not one in which under-investment in schools and teaching staff has been tackled—far from it. Schools and parents will view the Chancellor's remarks in the light of their experience of last year's funding crisis. They saw, as we all did, that overall expenditure increased, but they also saw, owing to increased taxes, and especially employers' national insurance contributions, increased pension charges, the removal of much of the standards fund money, and changes in pay scales, that schools had less money to spend at the front line.
Last year, the National Union of Teachers commissioned Professor Alan Smithers and Pamela Robinson to research the effects of the crisis. Last October, they published their report, "The Reality of School Staffing", which showed that more than half of primary schools and nearly two thirds of secondary schools received less money than they had in the previous year, and that nearly a quarter of primary schools and a third of secondary schools had cut staffing levels. Smithers and Robinson found that schools throughout the country had lost 8,800 teaching posts, 5,500 of which were in primary schools, and 12,300 non-teaching staff.
Last year's crisis would have led to even bigger cuts had not Ministers belatedly urged the use of capital funds to stave off redundancies. Even then, schools were left with no reserves and no funding for necessary capital projects. Many schools were forced to set deficit budgets for the current year, and schools that face budget pressures this year that are the same as or worse than last year's have no reserves on which to call.
I shall illustrate the point with a letter that I received from St. Mary's Church of England primary school in my constituency. The head wrote:
"Last year, because of the change to the distribution of class size funding I had to lose 0.5 of a teacher. I was, because of careful budgeting the year before, able to fund 0.4 from my under spend. This year I am in a similar situation with no underspend."
Such schools face the loss of teaching staff.
The Minister will say that, in some areas, jobs will go in schools because of falling rolls. A recent survey in The Times Educational Supplement suggests that hundreds of teaching jobs will be lost this year. Primary schools are expected to bear the brunt of the losses. Professor Smithers has estimated that as many as 50,000 teaching jobs could be lost by 2010. However, we now have what Ministers have called an historic agreement on teacher work load. Even if rolls are falling, staff numbers need not decline if the Government intend to keep their promise to reduce class sizes and teacher work load and to increase the numbers of classroom assistants. Instead, we are looking at a picture of further redundancies as well as vacant posts being left unfilled.
For the teacher work load agreement to work, schools will need more staff, not fewer, but the Minister for School Standards apparently thinks that everything is fine. Asked in The Guardian on 13 January about how the plans were taking shape, he responded:

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"How do I think it's going? Swimmingly well, swimmingly well."
The reality for schools, however, is often different, as the head of a Hale primary school told me:
"Finally I'd just like to add that as a relatively new Headteacher who has always aspired to this role I feel deeply let down by the workforce reform and the budget issues I am faced with on a day to day basis."
When the Prime Minister, no less, was in Manchester on 13 March, he advanced a new explanation for Labour's failures to deliver in our public services. He said that everything was wonderful—it is just that people think it is terrible. He said:
"There is much scratching of the head in political circles over this apparent paradox: people who feel personally optimistic in Britain; but collectively pessimistic. They say their own health care in the NHS is good; but the NHS in general is bad. Their schools are good; but education is bad."
One of the most important functions of the House is to keep Ministers, and perhaps especially the Prime Minister, in touch with reality. I shall do that by giving a snapshot of the views of primary school head teachers in my constituency.
I have already described the frustration felt by Laura Daniels, the head teacher at Woodheys. I shall share with hon. Members further comments that I received from a variety of primary schools in my area. The head teacher of an Altrincham school wrote to me on 12 March. He said:
"Confronted with advice from the DfES on increasing the number of classroom assistants and their profile across the school, I feel saddened, disappointed and disillusioned, whilst receiving funding that could not possibly meet the challenges set out by the DfES and current legislation.
Yesterday the school governors cut the hours by 40 per cent. of all classroom assistants and handed a redundancy notice to another. The working hours of one teacher were halved."
At a time when Ministers say that the work load of teachers should be reduced and staff numbers should be rising, staff numbers are actually falling, which will mean that work load will either stay at its current level or, in some schools, get worse.
The head teacher of All Saints Catholic primary school in Sale wrote to me, saying:
"Where vacancies have occurred, the Governors have taken clear decisions not to employ someone too expensive! Fortunately we have made good appointments, but we have actively discriminated against the elderly."
The funding pressures force schools to take staffing decisions that they regard as less than ideal. The funding crisis last year, and continuing pressures this year, mean that schools, instead of recruiting the teachers they think will be the best people to join their staff, will skew appointments towards the recruitment of less experienced, cheaper members of staff. At the other end of the scale, there are schools that already have long-serving members of staff, perhaps because they are the best schools and have the best working environments for teachers. Such schools, which have been successful in retaining their work force over a long period, will have a disproportionate number of older, more experienced teachers, and will face ever greater problems because the proportion of their school budget taken up by staff costs will be greater. The issue affects different schools in different ways, but in all those different scenarios it
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distorts the pattern of recruitment and creates problems, even in schools that are successful in retaining staff, which Ministers say is one of their principal priorities.
Another primary school head teacher in Sale wrote to me to say that the school faced a number of difficult issues this year, and that to resolve its budget difficulties it had been decided to
"reduce teacher staffing by one full-time teacher from 31/8/04."
He said that that
"does not involve redundancy as the teacher concerned is on a temporary contract".
Such job losses may not feature on the official returns of numbers of redundancies, because it is sometimes a matter of staff not being replaced, vacancies not being filled or contracts not being renewed, rather than of existing staff being made formally redundant.
The head teacher says that the school will also reduce its
"Teaching Assistant support by the equivalent of one full-time post from 31/8/04."
and its
"Midday Supervision Staffing by at least two staff members; this will involve redundancy procedures."
He continues that the school will also
"reduce budget allocations to Curriculum Resources and Buildings Maintenance by 30 per cent. and 20 per cent. respectively from the 2003/4 levels."
The pressures that are being applied to the numbers and type of staff recruited and retained are being felt throughout the system, and they are affecting other areas such as service provision, curriculum resources, library materials and buildings maintenance, because schools are moving heaven and earth to try to ensure that they do not have to make staff redundant.
The head teacher of a local Roman Catholic school wrote:
"It is the Governors' decision not to immediately pursue a policy of redundancy, however it is clear that we cannot continue to maintain the current quality of educational provision…for another year given the current level of funding. We are clearly at breaking point with no other cuts or strategies to adopt."
Those schools have already weathered a crisis in the past 12 months, the like of which many in the education world had never seen. They have been through an incredibly difficult period, believing at every stage the Government's promises that things would be better this year, that new resources would be in place, and that there would be a guaranteed funding increase to deliver them from their difficulties. However, there is nothing to help schools that plunged into deficit budgets last year and face continuing pressures this year.
The head teacher of another Sale school wrote to me:
"Although I will not have to make redundancies this year, I may not be replacing one teaching assistant who is leaving in September and will be using all of our reserves to make ends meet."
That school is perhaps fortunate, because it still had some reserves after the difficulties of last year. A vast number of schools that had run their finances prudently and maintained some reserves to help them in difficult times were forced to spend all that money to stave off redundancies last year, and they now have nothing left to cover current and future difficulties.

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The head teacher of another local school, this time in Timperley, wrote:
"Trafford have stated that the"
school's
"budget has been well managed. Savings in the Special Purposes Fund resulted in £73,000. Governors intended that this fund be used to supplement the budget during the years of falling pupil numbers. £33,000 was used to balance the budget in 03/04. The remaining £40,000 will be used in 04/05, but will not achieve a balanced budget."
Again, we see the problems that existed last year, and that the Minister assured everyone would be resolved adequately this year, continuing into the future.
The head teacher continued
"Even without falling rolls…we would be unable to maintain current staffing levels without additional funding."
Current staffing levels cannot be maintained, let alone the increases in the support staff and classroom assistants that the Government promised and that Ministers know are essential if their promises to tackle work load difficulties and meet the work load agreement are to be fulfilled.
The head teacher continued:
"From September 2004 we will have large, vertically grouped classes in most age groups, with many accompanying issues for staff and parents."
Again, we can see the ramifications for the quality and nature of education provision: not only the loss of valued staff but further difficulties as schools create different strategies to deal with the problems that arise.
The general secretary of the National Association of Head Teachers, David Hart, said:
"In some areas April's budgets will be like applying a sticking plaster to a gaping wound."
The Chancellor has promised a direct payment to each school in 2005–06, but that will not do anything to help this year. Even if the sticking plaster is big enough for the following year, it will have done nothing to prevent redundancies and job cuts this September.
We must ask why, faced with last year's devastating problems and continuing pressures this year, the Chancellor did not promise support this year in his Budget statement but held it out as a prospect for future additional help. Heads around the country are becoming somewhat sceptical about promises of future funding, because all too often, even when the overall expenditure is increased, the costs that heads have to bear—staff costs, additional tax costs or extra bureaucratic costs—increase by more than the additional funding.
Ministers must accept that thousands of schools across the country have dire problems. The Prime Minister must understand that the paradox puzzling parents is that they pay more tax and the Government are spending more money, but the outcome in schools is teachers facing the sack. Schools do not want to hear from the Minister that everything is perfect, because they know that it is not; they want him to understand that there is a problem. They want to hear, as do I on behalf of schools in my constituency that have written to me, practical proposals to stop the loss of good, experienced teachers and classroom assistants in September.
2.22 pm
Lembit Öpik: I was considering participating in the debate this morning, but I have a confession for this Chamber and the country: I am ill. However, I intend to fight the illness and continue as leader of the Welsh Liberal Democrats for now. Sadly, the media have not shown the slightest interest in the condition of my health, but my lines are open and I am waiting for "Newsnight" to call. Nevertheless, I put on record my gratitude for my leader, my right hon. Friend the Member for Ross, Skye and Inverness, West (Mr. Kennedy), for passing the torch of illness to a new generation of politicians, and I shall do my best to gain political mileage from it.
Redundancies caused by primary school closures are an issue in my constituency. I realise that the Minister is not directly responsible for matters in Wales and can therefore relax, but I will ask him a general strategic question on which I hope he can give his perspective. I shall describe the specific issue in my constituency that brings me to the debate. Over the past few years, Powys county council, which oversees education in Montgomeryshire, has considered various school closures, and some schools have been closed. Most recently, five schools were considered: Llangurig, Llandinam, Llanrhaeadr, Llansilin and Llangedwyn. One could think that all schools beginning with a double `1' were chosen, but I suspect that there was more strategy to it. The bottom line is that each individual committee felt it wrong to close those schools and cause redundancies in the teaching community, for various reasons.
A fractious series of debates and arguments culminated in a debate in Powys county council in which, breathtakingly, the then chief executive sought to criticise me in front of all the councillors for seeking to lobby them in support of the schools. I respectfully point out that that is my job. Nevertheless, that shows how high emotions were. I am glad to say that all those schools have had a reprieve, except for Llangedwyn, which remains under review.
That brings me to my analysis of the redundancy difficulties caused in my constituency, which are relevant to the whole situation in England, as outlined by the hon. Member for Altrincham and Sale, West (Mr. Brady) in his excellent introductory speech. The redundancies are bad from an educational perspective, especially in primary schools in rural areas, because the schools are the heart of small communities and in some senses embody the soul of the community. If we close down the school and fire the teachers, we also close down much of the community's social focus.
Those redundancies also have a knock-on effect on the economy. The decelerator effect of taking a primary school out of a rural community can often lead to a reduction in population and a disincentive for young families to move to the area. The result is economic pressure on the shops and trading outlets in those villages, which oftentimes pay the price as well. That is a new, additional observation that I seek to raise with the Minister: redundancies caused not directly by cuts in the education budget but indirectly, by population reduction and deterioration in the economic viability of a community.

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I could at this stage make known my criticisms of the Government for attacking councils that have introduced large council tax increases to mitigate what they regard as extremely difficult financial circumstances brought about by Government policy. However, I shall not do that, because that is not the core issue for this debate. The hon. Member for Altrincham and Sale, West sought guidance from the Minister on why money has increased in real terms but genuine cuts have been made. The explanation is the ring-fencing of much of the money. It is laudable that teachers have received a better financial settlement in the majority of cases, in order to right the continuous underfunding and reduction of salaries in the teaching community under the Conservatives, but using up the increased pot of money entirely in teachers' pay settlements will not help with the infrastructure or maintain the number of teachers.
My considerations about what could be done next apply to England as well as Wales, and I shall be interested to hear what the Minister has to say about them. We must obviously consider the educational impact of redundancies caused by downsizing or closing schools. Taking a primary school out of a community clearly has a knock-on effect. I personally believe that the most effective way to teach citizenship is in small local schools, with community support, where real relationship building can take place and inculcate values by osmosis. Both cuts in the teaching work force and school closures, which lead to redundancies, should be considered in the light of the economic knock-on effects that I have described.
There is an interesting implication of my analysis. If I am correct, it should sometimes be appropriate for money that is earmarked for economic activities to be used to support a primary school in a rural area, because the economic cost of not doing so far exceeds the saving to a local authority.
Mr. Brady: The hon. Gentleman might want to reflect on the fact that the Government accept his argument when it comes to regenerating urban areas, where they are happy for additional money to be spent, but apparently reject it for rural areas.
Lembit Öpik: The hon. Gentleman makes an insightful point. Some of us have felt for some time that, despite considerable talk of rural-proofing, there are double standards in the treatment of inner-city areas and rural areas such as Montgomeryshire. No doubt he is familiar with rural circumstances himself.
I seek confirmation that the Minister takes the economic impact of school closures seriously and that, strategically at least, he would recognise that there is an economic case to be considered in decisions to downsize teaching work forces or proceed with school closures that might lead to large-scale redundancies. For my part, I shall tight, fight and fight again to save the schools in Montgomeryshire, which I love. I hope that the Government's support for the strategic considerations that I have described will be a useful indicator for the decision makers in Welsh education policy, and also a reassurance to rural areas in England.
Mr. Deputy Speaker: May I express the hope from the Chair that the hon. Gentleman recovers from whatever is ailing him? He
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tipped me off this morning that he was suffering from a disease that is new to me, called Kennedyitis. I hope that the epidemic sweeping his party is not too debilitating for him or any of his colleagues.
Lembit Öpik: On a point of order, Mr. Deputy Speaker.
Mr. Deputy Speaker: It is sure to be bogus, but I will accept it.
Lembit Öpik: If one of the consequences of the affliction is a conversion to Liberal Democracy, you can expect that many more people in the House will contract it.
Mr. Deputy Speaker: I am sure that hon. Members have noted what the hon. Gentleman says.
2.31 pm
Mrs. Annette L. Brooke: I congratulate the hon. Member for Altrincham and Sale, West (Mr. Brady) on securing this debate. It is undoubtedly an important issue and has a big impact on our communities, demoralising teaching staff and causing them extra stress when they are already in stressful situations. In my constituency, certainly, parents are now desperately worried about the reorganisation that is being discussed. The issue is incredibly important, and the focus on primary schools is another vital aspect. The population bubble is moving into secondary schools, taking more funds and making it even harder to sustain a good teaching ratio in our primary schools.
I acknowledge at the outset the difference that the Government have made to our schools—it would be remiss not to. Up to two years ago, the teachers in my constituency were beginning to see a real difference. There was a sea change. I shall refer a little to my own constituency, although I know that this is a winding-up speech, simply because one of the two local education authorities there, Poole LEA, is the lowest-funded primary school authority, so some points are relevant.
Sadly, we have to take last year's settlement as our starting point. That is clearly where things started to go badly wrong. At long last, it has been accepted as a crisis that saw hundreds of teachers made redundant across the country and many temporary contracts for both teachers and learning support assistants not renewed. One survey showed that one in five primary schools increased their class sizes as a result, which is the contrary direction to that in which we wish to go. We saw the introduction of a new funding formula, plus the significant increase in costs falling on schools. It all happened at the same time. The increased national insurance contributions and teachers' pay and pension increases were all incredibly predictable, but it would appear that civil servants failed to research accurately the impact of such changes.
I seem to recall that at first Ministers were in denial, trying to blame LEAs for not passporting funds to schools. Undoubtedly, some misdeeds were flushed out, but at the end of the day not enough money was provided. That created extreme problems for many authorities, and especially those with low funding such as those in my constituency.

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The debate over who was at fault was blame culture at its worst. The crisis in funding was a setback in the considerable progress made by this Government, resulting in demoralisation for many teachers and head teachers while childish squabbling went on nationally. As we have heard from other parts of the country, and I am sure that it is pretty widespread, many schools minimised the impact of last year's poor settlement by using up balances or dipping into their capital reserves.
The improved settlement this year for many LEAs was not sufficient to make up that deficit. In many authorities, the problems are compounded by falling rolls. In Poole, the key group of workers facing redundancy were learning support assistants, many more of whom went than teachers last year. In that small education authority, 46 lost their jobs, partly as a result of falling rolls and partly because of the unfair education settlement for 2003–04, which favoured some parts of the country above others.
The survey to which the hon. Member for Altrincham and Sale, West referred was commissioned by the National Union of Teachers, and the Department for Education and Skills questioned some of its findings. One of the survey's conclusions was that head teachers and senior staff in primary schools would have to do more teaching, which is substantiated by schools in my constituency.
I quote a first-school head, who has met the Minister for School Standards several times, which I welcome, as that head teacher can explain what it is like being head of a small first school in the lowest-funded primary school authority in the country. She said:
"At the end of 2003 we lost a full-time teacher and 47 hours of teacher assistant time. In order to attempt to set a balanced budget we have replaced a retiring member of the school leadership team with a newly qualified teacher. This means that our leadership team will consist of only 2 others and myself to lead the teaching and learning for the school. This will put great pressure on us as we are so thinly spread. Our supply and staff-training budgets have been slashed. My SENCO relies on me, the head teacher, to give her non-contact time to carry out her role. I also give each staff member an afternoon of planning and preparation time each term, though this is not enough, of course. All these hidden stresses mean that in real terms we are a great deal worse off now than in 2002/3 and all staff are extremely tired through trying to compensate for the deficiencies in funding."
Many other schools in Poole are predicting compulsory redundancies this year because the percentage increase in funding in an already inadequate budget has just not lifted schools up to where they were before.
I have talked to various local education authorities. A councillor in Oxfordshire said:
"While we are not facing a huge drop in primary numbers due to housing growth, we still face severe budget problems from last year's settlement. This year's settlement has kept us stable from last year's position but has not made up all of last year's gap. The key factor in that gap was and is teacher pay reforms, which have never been properly funded."
We acknowledge that the Government swiftly took action for this year, introducing the guaranteed minimum increase in funding, restoring money to the standards fund—it would have been dreadful if that had been removed—and introducing payments for the worst-affected authorities, but many authorities just missed the additional help, and Poole was one of them.
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As falling rolls begin to bite, the threat of redeployment or redundancy will increasingly become a fact of life for teachers in many parts of the country. The Department for Education and Skills predicts that schools will lose more than 600,000 pupils between 2001 and 2016, which on the present pupil-teacher ratio is equivalent to about 41,000 teachers.
The Times Educational Supplement survey showed that schools in most of England's 150 local authorities would shed staff this year. It is difficult to imagine that anything will reverse the demographic trends—it will take more than power cuts—so we need to look forward and consider how they can be managed.
Liberal Democrats favour the local management of schools and local decision taking, but as a consequence, the way in which redundant teachers are treated varies tremendously across the country. In some areas, there appear to be deals with unions, but in others teachers are on their own in finding jobs. I have great sympathy with the teachers, who may include my daughter, as she is likely to be affected by what happens in the next four years. It is a sensitive matter that should not be subject to dictation from the centre, but it is difficult for the teaching profession to handle the differentials.
It is important to note that the decline in school rolls does not hit all areas in the same way, even in the same authority. In Poole, the drop has been sharpest in the old council house estates. That is a result of the policy of selling council houses, which means that families remain in their houses long after their children have grown up, so new, younger families cannot move in.
Commendably, the Government want to see joined-up services and extended schools, which I am in favour of, at the heart of such communities, but that will be impossible if existing schools close, so local education authorities face a choice: if communities are to be sustained in the face of falling rolls, key schools must be kept open and schools redefined as providers of a wide range of services to the community. If we can focus on that, the outcome could be very positive.
Councils must be allowed to be creative, but that will be impossible if market forces dominate and popular schools are allowed to grow at the expense of all others. That relates rather well to the point made by my hon. Friend the Member for Montgomeryshire (Lembit Öpik), who is suffering greatly, and who, I hope, is not spreading his germs in this direction. He referred to the economic impact of the closures and the fact that we need to support rural primary schools. I come across such rural issues in my mixed constituency, and I have great sympathy for his points. It is interesting that they are reflected among schools on council house estates. Indeed, the issue is exactly the same.
At the moment, everyone is talking about improving the protection of vulnerable children, and schools will undoubtedly play a vital role in ensuring that every child matters. As part of an excellent scheme in Poole, pastoral support workers are appointed to cover a pyramid of schools or a specific school. Those workers are ideally placed to link up with health and social services staff to co-ordinate services to children and parents. I am sorry to say, however, that cuts to learning support funds have put the position of those workers at risk. Of course, we now have the work force reform programme, which is much spoken about. I have not

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seen much evidence of it in my constituency, but that is because I have not visited any of the pathfinders, which are further along the line. It is also true that schools are now tackling the 24 tasks. However, learning assistants are still losing their jobs. They are the very people who should be doing jobs such as photocopying to make life better for our teachers and to allow them to concentrate on using their skills to the utmost.
I must tell the Minister about a meeting that I attended with Poole head teachers, just as the real severity of last year's settlement was hitting them. The LEA suddenly announced that it had been given a grant of £18,000 or more to devise a work reform strategy. I do not know how those head teachers stayed sitting in the room—they were so incensed about the fact that they had to make redundancies while a grant had been given to devise a strategy. Of course, they want work reform, but it is ironic that they face the prospect of working longer hours and asking others to do so. It is important that we get the balance right. We all want teachers to be given the non-contact time that they desperately need, and we need to use the opportunity provided by falling rolls. We must ensure that things do not get worse as schools get into a downward spiral because they do not have enough money. The 32 pathfinders have been given extra resources. What additional resources will be provided across all LEAs for work force reform? How will that tie in with falling rolls in some authorities?
Many trade unions have said that falling school rolls offer opportunities. For example, parents will have greater certainty about whether their preference for their child's school place can be met. There is greater scope for the removal or replacement of poor-quality or temporary accommodation, and other surplus accommodation can be used to support community initiatives in the extended schools. There is a good opportunity to reduce class sizes, which authorities cannot often do because the Government dictate the money flows to the schools and pressurise them to eliminate surplus places. The Government cannot do anything about the falling rolls, but they can allow greater flexibility locally to find good solutions that will benefit our young people, their future and our future. Redeploying more money into early-years education is possible.
Islington councillors made the interesting comment that inflexible compulsory requirements from the Department for Education and Skills have had unhelpful and distorting effects on the ground. For example, the requirement that no school should receive less money next year than last year cuts right across coherent three-year strategies. This is an example of a uniform national requirement having perverse effects because it does not take local factors into account. I do not know the full situation, but the councillors make the important point that so much has been dictated from the centre. I understand why, and I have seen schools that have benefited from such a strong-arm approach, but it is now time to let the LEAs and the schools work out the best local solution. Will there will be any slackening off?
Councillors from Milton Keynes made a point that is not key to the debate, but I have been asked to mention it and will do so as there is time: the school population of Milton Keynes is rising, but schools are still suffering. It is worth examining this converse situation, because
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the councillors say that the Government funding formula does not provide for that rising school population. Almost all their grant is swallowed by passporting to schools, but it does not cover the rising demand. It seems that everyone is unhappy, but I wanted to make that point. I was interested to read that the Department is responding to the problem of the falling primary school rolls, and that there is a proposal to establish a working group with partner organisations to explore the options and opportunities available to schools and communities. I will be interested to see how that works out.
When the Government announced the percentage terms and individual grants to secondary and primary schools, it all sounded as if there was a lot of money. There is, however, a lack of trust about whether all this money really exists and what it will mean. In my part of the world, people are never very happy when percentage increases are mentioned. Cash grants to schools would, in many ways, be more helpful. The percentage of a small base does not provide enough money. Moving to the new formula was a contributory factor, but the Government always said that it would not be revised in the first few years. What plans do the Government have for monitoring and adjusting that formula? It has been said many times before that LEAs throughout the south-west are suffering under the formula because of the bizarre situation of low wages outside the public sector, in which wages are high, and very high house prices. It is therefore very difficult for teachers to move, which we want the formula to take into account. It makes no sense that one area receives more money than another area a few miles away when there is no difference in the cost of living.
All in all, there are opportunities, but the situation worries many people in the profession and parents who are concerned about their children. I hope that the Minister will give us a positive answer. We know that he cannot control falling rolls, but there is much that he could do to mitigate the effects. I agree with the hon. Member for Altrincham and Sale, West that we do not want to hear that everything in the country is hunky dory, as it is not.
2.50 pm
Mr. Mark Hoban: I congratulate my hon. Friend the Member for Altrincham and Sale, West (Mr. Brady), as a veteran of school funding debates, on opening the debate in such magnificent style. He highlighted two aspects of the matter: its historical background—he set out a macro-picture of the cause of the current school funding crisis; and the impact of that crisis on the quality of education, which he eloquently described, with particular reference to schools in his constituency and the decisions that they are taking about funding and teacher recruitment.
My hon. Friend was right to point out that 8,800 teaching posts and 12,300 non-teaching posts were lost last year. It is noticeable how many schools took the difficult decision last year to lose staff—both teaching assistants and teachers—and how much poorer those schools are for having done so. I know that many hon. Members can tell of similar examples from their constituencies of problems that are the consequences of redundancies in primary schools.

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I am grateful that there is a cordon sanitaire between us and the hon. Member for Montgomeryshire (Lembit Öpik), who is suffering some ailments; he outlined the concerns of many hon. Members about the impact of falling rolls, particularly in rural areas, and described the threat that they pose to valued rural schools, which offer a great deal of amenity to their local communities—they are often their lifeblood.
The hon. Member for Mid-Dorset and North Poole (Mrs. Brooke) seemed to advocate a policy of selective power cuts on council estates to restore numbers in the schools in her constituency. I am fully aware of the problems there, for which she made a powerful case, since I visited Poole and met the excellent Conservative leader of the borough council, and the executive member for education. They have done a great deal to raise the profile of problems in Poole. As well as meeting me and my hon. Friend the Member for Westmorland and Lonsdale (Mr. Collins), they met the Minister for School Standards to raise their concerns.
I was delighted to have an opportunity to go to Poole, to meet the director of education and visit a couple of schools, so that I could understand at first hand the impact of relatively low LEA settlements on schools. In classrooms that I visited in my constituency in Hampshire, not that far along the coast, I saw the significant difference that a relatively small funding difference can generate in schools. Poole is suffering because it has relatively few areas of deprivation compared with the rest of the country, and does not receive the area cost adjustment that I believe the neighbouring authority of Bournemouth has. That clearly has a big impact on education.
I spoke to a head teacher who raised the same question as the hon. Lady about what happens when money from a Government initiative runs out and schools want to continue to support the employee who was recruited because of that initiative. The pastoral workers who have been recruited in Poole schools are clearly very highly valued by head teachers, who see them as a way of resolving several issues and improving learning. However, it is clearly difficult when central Government funding for that is withdrawn. How is the funding to support the post to be made up? That is particularly difficult in an LEA where there is little headroom as a consequence of the starting point of the financial settlement. The points about that were well made.
It is also clearly important to reduce the number and complexity of funding streams that schools must deal with. I was interested to talk to a group of heads in the primary school sector in Nottinghamshire recently. They applied for funding for a project and were told that they should have had a bid writer to help them prepare their bid. That would have meant diverting valuable resources from the classroom to appoint a consultant simply to secure additional funding for schools in the area.
It is appropriate to engage in this debate as we come to the end of March and the schools' financial year 2003–04. It is also timely to look forward to the next financial year. We are all clear as to the causes of last year's funding crisis. We are familiar with the means by which the Government have gone about trying to solve
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it for the 2004–05 financial year with the minimum per pupil guarantee of 4 per cent. and the transitional funding for some schools in some LEAs.
The letters that I have received from LEAs show that there are two important concerns about the upcoming financial year. First, there is a hangover from the 2003–04 financial year. As we have heard in the debate, many schools used their reserves to balance their books for this year and have set deficit budgets in the hope that things will get better. Those schools are now reaching a point where they wonder whether they can continue those measures in the 2004–05 financial year or whether they need to take tough decisions this year to solve their funding problem. Then there is the issue of work force reform, which has been touched on in all the speeches so far. How can we deliver the promises to classroom teachers if the funding is not there to employ support assistants to enable them to have more non-contact time?
Let me quote some of the responses that I have received from LEAs about the school funding crisis. Essex county council has delivered to its schools the 4 per cent. per pupil increase and it says that the average school should be able to meet the cost of inflationary pressures on the school budget in 2004–05. Most LEAs are in the same position. They believe that the Government's increase is sufficient to meet this year's cost pressures. Essex county council points out, however, that there are 34 schools in Essex with accumulated deficits totalling some £4 million. It believes that schools have used £18 million of their reserves to fund recurrent expenditure.
The Government, recognising this use of deficits and reserves to balance the books across all schools, primary and secondary, have given certain LEAs transitional funding. Essex has received only £9.8 million of transitional funding, which is clearly not enough to cover the reserves that have been used and the deficits that have been created in the 2003–04 financial year. Those schools that have used their reserves or have set deficit budgets will have difficult decisions to make in 2004–05.
That fact has not escaped the Essex NUT spokesman, Mr. Jerry Glazier, who said:
"These latest settlements just compound the problems. Clearly they are not nearly adequate to meet the financial demands on schools, especially with extra pressures faced by the workload agreements. The crisis is most certainly not over, not by a long way."
It is perhaps not surprising that the Secretary of State for Education and Skills has decided not to grace the NUT conference with his presence this year, arguing that he has better things to do.
The director of education in Bromley said:
"Evidence from individual schools is that the guaranteed funding level may not be sufficient to maintain school resources…at the current level. As at 31 March 2003"—

this shows the scale of the problem and its deterioration over the course of the last year—
"Bromley had 11 primary schools with a total deficit or £295,000."
It is estimated that at the end of March 2004, 16 primary schools will have a total deficit of £716,000. Based on the allocation of the transitional grant to Bromley, he considers the £1.8 million that has been allocated insufficient to cover the deficits and the use of reserves.

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In Bedfordshire, another authority expressing concern over the future, the county education officer says:
"I am aware that some schools are already expressing concern over not being able to balance their budgets without making reductions…A wider issue however, is whether the Government will be able to sustain these levels of funding in future years. A major area of concern here is the pressures associated with the full implementation of the workforce reform proposals over the next two years."
I have heard of at least one school that had to make teachers redundant in order to employ learning support assistants to meet the work force reform commitments. Our schools are facing a dreadful situation.
The Minister is responsible for education in London, so he will be interested to know that the chief education officer for Barnet, in a letter to me, said:
"the LEA has managed to ensure that the schools' budget shares will rise by 5.8 per cent. The Government's assessment of the inflation pressures on schools is 3.4 per cent., but we believe that this is an underassessment of the costs of implementing single status and workforce reform. This leaves insufficient funds to redress the budget gap from 2003–04…Most of our schools have had to make savings in 2003–04, and many will have to make further savings in 2004–05 and 2005–06, to ensure they are able to balance their budgets in future years."
The initial impact of the Government's financial settlement, which we saw in the financial year 2003–04, will continue this year and next year. As the chief education officer goes on to say:
"Most of our schools' budgets consists of salaries, so it is inevitable that much of the savings will consist of staffing."
That is yet a further indication that there are more redundancies to come in our primary schools.
I also received a letter from the chief education officer for the London borough of Camden, in which he states:
"We anticipate that the transitional Grant will enable us to reduce the level of deficits in 2004/5. Our ability to continue this…into 2005/6 will depend on our then settlement and any further transitional protection. I do not believe that the level of funding will enable schools to replace the balances used during 2003/4 and 2004/5."
The picture seems to be similar across the whole of London. The borough of Enfield, in which the Minister will take a particular interest, is making an early bid for support in the financial year 2005–06, as shown in a letter that I received. It states:
"We are concerned about funding in future years including the additional costs that will arise from the next stage of implementing workforce reforms, the turbulence that may arise if pay and performance grants are mainstreamed in 2005/06 and the funding of the outer London teacher pay award that has been mooted for September 2005. We are also anxious to ensure that Enfield receives transitional support funding in 2005/06."
That is a clear indication, from the Minister's own authority, that problems will emerge in the future.
Lest any part of the country should feel neglected, let me turn to Portsmouth, which neighbours my local authority. Members of Portsmouth city council recently went to the Office of the Deputy Prime Minister to ask for more funding. The complexity of the Government's funding and the impact that it has on individual authorities comes out very clearly in the reported concerns for Portsmouth. On Thursday 18 March, Portsmouth newspaper,The News, reported that
"an additional gift of £891,000 given by the government last year to meet a shortfall has been taken out of this year's budget."
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The LEA must recover £900,000 from this year's budget, but it is a small authority with challenging schools and difficult circumstances—although it is making progress.
The impact of the shortfall can be seen in several primary schools in Portsmouth.The News reports:
"St. George's Beneficial C of E Primary School in Old Portsmouth lost seven assistants and Stamshaw Junior School was forced to axe two posts."
Across the whole of Portsmouth—with an LEA of 140,000 electors—some 40 learning support assistants were lost. That is a big reduction in an area that has many difficulties. Therefore, even when LEAs make great efforts—as the Portsmouth authority has—to improve behaviour in schools and to find innovative ways to tackle truancy and bad behaviour, they find that central Government do not give money to support those initiatives.
As I hope to have illustrated using those letters from LEAs, the prospects for 2004–05 are bleak in many schools, particularly those that set deficit budgets last year or used their reserves to safeguard the education of the children in their care. Although this year's spending pressures have been met from the settlement, the transitional grant is not sufficient to offset the use of reserves and deficits last year. If the transitional funding is not enough, how else will primary schools that used their reserves and set their deficit budget balance their books this year, other than by reducing their biggest cost—staff? Is there any light at the end of this tunnel?
The Chancellor announced in the Budget last week that education spending in the next spending round will rise by 4.4 per cent. in real terms. However, he failed to mention that this represents a tightening, compared with an increase in real terms of 6 per cent. in the current spending round. We are seeing a reduction in the rate of growth of spending on education across all schools in the next spending round. To put that into context, we are seeing work force reforms—many people doubt that they are adequately funded—on the basis of current spending plans, together with a combination of greater demands on schools' work forces and the need to recruit more learning support assistants. Will those demands be met from within the lower rate of increase forecast by the Chancellor for spending on schools in real terms in last week's Budget? I cannot see how primary schools will achieve that necessary reform without an improvement in spending.
My hon. Friend the Member for Altrincham and Sale, West mentioned the £55,000 for an average primary school that was promised by the Chancellor last week, and we must be clear what that promise means. Is it an extra £55,000 for the average primary school, or an increase in the standard sum that primary schools already receive, to take them up to £55,000? I heard a few comments last Friday in my constituency that led me to believe that teachers think they will receive an extra £55,000. That is what they hope for, but I suspect that the reality is that the average primary school will receive an increase up to £55,000. We must clarify that today, given the importance of funding to all schools, and especially primary schools.
There is another factor on which we have not yet touched. The cause of this spending crisis was the way in which the Government decided to reallocate money

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among the LEAs, a decision announced to the House in November 2002. The full effects of the funding system of floors and ceilings have yet to work their way through to LEAs. Some authorities, such as Barking, will lose up to £1 million; Bexley will lose up to £3.3 million; Kent up to £36.6 million; Enfield up to £4.5 million. Those are all figures that have been provided to me in written parliamentary answers by the Minister here today, or by the Minister for School Standards. In total, those local authorities and other LEAs are set to lose more than £166 million as the funding formula works its way through to fruition. When will it happen? We know that schools have been given a stay of execution until the other side of the general election, or the other side of the 2005–06 spending round, as Ministers prefer to put it—being a slightly cruder politician than some Ministers, I prefer to talk about the general election. However, once those spending reductions work their way through to those LEAs that are set to lose, there may well be a further round of redundancies in our primary schools.
It is clear that the funding crisis of 2003–04 will have repercussions, not just in 2004–05 but in 2005–06. It is also clear that such problems will be compounded by the introduction of work force reforms at a time when the Chancellor feels able to reduce the rate of growth of education spending. I fear that the combination of such circumstances will put many more jobs at risk in primary schools and the redundancies that we have seen over the last 12 months will merely be the start of worse to come.
3.9 pm
The Parliamentary Under-Secretary of State for Education and Skills: We have had a good debate, and I join others in congratulating the hon. Member for Altrincham and Sale, West (Mr. Brady) on securing the debate, and on his reappearance. He is a fellow veteran of schools debates in this place over last year, and it is good to see him back—though in a different place to where he was before. A number of important points have been raised during the debate, and I shall do my utmost to respond to as many of them as I can, but give my usual undertaking that if I fail to do so in the 20 minutes left, I shall respond to hon. Members' specific points in writing.
I congratulate the hon. Member for Montgomeryshire (Lembit Öpik) on his contribution and wish him better health. I congratulate his Front-Bench colleague, the hon. Member for Mid-Dorset and North Poole (Mrs. Brooke), on apparently being the only Liberal Democrat Member to be in good health at the moment.
This is a serious and important debate, and I was pleased when my right hon. Friend the Secretary of State for Education invited me to take responsibility for work with primary schools. The hon. Member for Altrincham and Sale, West quoted the 2001 Labour party manifesto, which said that we would seek to build on our success in primary schools. I do not regard that statement as meaning that somehow everything that needed to be done had been done. Rather, it recognised the real progress that primary schools made between 1997 and 2001, as measured most notably by the improvements in literacy and numeracy.
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There was a strong commitment to build on those improvements with regard to literacy and numeracy and the broader school curriculum. We therefore published last May the document entitled "Excellence and Enjoyment", which has been broadly welcomed in the primary sector, both for its reaffirmation of the core challenge of literacy and numeracy in primary schools and for its celebration of the broader school curriculum. I have no doubt that in addressing the need to build on that success, we must also recognise how crucial it is to invest in school buildings, equipment and staff. That is why this debate on redundancies in primary schools is of great relevance.
Let me say a word or two about the broader situation in Trafford. The hon. Member for Altrincham and Sale, West spoke, quite rightly, about his constituency and raised legitimate areas of concern. He is corresponding with my hon. Friend the Minister for School Standards about Woodheys school, but he will acknowledge that Trafford has seen a very significant improvement in staff numbers in schools since 1997. I am told that teacher numbers in Trafford increased from 1,750 in January 1997 to just over 2,000 in 2003—a 15 per cent. increase—and there has been an even bigger increase in the number of school support staff. That is the context for the events of recent years, about which the hon. Member for Mid-Dorset and North Poole spoke.
There has been a real improvement since 1997. The hon. Gentleman will acknowledge that that is reflected in the very high standards that are seen in schools in Trafford, which I am sure he would want to join me in celebrating. We estimate that between 1997–98 and 2004#x2013;05, the funding per pupil in Trafford will have increased by 31 per cent. We have also seen a significant improvement in capital investment in schools in Trafford, as we have in other parts of the country. Of course, I do not suggest, and I have not suggested in previous debates, that everything is perfect or, as the hon. Lady put it, hunky-dory. We face a number of challenges. I shall do my best to address some of them and, in particular, some of the points that were made in the debate.
The hon. Member for Montgomeryshire made a thoughtful speech in which he addressed one important aspect of the debate—teachers' pay. For years, this country has failed properly to recognise and recompense teachers. Part of the cost pressure that has resulted in some of the difficulties—I emphasise that—relates to the fact that we are starting to give teachers the levels of pay that they should be receiving. As several colleagues have said, that can result in 80, 85 or even 90 per cent. of the budgets for some schools going on staffing costs. That factor has definitely come into play in the difficulties that we have had over the past year.
The hon. Gentleman made another interesting point about ring-fencing. Part of the issue last year—this operated differently in different parts of the country—was an attempt to reduce ring-fencing by saying that the standards funds for certain areas would be removed. The effect of that was very difficult to deal with in some areas. It created some of the problems that we saw. That is partly why, in the announcements to which the hon. Member for Mid-Dorset and North Poole referred, the Secretary of State reversed the planned cuts to the standards funds for the coming financial year.

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In October, the Secretary of State set out our approach. As several colleagues have said, it will provide for a guaranteed minimum increase of 4 per cent. per pupil in every school's budget where pupil numbers stay the same. The guarantee also seeks to take account of unavoidable cost pressures on the budgets of all schools, whatever happens to their rolls. As has been said, those costs are estimated at 3.4 per cent. on average.
The dilemma that we face was well summed up by the hon. Lady, who set out the views of several different authorities. She made the perfectly legitimate point—I think that it was on behalf of Milton Keynes—that in an area in which schools typically have rising rolls, a guarantee that gives a little protection to those with falling rolls might mean that other schools do not get as big an increase as they might have done and that they might, therefore, be under additional pressure. That powerfully illustrates the difficult balance that we must strike, particularly in the general context of falling primary rolls. I shall return in a moment to some of the specific points that the hon. Lady and others made about falling rolls.
The Government have sought to ensure that every local education authority has sufficient resources, headroom and flexibility to deliver the guarantee and to support schools facing individual pressures. As I said, we have reversed the cuts to the standards funds for the coming year and the following year. The standards fund, the school standards grant and Learning and Skills Council funding for school sixth forms will all increase in line with the minimum guarantee, and we were pleased when the School Teachers Review Body agreed to a multi-year award, under which increases in teachers' pay will be in line with inflation from April this year to the end of August 2006. That will give schools and local education authorities some of the predictability that they have been denied in the past.
We expect local education authorities to do all that they can to ensure that funding reaches schools. In a sense, that gives LEAs a more local, flexible role in assessing and supporting every school's needs to ensure that resources additional to the minimum guarantee reach all the schools in their area.
Fears about redundancies are, of course, very real For those who have lost their jobs—be they teachers, teaching assistants or others working in our schools—there is clearly a human dimension, which several colleagues mentioned. The hon. Member for Altrincham and Sale, West referred to The Times Educational Supplement survey of 5 March. The paper concluded:
"ministers have largely succeeded in avoiding a repeat of last year's funding crisis…most problems will concern schools affected by demographic changes."
I do not deny that some issues follow on from last year's difficulties, but the bulk of those that we now face relate to falling rolls.
Falling rolls are a serious issue, and need to be dealt with effectively and sensitively. Primary rolls in many parts of the country are likely to fall and, indeed, to do so quite sharply in some cases. It is a challenge to us in central Government and to our colleagues in schools and local government to respond in a way that is appropriate and sensitive to the circumstances.
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All hon. Members will broadly agree with the principle that funding should follow pupil numbers and that local education authorities will, therefore, sometimes have to make hard decisions about a school or a local community of schools. We are properly considering the issue. Last year, there were almost 500,000 surplus places in primary schools in England—something like 12 per cent. of the total capacity. On the basis of current forecasts, primary rolls will fall by a further 4 per cent. by 2006–07.
The hon. Member for Montgomeryshire spoke about the impact on different communities of falling rolls, followed by downsizing or school closures. He was right to emphasise not only the educational dimension but the broader social and economic dimension. In the Government's first term, we introduced a presumption against closure of rural schools in England. That presumption has had quite a dramatic impact and is a positive example of rural-proofing, which the hon. Gentleman mentioned. From memory, I think that the average number of closures of rural schools in England has fallen from around 30 a year in the mid-1990s to around four or five a year now.
Lembit Öpik: I am very encouraged by that policy in England. However, I respectfully ask the Minister whether he would be willing to have a conversation with his opposite number in the Welsh Assembly to see whether there would be any benefit in at least considering a presumption against closures in rural Wales as well.
Mr. Twigg: I am happy to undertake to do that. It will be nice to lobby the Welsh Assembly, rather than have it lobbying us. I took the time to check that the presumption in question applies only in England and I understand that it does.
I should like to take up the challenge regarding the social focus of schools, which the hon. Gentleman mentioned. It is fair to say that there is a problem in rural areas, but the social focus of schools is important in some of the most disadvantaged urban areas as well. The hon. Member for Mid-Dorset and North Poole rightly challenged us to be creative about the problem. There is an option to avoid school closures, although I do not think that it will always work. She talked about extended schools. When considering surplus places, we can explore the possibility of some of those schools becoming extended schools. Such schools can offer an incredible opportunity to widen the services that are available to children and young people. Of equal importance, such schools can widen the services that are available to the broader local community. All of us who have seen the principle of extended schools in action agree that they can provide a great service on family learning, which involves giving educational opportunities to older members of the family and parents. I should like to take the hon. Lady's challenge forward, because extended schools are a possible solution in some cases. However, I would not want to pretend that they are always the solution. We must consider the problem in the round.
There is another possibility. The hon. Lady referred to the "Every Child Matters" Green Paper and the legislation coming from that. Local education authorities and schools have the potential to consider

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using spare capacity to develop the children's trust agenda, which aims to deliver integrated education, social and health care services to children and young people.
The hon. Lady also referred to discussions that the Department is conducting with partner organisations to consider some of the options and opportunities with respect to falling rolls. I can confirm we have established a group that brings together some of the key players, including the Department for Education and Skills, local education authorities, the head teacher associations, the majority of the teacher unions—the ones that have signed up to the work force reform agreement—the Local Government Association, governors' representatives, the Association of Chief Education Officers and the faith organisations. We have brought together all the key organisations. The first meeting was last Friday. The idea is to develop a toolkit of solutions working, for example, with the Audit Commission to help local education authorities to meet the challenge of falling rolls. I also hope that the group can come up with positive and creative solutions, very much as the hon. Lady set out. I shall be happy to keep her informed of the group's developing work, because it will be critical to getting things right.
In response to some of the other points that have been raised, we have set out a minimum guarantee, which recognises that schools with falling rolls will have fixed costs for cleaning, repairs and heating, which obviously do not decline when pupil numbers decline. That is why we guaranteed such schools a per pupil funding increase in 2004–05 of more than 4 per cent. In response to the hon. Member for Fareham (Mr. Hoban), I can confirm that what the Chancellor set out in his speech last week was what an average primary school could expect to receive in the coming year. The Chancellor did not make a new announcement of an additional £55,000; rather, he set out the combined payment in respect of the school standards grant—the money that we introduced to go directly to schools—and the devolved formula capital, which we had announced previously.
Mr. Brady: The picture seems to be worse than I feared. The Minister is telling schools across the country that they are not only faced with the hangover from last year's funding crisis—some schools have deficit budgets, some have spent their reserves—and the possibility of redundancies in September, but that the £55,000 referred to by the Chancellor will not bail out their next year's budget because it is a restatement of money that we already knew existed.
Mr. Twigg: That is not fair because we cannot compare where we were this time last year with where we are now. Other announcements have been made in the interim and schools and local education authorities across the country are working though the implications of those announcements in their budgets. The hon. Gentleman and his colleague set out examples of how that is being discussed. For example, it is fair to say that transitional grant money provides support to some schools that had particular difficulties in the financial
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year that is about to finish. That money is available for the coming year and, as the hon. Gentleman reminded us, will also be available for the following year.
Mrs. Brooke: I wonder whether the Minister will guarantee that clear information will be provided for all local education authorities and schools about cash grants to schools. If schools have read the Secretary of State's statement, as most people did, their planning will be considerably upset.
Mr. Twigg: That should not be the case because every school has received notification of their allocations for the coming year; no school should be in any doubt about the implications for the coming year. I visited schools in my constituency on Friday and there was a clear understanding that the focus of new announcements in the Budget was on the outcomes for schools of the following spending review. I hope that Opposition Members will join me in welcoming the fact that the announcement for education was made earlier than for other areas, enabling schools and LEAs to plan far further in advance than has previously been the case.
Mr. Hoban: It will be of use to hon. Members if the Minister could provide us with a copy of the letter that schools received about the £55,000 and the equivalent for secondary schools. Some head teachers will look at the budget for 2004–05 and think that they can put off making a difficult decision because they will receive an extra £55,000 in 2005–06.
Mr. Twigg: I am happy to clarify in writing for the hon. Gentleman what has been sent to schools—I will have to check whether it has been sent in the form of a letter or an e-mail.
I shall draw my remarks to a close. A number of hon. Members have referred to the work force reform agreement, which is an important part of the programme of reform in education. The agreement has been reached with all bar one of the trade unions, including the head teacher associations and the representatives of support staff. I welcome the broad support that there is for remodelling. I recognise that there are concerns about ensuring that resources are available. Some areas of work force reform require additional resources, but some will result in savings. In the schools that I visited recently, I noticed that there was a view that less supply cover might be required in schools when the work force reform comes in. Schools could invest the money saved in their own support staff. We are establishing a national remodelling team working closely with local education authorities and other partners to help schools to implement the changes in support of the agreement.
I conclusion, I again congratulate the hon. Member for Altrincham and Sale, West on securing the debate. I absolutely reaffirm our strong commitment to primary education because children must have the best possible preparation, not only for secondary education but for their later lives. I reassure the Chamber that continued investment in primary education, teachers, support staff, buildings and equipment is critical to the future of our education service.

Human Rights (Colombia)
3.30 pm
Mr. Richard Allan: As the chairman of the all-party parliamentary group on Colombia, I am grateful for the opportunity to hold this short debate. It is timely because in the past few days, we have had a visit by Vice-President Santos of Colombia, to whom I am grateful for the helpful and informative briefing that he gave at Chatham house yesterday morning.
I am also grateful to the AB Colombia umbrella group of non-governmental organisations and Amnesty International UK both for the briefings that they have given for today's debate and for their ongoing work in publicising incidents in Colombia and bringing visitors to meet us in Parliament. Peace Brigades International has also been important in exposing us to the work of human rights defenders in Colombia. The Colombian embassy has also supplied information, as has another interesting source—an intern in my office from the United States; although the use of word "intern" may be odd considering Guantanamo bay. Stephanie Adams, whose family are Colombian, has given me a helpful insight into life from the point of view of ordinary Columbian citizens.
Needless to say, 30 minutes is a short time to debate an issue of such importance, but I hope that at least it will allow the Minister to update the House on the Government's position, which is what we want to get on record.
Interest in the House on Colombian issues should be gauged not by attendance in this Chamber, as a hot Budget debate is raging in the main Chamber, but by the fact that 187 Members have so far signed early-day motion 333 on military assistance to Colombia and human rights abuses. That is an extraordinary number, and it is so high because any Member who has been touched by, or had experience of, Colombia takes a serious interest in the country. Many Members have clearly encouraged their colleagues to take an interest, too.
To set the context for the debate, I should like to point to several factors that bring the UK and Colombia together. We have always enjoyed good political and commercial relations. There are active links between chambers of commerce in the two countries, and I am sure that the Minister will testify to the fact that relations are extraordinarily warm, as they are between the UK and many Latin American countries. I found on my visit to Colombia that there is a tremendous, historical warmth between our two countries.
In that context, the UK was the host for the London declaration of July 2003, which established the international framework for Colombia's human rights agenda. Although the declaration brought together several countries, the fact that we were hosting it was not accidental and places us in a position where we have a particular responsibility to ensure that the declaration's aspirations are implemented.
Having visited Colombia with a Member from Northern Ireland some years ago, I believe that the Northern Ireland context is important. There are some similarities in how the Governments are trying to deal
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with armed paramilitary forces claiming to defend the state, although they are disowned by it, and secessionist groups trying to break away from it. That allows us to understand and empathise with the situation in Columbia, although the death and destruction caused by that conflict is on a greater scale.
It is also important not to take a neo-colonialist approach, which is especially significant in the light of a small dispute between the EU External Affairs Commissioner, Chris Patten, and the Colombian Vice-President. From the Vice-President's perspective, Chris Patten visited the country and tried to tell the Colombians how to run things, and was told off for treating the country like a banana republic. Although it is important to recognise that Ecuador is actually the largest exporter of bananas in La tin America, to treat the Colombians like a banana republic is inappropriate.
I shall couch my contribution in terms of our engagement with a sovereign, democratic country. The Vice-President made the serious point that Colombian democracy is deep rooted and goes back many years, and we need to respect the fact that we are dealing with a fellow sovereign democratic Government. We should not feel that we must instruct them, but rather behave as partners seeking to advise and assist in response to their request for assistance from the international community.
Whatever criticisms of the Colombian Government we may make in our debates, we should recognise that those are on a completely different level from the unreserved condemnation that we apply to acts of illegal violence, whether committed by the guerrilla or paramilitary factions. There is no equivalence in the way in which we treat the sovereign, democratic Colombian Government, and the armed groups who are acting illegally, and whom we condemn unreservedly.
It is also important not to make generalisations from the Colombian situation in relation to some kind of war on terror. The Colombian conflict started decades before any of the current rhetoric and debate on the war on terror—whatever that might mean; the situation in Colombia is unique and to generalise from it is unhelpful. Just as the Northern Ireland situation was unique and required unique British and Irish solutions, so the Colombian situation is unique and requires particular Colombian solutions.
The reaction of political visitors to Colombia is generally one of confusion, because they are confronted with different views of the same events. From a politician's point of view, it is clear that in Colombia there is a fundamental problem of governability, which has existed for many years. There are places where the Government's writ does not run. As a politician who has faith in democratic politics, I believe that the long-term solution must be for the democratic Colombian Government to have control and authority over the entire Colombian territory.
However, there is great concern about the allegations, suggestions and, in many cases, documented evidence of collusion between people who claim to act for the Government and for the Colombian state, and those who carry out the most severe human rights abuses. I have not met anyone who has visited Colombia who would say that the situation was simple—that it was

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either all the Government's fault or all everyone else's fault. Everyone returns with a confused picture of different views of the same events.
That is not surprising, for two reasons. First, the Colombian Government are trying, like every Government who deal with terrorism, to balance different rights—They are trying to balance the fundamental human right—the right to life, and therefore the right to be protected from acts of terrorism and violence—with other human rights, such as the right to a fair trial and fair treatment by the state.
Those rights can sometimes pull in different directions, and that leads to tension. It leads to something that is part of the normal discourse between all Governments—not just the Colombian Government, but Governments in general—and non-governmental organisations that are interested in human rights and criticise Governments severely when they are seen to have stepped from the path of absolute respect for human rights.
We see that process in the UK with some of the comments that the Home Secretary tends to make, not just about NGOs but about the judiciary and anyone else who dares to question his efforts to deal with terrorism. That is part of the normal political discourse: NGOs and judges criticise the Government, and the Government often respond robustly to that criticism.
However, there is an important difference in Colombia, because denunciation by the Government can lead to illegal actions by paramilitaries. That means death for people who believe that they are acting—and indeed are acting—as defenders of human rights, but who have been singled out as being friends of the terrorists. In the Colombian context, that is a most serious accusation and takes things far beyond the normal political discourse that might be enjoyed in places where such illegal actors are not so prevalent. Again, we can draw a parallel with Northern Ireland, where people were singled out as being friends of illegal actors—guerrilla groups—and were subsequently killed by other illegal groups.
In the Colombian context—again, perhaps, there is a parallel with Northern Ireland—there is particular concern about Church leaders who, in the course of looking after the interests of local people, may seek to negotiate the release of kidnap victims, and therefore may have contact with some of the illegal groups. The fact that they have contact with those illegal groups does not mean that they associate with them or approve of their agenda.
I hope that the Minister will be able to commit himself to speaking up for legitimate non-governmental organisations, Church groups and other similar groups that are trying to work in the Colombian context, and that he will ensure that we always request the Colombian Government to give them protection. The Minister will recognise the reference to a problem last year, when the Colombian President made comments about NGOs, which unfortunately fell on the plate of the then British ambassador in Colombia. The finger was pointed at the NGOs and the British Government were not as helpful as they could be, although the
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ambassador subsequently made statements to the effect that they would ensure that NGOs had the protection they needed.
I understand the scale of the threat to life in Colombia, which its Government are seeking to tackle. Colombia has a population that is about one third smaller than that in the UK, yet there are between 20,000 and 30.000 murders a year in Colombia, and only 800 a year in this country. I have every sympathy with the Colombian Government in trying to resolve such a serious death rate and I want the UK to continue to support them. In addition to the murders, hundreds of thousands of people are displaced, many are kidnapped and there are terrorist bombings; the situation will be fully resolved only if a settlement can be reached that respects human rights.
I seek the Minister's views on the following human rights issues: first, the question of military justice. The Colombian Government have recently proposed legislation to enable the military to conduct judicial processes in areas where the civilian authorities do not have a significant presence. Vice-President Santos was helpful, fair and open in describing the legislation as a limited set of powers, saying that there would be no sense of military impunity; if military officers abused the powers action would be taken against them—they would have no immunity in that respect. The powers would not be used where civilian authorities, as the preferable alternative, could be used. I hope the Minister will say that it is on the British Government's agenda to ensure that the powers are used appropriately.
Secondly, the question of impunity is significant and the Northern Ireland example is relevant. Settling a conflict requires exceptional measures, but they must be applied appropriately. People who have been convicted of terrorist murders are free again on the streets of Northern Ireland; exceptional measures were required to settle the conflict and it is helpful to see the situation in that context. However, in Northern Ireland, people were released on licence; they were not pardoned, and the terms on which they were released were important—the terms had to be acceptable. Convicted terrorists have no legitimate guise; they have gained no military authority. In the Colombian context, the concern is that paramilitaries who are demobilised could appear in a legitimate guise. Freedom from sanction is one thing, but being able to reappear in a position of power, having committed human rights abuses, is quite another.
We are interested in the resolutions proposed by the United Nations human rights commission. We hope that they will be given teeth with an action plan, but that has still not been proposed, even though the UN has made recommendations and continues to write regular reports. The end goal is to create a space in which people can act safely in a political context. Again, Vice-President Santos was helpful in pointing out that in the political context in Colombia, some left-wing politicians and trade unionists are able to succeed. I do not say that because I support left-wing politicians but because it is a sign of political health. Vice-President Santos cited the example of the mayor of Bogota, which is appropriate, because if people can engage in the normal political process they have moved on from engaging in the illegal, paramilitary process.

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In 2003, 68 trade unionists were killed, and many members of the opposition who oppose the political status quo in Colombia still cannot operate in the usual political sphere because they fear death and do not feel sufficiently protected by the state. I would be grateful for any reassurance that the Minister can provide.
Finally, military assistance between the two countries remains a concern. I know that other Members have asked questions about that and that it is limited to technical assistance. However, it is always helpful when talking about assistance between our two countries to reiterate the United Kingdom's clear and strong human rights agenda. After all, the Government introduced the Human Rights Act 1998 and, as I regularly restate, they require the recipients of their aid and assistance to respect human rights as we do. The Government must assure us that that assistance is monitored effectively, and that they are confident that it is not being abused. That was the subject of the early-day motion that attracted so much attention.
I am grateful for the opportunity to debate this important subject. I hope that the Minister will assure us that human rights in Colombia remain high on the Government's agenda, and that the UK can offer genuine assistance and friendship to the Colombian Government and to all the other agencies that work in Colombia. I hope that they can reach a peace settlement, not exactly like the Northern Ireland peace settlement, because we are not quite there yet, but one that at least mirrors its demilitarisation. That was a significant step forward, and to reach even that stage would be a tremendous achievement for the Colombian people.
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The Parliamentary Under-Secretary of State for Foreign and Commonwealth Affairs: I am exceedingly grateful that the hon. Member for Sheffield, Hallam (Mr. Allan) has secured the debate and enabled us to discuss these issues openly. It is not parliamentary flannel to say that I warmly welcome the measured tone and balance of his contribution. One of the frustrations of dealing with the situation in Colombia is that people with the best motives sometimes lack that balance, and that does not help any of us to make progress. I immediately confirm that we share the hon. Gentleman's view that the human rights situation in Colombia merits great attention. Human rights lie at the heart of the Government's agenda and policy on Colombia.
Colombia's problems are immense and extraordinarily long-standing. They stem from a potent mix of drug trafficking and the wealth that that brings to those involved, a continuing 40-year armed conflict that followed decades of violence, and an historical lack of state control over huge swathes of the country, which the hon. Gentleman mentioned. The activities of three large illegal armed groups and scores of smaller organisations, as well as of criminal gangs, have made Colombia one of the world's most violent countries. Serious human rights abuses, which affect principally the civilian population, are the inevitable consequence of these problems.
In 2002, President Alvaro Uribe was elected with a strong mandate to tackle these problems. His first priority was to re-establish state control over the whole
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of Colombia to provide security for the whole population. From the outset, we made it clear that we support his efforts to deal with the dual and linked problems of armed conflict and the trade in drugs. It is critical, however, that those efforts are grounded in a complete and unconditional respect for human rights and international humanitarian law. Indeed, I made that clear to President Uribe when I met him in Bogota last May and in all my subsequent discussions with his colleagues. The London declaration of July 2003, to which the hon. Gentleman referred, was adopted following a meeting of 24 Governments and international organisations. The blunt message that security was necessary, but not at the expense of human rights, was repeated loud and clear in the presence of senior members of the Colombian Government, including Vice-President Santos. We have continued that dialogue since then.
The hon. Gentleman was absolutely right to say that the situation in Colombia is unique and requires unique solutions; there are no off-the-shelf solutions from elsewhere in the world. He also rightly underlined the significant problem in Colombia with respect to the fact that the writ of the Government and state authority does not spread far enough in the country, so that people are beholden to terrorist groups and paramilitaries in a way that is not in their interests. I also agree that there are no simple, easy-to-deliver solutions and that the situation in Colombia is an acute form of the dilemma that faces all of us—balancing people's security against upholding and respecting their civil liberties and human rights. That is an aspect of the current difficulty in Colombia.
The hon. Gentleman referred to non-governmental organisations, which have a critical role to play in any civilised and developing society. That is particularly true in Colombia, where fundamental liberties are under threat from illegal armed groups. Non-governmental organisations have a very important role to play in bringing problems to the attention of local authorities, the Government and the international community. We work with those organisations, and I pay tribute to the work that many of their staff undertake in difficult circumstances. I also believe that civil society more generally must be part of the solution for Colombia, rather than part of the problem, as it has sometimes been portrayed.
We put our money where our mouth is, and give financial and political support to the work of NGOs such as the Peace Brigades International, Oxfam, Christian Aid, Plan, and Save the Children. That is an important priority for the Foreign and Commonwealth Office. We have continued to make our view clear to the Colombian Government: respect for NGOs and their work must be a priority. We need to continue to make that point.
Although senior Colombian figures have made some unfortunate statements about NGOs—I think that the hon. Gentleman referred to those—I do not believe that the President is deliberately trying to target civil society. I am, however, aware of the danger, in the Colombian context, that certain statements may be taken by illegal armed groups as a green light to attack NGOs and their staff. That is a real concern and it is unacceptable.
I know the speech that the hon. Gentleman was referring to. I have always said to the President and other Ministers in Colombia that if there are specific

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concerns about alleged links between certain non-governmental human rights organisations and terrorist groups, they should be tackled through due legal process. A blanket condemnation putting all NGOs and human rights organisations in the same basket should not be made. I have made that point and so have other Ministers. The Colombian Government have listened and responded, and we shall continue to put those views.
The President's policies are aimed at cracking down on the illegal armed groups that are responsible for the vast majority of human rights abuses in Colombia. That approach has yielded some impressive results in some areas of fundamental rights. Clearly, much more remains to be done, but we see those improvements as the start of a long and complex process in which we want to be involved—helping the Government to extend those successes.
We are acutely aware of the plight of Colombian trade unionists and other vulnerable groups, particularly with respect to human rights, and have made it plain to the Government that they must provide adequate protection from threats and attacks for those groups that are at risk. Our assessment is that although the situation is still critical, it has improved in the past 12 months. Fewer trade unionists have been murdered and the perpetrators of several murders have been brought to justice. The hon. Gentleman alluded to that.
Our contacts with the Colombian authorities, and, indeed, UK trade unionists, on trade union issues, are complemented by regular discussions with NGOs and trade unions themselves. We have raised individual cases of concern with the authorities and have facilitated visits to the UK by Colombian trade union leaders to allow them to tell their stories first hand to wider audiences. I have met many of those trade unionists.
As the hon. Gentleman said, NGOs are concerned about the effect of the intensification of the armed conflict, and of the President's policies, on the civilian population. The humanitarian crisis is severe, with between 2 million and 3 million Colombians driven from their homes by the conflict. We are also concerned about the illegal armed groups' adoption of new tactics, such as encircling villages to prevent the population from fleeing, thus forcing them to co-operate. That must stop.
We also share the concerns of civil society and our partners in the international community and the UN system about the interlinked problems of impunity and collusion between some members of the armed forces and police, and paramilitary groups. We have expressed publicly our conviction that the Colombian Government need to take early and effective action to stop collusion and to bring quickly to justice anyone accused of human rights abuses. Again, I think that it has to be acknowledged that there has been some progress in that area. About 15 military figures and 20 policemen were recently arrested for collusion with the paramilitaries, and I very much welcome that action.
We shall certainly continue to exert pressure on the Colombian Government to deal effectively with the problems and to meet their obligations under international law. We also believe that it is important for the Government to take rapid and effective measures to
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implement the 27 recommendations of the UN High Commissioner for Human Rights. Progress so far has been slow and we need to look at ways to improve that situation along with our partners.

We have also made it plain to the Colombian Government that we are concerned about the granting of judicial powers to the armed forces and about the future of the paramilitary peace process.
I know that the issue of UK assistance to Colombia provokes as much comment and controversy within this debate as any other issue. Principally, our assistance focuses on two areas: first, on human rights and social development, and secondly, on the fight against the trade in illegal drugs. Recent projects have dealt with creating a culture of non-violence in urban centres and helped poor agricultural producers to market their produce more effectively. Our embassy is crucially involved in those processes. When I was in Bogota in May, I was able to announce the funding for four community human rights ombudsmen in key conflict zones to provide an independent source of advice and assistance to Colombian citizens.
On the anti-narcotics front, we are actively assisting the Colombian Government in the war against drugs, as drugs are an integral part of the problem faced by Colombia. They are also our problem—80 per cent. of the cocaine that arrives in this country derives from Colombia.
The key issue of concern, to which the hon. Gentleman referred in respect of early-day motion 333, is the issue of UK military assistance. Compared to help in the anti-narcotics field, UK military assistance is small scale. It is centred on areas of direct benefit to the Colombian civilian population. We therefore fundamentally believe that it would be counter-productive to suspend it, since that would affect negatively the very civilian population whom we wish to help.
Recent assistance has been in anti-explosives training for police and military officers tasked with defusing bombs, which are often directed at civilian targets. We have also brought Colombian military officers to the UK to participate in senior staff training courses. An important element of all such courses is the role of the military in a democratic society and the need for an understanding of human rights concerns. In the same way we have also provided, along with the UN, training in human rights issues for the Colombian armed forces.
I can give a categorical assurance that no UK military assistance has been given to individuals or units known, or suspected to have been, implicated in human rights abuses or in collusion with paramilitary forces. I fundamentally believe that to be the case, and some of the things that are printed and written about the subject with no basis in fact do not help anyone in Colombia in addressing the issues and in taking the situation forward.
I will now deal with the UN recommendations and the London declaration. We have made it clear that we firmly believe that the Colombian Government must live up to the commitments made in the London declaration last year. I was pleased that President Uribe stressed the importance of that in his recent speech to the European Parliament. Our ambassador in Bogota is taking part in the follow-up process to the London

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meeting by participating in the working group set up to monitor progress on the commitments. The regular dialogue between Government and civil society representatives facilitated by the group is a vital and integral part of the process. Put bluntly, I strongly believe that Colombia has a moral obligation to carry out its task in respect of those commitments. I will be visiting Colombia soon and will raise the issues again.
There are many threats to the enjoyment of full human rights by the Colombian population. The illegal armed groups have not taken any notice of the recommendations of the United Nations Commissioner on Human Rights, which were addressed to them. They continue to torture, murder, kidnap and engage in drug trafficking and to commit the vast majority of human right abuses.
Although we recognise the progress made in some areas and applaud the Colombian Government for what they have achieved in the relatively short time that they have been in power, we will continue to urge them to take urgent and effective action to address the many remaining issues of concern, especially those of impunity and collusion between state forces and the paramilitaries. We will balance regular contact with the Colombian authorities at the highest levels, to keep up pressure on the issues, with close contacts with civil society, to ensure that our policies take into account the important issues, concerns and priorities.

BBC Monitoring
4 pm
Dr. Gavin Strang: I am grateful to have this opportunity to draw hon. Members' attention to an institution whose work is vital to our country in the light of the threats that we face today. In 1939, as the world stood on the brink of war, the BBC first established a service to monitor foreign broadcasts. A week before the outbreak of the second world war, 50 monitors moved into the Evesham headquarters. By 1942, BBC Monitoring had flourished—for obvious reasons—with 500 employees, and in 1943, the service moved into its present site in Caversham Park in Reading. With the end of the second world war and the lowering of the iron curtain, BBC Monitoring became a vital tool in observing the development and conclusion of the cold war. As I shall discuss later, in recent years, BBC Monitoring has again adapted to meet Britain's needs after the cold war and 11 September.
BBC Monitoring is a division of the BBC, part of the BBC World Service. It is funded separately, receiving about —22 million from its stakeholders and raising about —4 million in other revenue, including commercial income. BBC Monitoring's stakeholders are its four principal customers: the Foreign and Commonwealth Office, the Ministry of Defence, the Cabinet Office and its agencies and the BBC World Service. They provide funding and influence the priority given to the areas covered. It is worth describing the sheer scale of the operation conducted by BBC Monitoring. Covering about 150 countries and 100 languages, it tracks more than 3,000 sources in the international media. Selecting and translating material, the unit publishes an average of 1,000 reports daily, giving a comprehensive and well-judged portrayal of events worldwide. In addition to around 400 staff at Caversham Park, it has five bureaux abroad: in Baku, the capital of Azerbaijan, in Moscow, Kiev, Nairobi and Tashkent, the capital of Uzbekistan. It does not just translate and relay what has been broadcast, but analyses material to produce a viable picture of events. Reports published by BBC Monitoring cover all areas relevant to those interested in foreign affairs, including politics, security, human rights and organised crime. Clients can choose the type of reports that they wish to receive and how they receive them, including by internet or e-mail.
New sources are always appearing and BBC Monitoring is always looking for them. New technology brings new opportunities. It has introduced digital technology to develop multimedia projects, enabling customers to receive reports combining audio, video and the written word. Customers can also receive a live feed of a television station via the internet.
To provide a truly global service, BBC Monitoring works in partnership with the US Foreign Broadcast Information Service, or FBIS, a partnership that began in 1941. Britain does not have the capability alone to provide a detailed assessment of events in every corner of the earth, but there are many parts where we are exceptionally well placed to do so, often owing to our historic connections to those areas. In those parts of the world, we can provide a package second to none, and BBC Monitoring does the world a service. Working with the FBIS means a partnership with global reach: the two

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are perfectly complementary. The FBIS provides coverage that is vital to our Government—of the Chinese media, for example—and BBC Monitoring provides information that is vital to the US Government, such as coverage of Afghanistan.
The value of BBC Monitoring's work can be divided into two broad categories. First, it provides hard information about particular events worldwide. It was the partnership between BBC Monitoring and the FBIS that drew attention to the statement by an al-Qaedan group claiming responsibility for this month's atrocity in Madrid. The statement was spotted in a London-based Arabic newspaper. There are occasions when a particular broadcast is itself a significant event. Last year, hon. Members will remember Libya's announcement in December that it had programmes to develop weapons of mass destruction that it was prepared to dismantle. Before the Prime Minister gave his speech welcoming Libya's statement, BBC Monitoring was asked to check that that statement had actually been broadcast as agreed.
BBC Monitoring is also invaluable in providing its customers with information on the political climate in the area in question, including perceptions of Britain and our allies. In recent years, it has included in its work the monitoring of hate speech—broadcasts that incite violence. Countries whose media are being monitored for hate speech include the former Yugoslavia, the Ivory Coast and Israel-Palestine. Colleagues will, I am sure, agree that it is important to have a measure of the political temperature in those areas.
BBC Monitoring staff are not just skilled in languages; they have a broad and deep understanding of the countries in question and are therefore able to provide a good picture of the attitudes prevailing. This is an important point, which may sometimes be lost. In my view, it is not possible to overstate the importance of that expertise. Yes, BBC Monitoring is about sophisticated modern equipment, skilled engineers and expert linguists, but nothing is more important than the ability to put the information received into context, and that knowledge comes from the vast experience that BBC Monitoring staff have of the particular part of the world to which they are assigned.
BBC Monitoring is a tremendous national asset that is very important in today's world. We must nourish it. I know that the Government share that view. Indeed, the Foreign Office Minister, my hon. Friend the Member for Harlow (Mr. Rammell), told us last April that BBC Monitoring
"is the main open source provider of information for the Government and the BBC World Service. It provides a valuable service to its stakeholders and to others throughout Government. By tracking world events and reactions to them, including, importantly, perceptions of British foreign policy, it assists the Government in their decision-making processes."—[Official Report, Westminster Hall, 29 April 2003; Vol. 404, c. 30WH.]
At this point it is probably worth reminding ourselves that BBC Monitoring provides a large amount of the material that makes the BBC World Service the best known and most respected broadcaster in the world.
In a world in which our security is threatened by international terrorism, monitoring has taken on a greater importance, and BBC Monitoring clearly has an
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important role to play. There has understandably been a considerable focus on secret intelligence over recent months, but people are perhaps less aware that a lot of the information used in counter-terrorism is in the public domain. That information is conveyed to counter-terrorism staff by BBC Monitoring. It is important to realise that among the customers of BBC Monitoring are the Defence Intelligence Staff, the assessments staff, the intelligence agencies and the National Criminal Intelligence Service.
The cold war is miles behind us, and the threat that we face today is totally different. We have some experience, sadly, of terrorism at home, and that has no doubt been useful, but the threat facing Britain today—international terrorism—is far more dispersed than any previous threat to our security. BBC Monitoring, with its reach and skills, is of tremendous value to Britain and our allies in the face of that threat.
I should like to say a few words about the importance of global coverage. The global reach of the BBC Monitoring-FBIS partnership is crucial to its customers; there is widespread agreement among those working in foreign policy that the partnership's global coverage is critical. During the cold war, to put it bluntly, we knew where our opponent was, but in the current climate we simply do not know where we must look next to meet the challenges of tomorrow. Clearly, then, we should maintain global surveillance.
In addition, international terrorism is one of a number of global themes of which we need an accurate and comprehensive picture. Just as with other global themes, such as organised crime, we need global coverage to get a clear picture of international terrorism. From my remarks, my hon. Friend the Minister will not be surprised that I take the view that it is imperative that BBC Monitoring is adequately funded. Hon. Members may be surprised to learn, however, that BBC Monitoring funding from its stakeholders has actually declined in the past decade.
The worst of the damage was done in 1996, when more than 50 jobs and £1.2 million were axed. Since 1997, stakeholder funding has increased slightly in real terms, most significantly in the financial year 2001–02, but that slight increase has not repaired the gap in funding, and stakeholder funding to BBC Monitoring is 7 per cent. less in real terms today than it was in 1993–94. In parallel with that reduction in funding, BBC Monitoring has increased its work load many times over in terms of both input and output.
The number of broadcast stations and publications that are monitored has grown rapidly. In countries that are crucial to our Government's agenda such as Afghanistan, the media are flourishing, and many new outlets require the attention of BBC Monitoring, whose output has also increased massively. Rather than a single paper product, it now produces thousands of bespoke products, delivered to people in real time and wherever they need it, to our military in Basra or to Foreign office staff in Baghdad, for example. That has meant a huge retraining of staff and restructuring of operations. At the same time, many of the efficiencies currently being encouraged in our Departments have already been carried out by BBC Monitoring.
BBC Monitoring and the FBIS form an excellent partnership in providing global coverage. No one would argue that BBC Monitoring should be funded to the

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extent that it alone could provide detailed coverage of all the media in every part of the world—that is the strength of the partnership with the FBIS. However, as I said earlier, for various reasons there are parts of the world in which we are exceptionally well placed to do the job. It has been made clear to me that if BBC Monitoring were not there to do the job—if, for example, it was allowed to decline—the FBIS could not simply pick up the pieces and take on the work itself. The importance of BBC Monitoring to Britain in the world today means that it is crucial that the Government stakeholders make available the money that it requires to develop the excellent and important service that it provides. Indeed, I would argue that the case for investing in BBC Monitoring is stronger today than it has ever been.
I welcome the Government's provision of additional resources for our intelligence and security services. However, a lot of the information that the agencies use is open source material from BBC Monitoring. Such open source information provides a context into which secret intelligence data can be placed. The Government will fail to maximise the benefits that they should get from secret intelligence if our main provider of open source information is not adequately resourced. In the current climate, given the growing importance of being informed about what is going on worldwide, we should surely be providing more, not less, support to BBC Monitoring.
BBC Monitoring is a tremendous resource. It has an august past and a vital role in our future security. I hope that my hon. Friend the Minister will take this opportunity to put on record the tremendous service provided by BBC Monitoring and undertake to do what he can to ensure that it receives the resources that it needs to perform its crucial role in the years to come.
Mr. Deputy Speaker: I advise the House that the right hon. Member for North-East Hampshire (Mr. Arbuthnot) has obtained the permission of the right hon. Member for Edinburgh, East and Musselburgh (Dr. Strang), the Minister and the Chair to participate briefly.
4.12 pm
Mr. James Arbuthnot: I obtained permission, but only late in the day, and for that I apologise.
I am grateful to the right hon. Member for Edinburgh, East and Musselburgh (Dr. Strang) for allowing me to contribute briefly to his debate. I agree with everything that he has said and echo in particular his point about the value that the BBC gains and gives to this country from its partnership with the FBIS in the United States. That value is phenomenal, and we are all in debt to the BBC for the service that it gives partly as a result of that partnership.
Only this morning, I checked the BBC Monitoring service to compare the coverage in Israeli Hebrew newspapers with that in Palestinian newspapers of yesterday's death of Ahmed Yassin. The comparison that I was able to make was unlike anything that I could have found anywhere else, and it was interesting to see that even the Hebrew newspapers made comments such as:
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"With his death he has bequeathed to us another death."
It is important to be able to find out that the Hebrew newspapers are saying that. The BBC Monitoring service is extremely valuable to this country, and I hope that the Minister will consider carefully what the right hon. Gentleman said.
4.14 pm
The Parliamentary Under-Secretary of State for Foreign and Commonwealth Affairs: My right hon. Friend the Member for Edinburgh, East and Musselburgh (Dr. Strang) has raised an important issue. He recently visited the BBC Monitoring service at Caversham, as I did last September. In a previous incarnation as a humble sub-editor at the BBC World Service in the 1970s, I made use of its output, so I have been well aware of it for many years.
As my right hon. Friend said, BBC Monitoring supplies news, information and comment from the world's media. It covers a wide range of topics, including politics, elections, international security, terrorism, human rights, technology, the environment and economic affairs. It is the main open source provider of information for Her Majesty's Government and the BBC World Service.
BBC Monitoring was founded in 1939 on the eve of the second world war. By 1942, it had grown from having 50 staff to about 500. In those days, it played a vital role in relaying information from France to UK Government headquarters. After the war, it turned its attention to developments in the iron curtain countries and the unfolding cold war. There is no doubt that the service has played a valuable role in the recent past. Today, as my right hon. Friend mentioned, it operates from bureaux in Moscow, Kiev, Tashkent, Baku and Nairobi, in addition, of course, to Caversham Park, near Reading. In co-operation with its American counterpart, it can provide global coverage of events.
BBC Monitoring has adapted to changing geographical priorities and huge changes in the information environment flowing from recent technological developments. It now has access to video footage and websites and distributes material electronically—facilitating a more rapid response—in greater quantities. Users who fund the service can customise the information that they receive through a password-protected intranet.
BBC Monitoring used to be funded through grant in aid from the Foreign and Commonwealth Office, to which the Ministry of Defence contributed 20 per cent. A review of the funding regime was carried out in 1994, with the aim of making it more customer-focused. The review recommended a move from grant in aid to a stakeholder regime to be shared among primary Government users and the BBC World Service. The new regime came into effect in 1997, with costs divided as follows. The FCO paid 40 per cent., as did the MOD. The Cabinet Office got away with 1 per cent. and the BBC World Service paid 19 per cent.
Those shares were adjusted in 2001 better to reflect use of the service and were set at the current levels. The FCO and MOD shares were reduced to 33 per cent.; the Cabinet Office share was increased to 12 per cent.; and the BBC World Service share went up to 22 per cent. Total funding is at about £22 million per annum, with

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the FCO share amounting to approximately £7 million. There is also limited commercial income from other Government users, foreign Governments, and commercial organisations. Last year, a further independent review was undertaken to explore radical options for funding. It recommended no change in the current funding mechanism, although it suggested that a benchmarking exercise be undertaken to make the costing of products and services more meaningful.
I have described how BBC Monitoring has successfully adapted its activities in the light of changing circumstances during the years since it was founded. It now faces three main challenges: changes in the information environment, changes in strategic and geographical priorities, and the prevailing climate in favour of reduced public spending.
Never before has so much information been available to people at the touch of a button. Staff at the Foreign Office in London can read this morning's American newspapers; the right hon. Member for North-East Hampshire (Mr. Arbuthnot) can read this morning's Arab and Israeli press. Information comes at us from all directions—from television, radio, the print media, the internet, mobile phones and so on. If anything, the problem these days is information overload, not information shortage. That is very different from the dark days of 1939, when we struggled to keep track of what was going on just across the channel.
As we have seen, the geographical focus of our interests has shifted and strategic priorities have changed over time. The campaign against terrorism is now a top priority. BBC Monitoring plays a valuable role in providing information on developments in the middle east and elsewhere. It continues to play a key role in covering closed societies such as North Korea, and can make a particularly useful contribution to our understanding of developments in countries with little freedom of information and tight state control of the
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media. The question obviously arises: should it focus only on those priority targets, or should it continue to offer global coverage?
The financial climate sets an important backdrop for our thinking. The Chancellor, in his Budget speech, warned that the next public expenditure round would be tough for most Departments, and that certainly includes the Foreign and Commonwealth Office. That comes at a time when we are facing a number of pressures. For example, the campaign against terrorism has led to increased spending on the security of our overseas staff. We also have to find substantial additional resources—both human and financial—to enable us to establish a meaningful presence in Iraq.
My right hon. Friend called for additional funding to be made available to BBC Monitoring. I cannot speak for the other users of the service, but I know that it faces the same pressures on resources as the FCO, and I find it difficult to envisage any increase in funding for it. Frankly, we will have to think hard about whether we are able to maintain existing levels of spending. The pressure on public spending will force us to make hard choices. We will have to look rigorously at our spending programmes and what they contribute to the achievement of our objectives. The annual £7 million grant to BBC Monitoring is substantial in FCO terms, which we must take into account as we weigh up the options.
I am grateful to my right hon. Friend for the points that he has made today and I assure him that they will be borne in mind as we consider the difficult issues in the months ahead. He will appreciate that no decisions have been taken about the future of BBC Monitoring. The issue is under consideration, but I hope that he will understand that I am unable to go into further detail today since no decisions have been made.
Question put and agreed to.
Adjourned accordingly at twenty-two minutes past Four o'clock.

DEFENCE
  Afghanistan
  Afghanistan
  Iraq
  Iraq
  Chris Rowlands
  Chris Rowlands
  Service Communications
  Service Communications
  Kosovo
  Kosovo
  Leslie John Douglas
  Leslie John Douglas
  Medical Reservists
  Medical Reservists
  Sean Benton
  Sean Benton
  Territorial Army
  Territorial Army
TREASURY
  Small Businesses
  Small Businesses
  Biofuels
  Biofuels
  Direct Payment
  Direct Payment
  Community Benefit Society Asset Locks
  Community Benefit Society Asset Locks
  Complaints
  Complaints
  E-business Strategy
  E-business Strategy
  Energy Saving Allowance
  Energy Saving Allowance
  Inland Revenue
  Inland Revenue
  Personal Tax Allowances
  Personal Tax Allowances
  Tax Avoidance
  Tax Avoidance
  Tax Fraud and Evasion
  Tax Fraud and Evasion
  VAT
  VAT
  Working Tax Credit
  Working Tax Credit
SCOTLAND
  Asbestos
  Asbestos
  Common Fisheries Policy
  Common Fisheries Policy
  Departmental Communications
  Departmental Communications
  Mineral Water Industry
  Mineral Water Industry
  Scottish Executive
  Scottish Executive
EDUCATION AND SKILLS
  Capital Modernisation Fund (Crosby)
  Capital Modernisation Fund (Crosby)
  Sure Start
  Sure Start
  Education (Stroud)
  Education (Stroud)
  IT Procurement
  IT Procurement
  Maintained Schools (Languages)
  Maintained Schools (Languages)
  Return-to-work Training (Crosby)
  Return-to-work Training (Crosby)
  Schools (West Suffolk)
  Schools (West Suffolk)
ENVIRONMENT, FOOD AND RURAL AFFAIRS
  Peat
  Peat
  Animal Welfare
  Animal Welfare
  Badgers/Bovine TB
  Badgers/Bovine TB
  Cattle Movements
  Cattle Movements
  Cetacean By-catch
  Cetacean By-catch
  Computer Production (Environmental Effects)
  Computer Production (Environmental Effects)
  Correspondence
  Correspondence
  Cotswolds Canals
  Cotswolds Canals
  Deer Sanctuaries
  Deer Sanctuaries
  Energy Efficiency
  Energy Efficiency
  Farming
  Farming
  Foot and Mouth Disease
  Foot and Mouth Disease
  Gamma Interferon Test
  Gamma Interferon Test
  GM Crops
  GM Crops
  Illegal Meat Imports
  Illegal Meat Imports
  Lamb and Beef Farming (Lancashire)
  Lamb and Beef Farming (Lancashire)
  Nappies
  Nappies
  Nuclear Materials
  Nuclear Materials
  Pesticides
  Pesticides
  Plant Diversity
  Plant Diversity
  Printer Cartridges
  Printer Cartridges
  Sewer Baiting
  Sewer Baiting
  Sugar Regime
  Sugar Regime
  US Ships
  US Ships
  Wildlife Habitats
  Wildlife Habitats
CABINET OFFICE
  Departmental Communications
  Departmental Communications
  Official Opposition (Officials)
  Official Opposition (Officials)
CULTURE, MEDIA AND SPORT
  National Lottery
  National Lottery
  New Opportunities Fund
  New Opportunities Fund
  Police Transfers
  Police Transfers
  Television Signal
  Television Signal
TRANSPORT
  Bus Services
  Bus Services
  Cycling Accidents
  Cycling Accidents
  Departmental Scientific Adviser
  Departmental Scientific Adviser
  E-business Strategy
  E-business Strategy
  Fuel-efficient Vehicles
  Fuel-efficient Vehicles
  Headlamp Glare
  Headlamp Glare
  M1
  M1
  Science Strategy
  Science Strategy
  Speeding
  Speeding
  Steer Davies Gleave
  Steer Davies Gleave
  Vehicle Excise Duty
  Vehicle Excise Duty
CONSTITUTIONAL AFFAIRS
  Cleveland Coroner Inquiry
  Cleveland Coroner Inquiry
  Fines (Salisbury Courts)
  Fines (Salisbury Courts)
  Liability Claims
  Liability Claims
  Project Funding
  Project Funding
  Hutton Inquiry
  Hutton Inquiry
  Supreme Court
  Supreme Court
HEALTH
  Social Work
  Social Work
  Patients Forums
  Patients Forums
  Obesity
  Obesity
  Hospital-acquired Infections
  Hospital-acquired Infections
  Health Services (West Worcestershire)
  Health Services (West Worcestershire)
  Blood Donation
  Blood Donation
  Sports Provision
  Sports Provision
  Digital Hearing Aids
  Digital Hearing Aids
  Administration Costs
  Administration Costs
  Alcohol-related Violence
  Alcohol-related Violence
  Angiography
  Angiography
  Berners Willi Syndrome
  Berners Willi Syndrome
  Carers Assessments
  Carers Assessments
  Chronic Disease Management
  Chronic Disease Management
  Dentistry
  Dentistry
  East Midlands Ambulance Service
  East Midlands Ambulance Service
  Elderly People
  Elderly People
  Environmental Protection
  Environmental Protection
  NHS Trusts
  NHS Trusts
  Franchise Managers
  Franchise Managers
  Hip Replacements
  Hip Replacements
  Hospital Car Park Charges
  Hospital Car Park Charges
  Medical Contracts
  Medical Contracts
  NHS Professionals
  NHS Professionals
  Nursing
  Nursing
  Parliamentary Questions
  Parliamentary Questions
  Patient Power
  Patient Power
  Primary Care Trusts
  Primary Care Trusts
  Private Health Providers
  Private Health Providers
  Recruitment
  Recruitment
  Temporary Staff
  Temporary Staff
  Trusts (Franchise Appointments)
  Trusts (Franchise Appointments)
  Wanless Report
  Wanless Report
TRADE AND INDUSTRY
  End of Life Vehicles Directive
  End of Life Vehicles Directive
  Energy Supplies
  Energy Supplies
  EU Regional Policy
  EU Regional Policy
  Supermarket Supply
  Supermarket Supply
  British Electricity Trading and Transmission Arrangements
  British Electricity Trading and Transmission Arrangements
  Company Investment (Middle East)
  Company Investment (Middle East)
  Conferences and Seminars
  Conferences and Seminars
  Export Contracts (Iraq)
  Export Contracts (Iraq)
  Miners' Compensation
  Miners' Compensation
  Mobile Phone Tracking
  Mobile Phone Tracking
  Official Engagements (Linlithgow)
  Official Engagements (Linlithgow)
  Postwatch/Postwatch Scotland
  Postwatch/Postwatch Scotland
  Press Officers
  Press Officers
  Renewable Energy
  Renewable Energy
  Renewables Obligation Certificates Scheme
  Renewables Obligation Certificates Scheme
  Taxis
  Taxis
  Tidal Power
  Tidal Power
  Wind Farms
  Wind Farms
WORK AND PENSIONS
  Carer's Allowance
  Carer's Allowance
  Child Support Agency
  Child Support Agency
  Council Tax Benefit
  Council Tax Benefit
  Discretionary Social Fund
  Discretionary Social Fund
  Earnings Disregards
  Earnings Disregards
  Employers' Liability Compulsory Insurance
  Employers' Liability Compulsory Insurance
  Lone Parents
  Lone Parents
  National Insurance Pension Benefits
  National Insurance Pension Benefits
  New Deal
  New Deal
  Pension Entitlements
  Pension Entitlements
  Pensioner Incomes
  Pensioner Incomes
  Pensions
  Pensions
  Worktrain Scheme
  Worktrain Scheme
FOREIGN AND COMMONWEALTH AFFAIRS
  Bodies/Associations
  Bodies/Associations
  Cameroon/Nigeria
  Cameroon/Nigeria
  European Radio Asia
  European Radio Asia
  Guantanamo Bay Detainees
  Guantanamo Bay Detainees
  Kosovo
  Kosovo
  Laos
  Laos
  Marshall Aid Commemoration Commission
  Marshall Aid Commemoration Commission
  McCann v. United Kingdom
  McCann v. United Kingdom
  Mr. Maajid Nawaz
  Mr. Maajid Nawaz
  Secondees
  Secondees
NORTHERN IRELAND
  Belfast Metropolitan Area Plan
  Belfast Metropolitan Area Plan
  Census Records
  Census Records
  Dentistry
  Dentistry
  Road Safety
  Road Safety
  End-of-life Vehicle Directive
  End-of-life Vehicle Directive
  Essential Skills Strategy
  Essential Skills Strategy
  Futurebuilders Fund
  Futurebuilders Fund
  Gocean Development
  Gocean Development
  Hospital Beds (Psychiatric Patients)
  Hospital Beds (Psychiatric Patients)
  Land Use (Dundonald)
  Land Use (Dundonald)
  Patient Exemption Fraud
  Patient Exemption Fraud
  Police
  Police
  Prisons
  Prisons
  Road Taxes
  Road Taxes
  Security Costs
  Security Costs
  Speaker's Office
  Speaker's Office
  Terrorism
  Terrorism
  Waste Management
  Waste Management
LEADER OF THE HOUSE
  Members' Staff (Pensions)
  Members' Staff (Pensions)
MINISTER FOR WOMEN
  Domestic Violence
  Domestic Violence
DEPUTY PRIME MINISTER
  Affordable Housing
  Affordable Housing
  Building Regulations
  Building Regulations
  English Channel
  English Channel
  Compulsory Purchase Orders
  Compulsory Purchase Orders
  Housing
  Housing
  Local Authority Statistics
  Local Authority Statistics
  New Deal for Communities
  New Deal for Communities
  Ordnance Survey
  Ordnance Survey
  Public Toilets
  Public Toilets
  Recruitment Advertising
  Recruitment Advertising
  Regeneration Partnerships
  Regeneration Partnerships
  Small Business Support
  Small Business Support
  Social Housing (Greater London)
  Social Housing (Greater London)
HOME DEPARTMENT
  Freight (Theft)
  Freight (Theft)
  Primates
  Primates
  "Reducing Crime—Changing Lives"
  "Reducing Crime—Changing Lives"
  Anti-terrorism (Overseas Evidence)
  Anti-terrorism (Overseas Evidence)
  Cargo Theft
  Cargo Theft
  Child Abuse
  Child Abuse
  Coroners
  Coroners
  Corruption
  Corruption
  Crime
  Crime
  Criminal Cases Review Commission
  Criminal Cases Review Commission
  Criminal Justice Act
  Criminal Justice Act
  Dogs Act
  Dogs Act
  Domestic Violence
  Domestic Violence
  Drug Abuse (Avon and Somerset)
  Drug Abuse (Avon and Somerset)
  Emergency Services (Attacks)
  Emergency Services (Attacks)
  Forensic Science Service
  Forensic Science Service
  Greater London Crime Statistics
  Greater London Crime Statistics
  Homicide Law
  Homicide Law
  Huntingdon Life Sciences
  Huntingdon Life Sciences
  Identity Cards
  Identity Cards
  Internet Child Pornography
  Internet Child Pornography
  Legislation
  Legislation
  Misuse of Computers Act
  Misuse of Computers Act
  National Offender Management Service
  National Offender Management Service
  Neighbourhood Wardens
  Neighbourhood Wardens
  Parole
  Parole
  Police
  Police
  Prison Governors
  Prison Governors
  Prison Officers
  Prison Officers
  Prison Staff
  Prison Staff
  Prison/Probation Services
  Prison/Probation Services
  Prisoner Categories
  Prisoner Categories
  Prisoner Statistics
  Prisoner Statistics
  Prisons
  Prisons
  Probation
  Probation
  Science Strategy
  Science Strategy
  Sentencing Statistics
  Sentencing Statistics
  Shoplifting
  Shoplifting
  Traffic Officers
  Traffic Officers
  Wormwood Scrubs
  Wormwood Scrubs
DEFENCE

  Principal Service Museums
  The Parliamentary Under-Secretary of State for Defence (Mr. Ivor Caplin)
  The business process review of the six principal service museums has been completed. The review confirmed the value of the museums and recommended their continued support by the MOD. The review also recommended a number of measures to improve communication between the museums and their relevant sponsor branch, to provide assurance of value for money and to facilitate longer term planning. These will be taken forward by the Deputy Chief of the Defence Staff (personnel) in conjunction with the three service sponsor branches.

  Estate Rationalisation (Presentation Strategy)
  The Parliamentary Under-Secretary of State for Defence (Mr. Ivor Caplin)
  The 2003 defence estate stewardship report is published today. This report outlines the continuing progress that the Ministry of Defence is making in implementing the estate strategy that was launched in 2000.

  The Ministry of Defence is continually examining ways of improving military capability and value for money for the taxpayer. As part of this approach, we want to keep the size and location of our bases under review. Building on initial work that has been done to identify the MOD's core sites, the Department is now undertaking further work to examine where estate rationalisation may be possible. This work is consistent with the Department's contribution to the Government's independent review of public sect or rationalisation—the "Lyons Review".

  The work now underway is looking at consolidating defence activity at a smaller number of more densely utilised locations in order to achieve the optimum use of land and facilities. This on-going review will necessarily involve the examination of a number of proposals for the potential collocation and relocation of units. It will also take into account existing relocation studies that have already been announced. It is important to recognise that any options that are considered will need to meet operational requirements as well as representing value for money.

  The Department is currently at an early stage of this wider review and each proposal that emerges from this work will be subject to full consultation in the normal way. This consultation is essential to determine whether the options under consideration are viable in the widest sense, for instance, in relation to transport, education, health and the future use of potential surplus MOD sites.

  48WS
  No decisions have yet been reached on any site, but as this matter progresses I will ensure that right hon. and hon. Members are advised of progress where such an issue may affect their constituency.

  A copy of the report is in the Library of the House.

CULTURE, MEDIA AND SPORT

  Licensing Act 2003
  The Secretary of State for Culture, Media and Sport (Tessa Jowell)
  I am today laying before Parliament a draft of the guidance to be issued by me under section 182 of the Licensing Act 2003. I am also placing copies in the Libraries of both Houses, the Vote Office, and the Printed Paper Office. Copies will be made available to the public on the DCMS website at:

  http://www.culture.gov.uk/alcohol_and_entertainment/licensing_act_2003.

  The guidance makes clear our determination to enable licensing authorities and the police to bring the minority of badly run premises into line with the best. The police and other responsible authorities should make full use of existing, and new powers under the Act, proactively tackling alcohol-related crime and disorder and badly run premises.

  In carrying out their functions under the Act, licensing authorities have a clear responsibility to promote the prevention of crime and disorder, and the prevention of public nuisance, as well as promote public safety, and protect children from harm.

DEPUTY PRIME MINISTER

  Planning and Compulsory Purchase Bill
  The Minister for Housing and Planning (Keith Hill)
  On 15 December I issued a statement noting that I had received significant representations from organisations representing housebuilders and other major developers indicating their concerns about the potential removal from planning legislation of outline planning permission and its effect on proposed developments. I said that I would consider further the removal of the provision from the Planning and Compulsory Purchase Bill that abolishes outline planning permission.

  My statement said that if outline planning permission were to be retained this could only be on the basis that it provided the opportunity for greater community involvement and a level of information which will enable local authorities to assess all the significant environmental impacts. I indicated my willingness to consider proposals on the scope and extent of the further information needed to achieve these objectives.

  Discussions have been held with the Commission for Architecture and the Built Environment and representatives of developers. We have received letters from the British Property Federation (BPF) and the House Builders Federation (HBF) indicating their willingness for their members to provide sufficient information with applications for outline planning permission to satisfy our objectives. The information would meet the requirements of environmental impact assessments and would comprise elements to be included

  49WS
  in a design statement. These elements would be massing, layout, relationship to public space, density (as defined by units for residential developments or floorspace for commercial developments), building heights, access and movements, landscape strategy, mix of use and response to context. The level of information provided would be appropriate to the complexity of the scheme. We see this information as providing the foundation for greater community involvement.

  Following the discussions with developers and the receipt of the letters from the BPF and the HBF I am pleased to announce that the Government are now prepared to retain outline planning permission as part of
  50WS
  the Town and Country Planning Act 1990. We will table an amendment to achieve this for consideration on 25 March during third reading in the House of Lords of the Planning and Compulsory Purchase Bill.

  We propose to use the standard application form proposed in the Bill as the means for the submission of the additional information to be required to accompany an application for outline planning permission. The details would be set out in secondary legislation, in an amendment to the General Permitted Development Order and in guidance accompanying the standard application form. We aim to consult on this package in June.

Preamble
The House met at half-past two of the clock: The LORD CHANCELLOR on the Woolsack.
Prayers—Read by the Lord Bishop of Portsmouth.

Incomes Gap: Social Consequences
Lord Lea of Crondall Lord Lea of Crondall asked Her Majesty's Government:
Whether there are any negative consequences for social cohesion in the growing gap between the highest and lowest pay levels in the United Kingdom.
The Parliamentary Under-Secretary of State, Department for Culture, Media and Sport (Lord McIntosh of Haringey): My Lords, the Government's objective is to build a strong economy and a fair society, with opportunity and security for all, by tackling poverty and social exclusion. The Government's policies are aimed at raising the incomes of the poorest families with children and pensioners relative to the average of the population, not at trying to drag down the position of the highest earners. With the new tax credits, the national minimum wage and the pension credit, we have taken major steps to achieve this.
Lord Lea of Crondall: My Lords, top FTSE chief executives arc now for the first time being paid an average of £1 million per year, which is 100 times the minimum wage compared to 20 times only a few years ago. Is it not "the unacceptable face of capitalism"—to quote Sir Edward Heath for the same people to urge ordinary workers not to put in for double-figure pay rises, while at the same time awarding themselves increases that are six times the average in percentage terms and 600 times more in absolute terms than those at the bottom?
Secondly, in view of the restrictive practices and total abdication of social responsibility by remuneration committees of boards, will my noble friend provide for a representation of employees as well as shareholders on them, and refer their activity to the Restrictive Practices Court or its equivalent?
Lord McIntosh of Haringey: My Lords, I happen to share my noble friend's distaste for conspicuous consumption at the top, but that does not take away from the fact that it is far more effective when dealing with social cohesion—to go back to the original Question—to deal with poverty rather than to concentrate on the activities of the highest paid. Even taking that into account, we have to remember that the top 10 per cent of income taxpayers pay 52 per cent of the income tax received.
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I think that the noble Lord's second question about management boards is somewhat wide of the Question.
The Lord Bishop of Portsmouth: My Lords, my question is about children. Top people quite rightly attract a lot of attention. The Government are to be congratulated on wanting to bring child poverty down by 25 per cent in the next two years. Does the Minister agree that 12 per cent of all children living in abject poverty and in lone-parent homes is a worryingly high figure? What does he propose to do about it?
Lord McIntosh of Haringey: My Lords. I entirely agree with that. I agree that it is a worrying figure. We have to remember that relative child poverty doubled in the years before 1997. We have not yet achieved the reduction of a quarter, but we have taken 500,000 children out of poverty. I take a great deal of pride collectively on behalf of the Government for that. We have done that at a time of very high growth in median incomes against which poverty is compared.
Lord Dholakia: My Lords, is there adequate monitoring of pay levels affecting women and ethnic minorities? Will the Minister confirm that they feature on pay scales at a very low level? If so, what effect does that have on social cohesion?
Lord McIntosh of Haringey: My Lords, there is very full monitoring, as I am sure the noble Lord, Lord Dholakia, knows. I have a document in front of me called The Effects of Taxes and Benefits on Household Income 2001 which, at nearly 100 pages, is a little long for me to read. We do monitor the differentials for women and ethnic minorities and we do acknowledge that there are significant differentials at the lower end of pay scales.
Lord Marlesford: My Lords, does the noble Lord feel that perhaps one aspect of the problem raised by the noble Lord, Lord Lea, was dealt with rather well by the American industrialist J Peter Grace, who, when asked for an enormous salary by one of his executives, replied: "do not have a problem paying you that sort of money; you just have a problem earning it".
Lord McIntosh of Haringey: My Lords, I do not reply to other people's jokes—particularly good ones.
Lord Sheldon: My Lords, is not one of the major problems the remuneration committees themselves? People who are members of those committees have a vested interest because of their other activities.
Lord McIntosh of Haringey: My Lords, that may well be the case in some circumstances. My response to the original Question was about our attack on poverty. I stick to that thrust.
Lord Newby: My Lords, does the Minister agree that one way of dealing with excessive levels of income at the top end and child poverty at the bottom would be to have a somewhat more redistributive income tax policy? For example, the introduction of a rate of 50 per cent on incomes over £100,000 per year—a rate incidentally significantly less than the top rate which obtained during the majority of the previous Conservative administration might kill two birds with one stone?
Lord McIntosh of Haringey: My Lords, I am interested that the noble Lord, Lord Newby, should say that on 23 March 2004. If one looks back at the record of what Liberal Democrats have been saying over the past few years since they adopted this policy, one will find that there are periods of strange silence. I am glad to know that the issue is back on the agenda again. It helps us all to know where we stand.
Lord Hoyle: My Lords, does my noble friend agree that perhaps the solution is to have employees on the boards so that they can watch these activities?
Lord McIntosh of Haringey: My Lords, I have already been asked that question. My answer has been about poverty rather than about a small number of people with very high pay. My objection to such people is more aesthetic than economic.
Lord Skelmersdale: My Lords, the Government's own figures show that income inequality is higher now than at any point under the previous two Conservative Prime Ministers. Why has this inequality risen since the party opposite came to power?
Lord McIntosh of Haringey: My Lords, it has not. The fact is that differences between the top and lower 10 per cent, which had been increasing, have now stabilised—they have stabilised since 2001. In the financial year 2002–03, the income of the bottom 10 per cent rose by 3.3 per cent; and of the top 10 per cent by 2.3 per cent. Of course, we can always play different games with quintiles, deciles and so on to produce the figures that suit us, but those figures are significant.
Lord Haskel: My Lords, does my noble friend agree that one of the main reasons for the growing gap in pay is the difference in skills? Does he agree that industry today demands much higher skills and is prepared to pay a lot more for them, and that the reason for the gap is that those people who have the skills get the pay and those who do not, do not?
Lord McIntosh of Haringey: My Lords, I cannot disagree with that in general, but there are an awful lot of exceptions of people without skills receiving excessive pay packages.

Government Departments: Efficiency Review
2.43 p.m.
Lord Campbell-Savours Lord Campbell-Savours asked Her Majesty's Government:
When the head of their efficiency review, Sir Peter Gershon, will report to Parliament.
Lord McIntosh of Haringey: My Lords, Sir Peter Gershon is working closely with departments to help them develop efficiency proposals for consideration in the 2004 spending review. Departments' agreed efficiency programmes will be published in parallel with the final spending review settlement.
Lord Campbell-Savours: My Lords, my noble friend will know that the public sector can often provide services more efficiently and more cheaply than the private sector. With that in mind, would he ask Sir Peter Gershon whether he recommends the establishment of a national online teacher recruitment agency, which could be run for as little as £2 million or £3 million a year, to replace the existing, fragmented teacher recruitment arrangements, which currently cost between £60 million and £80 million pounds per year? Is not a substantial saving to the taxpayer available?
Lord McIntosh of Haringey: My Lords, my noble friend asked that question of my noble friend Lady Ashton in May last year. She replied that the Government do not recruit or employ teachers directly but expressed interest in any measure that increases efficiency in the system. However, surely one of the most effective ways of reducing the cost of recruiting teachers is to reduce the vacancy rate. The vacancy rate for teachers, and therefore in parallel the turnover rate, has been decreasing, but I am not resistant to my noble friend's suggestion, which I am sure that the Department for Education and Skills will consider seriously.
Lord Newby: My Lords, does the Minister accept that the Government cynically leaked an early draft of the Gershon report to a single journalist to spike the guns of the Conservative Party, which was launching a report on public expenditure on the same day? Does he accept that that complete disregard for the parliamentary process helps to reduce trust in government, and will he urge his colleagues in the Treasury to place in the Library of the House the draft of the Gershon report that was leaked to the Financial Times, was briefed by officials to a single Financial Times journalist and was covered over several pages in the Financial Times? The rest of us have not had the benefit of seeing the text of that draft.
Lord McIntosh of Haringey: My Lords, I have no knowledge of what the noble Lord, Lord Newby, calls a cynical leak. That is an assertion that he makes. He is entitled to his own interpretation, but it is certainly the case that the report in the Financial Times was broadly accurate.
Lord Brooke of Alverthorpe: My Lords, does my noble friend agree that most of the major themes of the Gershon efficiency report, when it appears, are already in the Red Book and available for everyone to see? In the light of that, does he agree that one of those major themes will be a cross-cutting approach to effect efficiencies? What mechanisms exist in the Palace of Westminster for a cross-cutting approach to be taken to examine our separate establishments for the House of Lords and the House of Commons, to see whether we may seek efficiencies here also?
Lord McIntosh of Haringey: My Lords, on my noble friend's first point, yes, Chapter 6 of the Red Book indeed contains a very full exposition of the Government's position on efficiency and how to achieve it in departments. Perhaps I should have given that answer to the noble Lord, Lord Newby, when he talked as if we are somehow being deprived of information that ought to be in the public domain. However, among the more difficult public sector activities for the Government to control are the House of Commons Commission and the expenditure of the House of Lords.
Lord Skelmersdale: My Lords, let us return to the Government. In his Budget last week, the Chancellor said that he intends to make 5 per cent real-terms savings in a number of departments by 2008. How does that square with the Financial Secretary to the Treasury's view on "Newsnight" the other day, who said of the Gershon review:
"These are very long-term, speculative gains"?
Lord McIntosh of Haringey: My Lords, I think that we can state the position very precisely. What Gershon is saying is that there is a target of 2.5 per cent savings per annum in other words, a freeze in money terms—over the spending review period, which is 2005–08. If achieved, that will result in a saving of £20 billion. That target is consistent with both the statements cited by the noble Lord, Lord Skelmersdale.

People Trafficking
2.49 p.m.
Lord Hylton Lord Hylton asked Her Majesty's Government:
What protection should be afforded to victims of people trafficking, who have reached England and Wales, both before and after the Asylum and Immigration (Treatment of Claimants, etc.) Bill becomes law.
Lord Bassam of Brighton: My Lords, in February 2000, the Government set out their comprehensive strategy for addressing the trafficking of men, women and children in the White Paper Secure Borders, Safe Haven. The strategy recognises the need for a multifaceted response to the abhorrent trade in human beings. The provisions in the Asylum and Immigration
590
(Treatment of Claimants, etc.) Bill support a continued commitment to the fight against those who would seek to exploit the vulnerable.
Lord Hylton: My Lords, I thank the noble Lord for his Answer. Have the Government noted that no fewer than 32 London boroughs acknowledge having a problem with trafficked children? Will the many facets quoted by the noble Lord include reimbursement of local authorities for all their protection costs? As to adults, will the criteria for the existing Poppy Project be widened, so that women do not have to suffer sexual abuse before they can receive the help that they need?
Lord Bassam of Brighton: My Lords, I am interested In the noble Lord's request for funding on behalf of 32 London boroughs. It must be remembered that London boroughs already receive support through the grant formula, and that the grant formula is finely tuned to take account of pressures on spending, particularly in social services. We keep the formula under careful review, and we listen carefully to what local authorities say on those matters. The criteria for the Poppy Project and Eaves Housing are right. The pilot project has proved to be of immense value. It has been extended until April 2005, and we will need to take careful account of the use that is made of that project in looking at the criteria in the future, particularly if the project is to continue beyond 2005.
Lord Avebury: My Lords, although I welcome the support that the Home Office has given to the Poppy Project, is it not limited to women victims of trafficking for prostitution? What help, other than the Poppy Project, is the Home Office giving to victims of trafficking for other purposes, particularly to children? Does the Answer that the noble Lord gave to the noble Lord, Lord Hylton, mean that there is no special help for any local authority that must cope with a large number of trafficked children? Is the noble Lord aware that it is not only a problem in London, but in other parts of the country also? It is particularly a problem in areas adjacent to airports, where unaccompanied children are finding themselves dumped on to social services departments. Will the Government at least ask local authorities to make returns so that we know the size of this problem and the number of trafficked children that are entering the country?
Lord Bassam of Brighton: My Lords, this is a sensitive issue. We listen carefully to what local authorities say. We have been working with the Department of Health to ensure that we have a code of practice that provides guidance in this area. If there are particular spending pressures, no doubt the Local Government Association and those local authorities with particular problems I understand that those with airports adjacent have particular problems—will make representations. As I described, the Government's approach is multi-faceted. It concentrates on prevention and enforcement, but it

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also ensures that resources are available to help those voluntary organisations that provide facilities to assist where there is evidence of trafficked children.
Baroness Sharples: My Lords, can the Minister give us an estimate of the numbers involved in this trafficking?
Lord Bassam of Brighton: My Lords, by the very clandestine nature of the operation, it is hard to give meaningful estimates. Our estimates suggest that anything between 140 and 1,400 persons are trafficked each year, but that is only a very rough estimate. It is hard to seek returns on that.
Baroness Anelay of St Johns: My Lords, the Minister referred to the multi-faceted approach of the Government to this serious problem. Within that approach, does he agree that the Domestic Violence, Crime and Victims Bill, which is currently before this House, should give protection to people who are so cruelly trafficked? If so, will he give a commitment to support an amendment that I have tabled to the Bill that will come up on Thursday, which achieves that objective? As the noble Lord knows, I am always ready to help the Government.
Lord Bassam of Brighton: My Lords, I am always enormously grateful when the noble Baroness offers her help and assistance. We always have an open mind on these matters, but without the precise wording of the amendment in front of me—I understand the political point that the noble Baroness is making—I obviously cannot give such a commitment. We have a robust strategy in place that is based on co-operation and working with agencies across the world, particularly in Europe. It is based on ensuring that local authorities are effective in the work that they carry out. It is also based on a case-by-case understanding of the problem as it presents itself.
The Earl of Sandwich: My Lords, in line with the question asked by the noble Baroness, Lady Anelay, is the noble Lord aware that Clause 4 of the Asylum and Immigration (Treatment of Claimants, etc.) Bill was well received for its mention of offences? Can he explain why it does not also underline the need for protection, as the noble Baroness mentioned with regard to the Domestic Violence, Crime and Victims Bill?
Lord Bassam of Brighton: My Lords, we have gone some way on the issue of protection. The noble Lord will know better than I that the Nationality, Immigration and Asylum Act 2002 dealt with that issue. We have put in place further measures to penalise traffickers since then—the Sexual Offences Act 2003 and Clause 4 of the Asylum and Immigration (Treatment of Claimants, etc.) Bill—so that sexual exploitation and labour exploitation issues are covered and we hit hard those people who deal in the abhorrent trade of human trafficking.
Lord Dholakia: My Lords, is the Minister satisfied that social services departments offer adequate
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supervision of the victims of trafficking in their care? Is he aware of cases involving West Sussex County Council, where children have disappeared without trace? Is there evidence that they are further trafficked for the purpose of prostitution?
Lord Bassam of Brighton: My Lords, we have discussed on several occasions in your Lordships' House the West Sussex case and the allegations of disappearance. An operation was undertaken to investigate that. Sadly, the investigation did not result in arrests or prosecutions, but there have been other instances, particularly in the UK, where useful co-operation has taken place. A number of high profile prosecutions have taken place; some 37 since 2002 when the first phalanx of new offences was introduced. As to our general level of satisfaction with local authority performance, we are satisfied that they are working hard, but there is, as ever, plenty of scope for improvement. That is why we are working hard with them to ensure that we can identify the problem when it first presents itself.
Earl Ferrers: My Lords, the noble Lord has mentioned twice the Government's -multi-faceted response". Will he explain what he means?
Lord Bassam of Brighton: My Lords, it boils down to ensuring that you have all angles covered—or as many angles as you can—whether it is dealing with immigration across Europe, relations between agencies in the UK, or ensuring that the police are working with social services. It is a strategy that works at many levels.

Terrorist Attacks in Spain: Implications for UK Foreign Policy
2.57 p.m.
Lord Blaker Lord Blaker asked Her Majesty's Government:
What are the implications for United Kingdom foreign policy of the recent bomb explosions in Spain.
The Minister of State, Foreign and Commonwealth Office (Baroness Symons of Vernham Dean): My Lords, the dreadful events in Madrid on the morning of 11 March underline the importance of maintaining the international fight against terrorism as a top priority in the United Kingdom's foreign policy. The threat from indiscriminate, mass casualty terrorism has been with us for several years. This Government have been clear and consistent in their commitment to tackling this threat. The Prime Minister will discuss this with the leaders of our EU partners at the European Council this week.
Lord Blaker: My Lords, I accept the general drift of the Answer given by the noble Baroness. I raise two points. The first is that the change of government in Madrid is likely to lead to a European constitution that is less acceptable to this country than had

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previously been hoped for. That makes it even more important that there should be a referendum in due course, which is what most people want according to the opinion polls. The second point relates to the dreadful assassination of Sheikh Yassin yesterday in the Gaza Strip. Surely that will be followed by extra terrorism, not necessarily confined to Israel, but possibly anywhere. Surely, that makes it essential that the powers that make up the quartet should now return to the charge to get some momentum into the peace process between Israel and the Palestinians, and not leave it until after the American elections in November.
Baroness Symons of Vernham Dean: My Lords, we must see how the new government in Spain decide to deal with their various responsibilities, both with regard to the European questions that the noble Lord raised and to questions that are perhaps more closely related to Iraq and to terrorism. There will be many questions to be settled and discussed with the new government.
With regard to the assassination of Sheikh Yassin, which took place yesterday, your Lordships will know that my right honourable friend the Foreign Secretary has made the British Government's position clear. I remind the noble Lord, Lord Blaker, that the last time that he asked a similar question, I was able to reassure him about the level of the Government's engagement in issues relating to the Middle East and the Israel/ Palestine conflict. I assure him that the level of engagement remains very high. We will do everything that we can to pursue through every possible means a peaceful settlement, as we have done in the past few weeks. I do not think that the events of yesterday will have helped.
Lord Clinton-Davis: My Lords, neither of the questions raised by the noble Lord have anything to do with the Question on the Order Paper. Will my noble friend ensure that everything is done to promote good relations with the new government of Spain, particularly at prime ministerial level?
Baroness Symons of Vernham Dean: My Lords, the noble Lord framed his Question very widely—rather cleverly, perhaps. He asked what the implications were for foreign policy, and then he asked a question about European foreign policy and a question about foreign policy in the Middle East. So, perhaps, he was not that wide of the mark. Even if they were not quite what I expected, they were, I think, legitimate questions none the less.
Your Lordships will know that many of my colleagues in government have very good relationships with those coming into government in Spain. Of course, some things have been said on various issues by the incoming Government that have caused some eyebrows to rise. We already have a good relationship with incoming Prime Minister Zapatero, and your
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Lordships will have heard several of my colleagues in another place express the desire to further that relationship.
Baroness Williams of Crosby: My Lords, does the Minister agree that we should congratulate the Spanish police on what appears to have been an effective operation to apprehend a range of people who may have been connected with the outrage in Spain? Returning to the main theme of the Question, may I ask whether one of the lessons that we should draw from the dreadful Spanish explosions is that it is unwise to make assumptions about the source of a terrorist outrage until all the facts are known? The Minister will recognise that the then Prime Minister—rather unwisely, perhaps appeared to attribute the terrorism to ETA. It later emerged that that was very unlikely, although we do not know for certain.
Does the Minister agree that there is a parallel with the remarks made by Richard Clarke, the senior counter-terrorism expert advising the United States Administration? In a statement to CBS on -60 Minutes", he said that he was specifically asked to try to find reasons to connect Iraq with Al'Qaeda. Would it not be better to conclude that we should concentrate on the fight, as the Minister implied, against Al'Qaeda and not be distracted by a political aspiration to make other people the centre of our charges?
Baroness Symons of Vernham Dean: My Lords, throughout the discussions in your Lordships' House on foreign policy issues, I have tried hard to deal with facts, not speculation. I am often asked to speculate, and I do my best to resist the temptation, no matter how attractive it may seem.
Of course I congratulate the police in Spain on the arrests that have been made, but I caution the noble Baroness—she was careful about what she said—that we should not assume guilt before people have gone through a legal process. It is none the less reassuring to know that the police have been active.
Was there too quick a condemnation of ETA? We must wait for the Spanish authorities to reach some conclusions about who was responsible. The Spanish authorities said that they had good reason, given recent intelligence warnings that they had received. I have no means of knowing the depth of those warnings.
The noble Baronessreferred to Richard Clarke. I say to her that we should also hear the other side of the question. We should hear what is said by Mr Rurnsfeld and by Mr Powell, when they too give evidence. The noble Baroness urges us to wait to see all sides of the question; I urge her to wait to see that side of the question too.
The Lord Bishop of Portsmouth: My Lords, I shall return to the question asked by the noble Lord, Lord Clinton-Davis. Does the Minister agree that the

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new Spanish Government's policy on the Iraq war is a more accurate mirror of traditional Spanish foreign policy than that of the previous government?
Baroness Symons of Vernham Dean: My Lords, I do not know that I am in a position to make such a judgment about Spanish foreign policy over the years. I would be reluctant to do so without considerably more information.
The incoming Prime Minister of Spain has made it clear that no formal decisions will be taken about the way in which Spain deals with the Iraq issue until he has come into office and had the opportunity to consult more widely. To all those who said that it was a fait accompli that Spanish troops would be withdrawn, I say that we should wait a moment and see what the new government decide to do when they are in office and have had the opportunity to take proper briefings. I also understand that the incoming government will be interested to see what the attitude is likely to be with regard to the United Nations.
Lord Howell of Guildford: My Lords, the Prime Minister goes to Spain tonight to meet Mr Zapatero—the new Spanish leader, although he is yet to form a government. If I may say so, he is a leader who is a little loose with his rhetoric. Will the noble Baroness encourage the Prime Minister to say to Mr Zapatero that he should recognise that if, as he says, Spain wants to continue fighting the war against terrorism, it will have to take not merely a local or even a European view of the battle but a global view? That means staying fully committed, with the global community, to dealing with crisis areas such as the Middle East. Will the Minister make sure that the message is taken to Spain that it should not stick to its traditional isolationism but should act as the responsible Spain that we admire and which is a major player in the world of security and peace that we now need?
Baroness Symons of Vernham Dean: My Lords, I venture to suggest that I need not give the Prime Minister of this country any such advice. I am sure that he is well equipped to give that advice to Mr Zapatero.
The noble Lord accused Mr Zapatero of being a little loose with his rhetoric—I think that those were his words in opposition. Sometimes, opposition parties are a little loose in their rhetoric. In government, there are real responsibilities, and Mr Zapatero has made it clear that he will consider those responsibilities carefully before he takes a decision.
Lord Lea of Crondall: My Lords, does the Minister agree that if, as the noble Lord, Lord Blaker, suggests, the change of government in Madrid leads to a move forward on the European constitution—Spain and Poland had some difficulty with the voting weights—many of us would welcome it?
Baroness Symons of Vernham Dean: My Lords, that might well be. As we have already had numerous
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exchanges about the foolishness of premature speculation, it would, perhaps, be as well for us to wait and see what Spain decides.

Hospices: Financial Support
3.8 p.m.
Lord Laming Lord Laming asked Her Majesty's Government:
Whether they will review the financial support given to hospices.
The Parliamentary Under-Secretary of State, Department of Health (Lord Warner): My Lords, as I informed my noble friend Lord Ashley of Stoke on 9 March, the Government have met their pledge to increase NHS investment in specialist palliative care, including hospices, by £50 million a year by 2004. The additional funding has been allocated by the joint NHS/voluntary sector National Partnership Group for Specialist Palliative Care, which will undertake a monitoring exercise to see how the funding has been used, including the level of support for hospices.
Lord Laming: My Lords, I am grateful to the Minister for that reply. Does he agree that the work of hospices deserves the support of us all, because of the pioneering work that they have done on the management of pain for young and old and on encouraging dignity in death, both in hospitals and in the home?
Does the Minister share with me and, I suspect, others the concern about the time that the good people who work in hospices must devote to fund raising? There is constant anxiety about the continuation of this valuable service. Will the Government consider a national formula that would guarantee core funding for hospices?
Lord Warner: My Lords, of course I join the noble Lord in paying tribute to the splendid work done day in, day out, in hospices across the country. As he may know, about three-quarters of all in-patient hospice services in England are provided in the voluntary sector. We have allocated this extra £50 million on a co-operative basis between the voluntary sector and the NHS, so the voluntary sector has played a major part in this allocation and will benefit considerably from the £50 million.
Lord Clement-Jones: My Lords, all of us will welcome the additional £50 million and, indeed, the additional £12 million for training that has also been allocated. However, the Minister is no doubt aware of considerable concern about the funding of children's hospices in particular. On average, only 7 per cent of their funding is received directly through the NHS, whereas adult hospices receive more than 35 per cent. Is the department considering this issue?
Lord Warner: My Lords, I draw the noble Lord's attention to the fact that the New Opportunities Fund,

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chaired by my noble friend Lady Pitkeathley, has given £45 million since 2003 to palliative care for children, of which about £15 million has gone to children's hospices.
Lord Glenarthur: My Lords, can the Minister say how many hospices there are in the public sector and how he expects that figure to grow over the next five or 10 years?
Lord Warner: My Lords, as I said earlier to the noble Lord, Lord Laming, about three-quarters of the in-patient services in hospices are provided in the voluntary sector. That amounts to approximately 2,630 beds. A third of that, give or take, is provided also in the public sector.
Lord Ashley of Stoke: My Lords, is my noble friend aware that although the Government have done well as far as hospices are concerned, it is far from good enough? Although the £50 million he mentioned has been helpful and welcome, the Government are relying far too heavily on the voluntary sector. Hospices should have greater responsibility to the Government, and the Government, in my view, should be primarily responsible for funding them. We are nowhere near that, so how about approaching the issue in that way?
Lord Warner: My Lords, of course we would all like to do better, and we accept that there is a need to continue to improve the funding of hospices. However, the voluntary sector has done a splendid job in hospices and is held in a great deal of public affection by those who use such services. I do not think we would want to, in effect, give a vote of no confidence to that work by implying that we were not satisfied in any way with the work done in voluntary hospices.
Lord Walton of Detchant: My Lords, while welcoming the extra funding to which the Minister has referred, will the long-term support for the hospice movement fall within the remit of the Select Committee's consideration of the Assisted Dying for the Terminally Ill Bill of the noble Lord, Lord Joffe, which is, I understand, not to meet until July?
Lord Warner: My Lords, I do not think it is for me to suggest in any way whatever how that Select Committee should do its work. I draw the noble Lord's attention to the fact that the Select Committee on Health will be making an inquiry into hospices and palliative care.
The Lord Bishop of Oxford: My Lords, does the Minister agree that although hospice care is sometimes said to be expensive, it represents very good value for money? Not only does it represent superb care for patients but, as the noble Lord, Lord Laming, implied, it has pioneered palliative care for the country as a whole and raised standards.
Lord Warner: My Lords, the right reverend Prelate is absolutely right. Great pioneering work has been done
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by hospices, much of it in developing services outside hospices as well as in relation to in-patient beds. For example, there are 264 specialist palliative homecare teams, 81 hospice at home services and 200-odd daycare services. Some pioneering services have been developed by the voluntary hospice movement.
Lord Hunt of Kings Heath: My Lords, given that the health service now knows its allocations three years in advance, will my noble friend encourage primary care trusts to enter into longer term agreements with hospices so that they have much more stability and certainty about the funding they receive from the NHS?
Lord Warner: My Lords, as my noble friend knows, primary care trusts will, from April 2004, be responsible for controlling 75 per cent of the NHS budget. Very substantial increases in that budget mean that there will be opportunities for them to respond to local needs, which is the purpose of many of these increases. Much of the £50 million that I mentioned was to improve inequalities in different parts of the country. My noble friend will be aware that in the cross-cutting review by the Treasury and the voluntary sector, strong emphasis was placed on government departments and the public services entering into more secure funding for the voluntary sector.

Business of the House: Executive Powers and Civil Service Bill IHLI
The Lord President of the Council (Baroness Amos): My Lords, I beg to move the Motion standing in my name on the Order Paper.
Moved, That leave be given to advance the Committee stage of the Executive Powers and Civil Service Bill [HL] from Tuesday 30 March to Friday 26 March.—(Baroness Amos.)
On Question, Motion agreed to.

Energy Bill [H.L.]
3.16 p.m.
The Parliamentary Under-Secretary of State, Department for Environment, Food and Rural Affairs (Lord Whitty): My Lords, I beg to move that the Bill be now further considered on Report.
Moved, That the Bill be further considered on Report.—(Lord Whitty.)
On Question, Motion agreed to.
Baroness Miller of Chilthorne Domer Baroness Miller of Chilthorne Domer moved Amendment No. 171B:
Before Clause 76, insert the following new clause—
"GAS AND ELECTRICITY MARKETS AUTHORITY SUSTAINABILITY DUTY
(1) The 1989 Act shall be amended as follows.

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(2) In section 3A (the principal objective and general duties of the Secretary of State and the Authority), after subsection (2) insert—
"(2A) Subject to subsections (1) and (2) above, the Secretary of State and the Authority shall carry out their respective functions under this Part in such a manner as to ensure the contribution to the achievement of sustainable development.""
The noble Baroness said: Perhaps of all the amendments in the Energy Bill, I regard this one as bringing the Bill up to date in helping the Government achieve what they said they wanted to achieve in the energy White Paper. Ensuring that energy continues to be affordable should not be done at the cost of increased climate change. Indeed, it should be done with a view to decreasing the burden on our environment.
When I moved a similar amendment in Committee, I included the sort of environmental considerations that Ofgem should take into account. The amendment probed the Government's attitude to both the narrow environmental issues and the much wider issue of sustainable development. The Minister gave some quite satisfactory answers on the environmental issues. He said that guidance on environmental and social issues would be issued to Ofgem. I believe it was so issued on 23 February, between Committee and Report. He further told us that regulatory impact assessments and environmental impact assessments must be carried out. That is good, but there is nothing to suggest that any change of policy must result from their being carried out. Nevertheless, I felt that those were both moves in the right direction and did not retable the part of the amendment dealing with the environmental issues.
However, the reply of the noble Lord, Lord Davies of Oldham, on overall sustainable development was, I believe, totally unsatisfactory; I do not believe that it included the words "sustainable development" anywhere. I fear that this Bill does not recognise the importance of Ofgem updating what it is able to have regard to in its principal duties. With all due respect to the Minister and his department, that may be because there is still a lack of understanding of what exactly sustainable development is. The reply suggested that just dealing with the environmental issues was adequate. But I quote to the Minister from the Government's own publication on sustainable development, which states:
"Sustainable development is currently a headline topic for policy making … The significance is given further weight by the recently expanded definition of sustainable development, broadened from its origins within environmental protection and resource conservation now to include social perspectives, as well as economic perspectives, which dictates a relevance to policy making across most if not all of the public sector".
That is a very good statement of policy. It is on the Defra website, and I believe that that department does understand what sustainable development is all about. Indeed, in the recent debate on the countryside, the noble Lord, Lord Palmer, described sustainable development as a three-legged stool. That is a vivid and apt description. All the legs need to be of equal length for the stool to be balanced. That is Ofgem's problem: at the moment, the stool is unbalanced on the
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economic and social sides. That is not to say that we do not need to regard separately the social, environmental and economic strands, but there really must be an over-arching principle in place. That is what my amendment seeks to do.
The Minister's reply in Committee was that the,
"current drafting of the principal objective and the general duties strikes a fair balance between protecting the interests of consumers and safeguarding the environment".—[Official Report, 4/2/04; col. GC 401.]
That defines the problem that I am trying to explain. The Minister saw the problem as a balance, as if the two objectives were on opposing sides of the equation. However, the core of what sustainable development is all about is that the three things are not in opposition, but are in a complementary tension.
The interests of consumers should be seen in the context of the price of energy and the manner in which it is generated; that must be something that Ofgem fundamentally concerns itself with. We have seen some good examples recently of Ofgem, without the sustainable development duty, being unable to exercise its powers in a way that is complementary to sustainable development. It is quite interesting that in Ofgem's own folder about what it does, it states that it works in the interests of customers, both present and future. I was intrigued to discover that it believes that it works in the interests of future customers, as that suggests that it believes that it should be able to take issues such as the overall effect of its policies on something like climate change as central to the duties that it should be pursuing. However, following the Minister's reply last time, I do not believe that, given its duties under the legislation as drafted, it would be able to do that.
The Minister's third point was that:
"Piecemeal rearranging of the regulator's general duties does not provide for regulatory certainty, which is an important objective".—[Offical Report, 4/2/04; col. GC 401.]
My wish to put sustainable development as the overarching framework in which the authority operates is certainly not a piecemeal rearrangement. It would enable there to be a very firm framework so that we should not need to return to the issue in future. With this amendment in the Bill, the legislation should stand the test of time.
Finally, I quote again from the Government's own writings on sustainable development. When it is understood as a matter of importance, I believe that it is very well expressed. The following quote came from the No. 10 website:
"In the past, economic activity tended to mean more pollution and wasteful use of resources. Money has had to be spent to clean up the mess. A damaged environment impairs quality of life and, at worst, may threaten long term economic growth—for example as a result of climate change".
That is very well put. However, if Ofgem, as the regulator that considers how energy should be generated and used, including all those important price mechanisms, is unable to take overall regard of sustainable development, it will fail at that first test. The Government are incorrect in saying that there are

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in place sufficient powers for Ofgem to be able to do that. I have not found that to be the case on the reading of the past legislation. Therefore, I beg to move.
Lord Ezra: My Lords, when my noble friend raised this issue in Grand Committee, she drew attention to the fact that a much stronger obligation to sustainability was laid on Ofwat than is proposed, even with her amendment. on Ofgem. The noble Lord, Lord Davies, in reply to that, said:
"Ofwat is a different structure from Ofgem. Ofwat has clear environmental and sustainable factors built into its remit and role".—[Official Report, 4/2/04; col. 402]
I do not for the life of me see why water, which is a prime necessity, should be treated any differently from energy, which is a prime necessity. I am very puzzled about why the Government, having dealt with the matter with regard to water in one way, should not be ready to deal in the same way with regard to energy.
Lord Jenkin of Roding: My Lords, briefly, I should like to support the noble Baroness, Lady Miller of Chilthorne Domer. It may seem surprising that I do so, given that I have regularly argued that Ofgem is primarily an economic regulator whose primary duty is to look after customers. Where I differ from the noble Baroness a little is in the reference to future customers, which was of course relied on by the Government to resist the amendment that was in the event added to the Utilities Act 2000, that Ofgem should be responsible for,
"securing a diverse and viable",
electricity—or, in the other amendment—gas supply.
The House took a different view on that occasion, and that amendment was put into the Bill. However, I suspect that we shall hear from the Minister the same sort of argument that we heard on that occasion against those amendments. The Minister said, at col. 1497 on 5 July 2000 that,
"it follows that amendments such as this are a distraction and would serve to confuse rather than enhance the framework of obligations and duties under the legislation".—[Official Report, 5/7/2000; col. 1497.]
I have heard that argument put comparatively recently about the amendment proposed by the noble Baroness. However, the Government were wrong on that occasion, in 2000, and the amendment was added to the Bill and is now part of the Utilities Act 2000. I do not believe that it interferes at all in how Ofgem performs its economic duties. Why should an amendment about the environment, such as the noble Baroness has moved, have that effect?
n the present circumstances, when we are facing environmental problems on a wide range of fronts, every organisation concerned in any way with regulating or operating activities that could impact on the environment should always recognise that they have the environment as one of the objectives to which they should have regard. For the life of me, I cannot see why this amendment should not be accepted by the Government. I understand the arguments that have been put by Ministers, and no doubt we shall hear them in a moment or two from the Minister on the Front Bench today. However, on this occasion, I
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believe that the noble Baroness has got it right, and I shall be happy to support her if she presses the amendment to a Division.
Baroness Byford: My Lords, I rise to support the amendment. My name is added to it, and I thank the noble Baroness, Lady Miller of Chilthorne Domer, for explaining her reasons for bringing it back. It is hugely important. As the noble Baroness said, the environmental issue that she raised in Committee has been addressed. I do not know whether she is fully satisfied, but it has been addressed. We do not feel that the issue of sustainable development has been addressed and we support her on that issue. Now the principal duties have expanded to include social and economic impacts it is important that the Government respond in a positive way.
Other noble Lords who have already spoken are anticipating that the Minister will say, "No". As it is the start of a new day, I am hoping that the Minister will say, "Yes". If he cannot say yes, he may at least say that he has heard what noble Lords have said and that he recognises the reasoning behind the amendment. If he does not like the wording of the amendment, at the start of this day we issue him a challenge for the Government to come back with a wording that will meet all our concerns.
The noble Baroness is quite right that this is a very important amendment. I was part of the team that took the Utilities Bill through the House and my noble friend Lord Jenkin has reminded us that Ofgem had to take the amendment on board in the end. The Government took it on board with great reluctance because it was not their idea but they had to accept it. I hope that we can start this afternoon in a more positive spirit. The amendment has much to recommend it. It is not asking for too much. All it is asking, in new subsection (2a), is that:
"the Secretary of State and the Authority shall carry out their respective functions under this Part in such a manner as to ensure the contribution to the achievement of sustainable development".
We are all very conscious that we live in the present but that we must plan for the future. If this responsibility is not put in the Bill I fear that it may slip down the line of importance behind other matters that have to be dealt with. I support his amendment.
3.30 p.m.
Lord Dixon-Smith: My Lords, I have no difficulty in supporting the sentiments expressed by he noble Baroness. I am slightly puzzled by the placing of this amendment at this point in the Bill, after provisions on the police and before provisions on offshore zones. I wonder whether that is the best place for it, although I am bound to say that the more I look at the Bill, the less sure I am that there is an ideal place for it. The noble Baroness has my sympathy in that regard but I support the principle that she has enunciated.
Lord Whitty: My Lords, I am grateful for the noble Baroness's words about the issue of the environment. Her main complaint now is that we have not reflected the whole gamut of sustainable development in terms of the

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duties on GEMA. As she said, there are three strands to sustainable development: the environmental, the social and the economic. Essentially, GEMA operates in the economic sphere but it has some environmental obligations and has guidance on environmental and social matters from the Secretary of State. It contributes, via its economic activities, to sustainability. Clearly there is some crossover. For example, as the noble Baroness recognised in her opening remarks, in producing regulatory impact assessments for all important decisions GEMA must include environmental impact assessments.
The role of an economic regulator is obviously to deliver a degree of economic sustainability as well as to ensure that that is done having regard to environmental and social sustainability. The noble Lord, Lord Ezra, made the point that in the Water Bill, which most of us here discussed not long ago, Ofwat, as a regulator, has a sustainable development requirement. But the water legislation is not drafted in the same way as the Utilities Act and the legislation governing energy. For instance, while GEMA does not have a general duty to have regard to sustainable development, it does have a general duty to the environment whereas Ofwat does not, despite the fact that it is clear that sustainability in the water sector must include an environmental dimension. The balance of responsibilities between the regulator and the Secretary of State in relation to water are different from the balance of responsibilities between the regulator and the Secretary of State under the Utilities Act.
I was rarely present during debates on the Utilities Act, but noble Lords will remember that the overall duties of the energy regulator were debated in some detail. Noble Lords sought an amendment to place a sustainable development duty on GEMA. At the time, the Government's response was that it should be recognised that measures concerned with such matters will often be in the interests of consumers, in particular their long-term interests; that is, the interests not only of present but of future consumers. That is where the economic sustainability responsibilities of GEMA arise and that is the principal objective of GEMA and, to some extent, the Secretary of State.
Time has moved on in one respect since the Utilities Act but we are still dealing with a structure that was laid down in it. To accept sustainable development as a direct responsibility in all its manifestations through GEMA would be to alter the balance set down in the Utilities Act. The concept of sustainable development incorporates social and environmental, as well as economic, considerations. If we incorporate the social and environmental considerations into the principal objective then we remove the priority that GEMA, as part of this structure, has afforded to the economic interests of consumers present and future. That is confusing for GEMA and for those who deal with it.
It is also important to recognise that in the course of production of the energy White Paper extensive consultation took place in relation to how we deliver regulation and the objectives of the energy White Paper.
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The conclusion at that time was that the current drafting of the principal objective and the general duties reflected the objectives, including the balance of responsibilities. That is balance not in the sense of trading one against another but in the sense of delivering all three aspects of sustainable development via GEMA's responsibilities for the economic interests of consumers and the Secretary of State's responsibilities on the social and environmental side.
I appreciate that we have been round this circle when the Utilities Bill was considered and again with the Water Bill. We have had the present structure of regulation within the energy sector for a relatively short time. It has worked reasonably well and the energy White Paper places wider responsibilities on all players within the energy policy structure, including sustainable development. Now is not the time to alter the central responsibilities of GEMA, bearing in mind that sustainable development is mainstreamed into the Government's whole approach to energy policy and the energy strategy embodied in the energy White Paper. To place that responsibility on GEMA is not consistent with the differentiation of the functions that was set out in the Utilities Act. At the end of various consultations in which varying views were expressed we felt that, on balance, we should keep the situation as it is. I do not propose to move from that position today.
Baroness Byford: My Lords, before the Minister sits down, I notice that he has just said that the Government's main sustainability belief is within their White Paper. That is fine but the White Paper will not be part of the Bill. We may not have another chance of a Bill like this for many years to come. I urge the Minister to reconsider because we would be very concerned at missing this opportunity. The amendment will not dilute the responsibilities that Ofgem is being given in the way that he thinks. I think that the opportunity to put a responsibility in law on the face of the Bill will be missed. I am slightly disappointed with his answer and I wonder whether he would like to indicate anywhere in the Bill where there is any reference to what we are trying to achieve with this amendment.
Lord Whitty: My Lords, the answer is: not in relation to the powers of GEMA, which is what the amendment deals with and presumably why it is in this place. There is no other opportunity to debate that particular dimension, but throughout the Bill we have stressed sustainability and some of the objectives of the Bill relate directly to sustainability. The importance of the structure of regulation and intervention in this market is to ensure that we have a sustainable energy policy. However, the particular responsibilities of GEMA are primarily—sustainably—economic; not all the range of responsibilities comes under the heading of sustainable development.
Baroness Miller of Chilthorne Domer: My Lords, I warmly thank noble Lords who have supported this amendment. I am particularly grateful to the noble Lord, Lord Jenkin of Roding, for his long view and,

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with the length of his experience, for choosing to support this amendment. Like the noble Baroness, Lady Byford, perhaps I wished that the Minister would say "Yes" to this amendment, but unlike her perhaps I was more pessimistic. Like the noble Lord, Lord Dixon-Smith, I searched hard for where to place this amendment; there is no obvious place because, contrary to the Minister's view, the Bill does not give us an opportunity to explore the overall framework of sustainable development. As such, I thought that this was probably as good a place as any to put the amendment.
The Government did produce an energy White Paper and they do have a policy on sustainable development, but GEM A is so influential in the implementation of that policy that its ability to interpret what sustainable development means in the market is critical. For all that the Minister said about what is in the Utilities Act being sufficient, we have learnt, for example from the NETA fiasco—whereby CHP was significantly depressed by the way Ofgem chose to interpret its powers under the Utilities Act—that this amendment is essential if we are not to see that situation happen again. For that reason I would like to test the opinion of the House.
3.43 p.m.
On Question, Whether the said amendment (No. 171 B) shall be agreed to?
*Their Lordships divided: Contents, 148; Not-Contents. 111.

Division No. 1

CONTENTS

Addington, L.

Crickhowell, L.

Allenby of Megiddo, V.

Dahrendorf, L.

Alton of Liverpool, L.

Dean of Harptree, L.

AnelayofStJohns, B.

Denham, L.

Astor, V.

Dholakia, L.

AstorofHever, L.

Dixon-Smith, L.

Attlee, E.

Dundee, E.

Avebury, L.

Eden of Winton, L.

Baker of Dorking, L.

Elles, B.

Barker, B.

Ezra, L.

Beaumont of Whitley, L.

Falkland, V.

Biffen, L.

Fearn, L.

Blaker, L.

Ferrers, E.

Bowness, L.

Finlay of Llandaff, B.

Bradshaw, L.

Fowler, L.

Bridgeman, V.

Geddes, L.

Brooke of Sutton Mandeville, L.

Glentoran, L.

Brookeborough, V.

Goodhart, L.

Brougham and Vaux, L.

Gray of Contin, L.

Burnham, L.

Greenway, L.

Byford, B.

Hanham, B.

Caithness, E.

Hannay of Chiswkk, L.

Campbell of Alloway, L.

Hayhoe, L.

Carlisle of Bucklow, L.

Henley, L.

Carnegy of Lour, B.

Higgins, L.

Chadlington, L.

Hooson, L.

Chalfont, L.

Howarth of Breckland, B.

Chorley, L.

Howe, E.

Cobbold, L.

Howe of Aberavon, L.

Colville of Culross, V.

Howe of Idlicote, B.

Cope of Berkeley, L.

Howell of Guildford, L.

Courtown, E.

Hussey of North Bradley, L.

Crathorne, L.

Hylton, L.

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Jenkin of Roding, L.

Rogan, L.

Kimball, L.

Roper, L. [Teller]

King of Bridgwater, L.

Rotherwick, L.

Kingsland, L.

Saltoun of Abernethy, Ly.

Laing of Dunphail, L.

Sandwich, E.

Laming, L.

Scott of Needham Market, B.

Lamont of Lerwick, L.

Seccombe, B.

Lester of Heme Hill, L.

Selborne, E.

Listowel, E.

Selsdon, L.

Livsey of Talgarth, L.

Sharp of Guildford, B.

Lyell, L.

Sharples, B.

McCollofDulwich, L.

ShawofNorthstead, L.

McNally, L.

Shutt of Greetland, L. [Teller]

Maddock, B.

Skelmersdale, L.

Manaoft, L.

Slim, V.

Mar, C.

Smith of Clifton, L.

MarandKellie, E.

Soulsby of Swaffham Prior, L.

Marlesford, L.

Steel of Aikwood, L.

MashamofIlton, B.

Stewartby, L.

Mayhew of Twysden, L.

Stoddart of Swindon. L.

Strange, B.

Methuen, L.

Swinfen, L.

Miller of Chilthorne Domer, B.

Tanlaw, L.

Miller of Hendon, B.

Taverne, L.

Monro of Langholm, L.

Tenby, V.

Mowbray and Stourton, L.

Thomas of Gwydir, L.

Murton of Lindisfarne, L.

Thomas of Walliswood, B.

Naseby, L.

Thomson of Monifieth, L.

Newby, L.

Trefgame, L.

Northesk, E.

Trumpington, B.

Northover, B.

Ullswater, V.

O'Cathain, B.

Vinson, L.

Onslow, E.

Wade of Chorlton, L.

Palmer, L.

Wakeham, L.

Peel, E.

Walmsley, B.

Perry of Southwark, B.

Walton of Detchant, L.

Plumb, L.

Weatherill, L.

Rawlings, B.

Wilcox, B.

Redesdale, L.

Williams of Crosby, B.

Rees-Mogg, L.

Williamson of Horton, L.

Rodgers of Quarry Bank, L.

Windlesham, L.

NOT-CONTENTS

Acton, L.

Filkin, L.

Ahmed, L.

Fyfe of Fairfield, L.

Amos, B. (Lord President of the

Gale, B.

Council)

Gibson of Market Rasen, B.

Andrews, B.

Golding, B.

Ashley of Stoke, L.

Goldsmith, L.

Ashton of Upholland, B.

Goudie, B.

Barnett, L.

Graham of Edmonton, L.

Bassam of Brighton, L.

Gregson, L.

Berkeley, L.

Grocott, L.

Bhatia, L.

Harrison, L.

Billingham, B.

Haskel, L.

Blood, B.

Haskins, L.

Borne, L.

Hayman, B.

Brooke of Alverthorpe, L.

Hilton of Eggardon, B.

Campbell-Savours, L.

Hogg of Cumbernauld, L.

Carter, L.

Hollis of Heigham, B.

Christopher, L.

Howells of St. Davids, B.

Clark of Windermere, L.

Howie of Troon, L.

Clinton-Davis, L.

Hoyle, L.

David, B.

Hughes of Woodside, L.

Davies of Coity, L.

Hunt of Kings Heath, L.

Davies of Oldham, L. [Teller]

Irvine of Lairg, L.

Dixon, L.

Jay of Paddington, B.

Donoughue, L.

Jones, L.

Elder, L.

Jordan, L.

Evans of Parkside, L.

King of West Bromwich, L.

Evans of Temple Guiting, L.

Kirkhill, L.

Falconer of Thoroton, L. (Lord

Layard, L.

Chancellor)

Lea of Crondall, L.

Partington of Ribbleton, B.

Lipsey, L.

Faulkner of Worcester, L.

Lockwood, B.

607

Lofthouse of Pontefract, L.

Rooker, L.

McIntosh of Haringey, L.

Sainsbury of Turville, L.

McIntosh of Hudnall, B.

Sheldon, L.

MacKenzIie of Culkein, L.

Sheppard of Liverpool, L.

Mackenzie of Framwellgate, L.

Simon, V.

Mason of Barnsley, L.

Smith of Gilmorehill, B.

Merlyn-Rees, L.

Smith of Leigh, L.

Mitchell, L.

Stallard, L.

Morris of Manchester, L.

Stone of Blackheath, L.

Nicol, B.

Strabolgi, L.

Orme, L.

Symons of Vernham Dean, B.

Ouseley, L.

Taylor of Blackburn, L.

Patel of Blackburn, L.

Pendry, L.

Temple-Morris, L.

Peston, L.

Thornton, B.

Pitkeathley, B.

Triesman, L. [Teller]

Plant of Highfield, L.

Turnberg, L

Ponson by of Shulbrede, L.

Turner of Camden, B.

Portsmouth, Bp.

Warner, L.

Prys-Davies, L.

Warwick of Undercliffe, B.

Radios, L.

Whitaker, B.

Ramsay of Cartvale, B.

Whitty, L.

Randall of St. Budeaux, L.

Williams of Elvel, L.

Rendell of Babergh, B.

Winston, L.

Richard, L.

Woolmer of Leeds, L.

[*The Tellers for the Contents reported 148 votes; the Clerks recorded 147 names.]
Resolved in the affirmative, and amendment agreed to accordingly.
3.54 p.m.
Clause 76 [Exploitation of areas outside the territorial sea for energy production]:
Lord Greenway Lord Greenway moved Amendment No. 172:
Page 59, line 20, at end insert—
"( ) No renewable energy zone shall be sited so that it restricts—

(a) any recognised maritime navigation channel, and

(b) any recognised approach to a port."

The noble Lord said: My Lords, in moving Amendment No. 172, I wish to speak also to Amendment No. 184 which stands in my name and that of the noble Lord, Lord Higgins.
In Grand Committee, again in consort with the noble Lord, Lord Higgins, I moved an amendment regarding the safety of navigation in respect of the establishment of offshore wind farms. The amendment arose from concerns felt in the shipping and ports industries, including Trinity House which is responsible for marking our navigation lanes around the coast.
The noble Lord, Lord Whitty, who answered on that occasion, conceded that safety of navigation was a serious matter. I do not think that any of us would disagree with that. However, he nevertheless argued that the concerns expressed were already covered by existing legislation. Since then further meetings have taken place with the industries and the Government, as a result of which further amendments, to which I now speak, have been brought forward. I should say at the outset that the first amendment was originally tabled in the name of the noble Lord, Lord Dixon-Smith, who I am pleased to see in his place. That was a procedural ploy as the noble Lord could not be here last night. Therefore the amendment appeared in my name. It is covered in the generality of what we are
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discussing in this grouping, but he will forgive me if I do not speak specifically to his amendment as I am sure he is quite capable of doing that himself.
Amendment No. 184, which would insert a new clause in the Bill, is designed to meet those concerns from the shipping and ports industries that still exist even after further discussions with the Government. The points covered in the amendment on which I seek assurances from the Government are as follows. The first is the question of consultation. The industries are very worried that they were not consulted early enough in the process of granting licences for offshore wind farms. They would like the Government to publish details of the most heavily used shipping routes for the assistance of would-be developers. They would also like the Government to negotiate possibly a memorandum of understanding on consultation with shipping and ports interests before any further sites are offered for tender.
The industries felt that they were not properly consulted under round one of the offshore wind sites licences. As a result certain sites were proposed such as the one off Cromer where three existing shipping lanes will have to be altered to accommodate a wind farm. The inshore route will become much more difficult. It is one that ships use when there are very strong winds from the west. The middle lane will be moved to go round the wind farm and that pushes it further out to sea and much closer to the third lane, thereby in my view increasing the risk of possible collision.
The industries consider that there is also a need for much more technical study to be carried out into the adverse effects of wind farms on shore and ship radar, radio and other electronic communications systems. An amendment tabled in the name of the noble Lord, Lord Higgins, deals specifically with that subject. I shall leave it to him to fill in the details on that. Suffice to say that we should like the Government to give us an assurance that they will commission a study into the effect of wind farms on marine radar and radio communications systems, including the combination effects of these structures.
The industry would also like to see the use of traffic management tools to enable offshore renewable energy installations and shipping to coexist in safety. In Grand Committee I mentioned the use of shipping clearways that were used in the early days of the offshore oil industry. The Government have indicated that they already have the necessary tools to do this, but I should like an assurance from the Minister that any traffic management systems that may be introduced will be required to conform to international standards and that, as a direct result of the establishment of offshore renewable energy installations, they will be financed by the developers. Furthermore, the industry feels that there is a need for a common regime in territorial waters and the renewable energy zones. These are the zones extending beyond our territorial waters where offshore wind farms can be set up. We seek an assurance that the Government will, in practice, apply Article 60(7) of the United Nations Convention on the Law of the Sea when considering the establishment of installations in territorial waters, as well as the REZs. Finally, there is a need for a pragmatic approach in applying Article 60(7)

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of UNCLOS, and we seek assurance from the Government that any deviations that may be required of ships—I mentioned an instance earlier—will be kept to a minimum.
I wish to mention one further very important point. In Grand Committee, the noble Lord, Lord Whitty, mentioned the Transport and Works Act 1992 and the difficulties involved with that. Industries are seeking an assurance from the Government that they will give full consideration to issues of safety of navigation before installations are consented to, both under the Transport and Works Act and the Coast Protection Act 1949. The noble Lord, Lord Whitty, made great play of the Coast Protection Act in his remarks in Grand Committee, but there is another avenue for would-be developers to follow: the Transport and Works Act, which does not require them to look at the interests of safety of navigation. I hope that the noble Lord, Lord Higgins, will expand on that as well.
It is worth mentioning what other countries are doing in respect of this. Denmark, Germany and Holland are taking their responsibilities for the safety of navigation very seriously and have commissioned studies. Indeed, I was reading about one in Lloyd's List, the shipping newspaper, only this morning, whereby a company has been taken on by the German navigation authorities to put a test structure on one of their proposed wind farm sites out in the North Sea, to monitor the density of shipping movements. Our Government should be doing that. It is what I might describe as a precautionary approach. It seems to me that the Government are hell-bent on rushing forward to meet their commitments of 10 per cent renewable energy by 2010, whereas other countries are taking a more careful approach and are looking into aspects such as the safety of navigation.
On the precautionary matter, there is the suggestion that back in 1986, when the North Sea oil and gas development was going on, it was UK practice to avoid licensing not only inside traffic separation schemes but also within 10 miles of them, in case ships went off course. We all know that ships do go off course; ships break down; ships it is widespread knowledge—are run by officers whose standards are not what they were 15 or 20 years ago. There have been quite a number of incidents where ships have run into well-known structures. In the old days, for instance, they were forever clouting the odd light-vessel in the Thames approaches and the Channel. We had the incident of the Norwegian car carrier, the "Tricolor", which went down just over a year ago after a collision in the North Sea. Shortly after that, at least three ships ran straight onto that wreck. Even when it was properly buoyed and permanently patrolled by ships, one ship a week ran through that exclusion zone. That says a lot about modern standards of navigation, and thereby hangs the worry. It would take only one incident of a ship—through collision, or whatever—running into one of these wind farms, perhaps catching fire, causing widespread pollution, to cause a huge furore in the national press and everywhere. I do think that the whole aspect of the safety of navigation is something we should look at very carefully indeed.
I hope that the noble Lord who is to reply will be able to give me some of the assurances that I have asked for. I beg to move.
4 p.m.
Lord Dixon-Smith: My Lords, I am grateful to the noble Lord, Lord Greenway, for taking on the burden of moving, in effect, my amendment and his, because he knows far more about the subject than I do. I could not be here last night, and it therefore seemed prudent that he, conveniently for me, should take over my amendment. But I do think I should have my say.
This part of the Bill applies to all of the United Kingdom rights under Part 5 of the United Nations Convention on the Law of the Sea. It gives the Government the power to designate, within that huge area of seabed, renewable energy zones. Theoretically, therefore, the Government could surround this country with renewable energy zones. The problem may not be so much with wind in this instance, but the possibility of wave energy in the future. If we begin to extract energy from waves, that opens up the possibility of going out to deeper sea than one would think of conventionally in the context of wind turbines. Once you begin to widen out the scope, the possibility for interference with shipping becomes greater and greater. I am not a mariner in that sense, but I have sailed off the east coast for some years of my life. The approaches to Harwich and Felixstowe became important to me when we were involved with some port improvements in Harwich. I have lived with the problems of the approaches to the Thames Estuary all my life—who does not who lives in either Essex or Kent? The problems of the Goodwin Sands are something that I remember vividly from my childhood. As the noble Lord, Lord Greenway, pointed out, ships still sink off our shores, for whatever reason, and subsequently there is slightly hazardous navigation. We should not pretend that the sea is a safe place.
My original amendment sought to require the Government, as far as was possible, not to put renewable energy zones in those areas where ships are accustomed to make their passage. They do not make their passage in straight lines in the North Sea, and definitely not as they begin to approach the east coast ports. There are offshore sands and shallows which mean that you must have fairly closely defined routes into these ports. The North Sea itself is shallow. There will be areas which large boats will tend to avoid because of shallow water, even if it is deep enough for them to pass through, because of sea conditions and so on. This matter is not straightforward and it requires the most careful consideration.
You cannot slap down a renewable energy zone somewhere in the middle of the North Sea just because you happen to think it is a nice place. The fact that there is a reasonable depth of water that is convenient for the construction of wind turbines will not necessarily mean that it is a safe place if shipping is required to sail close to it.
That was my motivation in starting my own hare, but the noble Lord, Lord Greenway, has covered the point far better than I. There is no need for me to say

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more—except that I wholly support everything that is being done to apply the same principles to the inshore areas. In many instances there, they are even more vital because the possible channels for shipping travel are inevitably more constricted.
The Earl of Sandwich: My Lords, my noble friend Lord Greenway has raised a serious issue on consultation. Will the Minister address the reasons behind the delay in consultation? The industry deserves an apology from the Government if the consultation has not been adequate. I hope that the Minister will deal with that.
Lord Monro of Langholm: My Lords, I support the noble Lord, Lord Greenway, and my noble friend Lord Dixon-Smith in tabling the amendments. We must assume that if the Government are not prepared to accept them, they believe that the present legislation is adequate. But manifestly it is not. I want to call the Minister's attention to the wind farms on the Solway Firth, which cross the median line between Scotland and England. The Minister must accept that he has to reply, just as Ministers must reply in the Scottish Executive. It is an English/Scottish decision. We are dealing with UK legislation and UK incentives that provide the enthusiasm for all these wind farms.
What consultations did the Government have with the local interests in the Solway Firth, with the fishermen, pleasure sailing interests and the commercial ports of Kirkcudbright and Annan? The Government refused to have a public inquiry and any form of local authority involvement. They said, willy-nilly, "We'll have the wind farm in the middle of the Solway". How does that measure up with their indication that there is consultation and nothing to worry about when there obviously is something to worry about?
It is disgraceful that the Government have reached this decision with no consultation or inquiry and to hell with what the fishermen think. It is a most serious matter. One must thread one's way back from the Irish Sea to ports in the Solway—with a great deal of pleasure sailing in south-west Scotland. One cannot just take a sailing boat anywhere one wants to go through a wind farm it is more complicated than that. Why has this been allowed to happen? Will the amendment avoid the serious difficulty that has arisen? I want to know the answers.
Lord MacKenzie of Culkein: My Lords, I want to speak briefly, not having spoken previously in the debate. I support the points made by the noble Lord, Lord Greenway, particularly about the safety of navigation and whether the general lighthouse authorities are involved in the discussions and consultations. I understand that in relation to the wind farms in Solway Firth the Northern Lighthouse Board had to insist that it was involved. Again as I understand it, at one stage it was told that there was no need for its involvement. It insisted on being well involved because it regarded it as being important for safety and navigation at night that the required
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structures are properly lit. I join the noble Lord, Lord Greenway, in seeking assurance that the three general lighthouse authorities are involved wherever these structures are being built offshore.
Furthermore, I certainly agree with the noble Lord, Lord Greenway, on standards of navigation. In my part of the world—north-west Scotland—when the seamen on watch on board the "Jambo" were sent below, the officer of the watch promptly went to sleep for 40 minutes. That ship went ashore at the entrance to Loch Broom. That can happen anywhere and with disastrous effects. It is important that there is proper consultation and proper involvement with all the relevant authorities.
4.15 p.m.
The Earl of Caithness: My Lords, I, too, want to take up that theme. If your Lordships look at the www.bigconversation.org.uk website, they will see this statement from the Prime Minister:
"We should have the confidence to open up the debate, be honest about the challenges, lay out the real choices".
When it comes to shipping, ports, fishing, recreation and wind farms, far from being a big conversation it is a big silence. I agree with the noble Lord, Lord Greenway, and others who have spoken that the department ought to be severely rebuked for the lack of consultation that it has undertaken on this important subject.
We are now in round two, and as future rounds come up it is particularly important that the Government do not make the same mistake as they have made with rounds one and two in not consulting. When it comes to the sea around our coast, we need to be careful before doing anything. Your Lordships will appreciate that some 95 per cent of our trade comes by ships. We take that for granted, but ships have accidents for all kinds of reasons.
I was involved with the "Braer" and "Herald of Free Enterprise" accidents and I know only too well the disasters that can happen. Both those ships were exercising the right of free passage; an international right. It is the Government's responsibility not to hinder that right. The noble Lord, Lord Greenway, referred to Article 60(7) of UNCLOS; it is worth reading that to your Lordships. It states:
"Artificial islands, installations and structures and the safety zones around them may not be established where interference may be caused to the use of recognised sea lanes essential to international navigation".
That is what is happening with some of the proposals under round two.
That agreement with UNCLOS, to which the British Government have signed up, does not apply to territorial waters, but it applies within the UK renewable energy zone and both should have a common energy regime. It is wrong that there should be two different regimes. I support that statement with the argument that the Thames estuary and the Greater Wash strategic areas straddle both the UK territorial waters and the UK renewable energy zone. It is therefore important that a common regime applies to both.

613
Increasingly, Britain and Europe are moving to a short sea shipping regime—a regime supported by the Commission and the governments of member states. That is for two reasons: one is the appalling congestion on our roads and railways; the other is pure economics. Inevitably, much trade to Britain comes on short sea routes from Europe rather than arriving in this country and using the motorway. For example, most of B&Q's goods coming into the Humber estuary come from Rotterdam. There they come off the big international liners, are broken down on to smaller vessels and they come across the sea into the Humber estuary.
It is worth looking at the Humber estuary for a moment. The area will be affected by a proposed wind farm. In 2002, the Department for Transport's statistics showed 15,321 ship arrivals in all the Humber ports. In 2002, more than 1 million passengers sailed either on the Hull/Rotterdam ferry or the Hull/ Zeebrugge ferry. Grimsby and Immingham are the largest freight ports in this country, taking 10 per cent of the 2002 traffic—some 55.7 million tonnes. If one sites a wind farm so that restrictions are imposed on that kind of shipping traffic, one is asking for trouble. I ask the Government to consider this matter very seriously. It is not only the Humber ports that are affected; as the noble Lord, Lord Greenway, said, Cromer is affected, as are the Merseyside ports by the development of Liverpool.
Another reason for considering this matter particularly carefully is that there is an EU initiative on short-sea shipping called "Motorways of the Sea". When I was in Brussels last week talking about short sea shipping, one lane that was mentioned as possibly being designated as a new motorway of the sea was the Rotterdam-Humber link. A wind farm in the middle of that lane would affect the shipping and merely complicate the hazards. The noble Lord, Lord Whitty, may say that it would be very easy for ships to sail round the wind farm, but I ask him what his reaction would be if one of us submitted a planning application to place a mast on the flight path into Heathrow. It is perfectly feasible for an aircraft to divert around a mast but it is not terribly practical to do so. The more that people are asked to divert ships, the more that will cause congestion. That is true not only of ships bringing in freight and passengers; one will be forcing fishermen and recreational craft into a smaller and smaller area.
I want to move on to the subject of recreation and draw your Lordships' attention to some of the effects of wind farms, particularly the one proposed for Portland Harbour and Weymouth Bay. I freely recognise that that is not one of the round two wind farms, but a wind farm there will cause sufficient turbulence to prevent that stretch of water, which is the finest small-craft racing water in northern Europe, being used as our 2012 Olympic sailing event post. That will have a very serious implication for recreational craft and for the economics of this
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country. If our best racing water would be disturbed by turbines, for goodness sake, let us think again and put the turbines somewhere else.
Lord Howie of Troon: My Lords, I believe that my noble friend Lord Whitty should pay great attention to the amendment of the noble Lord, Lord Greenway. This is a very serious matter and I do not consider that the Government have treated it with proper courtesy. The question is partly one of diverting shipping around intrusions in the shipping lanes. The important point about those intrusions—it has not been mentioned thus far in the debate—is their size. The noble Lord, Lord Greenway, referred to the controversies in the 1960s and thereabouts concerning oil rigs. Oil rigs were certainly an intrusion and a potential danger but, from the point of view of energy policy, they were useful. None the less, there was a good deal of concern about their effect upon shipping in the North Sea.
I am struck by the fact that wind farms are far bigger than oil rigs. Therefore, they intrude far more and are much more dangerous. A wind farm with 30 turbines was recently erected off Anglesey. I do not remember its exact size but it produces 60 megawatts of power. That is not a great deal, but it is no doubt worth having.
However, the other day I read in New Civil Engineer magazine, which comes my way, about a proposed wind farm off the East Anglian coast. I am not sure whether it was the one to which the noble Lord, Lord Greenway, referred, but the point is that it will be at least two kilometres—that is, a mile—wide. It is far wider than any oil rig of which I have heard. In addition, it will be five or six kilometres in length. Therefore, we are talking about an area off East Anglia which is two kilometres wide by five or six kilometres long, which is a sizeable area of intrusion into the North Sea.
The Government must consider the following. First, from their point of view, it is highly desirable to obtain energy which does not produce carbon dioxide and other such by-products which are thought to be undesirable. Secondly—this appeals to me as a Scotsman—in a sense, the fuel is obtained for free. On the other hand, the amount of fuel produced is far less than one imagines. In Denmark, wind farms produce only 25 per cent of the available energy, which is less than one might have thought. None the less, wind farms are desirable.
But, against that, the Government must set the fact that, in producing any energy from off-shore wind farms, the intrusion into the North Sea or, indeed, into other seas around our islands will be unreasonable. The Government must rethink their policies from first principles and not from a mere desire to meet their Kyoto requirements, reasonable although that may be.
Lord Donaldson of Lymington: My Lords, I want to pick up the last point concerning the fact that a wind farm is not an isolated object, such as a platform. One must also remember that it has a safety zone around it, which may contribute to the safety of the wind farm if

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to no one else. On the other hand, a far larger zone is thus created which, necessarily, should be regarded as a no-go area.
Much of the planning will depend upon having a clear idea of where ships go, and I am reminded of some surprising situations. In 1993, I was asked by the Government to conduct an inquiry into pollution around the coast of the United Kingdom and into what could be done to prevent it. One question which I asked of the department was, "Where do ships go?". There was a deafening silence and then back came the answer, "A lot of research was done some years ago and clearways were established so that platforms would not be built in the areas where ships go". I said, "Well, that's a useful starting point for us. How does it work?". The answer was, "It doesn't work at all because either nobody tells the ships or it doesn't suit the ships. They don't use the clearway; they simply thread their way as best they can through the platforms". Therefore, it is no good simply to have bright ideas about where one would like ships to go; one must take account of where they actually do go. I was helped a little by some retired mariners of whom I asked, "If you were going from A to B, what route would you take?". At any rate, that was better than the clearway system.
However, since then, some fairly detailed studies have been carried out on where ships go—at least, in coastal areas—and clearly those must be taken into account. Again, I commend the Dutch example of updating such statistics through monitoring. As the size of ships change, draughts change and so patterns will change. One has to be careful to take account of reasonably foreseeable future developments.
It has been said that nowadays standards of navigation vary considerably. That is right, but I do not believe that we should dismiss that on the basis that some third-world countries licence their mariners rather freely. The general-secretary of one of the maritime unions, who I am sure is an admirable trade union leader, has no personal experience of ships. He went to the east for a fortnight and came back with a full master's ticket. It cost the union £5,000, but that was money well spent as it revealed the realities of life. One cannot assume that someone with a certificate in charge of a ship necessarily knows what he is doing.
I do not necessarily believe that that is the greatest risk. The biggest risk is fatigue. Ships often comply with minimum standards, but really they are undermanned. Two examples come to my mind. The first was a gentleman who ran his brand new ship on to an island—I forget whether it was the Pentland Firth, but it was in that kind of area—where it stays to this day. When asked why he had done so, he said, "I got blinded by the lighthouse on the island". That was not a very good excuse. Further research showed that he had been very tired, had come across the Atlantic and that only he and the master were competent watchkeepers. He had undoubtedly dozed off and, at the last minute, seen the lighthouse. Because of his tiredness and in the confusion, instead of putting the
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helm hard over, he worked through the auto-pilot which had limitations on the extent to which one could put the helm over. Hence the accident occurred.
A second example is that of a banana ship which came in after fierce troubles in the Atlantic. It berthed in Portsmouth. The master was given two hours in which to discharge some cargo and put to sea again. Desperately tired, he put to sea and, thinking he saw a navigation light, he took emergency action, putting his ship straight into the Nab Tower. He was a perfectly competent master—I believe he had 40 plus years' experience and an unblemished record. I very much regret that the coastguard agency saw fit to prosecute him. I believe that his employers should have been prosecuted. Such situations happen and we have to take account of them.
Those who erect wind farms should bear in mind that, relatively speaking, they are very fragile structures. The individual structures in a wind farm have absolutely no chance against a ship of any size, with any dead-weight. A ship would skittle them down and there would probably not be much harm caused to the ship. People who erect wind farms might like to take such matters into account.
The noble Earl, Lord Caithness, mentioned the entrance to the Humber. I have been looking at a chartlet produced, I believe, by the Chamber of Shipping on which it says at the bottom that it is not to be used for navigation purposes. That is plainly true, but it is a frightening prospect. How will a ship enter the Humber if the various projected wind farms are erected? I am sure it can be done, but the exercise will call for the utmost skill and vigilance and a high degree of risk will be involved.
I want to mention radar. I have heard interesting remarks on the radio or wherever by someone speaking on behalf of the MoD I believe he came from the air ministry side—concerning worries about the effect of wind farms on radar. To my surprise he said that the MoD was very worried about wind farms in areas where low-flying aircraft operate, but that otherwise it was not very worried. If the radar used by aircraft can be disturbed by wind farms, those in the MoD concerned with the sea should consider this matter carefully, as should the Government.
For all those reasons, I wholeheartedly support the amendment tabled by the noble Lord, Lord Greenway. It is too much to expect the Government to support it, but I hope that they will give it careful consideration and will not oppose any amendments in this group that are pressed.
4.30 p.m.
Lord Howie of Troon: My Lords, individual windmills have fairly substantial foundations which a ship could strike and a good deal of damage would be done to a ship.
Lord Donaldson of Lymington: My Lords, no doubt that is right, provided that the foundation projects sufficiently high from the sea bed. If the foundation is sufficient, I do not see why the stalk of the windmill

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should not stay up. Provided that the draught were not too great, a ship would just whip off the stalks at the top of the foundation.
Baroness Miller of Chilthorne Domer: My Lords, this debate provides a good example of the unfortunate fact that we already have the renewable energy zone proposition and the safety zones around renewable energy installations have been proposed before the Government have brought forward their long-promised marine Bill, which would give a marine planning framework. Without a spatial framework, it is very difficult to balance the competing demands of renewable energy, commercial shipping and even recreational yachting.
In disagreeing with the noble Earl, Lord Caithness, I declare an interest as a recreational sailor. I view the issues of climate change as more important than whether I shall be able to sail in a recreational manner here or there. If push came to shove, I would certainly choose to have my recreational sailing slightly disrupted.
In principle, I believe that the noble Lord, Lord Greenway, has raised an extremely important point about whether the competing demands are being dealt with fairly despite the lack of a spatial planning framework. One slight concern is that the debate on the amendment has focused mostly on renewable energy zones. The amendment talks about approaches to ports. My understanding was that most renewable energy zones—perhaps the Minister can clear up this point—will be further out to sea. As regards approaches to ports, the important factor is the safety zones around the renewable energy installations. A number of issues with regard to commercial shipping need to be addressed and I suggest that Clause 87 should concern those who have a great interest in it.
Lord Higgins: My Lords, the House will be grateful to the noble Lord, Lord Greenway, for moving Amendment No. 172. As he pointed out, it has been grouped with Amendments Nos. 179, 184 and 184A. The issue is clearly extremely important. In a sense, we have had a Second Reading debate. Depending on the Government's response to these amendments, it may or may not be necessary to vote at a later stage in the proceedings.
It is extraordinary that whatever subject comes up in your Lordships' House there is immediately a huge amount of expertise available to debate it. I shall not go through this matter in the form of a wind-up speech, but I shall comment on some of the points that have been made and make a few of my own.
As I said in Committee, I am not intrinsically against wind farms. Almost every weekend I fly to Holland at a rather low altitude, and I am surrounded by wind farms when I arrive there. In the course of doing that, one is very conscious of the large amount of shipping passing from one side of the Channel to the other. It is quite extraordinary that we have reached this stage in relation to such matters without proper consultation and consideration having been given to them by the Government. If the Government were
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thinking of placing offshore wind farms in various parts of the English Channel, off Hull, off Liverpool and in Scotland, it should surely be necessary first to ask, "Where are the shipping lanes?" and then to place the wind farms somewhere else. So far, there appears to have been absolutely no attempt to do that or to consult the relevant interests. That is a very dangerous situation.
The effect of the location of the wind farms, of course, is partly economic, partly environmental and partly a matter of safety. So far as the economic side is concerned, my noble friend Lord Caithness pointed out that 95 per cent by volume of our international trade is by ship, and he also implied that 25 per cent of our internal trade is carried by sea. That is a matter of very great importance.
To what extent have the Government evaluated the problems that arise from diverting our own and other countries' shipping as a result of putting up the wind farms? More particularly, with regard to the environment, have they taken into account the extent to which there may be an increase in pollution because of the re-routing of ships as well as some saving from the location of the wind farms? Whether or not the wind farms are located sensibly will have an effect on the net gain with regard to the sustainable environmental aspects of the question.
It is also the case that there is potential, to which the noble Lord drew attention in proposing the amendment, for an environmental disaster If we do not take fully into account the safety aspects, we shall almost be planning for a disaster, and not necessarily only one. As the noble Lord pointed out, the degree of damage following the sinking of the ferry in the Channel last year was very considerable. If the wind farms are located in the wrong place, the dangers are likely to be repeated time and again and the likelihood is that more than one super tanker will collide with them. As the noble and learned Lord, Lord Donaldson said, although the damage to a super tanker is not likely to be very great, it is still possible that there would be some leakage. That would pose a constant threat to the environment, which needs to be mitigated as much as possible by locating the wind farms in the right places.
Amendment No. 179, standing in my name, takes up the point made by the noble and learned Lord, Lord Donaldson, about radar. The amendment proposes the insertion of a new clause as follows:
"Provisions in this Act and earlier legislation concerning the granting of new licences for generating stations shall not come into effect until the Secretary of State has commissioned, received and approved a full report on the effect of offshore wind farms on radar, radio and other devices used by vessels for the purposes of navigation".
I stress that that is the Government's responsibility, though no doubt they will wish to consider to what extent the cost of such an investigation should be borne by the developers of the wind farms.
The noble and learned Lord, Lord Donaldson, referred to a broadcast that he had heard. 1 can give him a more specific reference. On 16 March, the noble

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Lord, Lord Bach, replying to a parliamentary Question about wind farms and low flying aircraft, said:
"It is undisputed that wind turbines can affect radar, low flying, and communications links, so we have to ensure that wind farm developments do not impair our operational needs and safety".—[Official Report, 16/3/04; col. 127.]
If that is the case for air force training, it is surely far more important in the context in which the noble and learned Lord, Lord Donaldson, drew attention to it. I therefore hope that the Government will accept my Amendment No. 179. Alternatively, it may be necessary to press it to a Division.
In proposing the amendment, the noble Lord spoke also to Amendment No. 184, which raises a number of points. It is extraordinary that the issue is to some extent divided between different departments. The lead department appears to be the Crown Estate—perhaps not a department that immediately comes to mind with regard to the development of international or offshore waters. The document produced by the Crown Estate shows a mass of proposed sites—some, as mentioned on the other side of the House, of very considerable extent—which could not be more conveniently located, not off the shipping lanes but in the Thames Estuary, off the Greater Wash and off Liverpool. All that appears to have happened without any regard to where the shipping lanes actually are and the extent to which the ships will need to divert in order to avoid them, subject to all the hazards of navigation, to which a number of noble Lords have drawn attention.
That brings me to another point regarding the amount of data that we have on shipping lanes. Amendment No. I 84A, also tabled in my name, relates to the use of recognised shipping lanes. It reads:
"Installations and the safety zones around them may not be established where interference may be caused to the use of recognised sea lanes essential to international navigation".
I understand that on 19 March a government department issued some information on shipping lanes. However, it appears to have been sent only to the developers, but apparently not to the shipping interests that are involved. Perhaps the Minister will let us know whether or not that is so.
Clearly, these are matters of very great importance. It is right that we should debate them and, if necessary, vote on them. A number of other points have arisen, particularly with regard to our international treaty obligations, which perhaps may more appropriately be dealt with on consideration of later amendments. I believe that we have been right to raise this issue today. We are grateful to the noble Lord for moving the amendment. There are a number of additional points of greater detail, to which I am sure we shall want to pay close attention in a moment.
4.45 p.m.
Lord Davies of Oldham: My Lords, I am grateful to noble Lords who have participated in this extensive debate. I am particularly grateful to the mover of Amendment No. 172 and to those who have spoken to
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the amendments grouped with it for having identified the issues that we debated generally at Second Reading and considered extensively in Committee. As the noble Lord, Lord Higgins, has indicated and the noble Lord, Lord Greenway, has expressed through his contribution, there are a number of issues about which Members of the House are dissatisfied, and I hope to allay their concerns when I speak to their particular amendments. However, I am also obliged to respond to a debate, which has all the hallmarks of a Second Reading, about general issues of marine safety without having anything to do with wind farms and the sea. That is a fairly extensive remit, and I shall therefore limit my response to certain aspects.
Perhaps I may first clear up one important misconception that I believe has underlined one or two contributions to the debate. To a degree, that misunderstanding is implicit in Amendment No. 172, the first amendment tabled by the noble Lord, Lord Greenway.
The amendment implies that decisions will be taken about whether offshore renewable energy development is to be permitted and then the renewable energy zone will be created over that area of the sea. That is exactly the wrong way round. The process we are introducing is the opposite. The renewable energy zone will be created first around the whole of the United Kingdom. The reason why it is referred to in plural is that it is cumulative.
The zone is not defined totally in one stage. Zones are defined but the concept is a zone around the United Kingdom established in stages in the area of the sea where the UK has the right to produce energy from the water and winds. Designation of the zones is purely an enabling step to give us the legal power to consider and control renewable energy development within them. Creation of these zones does not imply that renewable energy development will take place in any particular location. The process of deciding where and how development will take place comes at a later stage.
In response to the noble Lord, Lord Monro, as regards the Scottish issue, the Solway Firth was the subject of consultation. It featured in round one and was carried out with the agreement of the Scottish Executive. As the noble Lord rightly identifies, it is in Scottish waters. The process might not have been as extensive as he would have liked. It may be that we need to learn lessons from round one on several aspects of consulting more effectively. However, I assure the noble Lord that that was not carried out as part of a "mega" project by the Department of Trade and Industry imposing a requirement upon the locality against some kind of master plan. That is not the way the issues are evolving and it was not so in that case.
What I have learnt from this debate and what noble Lords, including the noble Lord, Lord Monro, have pressed with great strength, is that we need carefully to consider the process of consultation and the position to which the noble Lords, Lord Greenway and Lord Higgins, referred where certain interests felt that they had been consulted on general issues contained in

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the Bill rather later than they would have wished. Certainly, we are seeking to put that right and I shall comment on that in a few moments.
Lord Dixon-Smith: My Lords, I thank the noble Lord for giving way. I want to be clear. If I understand the Minister correctly, in effect he is saying that there will not be renewable energy zones; there is one zone which will circumnavigate the United Kingdom. I have always accepted that within the renewable energy zones the position of a wind farm would be much more closely and strictly defined. Certainly, in so far as I was involved in Amendment No. 172, the purpose of that is specific and identifiable and, I thought, clear from its wording; that is, that there would be areas that were not renewable energy zones and would be reserved to shipping. That is the reason it was worded in that way. That may cause complications for the Minister because it means that there would then be renewable energy zones because shipping would have priority, as, indeed, I think it should, in particular parts of the North Sea where there are these "maritime motorways".
Lord Davies of Oldham: My Lords, I do not want to belabour the point. I merely indicate that the concept of zones is just a sub-section of the zone around the whole of the United Kingdom for which we have legal powers to examine the issues of wind energy. The question of where the installation should be, the whole issue of maritime safety, consultation and all the issues that have been aired in the debate, are part of a secondary process. The amendment addresses the concept of the zone and in that sense is not effective in terms of seeking to obtain what has been expressed in the House.
I shall respond in a more direct way to the very important points raised by the noble Lord, Lord Greenway. By that technical approach at the beginning I do not in any way seek to disavow the importance of the issues he raises. The safety of navigation is a predominant concern to the Government. I remind the House that we are dealing with Report stage. We have had Committee stage and are now into the detail. However, in the course of this debate I have been asked two questions, or they were implicit by some contributions. First, I was asked whether the Government have any concept that building wind installations might affect maritime safety. There is only one answer to such a general question and it is brief. The answer is "yes". Secondly, I have been asked the general question of whether we have any idea that there are important sea lanes which ships pass through, some of which can be likened to motorways on land and that it would be absurd to build an installation in the middle of a motorway. The answer to that is also "yes". The Government unreservedly recognise that point too, to say nothing of the fact that there are international shipping lanes. We are governed by international law and therefore there would not be any question of producing such intrusions.
However, I think this was addressed more accurately by the noble Lord, Lord Greenway, who participated in our deliberations in Committee. He identified concerns for certain kinds of shipping and concerns with regard to access to certain of our ports.
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However, if we can talk about ports in the east of England and not mention Felixstowe I am a little worried about just how precise the debate is on the concerns of Britain as a maritime trading nation.
Lord Dixon-Smith: My Lords, I apologise for intervening again. Harwich and Felixstowe are the same; if you talk about one, you talk about the other.
5 p.m.
Lord Davies of Oldham: My Lords, I accept the correction from the noble Lord. I was seeking to emphasise that it is important that we concentrate on the detail, which has been identified as issues which the Government should appropriately address, and not on the more general issues which obviously the Government are enormously concerned about but which do not relate directly to these amendments nor in a very real sense to the Bill. We all recognise that the Bill has implications for shipping and the sea. However, it will also be recognised that other laws govern the processes of consultation. The question of decisions taken which affect shipping are extant, viable, crucial and still impact upon this process. However, in this Bill we need only concentrate on those issues which arise particularly because of the proposed wind farm installations.
I turn to the substantive issues covered by the amendments. We understand the concerns of the shipping industry about the development of the renewable energy sector. The Government are committed to working creatively and positively to finding ways in which those two sectors can co-exist.
The Minister responsible for energy, my right honourable friend Stephen Timms in the other place, met representatives of the industry on 16 March and has written subsequently to the Chamber of Shipping to give the shipping community assurances which I trust will allay its concern. The most important point is that the Government will not permit the location of offshore renewable energy installations where they would put at risk the safety of navigation. That is the concern behind the amendments tabled by the noble Lords, Lord Greenway and Lord Higgins. As I stated in Committee, the Government are committed to maritime safety and I am happy for the opportunity to emphasise that point again today.
The statement that we shall not permit the location of offshore renewable energy installations where they will endanger navigation is not a vague aspiration on our part. As I indicated in my opening remarks, we already have legislation the Coast Protection Act 1949—to ensure that offshore renewable energy installations are not located where they would obstruct or endanger navigation. The Department for Transport considers applications for consent very carefully and consults the Maritime and Coastguard Agency and other organisations with an interest in marine safety before deciding whether to grant an application.

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The Coast Protection Act applies to development in territorial waters and to areas designated under Section 1(7) of the Continental Shelf Act. So, it will cover installations in the renewable energy zones which are being established by the Bill.
I appreciate that a developer can choose to seek development approval for a project in English and Welsh territorial waters using the Transport and Works Act 1992, which disapplies the Coast Protection Act. However, I want to assure noble Lords that control of such developments is equally stringent under those provisions to ensure maritime safety is not compromised. The Maritime and Coastguard Agency is consulted on all applications.
The noble Lord, Lord Higgins, in his Amendment No. 184A, raised the important point of the cumulative impact of wind farms. I assure him that we regard that as a very important factor in looking at whether development consent can be given for those projects. Developers will be obliged to work closely with each other and with shipping interests to understand the cumulative elements of the development of such installations.
I recognise that the shipping industry would like to see wind farms relocated rather than shipping diverted. The noble Lord, Lord Greenway, emphasised why significant costs would be potentially involved to the shipping industry if diversions were necessary in order to avoid wind farm installations. That is the burden of his Amendment No. 184, which we are considering in the group. This may not be a simple matter, given the technical and environmental constraints on where wind farms can be located. A number of factors will undoubtedly have to be taken into account in reaching decisions in this area. They will include, of course, the efficacy of wind farms and our need, as the House would recognise, to improve production of energy from renewable sources. One important issue to take into account is the possible impact on shipping. Consents decisions have to be carefully balanced across a range of interests. I merely wish to acknowledge in this debate the fact that, as the noble Lord has emphasised, shipping is important.
It may be reasonable in certain cases for ships to reroute around a proposed wind farm rather than for the wind farm developer to find a new site. Where such a rerouting could be achieved safely I emphasise "safely"—we would want to consider it as an option. We would not propose such a change lightly, and would want to look at all the other aspects identified by the noble Lord, including the environmental, but certainly the economic, aspects of interfering with shipping. I can give an assurance that any such requirements for shipping to deviate from its present routes will be kept to a minimum. We shall need to bear in mind also our obligations under the United Nations Convention on the Law of the Sea. It is just not possible for us to site installations, and the safety zones around them, in international shipping lanes.
Looking to the future, the Minister has given an undertaking that the Government will work with the shipping industry to see whether we can improve our
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current processes for making the initial high-level decisions about the areas, within which development of offshore renewable energy installations can take place. The re-establishment of shipping clearways would certainly be one approach that could be considered further in co-ordination with the industry.
Amendment No. 179 raises the issue of possible interference with ship communications systems. As the noble Lord, Lord Higgins, identified, the House has considered—albeit briefly in Question Time—issues with regard to low-flying aircraft concerning the Ministry of Defence. There is the issue of whether wind farms will affect ships' communications systems. I give the noble Lord this assurance: we agree that a further study of the matter needs to be undertaken in view of the possible effects on navigational safety. Such communications are of paramount importance in search and rescue operations. I hope noble Lords will recognise that we take that point on board. We shall carry out such a study and ensure that the results give us the assurances we need that such radar systems are not adversely affected in such a way as to jeopardise the activity of shipping.
As I have indicated, I have spoken at considerable length. This has been a lengthy debate. I apologise for the length of my reply, but I thought I owed it to the mover of the amendment and those noble Lords who have contributed to the debate to give a comprehensive reply. I see that I am being stimulated to add to my already extensive remarks. I give way.
Lord Higgins: My Lords, before the noble Lord sits down, I should like to refer to the question of radar. Am I to understand that he accepts the amendment, which is much more precise than the statement he has just made, in as much as more licences should not be granted until that study has been carried out? It would be quite absurd to grant the licences and then to find that the radar implications make the licence dangerous.
Lord Davies of Oldham: My Lords, I do not want to accept the amendment at this point. I am giving the noble Lord a general response that we recognise the validity of the points that he makes and that we intend to carry out such a study. I am quite prepared to discuss the matter further with him. I was hoping that he would recognise the degree to which I have sought to meet him regarding his amendment in recognising the validity of his points; that he would give us time to work on this issue and to discuss the matter further. I have made my response to his points on that basis.
The amendments cover very important issues. That is why we have had such an extensive debate. I wanted to emphasise just how seriously the Government take the issues and why we recognise the validity of many of the points that have been made. However, I also want to emphasise that we are not convinced, as I hope I have demonstrated, that it is necessary to write new legislation on the face of this Bill. Many safeguards regarding shipping obtain in other legislation, which were already operating with regard to round one of the development of these installations. We do not believe that we need to use the vehicle of this Bill for more

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extensive amendments save that—and I have told the noble Lord—we shall look further at the question of radar, discuss it further and see whether we need to make changes.
As for the rest, I hope I have given the assurance that this debate has raised very important issues. The Government take them very seriously. I hope that on that basis the noble Lord will feel able to withdraw his amendment.
Lord Greenway: My Lords, at the outset I thank all noble Lords from all sides of the House who have contributed to this important but lengthy debate. I must confess that I was wondering what would have happened had the amendment been reached late last night. I think we might have had a much shorter debate. Nevertheless, some very interesting points of view have been put forward. I am very grateful to noble Lords who have been able to expand on the many points that I could not possibly cover in my opening remarks.
The noble Baroness, Lady Miller of Chilthorne Domer, is not in her place, but I should like to pick up her point suggesting that perhaps we might be anti-wind farms. I can categorically say that the shipping industry is not against wind farms. It recognises that the Government have chosen this way forward with renewable energy. All it seeks is the right mechanism and the right early consultation to enable the developers and the users of the sea to cohabit. Indeed, the Minister has said that the Government want to achieve that.
The Minister has been generous in the assurances that he has announced: I have not been sitting with a checklist, because there were too many of them. He has certainly gone a long way towards meeting many of our concerns. There are still one or two concerns outstanding, particularly with regard to the Transport and Works Act 1992, where developers have an alternative route of going about things, which, although it may be expensive, could be attractive to them because of the possibility of extinguishing rights of navigation and therefore reducing risks.
The Minister said that route would be subject to the same checks and balances as under the Coast Protection Act 1949, but there are still one or two worries on that. Using that route, there is no statutory requirement for wind farms causing a hazard to navigation to be addressed. It is appreciated that the MCA, as the Minister said, will be asked to assess orders from the safety perspective. However, the MCA is not legally part of that consent regime, and therefore any conditions in the consents imposed by them would not be legally binding on developers.
If that route was to be taken, there would be a serious weakness in the legislative machinery to protect against wind farms causing a hazard to navigation and therefore compromising safety. I do not know whether, with the leave of the House, the Minister is able to say a little more on that before I decide what to do on this amendment—no answer is forthcoming. In that case, once again, I
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thank all those who have taken part in the debate and the Minister for his assurances. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Higgins Lord Higgins moved Amendment No. 173:
Page 59, line 25, leave out "negative" and insert "positive"
The noble Lord said: My Lords, this amendment is concerned with the procedure that would be exercised for Orders in Council. The paragraph as a whole is concerned with the exploitation of areas outside the territorial sea for energy production. It states:
"The rights to which this section applies shall have effect as rights belonging to Her Majesty by virtue of this section".
This is an important assertion of British sovereignty. I make no complaint about that, but it then goes on at subsection (6), to which the amendment applies:
"Orders in Council under this section, and orders under subsection (5), are subject to the negative resolution procedure".
It seems most extraordinary that something as important as this—asserting our sovereignty over exploitation of areas outside the territorial waters—should be done by negative resolution. I hope that the Minister can agree that it would be more appropriate for there to be an affirmative resolution and that he can accept the amendment. I beg to move.
Lord Davies of Oldham: My Lords, I appreciate the precision and cogency with which the noble Lord has addressed this amendment, but I am afraid that I will not be as forthcoming as I was on his last significant amendment.
There are two slightly different delegated powers in Clause 76, both of which, as the noble Lord indicated, are subject to negative resolution where he would prefer an affirmative resolution. The first, in Clause 76(4), is a power for Her Majesty to designate an area, which we are calling a renewable energy zone, as an area to which the rights under the United Nations Convention on the Law of the Sea set out in subsection (2) are exercisable. The second power, in Clause 76(5), is a power for the Secretary of State to designate the whole or part of a renewable energy zone as an area in relation to which Scottish Ministers are to have functions, as set out, for example, in Clause 80 and the decommissioning powers in Chapter 2.
Both are important powers, but the subject matter of the orders will be technical in nature. My reason for seeking to rebut the argument made by the noble Lord is that we regard them as technical in nature, and we do not foresee that they will be particularly controversial. That is why we have chosen the negative resolution procedure. The Select Committee on Delegated Powers and Regulatory Reform, in looking at the delegated powers in this Bill as a whole, thought that this was reasonable. We do not see a case for a change to an affirmative resolution.
It may be helpful if I add a little more about the powers. As noble Lords will be aware, the United Nations Convention on the Law of the Sea gives the UK the right to exploit the renewable energy resources from the winds and waters in an area that we are

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calling the renewable energy zone. It is essential that there is a power to designate the area that we are claiming as the United Kingdom's renewable energy zone. UNCLOS lays down the rules that contracting parties are to use in designating this area. It is not to extend beyond 200 nautical miles from the baselines from which the breadth of the territorial sea is measured. The rules for establishing these baselines are set out in UNCLOS and the baselines around the UK coast have been established for a long time, so there is no problem in this regard. Noble Lords will recognise immediately that we are not able to claim a full 200 miles in some places, for the obvious reason that we would impact on the areas of our neighbours. This is not a problem, as we intend that the zone will extend only to the median line between us and other sovereign powers. This is the agreed maritime boundary, which we have established for the purpose of designating the UK's continental shelf. We envisage that the renewable energy zone will be designated in stages, hence the reference to zones in the plural throughout the Bill.
I hope that noble Lords will appreciate from this brief description of the process that this is an entirely technical exercise. We would not expect this to be controversial. The process will be similar to the mapping of the UK continental shelf. Our conclusion is that the negative resolution procedure for Orders in Council for such a technical matter is entirely appropriate.
On the second power, which concerns Scottish Ministers and the Scottish dimension, it follows that we need to designate the areas in the United Kingdom renewable energy zone as a whole, within which Scottish Ministers are to exercise certain functions regarding certain parts. The process of designation will be similar to that outlined above. However, we will need to define the maritime border between Scotland and the rest of the UK. There are precedents for this in other legislation. We will want to consult the Scottish Executive before making an order under Clause 76. Again, it seems to us that this is not an area of high controversy. Therefore, we think the negative resolution procedures entirely appropriate. I hope that the noble Lord is convinced by my argument and will be prepared to withdraw his amendment.
Baroness Carnegy of Lour: My Lords, before the noble Lord sits down, and with the leave of the House, he mentioned the Select Committee on Delegated Powers and Regulatory Reform, of which I am a member. I looked up the proceedings of the committee, as printed and available to noble Lords. The committee did not disagree with the point that this was a technical matter, and therefore did not disagree with what the Government wanted to do. However, the point that this measure means ceding sovereignty was not raised. My noble friend Lord Higgins raised the point that the sovereignty of the seas is being ceded.
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Following the Minister's argument, I was not sure whether he took that point or not. My noble friend will doubtless pick up on it if he sees fit to do so.
Lord Davies of Oldham: My Lords, the Select Committee on Delegated Powers and Regulatory Reform looked at this matter and saw that the decision taken that we were involved in was of a limited nature. The first point is that we are bound by the United Nations Convention on the Law of the Sea. The other point is that it is simply a question of defining those territorial waters for Scotland in which the Scottish Executive has the right to make its point. I do not see that that is anything more than a technical matter.
Baroness Carnegy of Lour: My Lords, it was not a Scottish question; I understand that completely. My question was about the point that my noble friend Lord Higgins made to the effect that we were ceding sovereignty of the sea through the Order in Council.
Lord Davies of Oldham: My Lords, I hear what the noble Baroness says, but I have nothing to add.
Lord Higgins: My Lords, I found some parts of the Minister's reply more convincing than others. Some were irrelevant. The irrelevant ones can be pursued with some of the later amendments.
I share the concern of my noble friend who intervened a moment ago. I am far from convinced that it is a mere technical matter. I will consider the matter further and will come back to it, if necessary, at Third Reading. Meanwhile, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Baroness Byford Baroness Byford moved Amendment No. 174:
Page 59, line 30, at end insert—
""exploitation" excludes the doing of anything which would diminish or harm the natural environment on or under the sea bed, at sea, of on or under land;"
The noble Baroness said: My Lords, in moving Amendment No. 174, I shall speak also to Amendments Nos. 175, 189 and 190, which stand in my name.
All four amendments are based on the amendments that we tabled in Committee—Amendments Nos. 106A and 106B. Those amendments were debated at great length, and the debate is reported at cols. GC 316 to GC 325 of Hansard for 3 February 2004. The noble Lord, Lord Triesman, felt that we had tabled the amendments too early in the process, which explains their repetition in the provisions dealing with interpretation of the chapter. I should hate to think that, by reiterating them only in sections that deal with the setting-up of the zones, we would give carte blanche to builders and developers to behave as they pleased. I am sure that the Government would not wish to see that.
In Committee, I said that the use of the word "exploitation" worried me. It still does. The noble Lord, Lord Triesman, explained that the word,
"follows exactly the word used in the UN Convention on the Law of the Sea".—[Official Report, 3/2/04; col. GC 319.]
I humbly suggest that most international conventions use words that have probably been translated and retranslated from a number of different tongues. If the noble Lord can tell me that English was used, I will stand corrected.
The use of the word in the UN Convention on the Law of the Sea does not mean that it is precisely what is intended by the original German, French or American explanation. My alarm was compounded recently, when the Prime Minister used it in extolling changes to the way in which asylum seekers would be dealt with. He referred to the new regime and the prevention of the "exploitation" of our social security system. That is precisely the normal shade of meaning of the word that, I think, people would accept. It might be used to refer to someone who tried to exploit a loophole and gain something by it. In most cases, that will be the interpretation that an ordinary member of the developer's workforce will understand.
Of course, developers seeking permission to work at sea will present a picture of responsibility. I merely want to make sure that there is in the Bill a description of what is not acceptable. The seabeds around our shores must, as we said earlier, be littered with crashed aeroplanes, sunken ships and waterlogged rubbish that has accumulated over the years. It is no excuse for adding so much as one dropped spanner or ploughing up a seabed for half a mile to say that it is quicker and easier to do so.
I have used the definitions that I have because I feel that harm or damage, in most cases, is relevant to its context. Digging a hole to erect a pylon in an area with a radius of several hundred feet is not, in itself, harmful to the environment, but removing a chunk of seabed measuring 100 by 100 feet probably is. Excavating a black coral reef, as has happened, is both harmful and irrevocable, and we know that damaged coral cannot be regenerated.
I do not apologise to the Minister. I know that we had a long debate in Committee, in which I was supported by the noble Baroness, Lady Miller of Chilthorne Domer, and by my noble friends Lady Miller of Hendon, Lord Ullswater, Lord Dixon-Smith and the Duke of Montrose. It is important that we clarify the point again. If the Minister responds by saying that he does not like my words or does not think that the amendment is necessary, I will encourage him, at this stage of the Bill's progress, to think of another word that does not have such direct influence in everyday language. "Exploitation" is not a good word, which is why I have brought the matter back.
Amendment No. 175 refers to anything which does not cause irrevocable damage in the marine environment. I shall give an example. We live opposite the biggest granite quarry in Europe. It was originally Mountsorrel, became Redland and is now Lafarge. It is on a site of special scientific interest. I realise that, although the work to get the granite out will be done for many years, the site must ultimately be restored, so that the totality of the environment will not be damaged. I used to know it as a lovely woodland, but I fear that I will be under the soil long before that restoration happens.
The word "exploitation" raises alarms for many people. For that reason, I brought the matter back. I was unable to divide the Committee, as the Minister knows. If I had been, I would have done. I apologise to noble Lords who sat through our debates in Committee in the Moses Room, but the issue was important enough for further discussion. I hope that I have persuaded the Minister that the use of the word in the Bill is undesirable. I beg to move.
Baroness Miller of Chilthorne Domer: My Lords, in Committee, I supported the noble Baroness, Lady Byford, and agreed with what she wanted to achieve with the amendments. I continue to do so. I noticed that, with regard to Amendment No. 175, she said, perhaps in error, "irrevocable", when the amendment actually says "irreversible", but I am splitting hairs. The two words have the same meaning.
I hope that the Government will, as the noble Baroness invited them to do, produce a definition in both cases. It is useful, in such a Bill, to have some reference to the protective framework that the marine environment can expect, given the sort of work that will take place. I mention again the fact that there is no marine Act protecting the marine environment, such as the Government themselves thought necessary. They have committed themselves to bringing in such an Act, but they have given no timescale for doing so. If such an Act were in place, we would not need such a definition in the Bill, but because there is no such Act, the marine environment lacks protection, as the Government have recognised. The Government should recognise that lack and put something in the Bill to achieve what the noble Baroness is getting at.
Lord Whitty: My Lords, as the noble Baroness said, the matter was discussed at some length in Committee. I see no reason to change the Government's position. The noble Baroness is attempting to use somewhat tendentious definitions of words that are used in international legislation to achieve the aim of avoiding irreversible harm to the marine environment. The procedures that we are adopting will achieve that, and we cannot stretch the definitions in the way that she suggests.
The noble Baroness obviously has an aversion to the word "exploitation". If I might venture to say so, she seems to regard it in a rather Marxist way as always being likely to be damaging, unless otherwise stated. In fact, the term "exploitation", in English or French—which is what the United Nations treaty is written in—would undoubtedly mean simply taking advantage of, using or operating in a way which made use of natural resources. Whether that was damaging or not depends on the circumstances.
There is also a problem in the noble Baroness's definition of what "damage" and "diminish" actually mean. Clearly, no development of this nature can be entirely impact-free. Certainly, almost any wind farm at sea is bound to change, to some extent, the marine environment. It might diminish the wildlife or it might, in the short or long term, attract a wider range of biodiversity and species into the area—that is likely to

631
be the long-term effect. Whether people regard that as harmful and negative or beneficial depends on a rather subjective view. Therefore, I do not think it is very easy to use the definition that the noble Baroness has chosen because there is no construction of wind farms at sea that will not have some effect on the marine environment.
In addition to the effect on the marine environment and ecology, there is the overall impact of creating this development in the first place. The whole objective is, after all, environmental—to provide non-carbon fuel in order not to diminish the planet's resources as well as not to pump carbon into the atmosphere and to heat up the planet. The net environmental gain of the successful exploitation of wind farm possibilities is therefore likely to be substantial. The same would be true of wave and tidal operations. Therefore, it is not just the immediate and local environmental effect which has to be taken into account but the total environmental effect of the whole operation. I do not think that that is covered by the noble Baroness's definition.
The Government's approach to such propositions is through the safeguards of the strategic environmental assessment process and through the site-specific environmental impact assessment of any proposed development application. That will look at the impact on marine life and on any micro-climate as well as the overall environmental effects and benefits of the scheme. That will be a rigorous process and it will not depend on definitions which are somewhat different from the dictionary definitions of "exploration" and "exploitation". The developers will be forced to go through such a process before the Government approve any particular site development or designation of a zone or area.
While I utterly sympathise with the need in this process to ensure that renewable energy projects do not have an unreasonable, disproportionate, negative effect on the local environment, our procedures are in place to avoid that. That is a better way of tightening up control over such developments than attempting a definition, as the noble Baroness suggests.
5.30 p.m.
Baroness Miller of Chilthorne Domer: My Lords, before the Minister sits down, does he mean that strategic environmental assessments will be undertaken before any or all of the projects are commenced?
Lord Whitty: My Lords, there will be the overall strategic environmental assessment as well as the site-specific environmental impact assessment. There will be a designation, followed by a development proposition, which will have to come through the environmental impact assessment.
Baroness Byford: My Lords, I thank the noble Baroness, Lady Miller of Chilthorne Domer, for her support and her questions to the Minister again. Obviously, I am disappointed at his response. Those words are so different, and I think they can be misunderstood. "Exploration" is used in the same
632
context as "exploitation"; I think that will be a concern to those actually doing the work, although I think they will just get on with the work that they have to do.
I have listened to the Minister and I know I will not persuade him. At this stage, with disappointment, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 175 and 176 not moved.]
Clause 77 [Application of criminal law to renewable energy installations]:
Lord Kingsland Lord Kingsland moved Amendment No. 176A:
Page 60, line 29, at end insert "if he would have been guilty of that offence and so liable had the offence taken place within a part of the United Kingdom"
The noble Lord said: My Lords, Amendments Nos. 176A and 176B are intended to remedy a problem, which seems to have been unnoticed by the Government and their advisers, in relation to the application of the criminal law to offshore renewable energy installations.
Clause 77 provides that, by Order in Council, the criminal law may be applied to any actions which take place around an offshore renewable energy installation or within a renewable safety zone. Under subsections (6) and (7), liability may attach personally to directors and officers of companies for any criminal offence, whatever its nature, which is committed on the installation or in the safety zone.
The effect of this must be to widen the scope of the criminal law. It applies to all criminal offences which must include some in respect of which directors and officers would not otherwise be personally liable. Moreover, this widening will apply in such a way as to establish a legal inconsistency between certain offences committed within the jurisdiction, to which personal liability may not attach, and those committed in a safety zone, to which it will always attach.
We support the application of the normal criminal law to renewable installations and the area around them. However, there is no obvious policy rationale—at least, none that has been explained by the Government in consultation—either for widening the scope of the criminal law or for creating the difference in approach between the onshore and offshore regimes.
In our view, both subsections (6) and (7) of Clause 77 should be subject to the proviso that they are applicable if, and only if, the person in question would have been guilty of the offence, and therefore liable to be proceeded against, if the offence in question had taken place within a part of the United Kingdom. I beg to move.
Lord Whitty: My Lords, the provisions in this part of the Bill relating to the criminal law are modelled on those in the Petroleum Act 1998, which itself consolidates a similar provision in the Oil and Gas

633
(Enterprise) Act 1982. There is therefore quite a long history of treating offshore activities in this way. Quite a lot of modern legislation includes provisions for officers of corporate bodies to be punished when it can be proved that they had consented to or connived at criminal behaviour by the company or were negligent in allowing that to so happen.
I understand the point that the noble Lord is making, but there is a corporate responsibility here. It is largely corporations which will be operating in these renewable energy zones and on the installations to be established there. Officers of corporate bodies have a responsibility if it can be proven that they consented to or connived at the commission of an offence. The noble Lord is right that the provision extends the liability for an offence; it does not extend the definition of an offence as compared with onshore, but it is done in a way which has applied in the offshore petroleum industry since the 1980s for the reason that, by and large, what happens on oil and gas platforms and, likewise, offshore wind farms, is a corporate responsibility.
That seems to us sensible; I am not sure that the noble Lord has convinced me otherwise, although I understand his point. However, I am not at this stage inclined to accept that we should treat this differently from the very analogous situations that exist elsewhere offshore.
Lord Kingsland: My Lords, I am grateful for the noble Lord's response. The fact that there is a similar clause in previous legislation is not a conclusive response to the arguments I have put forward on behalf of the Opposition in support of the amendments.
We shall have differential criminal law regimes for directors of companies: one onshore and the other offshore. In my submission, that is inherently undesirable. All the Government have to do is to agree with our amendments. There will then be a level playing field for directors whether or not the offences are committed inland or outside the territorial waters. Why is that such a difficult pill for the noble Lord to swallow?
Lord Whitty: My Lords, I am not entirely sure that I am in order in responding at this point but I shall do so as long as we do not make a habit of it.
Presumably the same logic applies with petroleum platforms. Offshore it is extremely unlikely that individuals will commit offences unless they are under the broad jurisdiction of a company which either owns, is operating or is a subcontractor on that site. Onshore there is clearly a high probability that someone is acting entirely on his own whether or not he is a company employee. Therefore, one is dealing with a situation of corporate responsibility for the site, part of the site or part of the operation on the site in a way that does not apply on land. It is not unreasonable, therefore, that there is some additional
634
responsibility—not additional extension of the criminal law—on the people who are in charge of the operations on that site.
Lord Kingsland: Additional responsibility means an extension of the criminal law since we are talking only about criminal obligations in this case. I am most grateful to the noble Lord for engaging in a discussion about this matter. I do not propose to pursue it to a vote today but I shall bring it back at Third Reading. Meanwhile, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 176B not moved.]
Clause 81 [Activities in Zones requiring 1989 Act Licences]:
[Amendment No. 177 not moved.]
Clause 82 [Modification of licence conditions for offshore transmission and distribution]:
[Amendment No. 178 not moved.]
Lord Higgins Lord Higgins had given notice of his intention to move Amendment No. 179:
After Clause 84, insert the following new clause—
"LICENCES FOR GENERATING STATIONS
Provisions in this Act and earlier legislation concerning the granting of new licences for generating stations shall not come into effect until the Secretary of State has commissioned, received and approved a full report on the effect of offshore wind farms on radar, radio and other devices used by vessels for the purpose of navigation."
The noble Lord said: My Lords, in the light of the Minister's comments, I propose to return to the issue at Third Reading but not to move the amendment.
[Amendment No. 179 not moved.]
Clause 85 [Consents for generating stations in Zones]:
[Amendments Nos. 180 and 181 not moved]
Clause 87 [Further provision relating to public rights of navigation]:
[Amendment No. 182 not moved.]
[Amendment No. 183 had been withdrawn from the Marshalled List.]
[Amendment No. 183A had been retabled as Amendment No. 197A.]
Lord Higgins Lord Higgins moved Amendment No. 184:
After Clause 90, insert the following new clause
"MEASURES TO MANAGE RISKS TO SAFETY OF NAVIGATION
(1) This section applies where the Secretary of State considers that the proposed location of offshore renewable energy installations or the stages of construction, operation or de-commissioning of the aforementioned installations give rise to unacceptable risks to safety of navigation.

635
(2) Reference to installations also includes their safety zones, and the reference to risks includes those related to collision, grounding and to interference to shore and ship radar, radio and other electronic communication systems caused by the aforementioned installations.
(3) If risks are identified at the strategic planning or environmental impact assessment stages in the evaluation of proposed installations, the Secretary of State shall consider which of the following measures shall be introduced to eliminate or to reduce the risks to acceptable levels—

(a) the relocation of installations away from recognised sea lanes, navigational channels including port access channels, particularly where installations may cause interference to lanes essential to international navigation;

(b) the establishment of ships' routeing measures conforming to international standards;

(c) the introduction of vessel traffic services conforming to international standards; or
any other appropriate measures.

(4) If experience in any of the stages referred to in subsection (1) or (2) above identifies risks, the Secretary of State shall consider whether the measures in subsection (3)(b) or (c) or any other appropriate measures shall be introduced to eliminate or to reduce the risks to acceptable levels.
(5) Where the measures in subsection (3)(a) or (b) are to be introduced, the Secretary of State shall ensure that a system for monitoring traffic patterns, their volumes and densities is established to assist in implementation and to overseer the effectiveness of the measures.
(6) Where the measures in subsection (3)(b) are to be taken, the Secretary of State shall ensure that any deviation from recognised sea lanes, navigational channels including port access channels is kept to a minimum.
(7) Where the measures in subsection (3)(b) or (c) are to be introduced, the Secretary of State shall ensure that all costs are borne by developers."
The noble Lord said: My Lords, I beg to move and seek the opinion of the House.
The Deputy Speaker (Baroness Cox): My Lords, the Question is that Amendment No. 184 shall be agreed to. As many as are of that opinion will say, "Content". To the contrary, "Not-Content". Clear the Bar.
Division called.
The Lord Chancellor (Lord Falconer of Thoroton): My Lords, Tellers for the Contents have not been appointed pursuant to Standing Order 54. A Division therefore cannot take place, and I declare that the "Not-Contents" have it.
Amendment negatived.
Lord Higgins Lord Higgins moved Amendment No. 184A:
After Clause 90, insert the following new clause
"INSTALLATIONS IN TERRITORIAL WATERS AND RENEWABLE ENERGY ZONES
Installations and the safety zones around them may not be established where interference may be caused to the use of recognised sea lanes essential to international navigation."
The noble Lord said: My Lords, I beg to move, and wish to test the opinion of the House.
5.48 p.m.
On Question, Whether the said amendment (No. 184A) shall be agreed to?
Their Lordships divided: Contents, 157; Not-Contents, 115.

Division No. 2

CONTENTS

Addington, L.

Hooson, L.

Allenby of Megiddo, V.

Howe, E.

Alton of Liverpool, L.

Howe of Aberavon, L.

Anelay of St Johns, B.

Howe of Idlicote, B.

Astor, V.

Howie of Troon, L.

Astor of Hever, L.

Hurd of Westwell, L.

Attlee, E.

Hylton, L.

Avebury, L.

Jenkin of Roding, L.

Barker, B.

Jopling, L.

Beaumont of Whitley, L.

Kimball, L.

Biffen, L.

Kingsland, L.

Blaker, L.

Knight of Collingtree, B.

Bowness, L.

Lamont of Lerwick, L.

Bridgeman, V.

Lester of Herne Hill, L.

Brooke of Sutton Mandeville, L.

Liverpool, E.

Brookeborough, V.

Livsey of Talgarth, L.

Brougham and Vaux, L.

Luke, L.

Burnham, L.

McColl of Dulwich, L.

Buscombe, B.

MacGregor of Pulham Market, L

Byford, B.

Caithness, E.

MacLaurin of Knebworth, L.

Carlisle of Bucklow, L.

Maclennan of Rogart, L.

Camegy of Lour, B.

McNally, L.

Chester, Bp.

Maddock, B.

Chorley, L.

Maginnis of Drumglass, L.

Clement- Jones, L.

Mar, C.

Cobbold, L.

Mar and Kellie, E.

Colwyn, L.

Marlesford, L.

Cope of Berkeley, L. [Teller]

Masham of Ilton, B.

Courtown, E.

Methuen, L.

Cox, B.

Miller of Chilthorne Domer, B.

Craig of Radley, L.

Miller of Hendon, B.

Crathorne, L.

Monro of Langholm, L.

Dahrendorf, L.

Monson, L.

Dean of Harptree, L.

Montagu of Beaulieu, L.

Dixon-Smith, L.

Mowbray and Stourton, L.

Donaldson of Lymington, L.

Murton of Lindisfarne, L.

Donoughue, L.

Naseby, L.

Dundee, E.

Newby, L.

Eden of Winton, L.

Northesk, E.

Elles, B.

Oakeshott of Seagrove Bay, L.

Erroll, E.

O'Cathain, B.

Ezra, L.

Palmer, L.

Falkland, V.

Park of Monmouth, B.

Feldman, L.

Parkinson, L.

Ferrers, E.

Patel, L.

Fookes, B.

Patten, L.

Freeman, L.

Peel, E.

Geddes, L.

Phillips of Sudbury, L.

Glenarthur, L.

Plumb, L.

Glentoran, L.

Plummer of St. Marylebone, L.

Goodhart, L.

Rawlings, B.

Greaves, L.

Razzall, L.

Greenway, L.

Reay, L.

Hamwee, B.

Redesdale, L.

Hanham, B.

Rees, L.

Hayhoe, L.

Renfrew of Kaimsthorn, L.

Henley, L.

Rennard, L.

Higgins, L.

Renton, L.

Holme of Cheltenham, L.

Rodgers of Quarry Bank, L.

637

Rogan, L.

Strange, B.

Roper, L.

Swinfen, L.

Rotherwick, L.

Taylor of Warwick, L.

Russell, E.

Tenby, V.

St.John of Bletso, L.

Thomas of Gwydir, L.

Salloun of Abernethy, Ly.

Thomas of Walliswood, B.

Scott of Needham Market, B.

Thomson of Monifieth, L.

Seccombe, B. [Teller]

Tope, L.

Selsdon, L.

Trumpington, B.

Sharp of Guildford, B.

Ullswater, V.

Sharples, B.

Vinson, L.

Shaw of Northstead, L.

Waddington, L.

Shutt of Greetland, L.

Wakeham, L.

Skelmersdale, L.

Walmsley, B.

Slim, V.

Walton of Detchant, L.

Smith of Clifton, L.

Weatherill, L.

Soulsby of Swaffham Prior, L.

Wilcox, B.

Steel of Aikwood, L.

Williams of Crosby, B.

Stoddart of Swindon, L.

Windlesham, L.

NOT-CONTENTS

Acton, L.

Hogg of Cumbernauld, L.

Ahmed. L.

Hollis of Heigham, B.

Alli, L.

Howells of St. Davids, B.

Amos, B. (Lord President of the Council

Hoyle, L.

Hughes of Woodside, L.

Andrews, B.

Hunt of Chesterton, L.

Ashley of Stoke, L.

Hunt of Kings Heath, L.

Ashton of Upholland, B.

Irvine of Lairg, L.

Bassam of Brighton, L.

Janner of Braunstone, L.

Berkeley, L.

Jay of Paddington, B.

Bhatia, L.

Jones, L.

Billingham, B.

King of West Bromwich, L.

Blackstone, B.

Kirkhill, L.

Blood, B.

Layard, L.

Borrie, L.

Lea of Crondall, L.

Brooke of Alverthorpe, L.

Lipsey, L.

Brookman, L.

Lockwood, B.

Brooks of Tremorfa, L.

Lofthouse of Pontefract, L.

Campbell-Savours, L.

Macdonald of Tradeston, L.

Carter, L.

McIntosh of Haringey, L.

Chan, L.

McIntosh of Hudnall, B.

Christopher, L.

MacKenzie of Culkein, L.

Clark of Windermere, L.

Mackenzie of Framwellgate, L.

Clarke of Hampstead, L.

Mason of Barnsley, L.

Clinton-Davis, L.

Massey of Darwen, B.

David, B.

Merlyn-Rees, L.

Davies of Coity, L.

Mitchell, L.

Davies of Oldham, L. [Teller]

Morgan, L.

Dean of Thornton-le-Fylde, B.

Nicol, B.

Dixon, L.

Orme, L.

Eatwell, L.

Parekh, L.

Elder, L.

Patel of Blackburn, L.

Evans of Parkside, L.

Pendry, L.

Evans of Temple Guiting, L.

Pitkeathley, B.

Falconer of Thoroton, L. (Lord Chancellor)

Plant of Highfield, L.

Prys-Davies, L.

Farrington of Ribbleton, B.

Radice, L.

Faulkner of Worcester, L.

Ramsay of Cartvale, B.

Filkin, L.

Randall of St. Budeaux, L.

Finlay of Llandaff, B.

Rendell of Babergh, B.

Fyfe of Fairfield, L.

Richard, L.

Gibson of Market Rasen, B.

Rooker, L.

Golding, B.

Sainsbury of Turville, L.

Goldsmith, L.

Sawyer, L.

Gordon of Strathblane, L.

Sheldon, L.

Goudie, B.

Simon, V.

Graham of Edmonton, L.

Smith of Leigh, L.

Grenfell, L.

Stone of Blackheath, L.

Grocott, L. [Teller]

Sutherland of Houndwood, L.

Harris of Haringey, L.

Symons of Vernham Dean, B.

Harrison, L.

Taylor of Blackburn, L.

Haskel, L.

Temple-Morris, L.

Hayman, B.

Thornton, B.

Hilton of Eggardon, B.

Triesman, L.

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Turnberg, L.

Whitty, L.

Turner of Camden, B.

Wilkins, B.

Warner, L.

Warwick of Undercliffe, B.

Williams of Elvel, L.

Whitaker, B.

Woolmer of Leeds, L

Resolved in the affirmative, and amendment agreed to accordingly.
Lord Higgins Lord Higgins moved Amendment No. 184B:
After Clause 90, insert the following new clause—
"INTERFERENCE WITH SAFETY OF NAVIGATION
In assessing whether installations and the safety zones around them present a danger to navigation, the Secretary of State shall ensure that their cumulative effects on safety of navigation are taken fully into account."
The noble Lord said: My Lords, the amendment relates to interference with the safety of navigation, which is an issue that we have already considered in some detail. In the course of earlier debates, the Minister recognised the importance of taking into account the cumulative effect of these wind farms. There may be a series of them dotted along a sea route requiring ships to divert a number of times. In dealing with some of these issues, the Minister said that the Coast Protection Act would be the main legislative tool that the Government would use to protect safety and, for proposed installations within the territorial waters of England and Wales, developers will also be able to seek approval in applying the order under the Transport and Works Act 1992.
Experience under round one indicates that this legislative route, while expensive, will be attractive to developers since it is possible to extinguish rights to navigation under this arrangement. Furthermore, this procedure does not cover danger to navigation. As I understand it, it does not refer to dangers to navigation or to the safety of navigation and it expressly excludes the requirement to obtain the consent of the Secretary of State under the Coast Protection Act. Consequently, using the Transport and Works Act route, there is no statutory requirement for wind farms causing a hazard to navigation to be addressed. If that route is taken there is a serious weakness in the legislative machinery to protect against wind farms causing a hazard to navigation. Therefore safety could be compromised. We therefore believe that the amendment is necessary. I beg to move.
6 p.m.
Lord Greenway: My Lords, I support this amendment. I inadvertently referred to it earlier, for which I apologise. I fully support the sentiments that lie behind it.
Lord Davies of Oldham: My Lords, we have had a substantial debate on safety issues. During the course of that debate, I indicated that the Government recognise the importance of the issue and the salience of the point that the noble Lord, Lord Higgins, raised. We regard it as essential that when the Government are considering the impact of wind farms on the safety of navigation, installations are considered separately and the cumulative effect is taken into account. We accept that point entirely.

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On round two wind farms, I give the noble Lord the firm assurance that the cumulative impact of wind farm sites in neighbouring locations will be a very important factor in deciding whether development consent can be given for such projects. This will apply whether the developer seeks consent under the Coast Protection Act, to which the noble Lord referred, or the Transport and Works Act 1992. Developers will need to work closely with each other and with shipping interests to understand these cumulative impacts. We shall ensure that that is done. The regulatory framework in the Bill is already flexible enough to take account of cumulative impact so, although I hear what the noble Lord has said, the position of the Government is that we do not think that this amendment is necessary. We regard the noble Lord's point as very important and I reassure the House that we have it covered in the way in which the legislation is framed.
Lord Higgins: My Lords, I note what the Minister says but he has not replied to my point about the danger of developers being able to bypass the normal procedures under other legislation, to which he referred. We believe that this is a danger and that this amendment would reinforce the need for the cumulative effect to be taken into account and for these procedures to be dealt with adequately. In the light of the Minister's reply, and the point made by my noble friend Lord Greenway, I feel we should seek the opinion of the House on this issue.
6.4 p.m.
On Question, Whether the said amendment (No. 184B) shall be agreed to?
Their Lordships divided: Contents, 147; Not-Contents, 108.

Division No. 3

CONTENTS

Addington, L.

Craig of Radley, L.

Anelay of St Johns, B.

Crathorne, L.

Astor, V.

Crickhowell, L.

Astor of Hever, L.

Dahrendorf, L.

Attlee, E.

Dixon-Smith, L.

Avebury, L.

Donaldson of Lymington, L.

Barker, B.

Donoughue, L.

Biffen, L.

Dundee, E.

Blaker, L.

Eames, L.

Bowness, L.

Eden of Winton, L.

Bridgeman, V.

Elles, B.

Brooke of Sutton Mandeville, L.

Erroll, E.

Brookeborough, V.

Ezra, L.

Brougham and Vaux, L.

Falkland, V.

Burnham, L.

Feldman, L.

Buscombe, B.

Ferrers, E.

Byford, B.

Fookes, B.

Caithness, E.

Fowler, L.

Carlisle of Bucklow, L.

Freeman, L.

Carnegy of Lour, B.

Geddes, L.

Chorley, L.

Glenarthur, L.

Colwyn, L.

Glentoran, L.

Cope of Berkeley, L. [Teller]

Goodhart, L.

Cox, B.

Gray of Contin, L.

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Greaves, L.

Patten, L.

Greenway, L.

Peel, E.

Hamwee, B.

Phillips of Sudbury, L.

Hayhoe, L.

Plumb, L.

Higgins, L.

Powell of Bayswater, L.

Holme of Cheltenham, L.

Rawlings, B.

Howe, E.

Razzall, L.

Howe of Idlicote, B.

Reay, L.

Howie of Troon, L.

Redesdale, L.

HurdofWestwell, L.

Rees, L.

Jenkin of Roding, L.

Renfrew of Kaimsthorn, L.

Jopling, L.

Rennard, L.

Kimball, L.

Renton, L.

King of Bridgwater, L.

Renton of Mount Harry, L.

Kingsland, L.

Rodgers of Quarry Bank, L.

Knight of Collingtree, B.

Rogan, L.

Lamont of Lerwick, L.

Roper, L.

Lester of Herne Hill, L.

Rotherwick, L.

Liverpool, E.

Russell, E.

Luke, L.

St.John of Bletso, L.

McColl of Dulwich, L.

Saltoun of Abemethy, Ly.

MacGregor of Pulham Market, L

Sandwich, E.

Scott of Needham Market, B.

MacLaurin of Knebworth, L.

Seccombe, B.[Teller]

McNally, L.

Selsdon, L.

Maddock, B.

Sharp of Guildford, B.

Maginnis of Drumglass, L.

Sharples, B.

Mancroft, L.

Shaw of Northstead, L.

Mar, C.

Shutt of Greetland, L.

Mar and Kellie, E.

Skelmersdale, L.

Marlesford, L.

Slim, V.

Masham of Ilton, B.

Smith of Clifton, L.

Mayhew of Twysden, L.

Steel of Aikwood, L.

Methuen, L.

Stoddart of Swindon, L.

Miller of Chilthorne Domer, B.

Strange, B.

Miller of Hendon, B.

Swinfen, L.

Monro of Langholm, L.

Thomas of Gwydir, L.

Monson, L.

Thomson of Monifieth. L.

Montagu of Beaulieu, L.

Tope, L.

Murton of Lindisfarne, L.

Trefgarne, L.

Naseby, L.

Trumpington, B.

Newby, L.

Ullswater, V.

Northbrook, L.

Vinson, L.

Northesk, E.

Waddington, L.

Norton of Louth, L.

Wakeham, L.

Oakeshott of Seagrove Bay, L.

Walmsley, B.

O'Cathain, B.

Walton of Detchant, L.

Palmer, L.

Weatherill, L.

Park of Monmouth, B.

Wilcox, B.

Parkinson, L.

Williams of Crosby, B.

NOT-CONTENTS

Acton, L.

Davies of Oldham, L. [Teller]

Ahmed, L.

Dean of Thornton-le-Fylde, B.

Amos, B. (Lord President of the Council)

Dixon, L.

Eatwell, L.

Andrews, B.

Elder, L.

Ashley of Stoke, L.

Evans of Parkside, L.

Ashton of Upholland, B.

Evans of Temple Guiting, L.

Bassam of Brighton, L.

Falconer of Thoroton, L. (Lord Chancellor)

Berkeley, L.

Blackstone, B.

Farrington of Ribbleton, B.

Blood, B.

Faulkner of Worcester, L.

Borrie, L.

Filkin, L.

Brooke of Alverthorpe, L.

Finlay of Llandaff, B.

Brookman, L.

Fyfe of Fairfield, L.

Brooks of Tremorfa, L.

Gibson of Market Rasen, B.

Campbell-Savours, L.

Golding, B.

Carter, L.

Goldsmith, L.

Christopher, L.

Gordon of Strathblane, L.

Clark of Windermere, L,

Goudie, B.

Clarke of Hampstead, L.

Grenfell, L.

Clinton-Davis, L.

Grocott, L. [Teller]

David, B.

Harris of Haringey, L.

Davies of Coity, L.

Harrison, L.

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Haskel, L.

Patel of Blackburn, L.

Hayman, B.

Pendry, L.

Hilton of Eggardon, B.

Pitkeathley, B.

Hogg of Cumbernauld, L.

Plant of Highfield, L.

Hollis of Heigham, B.

Radice, L.

Hoyle, L.

Ramsay of Cartvale, B.

Hughes of Woodside, L.

Randall of St. Budeaux, L.

Hunt of Chesterton, L.

Rea, L.

Hunt of Kings Heath, L.

Rendell of Babergh, B.

Irvine of Lairg, L.

Robertson of Port Ellen, L.

Janner of Braunstone, L.

Rooker, L.

Jay of Paddington, B.

Sainsbury of Turville, L.

Jones, L.

Sawyer, L.

King of West Bromwich, L.

Sheldon, L.

Kirkhill, L.

Simon, V.

Layard, L.

Smith of Leigh, L.

Lea of Crondall, L.

Stone of Blackheath, L.

Lipsey, L.

Sutherland of Houndwood, L.

Lockwood, B.

Symons of Vernham Dean, B.

Lofthouse of Pontefract, L.

Taylor of Blackburn, L.

Macdonald of Tradeston, L.

Temple-Morris, L.

McIntosh of Haringey, L.

Thornton, B.

McIntosh of Hudnall, B.

Triesman, L.

MacKenzie of Culkein, L.

Turnberg, L.

Mackenzie of Framwellgate, L.

Turner of Camden, B.

Mason of Barnsley, L.

Warner, L.

Massey of Darwen, B.

Warwick of UnderclifFe, B.

Merlyn-Rees, L.

Whitaker, B.

Mitchell, L.

Whitty, L.

Nicol, B.

Wilkins, B.

Onne, L.

Williams of Elvel, L.

Parekh, L.

Woolmer of Leeds, L.

Resolved in the affirmative, and amendment agreed to accordingly.
6.16 p.m.
Clause 91 [Extinguishment etc. of public rights of navigation]:
Lord Higgins Lord Higgins moved Amendment No. 185:
Leave out Clause 91.
The noble Lord said: My Lords, we move into somewhat calmer waters. The clause with which this amendment is concerned deals with the rights of navigation. Some of the points which are affected by that have been touched upon by the Minister. I have one or two questions and seek to clarify his remarks.
This clause is concerned with declarations extinguishing public rights of navigation. In his earlier remarks, the Minister pointed out that we were concerned with energy zones, within which apparently there were to be specific projects for approval. But there also seems to be an intermediate stage which the Crown Estate has gone ahead and published for stage two sites. To put it another way, there is the overall zone, which the Minister referred to, which on the map provided by the Crown Estate is a dotted line covering a very large area. Within that there are a number of specific sites, and then finally one comes to an actual approval of the construction of the wind farm by a particular developer.
At what stage are the public rights of navigation extinguished and over what area? That is clearly not over the entire renewable energy resources area and must be for the particular development. But is it proposed that public rights of navigation will be
642
extinguished within what the Crown Estate calls a "site"? What puzzled me about the map which it provided, was that alongside the particular sites there were the names of particular developers. Those sites cover a larger area than I imagine the actual farm itself would cover. To what extent have decisions already been reached by the Crown Estate or by the Minister as to which of those sites should be allocated to particular developers? If decisions have been made, is it proposed to extinguish the public rights of navigation in the intermediate stage?
The other problem which has arisen is in relation to the United Nations treaty and the Article 60 obligation. As for extinguishing public rights of navigation, presumably that will affect the shipping routes which normally would be protected under the UN treaty.
We seem to be concerned with territorial waters in their widest extent, the 200-mile limit. which I understand the Government do not propose to declare. Within that there is, apparently, an intermediate renewable energy zone. If the Government are to extinguish public rights of navigation of international ships, we are not clear why they consider that they do not need to put on the face of the Bill a common regime regarding the renewable energy zone. I am not sure that I have explained that clearly; it is extremely complicated.
What I seek to establish is to what extent—we can return to the matter at a later stage in the Bill—an intermediate stage exists where renewable energy zones are likely to affect or extinguish public rights of navigation. The Government still take the view that the relevant matter does not need to be put on the face of the Bill as it is covered by the treaty. However, the intermediate stage does not seem to be covered by the treaty. I hope that the Minister can clarify the position or perhaps we can have a further discussion on it. Serious points relating to the treaty and the extinguishing of international rights are not entirely clear at this stage. I beg to move.
Lord Dixon-Smith: My Lords, if my noble friend has concerns after the long debate that we have had, I am bound to say that I must support him. I was beginning very much to hope that the only places where rights of navigation would be extinguished were in those areas that were either covered by construction or by the buffer zone necessary to protect that construction. If there is any question in my noble friend's mind—which there obviously is—that the extinguishment of navigation rights will go any wider than that, it seems to me that we are in considerable difficulties and very great trouble. I await the Minister's clarification of the point with great interest. It is absolutely essential that we know precisely which part of—I was going to say "ground", but I suppose that I should refer to the sea bed—the sea bed this all rests on.
The Earl of Caithness: My Lords, I should like to support my noble friend Lord Higgins. I too am concerned about the map produced by the Crown Estates. It seems to indicate that sites have been allocated for wind farms that will affect our obligations under the United Nations Convention on the Law of the Sea (UNCLOS).

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I mentioned this on an earlier amendment. I refer to the international right of passage. No country is allowed to impede that. Looking at the map in front of me, it appears that we have already taken decisions that will impede the international right of passage.
Lord Donaldson of Lymington: My Lords, I have not had any advance notice of this matter. There is no reason why I should have. It is entirely my fault for not having informed myself of it. Therefore, I have not studied UNCLOS carefully. However, from my recollection of first principles, I am not entirely sure that the international rights of innocent passage and the rather different international rights through straits depend on UNCLOS. I think that they may depend on what one might almost describe as the common law maritime law of the sea, which UNCLOS will to some extent, perhaps wholly, have confirmed.
However, I have pondered the question of whether one could build a wind farm which would narrow the Straits of Dover. I wonder what the answer to that would be in terms of international rights. I came to the conclusion that that possibly would be all right so long as one left something for international ships to pass through. However, one could not extinguish their rights of passage. If they choose to thread their way through a wind farm, I shall not say, "good luck to them", but I think that one would have to establish an exclusion zone for the purposes of preventing pollution. You can do that under the merchant shipping Act. However, the measure that we are discussing seems to me to be an entirely new concept. I should be much happier if it could be explained to me how the United Kingdom Parliament can designate areas over which there is at the moment an international right of innocent passage or an international right of free passage through straits. If that can be done, that is very interesting, but I should like to know how.
Lord Greenway: My Lords, following what the noble and learned Lord has just said, with regard to the Straits of Dover I believe that there is, indeed, a planned installation of wind turbines somewhere off Ramsgate, which is fairly close to the English Channel and the Straits of Dover. However, as I see it, the problem would not arise in that regard because we would already have properly designated separation lanes in the Straits of Dover that are sacrosanct.
Lord Jenkin of Roding: My Lords, I should like to ask a question in this regard. Do the rights of navigation referred to in the clause that we are discussing include rights of navigation on the part of fishing vessels? If a zone were declared, could fishing vessels be excluded from the whole of it under the clause? I may return to the matter on a later amendment in connection with the issue of compensation. However, I should like to know whether fishing vessels are covered by the clause that we are currently debating.
Lord Triesman: My Lords, this is an important provision in the legislation and I wish to resist its
644
removal strongly. As the legislation stands it is not entirely clear whether a consent for the construction and operation of a generating station under Section 36 of the Electricity Act extinguishes public rights of navigation. The result for a developer is that although he has a consent from the Government to build, say, a wind farm in territorial waters, he is laid open to the possibility of being sued in the courts for causing a public nuisance because the wind farm is interfering with rights of navigation. This situation is plainly not conducive to attracting investment in offshore renewable energy projects. Investors need certainty before they will commit the significant funds needed to bring a wind farm to fruition. They will need to know how they stand.
The concept of extinguishing the right of navigation is not novel. An order under the Transport and Works Act 1992 can include provision to extinguish rights of navigation and several offshore wind farm developers have already used this legislation to gain development consent for their projects. What we want to achieve by this provision is to make the Electricity Act more appropriate for offshore generating stations. Without this power developers will be forced to use the Transport and Works Act for projects in territorial waters if they want to extinguish the right of navigation. This Act was not drafted with offshore wind farms in mind. We would have lost a real opportunity to bring the Electricity Act up to date and to make it more appropriate to marine projects. I make those comments to set the scene in terms of the purpose of the clause.
The point needs to be borne in mind that the power to extinguish the right of navigation applies only to the physical structure itself. I believe that that was one of the key questions that noble Lords have asked. It does not extend to any of the waters around the installation, so that, if they are small enough, vessels can continue to navigate through a wind turbine array, so long as a safety zone is not in place which may prevent their entry. Fishing vessels may well be small enough to navigate through such areas whereas vessels with a much greater draught may not be able to do so.
It is probably an appropriate moment to clear up another question. The proposal here relates to the extinguishment of domestic public rights of navigation, not international rights. It is not intended to touch upon international rights. Public rights will be extinguished out only to the limits of the territorial sea and not beyond in the renewable energy zone, which addresses the question noble Lords have understandably asked.
We recognise that extinguishing a public right of navigation is a serious matter and that there must be a robust, fair and open process in place for the Secretary of State to decide whether the issue of a declaration is justified. Clause 91 amends Section 36 of the Electricity Act, so that the well tried and tested process for deciding whether to grant a consent for the construction and operation of a generating station will also apply to applications for a declaration extinguishing rights of navigation. There will be full consultation with all stakeholders with an interest in the matter, and there is provision for the holding of a public inquiry where the

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issues raised are of particular importance. I emphasise that the Electricity Act process has stood the test of time well, and it seems to be the best way of ensuring that this process is one that would be conducted in the interest of all parties and stakeholders, in the fairest possible way.
6.30 p.m.
Lord Donaldson of Lymington: My Lords, before the Minister sits down, can he help me? I fully accept the point about international passage on the high seas. But am I wrong in thinking that there is a right of innocent passage through our territorial waters? In so far as this is merely confined to the actual site of the turbine, clearly there is no problem. If it goes further than that, may there be a problem?
Lord Triesman: My Lords, it is the site of the installation that we are trying to ensure is properly protected, and I would not want to get the two things confused. That is the exclusion I have referred to.
The Earl of Caithness: My Lords, before the Minister sits down, can he help me? I understood that within each wind farm there was going to be a safety zone, from which all vessels were going to be prohibited. The Minister now seems to lead me to believe that it is only for the structure of the turbine that there might be—not automatically, but might be—a safety zone as well. Could he clarify that for me?
Lord Triesman: My Lords, in response to the noble Earl, Lord Caithness, there might be a safety zone. The safety considerations at stake will be the way that is determined. I do not want to speculate about much, because I do not think it is particularly helpful to do so, but you could imagine a site in which the individual wind turbines were very well spaced out, and some where they were much closer together. I can imagine that different kinds of considerations about whether it was navigable in one circumstance, rather than the other, would apply.
Lord Jenkin of Roding: My Lords, it follows from what the Minister has just said in response to my noble friend Lord Caithness that a safety zone could be declared which would exclude fishermen from what might well be very valuable traditional fishing grounds. Could he confirm that this is indeed the case?
Lord Triesman: My Lords, I do confirm it. I think it was me who confirmed it when asked a question in Committee as well. I recall saying on that occasion—no doubt someone will check the record to make sure that I did—that the establishment of one of these zones, for the purposes of making sure that we could generate clean energy, could not be achieved with absolutely no conceivable downside. That would be a fiction. I certainly would not wish to be party to a fiction of that kind. As I said in Committee, safety will be the forefront issue. The exclusion of shipping, including small shipping, must be a safety judgment in the interests of the mariners.
Baroness Byford: My Lords, before the Minister sits down, can he help me? I hope I am not out of order,
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because he has described the safety issue and that is the one I want to keep to. If my memory serves me correctly—I am sure that the Minister will correct me if I am wrong—my understanding in Committee was that while the wind farms were being constructed you would have a safety zone. Once they were constructed, there would be no safety zone. I am a little confused by the contribution he has just made because it seems to differ from what we were doing at Committee. I do apologise, because I do not normally come back but I think we need clarification.
Lord Howie of Troon: My Lords—
Lord Davies of Oldham: My Lords, this is Report stage of the Bill. It is right, of course, that questions can be addressed on the issue of clarification. But we cannot have the Minister subjected to cross-examination after he has completed his speech as if this were Committee stage, because it clearly is not. Certainly, the noble Baroness, Lady Byford, has asked a question and she should be replied to. But that really ought to be the end of this particular part of the deliberations.
Lord Triesman: My Lords, while I have the opportunity to reply to the noble Baroness, Lady Byford, this clause does not deal with safety specifically. I was trying to illustrate a point by making reference to the different sorts of circumstances that might arise. It is certainly one of the circumstances that, while construction is going on, a safety zone might well be a sensible and necessary precaution. It may also be the case that after construction is completed, were it to be a completely non-safely navigable area, that that might continue. In general, that is not expected to be the case.
Lord Lawson of Blaby: My Lords, there is just one point of clarification that might be of help to this House. As former Secretary of State for Energy I have a lot of nostalgic feelings towards all energy Bills and such issues. The Minister referred to the Transport and Public Works Act, and the provisions there which up until now have had to be used for this purpose. Could he clarify in precisely what way the provisions to be inserted in this Bill go beyond the provisions in the Transport and Public Works Act?
Lord Triesman: My Lords, the belief is—I think this is probably the best way I can explain it—that an amendment to the Electricity Act would make it a great deal easier and more transparent than other available routes. That has been the experience of the industry in making applications more generally. That is the reason that this change is being contemplated: it involves transparency, simplicity and greater relevance.
Lord Higgins: My Lords, I think I am in order in coming in at this point. Unfortunately, we have the next amendment on the Order Paper which relates to the following clause, on which the same issues will arise. No doubt the noble Lord, Lord Howie of Troon, will be able to raise his point then if he wishes to do so.

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It is very inhibiting to have a Report stage rule, but I certainly believe it is right that we should seek to adhere to it.
I am now somewhat puzzled by what the Minister has said. I am not asking him to reply to it again, but perhaps he might like to do so on the next amendment. We have got a clause here, as well as the following clause, about extinguishing public rights of navigation. But I am now not at all clear what sort of area—I cannot find another word for it—the Government are proposing to extinguish the rights in. From what has just been said, it seems to involve just the turbines themselves. I would have thought it would normally include the safety zone. Or am Ito understand that you can have a safety zone within which the public rights of navigation will not be extinguished? Will it apply to some sizes of vessels and not others? I am not in the least bit clear about that. The other thing is, over how large an area beyond the safety zone is the public right of navigation going to be extinguished? For example, will it be extinguished within the relative territorial limits of the sites set out in the Crown Estate's documentation?
Finally, during the day we have had a great deal of discussion about the Transport and Works Act. I am nowhere near as familiar with that Act—indeed, I am totally unfamiliar with it—as is my noble friend Lord Lawson. It would seem that the existence of that Act is a positive disadvantage to this legislation. It provides a loophole whereby developers can get around the restraints that would otherwise be put on them—albeit a more expensive option.
Would the Government care to consider whether the operation of the Transport and Works Act ought to be excluded from the operation of this legislation?
Lord Triesman: My Lords, I shall deal with the last point first. We are not disapplying the Transport and Works Act, so developers could, if they wished, continue to use it. It is a matter for them if they wish to use it in relation to projects in territorial waters. We are giving developers a choice. For reasons I gave earlier, we expect that they will want to use the Electricity Act, which will prove more efficacious for their purposes. The Transport and Works Act process requires a lot of input by lawyers and the costs to developers are estimated to be much higher by using that route. The Electricity Act process is a good deal more streamlined, but it is robust at the same time. Far be it from me to wish to interfere with the legitimate earnings of the legal profession, but it may well be that one or two people will feel that it is as effective and a tiny bit more economical, which would be helpful.
On the question of which area, I had hoped that I had been clear. I apologise if I have not been sufficiently clear. The safety zones are designed to exclude the passage of shipping for reasons described in exchanges between myself and the noble Baroness, Lady Byford. The area of installation is the subject of this clause and I have described the arrangements contained in it. The public right of navigation will be extinguished for the installation only. I had hoped that I had made that clear. This is to deal with the problems of claims in law for
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nuisance, to which a developer would become liable if he did not have the protection. Safety zones, if applied, may stop navigation through them. I said "may" because we said that it was conditional. However, they do not need to distinguish the public rights of navigation. It is merely a practical matter to exclude vehicles under particular circumstances because there is no legal concern relating to the nuisance of the safety zone and the kind of risks that might be run. That is the distinction which the clause tries to make clear and I hope that in this effort I have made it somewhat clearer, too.
Lord Higgins: My Lords, in the light of the Minister's reply, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 92: [Further provision relating to public rights of navigation]:
Lord Triesman Lord Triesman moved Amendment No. 186:
Page 74, line 8, leave out "or all"
The noble Lord said: My Lords, happily this may be the shortest contribution to the debate. In Committee, the noble Baroness, Lady Byford, made a drafting amendment which considerably improved the drafting of Clause 91(1) in regard to the rights of navigation which might be extinguished. I thank her for having done so. The amendment seeks simply to make the same changes to Clause 92(3) and to make the Bill consistent. I beg to move.
Baroness Byford: My Lords, I thank the Minister. Success has been slow in certain parts of the Bill, but the provision was a nonsense. I am grateful to the Minister for putting the matter right.
On Question, amendment agreed to.
6.45 p.m.
Lord Higgins Lord Higgins moved Amendment No. 187:
Leave out Clause 92.
The noble Lord said: My Lords, this is a probing amendment. It is a question of tidying up one or two points. The Minister's previous reply was helpful in a number of respects and we will need to consider carefully what was said.
Perhaps I may clarify one point. Suddenly the Electricity Act has appeared in our debates—at least during my presence. If a developer goes through the Electricity Act process, are there sufficient powers for the Secretary of State to prevent a development taking place which would endanger the safety of navigation? Although there seems to be some disagreement between the two sides, we understand that there is a loophole under the Transport and Works Act. It is now suggested that developers might alternatively use the Electricity Act. In the context of wind farms, which presumably were not necessarily envisaged at the earlier stage, might that not be another loophole which one would want to cover? I beg to move.
Lord Davies of Oldham: My Lords—
Baroness Miller of Chilthorne Domer: My Lords, I see that the Minister is anxious to get on with his reply.

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However, having disallowed further questions in the previous debate, I hope that he will allow us to have our say in this one.
I gather that under Clause 87(3), safety zones can be declared by the Secretary of State, or an applicant may apply to the Secretary of State and he can then choose whether or not to declare a safety zone. If the application is made and the Secretary of State decides not to grant the safety zone and an accident happens within that area, who will be liable? Will it be the applicant for the safety zone—the person who developed the renewable energy installations—or will it be the Secretary of State who decided not to grant a safety zone?
The Earl of Caithness: My Lords, at page 73, line 47, the phrase "relevant waters" appears. Given what the Minister said on the previous amendment, I presume that "relevant" means territorial waters. That is what the Minister concerned himself with on the last amendment.
As regards Amendment No. 187, what happens to the right to navigation in waters outside the 12-mile territorial waters but inside the renewable energy zone? That point was not covered. How will the rights of navigation be extinguished to prevent structures being hit in those waters?
Lord Jenkin of Roding: My Lords, I want to return to the question of fishing vessels. The noble Lord, Lord Triesman, in his last couple of interventions left me more confused than when he started. I am no great expert in offshore fishing, but as I understand it one of the common methods of fishing is that the trawler trawls a substantial net behind it hoping to catch the fish. They are then pulled in and hauled up on to the deck. I am not going to get involved in the common fisheries policy or the conservation of marine resources—both of which are hugely important subjects—but I want to know what is the impact of this clause on fishermen coming out from an established fishing port and wanting to fish in what may well be traditional fishing grounds?
As I understood the Minister, he said that the only exclusion zone is several metres broad and covers the pillar on which the turbine sits, and that people are excluded only from the part of the sea which is occupied by each wind turbine standing on its pillar. But then came the question of how big the extension would be after taking into account the safety zones. Looking at this from the point of view of a trawler fisherman, I can tell the noble Lord that there is no way that a fisherman trailing nets perhaps 100 metres or more behind a boat will go anywhere near those places. In fact, he will be excluded from fishing anywhere within an area where many wind turbines are installed. In a sense, that will be the case irrespective of the area of the sea—the circle drawn on the chart—where the individual turbines are located. That is an important point.
Will the declarations made under this clause cover a wider area so that it is perfectly clear where people may not go once the wind farm has been established, or are we playing around with small circles on a chart as the
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only areas from which vessels are to be excluded? If the latter is the case, that is nonsensical because it bears absolutely no relation to what seamen, fishermen or anyone else would do in the circumstances. If that is all that is involved, one seriously wonders what is the point of doing it.
The Minister seems to be saying that, while the wind farms are being built and once they are established, it is important that there is an area around them from which navigation is excluded, presumably to ensure that the wind farms continue to generate their renewable energy so that we can all keep the lights on. That is the object of the exercise and it will not be helped if fishermen travel too close to the turbines, their nets become tangled and everything must be stopped while they are untangled. I cannot believe that the clause is directed only at the circles on the charts; there must be a significant area around the turbines, such as the safety zone, which my noble friend mentioned during debate on the previous amendment. I believe that this is the opportunity for Ministers to clarify the matter so that we know what the two clauses mean.
Lord Dixon-Smith: My Lords, I am sorry if this is becoming repetitious but it is a fundamental point. I thought that we had reached the point where a wind farm was a wind farm and shipping was excluded. From what he said at the end of the debate on the previous amendment, the Minister seemed to envisage what I can only describe as a dispersed wind farm from which shipping might not be excluded. However, it seems that if there is to be a series of individual points, as my noble friend Lord Jenkin of Roding has just enunciated, an even worse hazard for shipping will be created.
It is one thing to have a defined area where one knows that wind turbine generators are spaced at 200, 300 or 400-metre intervals, surrounded by a buffer zone, from which shipping is excluded; it is entirely another to say, "We'll have a turbine generator here and a turbine generator a mile away and another a mile away and navigation can continue through that". From the point of view of those who are to erect these installations, separating the generators to such an extent, with all the additional transmission costs that would be involved in trying to link the turbines, would appear impossible and an idea in which they would not be interested. In sheer practical terms, a wind farm must be just that: it must be as tight and as dense as is sensible and practical. However, that of course makes it a potentially greater hazard to shipping.
If we enter a debate about shipping accessing these areas, how shall we draw the line? It is one thing for a 50-foot shipping vessel to enter the area and pass through it, but will there be a distinction between that vessel, many of the medium-sized freighters which go through the North Sea or even, heaven help us, a supertanker? Heaven forbid that a supertanker should ever get anywhere near such an installation. However, in some sea conditions, who can say what might

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happen? I know that, in theory, it should not, and my guess is that a vessel would hit the bottom before it hit the wind turbine.
However, I do not believe that we can begin to distinguish between one type of ship and another. Either one prevents navigation, including fishing vessels, which seems to be the practical option, or there is a free-for-all. The Minister paid specific attention to the safety issue and said that that would be the driver. If safety is the driver, shipping should be excluded from a wind farm, whether it is a deep-sea or inshore installation or wherever it is. That is the beginning and end of it. At the end of his remarks, the Minister left me very confused as to whether or not that would be the situation. He said that the exclusion zone would be in place only during the construction period. I believe that I am right in saying that. But if that is the case, that will create huge problems in the future.
Lord Greenway: My Lords, I, too, would like to see this uncertainty cleared up because I know that it has been a subject of concern for the yachting authorities. Such people are quite used to sailing close to all kinds of obstructions in the water and they feel that they may be unnecessarily penalised if they are totally excluded from the areas surrounding some wind farms where, I understand, the turbines will be quite far apart. Also, I believe that the height of the turbine blades has been raised so that most yachts can get underneath them.
I also want to confirm the surmisal of the noble Lord, Lord Jenkin of Roding, with regard to trawling. A couple of weeks ago, a meeting took place of the All-Party Parliamentary Maritime Group that was very well attended. If my memory serves me correctly, the fishermen present stated explicitly that they would not trawl within the site of the wind farms because it would be too dangerous.
Baroness Carnegy of Lour: My Lords, fishermen do not only trawl; they set lobster pots. It would be extremely difficult to service a wind farm if it were full of lobster pots.
Lord Donaldson of Lymington: My Lords, perhaps I may reminisce for one moment. I was asked by the previous Administration to conduct an inquiry into the best methods of command and control and state intervention in salvage projects or other situations in which there was a potential for pollution. I had the happy idea that we could adapt the whole of merchant shipping to platforms, which is what we were considering, by simply redefining a ship as including a platform. However, I found at once that that was unacceptable to the DTI, which said, "Oh no. We have our own regime".
The essence of my conclusions, which were accepted by the government of the day and by the present Government, was that one man must be in charge whenever an incident occurs. Not only should one man be in charge but Ministers should keep out. They must either back him or sack him. That was obviously a problem. But as the DTI insisted on having its own
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SOSREP, I did at least receive an undertaking that the same man would be appointed by both Secretaries of State.
However, the underlying point was that there was no instinct for joined-up government; there was a turf-war element—perhaps not at ministerial level but lower down. I wonder to what extent this legislation has been discussed with the Department for Transport at a level rather lower than ministerial. It is at that lower level that people are aware of the nuts and bolts of the problems.
7 p.m.
Baroness Byford: My Lords, my noble friend Lord Higgins asked whether there is a loophole in the Electricity Act and whether it would be possible to prevent a development from taking place if it were not in a suitable place, which would affect our discussions on shipping access. I have one or two questions to ask the Minister.
On the renewables obligation and the way in which the Government are trying to reduce the CO2 emissions, can the Minister indicate how many wind farms and individual wind turbines the Government have in mind? The answer could make a huge difference to our present discussions. If there are to be three pockets, that is one matter, but I suspect from the lobbying that I have received from those who are concerned about productivity on wind farms, that many more will be needed than was originally anticipated. I do not know what evaluation the Government have carried out in advance of presenting the Bill, but I would be interested to know.
On the existing wind farms, were there any difficulties or dissatisfaction when previous Bills were enacted? The Government have an understanding of what has happened already with those wind farms. Returning to my noble friend's original question, was the existing legislation good enough, strong enough and sufficient to undertake what the Government are trying to do under this Bill, or is the previous experience partly the reason for greater clarification in this Bill? I would be grateful if the Minister could answer those questions.
Lord Davies of Oldham: My Lords, I owe the House and particularly the noble Baroness, Lady Miller, an apology. I was not seeking to cut off an extremely fruitful and interesting debate. I actually have a very clear answer to the question posed by the noble Lord, Lord Higgins, and for some ridiculous reason I thought that no one else was rising to speak. I was eager to respond to him in as positive a way as possible. That was why I rose when I did and in no way was I trying to constrain debate. The House will recognise that being a Whip—ensuring that a self-regulating House stays broadly in order—sometimes can be difficult when one is also responding to a debate. In that respect I made an error and I apologise.
The noble Lord, Lord Higgins, specifically asked whether the Secretary of State had sufficient power to deal with the situation and to reject or to agree to matters. The answer is in the affirmative. I was eager

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to rise to my feet to assure him of that. Under this Bill we shall ensure that that power exists for the Secretary of State.
I have been asked a plethora of questions on the amendment about safety and wind farms. One could almost have forgotten the original amendment. I shall be asking the noble Lord to withdraw his amendment. The simple fact is that we need both clauses in the Bill. I do not want to repeat all the arguments in relation to preceding amendments, but I can give the noble Lord a positive answer to his most trenchant and searching question. On that basis, I hope that he will withdraw the amendment, although I recognise that there is a whole range of questions that require answers. I shall do my best.
I was grateful to the noble Baroness, Lady Carnegy, for introducing the lobster pot fishermen. I had thought that we were all caught up with major vessels. The noble Lord, Lord Jenkin, quite rightly expressed concern about the fishing interests, with their vast trawling nets that will steer well clear of installations such as wind farms for all the obvious reasons. All noble Lords recognise that there are other fishermen besides deep-sea trawler fishermen. We are eager to preserve the rights of fishermen as best as we can. We are not seeking to limit them. Nor are we seeking to limit competent yachtsmen, people with pleasure craft or anyone who is in control of a vessel that will not cause enormous damage to an installation—one that can extricate itself.
When a safety zone is put in place we would expect a clear indication of who and what must be kept clear. It may not be everyone. It may depend on the safety zone. The noble Baroness, Lady Byford, indicated that through her questions. One of her questions related to the number of wind farm installations that we intend to construct. I have some indication of how many turbines there will be in each wind farm. In round one we are expecting about 30 turbines in each wind farm and in round two we are expecting as many as 200, but there will be smaller wind farms as well. There will be a great variety. The upper number may be as great as 200. That will be an extensive complex and it will need governing and a safety zone around it.
In answer to the question posed by the noble Lord, Lord Dixon-Smith, we shall certainly require safety precautions while the installations are being erected. A great deal of activity will take place while the large turbines are being installed, but a safety zone can last beyond installation for the necessary protection of shipping if the circumstances indicate that that is necessary. In a large installation of 200 turbines that may be important.
Noble Lords should recognise that we are seeking to meet the principles identified by noble Lords in terms of safety, but we are also seeking to preserve the freedom of the seas as regards access so that these installations do not necessarily restrict that freedom. Some installations will cause small vessels very little problem and it would be wise for others to steer clear of the installations. The definition of a safety zone will indicate whether that is necessary.
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That is against a background of the range of turbines that may be constructed at any one installation. The difference between the smallest and the largest will be a factor of nearly seven. That is a considerable difference. There is also no immediate prescription on how far away the turbines will be from each other. A range of factors have to be taken into account, but it should be recognised that it would not be sensible to be unduly prescriptive about the nature of the safety zone on the face of the Bill. We need extensive consultation. One theme that has run through the whole of this debate on shipping is that consultation is required to get these matters right.
In the course of the debate two noble Lords spoke about fishing, which is an important element. Fishermen's interests need to be taken into account, including the interest in access. There is also the issue of navigational channels that vessels use. I sought to indicate earlier that major channels of navigation are bound to be protected and that installations will be placed away from those. It is also clear that at times there may be a trade off between the requirement to build a wind farm installation and some change to the pattern that mariners are asked to pursue in setting out from particular locations. In each instance, those kinds of trade off will be the subject of considerable discussion and negotiation. However, one cannot generalise and be prescriptive in any precise way about such matters.
I regret to tell the noble Baroness that I do not have global figures for how many wind farms are proposed. I hope she will recognise that it would be helpful to obtain information about the size of the sea installations. If and when we have an estimate of the number at sea, I shall be only too happy to communicate it to the House in writing. Alternatively, as we still have not quite completed all the stages of the Bill, I may be able to exploit a fertile opportunity to provide that information.
With regard to the point raised by the noble Earl, Lord Caithness, there is no public right of navigation in these zones. The public right of navigation is governed by a domestic law that applies particularly to inshore waters, not to these zones. As has been indicated, the zone can extend as far out as the median line away from the coast. However, we recognise—we have debated some of these issues in relation to earlier amendments—our obvious international obligations with regard to the big navigational routes, and we are also well aware of the fact that this country uses the sea for both pleasure and enjoyment and necessary economic activity. We are still a substantial trading nation, carrying on a great deal of trade by cargo-bearing vessels, and we have to protect those interests. It will be necessary to strike a balance between the installation of wind farms and the necessary economic activity enjoyed by all those exploiting rights at sea—
7.15 p.m.
The Earl of Caithness: My Lords, I thank the Minister for giving way. Will he answer the question that I asked him? For instance, at least 12 major shipping routes pass through the proposed national wind-powered farm coming up to the Humber. That

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wind farm will be outside the territorial waters, within the renewable energy zone. How do the Government intend to alter the rights of navigation in such a situation? Under what powers can they do that?
Lord Davies of Oldham: My Lords, the granting of applications to develop those positions will be taken into account against the necessary rights of navigation. In distant waters beyond our immediate territorial waters—we have been down this path previously—there exist oil and gas installations in relation to which it is very necessary to consider what may be the navigation rights. I do not have to hand the benefit of enormous maps or statistics. However, like many other noble Lords, I have stood on the beach at Felixstowe or Lowestoft and seen installations that are both visible from the land and in the path of an extensive amount of shipping. That problem had to be addressed when we dealt with the Acts that gave authorisation to the exploitation of North Sea oil and gas, and a similar process is envisaged with regard to this Bill. Because we have in place the Electricity Act, which governs some of those issues, we do not need to write on to the face of the Bill powers that we already enjoy for conditioning such issues.
I can see by the wracked faces opposite that I have not satisfied each and every answer. It will be recognised that this has been not so much a debate as a volley of questions. I have not sought to dodge the questions. The ones that I have missed are those that I am quite incapable of answering, for which noble Lords will have to forgive me.
Lord Higgins: My Lords, we are grateful to the Minister for that sympathetic response and for his exploration of the various issues. Some of the questions that have been asked remain unanswered. If necessary, we shall no doubt return to them at Third Reading. However, we appreciate the trouble that the Minister has taken in replying. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Baroness Miller of Hendon Baroness Miller of Hendon moved Amendment No. 188:
After Clause 92, insert the following new clause—
"COMPENSATION UNDER SECTION 91 OR 92
(1) If the Secretary of State shall grant any consent or make any declaration under section 91 or 92 which shall interfere with the private or commercial interests of any person or corporation, he or it shall be entitled to compensation.
(2) Such compensation shall not be limited to the financial or other benefit received by the person in whose favour the consent or declaration is made."
The noble Baroness said: My Lords, when I introduced this amendment in Grand Committee. I began, as I do today, by reminding your Lordships that, in presenting the Bill to Parliament, the noble Lord, Lord Whiny, made a statement under Section 19(1)(a) of the Human Rights Act 1998.
Clauses 91 and 92 provide for the extinguishment and modification of public rights of navigation. The need to extinguish or interfere with those public rights
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is most likely to be caused by the erection of offshore windmills. It is not necessary for us to consider whether any other causes of such extinguishment might arise.
A "public right" is a public right, and a right is a right. To take away such a right is to deprive someone of a possession. That is contrary to the first protocol of the European Convention on Human Rights. which states:
"Every natural or legal person is entitled to the peaceful enjoyment of his possessions".
It is perfectly clear, without any convoluted exercise of interpretation, that to deprive people of public rights of navigation, or to interfere with such rights, is at the same time to deprive them of a possession.
I am not arguing that the measures provided for in these two sections are wrong, unreasonable or unnecessary. On the contrary, it may be perfectly reasonable to have an exclusion zone at sea or to modify access to waterways, or even a harbour, for the public good derived from wind farms as a renewable source of energy. However, it is not right that those who have lost their rights, in whole or in part, should receive no compensation or that they should in effect contribute to the cost. I need say no more about the merits of the amendment, which I submit are self evident.
The Minister's reply was that a public right is not an individual right and that a right of navigation is not a possession. As a kind of long stop back up, he then said that even if such a right were a possession in normal parlance, it did not lead to the inescapable conclusion that compensation should be paid. He concluded his remarks by saying that he did not believe that any normal reading of English or the Convention on Human Rights would lead to any claim for compensation.
My noble friend Lord Kingsland had anticipated and dealt with such an argument in his speech during the debate, when he quoted the case of Beveler v Italy, which established that:
"The concept of 'possessions' in Article 1 has an autonomous meaning which is not limited to ownership of physical goods, and is independent from the formal classification of domestic law; certain other rights and interests constituting assets can also be regarded as property rights, and thus as possessions".
I should also briefly and in passing mention new subsection (2) which defines the compensation to be paid to the person adversely affected as the loss he suffers, and not the benefit received by the person in whose favour the modification of rights is made. That resolves the problem of calculating compensation, because it puts the onus squarely on the person making the claim.
Reverting to the legal concept of a right to compensation, first, I do not understand why the Government should insist that other people should have to bear the financial consequences of any benefits given to commercial concerns, such as the owners of wind farms, even if being built for the public good. If the Government have to bear the initial cost, that is something that can be passed on to the generator as part of the licence conditions.
Secondly, with due respect to the Minister, I prefer the legal opinion of my noble friend, with his wide legal experience and knowledge of EC law, to the opinion expressed by the Minister on the last occasion we discussed this matter. I hope that since then the Minister has had the opportunity to further consider the matter with his advisers and will now concede that both law and justice demand that persons suffering from an administrative action of the Secretary of State shall be compensated for what is an act of confiscation of those rights by the state. I beg to move.
Baroness Miller of Chilthorne Domer: My Lords, the amendment enables us to continue with an interesting discussion in Committee. I agree with the noble Baroness that a number of issues are involved. However, I have some misgivings about the amendment.
Compensation for the fishing industry is complicated considerably by the effect of the future of the common fisheries policy. Without doubt there will be established no fish zones, a limit on days fished and so forth. It is difficult to see how the compensation clauses in the Bill will fit in with that. That is a question which the Government may want to address.
Furthermore, as a supporter of renewable energy, there are arguments for the establishment of wind farms being in the public interest. The same argument could be run in terms of public access issues. In any case the arguments are not cut and dried. I think that everyone is agreed that the overriding public interest here must be to try to combat climate change.
On 18 March the Government sent a helpful reply on the issue of compensation stating that it would be tailored to each renewable energy installation and that the DTI would work with the fishing industry to establish in what circumstances fishing vessels could safely enter a safety zone, whether on size of vessel, type of fishing activity and so forth. That is a helpful and practical approach.
However, in the penultimate paragraph is an issue which I should like the Minister to clarify. The Government state that:
"We take the view that the question of compensation whether for the establishment of a safety zone or the operation of the renewable energy installation itself must be one for the commercial judgment of the developer".
Given that the right to have a safety zone rests with the Secretary of State, as I raised with the Minister, and that it is by no means clear that all the applications for a safety zone would be granted, that raises two issues. First, who is liable if the application is not granted? Secondly, if it is granted, the Secretary of State thereby takes responsibility for the fact that that zone is necessary. As I have just quoted, it is up to the commercial judgment of the developer whether to give compensation. Surely, that is very curious and is a matter which in any case should be decided in this House and another place rather than left to the commercial judgment of the developer.
Lord Jenkin of Boding: My Lords, I should like briefly to follow the comments made by the noble Baroness, Lady Miller of Chilthorne Domer, and then
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to come back to the question of fishing. This is why I was rather keen to establish from Ministers that we are not talking just about little rings on the chart but about significant areas, from which fishermen, trawlers in particular, might need to be excluded. One comes back to the question of compensation for that.
I have re-read the debate held in Grand Committee and I understand the point then made by the noble Lord, Lord Whitty, that this is primarily, or at least in the first stage, a matter as between any fisherman likely to be affected by a proposal put by a developer, and the developers. Indeed, if there were a case for compensation for the fishermen, it would be for the developers to agree that before going ahead.
The noble Lord, Lord Whitty, also recognised that there may be cases where the developers are reluctant to agree to pay compensation yet where compensation may be necessary. However, my noble friend Lady Miller of Hendon failed to get from the Minister what would happen then. The noble Lord said that they might consider that as a reason for refusing consent to the developer. That would be a fairly extreme case. There might well be cases where, because of a traditional fishing ground for fishermen who have fished there for some time, it would be perfectly reasonable to grant permission for the development but to compensate the fishermen for being kept off their traditional fishing grounds.
The reason I raise these issues is because of the substantial report published by the Royal Society of Edinburgh—I declare an interest as an honorary fellow, of which I am very proud—which has considered the whole question of the future of the Scottish fishing industry. As noble Lords will know, the largest proportion of the fishing industry in the United Kingdom is in Scotland. As has been said, and was certainly said in Grand Committee, many other factors currently affect the fishing industry. It is not right for us to go into those today. However, paragraph 11 of Chapter 1 states:
"In the whitefish sector, there has been a collapse in profitability as a result of quota restrictions. Although it catches a diversity of species, its difficulties have been dominated by cod and haddock".
It goes on to talk about the decline both in landings and employment.
If one is to find in addition an exclusion from what has hitherto been regarded as profitable fishing grounds because of the construction of a wind farm, it seems to me that in those circumstances the Bill should include a right to compensation. As I read my noble friend's amendment, it should cover compensation for that loss of fishing. I should like the Minister to confirm that that would, indeed, be the case and then to try to justify why that should not be put into the Bill. As the noble Lord, Lord Greenway, stated, there is no doubt that the fishing interests are considerably worried by what could happen to them as a result of the substantial expansion of wind farms in their traditional fishing grounds.

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It is not enough simply to rest this on the question of getting an agreement between the developer and the relevant fishing industry. The fact of the matter is that it could be a very unequal bargain. The developers are sometimes very large and powerful companies, and the fishermen, as is shown in this report, are often quite small partnerships of individuals who run their boats as individuals. To expect a fair result from that could be very difficult. So, it seems to me that there is a case for writing into the Bill a clear right to compensation for fishermen who are excluded from traditional fishing grounds as a result of developments given under consents by the Secretary of State. I hope that we shall get a very clear statement from Ministers that that will indeed be the case.
7.30 p.m.
Lord Whitty: Well, my Lords, I am sorry to disappoint the noble Lord, Lord Jenkin, again, and indeed the noble Baroness, Lady Miller. My understanding of the legal position, based on what I regard as good legal advice, remains the same.
I shall deal with the basic legal point first. We are talking about a public right of navigation. I shall turn in a moment to the special case of fishermen. The public right of navigation is in normal parlance and in English legal experience not a possession in the normal sense of the word. The noble Lord, Lord Kingsland, in a previous debate was clearly right that possession is an autonomous concept—that is, that Strasbourg can make up its mind at any given time about what is and what is not a possession. But it seems fairly unlikely that a public right of navigation would be regarded as a possession.
As the noble Baroness rightly pointed out, I said that—as lawyers frequently do, although I am not a lawyer—even if I am wrong on that and the public right of navigation were to be found to be a possession, the question would be whether its extinguishment is a deprivation or control of use, which is the more accurate situation in this case, and whether that would amount to a control of use for which compensation would be appropriate.
On the public right of navigation, we are talking about a restriction, which, if we have a turbine site with 200 or so turbines, relates to quite a sizeable turbine site. I think that there have been some serious problems in the course of today's debate, and to some extent in Grand Committee, between the zone—the site, which is awarded for exploration and other purposes to the contractor—and the actual installation, which would be substantially smaller. Even the biggest installations would leave plenty of space for most navigation channels to be achieved. Clearly, if installations threatened that achievement that would be a major factor in whether the consent was given in the first place. A turbine that was blocking the Humber, the Mersey or whatever, would be a major consideration that the Secretary of State would have to take into account before he granted the consent in the first place. I think the restriction would be pretty limited and therefore the
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degree of deprivation, which could be established in terms of commercial loss, would be fairly small in relation to the rights of navigation as such.
Therefore, I think it is extremely unlikely that any court would find that any compensation was appropriate in those circumstances. That is why I think the Bill as it stands remains in conformity with the European Convention on Human Rights.
In relation to the case of fishing, on which we had a separate debate in Grand Committee, the two issues have now become slightly elided. Clearly, a traditional fishing ground may or may not be a main channel of navigation in the sense of commercial traffic from fishermen, whether they are lobster or inshore fishermen. That might actually be a serious problem for them.
In those circumstances, compensation may or may not be appropriate. That situation is essentially no different—to answer the point made by the noble Baroness, Lady Miller, and supported by the noble Lord, Lord Jenkin—from a road scheme, where if a developer comes forward with a proposition which would effectively cut off the garage from access to the road, normally part of the deal is that compensation is paid to that garage owner, either by giving him a different site or by paying him cash. Those kinds of deals would no doubt be part of the development process. Either there will be a negotiated deal to the fishermen affected, if they could establish a reasonable case, or it could be—as I think I said in response to the noble Lord, Lord Jenkin, in the earlier debate—that one of the conditions of the consent was that such compensation should be paid.
Should the developer be less than willing to offer such compensation there could be an intervention, which effectively ensured that the developer did pay such compensation. As a former roads Minister, I have to say that that is not unknown in relation to developers of road schemes.
So, I think the principle is well established. It is not written in legislation but is part of development law and practice in general terms. Of course whether or not the fisherman actually suffered a loss is hugely complicated by the wider issues touched on by the noble Lord, Lord Jenkin, and the noble Baroness, Lady Miller, in relation to whether we are restricting fishing for other purposes, and whether or not that could actually be a benign proposition if they have moved away from one fishing site. That would have to be argued case by case. In other words, there could be situations where part of the developing consents, either voluntarily or as a condition of that consent, would be compensation. I do not think it is sensible for the Bill to provide for a general system of compensation.
I do not think that the limit of the right of navigation would give rise to compensation, and I think the situation of fishermen, and potentially others, would be dealt with in the same way as it is dealt with in other planning situations. I therefore do not think that we would need a scheme of compensation written in these terms into the Bill.
Baroness Miller of Hendon: My Lords, I am sorry that the Minister did not see some merit in the amendment. I think that the issue will cause a problem for a lot of people. He was saying that you might be able to appeal to someone. To whom? I do not know to whom you would appeal if you were not happy or content or what you could do about it.
Moreover, this involves not just one installation but an awful lot of them. There might be very many people who will be, if you like, not able to do the things that they want to do. I do not know quite why the Minister has set his face so much against it.
This is not to say we are not for wind farms. Nobody has ever said that. We have always said that it is probably a very good source of energy. The bottom line is that nothing is free; there is no such thing as a free lunch. Some people are going to be very badly disturbed by the idea that compensation is not payable under any circumstances.
If there are cases where compensation might be paid, to whom does one actually go? Perhaps the Minister could answer that before I withdraw my amendment. While on my feet, I thank the noble Baroness and my noble friend for intervening in the short debate.
Lord Whitty: My Lords, perhaps I may take the analogy of a road scheme. In the process of the planning permission being given to the road scheme, the garage owner would object that he was being deprived of his livelihood as a result of that scheme. Either the developer would then offer him cash or an alternative site, or the planning officer, and the planning inquiry if necessary, would say that it is a condition of his going ahead with this scheme that he pays such compensation in some form or the other.
Exactly the same applies in this case. If the fishermen think that they are going to be deprived of their livelihood as a result of the scheme, that will arise during the course of the process of giving consent. Either the developer will recognise that as compared with the developer's potential outlay and profit it would be a relatively small amount that would be payable to the fishermen, and it might be very sensible for him to recognise that on a voluntary basis, or it would be for the Secretary of State in giving that consent to make it subject to paying compensation.
All I am saying is that that could arise in particular situations, but it would not arise in general because of this part of the Bill, which relates to the public right of navigation for everybody. In general, the public right of navigation would not be significantly inhibited, such as to lead to commercial loss of that nature.
Baroness Miller of Hendon: My Lords, I thank the noble Lord for that further clarification and I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Triesman: My Lords, I beg to move that further consideration on Report be now adjourned.
Moved accordingly, and, on Question, Motion agreed to.

Patents Bill [H.L.]
7.39 p.m.
Report received.
Clause 1 [Methods of treatment or diagnosis]:
Earl Attlee Earl Attlee moved Amendment No. 1:
Page 1, line 20, at end insert—
"(2) In section 130(7) of that Act, leave out "(4)" and insert "(4A)"."
The noble Earl said: My Lords, the amendment stands in my name and that of my noble friend Lord Lyell. Before speaking to the amendment, it may be helpful to the House if I explain why we are not pursuing our concerns about what are now Clauses 10 and 13. It would be preferable for another place to receive and debate the Bill more or less as the Government intended.
Returning to the amendment, its objective is to increase certainty and to keep UK patent law as closely as possible in line with the practice of the European Patent Office. The 1997 Act has a "same effect" proviso, similar to that in Clause 2(5), to bring the UK law into line the that of Europe. It applies to specified sections only. Without the amendment, the proviso will not apply to new subsection (1)(1) of the 1997 Act, although it will apply to others. Slight and unnecessary differences between UK and European law make matters more complicated, and hence more expensive, for UK inventors. The amendment would make it less likely that the laws would diverge.
It might make sense to apply the proviso even more widely. It is not clear how the sections to which it will apply differ from the rest. I beg to move.
The Parliamentary Under-Secretary of State, Department of Trade and Industry (Lord Sainsbury of Turville): My Lords, if I may, I shall preface my remarks with one or two words about Clause 1. The present position is that methods of treatment or diagnosis are not considered to be patentable because they are not, in the words of the 1977 Act, "capable of industrial application". That was regarded as an undesirable position to uphold in the revised European Patent Convention, since medical methods are not patentable in the interests of public health. Thus, Clause 1 makes clear that inventions consisting of such medical methods cannot be patented and conforms with how such methods are dealt with under the revised EPC. The scope of the exclusion will remain the same as that under current provisions.
Clause 1 also concerns the patentability of substances and compositions that are to be used in medical methods. In particular, an invention may comprise taking a known substance, which has already been used in a medical method, and finding a new

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medical use for that substance. Clause 1 does not extend the availability of patent protection in respect of such inventions, but it does allow such inventions to be patented in a more simple and direct form than is possible at present.
New Section 4A, inserted by Clause 1, is drafted to implement articles 53(c), 54(4) and 54(5) of the revised EPC. I agree with the noble Lord that legal certainty for users is important and that any discrepancy between practice under the EPC and practice in the UK should be minimised. Noble Lords want to ensure that new Section 4A falls within the scope of Section 130(7) of the 1977 Act, but the amendment is unnecessary, because that is already the case.
If noble Lords turn to the Act, they will see that Section 130(7) applies to Sections 2 to 6. It states that the following sections are covered: from 1(1) to (4) and Sections 2 to 6. That would already include new Section 4A, so there is no doubt that the new section will have, as nearly as practicable, the same effect as the corresponding provisions of the revised European Patent Convention.
I trust that, with that explanation, the noble Earl will withdraw the amendment.
Earl Attlee: My Lords, I am grateful for the Minister's explanation. I am afraid that I did not understand it; I shall read it carefully and take advice, but I doubt that I shall return to that. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Razzall Lord Razzall moved Amendment No. 2:
After Clause 6, insert the following new clause—
"INVENTOR CONFIDENTIALITY
In section 13 of the 1977 Act (mention of inventor), after subsection (1) there is inserted—
"(1A) When the applicant for a patent is not the inventor or joint inventor of the invention, the inventor or joint inventor shall have a right not to have their names and addresses mentioned on any patent granted for the invention and shall also have a right not to be so mentioned if possible in any published application for a patent for the invention and, if not so mentioned, a right not to be so mentioned in accordance with rules in a prescribed document.""
The noble Lord said: My Lords, the amendment had a good run through in Grand Committee. I fear that, having listened to the Minister explain why the amendment was not being accepted by the Government, I must return to it on Report. For many people, this Bill is somewhat dry—albeit at this relatively late hour, the attendance in the House indicates the dryness of the topic. It is nice to see the noble Lord, Lord Haskel, in his place, adding to the general jollity of the occasion.
Of all the points made and amendments tabled to the Bill, this is the one that goes wider than the dry dust of patent legislation. What we are talking about here is potential threats to the lives of inventors if names and addresses appear on patent applications. We are aware that in applications made by bio-science companies, there is currently a practice, especially by animal welfare extremists, of putting the individual's personal
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details on the Internet and in other public media. That means that the development of the Internet has significantly increased the risk for inventors who, as we know, have had significant threats to their lives.
My amendment would make a small step to protect those inventors, especially in those the field of bio-science. In every other field, in which there is no possible life-threatening implication to having their name published, most inventors would be delighted to have their name published, because it goes to their credit for their career. So my amendment does not say that no one should have their names and addresses mentioned; it simply gives the right to an inventor who is worried—that is likely to be in the bio-science area—to have his name excluded.
The two arguments made by the Government were that this is of course a finely balanced argument and that those of us who table amendments perhaps make the case too strongly and do not recognise the balance of the argument. That does not mean that we do not think we are right, but we recognise that that argument is finely balanced.
The first argument is that when the Government consulted, they received an adverse response to that suggestion, especially from the patent industry—the agents—who all said that that would make it difficult to perform proper searches and would make their lives much more difficult. That may make their life more difficult, but that is not quite the same as the life-threatening risks to inventors in the small number of cases where the right would be exercised. So I am not persuaded by that argument. I understand it, and I understand what the patent agency community said—it is a perfectly respectable argument; but it does not override the need for the Government to give certain inventors the ability to have that protection. The second argument made is that other countries, especially the United States, do not have this protection. As I understand it, in the United States, the inventor must be the applicant. Again, that is fine, but the inventor does not have to choose to put the application forward. If an inventor who is working for XYZ Ltd or XYZ plc fears that if the application is made, his or her life will be under threat, he or she does not have to do it. So, again, there is a self-protection provision. He or she can say to his or her employer, "Actually, I am not prepared to make this application because I think that if I do, my life could be in danger". Again, I do not think that that is a satisfactory argument. So I urge the Government to think again. I suspect that when the matter went out to consultation, they may have been minded to go down that route.
The third argument used in this regard—the Minister will no doubt use it—is that the intention is to involve the option for addresses not to be disclosed. That is all very well, but with modern search engines, as I said in Grand Committee, with a name like mine, or that of the noble Earl, Lord Attlee, you would not need to be a nuclear physicist of utmost renown to be able to discover where we live. Smith might be harder, or even Sainsbury—they might get the wrong Sainsbury—but the ability to exclude addresses does not really give the protection that

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any inventor needs in terms of confidentiality. I hope that the Minister has had an opportunity to think about what we discussed in Grand Committee. I beg to move.
Earl Attlee: My Lords, I am afraid that I omitted to put my name to the amendment proposed by the noble Lord, Lord Razzall, but I fully support his reasoning, and I would support him if he chose to test the opinion of the House.
We are living in different times. In the 1950s, the noble Earl, my grandfather, used to go home by public transport, and everyone knew where he lived. It is now easy to work out an address, given a name, especially if it happens to be Razzall or Attlee, as mentioned by the noble Lord. It is true that other countries require the name and address of an inventor to be published, but there will be other significant differences in their legal system. They will have other checks and balances to protect the individual. If we stop making the release of the inventor's name compulsory, other countries might consider whether their arrangements need to be reviewed.
The Minister will point to the requirement of researchers to know the inventor's name. The noble Lord, Lord Razzall, suggested that it would be a small number of inventors who would want to keep their names confidential. In Committee, I suggested that it should be possible to give an inventor who requests it an anonymous reference number. Of course, once he starts using that reference number, he must keep using it. Most inventors would want their names to be published—in fact, it is thought that is the reason behind the significant number of patent applications. However, there will always be some who desire privacy. In Grand Committee, the Minister said that the public had a right to know the inventor's name, as part of the deal when the state bestows a right in the form of a patent. It is important to remember that the applicant enjoys the right, not the employee inventor, who normally gets only his usual reward as an employee, except if he is enjoying compensation under Section 40. I support the amendment proposed by the noble Lord, Lord Razzall.
Lord Sainsbury of Turville: My Lords, the noble Lord, Lord Razzall, argued in Committee and again today that there is a balance to be struck between the right of the public at large to have access to information that is relevant to patents, and the right of a more limited group of individuals to have their personal details protected. Other noble Lords supported his view. I have had time to reflect on the arguments put to me in Committee, and I have listened carefully to the points made by the noble Lord today.
I remain of the view that it will be only of fairly limited benefit to an inventor if he can have his name and address kept confidential in the UK. In many cases, patents will have been applied for in other countries where the inventor's details will be made public. The noble Lord, Lord Razzall, was somewhat dismissive of this point in Committee and again today, on the rather curious argument that you did not have to apply for a patent, but with patents, particularly in
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the biosciences, almost the first place you go to is America to do that. That does not stop it from being an obviously relevant point.
In light of what I have heard from the noble Lords opposite, both today and in Committee, I am prepared to provide the limited benefit that will result from changing UK practice in this respect. We will therefore bring forward an amendment at Third Reading that will ensure that an inventor may have his name and address kept confidential at the patent office in appropriate circumstances. This amendment may simply make one or two minor adjustments to the 1977 Act, which will clear the way for the necessary procedures to be set out in secondary legislation. We will be looking carefully at the drafting necessary to achieve this. It will not become possible for a patent applicant or patent holder to keep his name and address confidential, but we will no doubt wish to consult users of the patent systems before setting out the detailed mechanism in rules. I hope that the noble Lord will accept our undertaking and withdraw his amendment.
Lord Razzall: My Lords, I am obviously delighted to have made some progress on this point. I thank the Minister for his courtesy in dealing with it, and I am happy to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 7 [Restrictions on applications abroad by United Kingdom residents]:
Earl Attlee Earl Attlee moved Amendment No. 3:
Page 4, line 3, leave out from "security;" to end of line 5.
The noble Earl said: My Lords, the objective of this amendment is to make the law clearer and lift vague and unnecessary burdens from industry and its advisers. Under current law, Section 22 of the 1977 Act gives the comptroller power to control publication of information in patent specifications if to do so would be prejudicial to the defence of the realm or the safety of the public. To allow for this, Section 23 provides that patent applicants must not file abroad until six weeks after filing in the UK without special leave. To make life easier, the Bill as amended abolishes the six-week period for all information not prejudicial to national security or the safety of the public. This is most welcome. However, it is not completely clear what is meant by the safety of the public. No doubt it overlaps largely with national security. If it overlaps completely, it is redundant, and if not, what else does it include? Many applications include information that is capable of misuse; for example, toxicity data for drugs or pesticides. The problem is that applicants may have to err on the side of caution and adhere to the Section 23 provisions, thus negating the Government's laudable deregulation aims.
The Minister will say that the safety of the public has been in the Act since 1978, and has not caused problems. That is a reference to Section 22, the power of the comptroller to restrict the release of information. The comptroller must make the judgement on behalf of the applicant's Section 23 notification, if I may put it

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that way. The Bill as drafted will require the applicant to make that judgment, but he may not be well equipped to do so. I beg to move.
Lord Triesman: My Lords, as I said in Grand Committee, the provisions now in Clause 7 would provide considerable benefit for UK residents wishing to file patent applications in other countries. The existing general restrictions on the filing of such applications in Section 23 of the 1977 Act would be deregulated by this clause. They would only apply where the application contained information which, if published, might be prejudicial to national security or the safety of the public. The noble Earl, Lord Attlee, asked what the distinction between those might be. I have also sought to satisfy myself as to what the distinction might be. To be candid, it is not easy to give detailed examples, but it is certainly the case that the security services believe that the comprehensive nature of the two expressions covers every kind of eventuality that could be conceived. That is advice that it would be better to take. Therefore, retention of references to the safety of the public in Section 22 and including it in Section 23 achieves that. It is possible to come up with some sorts of hypothetical examples, but that would not be particularly sensible.
The effect of the amendment would be to further limit the application of Section 23, and it would remove restrictions where publishing the information in the application might be prejudicial to the safety of the public. As I hope I made clear in Committee, an important reason for referring to both national security and the safety of the public in this section is for parity with Section 22 of the 1977 Act. It provides continuity in that sense. Section 22, which sets out procedures restricting or prohibiting publication of information in patent applications filed at the UK patent office has, for more than 25 years, covered information prejudicial to the safety of the public and information that is required to be restricted for the defence of the realm.
It is true that the provision in Section 22 relating to the safety of the public has been invoked on few occasions. Although there may be relatively few circumstances in which the provision might be needed, an application could contain information that might not fall within the ambit of national security but could be of a nature such as to necessitate prohibition, in order to protect the public. Moreover, we cannot always predict the future direction of innovation or the ingenuity of inventors, so we would want to ensure that the provision could serve a more important purpose in safeguarding the public in the future.
In order to ensure that no necessary protection for the public is lost—now and until the next time that we have an opportunity to update patents law—the simple and safe solution is to follow the precedents and retain the provision in this form. I hope that, in the circumstances, the noble Earl, Lord Attlee, and the noble Lord, Lord Lyell, who is also rightly
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associated with it—he is not in his place this evening—will feel that it is appropriate to withdraw the amendment.
8 p.m.
Earl Attlee: My Lords, I thank the Minister for his response. He said that the two phrases would cover every eventuality. That is what worries me. Applicants will play safe, and my fear is that the deregulation will not work as well as the Minister intends.
I am also not convinced that the Minister has grasped all my points, but I do not think that it matters. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 12 [Threats of infringement proceedings]:
Earl Attlee Earl Attlee moved Amendment No. 4:
Page 6, leave out lines 25 to 28 and insert—
"(b) either—

(i) the patent alleged to be infringed is not shown by the claimant to be invalid in a relevant respect, or

(ii) the patent alleged to be infringed is shown by the claimant to be invalid in a relevant respect and the defendant or defender proves that the time of making the threat he had no basis for believing the patent to be invalid in that respect.""

The noble Earl said: My Lords, the objective of the amendment is to hold the balance between honest patentees who believe that their legitimate rights are being infringed and honest third parties who are entitled to continue lawful activities without harassment.
The object of Section 70 is to prevent powerful patentees oppressing small traders by claiming dubious rights that the latter cannot afford to contest. It also hinders all patentees, large and small, from enforcing legitimate rights. There is no point in having rights that cannot be asserted. It should be possible to challenge apparent infringers without having to issue a writ first.
The useful reforms of the legal system brought about by the noble and learned Lord, Lord Woolf, emphasise the importance of reasonable discussion to achieve settlement. Section 70 obstructs such discussions. Just as threats may be issued oppressively or for purely tactical reasons, so may actions for threats. Suing a lawyer for issuing threats on behalf of his client can drive a wedge between the client and his adviser and deny the client justice. Although lawyers may find it convenient to be exempted completely from threats actions, the provision might also allow them to evade the intentions of Section 70. That is why I opposed the amendment tabled by the noble Lord, Lord Razzall, on that point in Grand Committee.
The amendment would allow patentees and their lawyers to issue threats believed in good faith to be justified. The burden would be on the issuer of the threats to prove his good faith. I beg to move.
Lord Sainsbury of Turville: My Lords, I am grateful to the noble Earl for the explanation of the thinking behind the amendment. Taking the amendment at face value, as it is on the Marshalled List, I find it puzzling. It would involve substituting our proposed new Section 70(4)(b) with some new wording. The new wording does not follow from the wording of the proposed new subsection (4)(a), either grammatically or logically. I strongly suspect that the noble Earl's intention is to replace existing subsection (2)(b) of Section 70. The noble Earl's proposed paragraph (b)(i) reproduces the wording of subsection (2)(b). The proposed paragraph (b)(ii) then adds to that existing wording.
I am helped in that piece of deduction—I hope that it is correct—by having seen a paper from the Chartered Institute of Patent Agents that contains exactly that proposal. My reply will therefore reflect the proposal put forward in that paper. I think that it mirrors the noble Earl's proposal.
The amendment proposes an additional way in which a patent holder may successfully defend himself against an action for making unjustified threats. The patent holder may genuinely believe that he has a valid patent and that it is being infringed. If he is sued for making threats against someone, the court may find that the acts under dispute amount to infringement of the patent. In that case, the patent holder is excused, as no unjustified threats were made. However, in those circumstances, the court may also find that the patent is invalid. If so, the patent holder is robbed of his defence and is found to have made unjustified threats, despite the fact that he was right in his assessment that infringement was taking place.
I agree that that seems unfair and may dissuade a genuine patent holder who has correctly assessed that infringement is taking place from seeking to resolve the dispute. As I understand it, the amendment addresses the apparent unfairness. If the court has found that the acts under dispute would have constituted infringement but also that the patent is invalid, the patent holder will not be held liable for making unjustified threats, provided that he shows that he genuinely had no reason for realising that his patent was invalid.
The point was not raised with us during the consultation. Had it been, we would, I think, have welcomed it. I am therefore prepared to agree an amendment that addresses the noble Earl's concerns and will table such an amendment at Third Reading. In other words, we have put the most favourable interpretation that we can on the noble Earl's amendment and will table amendments to take action on the point. We could not be more helpful than that, and I hope that the noble Earl will withdraw his amendment on that basis.
Earl Attlee: My Lords, I am extremely grateful for the Minister's interpretation of my amendment. I apologise for the drafting. I must confess that, when I studied the detail of it, I could not quite work it out myself.
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The Minister has given a helpful reply, and I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Earl Attlee Earl Attlee moved Amendment No. 5:
Page 6, line 41, leave out "best endeavours" and insert "reasonable endeavours in all circumstances"
The noble Earl said: My Lords, we return to the issue of the meaning of the phrase "best endeavours", in what is now Clause 12.
I remind the House that Clause 12 provides for the insertion of new subsections into Section 70 of the Patents Act. 1977. They give a defence in threats proceedings, when a person finds that he needs to resort to pursuing secondary infringers—often retailers or wholesalers. The defence is that he has used his "best endeavours" to determine who was the primary infringer or importer.
In support of his argument, the noble Lord, Lord Triesman, referred to the IBM case, decided in the Court of Appeal. It is true that the finding watered down the phrase "best endeavours", but I understand that, previously, it meant "to the point of commercial ruin". However, it still meant that IBM was expected to appeal a planning decision which, presumably, it reluctantly agreed with.
I believe that the Bill as drafted will not achieve what the Minister desires and that Clause 12 will be far less valuable. If my amendment is agreed to, the patent holder will still be obliged to try very hard o identify the primary infringer. However, the courts will be able to take into consideration all the circumstances and the reasonableness of the patent holder's actions. I beg to move.
Lord Lyell: My Lords, I support my noble friend Lord Attlee, who has raised an interesting point. I will not weary your Lordships tonight with the case of IBM; I think it was Mr Justice Laddie who had things to say about it.
My noble friend has argued his case cogently—I think there is, or can be, some difficulty with the interpretation of "best endeavours" or other words in quite how far the patent holder or the defendant will go in these cases. Perhaps the Minister can explain. I think that my noble friend's amendment has merit, and we are looking for clarity.
Lord Sainsbury of Turville: My Lords, it was clear in Committee that the noble Earl, Lord Attlee, had reservations about the best endeavours threshold setting too high a standard. In particular, he was concerned that it would, as he put it, hit SMEs hardest. I recall that the noble Lord, Lord Lyell, also expressed his concern about this point in Committee. I have listened carefully to the arguments put forward again this evening.

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As my noble friend Lord Triesman made clear in Committee, the intention of our best endeavours threshold is not to set an impossibly high standard. If we thought that it did so, we would not be putting it forward. Neither is it our intention to set a threshold which is easier for some to achieve than others. In particular, we would not wish to weigh the scales unfairly against the small or medium-sized patent holder. However, I am not convinced that this is what the threshold actually does.
The wording in Clause 12(4) makes it clear that the person concerned—I emphasise that point—must use his best endeavours. It does not measure his best against an absolute standard. Instead, the standard that he must attain is to make the efforts that a prudent, determined and reasonable person in his position would make. Since this is the case, the circumstances in which he finds himself—that includes the resources that are available to him—are an important consideration.
The endeavours that a multinational firm can make may well, when all the circumstances are considered, go further than the endeavours that can be made by a small business with five employees. So the person concerned will not necessarily be required to match what someone else with more time, money and resources could do. He must do his best to track down the alleged primary infringer, but that does not necessarily mean that he is required to do more than he is reasonably capable of doing.
I hope that, with those words, I have been able to allay the fears of noble Lords opposite in this respect and that they will agree that the current wording achieves the right balance without being unreasonably hard on any particular person or size of business.
Earl Attlee: My Lords, unfortunately, my legal advice differs from that of the Minister. I fear there will not be a meeting of minds on this issue. Therefore, I wish to test the opinion of the House.
8.12 p.m.
On Question. Whether the said amendment (No. 5) shall be agreed to?
Their Lordships divided: Contents, 28; Not-Contents, 93.

Division No. 4

CONTENTS

Attlee, E.

MacGregor of Pulham Market, L

Baker of Dorking, L.

Bridgeman, V.

Monro of Langholm, L.

Brookeborough, V.

Naseby, L.

Byford, B.

Norton of Louth, L.

Carnegy of Lour, B.

O'Cathain, B.

Cope of Berkeley, L.

Patten, L.

Dixon-Smith, L.

Reay, L.

Fookes, B.

Renfrew of Kaimsthorn, L

Glenarthur, L.

Laird, L.

Rotherwick, L. [Teller]

Lamont of Lerwick, L.

Seccombe, B. [Teller]

Lyell, L.

Sharples, B.

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Shaw of Northstead, L.

Waddington, L.

Thomas of Gwydir, L.

Windlesham, L.

NOT-CONTENTS

Acton, L.

Jones, L.

Amos, B. (Lord President of the Council)

Layard, L.

Lea of Crondall, L.

Andrews, B.

Livsey of Talgarth, L.

Ashley of Stoke, L.

Lockwood, B.

Barker, B.

Lofthouse of Pontefract, L.

Bassam of Brighton, L.

Macdonald of Tradeston, L.

Berkeley, L.

McIntosh of Haringey, L.

Brooke of Alverthorpe, L.

McIntosh of Hudnall, B.

Brookman, L.

MacKenzie of Culkein, L.

Campbell-Savours, L.

Maddock, B.

Carter, L.

Mar and Kellie, E.

Chandos, V.

Masham of Ilton, B.

Clark of Windermere, L.

Clarke of Hampstead, L.

Massey of Darwen, B.

Cohen of Pimlico, B.

Miller of Chilthorne Domer, B.

Dahrendorf, L.

Newby, L.

David, B.

Palmer, L.

Davies of Coity, L.

Pendry, L.

Davies of Oldham, L. [Teller]

Phillips of Sudbury, L.

Dean of Thornton-le-Fylde, B.

Pitkeathley, B.

Dixon, L.

Radice, L.

Eatwell, L.

Ramsay of Cartvale, B.

Elder, L.

Razzall, L.

Evans of Parkside, L.

Rendell of Babergh, B.

Evans of Temple Guiting, L.

Robertson of Port Ellen, L.

Farrington of Ribbleton, B.

Rooker, L.

Faulkner of Worcester, L.

Sainsbury of Turville, L.

Filkin, L.

Scotland of Asthal, B.

Finlay of Llandaff, B.

Shutt of Greetland, L.

Fyfe of Fairfield, L.

Simon, V.

Gibson of Market Rasen, B.

Smith of Clifton, L.

Golding, B.

Smith of Leigh, L.

Gordon of Strathblane, L.

Steel of Aikwood, L.

Goudie, B.

Stone of Blackheath, L.

Graham of Edmonton, L.

Symons of Vernham Dean, B.

Greaves, L.

Taylor of Blackburn, L.

Grocott, L. [Teller]

Harris of Haringey, L.

Thomson of Monifieth, L.

Harrison, L.

Thornton, B.

Haskel, L.

Triesman, L.

Hilton of Eggardon, B.

Turnberg, L.

Hogg of Cumbernauld, L.

Walmsley, B.

Howie of Troon, L.

Warwick of Undercliffe, B.

Hoyle, L.

Whitaker, B.

Hughes of Woodside, L.

Whitty, L.

Hunt of Kings Heath, L.

Wigoder, L.

Janner of Braunstone, L.

Woolmer of Leeds, L.

Resolved in the negative, and amendment disagreed to accordingly.
8.21 p.m.
Clause 13 [Opinions by Patent Office as to validity or infringement]:
Earl Attlee Earl Attlee moved Amendment No. 6:
Page 7, line 29, at end insert—
"( ) The examiner shall seek comment from any third party proprietor, licensee or alleged infringer before giving an opinion adverse to that party."
The noble Earl said: My Lords, the amendment relates to opinions given by the Patent Office on what is now Clause 13. We believe that the proposed system would be open to abuse and undesirable outcomes if official opinions were given by the Patent Office without the knowledge of third parties. There could be a ridiculous situation in which the Patent Office has

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correctly given an opinion that a patent is being infringed but the alleged infringer knows that the patent is invalid by reason of very clear prior art. If the alleged infringer knew that an infringement opinion was being sought, he could easily apply for a validity opinion himself.
The amendment states:
"The examiner shall seek comment from any third party proprietor, licensee or alleged infringer before giving an opinion adverse to that party".
If the examiner believes that the person seeking the opinion has no case, there will be no need to trouble other parties. I beg to move.
Lord Sainsbury of Turville: My Lords, before considering the amendment tabled by the noble Earl, Lord Attlee, and the noble Lord, Lord Lyell, I should first like to make some general points regarding the proposed opinion procedure, partly in response to comments made in our debate in Grand Committee.
The noble Earl, Lord Attlee, spoke in Committee of his concern that proposed new Section 74B(2)(d) was not compliant with TRIPS or Article 6 of the European Convention on Human Rights. However, let me reassure the noble Earl that the proposed new section does not contravene either TRIPS or the convention. The provision is in place to remove any overlap or confusion with existing procedures. It ensures that, in those instances where there will already be a sufficient means of challenging the outcome of a review, an automatic right of appeal from the new procedure for review of an opinion by the Patent Office can be excluded. The power will be exercised only in appropriate cases.
In Committee, the noble Earl, Lord Attlee, stated of opinions that,
"I am of the view that the only use would be as a sanity check".—[Official Report, 8/3/04; col. GC 377.]
I agree wholeheartedly with the idea that opinions will help to introduce greater sanity into the area of patent enforcement. What is needed is a procedure which, because of its non-binding nature, can be used at any stage in the life of a patent to help the patent holder or a third party in their decision-making processes and which does not compel them to act in a particular way.
It is for that reason that the Patent Office is best placed to be the provider of such opinions. The Patent Office has an excellent reputation for the quality of its work granting patents, as evidenced by its recent success in achieving the international ISO 9001:2000 quality accreditation, and is experienced in dealing with issues of validity and infringement. The advantages of the opinion procedure, which is a generally rapid, paper-based procedure, militate strongly against making it a binding one. This is to ensure that, precisely because the Patent Office is, as the noble Lord, Lord Razzall, said in Committee,
"an organ of the state",—[Official Report, 8/3/04; col. GC 374.]
a patent holder or third party will have every right to ignore the opinion if he so chooses. In our various discussions with the patent judges on this issue, they could see a greater need for a non-binding opinion
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process that could assist in the early settlement of disputes rather than the need for another binding litigation procedure.
I now turn to the amendment itself, which would make a change to new Section 74A(5) to require an examiner to obtain comment from a number of parties likely to be affected prior to issuing an adverse opinion. As I said in Committee and at Second Reading, much of the detail for the opinion procedure will be laid down in secondary legislation following further consultation with stakeholders on implementation. However, in order to ensure that the maximum benefit is derived from the opinion process, it has always been our intention to ensure that the request for an opinion is widely notified. This would ensure that those who are directly affected, for example, the patent holder, as well as those who have an interest can all submit their comments and observations for consideration by the examiner. However, at all times, we must make sure that the key advantages of the opinion procedure—its low cost and its speed—are not compromised.
There are a number of steps that we can take in order to ensure that a request for an opinion is widely advertised and notified. Clause 13(3) ensures that notification of the request for an opinion and of the outcome of the opinion can be made on the patents register. Any party who has an interest in a particular patent, such as the patent holder, a licensee or a third party competitor of the patent holder, can ask to be informed whenever such an entry on the register is made. This is a service that the Patent Office can provide upon payment of the appropriate fee.
In the case where the requester is not the patent holder we envisage that the Patent Office will notify the patent holder directly that a request for an opinion as to the validity or infringement of his patent has been received. We also propose to consult on whether or not it would be appropriate for the Patent Office to notify directly any party identified by the requester as having an interest. They could then be invited to submit observations on the question at issue within the appropriate time limit.
It is also proposed to notify all requests for an opinion in the Patents & Design Journal, which records the progress and status of all patent applications and granted patents and is readily available in electronic as well as paper form.
I hope that this will reassure noble Lords that requests for opinions will be widely notified and that all parties who have an interest will be able to be involved before the examiner issues an opinion. I believe that this will ensure that the interests of all, including the public interest, are safeguarded and will avoid the type of uncontested pre-emptive strike referred to by the noble Lord, Lord Razzall, in Grand Committee.
It is appropriate, and more consistent with what happens for other procedures under the 1977 Act, for details of the procedure to be laid out in secondary legislation, the Patent Rules. I would therefore ask noble Lords to accept my reassurance that their concerns will

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inform how we draw up the secondary legislation to follow from the Bill. With this reassurance, I would ask them to withdraw this amendment.
Earl Attlee: My Lords, I thank the Minister for his reference to the concerns that I raised at Grand Committee. Our concerns about the opinions provisions still remain. However, I thank the Minister for his interesting and illuminating reply. I think that it meets my concerns, I hope that it does, and I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.

Paternity and Adoption Leave (Amendment) Regulations 2004
8.28 p.m.
Lord Davies of Oldham Lord Davies of Oldham rose to move, That the draft regulations laid before the House on 9 February be approved [10th Report from the Joint Committee].
The noble Lord said: The Government introduced an important set of measures in April 2003 that gave parents more choice and more support than ever before to balance work and family life.
All mothers can now take 26 weeks ordinary maternity leave with most able to take an additional 26 weeks additional maternity leave, giving up to one year off in total. Statutory maternity pay and maternity allowance are now paid for 26 weeks and the standard rate was increased to £100 per week. These provisions give mothers far more choice in the vital first year of a child's life.
The Government also introduced a brand new right to two weeks' paid paternity leave. This acknowledged the crucial role played by fathers at birth both in supporting the mother and in caring for the child. For the first time the important role of adopters was recognised as they were given similar entitlements to birth parents. They can now take one year's adoption leave with 26 weeks' statutory adoption pay. As this was important new legislation we have been carefully monitoring its implementation. In doing so we have discovered a few minor oversights. The amendments we are debating today will smooth out the glitches and ensure that the new rights work as we said they would.
There are three amendments within the two statutory instruments before your Lordships today. The first removes the condition that an employee has to supply the name and date of birth of the child to be adopted if the employer requests it. There can be no doubt that the privacy of the child should be protected. Employers can still ask to see evidence of the expected placement if they suspect that the claim is false.
The second amendment deals with employees returning to work after taking adoption leave. It makes sure that they have the right to return to work on terms and conditions no less favourable than would have applied if they had not been absent. The Government clearly stated their intention to treat adoptive parents the same as mothers on maternity
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leave as far as possible—a principle that was widely accepted during the extensive consultation on the new laws for working parents. This amendment brings adopters in line with women returning from maternity leave.
The third amendment aligns the payment process for statutory paternity pay with that for statutory maternity pay and statutory adoption pay. It will make certain that employees whose second week of statutory paternity pay begins on or after the date of any increase to the statutory rate will receive the higher amount in the second week rather than the existing rate. The existing legislation was drafted to deal with paternity periods that were taken before 6 April 2003 by fathers whose babies arrived early. This change will simplify the process for both employers and employees.
These are minor technical amendments intended to fine-tune the existing regulations. There will be little impact on employers but it will make a difference to employees and their children as the right to privacy will be upheld and neither adopters nor fathers will be disadvantaged by taking their statutory entitlements to leave. I commend the regulations to the House.
Moved, That the draft regulations laid before the House on 9 February be approved [10th Report from the Joint Committee].—(Lord Davies of Oldham.)
Earl Attlee: My Lords, I thank the Minister for his explanation of these two very straightforward regulations. Both of them were described by the Minister and his colleagues in the Standing Committee on Delegated Legislation in the other place as "fine-tuning" of the original regulations which came into effect just under a year ago.
Perhaps I can remind your Lordships of what my honourable friend, the Member for Malden and Chelmsford East, then the Shadow Secretary of State for the DTI, said about the Employment Act 2002 during its passage through Parliament. He said:
"We welcome measures to help parents maintain their place in employment while at the same time spending time with their family, particularly during their children's early years".
For that same reason, we support the regulations which clarify those regulatory measures.
The removal of the right of an employer to demand details of the name and date of birth of the adopted child must be right. That was a piece of over-regulation which impinged on the child's right to privacy, which is carefully guarded in the case of adopted children. The number of possible cases where some dishonest employee might try to pretend to adopt a child to get some benefit must be so negligible as to make that particular requirement a gigantic hammer to smash a tiny nut.
The other two amendments, one to refine the terms and conditions on which an employee will return to work, and the other, in the weekly pay rates regulation to adjust the method of calculating pay, both seem to be innocuous.

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I have only one question for the Minister. His colleague told the Standing Committee in the other place that:
"The cost … to employers is negligible".—[Official Report, Commons, 8th Standing Committee on Delegated Legislation, 10/3/04; col. 6.]
But he could not give any figures of the actual cost because the Government are waiting for the Inland Revenue to report via the annual PAYE returns, which are due in May.
I ask the Minister to ensure that, when the whole PAYE report is available, the figures for the cost of these regulations are extracted from it and made available in the form of a Written Statement on the record for the benefit of noble Lords and other interested parties, including employers' associations and particularly the Federation of Small Businesses and the Small Business Bureau.
As I said earlier, we see no objection to either of these two sets of regulations.
Baroness Barker: My Lords, I, too, thank the Minister for introducing the regulations. I agree with him and the noble Earl, Lord Attlee, that they constitute very welcome tidying up amendments. I am very glad that the Government have taken on board the points made by adoption agencies and others that the regulations as they were previously would not work.
I have a couple of questions for the Minister that I accept he may not be able to answer this evening. First, will the regulations, along with other changes that were made to improve the employment terms and conditions of adoptive parents, be evaluated in the long term? This is a worthwhile policy which had the support of these Benches when it was going through. However, it would be good to know whether there is to be a longitudinal study of the economic effects and benefits of keeping families, and particularly fathers, in touch with children but also in touch with the world of work.
Secondly, are the provisions of the Adoption and Children Act that relate to special guardianship similarly covered in terms of a right to employment leave? I too noted the point made by the noble Earl, Lord Attlee, that, unhappily, the Federation of Small Businesses has raised some objections to these regulations. I believe that the noble Earl's suggestion concerning a report would be welcome, not least to small businesses, to enable them to see the overall effect of the benefits of the measure. Those of us who are normally more concerned with adoption regulations than employment regulations know how important in psychological terms the presence of parents can be at an early point of a child's placement. I am sure that the presence of fathers at an early stage in a placement must have a beneficial effect on the long-term stability of that placement. It would be good to know whether there is research to that effect.
Lord Davies of Oldham: My Lords, I am grateful to the noble Earl and to the noble Baroness for their broad welcome for the regulations which, as we have indicated, are minor in their effect hut, none the less, important.
The noble Earl, Lord Attlee, asked me about the effect on employers. I can assure him that there will be minimal costs on employers because of the technical nature of the changes. They merely implement the policy that should have obtained over the past year but which, due to slight defects which we have now put right, did not. There are only 3,500 adoptions a year so adoption leave will be a rare occurrence even for the very largest of employers.
I emphasise to the noble Baroness, Lady Barker, that the costs involved are marginal. The noble Baroness struck a welcome note when she talked of the necessity of studying the impact of legislation, and particularly the necessity of studying what we all recognise is a very important social feature that we need to get a grip on; namely, the whole question of the costs of parenting and the advantage to the child of policies being pursued that encourage both parents to play a full role right from the birth of the child.
I do not think that anyone is in any doubt that one of the great social challenges that we face is enhancing family life and support for children and making sure that they are well looked after. The relatively minor costs in early years can reap great dividends if children behave in a social manner in their teens and later. Consequently, this is investment well spent, and why the Government address themselves to these issues with considerable enthusiasm. I can therefore say to the noble Baroness, Lady Barker, that we do have a longitudinal study in progress on the question of the extent to which fathers are in touch with their children. We certainly intend to make sure that we have the evidence which both identifies whether we are pursuing the right policies, and which will give us a guide to any changes that need to be effected. That is most welcome.
I cannot reply to her on the issue of guardianship. We have no information on that, and the orders do not directly apply to that. But I will be happy to write to her if I have additional information.
On the basis of those responses, I commend the regulations to the House.
On Question, Motion agreed to.

Statutory Paternity Pay and Statutory Adoption Pay (Weekly Rates) (Amendment) Regulations 2004
Lord Davies of Oldham: My Lords, I beg to move the Motion standing in my name on the Order Paper.
Moved, That the draft regulations laid before the House on 9 February be approved [10th Report from the Joint Committee].—(Lord Davies of Oldham.)
On Question, Motion agreed to.

Renewables Obligation (Amendment) Order 2004
8.42 p.m.
Lord Davies of Oldham Lord Davies of Oldham rose to move, That the draft order laid before the House on 24 February be approved [10th Report from the Joint Committee].
The noble Lord said: My Lords, the draft order is the culmination of a technical review of the Renewables Obligation Order 2002, set up to check that the order was working as originally intended. It also represents the outcome of a consultation on the issue of late payments made into the buy-out fund. The changes proposed are divided into two types: those designed to enhance the likelihood of achieving a 10 per cent target by 2010, and those of a more administrative nature. In explaining the provision, I will of course focus primarily on the former.
I would like to say a little at this point on how effective the obligation has been since it came into force in April 2002. We have seen a step change in renewable energy projects commissioned and planned. When I say "planned" I mean the number of projects which have now come off the drawing board and for which planning consent is being sought. The wind industry trade association has calculated that nearly 500 megawatts of new capacity will be built this year, out of 2,000 megawatts of consented projects. Offshore wind and electricity production is now really taking off, with over 1,200 megawatts consented under round one and, of that, North Hoyle at 60 megawatts has now been commissioned. A further 7.2 gigawatts of offshore wind projects have been offered site leases under round two. It is the renewables obligation that has stimulated this level of renewables development, and the order before us today is designed to improve the investment climate for renewables even further.
Investor confidence is clearly very important and the extension of the profile of the obligation—from 10.4 per cent in 2010–11 to 15.4 per cent in 2015–16—will also be an important factor in this. We have already announced this, and we shall be consulting on it later this year with the intention of legislating in a year's time. The Renewables Innovation Review confirmed that 10 per cent renewables electricity by 2010 is achievable, while highlighting the importance of wind energy in achieving this.
Let me turn to the main provisions of the order. There are five main provisions on which I wish to focus: co-firing, conversion of fossil fuel stations to biomass, smaller generating stations, NFFO sites and the recycling of late payments into the buy-out fund. Of these, the most significant change is to the rules for co-firing.
By co-firing, we mean the dual firing of biomass with fossil fuel, usually coal. We are using the co-firing of biomass, which includes energy crops, as a transitional measure to encourage the planting and use of energy crops
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as a fuel for electricity generation. Our existing fossil-fuelled generating stations are able to burn a proportion of biomass, including energy crops, and this is what the renewables obligation encourages by awarding ROCs for the electricity produced from the biomass element. At the moment, to be eligible for renewable obligation certificates—with the leave of the House, I shall now refer to them as ROCs—co-firing generating stations must have 75 per cent of their biomass by energy content as energy crops from 2006 and the eligibility of co-firing for ROCs ceases in 2011. After a detailed study on co-firing, we have concluded that more time is needed to develop energy crops and that farmers and generators need greater security. The requirement for some biomass to be energy crops has therefore been deferred until 2009, rather than 2006, and thereafter there will be a stepped increase. Co-firing stations will continue to be eligible for ROCs until 2016, giving time for farmers to harvest three full crops of new short rotation coppice. To balance this and to reduce the risk of co-firing ROCs flooding the market, the amendment order tightens the cap on co-fired ROCs that may be used to meet an individual supplier's obligation. This will be progressively reduced from 25 per cent currently to 10 per cent in 2006 and to 5 per cent in 2011 until 2016.
I am aware that concerns have been raised that we have not limited energy crops to those grown in this country. I should like to comment on that briefly. Electricity generated from biomass is eligible for ROCs whether the biomass is imported or produced here. This will not change as a result of the order. The obligation is a market mechanism, leaving generators free to decide on the source of their fuel. Any restriction on the source of the fuel would not be permissible under international trade rules and would also deprive generators of a source of fuel, some of which is waste with no other end use. However, we expect the amount of imported biomass to decline as home grown energy crops increase. DRAX power station, one of our largest, last week announced trials of UK-sourced biomass for its co-firing; it has previously been using imported fuel.
Staying with biomass, the amendment order will permit fossil fuel generating stations to convert to biomass without refurbishment. At present, most generating stations, other than co-fired stations and micro hydro, if built before 1990, have to refurbish before they can claim ROCs. By eliminating this requirement for stations converting to biomass, we shall give a boost to this sector.
We have also made provision for small generating stations—those of 50 kilowatts DNC or less—to accumulate output and to claim ROCs on the basis of their annual rather than their monthly output. Although eligible for ROCs, at present their monthly output is often too low to claim any ROCs, but in future they would be able to acquire a few on the basis of their annual use. This will benefit those such as homeowners who have put a PV panel on the roof of their house.
Another of the changes relates to NFFO contract sites that have not been developed. There are a large number of NFFO contracts not yet commissioned—some 1,500MW of capacity. As the order currently stands, projects on those sites are deterred from being developed by others as they would not attract ROCs. The amendment order will now allow third parties who are not connected or linked persons to the NFFO contractor to develop renewables projects on these sites and qualify for ROCs for eligible output. It also has the effect of encouraging NFFO contract holders to move ahead and develop their, as yet, undeveloped projects as there is now no point in holding off in the hope that they will in time be able to qualify for ROCs. This amendment will be beneficial all round, encouraging NFFO contractors to develop their projects and, if they fail to do so, making ROCs available to those who will move ahead with these developments.
Finally, as a result of TXU going into administration last year, it became clear that the current order did not make provision for any late payments and their recycling to suppliers. There is now a provision in the amendment order that allows any late payments received into the buy-out fund to be recycled to eligible suppliers for the relevant obligation period.
As the other changes are mainly designed to facilitate the administration of the obligation, I do not believe that I need to go into detail. I confirm that, in my view, the provisions in the amendment order are compatible with convention rights, as defined by Section 1 of the Human Rights Act 1998. Accordingly, I beg to move.
Moved, That the draft order laid before the House on 24 February be approved [10th Report from the Joint Committee].—(Lord Davies of Oldham.)
Earl Attlee: My Lords, I thank the Minister for his detailed and interesting explanation of the order, whose complexity may be judged by the fact that his department's Explanatory Memorandum is just about double the length of the order itself. I say at once, as my honourable friend the Member for Tewkesbury told the Standing Committee on Delegated Legislation in the other place, that we do not oppose the order.
Your Lordships have had the benefit that another place has not yet enjoyed: we have had a lengthy and well informed Second Reading debate, followed by 11 sessions in Grand Committee and, so far, three days on the Report stage of the Energy Bill. I suspect that some of your Lordships may, by now, be suffering from what sounds like a paradox—energy fatigue.
The purpose of the order is to give a stimulant to an important renewable source of energy, both to assist in our Kyoto commitment and—to my mind, no less importantly—to reduce the United Kingdom's reliance on fuel from abroad while our own domestic
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sources almost totally disappear over the next 15 years or so. So far, we are woefully short of our target for renewables. I do not say that in any recriminatory sense, but facts are facts.
The Minister quoted some impressive figures, but by far and away the largest component is wind. Therefore, anything that can stimulate growth in our use of renewables is to be welcomed. Biomass can be a reliable and non-intermittent source of fuel and, to repeat the word, a stimulant to our agriculture industry at the same time. It is hoped that the co-firing concept for this new source of fuel will rely on homegrown material without the need for further imports. However, I listened carefully to what the Minister said about the temporary need for imports.
As a result of an opposition amendment to the Energy Bill passed by your Lordships on 18 March by a majority of 22, the Government are required to provide annual reports of information on various sources of renewable energy, including biomass. In supporting this order, perhaps I may say that we look forward to that report so that we may see the progress made in this area.
Baroness Miller of Chilthorne Domer: My Lords, first, I apologise for missing the first few words of the Minister's opening statement. As mentioned by the noble Earl, I, too, believe that I am suffering from energy fatigue. I recognise that the Minister must be suffering in the same way, having spent all day on the Report stage of the Energy Bill.
I very much welcome the order and the practical approach that it takes further to encourage biomass. I also welcome the recognition that the Government have given to the fact that more time and encouragement is needed so that farmers can develop energy crops, as the Minister said.
I noted the Minister's comment about home-grown crops. At some stage—I certainly do not expect him to comment on this tonight—it would be useful to have a joint letter from Defra and the DTI explaining how growers of energy crops, and in particular short-rotation coppice, will fare under the CAP reforms as proposed and also how they will fit into the entry level or higher-tier agri-environment payment system. Coppice may well qualify as a higher-tier environment, although I suppose that if coppicing has taken place frequently, it may not. I simply seek, at some stage, a letter which lays out how farmers looking to their future see the attitude of the two departments interrelating.
My second comment on the order is that it recognises that small generating stations can earn ROCs. They should be allowed to accumulate and be put on an annual basis. The Explanatory Notes spell out what is in the mind of the Government: that the change will enable smaller generators to offset some of the cost of their investment. Although that is true, if

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the Government really wanted to help small generators—I mean domestic households—they would look at net metering. That means that people who invest in a small generator could sell the electricity that they generate into the grid at the same price at which they buy their electricity. At the moment they have to sell it at a pathetically low price and buy it at a more expensive price. That is the true disincentive. I hope that that is the next matter that the Government address in what is otherwise a welcome commitment to fulfilling their obligations under Kyoto.
Lord Davies of Oldham: My Lords, I am grateful for the positive, sympathetic way in which noble Lords have responded to the order. One cannot be fatigued by the Energy Bill. It provides such stimulation to the intellect and keeps us occupied. I am sure that we have all enjoyed every sitting on the Bill, not least today. I recognise that the order represents a slight return to old haunts. Only an hour after we suspended discussions on Report stage of the Energy Bill, we find ourselves discussing an energy order.
I hear what the noble Earl, Lord Attlee, says. We shall have an annual report, which will monitor progress in the area. He will know that we disagreed on that and that was why we voted in different Lobbies on the question. There is a necessity for an annual report on progress in those terms but he has the obvious right to delight in the victory secured in an earlier stage of the Bill. I can confidently predict that as the reports come through they will show the stimulus that the Government are providing to essential developments of alternative energy strategy and we shall be pleased and encouraged by the results. He is right to say that one cannot disavow the central issue on wind energy which is to reach the targets by 2010 and 2015. However, it is important that we recognise the contribution that other technologies can make and, with encouragement, will make as the years go by.
I am grateful to the noble Baroness for her comments. She will recognise that I appreciate that there is a danger that coppicing—I am not sure of the correct verb for developing coppice—may fall within different categories of the CAP. I shall write to her on that point as I do not have the details to hand. She will appreciate, as I am sure all sides of the House do, that a great deterrent to the lack of stimulus for the development of coppicing is less a matter of the CAP and its position, and rather more the fact that one needs to know that there is a market for it. Inevitably, such investments take time to mature, so there is a long-term nature to that market and to the guarantees. Under the order we have sought to give assurances in that area so that the generating stations have the assurance that there will be an increased amount of home-produced biofuel that they will be able to use and that farmers will have a longer-run projection of how worth while it will be to invest in development. That is the purpose.
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On the issue of very small generators, I hear what the noble Baroness says. It is not the first time that I have heard it. I am sure that we have not progressed far enough through our consideration of the Energy Bill to prevent me from hearing the noble Baroness press her point on a third occasion. I recognise the validity of a great deal of what the noble Baroness says. However, she will also know that there are considerable on costs involved in the development of the link-up to the national grid, and we cannot at this stage pretend that we have ready and easy solutions to that. Of course, that does not mean that we should in any way underestimate the contribution that individual householders and small generators can make to our future energy production, nor the inevitable lesson that goes alongside electricity generation; namely, the obligation on all of us in smaller units to conserve energy.
On the basis of those constructive responses, I hope that I have answered the points made. I commend the order to the House.
On Question, Motion agreed to.

National Minimum Wage Regulations 1999 (Amendment) Regulations 2004
9 p.m.
Lord Davies of Oldham Lord Davies of Oldham rose to move, That the draft regulations laid before the House on 23 February be approved [12th Report from the Joint Committee].
The noble Lord said: My Lords, there has been a slight procedural hiccup in relation to these regulations. There is a mistake on the Order Paper. The Motion refers to a draft laid on 23 February and the 12th Report of the Joint Committee on Statutory Instruments. It should refer to a new draft laid on 18 March and the 13th report of the JCSI, which was published today. Furthermore, until 7 o'clock, the Printed Paper Office was distributing the 23 February text, not the 18 March text. That has been corrected in the intervening two hours. I do not believe that either error was entirely the Government's fault. Nevertheless, I apologise on behalf of the Government. The usual channels have agreed that we should debate these regulations today, as planned, at the end of which I shall withdraw the Motion because it is not accurate. The correct Motion will then be moved and hopefully agreed formally on Thursday.
The only difference between the drafts relates to paragraph 26A(1)(a), which has been clarified in response to the recommendation made in the 12th Report of the JCSI. Today's 13th Report of the JCSI clears the new regulations without comment. I therefore believe that, far from wasting our time today, we shall be engaging in a debate to which we have all looked forward, and I apologise for that small hiccup in the proceedings.
The House will recognise that discussion of the national minimum wage always represents an occasion of joy for these Benches, because it is one of the Government's great successes. The regulations before the House today are concerned with how the minimum wage applies to output workers, including home workers. They replace the present system of fair estimate agreements with a system of fair piece rates linked to the minimum wage.
As noble Lords will know, the Government introduced the minimum wage in April 1999. We were absolutely determined that the minimum wage should be successful and that it should not lead to increased unemployment for the very people we were trying to help, nor that it should damage the economy. I believe that we have succeeded in achieving both goals.
Last week we announced that the minimum hourly rate would go up from £4.50 to £4.85 in October and that a new hourly rate of £3 would be introduced for 16 and 17 year-olds where there has been some evidence of exploitation. The minimum wage has made an enormous difference for more than a million low paid workers in the United Kingdom and has helped us to tackle the very low rates of pay that were so prevalent under the last government. There has been little or no evidence so far of any adverse impact on the employment prospects of low-paid workers. The minimum wage has been widely recognised as a success. In my view the Government can be proud of their achievement.
However, we cannot be complacent. The vast majority of employers are complying with the minimum wage. But there is some evidence that homeworkers are not receiving it. The regulations we are discussing tonight will attempt to remedy that. They will help all workers who are paid on the basis of the number of goods they produce or tasks they perform rather than the hours they work. The main beneficiaries are likely to be homeworkers who include, as I think will be recognised in all parts of the House, some of the most vulnerable people in the workforce.
The regulations replace the system of "fair estimate agreements" with a new system called "rated output work". Under the fair estimate agreements system, employers set a fair estimate of the hours needed to complete a block of work and then pay the worker the hourly rate of the national minimum wage for the hours actually worked up to the limit set in the estimate. Such a limit must be fair and will not be if it is less than four-fifths of the time that an average worker would take to do the same amount of work in the same conditions.
It seems clear that the "fair estimates" regime has been widely ignored. Part of the problem is that it is complex and difficult to administer. In practice, it has been difficult to predict the estimated hours for each block of work taken on by an individual homeworker from week to week. Also, the fact that an estimate will be fair if it is only four-fifths of the time that an average worker takes to do the block of work is very unpopular among workers. Most employers who apply the fair
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estimates system routinely set the estimate at this four-fifths level; that is, they do not take into account all of the time spent by the average worker. The regulations we are debating provide for a more straightforward system which will be easier for employers and employees to understand and apply.
We consulted all interested parties fully when drawing up the regulations. Perhaps it would help if I explain them in more detail. They extend to Great Britain and Northern Ireland and amend the National Minimum Wage Regulations 1999. They mainly come into force on 1 October 2004 with an amendment coming into force on 6 April 2005.
Regulation 1 provides for the new "rated output work" system to come into force on 1 October 2004. That will give affected employers sufficient time to prepare and plan for the changes. In addition, Regulation 1 provides for the coming into effect of an amendment to the system on 6 April 2005.
Regulation 2 amends the principal regulations by substituting new Regulations 24, 25 and 26 and inserting Regulation 26A. The effect of new Regulation 24 of the principal regulations is t o provide that, in relation to a type of piece produced or a type of task performed, output workers must be paid the hourly rate of the national minimum wage for all hours actually worked unless the work in question is "rated output work". Work will be rated output work only if various conditions are satisfied.
New Regulation 25 of the principal regulations sets out the various conditions. Those are that the work in relation to a type of piece produced or type of task performed is work in relation to which the contract between the employer and the worker does not set any normal minimum or maximum working hours; that the employer does not control the hours that the worker works (for example, does not set his starting or finishing time or the length of time spent in producing the piece or performing the task); that the employer has arrived at the "mean hourly output" (the average number of pieces that can be produced or tasks that can be performed in an hour) in relation to a piece or task; and that a written notice containing specified information has been given to the worker to whom the "rated output work" system is to apply.
New Regulation 25 of the principal regulations also provides that the written notice must be given to the worker before the beginning of the pay reference period (which, broadly speaking, is the period of work for which a worker is paid) and sets out the specified information to be included in the notice.
Regulation 26 provides that where the conditions relating to "rated output work" are satisfied, to determine whether the worker has been paid the minimum wage the employer must calculate the number of hours that the worker is deemed to have worked. The number of hours taken by a worker in producing the piece or performing the task is deemed to be the same number of hours as a worker working at the "mean hourly output rate" would have taken.

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New Regulation 26 also defines "mean hourly output rate", that is, the average number of pieces or tasks produced or performed by workers of the employer.
New Regulation 26A of the principal regulations contains provisions relating to the determination of the "mean hourly output rate" in relation to a type of piece or task. The employer must test the speed at which all his workers, or a representative sample, who produce—in similar working circumstances—the piece or perform the task work, and then divide the number of pieces produced or tasks performed in an hour by the number of workers thus tested.
Alternatively, the employer may, in certain circumstances, estimate the average speed by making an adjustment to a pre-existing test result. He may do so where the piece or task is reasonably similar to, but not the same as, the piece or task that has been the subject of the test and is being produced/performed in the same working circumstances; or where the piece or task is the same as the piece or task that has been the subject of the test, but is being produced/performed in different working circumstances.
Subsequent changes in the identity or number of the employer's workers producing the piece in question or performing the task in question do not, generally speaking, require the employer to retest or re-estimate to determine the average speed.
The effect of these provisions is that the average worker will be entitled to the national minimum wage from October this year. We want to provide some time for employers to understand and operate the new system. But by definition this means that workers who are a little slower than the average—which could be half of the relevant homeworkers—will not receive the minimum wage.
Accordingly, the effect of Regulation 3 is to provide that, from 6 April next year, most people, including those who work a little slower than the average worker, will be entitled to the minimum wage. That is achieved because Regulation 3 will ensure that the number of hours taken by a worker in producing pieces or performing tasks during the pay reference period will be treated as being 120 per cent of the number of hours that a worker working at the mean hourly output rate would have taken to produce or perform the same number of the same type of pieces or tasks.
According to the regulatory impact assessment prepared by the Department of Trade and Industry, approximately 170,000 homeworkers will be covered by the new "rated output work" system from April 2005, equating to an average benefit per worker of around £3,000 per year, before adjusting for taxes and any benefit entitlements. These proposed changes to the law will be especially important to ethnic minority and women workers, who make up a large proportion of people who work at home.
We recognise that some people are concerned about possible job losses. That is why we have agreed that the full effect to the proposals—the 120 per cent uplift—should be delayed until April next year to give business the opportunity to plan for its introduction. But the current position with tens of thousands of homeworkers earning less than the minimum wage is completely unacceptable. We will never be able to compete with countries such as India or China on the basis of pay costs, nor should we even aim to do so. We need to build the skills of our workforce to achieve high performance work places delivering quality output and not of course on low wages.
Finally, we are aware that employers and homeworkers need to be aware of the new regulations and have already produced draft guidance which we will update once the regulations have been approved by both Houses of Parliament. We are discussing with the National Group on Homeworking how we can generate publicity surrounding the changes, but our aim will be first to warn employers about the changes, encouraging them to prepare by conducting necessary tests, followed by a campaign in the autumn advising homeworkers of their new rights. I commend the regulations to the House.
Moved, That the draft regulations laid before the House on 23 February be approved [12th Report from the Joint Committee].—(Lord Davies of Oldham.)
Earl Attlee: My Lords, I thank the Minister for his detailed explanation of these important regulations.
We fully understand the difficulties with the drafts explained by the Minister and we have no problem with the proposed solution.
The fact is that workers on piece work are among those likely to find that they are being paid less than the national minimum wage, and those who work from home are faced with, in a phrase coined by my right honourable friend the Member for Rushcliffe, "a double whammy".
People who do piece work at home are among the most vulnerable in society. I refer, for example, to the disabled, or those who have family commitments which prevent them from seeking regular outside work. These same people are often the least able to complain about exploitation by unscrupulous employers, or the most fearful about their already small income to risk doing so.
Of course, not all companies employing outworkers are wicked exploiters, and I have no doubt that most of them behave honourably. It is also probably true that for various reasons it may be difficult for the Inland Revenue, which is responsible for catching out those defaulting on their national minimum wage obligations, to do so in this case. However, that is no reason why a proper legal framework for calculating outworking pieceworkers should not be established and what appears to be a loophole in the existing regulations should not be closed. We support the regulations.
Baroness Miller of Chilthorne Domer: My Lords, we note the drafting problem, and we are happy that the

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regulations be formally moved on Thursday. I will not repeat the benefits of this, which have already been welcomed by the noble Earl, Lord Attlee. We too welcome the regulations, in particular since they apply to a large number of people—170,000. That is a lot of people who will, I hope, benefit from the regulations.
Lord Davies of Oldham: My Lords, I am most grateful to both noble Lords, not only for their comments on the regulations, but for the understanding way in which they have accepted our apology for the slight hiccup with regard to the regulations, which we will put right at the earliest
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opportunity. We can all finish today united in this commitment to a fair day's work for a fair day's pay. Accordingly, I commend the regulations, but I beg leave to withdraw the Motion.
Motion, by leave, withdrawn.

London Local Authorities Bill [H.L.]
Returned from the Commons agreed to with amendments.
House adjourned at seventeen minutes past nine o'clock.

Official Report of the Grand Committee on theChild Trust Funds Bill
(Second Day)
Tuesday, 23 March 2004.
The Committee met at half past three of the clock.
[The Deputy Chairman of Committees (Viscount Allenby of Megiddo) in the Chair.]
Clause 5 [Opening by responsible person or child]:
Baroness Wilcox moved Amendment No. 31:
Page 4, line 16, at end insert—
"( ) Regulations under subsection (4) shall permit applications to be made by electronic or other means which do not involve the physical transfer of the voucher to the account provider."
The noble Baroness said: In moving Amendment No. 31, I shall speak also to Amendment No. 34. Amendment No. 31 deals with electronic applications.
I know that the Minister will say that electronic applications are not forbidden by the regulations, but the regulations do not require the voucher to be transferred to the account provider, and that is what undermines electronic applications. The account provider would have to send documentation asking for the voucher and then have a system for receiving and storing it. The regulation also requires three years' storage and, presumably, potential retrieval.
The Children's Mutual told us that up to 50 per cent of electronic applications for investment accounts are not followed up when the paperwork is sent. If that is the experience for child trust funds, there will be many accounts that cannot be fully activated for want of a voucher. That will add to providers' costs, and brings us back to the issue of the charge cap, which we have already debated.
I hope that the Minister can explain why the Government are insisting on this archaic paper-based system. It cannot be for fear of fraud because it is difficult to think of any kind of fraudster who would play an 18-year-long game for £250. In any event, unique numbers can minimise the possibility of fraud. I do not know why Tesco can issue me with e-vouchers for use when I shop online but the Government cannot do the same for child trust funds.
Amendment No. 34 is partially directed at this issue, and, more widely, at the way in which the voucher system is working. It requires a report on the voucher system to be prepared after two years' operation. If the Government have imposed massive bureaucracy on providers, this review would provide a mechanism for that problem to be aired and, it is to be hoped, addressed.
My concern is the burden on providers, but there are other aspects, such as the costs of the Inland Revenue and its effectiveness in communicating with parents. All in all, we believe that a review is a good idea. We hope that the Government will agree. I beg to move.
Lord Newby: Amendment No. 31 seems eminently sensible. Given that the Revenue will be required to open child trust funds for those parents who do not turn up with a voucher, anything that can be done to make it easier for people to register with a provider would be sensible. Young people, in particular, communicate electronically these days—not least with financial institutions—and find paper an alien media. Young parents would take up the system outlined in Amendment No. 31. It would work to their advantage and, in the longer run, to the advantage of the Revenue as well.
Lord Naseby: I must first declare an interest as chairman of the Children's Mutual. I hope that that declaration can last for the whole of this Committee sitting. Secondly, the Committee will notice that I have tabled an amendment that is marginally more succinct than the one tabled by my colleagues on the Front Bench.
The reason that I have tabled the amendment—or, rather, that I pinched their original amendment, to be totally honest—is that, even at the launch of the child trust fund, we are dealing with an 18-year period, albeit that Amendment No. 34 may find favour with the Minister. We do not know whether or not it will but, even if it does, we are nevertheless talking about a timespan in which governments are not too used to operating. The voucher as such might well disappear at some point. Who is to know over an 18-year period?
Since we—that is, the Children's Mutual—were engaged in discussions with officials about the original structure, from the start we were fully supportive of the concept of a voucher. I reiterate that. It is an excellent method to ensure that parents/guardians are aware that they have something of value that has come from the government of the day, which will provide information about their choices. In short, it is an excellent way to engage and potentially encourage people to save for their children. That is the whole principle of the child trust fund.
However, we currently differ with Her Majesty's Government, although one is ever hopeful, in that we thought that the Government were all enthused about a system where paper did not have to be transferred, and where an electronic means was to be the way forward. In fact, there are many government consultation documents which indicate that that is the way forward. Indeed, there are some of us who are a little slow at picking up the electronic means of communication, although I hasten to say that I am taking a crash course from my beloved wife. We are making progress. Before long, we shall be totally versatile with electronic means. But at this moment, as an ex pilot, I suppose that I have taken my initial flight and I am still doing circuits and humps. Be that as it may.

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We do not think that a voucher physically needs to be presented to the parent or guardian in every case. I think that the Minister will accept that we are hoping to encourage people to open accounts whenever possible. Therefore, on the assumption that both parents are working, the two most likely means that they will use are the telephone or the Internet. If that is so, should we—all of us who believe in child trust funds—say to them, "Once you have gone through that process, you have still got to remember to stick the voucher in the post"?
It may surprise the Minister, but our experience is that most people do not keep stamps at home. Those days are gone. Everyone kept stamps at home 10 to 15 years ago. But younger married couples do not have stamps at home because they communicate electronically. Occasionally, they may go out to buy a stamp or a book of stamps, but they do not keep them at home. That is a deterrent.
Lord Woolmer of Leeds: Does the noble Lord know that stamps can now be bought on the Internet from the Royal Mail? Stamps can be acquired and used electronically.
Lord Naseby: I am delighted to hear that. As I said, I have only just graduated to that. But in itself that is a second transaction. Presumably, one would have to access the Royal Mail. We forget. The noble Lord is a similar age to myself. I suspect that he has got grandchildren. We are not kept up all night. We transfer them back when it gets to around bedtime or beyond. Occasionally, we baby-sit and pray that they do not wake up. For a busy couple with a rotten child who keeps them awake all night, the last thing that they would want to do is a double entry on the Internet to determine how to get a stamp. I do not think that that is terribly helpful, is it?
My noble friend who leads us today alluded to my second issue. In the Children's Mutual, we have experience that is nothing to do with the child trust fund. Our experience is with the baby bond, which I accept does not have the same incentive as the child trust fund. I wish that it did. I wish someone would index link the amount of the contribution for tax exempt policies and perhaps at some time the Treasury would listen to that. That is probably marginally out of order, but it is on the record now.
Be that as it may, the basic point—it is important—is that in our experience people want to save. Those at the margin who are not totally committed—who are very busy, have five kids or whatever—take all the trouble to communicate electronically or by telephone and, at the moment, we have to send them back a policy application that they have to sign. That is all they have to do, just sign it. A stamped addressed envelope—nothing else. They do not have to apply on the net for a stamp. That is another deterrent but I shall leave that aside. Even so, half the people who have made the request themselves—they have not contacted us at our request—cannot be fagged to go through with it. I want the child trust fund to succeed,
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but the requirement by the Inland Revenue that a voucher has to be transmitted from A to B is a deterrent.
My noble friend indicated clearly what is the financial exposure to the Treasury at this point in time. Is it really likely that someone will carry out a major money-laundering activity based on £250 over 18 years? It is fairly unlikely. In any case, we have the unique reference number on each voucher. That in itself is a double check. There is no reason why one cannot transfer the unique number by telephone or by electronic means, which is itself a fundamental check. Therefore, the Government are putting a constraint on the success of the CTF.
The Minister may say that the whole thing will be reviewed in two years' time. However, I am a marketing man and he is a market research man and both of us know in our heart of hearts that the launch is crucial. It is jolly difficult to relaunch or to give something an added impetus. One has to make something as successful as one possibly can—or as big a failure as one possibly can if one is Coca-Cola. One needs to get the message over from the start. That is a hurdle, not put up by the Treasury but by the Inland Revenue. Someone in the Inland Revenue does not understand how electronic communication and telephone applications work today.
I have just applied to go and see my son in Warsaw. I have certain bonus points—I do not wish to advertise—on my American Express British Airways credit card. The whole of that transaction, which costs about £150 a ticket, has been carried out electronically. I have not had to send my statement from American Express that says that I have "X" number of bonus points exclusive to me, with my number on it. I have not had to do any of that. The whole thing was done over the telephone.
The Deputy Chairman of Committees (Viscount Allenby of Megiddo): I am sorry to have to interrupt the noble Lord, Lord Naseby, but we should adjourn for a Division in the House.
The Parliamentary Under-Secretary of State, Department for Culture, Media and Sport (Lord McIntosh of Haringey): If the noble Lord has nearly finished, should he not be allowed to finish?
Lord Naseby: I could finish. That is one problem. The other one is that we are simply adding to the costs of providers. If any of the providers has to provide money there, that is money taken away from presenting the child trust fund to the general public.
[The Sitting was suspended for a Division in the House from 3.43 to 3.53 p.m.]
Lord McIntosh of Haringey: The amendments have been accurately described. They would remove the need for a paper voucher to be produced before an account can be opened. Of course, there is nothing to stop providers handling the administration of child trust fund accounts, either electronically or by telephone, as the noble Baroness, Lady Wilcox, acknowledged. Regarding another point that she

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made, it is also possible for the storage of the accounts to be carried out electronically. But we do, indeed, insist that there should be a paper voucher produced, either by post or in person, before an account is opened and there are good reasons for that.
First, a paper voucher plays a part in financial education, particularly for those who do not have any experience of dealing in financial products, who would not think of approaching providers by telephone or online. Parents will have a physical reminder of the amount that their child is entitled to and the handing over of the voucher emphasises the choice that they have made and the reasons that they have had for doing so.
It is not true that, as the noble Baroness, Lady Wilcox, suggested, this paper voucher will be archaic. It will contain vital information in the form of a barcode or microline comparable to the information on the bottom of cheques that will allow providers to scan the vouchers and put the information directly into their database. I would be surprised if many providers have the sort of objection described by the noble Lord, Lord Naseby, as coming from the Children's Mutual. This system would eliminate keying errors. It may not be well known, but 30 per cent of cases of incorrect combinations of ISAs are due to such errors. Clearly this is important because we can pay contributions only when providers' claims reconcile with the Inland Revenue's child trust fund database.
I agree that fraud on a large scale is hardly likely with these relatively small amounts of money. However, there is a role in reducing fraud. Sophisticated fraudsters can produce a copy of any document, but the voucher will be designed in a way to make copying difficult for less sophisticated people, so the providers will have a certain degree of confidence that the voucher accompanying the application to open the CTF is genuine. The electronic process would not provide that degree of certainty because it would be open to the possibility of Internet hackers opening multiple accounts. It is costly for both the Revenue and providers to unravel invalid or fraudulent CTF accounts and it costs less to prevent this happening in the first place. Vouchers can do that in a way that Internet or phone applications cannot. Providers will not have the burden of evaluating the information that they have been provided with against what they are required to ask for.
The noble Lord, Lord Naseby, suggested that we are requiring things to be done twice. However, any application on the Internet has to be followed by proof of identity which would have to be sent by post.
We have gone some way to satisfying the concerns raised by these amendments. We amended the Bill in the House of Commons to include the requirement to obtain the voucher in regulations, because that gives us the flexibility to change the system in future if we need to. That also deals with the issue raised in Amendment No. 34 about an independent review. The Financial Secretary specifically said on Report in the Commons that the collection of the voucher would be set out in regulations to allow the flexibility to change the
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requirement if that seemed appropriate. She said that it would be monitored to see whether it is indeed necessary to the smooth operation of the CTF. Bearing in mind that, following the review and monitoring that will take place, we will be able to change the system by regulation if we need to, I suggest that we leave the Bill as it is.
Baroness Wilcox: I thank the noble Lord, Lord Newby, for the Liberal Democrats' support for Amendment No. 31. I listened with interest to my noble friend Lord Naseby speaking, as he does, so eloquently and practically on behalf of the Children's Mutual. I also listened to the Minister's reply and smiled somewhat, because this is a modern Government and the cumbersome and slightly troublesome method that we will be using will produce double handling, but there we are.
I was interested to hear that the voucher itself will be able to be scanned—which I had not realised—and to be reminded that the Government are prepared to change the system in the future if need be. I am sorry that the Minister will not harden that up a bit by including a report after two years' operation. However, this is the best that we are going to get, so I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
4 p.m.
Lord Naseby had given notice of his intention to move Amendment No. 32:
Page 4, line 16, at end insert—
"( ) Regulations made under this section must permit applications to be made by wholly electronic means."
The noble Lord said: I believe that Amendment No. 31, which has been withdrawn, stands in my noble friend's name. Perhaps I may respond to Amendment No. 32.
The Deputy Chairman of Committees: Yes, certainly.
Lord Naseby: I am most grateful. Perhaps the Minister can clarify one point. He said that the vouchers could be stored electronically. Does that mean that, once a voucher is stored electronically, the paper voucher can be destroyed?
Lord McIntosh of Haringey: No, it just means that interrogation of the contents of the voucher will be electronic. The voucher itself will remain with the parent. Oh! I am wrong; they can be destroyed. There we have it: instant success.
Lord Naseby: I am most grateful for the forthcoming manner in which the Minister was able to offer that to providers. I think that that will help all of them.
Is it not the case that the Minister is not quite right in suggesting that providers must have proof of identity, when of course every provider will communicate with whoever has applied and the child? An automatic means of communication will take place, so it is not an added burden or something new.

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Secondly, the Minister might think that the Children's Mutual is out on a limb and is the only provider that believes what I have said. Although I cannot claim to have spoken to every potential provider, all those to which I have spoken who expect to be the dominant providers are of the same view as we are. Far from the Children's Mutual being a minority provider, the Minister will find that the vast majority of other providers share the view that I have expressed today.
The Minister said that 30 per cent of ISAs had keying-in errors. If I had 3 per cent keying-in errors at Children's Mutual, someone would look at it. The figure of 30 per cent keying-in errors is huge. Any percentage amount of keying-in errors in double figures is unacceptable, so I hope that the Minister will not use that as one reason why we cannot have electronic means.
The Minister told us about the Internet hackers producing multiple errors. That is fantasy, is it not? The real point, as my noble friend who leads for the Opposition said, is that we understood that this modern Government wanted to communicate electronically; the providers that have backed the child trust fund want to provide and to communicate electronically. Sadly, Her Majesty's Government and this Minister in particular—I do not mean to be personal, but he is taking the Bill through—are throwing out a wonderful opportunity.
This is the point that surprises me: the Minister is saying, "I will not even agree to a formal two-year review; I will put it in the regulations". I accept and recognise that the Minister is moving it from the Bill to the regulations, for which I thank him. But what problem is there with a formal two-year review? It is in Parliament's interest. Things may have to be changed either way, but if it is just left, that does not suggest to me that people are really focusing on the issues. Other issues will interfere, and some other scheme or issue will take the time of the Inland Revenue or the Treasury—perhaps we will be in the middle of a general election or whatever.
I urge the Minister to think hard about Report, perhaps not this afternoon, and to see whether we cannot get on to the statute book at least a formal two-year review.
Lord McIntosh of Haringey: I have responded, I think, to the main points, but I will be happy to respond to some additional ones. First, I did not suggest that the Children's Mutual was on its own and that nobody else had objected. I do not know the collective view of providers or whether they have expressed one. I certainly accept that the people to whom the noble Lord, Lord Naseby, has spoken agree with him. I would never doubt that.
Secondly, I did not say that 30 per cent of ISAs had errors; I said that 30 per cent of the cases of incorrect combinations of ISAs were due to keying-in errors. That is not the same thing.
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Thirdly, I come back to the issue of whether we are being "archaic", as the noble Baroness, Lady Wilcox, said. We are going to have microline on the vouchers, and we will have the possibility of automatic transcription of the essential features of a CTF voucher. Therefore, all the later work done by providers can be carried out electronically. For reasons of recognition by parents, particularly those who are not used to financial transactions and do not have access to electronic means of communications, it is useful to have a paper voucher at the beginning. Furthermore—although I do not make too much of this point—the possibility of fraud is reduced.
My fundamental point is that it is impossible to conceive that the child trust fund will not be crawled over. It will be crawled over by the Treasury Committee. It will be crawled over by the National Audit Office. Even if we did not want to have reviews and to consider the views of Parliament, on many occasions as we proceed with this new venture we will be obliged to do so. A formal two-year review might actually reduce the amount of scrutiny rather than increase it.
[Amendment No. 32 not moved.]
Lord McIntosh of Haringey moved Amendment No. 33:
Page 4, line 21, leave out subsection (6).
On Question, amendment agreed to.
[Amendment No. 34 not moved.]
Clause 5, as amended, agreed to.
[Amendments Nos. 35 to 37 not moved.]
Clause 6 [Opening by Inland Revenue]:
Lord Newby moved Amendment No. 38:
Page 4, line 26, leave out "a description so selected" and insert "one of the descriptions prescribed by regulations"
The noble Lord said: This amendment brings us back to an issue that we debated in our first day in Committee the Government's view that the equity-based child trust fund is a superior vehicle in all circumstances. The purpose of this amendment is to give the Government discretion to invest child trust fund money in accounts other than equity-based stakeholder accounts if the circumstances are such that that makes best financial sense.
We have already had a debate about the fact that equities have outperformed deposits in every 18-year period over the past 100 years. However, I should like to take a slightly different case. The Government are not just going to be putting funds into child trust funds at age zero; they will also be putting funds into child trust funds at age seven. With the plans for "lifestyling", the balance of the fund will in any event shift in the later years out of equities and no doubt into bonds. So if one puts money into an equity-based trust fund at age seven, that fund will not be wholly in equities for 18 years. It will not even be held in equities for 11 years. It will be in equities for a significantly shorter period. Over such a shorter period, my contention is that it is reasonable to suppose that some people will do very badly.
The example I should like to use is the hypothetical one of the Government having established this process in 1993 and put in a top-up in January 2000. In January 2000, the FTSE 100 index stood at about 6,700. Four years later, it stood, broadly speaking, at 4,500. It had diminished by about 50 per cent.
In January 2004, the child who was seven years old when the money was put into the fund would be aged 11 and, as I understand it, would be within a year or two of the lifestyling provision coming into force. Obviously, we do not know what will happen to the FTSE index over the next year or two. But I do not know anyone who believes that over the next two years the index will go from 4,500 to 6,700, which is the point at which it stood when the money would have been put in in my hypothetical case.
My contention is that only a foolhardy investor would have put money into an equity-based product in January 2000. For the Revenue to be forced to put money into an equity-based product at every point in the stock market cycle, even when there is widespread acceptance that we are at the top of a bubble, seems to be foolhardy. At the very least, the Government should give themselves the flexibility in legislation to direct those funds that they are establishing away from equities into a deposit-based child trust fund when market circumstances suggest that investing in equities is foolish. I beg to move.
Lord McIntosh of Haringey: I am not in a position to query the particular example given by the noble Lord, Lo rd Newby. Clearly he has done his homework. But he is talking about a rather extreme case, of the difference between ages seven and 11. He then said that there would be two years before the lifestyling provisions came into force when the child was 13. For the sake of argument, I shall accept his figures, but that does not deny the fact that the final judgment would be taken only at age 18. Most of the money will be invested at the beginning or spread out over the whole of the 18-year period. With a little ingenuity, if one can find one exception to the rule, that does not really cast very much doubt on the principle behind it; namely, that we want to provide the best possible value to all consumers.
The proposals follow the way in which we have introduced stakeholder investment products. Of course, more money can be put into equity ISAs than can be put into cash or insurance ISAs. Generally, I think that all parties have accepted that that is the right way to encourage equity investment.
Even in the particular case raised by the noble Lord, Lord Newby, it is a bit much to describe the investor as foolhardy. The investor might have been mistaken, but we have all done it. We are all in that position. I would rather be called mistaken than foolhardy because I did not anticipate what, in fact, no one anticipated.
Lord Naseby: The Minister is too modest. He will have reflected that the providers operating in this market will, one hopes, have recognised the situation in January 2000 and moved into high-yielding equities
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which by any yardstick would have been better than a deposit account at the time of about—I do not remember—1 per cent.
Lord McIntosh of Haringey: I am grateful for that support. And I am not usually called too modest. The point is that the stakeholder account has been selected as the most appropriate type to open for children where the Revenue needs to open an account for them. That is the important point. This is an amendment to Clause 5, which is a particular subset of child trust fund accounts.
Under the amendment, the Revenue—not the parent or responsible adult—would have to make a decision about which account to open. On what basis would the Revenue be making a decision? One can see the basis on which parents or responsible adults can make different decisions, but I cannot quite see what criteria would apply. It could mean that very different types of accounts are opened for children about whom the Revenue, by definition, knows nothing.
So the allocation of accounts by the Revenue is done by selecting the next provider of these accounts in rotation from the list. Providing for these children to have very different kinds of accounts opened for them by the Revenue by rotating through the providers and the types of accounts being offered would turn the whole thing into a lottery. I do not think that that is what the noble Lord, Lord Newby, would want.
I suggest that, in the light of the potential for children to be provided with less tightly specified accounts and the questions that arise over their potential to deliver the best returns over the long term, thus providing good value for money if they are not subject to the charge cap, means that I hope that the amendment will not be pressed today and, further, will not be brought back.
4.15 p.m.
Lord Newby: I am grateful to the Minister for that detailed reply. He has outlined a fascinating concept. Parents with varying degrees of financial literacy will be able to exercise judgment, but the Revenue will not be able to do so. That is a new one on me. I can only assume that what the Government really have in mind here is the fourth of their requirements for child trust funds; namely, that they will help to finance the education of the children involved, who may well find that their funds are worth significantly less than they might have envisaged. In effect, this may prove to be a costly demonstration of the fact that equities may go up and, equally, they sometimes go down. I shall not press the amendment, but beg leave to withdraw it.
Amendment, by leave, withdrawn.
[Amendment No. 39 not moved.]
Baroness Wilcox moved Amendment No. 40:
Page 4, line 40, at end insert ", or
( ) the child is under 16 and the responsible person in relation to the child is also under 16."
The noble Baroness said: In moving Amendment No. 40 I shall speak also to Amendment No. 41. The purpose of these amendments is to probe how

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accounts are opened for the children of those aged 18 years and under. This links with the amendments we discussed earlier in relation to Clause 5, and applications made by those who are aged 18 and under.
The amendments are probing in nature and are designed to find out how accounts will be opened for the children of children. They are alternative amendments dealing with the position of parents who are "responsible persons" aged under 16 years and under 18 years respectively. I believe that, under Clause 6, the Inland Revenue must wait until one year has passed before an account is opened for the child of a child. That is how Clause 6(5) appears to be constructed. I can see no reason for the one-year delay and the loss of compound return because, according to the regulations, it is impossible for a child responsible for a child to open the account. They have to rely on the Inland Revenue.
The amendments would require the Revenue to open the account without waiting for one year. I believe that the Government have accepted that 16 and 17 year-old parents can open accounts—we discussed that point on our previous day in Committee. However, there appears to be no alternative for underage parents to open an account other than by waiting for one year. In that case, I hope that Amendment No. 40 will commend itself to the Government. I beg to move.
Lord McIntosh of Haringey: The first amendment would require the Inland Revenue to open a child trust fund account where the child is under 16 and the person with parental responsibility is also under 16. In fact, the Bill already provides in Clause 6(5)(b) for the Revenue to open a child trust fund account for a child whose parents are aged under 16. That is because a person aged under 16 cannot act as a responsible person for the child trust fund. The amendment, therefore, is already covered by the provisions in the Bill.
The Revenue cannot open an account for children with parents aged under 16 automatically, which is what the amendment would require, because it will not know from child benefit claimant details whether or not there is a person who can act as a responsible person for the child's account. Where there is a person who is able to exercise the parental responsibility in this way, we want that person rather than the Revenue to have the opportunity to take an active role in the choice and management of the child trust fund account. In other words, if a grandparent can assume the role, that can be done; or it can be done by the Revenue. However, we can deal with this on a case-by-case basis. The amendment would prevent us from doing so. But if there is no one who can act as a responsible adult, parents can contact the Inland Revenue when they receive a voucher so that the account can be opened for the child as soon as possible—again, there is no question of having to wait for a year.
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The information pack will make it clear that when there is no one with parental responsibility aged 16 or above, all that will be required is a simple telephone call to the Inland Revenue to arrange for an account to be opened. Parents under 16 will be able to change the account type or the account provider, if that is what they desire, as soon as they turn 16.
The second amendment would require the Inland Revenue to open a child trust fund account where the child is under 16 and the parents are under 18. I do not understand why we need the intervention of the Inland Revenue here, because parents of 16 and over are able to open a child trust fund account for their child. That is covered in Clause 3(10). I really do not understand why the two amendments are tabled together. I trust that on that basis the amendments will not be pressed.
Baroness Wilcox: I thank the Minister for his reply. The amendment I have moved and spoken to was tabled by my colleague and I would like her to read the answer that the Government have given so that she may respond if she so wishes. I beg leave to withdraw the amendment.
Lord Naseby: There is just one point I wish to raise. Let us assume for a moment that the mother is 14 and therefore is some way off from being 16. Let us also assume that it takes some time to find a responsible person. What is the position of the child when the voucher is eventually issued? Is it backdated to the birth of the child or is the operational date that at which one has discovered who will vouch for the child?
Lord McIntosh of Haringey: The child trust fund voucher is always issued from the date of birth.
Amendment, by leave, withdrawn.
[Amendment No. 41 not moved.]
Clause 6 agreed to.
Clause 7 [Transfers]:
Baroness Wilcox moved Amendment No. 42:
Page 5, line 10, at end insert—
"( ) Regulations under subsection (1) shall include provisions about the circumstances in which the agreement of the person with the authority to manage a child trust fund is required."
The noble Baroness said: Amendment No. 7 focuses on the circumstances when a child trust fund may be transferred from one account provider to another. Clause 7, as currently drafted, is very brief. It states:
"Regulations may make provision about the circumstances in which—

(a) a child trust fund which is an account of one of the descriptions prescribed by regulations may become an account of another of those descriptions, and

(b) a child trust fund held with one account provider may be transferred to another".

It is certainly necessary to have a clause in the Bill which allows for a transfer of a CTF from one provider to another. That would allow the responsible person managing the CTF to decide to change the type of CTF account and that right should always be available. However, there is an alternative situation which could be envisaged—one where a CTF provider is taken over, goes bust, merges or perhaps just

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changes the services on offer and wishes to discontinue the provision of CTF accounts. In such circumstances and as provided for by clause 7, as I read it, the provider could transfer the child trust funds under their management to another provider without the consent of the responsible person. Presumably the responsible person could subsequently move their CTF to another provider as is their right at any time, but they would be in a situation where a decision had been made already about their CTF account without anyone informing them until after the event.
That seems to be an unsatisfactory situation and we have tabled our amendment accordingly to probe the point. I appreciate that not all CTFs will have a parent as the responsible person and in some situations the Inland Revenue will have to act for the child in decisions affecting their CTFs. The amendment provides flexibility by allowing regulations to set out circumstances where it is thought appropriate for transfers not to be carried out without the agreement of the person who manages that fund. We do not envisage the creation of a loophole by which a responsible person could block the winding up of a provider because they could refuse to agree to transfer the CTF to another provider.
All we are seeking is some reassurance that, wherever possible, those responsible for managing CTFs will be told when it is necessary for account providers to transfer their CTF to an alternative provider. In such circumstances, the responsible person could make an informed decision about which provider they will move to. I beg to move.
Lord McIntosh of Haringey: I think I can give that assurance. I agree that Clause 7 is not the easiest to read. However, the Explanatory Notes make it clear that the clause gives the Treasury power to make regulations allowing a responsible person to change the type of CTF account, for example, from a cash to a stakeholder CTF account and to move a CTF account from one provider to a different provider.
So that is what Clause 7 does. It requires that instructions on the management of the account can be given to the provider only by the person with authority. The instructions will cover matters such as whether the account is a stakeholder or non-stakeholder account; what investments will be bought, sold and held in the account; and whether the account will be transferred to another provider. The provider has no authority to act except in accordance with those instructions. If it did, the FSA and the Inland Revenue would want to know why.
I think the concern is that the child trust fund account could be transferred without the agreement of the person with authority. However, the draft regulations allow accounts to be transferred only at the request of the registered contact, who is that person.
As to the point made by the noble Baroness, Lady Wilcox, there may be circumstances where, to avoid disadvantaging a child, we would want to provide for a transfer without the responsible person's authority—for example, as she said, where a provider ceases to conduct child trust fund business. In these cases,
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providers contact the people managing accounts to let them know what is happening. However, the Inland Revenue's experience in running the ISA scheme is that some people will not reply. In those exceptional circumstances, the Revenue will use its care and management powers to arrange for the account to be transferred to ensure that the child is not disadvantaged.
Amendment, by leave, withdrawn.
Baroness Wilcox: I thank the Minister for that clarification. I beg leave to withdraw the amendment.
Clause 7 agreed to.
Baroness Wilcox moved Amendment No. 43:
After Clause 7, insert the following new clause—
"REPORT ON READINESS OF THE INLAND REVENUE
(1) The Chancellor of the Exchequer shall lay before each House of Parliament a report on the readiness of the Inland Revenue to carry out its functions under this Act.
(2) The report under subsection (1) shall not be laid before each House of Parliament until such time as the Chancellor of the Exchequer is satisfied that vouchers will be distributed in respect of all eligible children born before the date on which the first order is made under section 27 and no later than two months after the date of the order."
The noble Baroness said: In moving Amendment No. 43, I shall speak also to Amendments Nos. 88 and 90. The focus of the amendments is to ensure that no order is made under Clause 27, which is the commencement order, until the Chancellor of the Exchequer has laid before both Houses of Parliament a report setting out that the Inland Revenue is suitably prepared. We have laid down some criteria here in subsection (2) of our new clause. This states that the Chancellor should be satisfied that vouchers will be sent out to all eligible children born before the date the commencement order is laid, within a two-month period from the date of that same order.
Our aim here is to tease out further details on whether the Inland Revenue is adequately prepared to take on the burden of administering CTFs. We are talking here about resources, capacity and, specifically, the IT systems. Here I must declare a previous interest. For three years in the 1990s, I was on the board of the Inland Revenue when we brought in self-assessment. I saw at first hand how unprepared we were and how difficult, complicated and, at some stages, disastrous the IT systems were. We need to be sure that there is no risk that the Inland Revenue will be, as it was then, overburdened. Is it too much to ask the Chancellor to guarantee that by laying a report before Parliament? In discussion in the other place, the Minister emphasised that the Inland Revenue was prepared and that she was having ongoing meetings with it to ensure that that was the case.
We are, however, talking about a massive commitment of public money. It would be a nightmare if the IT systems were not sufficiently ready and there was an administrative crisis. In our amendment we draw attention in particular to the backlog of CTFs which will have to be processed. Can the Minister assure us that the Inland Revenue can guarantee that those funds will be set up within two months of the

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date of the commencement order? We have a new system coming into force which is essentially untried and untested. We know that account providers have had severe doubts about how the new voucher system will function and about how the timing of the backlog of CTFs will work.
It would be highly inadvisable to have a commencement order for CTFs unless the Chancellor were convinced that the Inland Revenue was sufficiently prepared and could lay a report before both Houses of Parliament to that effect. Fears have been voiced by many providers about how the administrative detail will work in conjunction with the Inland Revenue, and we know that the FSA is consulting on its sales regime until October this year.
If I were to be cynical, I might say that the Government were rushing to push for commencement in April 2005 as a prelude to the general election. We on these Benches see no justification for commencement until we are certain that the systems are in place within the Inland Revenue to deal with the massive amount of work which the initiation of such a scheme will entail. To do anything else would be irresponsible. I beg to move.
4.30 p.m.
Lord Naseby: I support my noble friend, particularly the point that she made about two thirds of the way through her remarks, which basically recorded that the FSA will itself not be ready at the beginning of October. The most recent letter that I have seen from the FSA was dated 2 March, when it said that it did not expect to be ready or to have the final rules by the end of October. I think that I have already given a copy of the letter to the Minister, but I am happy to give him another one. The person who writes from the FSA, Mr Norman Digance in business standards, to my chief executive, goes on to say:
"I appreciate that the timing is somewhat tight given the Government's expectation that firms will be in a position to open accounts for those born since September 2002 from January 2005 in readiness for accepting money into them from April".
What my noble friend questions seems entirely valid. There would be nothing worse for the Government and those who support the whole concept than to have it fouled up because the Revenue is not ready. I hope that the Minister will be able to reassure us with robustness on the amendment.
Lord McIntosh of Haringey: The noble Baroness said that she might be cynical; I have never known her be cynical. If I were to be cynical, I might suggest that when she was on the board of the Inland Revenue and there were difficulties with introducing self-assessment in 1990, the then Chancellor of the Exchequer probably assured Parliament that everything was all right. I bet he did; I bet he was required to do so.
Of course it is important that the Revenue be ready and that everyone can assure themselves that that is the case. The Revenue has undertaken a full review of the risks to the CTF delivery schedule between now and April 2005 and has taken steps to reduce the likelihood
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of difficulties occurring. The progress made in preparing for the launch of the child trust fund is tracked at a series of fortnightly and monthly meetings, and I am happy to say that the Revenue is fully on schedule with all activities to date. The Government are confident that the child trust fund can be delivered on time.
The amendments refer in particular to the proposed phasing in of vouchers to children born before 2005, and certainly there is here a peak which will have to be dealt with. The Opposition is concerned that this could be a burden on providers. In fact, the contrary is the case. As with other aspects of the child trust fund, this has been discussed in informal consultation with the providers as a way of managing a potentially high peak of work in April 2005. Providers have supported the measure, seeing it as an opportunity to spread their workload over months rather than days.
The noble Lord, Lord Naseby, raised the issue of the FSA publication on the sales regime. As I think I said at Second Reading, the FSA is planning to publish its consultation paper on the sales regime towards the end of April; that is, in just over a month. Thus the outline of what is being proposed, subject to consultation, will be known at that time. Following that will be a three-month consultation period to give people an opportunity to make their comments. Time must also be allowed for an analysis of those responses. That is the reason why the final document will not be published until October 2004.
At that point, firms in the industry will be able to begin applying to the Revenue to be approved and registered as child trust fund providers. It is not a final deadline for them. A number of months will still be available to them after October 2004. I hope that that is reassuring.
Lord Naseby: I understand entirely what the Minister has said. The draft regulations from the FSA will be available at the end of April and a three-month consultation will take place during May, June and July. Given that the FSA, the Treasury and the Inland Revenue have been working extensively on this, it is difficult to understand why it will take them another three months to come to firm conclusions, particularly when the application date is set at the beginning of October. I fail to understand why the Government cannot ensure that the two are synchronised, which would certainly make it easier for the providers.
Lord McIntosh of Haringey: The idea is that they will be very closely synchronised. I agree that the opening date will be 1 October 2004 and that the final rules will be published in that month.
Lord Naseby: The end of October?
Lord McIntosh of Haringey: In the month of October—I did not understand it to be at the end of that month. I shall convey the views of the noble Lord, Lord Naseby, to the appropriate quarters.
Lord Naseby: I am most grateful to the Minister for doing that, but the letter states specifically that the final rules will be published by the end of October. I do not know whether that might mean the middle of the month. But, either way, I hope that the Minister will be able to put pressure on all parties to ensure that all this happens by 1 October.
Lord McIntosh of Haringey: This sounds like someone is being cautious. I shall convey the noble Lord's views and write to him.
Baroness Wilcox: The Minister is aware that we support this Bill and these amendments were designed to do just that; that is, to try to bring this proposal to fruition safely, in good time and without embarrassment. In rejecting our suggestions, I hope that the Government do not find themselves embarrassed at a later date. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 44 not moved.]
Lord Newby moved Amendment No. 45:
After Clause 7, insert the following new clause—
"PAYMENTS AT AGE OF MAJORITY
(1) Where the eligible child has been on the child protection register within the two year period up to the date of attaining the age of majority, the Inland Revenue shall request payment advice from the relevant local authority.
(2) The relevant local authority shall undertake a comprehensive assessment of the risk of significant harm the payment presents to the eligible child.
(3) Based on the assessment in subsection (2) the relevant local authority shall provide payment advice to the Inland Revenue.
(4) If the payment advice is that the payment presents a risk of significant harm, the local authority shall—

(a) undertake to provide a package of social care to the eligible child, in order for payment to be made without it presenting a risk, or

(b) hold the fund on trust for the eligible child until age 24 or, if sooner, until the payment presents no further risk.

(5) Proof of identity shall be sufficient proof for receipt of payment.
(6) Regulations may stipulate what would constitute sufficient proof of identity and what form notification of entitlement by the Inland Revenue shall take.
(7) Where the eligible child lacks the appropriate capacity to deal with their financial affairs at the age of majority, the provisions of the mental incapacity legislation in force at that time will apply."
The noble Lord said: During our first sitting in Committee we spent a certain amount of time discussing the extent to which it might be possible to prevent young people spending their child trust fund in a wasteful manner. This amendment seeks to deal with rather more difficult circumstances; namely, where, for one reason or another, vulnerable young people find that the child trust fund money is used in ways that are positively harmful.
I have tabled the amendment following discussions with representatives of the NSPCC, which is very concerned about this matter. Perhaps I may detail two sets of circumstances that exemplify the situations which are of concern to the NSPCC and myself.
The first circumstance concerns a vulnerable young adult aged 18 in local authority care with drug problems. On turning 18, he is about to leave the safety net of the care home, at which point the young person is also suddenly given the windfall of a child trust fund. One can easily imagine, in those circumstances, that it would be accepted with gratitude since it would provide a means of feeding the drug habit. Another possible scenario is that of children involved in prostitution. They would be forced to hand over their child trust fund money to a pimp.
I realise that while it is relatively easy to cite such difficult examples, it is much more difficult to provide the solutions. I do not claim that this amendment is perfect, but perhaps I may explain briefly what it seeks to do.
Basically, for all children who have been registered on the child protection register for a period of two years up to their reaching the age of 18, the relevant local authority would be required to,
"undertake a comprehensive assessment of the risk of significant harm which the payment of the child trust fund presents to the eligible child".
On the basis of that assessment, the local authority would provide advice to the Inland Revenue. If the advice suggests that payment would present a risk, the local authority should undertake to provide a package of social care while the fund itself is held in trust until either the child is deemed by the local authority no longer to be at risk or when the child reaches the age of 24.
I accept that this amendment may not be perfect, but I think that there is a serious issue to be addressed. The NSPCC has made the point that if child trust funds were seen to be spent in ways that are positively harmful to young people, that would severely damage the concept of the trust fund itself. I certainly agree with that view.
While I would be delighted if it were possible for the whole amendment to be adopted by the Government, the broader question of local authorities providing risk assessments and support for a child specifically in relation to that child receiving child trust fund money is an extremely important and serious one. I should be most grateful for any assurance that the Minister is able to give me on this. I beg to move.
Lord McIntosh of Haringey: I make nothing of the drafting because it is important that we discuss the issues raised by the amendment. Since we are in Grand Committee, we can deal with issues of drafting at a later stage if that is necessary.
However, I have both principled and practical problems with the thrust of the amendment. The problem of principle is well known. When a child reaches the age of 18, he or she becomes an adult. To take away the property of the 18 year-old would raise serious issues with the Human Rights Act. All the money in a child trust fund belongs to the child from the day that it is put into the account. What is being suggested here is that we should take away the property of a person who is, by the age of 18 years, an adult in the eyes of the law.

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We have been through the arguments about the age of majority for different purposes, such as serving in the Army, getting married, voting and so forth, but the age of 18 for these purposes—and for most other purposes—is the age at which a child becomes an adult. There is no basis for intervention by the Inland Revenue or any other body. Indeed, the role of the Inland Revenue and local authorities in the Bill is limited very much to ensuring that all eligible children get a child trust fund account. It does not envisage administering the account in any way.
The amendment talks about the circumstances where a child has been on the child protection register within the two-year period up to the date of attaining the age of majority. It is a well thought-out way of getting a local authority to investigate whether there is a risk of significant harm to the child. I have two points to make. First, many vulnerable 18 year-olds will never have been on the child protection register. Secondly, many people who have been on the child protection register, even in the previous two years, will be no longer at risk. In many cases, there will be a very poor match between being on the child protection register and being vulnerable in the way that the amendment anticipates.
Local authorities should not automatically withdraw help from young adults who have reached 18, although that is the age at which all children are de-registered from the child protection register. We must rely on local authorities and oblige them to take continuing responsibility. That, I suggest, is the best way of dealing with young adults at risk, within the law as it stands and the provisions of the Human Rights Act.
4.45 p.m.
Lord Newby: I am grateful to the Minister for that reply. As I said, the key issue is local authorities taking ongoing responsibility for particularly vulnerable and at-risk young people.
Lord McIntosh of Haringey: I apologise; I failed to respond to the last point in the amendment relating to mental incapacity legislation. Whatever mental incapacity legislation is in force at the relevant time will apply to children's trust funds.
Lord Newby: I am grateful to the Minister for that further clarification. The key issue is the extent to which local authorities will exercise ongoing responsibility towards such young people, and have a particular view and focus on that point. I shall give further thought to the Minister's comments, but I may return to the issue on Report. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 8 [Initial contribution by Inland Revenue]:
[Amendment No. 46 not moved.]
Baroness Wilcox moved Amendment No. 47:
Page 5, line 17, at end insert—
"( ) If the Inland Revenue make the payment referred to in subsection (1) after 30 days from the latest of the receipt of the information referred to in paragraph (a) and the receipt of a valid claim referred to in paragraph (b), the payment shall include an additional amount calculated in accordance with regulations."
The noble Baroness said: In moving this amendment, I shall speak also to Amendments Nos. 52 and 60. All the amendments require the Inland Revenue to make an additional payment if it is late in paying what it should pay. That will compensate the child trust fund for loss of return on the funds that could have been invested earlier. Amendment No. 47 applies to the payment of initial contributions by the Inland Revenue under Clause 8; Amendment No. 52 applies to Clause 9, which deals with supplementary contribution payments; and Amendment No. 60 applies to the further contributions that may or may not be made under Clause 10.
Each amendment allows the Inland Revenue 30 days to make the payment, which seems reasonable in the light of payment policies generally. It is, I believe, a period found in other Inland Revenue legislation. The amendments refer to an additional amount rather than interest, because I believe that the Inland Revenue is averse to paying interest as such. It would be for the Government to decide in regulations what rate should be paid and how it should be calculated. I hope that the Government will regard that as reasonable. I beg to move.
Lord McIntosh of Haringey: There are two issues. One is potential delay; the other is interest. The system proposed in the Bill has been worked out by the Revenue with the providers to produce a system that will get money into children's accounts quickly and therefore start to earn interest. That is why, for instance, child trust fund providers are required to make fortnightly returns of claims received. The system is designed to automatically check and pay claims. When the information supplied by a provider reconciles with the information held on the CPS system, the claim will be paid automatically. That will normally be done through the bank clearing system, so there will be up to 14 days plus however many days the money takes to go through BACS.
There should be delay only when the information does not reconcile and further information is needed to process the claim. Again, if providers provide accurate information quickly, delay should be minimal with the claim being paid on receipt of the provider's next claim—in other words, well within the 30 days time scale proposed by the amendment. Of course, there could also be delay because of suspected fraud. There should be very few instances where a valid claim is paid late, and so late that it significantly affects the income and growth of the child trust fund.
No one can deny that things can and will go wrong. However, we do not think that further regulations are necessarily the best way to address those problems because—this is my answer to the second point—the Revenue already has a compensation scheme to deal with such delays. It would add to the costs of administering the child trust fund to create another compensation scheme especially for that purpose.

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Code of Practice 1—Putting Things Right states that the Revenue will,
"correct the mistake so that, where possible, your affairs will be in the same position as if we hadn't made the mistake".
Any compensation paid will include an amount for income or growth lost through a Revenue delay. I hope that that is reassuring.
Baroness Wilcox: I thank the Minister. I smiled a little when he said "should be"; I remember times when the Inland Revenue and I had long ongoing conversations and I found myself receiving very little support afterwards. I shall read carefully what he said and, for the moment, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 48 not moved.]
Clause 8 agreed to.
Clause 9 [Supplementary contribution by Inland Revenue]:
[Amendments Nos. 49 and 50 not moved.]
Baroness Wilcox moved Amendment No. 51:
Page 5, line 26. at end insert—
"( ) The amount prescribed for the purposes of subsection (2) shall be not less than the amount prescribed for the purposes of section 8(1)."
The noble Baroness said: The amendment simply probes Clause 9, which provides for supplementary contributions to be paid to children in families on lower incomes. Our amendment requires the amount of the supplementary contributions under Clause 9 to be not less than the basic contribution under Clause 8.
The Explanatory Notes state, at paragraph 38, that the amount payable under Clause 9 "will be £250". I am aware that the draft regulations prescribe £250. However, nothing in the Bill prevents a government prescribing a lesser amount at a late stage. The Government have said that they are concerned about poorer children, but they have not protected them in the Bill, which is what my amendment seeks to do. I beg to move.
Lord McIntosh of Haringey: This Government have committed themselves to the Bill; the Conservative Party has committed itself to the Bill; only a Liberal Democrat government would withdraw the whole thing, so we are reasonably secure.
Of course it is difficult for people on lower incomes to save, because they very often need to spend every penny that they have. That is why we have an additional endowment—the supplementary contribution—for children in low-income families, to help their accounts get off to a good start. We have made eligibility as straightforward as we can. Children will be eligible for the supplementary contribution if they are part of a household receiving child tax credit with an income below the child tax credit threshold, which is currently £13,230 but will go up under the Budget to £13,480 for 2004–05. The amount of the supplementary payment will be £250 on top of the initial payment of £250.
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The amendment would commit this and future governments to the amount of the supplementary contribution being at least the value of the initial contribution. That would give any government, present or future, less flexibility. It would deny them the flexibility they might need to determine the value. We believe that it would be unwise to put this kind of rule on the face of the Bill. We want to give future governments full flexibility to manage the child trust fund in the light of future developments, needs and opportunities, rather than tying their hands indefinitely. The limit will be kept under review in the light of the progress of the child trust fund.
Lord Naseby: I listened carefully to the Minister's answer and I was somewhat surprised by it. We are of course dealing with a Bill, which will become an Act, which will last for 18 years for a child. As the Minister rightly said, the two major political parties have committed themselves to this.
The only scenario that immediately comes to mind of where the Government have changed their mind is on ISAs. Many people, when they entered into the ISA regime, thought, perhaps foolishly, that the equity ISA would be stuck at £7,000. People may have hoped that it would be upgraded with inflation but they never conceived that it would be cut back; that savings would be disallowed and that people would be put off saving. They certainly never believed that the cash ISA would be cut back.
I am surprised that the Minister does not recognise that problem. We are not dealing with adults here; we are dealing with the children of the nation. The vast majority of Members of Parliament in the other place and Members of this House support the Bill; they support the children and future children of our country.
The sum of £250 is not a fortune, but it is significant. Is the Minister really saying that the present Labour Government are not prepared to put on the face of the Bill the fact that it will be at least £250? It will be up to them and, indeed, future Conservative governments to upgrade it if they so wish. I am not on the Front Bench, but I shall certainly petition my Front Bench if anyone suggests that the subsequent amount should be reduced below £250. I cannot see where the Minister is coming from unless, like the ISA, the sum is to be cut.
Lord McIntosh of Haringey: I would love to engage with the noble Lord, Lord Naseby, in a debate about ISAs. It has always been recognised that the effect of tax-free investment schemes is cumulative. If you go on with them for many years, at some stage something has to be done to stop matters getting out of hand. But that is not the subject of the Bill, and it would be quite wrong of me to rise to the temptation to debate it.
I am following the principle that, where possible, we should avoid committing future governments to specific figures. That is why, for example, when you introduce a custodial sentence or a fine, you do not lay it out in figures; you say that the fine is on such and such a scale and then future governments and future Parliaments can change it. That is the principle behind

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what we are doing here. We have no more intention than the Opposition of reneging on a commitment that we have made in public. It is merely that it is not appropriate for it to be on the face of the Bill.
Baroness Wilcox: I am disappointed with the Minister's response. I cannot express the position any better than my noble friend Lord Naseby did. So, disappointed, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 52 not moved.]
5 p.m.
Baroness Wilcox moved Amendment No. 53:
Page 5, line 35, leave out "entitled to" and insert "eligible for"
The noble Baroness said: In moving this amendment, I shall speak also to Amendment No. 54. For the convenience of the Committee, I have grouped with these amendments our opposition to the Question whether Clause 9 should stand part of the Bill. Each addresses means testing, which is at the heart of the supplementary contribution proposed in Clause 9. We are concerned with the increasing level of means testing that the Government have introduced since 1997.
I shall deal first with the two amendments specifically, before turning to means testing more generally. Amendment No. 53 challenges why a parent must have established a claim for child tax credit before his or her child can have the supplementary contribution. Parents may not want to claim child tax credit. Not all parents want to submit to the indignity of claiming benefits, even if they are called credits. What take-up of child tax credits do the Government expect? How many children will that exclude from the supplementary amount? The Minister will be aware that take-up rates of other means-tested benefits can fall as low as 20 per cent, as in the case of the short-lived baby tax credits.
The second amendment would remove the second leg of the conditions provided for in Clause 9(5). Not only must the parent have claimed child tax credit; the parent's income must be lower than the threshold of £13,230. Child tax credit is payable in reducing amounts to parents whose incomes are higher than £13,230. But there is a cliff edge for the purpose of the supplementary child trust fund payment. An additional fl income for a parent means £250 less for the child. Does the Minister really think that that is fair?
Those are the technical points, but behind all of this is the intruder state. The Financial Secretary told the Standing Committee in another place that 40 per cent of children will be eligible for the supplementary contribution. So we will be starting the lives of four in 10 children born each year with the personal stigma of being means tested. That will be added to the stigma of those who receive free school meals. Children are starting life with a disadvantage imposed by the Government. We are concerned about that, and we are not alone, as the Child Poverty Action Group shares our concerns.
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The Government will start 40 per cent of people's lives on means testing, and by the time they retire around 60 per cent will be on means-tested pension credit. We find that a disturbing trend. The Government will justify that by saying that they are trying to help poor people, and may even claim that making them dependent on means testing for their child trust fund will magically make them asset owners and savers. But they seem blind to the increasing way in which they are taking money in tax and national insurance, even from the poor, in order to give it back on condition that they specifically claim it and subject themselves to a means test. That is not our way. I beg to move.
Lord McIntosh of Haringey: I am puzzled by the contrast between this group of amendments and that which we have just debated. In the debate on the previous amendment, the Conservative Party was keen to ensure that a supplementary payment would be not less than the original payment; in other words, not less than £250. Now it is being said, certainly by opposing the Question whether Clause 9 should stand part of the Bill, that there should be no progressive payment at all. That is what Clause 9 does. If you remove that clause, there will be nothing left.
I assume that the intention of replacing "entitled to" with "eligible for" is to make eligible the children whose parents have not claimed child tax credit but would be eligible to do so. One must still know whether or not they are eligible, so one still has what the noble Baroness, Lady Wilcox, calls a means test. I am puzzled by the amendments. Child tax credit is an enormous success as regards take-up. The threshold brings 40 per cent of all children into the higher rate endowment. Five and a half million children live in households with an income of less than £13,230. To remove the threshold completely would bring in 430,000 children, some of whom would be in families of very reasonable incomes—up to £55,000—and that does not seem defensible. The child tax credit is being taken up very successfully. By January 2004, the numbers who had taken it up since April 2003 were already 100 per cent of what we expected at the end of a full year. The amendments do not get rid of a means test. They simply ensure that those with fewer needs should get the supplementary payment. That is then contradicted by the proposal to take out Clause 9.
Lord Naseby: The Minister does a disservice to my noble friend. She made it clear that in this Committee she is probing the Minister for his response. The Minister's response was pretty woolly in relation to child trust credit. He said that basically after nine months the Government have hit their one-year target; that the whole thing is running smoothly and swimmingly; and that it is an enormous success.
My noble friend asked what percentage of people eligible for child tax credit are not taking it up. What happens to those children? That was her question. I would expect the Minister to have that answer to hand.

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The matter was raised at Second Reading, so it is not a new question. I am disappointed that he was unable to give an answer, but perhaps he overlooked it.
Lord McIntosh of Haringey: I can say that 6 million children are benefiting from the child tax credit. If I can add anything further, I shall do so in writing to the noble Baroness, Lady Wilcox, and the noble Lord, Lord Naseby.
Lord Naseby: This is an important dimension. It is the children who are eligible in the families not claiming about whom we should be concerned. That is the issue that on Report I shall want to follow further.
Lord McIntosh of Haringey: It is a little more complicated than that. The effect of the amendment would he that the Revenue should spend a great deal of time trying to contact parents who have not made themselves known by claiming the allowances to which they are entitled. No government have given high priority to that.
Baroness Wilcox: I thank my noble friend Lord Naseby very much for emphasising the question that I asked. I am sorry that the Minister is unable to answer today. Perhaps he will write to me with that answer because we are talking about people who will not claim; people who cannot bear to do so and therefore would disadvantage their own children. I await the Minister's reply in writing. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 54 not moved.]
Clause 9 agreed to.
Baroness Wilcox moved Amendment No. 55:
After Clause 9, insert the following new clause—
"ADDITIONAL CONTRIBUTIONS BY INLAND REVENUE FOR CHILDREN IN CARE
(1) If this section applies to a child, the Inland Revenue must inform the account provider with whom a child trust fund is held by the child that this section applies to the child.
(2) If the account provider makes a claim to the Inland Revenue in accordance with regulations, the Inland Revenue must pay to the account provider such amount as prescribed by regulations.
(3) The amount prescribed by regulations under subsection (2) shall he calculated so as to represent a percentage of the average value of subscriptions to child trust funds made during the preceding financial year.
(4) On receipt of payment the account provider must credit the child trust fund with the amount of the payment.
(5) This section applies to a child if—

(a) a child trust fund is held by the child, and

(b) the child was first an eligible child by virtue of section 2(1)(b)."

The noble Baroness said: Amendment No. 55 would insert a new clause after Clause 9. The other amendments in this group are consequential. We return to the topic of children in care, which we have debated a little in connection with earlier amendments. The one thing that we know about children in care is that they start their adult life disadvantaged. Currently, they have extremely low educational
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achievements. Barely more than one half of those children have one GCSE compared with 95 per cent of all other children. The position is not improving: the Government have even dropped their own modest target of increasing basic educational achievements.
Children in care are less likely to be in higher education or in employment when they leave school. Sadly, they are more likely to be on the wrong side of the criminal law. A looked-after child will qualify for a higher amount of £500 when his child trust fund is opened—at least, that is what the draft regulations provide. That does not appear to be required under the Bill. Perhaps the Minister would state the long-term intention of the Government for payments to the child trust funds of looked-after children. Would he also state why the entitlement to a higher or supplementary amount for looked-after children is not in the Bill?
The child is unlikely to have any further contributions paid into his account if he remains in care. Of course, some children move in and out of care and it may be that the children's parents or other relatives will contribute something, but we should not expect this to be the norm.
Our new clause would require the Inland Revenue to pay into the looked-after child's trust fund an amount which will equate to the average amount paid into all children's trust funds. If the scheme is successful overall and the average annual contribution to child trust funds is, say, £500, the Government would have to specify what percentage of that amount should be paid to the child trust funds of looked-after children. I hope that they would specify at least 100 per cent so that looked-after children benefit rateably with other children in society.
At the Report stage in another place the Financial Secretary said little more than that in the next 15 years or so the position of looked-after children would be examined further. But if child trust funds are to accumulate to any significant amount to help a young person leaving care, extra contributions need to be made throughout the 18 years, preferably as early as possible so that the amount can accumulate.
We should remember that, with no family behind them, the transition of a looked-after child into independent adulthood is a particularly testing time. Pathway plans and the like are all very well, but if there is one group of children that needs a proper financial start in adult life, it is this.
At this stage, my amendment is a probing one, which I am sure can be improved technically. For example, I am not certain how best to deal with children who move in and out of care. The amendment does not tackle this, but I assume that further regulation-making powers could do the trick. Can the Minister clarify the situation for such children? I beg to move.
Lord McIntosh of Haringey: Again, I make nothing of the drafting; it is not important. I am grateful that the noble Baroness, Lady Wilcox, shows concern for looked-after children who, I agree, are among, the most disadvantaged children in our society. We are certainly

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committed to making special arrangements to ensure that they are fully included in the child trust fund, but we shall do so by regulations. This is how I think I can give the assurance that the noble Baroness seeks.
I am pleased to say that the draft regulations provide for looked-after children who cannot receive a child trust fund through a child benefit award to have an account opened for them and to automatically receive a government endowment representing both the initial endowments, which all children will get, and the supplementary government endowments that will go to children in lower income families.
Again, all children who are being looked after at the age of seven—I agree that there are issues about children moving in and out of care—will also automatically receive the government endowments that other children will receive at that age. They will receive a sum amounting to both the endowment that all children will receive and the additional endowment that children from lower income families will receive.
So the Bill is a foundation on which to build for all looked-after children as well as all other children. It allows subscriptions into the child trust fund to be paid by anyone—family, friends, godparents, local authorities or the child himself or herself.
The amendments seek to boost the funds in the child trust fund accounts of a minority of looked-after children whose accounts have been opened by the Inland Revenue in the absence of a child benefit claim having been made on their behalf. It is true that these children may be among the most disadvantaged while they are being looked after, but the vast majority move out of care and will have families to care for them and to contribute to their child trust fund account in the same way as other children. As I said, while they are being looked after there is nothing to stop grandparents and other relatives or friends from contributing to their accounts.
I do not believe that further government payments for these children are the best way of helping them. Children move in and out of care and any government payment would be rather hit and miss. But we recognise that it is important that the pathway plan which local authorities develop with children leaving care should consider the child trust fund account. Financial issues are already taken into account in the pathway plan and we will ensure that specific consideration is given to the child trust fund account.
We are aware of some local authorities who have already taken financial education seriously. Warwickshire County Council has introduced a scheme where a savings account is opened for a foster child to help make them aware of the value of money as building up savings. But most financial education will be delivered in the school curriculum and that is the best place for it because it reaches all children.
Over the coming months and years we will consult with various bodies and organisations about financial education. As part of that, we want to address the particular needs that there may be for looked-after children and, if possible, include some looked-after
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children in our consultation—for example, through readers' panels. I am addressing the later amendments in the group that the noble Baroness, Lady Wilcox, did not have time to address, but I did not think that she would mind if I also considered those issues.
5.15 p.m.
Baroness Wilcox: I am grateful to the Minister for that full answer to what was a probing amendment. I shall read the Minister's comments carefully, but, for the moment, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 10 [Further contributions by Inland Revenue]:
Baroness Wilcox moved Amendment No. 56:
Page 6, line 45, leave out "description" and insert "category"
The noble Baroness said: I shall speak briefly. Amendment No. 56 is designed to probe the drafting of Clause 10(1) and was suggested to us by the Law Society for Scotland. Clause 10 deals with the further contributions that the Government intend to make to children at the age of seven. As currently drafted, subsection (1) states that regulations may make provision for the Inland Revenue to make payments of certain amounts prescribed by regulations to account providers of CTFs held by:
"(a) eligible children, or
(b) any description of eligible children".
The Explanatory Notes state:
"Subsection (1) provides for those children to be eligible children as defined in this Bill (or a description of those children specified in the regulations)".
I find the drafting slightly confusing. Eligibility is already defined in the Bill regarding CTFs, initial contributions and supplementary contributions. The mention of a subsequent and further "description of eligible children" for the secondary contributions at age seven muddies the waters. What is the "description" of eligibility contained in regulations likely to look like? Will it merely reproduce what is already made clear on the face of the Bill as regards eligibility?
We have followed recommendation of the Law Society for Scotland that paragraph (b) should read:
"any category of eligible children".
The word "description" seems ambiguous and unclear, while "category" would at least involve some criteria that the regulations would prescribe. I beg to move.
Lord McIntosh of Haringey: I am grateful for that but I do not believe that the amendment would make any difference. There is nothing sinister about it—it is simply the drafting style that parliamentary counsel has used for a sub-set of eligible children. The term "description" is used throughout the Bill. For example, Clause 3 refers to "descriptions" of accounts where another draftsman might have used a different term. But in the example that I want to give, Clause 10 allows the Government to make further payments to CTF accounts held by eligible children or a sub-set of those children such as the sub-set already announced of children on their seventh birthday.

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The phrase,
"any description of eligible children",
simply allows us to define in regulations the particular sub-set to which payments will be made. And it would not make any difference if the word was changed to "category", it would just lead to inconsistency in the Bill.
Baroness Wilcox: I thank the Minister for that. I beg leave to withdraw the amendment.
Amendment. by leave, withdrawn.
[Amendment No. 57 not moved.]
Baroness Wilcox moved Amendment No. 58:
Page 6, line 46, at end insert—
'( ) The amount prescribed for the purpose of subsection (1) shall be not less than the amount prescribed at that time for the purpose of payments under section 8."
The noble Baroness said: The amendment is designed to probe the Government to see whether they have any further thoughts about the amount they intend to contribute under the provisions of Clause 10 covering the contribution to be made, as I understand it, at the age of seven. We know that the initial contributions are to be £250 under Clause 8 and a £250 supplementary contribution for low income families under Clause 9. The Explanatory Notes confirm that the payments will be made at the age of seven, but that the amounts themselves will be published nearer the time. We have no estimates at all of what they will be. What sort of figures are we talking about?
I imagine that the Minister will tell us that the amount to be contributed at the secondary stage—that is, in 2009—cannot be announced yet because it is such a long way off. Our amendment proposes that the contribution from the Government at seven will be prescribed in regulation but will not be any less than the initial government contribution under Clause 8(1).
I imagine that many people will have their own views about the secondary amount to be contributed. We wish to raise the issue now with this probing amendment to ascertain the Minister's view on what sort of amount the Government envisage. The issue cropped up here and there during debate in another place, and again in our debates in Committee, but we have not yet had a hint from the Minister about what he envisages. Rumours were floating around of £50 at seven, with £100 as a supplementary, but there was no confirmation of that.
Our amendment would have the second instalment on a par with the first. That allows some flexibility because it does not insist on a specific amount. We know that the initial contributions under Clauses 8(1) and 9(2) can be changed from the £250 and £500 currently proposed by regulation and subject to affirmative procedure. We simply propose that the second contributions mirror the first, whatever those are, in 2009. They may not continue to be £250 and £500 as at present.
Our amendment is intended only to probe. If the Minister is unhappy with a second contribution equal to the initial one, perhaps he will allow a different
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percentage—perhaps half of the initial contribution. I believe it makes sense to specify the secondary contribution as a percentage of the first so that we all have some idea about what amounts we are talking about. This is not being prescriptive, but it is fleshing out the detail of the scheme as it moves into the future. I do not believe that this ties the hands of future governments. If there is a shortfall in money available. then both amounts will be reduced—the initial one and the secondary contribution. Where is the harm in having the same ratio between the two as a constant? I beg to move.
Lord Naseby: I rise briefly to support my noble friend. This amendment is absolutely hitting the nail on the head and prising out of the Government their current thoughts on the issue. It seems to me that Sandler's view—although I would not want to take his name in vain—is that there should be nothing. He does not believe in incentives to save. He says that they do not work. If he had his way, it would be nothing. That. of course, would be a travesty of the whole concept of child trust funds.
My noble friend's proposal that the percentage should be matched does not commit the Government to a specific figure. However, she is certainly seeking from the Minister a statement of commitment to the future of the child trust fund, rather than their treating it as a short-term measure. I do not believe that either the Minister or the Government are treating it as such. However, we await his response with great interest.
Lord McIntosh of Haringey: I do not know that I have anything much to add to what I said on virtually the same amendment earlier. I have exhausted myself and bored the Committee already on this subject.
Noble Lords: No!
Lord Naseby: The Minister may be exhausted, but he has certainly not bored any of us.
Lord McIntosh of Haringey: Surely the issue is very straightforward. Neither of the major political parties that support the Bill could afford to play fast and loose with it, even in 2009. There is a public commitment to a significant payment and to significant supplementary payments, and there is a public commitment—which is not on the face of the Bill except in the possibility of regulations—for further payments at age seven. It would be utterly inappropriate for us to commit future governments on the amount. We will be held to account by the people of this country, to put it pompously.
Baroness Wilcox: I have spoken to people about the proposition and the fact that we in the Conservative Party support it. When I say, "If your baby was born by the end of August 2002, you're going to get £250", that sounds good and quite exciting. Then I say, "At seven you'll get some more". "The same?", I am asked, to which I reply, "No". Then I am asked, "How much?", and I reply that we do not know. "What do

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you mean?", I am asked. "You know what you're going to give us now but not what you're going to give us when the child is seven? It seems very odd".
The Government cannot tell us that we should not seek some sort of certainty and expectation. If we are to encourage people to save—to look forward to the future—I would have thought that putting something in this area would have been a good idea. Our amendment would have been an awfully good idea and I wish the Government had taken it up. However, I see that the Minister is determined not to do so. At least I now know for certain that he will not do so and, as such, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 59 and 60 not moved.]
Clause 10 agreed to.
Clause 11 [Recouping Inland Revenue contributions]:
Baroness Wilcox moved Amendment No. 61:
Page 7, line 14, at end insert—
"( ) The circumstances referred to in subsection (1) shall not include any error or mistake which is attributable solely to acts or omissions of the Inland Revenue."
The noble Baroness said: In moving Amendment No. 61, I shall also speak to Amendment No. 62, both of which deal with the issue of Inland Revenue error. Clause 11 allows the Inland Revenue to recoup contributions made under Clauses 8, 9 and 10 in the almost limitless circumstances to be prescribed in the ubiquitous regulations. That is fine where the children's parents or an account provider have given incorrect information, but there could be other circumstances, for example, where the Inland Revenue has incorrectly interpreted whether the provisions in Clause 9 or the regulations yet to come under Clause 10 are met.
The purpose of the amendments is to probe whether the Inland Revenue should be able to recover money even where the only fault lay with the Inland Revenue—an entirely plausible scenario. Amendment No. 61 would not allow any recovery where the Inland Revenue's acts or omissions were solely to blame, while Amendment No. 62 would allow recovery of the capital amount but not any income or gains made in the interim. I beg to move.
Lord McIntosh of Haringey: I am tempted to see whether there are any bankers around and to ask whether banks do not attempt to recover any money that they have paid incorrectly. My understanding is that they do, quite reasonably.
The amendment would prevent the Revenue recovering a payment in a situation where it has made one into a child trust fund account in error. The amendment assumes that the provisions of Clause 11 are broad enough for the Revenue to recoup any payment, including money paid incorrectly by the Revenue, into an account. But our legal advice is that Clause 11(2) contains the assumption that payments should not have been made in the first place. Therefore the circumstances in which we are intending to use the power in Clause 11 are where fraud or negligence by the investor or the provider has been involved.
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But where an erroneous payment has been made by the Revenue, it will be recovered under the provisions of general law. This comes back to "Bank error in your favour. Collect £200". You do not. The Revenue would recover any excess payments, together with any income or gains which have arisen on those funds. Although the Revenue acts to eliminate errors, it is unrealistic to assume that they will not happen. Although we expect them to be rare, it is likely in a scheme of this size that payments could be made in error. It is only right in those circumstances that the money should be recovered.
In virtually all cases of such a nature, the payment and the income or gains arising from it will still be in the child trust fund account and will be recovered from the account. Not to recover money paid in error would be unfair to others and an improper use of government money. It would mean that children would benefit from funds to which they were not entitled, putting them in a better position than other children and, logically, putting the other children in a worse position.
5.30 p.m.
Baroness Wilcox: I thank the Minister for that response. I always like asking questions about the Inland Revenue, having run a business of my own and having come to the definite conclusion that, so far as the Inland Revenue is concerned, one is guilty until one can prove one's innocence. I have served on the board of the Inland Revenue, and seen how difficult life can be for it sometimes. I have also seen how much error is made. It seems to me that the Inland Revenue is in a win-win situation whereas the rest of us are not. For the moment, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 62 and 63 not moved.]
Clause 11 agreed to.
Clause 12 [Subscription limits]:
Baroness Wilcox moved Amendment No. 64:
Page 7, line 20, at end insert "or marketable securities"
The noble Baroness said: Amendment No. 64 raises the question of why shares and securities may not be used when making contributions to a child trust fund. Clause 12(1) states that subscriptions to a child trust fund may be made only by way of a monetary contribution. Amendment No. 64 seeks to extend that to allow marketable securities.
I do not believe that all child trust fund providers should be compelled to take marketable securities but it would be a useful facility for some contributors to be able to transfer shares or other securities. The need to stick within the monetary limit as well as the practicality of running a child trust fund itself dictates that only marketable securities should be involved. I believe that the ISA rule allows for this and that it operates without difficulty.

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When this issue was discussed in Standing Committee in another place, the only substantive objection raised by the Financial Secretary was in relation to unlisted shares. My amendment avoids that pitfall. I beg to move.
Lord McIntosh of Haringey: The key to this is to keep the operation of child trust funds as simple as possible. After all, we have put a cap on the charges and we are talking about relatively small amounts of money, although of course it is all new business. If we were to allow for the acceptance of shares and other investments, even marketable securities, that would mean that a provider would have to arrange for a valuation. I admit that that is straightforward for quoted shares but the Revenue would have to agree a valuation for unquoted shares.
Valuation is not a simple process and it would be difficult for the provider to keep track of the annual limit. If the limit were exceeded once the valuation was agreed, either because it was higher than expected or because other contributions had been made to the account as well, contributions would need to be returned to whoever made them. That would incur additional administrative costs. Securities may not always remain marketable, and that also would add to costs.
There is another issue that needs to be considered in regard to the acceptance of non-monetary contributions: the stakeholder account is risk controlled and the provider is required to maintain a diverse portfolio of investments. In addition, as the account moves closer to maturity, the provider is required to move investments into lower risk areas. Accepting bundles of shares or gilts would be inconsistent with this approach and the value of shares and securities could easily be manipulated for avoidance purposes. If we were to allow contributions in the form of securities, we would need complex anti-avoidance rules specifically to prevent abuse. Again, that would increase the administrative burden and therefore the costs.
Providers are required to value child trust fund accounts annually. Non-monetary contributions would have to be valued not only once but every year. So the initial additional flexibility offered by the amendment would be outweighed by the extra administrative cost. A small minority of people might be disappointed that contributions of securities could not be accepted, but the reason for this is to keep account charges low.
The noble Baroness, Lady Wilcox, referred to ISAs. The transfer of securities into ISAs is allowed in very limited circumstances—that is, in transfers from employee share schemes only.
Lord Skelmersdale: Before my noble friend responds to that reply, can the Minister explain why there is a cap of £1.200 at all?
Lord McIntosh of Haringey: There has to be some sort of limit in order that the scheme is not another way of richer people investing on behalf of their children.
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We are setting a limit which is manageable in terms of tax foregone in return for a benefit for all children in this country.
Baroness Wilcox: I think that this is an opportunity missed. I was pleased and delighted at the speed with which the officials were able to provide the Minister with the answer to the question about the IS.4 rules. What I said was right: the ISA rules allow for this and operate without difficulty. I am very sorry that we cannot even consider this proposal. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Baroness Wilcox moved Amendment No. 65:
Page 7, line 22, after "fund" insert "in respect of '
The noble Baroness said: This amendment—
Lord McIntosh of Haringey: This is the Skelmersdale amendment.
Baroness Wilcox: Is that so? I speak on behalf of myself and my noble friend Lord Skelmersdale to Amendment No. 65—but of course I am moving it on my own behalf. I shall speak also to the other amendments in the group, again tabled in my name. They all concern the maximum amount that can be contributed to a child trust fund.
Amendment No. 65 would insert a form of words into Clause 12(2) so that the maximum amount is an amount paid in respect of one year and not simply in a year. This would allow unused contribution limits in one year to be carried over to the following year.
Not all parents can contribute the same amount every year. Perhaps a parent has a period of unemployment or the family has other financial commitments. However, when funds are more plentiful in following years, parents would like to make up the contributions that were missed. If the Government are serious about encouraging savings through the medium of the child trust fund, this amendment would allow a more diverse set of saving patterns to emerge.
Amendment No. 66 is a probing amendment to establish the Government's intentions as regards the maximum contribution. We have heard the Minister's reply on that. This is set at £1,200 in the draft regulations. My amendment would ensure that later regulations could not reduce that amount. The Minister will be aware that the reduction in the annual ISA contribution limit has been much criticised. It would be odd if this new vehicle, one designed to increase savings, was also savaged in that way. People need to be reassured that the Government will be consistent in their approach.
Amendment No. 67 is a variation on that theme as it requires the regulations to provide for the annual uprating of the contribution limit by the rate of inflation. My amendment uses the retail prices index, but to be trendy I should have used the consumer prices index. However, that seems likely to produce a considerably lower figure at all times.

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Finally, I turn to Amendment No. 70. This is a probing amendment to clarify whether amounts paid under the terms of Clauses 9 and 10 could be construed as contributions, thus restricting the amounts capable of being contributed by parents and others. I hope that the Minister can reassure me on this point. I beg to move.
Lord Skelmersdale: For the avoidance of doubt, none of these amendments is a Skelmersdale amendment.
Lord McIntosh of Haringey: I was teasing. The noble Lord, Lord Skelmersdale, raised the issue of why there should be a limit of £1,200 and these amendments concern that limit, although I acknowledge that they have a different thrust.
It is important to the concept of the child trust fund that family, friends, or children themselves can make additional contributions to the fund. As has been said, if no additional contributions are made, after 18 years the fund is likely to be in three figures rather than a more significant amount.
The purpose of the government endowments is to encourage people to save for a child's future. Additional savings by family and friends could significantly increase the amount that children receive at the age of 18. The fund intends to encourage a partnership between government and families to build on existing positive attitudes to saving for children.
However, we believe it unwise to put rules into the Bill—such as the subscription limit not falling below £1,200, as proposed in Amendment No. 66, and increasing with RPI, as proposed in Amendment No. 67—rather than give future governments full flexibility to manage the child trust fund in the light of future developments, needs and opportunities. This subscription limit must be kept under review in light of the progress of the child trust fund.
A further amendment in this group, Amendment No. 70, is unnecessary as it seeks to ensure that the government contributions will not count towards the maximum subscription limit. That has already been specified in the regulations, which have been published.
We are not certain about the reason for Amendment No. 65. We assume that, by inserting "in respect of" into Clause 12, the amendment would allow unused contributions from one year to be carried forward to the next. I am afraid that that would make the fund more complicated for providers to administer, and difficult for child trust fund account holders and their families to get to grips with. There would have to be enhancements to the IT systems, which might not be popular with providers, especially small ones who are dealing with more modest savers. Such providers believe that a regular annual limit on a simple basis encourages regular saving and provides well for the modest contributor who will form the vast majority in child trust funds.
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To return to the thrust of the other amendments, my argument about flexibility for future governments is unchanged from that which I made in relation to previous amendments.
Lord Naseby: This provision discriminates against children. The Minister will be aware of government index-linked gilts. The Government recognise that people in the professional financial world buy index-linked gilts because they act as a hedge against inflation going up. Furthermore, National Savings offers index-linked products. As I understand it, the Minister is saying, "That's all very well for people who buy those securities, but our country's children will not have anything that protects them against inflation. The maximum limit will be fixed at £1,200, and that is it. The children themselves, a couple of years down the track, will be limited to £1,200, as well as those starting in April 2005".
If that is the Government's philosophy, it is strange because they upgraded the original £250 for those born after September 2002. There is a certain inconsistency in the Government's approach and we should reconsider the matter on Report. All governments want flexibility, but the nation's children are the last people who should be used in such a way.
Lord McIntosh of Haringey: That is not the Government's philosophy and we are not imposing any restriction of that kind. We are simply saying that future governments will decide the limit. The noble Lord, Lord Naseby, is making a false analogy with index-linked gilts and so forth. Of course, the terms on which people are lent money survive throughout the period of the loan, but this is nothing to do with lending someone money. This provision limits how much can be invested. When the investment is made, normal financial conditions will apply to the interest.
Baroness Wilcox: I am sorry that we will not get close to what we sought to achieve with Amendment No. 66, because of the disappointment that ISAs have been and the worry that surrounds them. The Minister mentioned "flexibility" again and again in relation to how much the second-stage payment would be and he said that flexibility was required so that governments of whatever kind in the future would not be bound, yet there seems to be no flexibility of any other kind in this discussion. This takes me back to the days when I was chairman of the National Consumer Council: this is a classic case of something being process-driven and not consumer-led. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 66 to 68 not moved.]
[The Sitting was suspended for a Division in the House from 5.44 to 5.54 p.m.]
Baroness Wilcox moved Amendment No. 69:
Page 7, line 24, at end insert—
"( ) Regulations under this section may prescribe the methods by which subscriptions to a child trust fund may be made but such regulations may not require an account provider to accept subscriptions by way of cash, credit card or debit card."
The noble Baroness said: Amendment 69 would restrict the regulations under Clause 11 on the methods of payment into a child trust fund so that they may not require the account provider to accept cash, credit card or debit card. The draft regulations which define a stakeholder account require the account provider to accept all of those methods as well as cheques, direct debits, standing orders or direct credits. Fortunately, those restrictions do not appear to apply to non-stakeholder accounts, which the account provider may also offer—perhaps the Minister would confirm that.
The potential providers of stakeholder child trust funds will have to live within the charge cap of 1.5 per cent, which we have already debated. If a provider had to accept all the methods of payment listed in the schedule to the regulations, it would find it very difficult to make money. For example, credit card commissions will exceed 1.5 per cent. Some providers are also concerned about the administration costs of dealing with cheques or standing orders, although I have not included these for the purposes of today's debate.
The amendment also states that cash must not be prescribed. Cash handling will doubtless provide no problem for those organisations with an existing infrastructure, such as building societies. But others, such as the Children's Mutual, do not have that infrastructure. That may drive providers out of the market by itself. Those who look at what it will cost them to make arrangements to take cash themselves or through agencies may conclude that the costs are prohibitive within the 1.5 per cent cap.
I have a technical point to put to the Minister. Concern has been expressed that the FSA's client money regulations will not allow independent financial advisers to offer child trust funds to their clients. Will the Minister comment on that?
A better amendment would be to leave providers free to say what payment methods they want to provide, but for today's debate I have not been so radical or, perhaps I should say, so sensible. I beg to move.
6 p.m.
Lord McIntosh of Haringey: Perhaps I may help the Committee. I do not want to curtail debate—I do, actually, but that is not the point—but I should point out that we have been discussing these issues further with providers. We recognise the concerns expressed in the amendment. There have been persuasive arguments against providing the full range of the methods of payments. Current stakeholder pension regulations require cheque, direct debit, standing order and direct credit as methods of payment. We shall consider the industry's concerns and suggestions for keeping the CTS account regulations in line with stakeholder pension regulations.
Baroness Wilcox: I thank the Minister for that indication. I am delighted to know that discussions are continuing. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 70 not moved.]
Clause 12 agreed to.
Clauses 13 and 14 agreed to.
Baroness Wilcox moved Amendment No. 71:
Before Clause 15, insert the following new clause—
"ANNUAL REPORT
The Treasury shall lay before each House of Parliament every year a report on the operation of child trust funds, including—

(a) the amounts paid under sections 8, 9 and 10;

(b) the additional amounts paid into child truss funds under section 12;

(c) any practical difficulties that have been encountered by the Inland Revenue;

(d) the results of any research carried out into the effect of child trust funds on savings behaviour or any other matters."

The noble Baroness said: Amendment No. 71 seeks to insert a new clause before Clause 15. When we reach a clause asking for an annual report, we know that there is light at the end of the Committee tunnel, although this is not quite the final amendment.
The proposed new clause requires the Treasury to lay a report each year before the Houses of Parliament on how child trust funds are operating. There is very little evidence underpinning this policy. and the Government are setting no targets, for example, on the amount of savings the policy is expected to generate. My honourable friend in another place, Mr George Osborne, made a telling point in Standing Committee when he said that, if another department had come to the Treasury during the spending round and asked for £250 million a year for a policy underpinned by little research and unaccompanied by any output targets, it would be sent away with a flea in its ear.
Over time, problems may well emerge. One thing that concerns many of us is the potential dissipation of the proceeds of a child trust fund at its maturity. Providers have a number of concerns about how the stakeholder element will work in practice and how the voucher scheme will operate. There will be a need for basic data on how much is being contributed to child trust funds under the various routes for that. The Government say that they are concerned about financial education, but how will they measure that and report to Parliament?
The amendment asks for an annual report so that it can provide an opportunity for either House to debate the way in which the policy is unfolding. I hope that the Chancellor will be curious to find out what he is getting for his money. That may be a vain hope, but the rest of us want to know what we are getting for our money—because it is taxpayers' money that is being used, not the Government's or the Chancellor's.
I hope that the Minister, who is so enthusiastic about this policy, will welcome the opportunity to show each year how well it is going. I beg to move.
Lord Newby: I rise briefly to support this amendment. The part of the amendment that could be particularly valuable is subsection (b), covering,
"the additional amounts paid into child trust funds under section 12".
On the first day in Grand Committee we debated the question of varying the way in which the charge cap might operate to enable child trust funds to be marketed more efficiently and effectively than might otherwise be the case. An annual report on the lines proposed in the amendment would provide the means to cast an investigative light on how the additional payments are working.
Lord McIntosh of Haringey: I hope that I can do better than the amendment by offering more. The new clause focuses on limited aspects of the child trust fund: the level of savings into the account; practical difficulties encountered by the Inland Revenue; the results of research carried out on savings behaviour and other matters. We are also concerned with helping people to understand the benefits of saving and investing, encouraging the saving of even small amounts, ensuring that in future all children have a financial asset at the start of adult life, and building on financial education to help people make better financial choices throughout their lives. All these are matters that Parliament ought to know about.
Most of the information asked for here will be available on the Internet. The Division Bell has sounded. I do not think that I will be able to finish my remarks.
The Chairman of Committees (Lord Brabazon of Tara): In that case I shall stop the noble Lord in mid flow. We shall return to this matter at a quarter past six.
[The Sitting was suspended for a Division in the House from 6.6 p.m. to 6.15 p.m.]
Lord McIntosh of Haringey: I started by saying that I hoped we could do better than the amendment does and pointed out the other things on which we ought to report. We shall report in two ways. First, we will publish annual statistics for the child trust fund, from 2007 onwards. The statistics will provide more information than is being sought here. They will include the level of take-up of the child trust fund; the number of revenue-allocated accounts; the level of assets accumulating in the accounts; and, in due course, the income distribution across which contributions are made.
We are also developing a detailed evaluation plan identifying key success criteria associated with the policy objectives. Those might include, for example: parents' understanding of the child trust fund and how it works; the number of cash deposits in equity-based accounts; the extent to which it has increased savings for children compared with now and in the longer term; and the level of financial awareness among children and parents.
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The amendment is less ambitious than what we propose. I hope that it will be withdrawn.
Lord Naseby: That all sounds very fine, but will all the information be put into one annual report? It was not made clear.
Lord McIntosh of Haringey: No, we will publish annual statistics, but the evaluation that we are talking about could take place at irregular intervals. I am sure that something will be published each year, but, in order to get a proper evaluation, one must look at things over a period. I would not like to be tied down by frequency of publication, except in the sense of annual statistics.
Lord Naseby: I am most grateful to the Minister for giving way. He is quite right; it is quite difficult to tie him down. Would it not be normal for evaluation to be left to the National Audit Office? That is the area in which one expects an independent body to carry out an evaluation. I sat for some 10 years on the Public Accounts Committee, which analyses the government policy of the day and reports impartially. The Minister raises two issues. The first is the annual statistics. If he thinks further about what my noble friend says, I think that he will be tempted to pull all that information together into an annual report. Secondly, there is the separate issue of evaluation of the policy. With the greatest respect to any political party—it applies to my own above any of us—we would all prefer the National Audit Office to evaluate the policy.
Lord McIntosh of Haringey: That is indeed a nonpolitical point. I think that the Comptroller and Auditor General would say that there are too many occasions when his staff are occupied in finding out why things have gone wrong. We are concerned to keep adequate records and to interpret and analyse them in such a way as to make it unnecessary for the National Audit Office to look at things that have gone wrong. Of course the National Audit Office is always free to investigate anything that it wishes. Nothing that we do would make that less possible.
Lord Naseby: I am grateful to the Minister for giving way once again. It is not a question of what the National Audit Office and the Comptroller and Auditor General wishes; it is laid down in statute that they must audit the accounts, so it is not an option. The Minister may wish to think about the matter further. I accept that we have not discussed the matter in any detail. He may want to return on Report when he has clarified his own mind on the matter.
Lord McIntosh of Haringey: I am sorry; there has been a misunderstanding. Of course there will be an audit of the fund every year—nothing takes away from that. I am talking about going further, as the amendment would, by looking at the reasons that things happen. That is in addition to the audit function of the National Audit Office. I assumed that the noble Lord was talking about its value-for-money studies.
Baroness Wilcox: I hear what the Minister says about all the checks and balances that will take place,

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but we have said many times that the initiative is new and different. An annual report would give the Government a way of celebrating, educating and bringing matters together. That would be novel and it is a missed opportunity, but that is for the Government to decide. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 15 [Information from account providers etc.]:
Baroness Wilcox moved Amendment No. 72:
Page 9, line 2, at end insert "but the regulations may not require the provision of information by account providers more frequently than monthly"
The noble Baroness said: Amendment No. 72 adds to Clause 15, which deals with information from account providers, the requirement that information must not be required more frequently than monthly. The draft regulations require providers to put in claim and financial returns fortnightly. The Association of British Insurers has described that as "excessively bureaucratic". It has pointed out that the draft regulations do not require fortnightly but bi-monthly returns, which may well be difficult to achieve with existing IT systems. In total, the draft regulations require 61 separate returns, which the ABI believes should be streamlined to 12 integrated monthly returns and possibly an annual one in addition.
I know that the Government have argued that the so-called fortnightly returns will speed up the crediting of government contributions to the child trust funds and thus maximise the returns. This is probably de minimis, but in any event the ABI tells us that many providers will credit the voucher as soon as they receive it, as insurers currently do for life assurance premium relief.
I hope that the Government will be prepared to look again at the administrative burden on the providers. A point will come at which the camel's back will be broken and the Government should listen to those real concerns from providers if they wish to see a significant number enter the child trust fund market. I beg to move.
Lord McIntosh of Haringey: The noble Baroness, Lady Wilcox, says that the Government argue that the fortnightly returns will speed up the money for an account—indeed, we do argue that. What happens is that the information is provided, the account is opened—please pay. If the money is paid in straight away or on a fortnightly basis, interest starts to be accrued from that date. I am glad to hear of the ABI's comments about paying the money in straight away, but that is not a legal requirement, as I understand it.
The amendment says that the regulations may not require providers to provide the Inland Revenue with information more frequently than monthly. The noble Baroness. Lady Wilcox, made clear that it refers to the draft regulations, which we published on 2 February. It does not work in that sense, because several other clauses in the Bill impact in this area—for example Clause 5(5)(b) allows for regulations requiring the provider to inform the Revenue when an account is
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opened using a voucher. The amendment would not prevent fortnightly returns, but would remove some of the important information we need from those returns.
Our intention is that providers should notify the Revenue within two weeks of opening an account, and of other important changes in the account. such as if the account has been closed or has been transferred to another provider. The reason for the two-week period rather than longer is that we want to put the money into the child's account as quickly as is practicable once the parents have decided which CTF provider's account to open, so that the child can gain maximum growth from it.
The fortnightly exchange of information will be via the Internet and that will be an automated process with very little human intervention. There will be a specified electronic format that will encrypt information and use a password that is specific to the provider. If the provider's return is correct, the Government contributions will be paid automatically to the relevant account. If the provider's return is incorrect it will be automatically returned to the provider to rectify.
As it is an automated process, it is not envisaged that fortnightly reporting will add significantly to the workload of providers and it will enable Government contributions to reach CTFs at the earliest possible time.
Lord Naseby: I do not disagree with what the Minister said, but does that mean that there will be 26 returns a year?
Lord McIntosh of Haringey: Yes.
Baroness Wilcox: Fortnightly seems onerous, and I am interested to hear that payments would be made via the Internet. There is the electronic application about which we started to talk as early as Amendment No. 31.
Lord McIntosh of Haringey: But if the noble Baroness will permit me to say so, we are talking about a return between the Government and the provider. It is not for the parent.
Baroness Wilcox: I fully understand exactly what the Minister is saying, but it is nice to hear him use the words "via the Internet". However, I am sorry that the process is fortnightly, which seems onerous. If anything, it will prevent people entering the child trust fund market. We do not want to limit it if we can avoid it; I am sure that the Minister does not either. For the moment, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
On Question, Whether Clause 15 shall stand part of the Bill?
Lord Naseby: I apologise to the Minister for not giving him prior knowledge that I would speak on clause stand part; I am not even sure that my comments come at exactly the right place in the Bill. However, I am concerned about what happens to children whose parents divorce, or one partner dies

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and the parent remarries, when the child wants to change their name. Then it happens again and they want to change their name again, and they then may want to change it back to what it originally was. It is an experience that some of my noble friends have when they change their names on arriving in the House. It is at best tedious, and often very lengthy. Is there a process on the information from account providers that simplifies the whole issue?
Lord McIntosh of Haringey: I rather think that I shall have to write to the noble Lord on that point. I am sure that there is.
Clause 15 agreed to.
Clause 16 agreed to.
Clause 17 [Use of information]:
Baroness Wilcox moved Amendment No. 73:
Page 9, line 34, leave out subsection (2).
The noble Baroness said: I shall speak to Amendments Nos. 73 and 74. In order for the system of CTFs proposed by the Bill to work well, the Inland Revenue needs the power given to it in Clause 15 to require information and documentation from any relevant person—that is, those responsible for a CTF and the account providers. Those details are to be contained in regulations. Our concerns, however, centre round Clause 17, which makes provision for the use to which that information, once gathered, can be used.
Subsection (1) states that the information held by the Revenue,
"may be used, or supplied to any person providing services to the Inland Revenue, for the purposes of, or for any purposes connected with, the exercise of",
functions relating to CTFs. That is all well and good—there needs to be effective interaction between all parties who work together and co-operate to allow CTF schemes to work.
We are concerned about subsections (2) and (3), however. Subsection (2) would allow information held by the Inland Revenue or by a person providing services to it, for any purpose relating to CTFs, to be used or supplied to any person providing any services whatever to it for the exercise of any other function which it undertakes. Subsection (3) would do the opposite and allow any information held by the Inland Revenue, for any other purpose unconnected with CTFs, to be used and supplied to it or to any person providing services to it to exercise its functions regarding CTFs.
Our amendments leave out subsections (2) and (3) on a probing basis. The powers are broad-ranging. I do not doubt that the intention of the Government is to encourage co-operation between different departments within the Inland Revenue. Mention has been made of the need to allow a third party to collate statistical data to examine how well the scheme is working. That might require sharing of personal information about CTFs. We have also heard mention of sharing information with IT contractors and so on. However, that is not what the Bill currently says—it
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says that any information which the Inland Revenue has acquired in the process of administering CTFs can be shared with any third party, not for purposes connected with the exercise of the Inland Revenue's functions within this Bill, but for an altogether different purpose.
I am always wary of the issue of data protection. Personal information should not be shared unless it is strictly necessary for the purpose of administering CTFs. That is already covered by Clause 17(1). Can the Minister explain how he justifies extending this information sharing to parties unconnected with CTFs? The powers currently set out in subsections (2) and (3) are broad. We would feel happier if the regulations provided for the circumstances in which information could be made available by the Inland Revenue to other Inland Revenue departments and outside providers not directly related to CTFs. As it is, the Bill gives a free rein without any of the specific examples to which the Minister in another place referred. I beg to move.
6.30 p.m.
Lord McIntosh of Haringey: I think that we are at cross purposes. It may be the wording of the clause that is causing the trouble. The phrase "person providing services" is the key. The person providing services referred to in the Bill is always the IT contractor—and only the IT contractor. There is nothing in the clause that means that information will be shared with anyone else who conceivably might have an interest.
What is largely meant by information sharing is enabling computer systems and databases to talk to each other so that information held in one part of government can be used by another. There is plenty of precedent here. It is a standard provision that formalises for new work taken on by the Inland Revenue the existing convention that information received by the Inland Revenue for one purpose can be used for other purposes. We have the same provision, for example, in the new tax credits legislation.
The first amendment proposes that subsection (2) be left out. If accepted, it would not be possible, for instance, for the Inland Revenue to use information about child trust funds for evidence-based policy making. For example, we would not be able to produce the annual report, which the noble Baroness, Lady Wilcox, wanted in the previous amendment. As part of the evaluation of child trust funds, it might be worthwhile to follow a particular group of children and show how their child trust funds develop. We might want to consider differences in the use of child trust funds between children who start work at age 16 and those who go on to higher education If we left out subsection (2), we would not be able to do that.
Subsection (3) allows the Revenue to use information held for other purposes for the child trust fund. It allows the award of child benefit to be used to determine eligibility for child trust funds and details of child tax credit awards to be used in assessing whether a child is eligible for the higher rate of government

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endowment. I hope that it will be seen that these subsections are both quite restrictive and absolutely essential to the operation of the child trust fund.
Lord MacGregor of Pulham Market: I am sorry that 1 was unable to be present earlier in the debate. I intended to ask the Minister if he could indicate precedence for this, which he has just done. However, one point arises from his response. While I fully accept the need for a clause along these lines, the Minister said that subsection (2) would be applied only for IT services. But that is not what the Bill states. It uses the words, "supplied to any person". Is the normal precedent "to any person" when it is meant to be confined to particular services?
Lord McIntosh of Haringey: The phrase is "any person providing services". My advice is that that is to be interpreted as IT contractors and no one else. It sounds counter-intuitive to me as well, but I think that there is precedent for it.
Lord MacGregor of Pulham Market: I am sure that stationers supply services to the Inland Revenue. Probably caterers also supply services. The Minister says that his interpretation is correct, but it seems a very broad phrase indeed.
Lord McIntosh of Haringey: When I read it, it sounds broad as well. I shall write to everyone concerned about this.
Baroness Wilcox: I thank the Minister for that. These were probing amendments, and we have had a useful debate. I should be grateful if the Minister would write to us on the matter. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 74 not moved.]
Clause 17 agreed to.
Clause 18 agreed to.
Clause 19 [Payments after death of child]:
Baroness Wilcox moved Amendment No. 75:
Page 11, line 3, leave out "may" and insert "shall"
The noble Baroness said: Amendment No. 75 is also probing. Clause 19 states that the Inland Revenue "may" make a payment to the personal representatives of the child. This concerns child trust fund contributions that had not been paid over before a child's death.
The amendment seeks to ascertain why, if the conditions in subsection (3) have been met, the Inland Revenue should have any discretion as to this payment. The issue was debated a little in Standing Committee in another place, where the only example given was of a parent who had murdered the child. I want to challenge that. The clause requires a payment to be made to the child's personal representatives, not the parents. I may be mistaken, but if a parent has murdered a child, he or she would not be eligible to receive anything from the child's estate, so the fact that the child had been murdered should not be relevant. In
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any event, it is not something that the Inland Revenue should opine upon, as it is a matter for the criminal law.
So I return to the basic question of why discretion has been given to the Inland Revenue, and on what basis it intends to exercise it. The Minister will see that this is not the usual "may" or "shall" debate, but raises issues of real substance. I beg to move.
Lord McIntosh of Haringey: Clause 19 is quite specific. The amendment is concerned with cases where the child dies. In such circumstances, the child trust fund will form part of the child's estate and be passed to personal representatives. Clause 19 deals with cases where children die before the Inland Revenue has made child trust fund payments which would be otherwise due. It also deals with cases where a child trust fund payment has been paid but has not been credited to an account before the death of the child.
There will be no need for parents to make an additional claim to receive any outstanding payments due. These will be sent to the parents automatically, accompanied by an appropriate letter.
In case the noble Baroness, Lady Wilcox, or others think that this may be restrictive, it may help if I explain why the Inland Revenue will make payments to personal representatives only if the child benefit has been claimed. Where they so wish, parents can claim child benefit even though a child has died. Child benefit is paid for eight weeks in those circumstances. I understand the circumstances in which some parents do not wish to do so; I also understand that some parents wish to occupy their minds in sad circumstances by seeing to it that they get for their children the rights that they have. Where parents do not claim the child benefit, I think it is wise to assume that they do not wish to be contacted to have their eligibility assessed. We believe that that is the least intrusive approach.
The amendment refers to subsection ( 1 ) of Clause 19, which states that the Inland Revenue "may" make a payment after the death of the child to personal representatives. The clause stops short of saying that a payment "shall" be made. That provides the Revenue with the power not to make a payment if it would be inappropriate to do so—in other words, if it appears that communication would be intrusive.
Turning to the issue of murder, personal representatives responsible for the unlawful death of a child would not receive a child trust fund payment. In practice, the Revenue would wait until another personal representative was able to receive the money. In these difficult circumstances, it is best to include that degree of discretion.
Baroness Wilcox: I said that it was a probing amendment, and it is. I thank the Minister for his reply. I have nothing more to say at this stage. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Baroness Wilcox moved Amendment No. 76:
Page line 4. after "representatives" insert "or executors"
The noble Baroness said: Finally, I rise to speak to Amendments Nos. 76 and 92, unless I respond to the government amendment which follows.
We are drawing to the close of our discussions in Grand Committee. Clause 19 deals with payments made by the Inland Revenue after the death of a child. Subsection (1) states:
"Where a relevant child dies, the Inland Revenue may make a payment to the personal representatives of the child".
Amendment No 76 is a strictly technical amendment. We have been advised by the Law Society for Scotland that Clause 19 does not make correct reference to the Scottish terminology for personal representatives. As the Bill is intended to extend to Scotland, the term "executor" should be used in addition to "personal representatives" to avoid causing any possible confusion to those in Scotland affected by the legislation.
Amendment No. 92 has a slightly different focus. It would provide for a regulation to enable sums of money to be paid into a deceased child's trust fund without requiring the confirmation of a personal representative or executor. This amendment was also recommended to us by the Law Society for Scotland. I am not sure whether the drafting is correct, but there is a significant point to be made here, so it will serve its purpose at this stage.
Clause 19 enables any payments that the Inland Revenue should have made to the child trust fund before the child dies to be paid to the child's personal representatives. It is quite possible that the sums to be paid into the child trust fund are unlikely to exceed £1,000. On the basis that this claim would normally be the only asset of the estate, apart from any money already paid into the child trust fund, it would mean that the child's father, mother or sibling would require to be confirmed as executor under the small estates procedure.
Where other payments are due by the Government to a deceased person at the time of death, there are government regulations enabling the particular government office to release moneys under, for example, Section 5(1)(g) and (q) of the Social Security Administration Act 1992. Although Clause 28 provides for regulations to be made under the Bill, there does not appear to be any provision enabling a regulation to be made relating to payments due under Clause 19. This amendment seeks to address that omission. I beg to move.
Lord McIntosh of Haringey: I should love to find the Law Society for Scotland right, as the noble Baroness, Lady Wilcox, claimed when she introduced the first of their amendments, but I am advised that neither of these amendments is necessary.
Payments made under this clause will go to the deceased child's estate. "Personal representatives" is the conventional legal expression covering both executors and administrators on an intestacy. It applies throughout the United Kingdom.
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Amendment No. 92 seeks to amend Clause 28 so that regulations could be made allowing the parents of a deceased child to claim the child trust fund more simply than would normally be the case. I have already explained that child benefit claims will be the normal gateway to CTF, and this will be the case when children die early in life. Child benefit will act as a secure and clear pathway.
The Revenue has developed this procedure to handle these difficult issues sensitively and sympathetically. There is no need for further regulations.
Baroness Wilcox: I thank the Minister for that explanation and clarification. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 77 and 78 not moved.]
Clause 19 agreed to.
Clause 20 [Penalties]:
[Amendments Nos. 79 to 84 not moved.]
Clause 20 agreed to.
Clause 21 agreed to.
Clause 22 [Rights of appeal]:
[Amendments Nos. 85 and 86 not moved.]
Clause 22 agreed to.
Clause 23 [Exercise of rights of appeal]:
Lord McIntosh of Haringey moved Amendment No. 87:
Page 14, line 11, leave out "prescribed manner" and insert "manner prescribed by regulations"
The noble Lord said: This amendment seeks to insert in the wording of Clause 23 a phrase that has been accidentally omitted. Clause 23 relates to the appeals process. The Bill provides for appeals against decisions taken by the Inland Revenue. Appeals may be brought by account providers or the responsible person for the child and will be heard by the appeals service, which hears social security appeals including child benefit appeals.
Clause 23(1) states:
"Notice of an appeal under section 22 against a decision must be given to the Inland Revenue in the prescribed manner within the period of thirty days after the date on which notice of the decision was given".
The amendment clarifies the fact that the manner in which the appeals are to be made will be set out in regulation. I beg to move.
On Question, amendment agreed to.
Clause 23, as amended, agreed to.
Clauses 24 to 26 agreed to.
Clause 27 [Commencement]:
[Amendments Nos. 88 to 90 not moved.]
Clause 27 agreed to.
Clause 28 [Regulations and orders]:
[Amendments Nos. 91 and 92 not moved.]
Lord McIntosh of Haringey moved Amendments Nos. 93 and 94:
Page 16, line 29, at end insert—
"(4A) No regulations to which this subsection applies may be made unless a draft of the instrument containing them has been laid before, and approved by a resolution of, each House of Parliament.
(413) Subsection (4A) applies to—

(a) regulations under section 2(7) or 10(1) or (2), and

(b) regulations which prescribe an amount under section 8(1) or 9(2), other than the first regulations which do so."

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Page 16, line 32, after "is" insert "(unless a draft of the instrument has been laid before, and approved by a resolution of, each House of Parliament)"
On Question, amendments agreed to.
Clause 28, as amended, agreed to.
Clauses 29 to 31 agreed to.
Bill reported with amendments.
The Committee adjourned at twelve minutes before seven o'clock.

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  Film Production Tax Relief
  Wind Farms
  Wind Farms
  Sub-post Offices: South Tyneside
  Sub-post Offices: South Tyneside
  Myalgic Encephalomyelitis and Chronic Fatigue Syndrome
  Myalgic Encephalomyelitis and Chronic Fatigue Syndrome

  Licensing Act 2003: Section 182 Draft Guidance
  The Parliamentary Under-Secretary of State, Department for Culture, Media and Sport (Lord McIntosh of Haringey)
  My right honourable friend the Secretary of State for Culture, Media and Sport (Tessa Jowell) has made the following Written Ministerial Statement.

  I am today laying before Parliament a draft of the guidance to be issued by me under Section 182 of the Licensing Act 2003. I am also placing copies in the Libraries of both Houses, the Vote Office, and the Printed Paper Office. Copies will be made available to the public on the DCMS website at: www.culture.gov.uk/alcohol and entertainment/licensing_act_2003.

  The guidance makes clear our determination to enable licensing authorities and the police to bring the minority of badly run premises into line with the best. The police and other responsible authorities should make full use of existing and new powers under the Act proactively tackling alcohol-related crime and disorder and badly run premises.
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  In carrying out their functions under the Act, licensing authorities have a clear responsibility to promote the prevention of crime and disorder, and the prevention of public nuisance, as well as to promote public safety and protect children from harm.

  Fine Enforcement
  The Parliamentary Under-Secretary of State, Department for Constitutional Affairs (Lord Filkin)
  My honourable friend the Parliamentary Under-Secretary of State has made the following Statement.

  Improving fine enforcement performance is an important part of maintaining public confidence in the criminal justice system. Justice must be done, and must be seen to be done.

  To this end, we are launching a national initiative to target those who have defaulted on criminal penalties imposed by the courts. The initiative, called Operation Payback, will see magistrates' courts across England and Wales conducting blitzes against serious fines defaulters in their areas.

  The operation means that money owed to the court, and therefore the taxpayer, and compensation owed to victims, is collected. The Government are sending a clear message to those who have been fined that payment is not optional and that penalties must be paid.

  The national operation is being co-ordinated by the Department for Constitutional Affairs with support from the police and the Department for Work and Pensions.