Westminster Hall Sitting of 15 December 1999

Preamble
[MR. MICHAEL J. MARTIN in the Chair]

"Sharing the Nation's Prosperity"
Motion made, and Question proposed, That the sitting be now adjourned.—[Mr. Clelland.]
9.30 am
Mr. Jim Cousins: We are here this morning to discuss the Cabinet Office report "Sharing the Nation's Prosperity". The report is a landmark in the discussion of regional needs and problems, and the Government programmes and spending that attempt to deal with them. We all know that society is extremely divided. We are now in a city where people are jamming switchboards to buy internet stocks, yet it is also a city where there is a low rate of investment in new technology. We are now in a city with sharp divisions between neighbourhoods. For instance, Hackney has some of the worst deprivation in Britain, yet it is only a short bus ride away from some of the greatest explosions of wealth on the continent.
I am conscious that many of my hon. Friends are here today to discuss the north-east of England, because the situation there is different. Not one family in the northeast is untouched by the brutal facts set out in the report. That is not the result of a temporary swing in economic activity. It is not the result of the closure of a single factory or of an industry. It cannot be addressed by a task force or a sprinkle of worthy Government initiatives.
The problems for the north-east that are highlighted in the report have very deep roots. They affect the way of life and the thinking of the people of the north-east. Nobody in the north-east ever feels confident of job or income, and it will be so for years to come. That affects planning for the future; it affects the start-up of businesses; and it affects people's thinking about their own and their families' future.
People in the north-east have made huge efforts to adapt and to come to terms with the facts that are set out in the document. There are many disappointments, despite the efforts that ordinary people have made. Some of the problems are well known to us. My hon. Friend the Member for Tynemouth (Mr. Campbell) has had to grapple with the problems caused by the closure of Siemens. Others are grappling with the difficulties of the offshore oil industry, which the report claims to be a growing industry. The pattern of problems feeds on itself, and it will require years of calculated, determined and systematic action to deal with it.
I do not intend to spend much time speaking about statistics, but, for those who represent the north-east, the indicators in the report are part of the ordinary week-by-week experience for us and our constituents. Among English regions, the north-east of England has the lowest economic activity, the lowest gross domestic product per head, the lowest earnings, the lowest household incomes and the lowest rate of registration for VAT for new businesses. It has the second lowest
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number of income support claimants and the second lowest rating for educational achievement and attainment—a crucial indicator. It is the region in the United Kingdom with the lowest take-up of vocational qualifications, the lowest business-base formation, the greatest unemployment and the lowest employment rates. The difference between the north-east and the south-east, means that one in six people of working age are not in the labour market. That capacity and potential are not available to serve our community and our people.
With that goes the ridiculous social stress of London and the south-east—the overcrowding, the poor quality of life and the other difficult and intractable problems that require so much Government action. Only yesterday, I was present at a parliamentary Committee, and heard the Chancellor say that it would cost between £14 billion and £16 billion to solve the problems of the London Underground. The cost of relieving stress in London and the south-east is paid twice over by the north-east. First, we help to pay for it. Secondly, if that economic activity were taking place in our region, not only would we benefit directly, but the cost to the south-east would be so much lower. Sharing the nation's prosperity is fundamental to maintaining the broader welfare of life, not only in the north-east but in London and the south-east. That will require sustained longterm action. We cannot leave it to market forces. Nor can we leave it to the tweaking of market forces. That simply will not work.
I ask the Government to bear in mind the following points. First, we need to set regional spending and performance targets, so that we can measure regional progress towards a benchmark to which all regions can aspire. Secondly, a needs assessment should be made of the English regions, and of the other nations that form the United Kingdom, that puts consideration of regional problems, needs and spending on a common base. We could thus ensure that the regions and nations of Britain achieved the common objectives set out in the report.
The north-east obviously needs a substantial increase in health spending. It has the worst health experience in the United Kingdom, except for Scotland. We need a substantial increase in health spending, and I look to the Cabinet Office to work with the Department of Health to ensure that those needs are met on a regional basis. However, we must bear in mind the fact that the health regions are not the same as the regional areas used in the report.
The north-east has the lowest educational achievement anywhere in Britain, but there is no regional element in the work of the Department for Education and Employment; it has no regionally based programmes or assessments. If we are to have joined-up government, and if we are to tackle the deep-rooted patterns of low educational achievement of which our communities are the victims, we need a regional element in the work of the Department for Education and Employment.
Mr. A. J. Beith: On that point, surely if there were some proper regional assessment within the Department for Education and Employment, action would have to be taken to deal with low educational funding in the counties of

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Northumerland and Durham. Both counties have a very low level of educational take-up compared to the nation as a whole.
Mr. Cousins: I suspect that every part of the northeast would benefit from such an assessment. I would not care to single out the counties of Durham or Northumberland, although I am well aware of some of the difficulties that Northumberland faces because of the low density of its population and the large geographical area that has to be covered.
We must consider another point. The Government, in the White Paper on regional development, describe our region as "peripheral". I look to the Government to ensure that we have at least one motorway connection to the south, which we do not have now, and one dual carriageway connection to the north, which we do not have now. We would then be rather less peripheral.
Above all, the regional development agency needs a substantial amount of money to regenerate the communities of the north-east and to take advantage of the Government's programme for setting up new enterprise. To have one law for the lion and for the ox is oppressive. To treat every region equally in the promotion of new enterprise will be to the advantage of those regions that already have a stronger business base than we have in the north-east. Strong and special measures must be taken if the north-east is to achieve equality in the creation of new businesses.
The Government have created a huge agenda for themselves. It is set out in the White Paper "Building Partnerships for Prosperity", in which the Deputy Prime Minister said:
"Throughout my political career I have argued that the English regions are crucial to this inclusive approach."
That approach is intended to tackle the environment and our quality of life, and to modernise and achieve sustainable development. He continued:
"Our vision is for the English regions to grow and prosper, alongside Scotland, Wales and Northern Ireland, within the United Kingdom and within the European Union."
We need the right information so that we can measure whether that agenda is being achieved.
In the preface to that White Paper, the Prime Minister, who represents a constituency in the northeast, said:
"I want the people of each of England's regions to have better opportunities to contribute to the prosperity of their own communities".
That is absolutely right. We in the north-east of England do not want permanent welfare dependency. We want a platform and programme of Government action that will permanently lift us out of structural welfare dependence and enable our people to play a full part in British society, as they want and need to do. That will contribute to the well-being of national society.
Our people must believe that they can prosper and shape the destiny of their region without constantly depending on decisions, including those on Government budgets down to fine-grain detail, taken in Westminster and Whitehall. It is time to support regions such as the north-east more strongly and to enable our people to be
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free to take part in British society, which they want to do. That will relieve many of the difficulties in other regions, which suffer the opposite end of the problems that our people suffer. That is a great agenda, and we ask the Government to take steps to put it into practice.
9.43 am
Mr. Ronnie Campbell: I shall not take too much time, because I made a speech on the north-south divide in the debate on the Queen's Speech not so long ago and I do not want to repeat myself.
The report, entitled "Sharing the Nation's Prosperity" was produced in five days. I was sceptical about that because I thought that it would be a whitewash—just a push-off that had been dreamt up and put on paper. We thought that the report was intended to soften us up, but we have now read it and its findngs are worse than we thought; they reinforce our case.
As my hon. Friend the Member for Newcastle upon Tyne, Central (Mr. Cousins) has said, we are dealing with the north-south divide, and we have seen the problem before. I shall not knock the Scots today, Mr. Deputy Speaker, because you are in the Chair. I shall take it easy. The Barnett formula was devised many years ago to help Wales and especially Scotland, which was going through a bad patch. It helped Scotland and got it going, especially in terms of education, health, jobs and prosperity.
There are big differences between the regions. People have said that the gap is closing, but not according to the figures that I have seen, which show enormous regional differences. In The Journal, the local Newcastle paper, the right hon. Member for Berwick-upon-Tweed (Mr. Beith) compared education in Berwick with that in a little town just over the border in Scotland. The Scottish school received much more money than the one in the right hon. Gentleman's constituency did. Any Government who allow such unfair differences to continue are not doing their job.
I do not want to take money from the Scots. Geordies never want to take money from anyone. I am sure that you have a lot of money, Mr. Deputy Speaker, but I do not want to take it from you. All that we in the northeast are saying is that the formula was good enough for Scotland when it was on its knees, so we should receive similar help. We never said that we wanted what the Scots were getting. We were all right in those days; we had pits and shipyards, and the north-east was not a bad place to be. As my hon. Friend the Member for Newcastle upon Tyne, Central said, at least we knew that we had a job. We thought that jobs in the pits were for life, until Margaret Thatcher decided otherwise.
What does the report mean for us? What will it do for the north-east? When will the proposals be implemented? The report is very good; it goes a long way to help our case, but how will the Government help us? I hear rumours that the Government will look at the north-east and say, "Well, there are some good pockets in the north-east and some bad ones." I have the funniest feeling that they will throw a little money here and there and say, "Get on with it. That's all you are going to get", yet the Barnett formula will not be touched. The formula will stay in place because the Prime Minister does not have the bottle to change it given the Scottish situation. The Scottish nationalists are breathing down the Government's neck.

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Unfortunately for us, there is no fourth party in the north-east; we have only the Liberals. Only one Tory Member is here in the Chamber. The Liberals are on our backs. If people in the north-east become disillusioned with the Government, they will go to the Liberals. Fine; the Prime Minister might love to see a Liberal in my seat rather than me. He works with them now, so he might work with one better than with me.
The problem is that we need extra cash in the northeast. The Barnett formula must be changed. I am not knocking people in Scotland, but we should get the same as them. We are on our knees. Our shipbuilding, mining and other industries have gone. Elleton pit is on the brink and may close in the new year. We want something to replace those industries. We need help not only in industry but in education, and the Government's five-day wonder report proves our point.
9.48 am
Mr. Peter Atkinson: The longer I spend in the House, the more I begin to agree with the hon. Member for Blyth Valley (Mr. Campbell). I agree with him that the Prime Minister would not have the bottle to revise the Barnett formula. In recent weeks, people have concentrated on the Barnett formula, but doing so is a waste of time. The Government's response at yesterday's Scottish questions shows that they are more concerned with keeping the Scottish National party at bay than with anything else. That is why the Barnett formula will not be reformed.
Ms Dari Taylor: Did the previous Administration ever consider changing the Barnett formula?
Mr. Atkinson: I shall answer that point later, and I hope that the hon. Lady will be patient.
The only way to increase funding for the north-east is to take money away from the south. However, the Government will not do that, given Labour's marginal seats in the south. I am afraid that the five-day wonder report, "Sharing the Nation's Prosperity", is more Downing street spin that anything else. As has been said, the report took five days to produce and it is only a mishmash of old statistics pulled together in a binder.
The statistics on the north-east given in the report are out of date. It talks about unemployment going down—in fact, it is going up. The Prime Minister's press secretary, whose name we cannot mention, talked about hysteria in the local media over the north-south divide. The north-south divide is as old as the hills, but has been made worse in recent years with the decline of the heavy manufacturing industries, while the south has boomed under the growth of high-tech and financial services. We are continually seen to be knocking the north, which is a great pity. One of our problems is convincing people who live south of Watford that we have some good things going for us in the north. As long as we appear a begging-bowl economy, it is harder to attract inward investment and people into the region.
The north has a great deal going for it. It has spectacular landscapes and coastline, in many respects a high quality of life, relatively traffic-free roads, an industrious, hard-working and innovative population, some splendid cities—such as Newcastle upon Tyne, which is one of the most spectacular cities in the country—and wonderful growth in its higher education
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sector: more than 70,000 students go to the north-east to learn, and that would be a wonderful resource for the region if only it were properly capitalised on. The fastest-growing industry is tourism and there is much to do to build that up.
The blame, if I may put it that way, for the growing north-south divide can be put on the policies introduced by the Government since the last election. It is worth considering what they have done. The hon. Member for Shipley (Mr. Leslie) laughs, but one has to remember—he probably does not know the north-east—that it is a big, rural, peripheral area, as it has been described. So what do the Government do? They hike petrol tax up to one of the highest levels ever—the highest level in Europe. How does that help an area that depends on cars and on tourism?
Mr. Derek Foster: Does the hon. Gentleman not recall that the only time in recent years that the north-south divide reduced was during the disastrous recession of 1990–92 when the south, for almost the first time in the past 100 years, suffered as much as, or perhaps even more than, the north? That was under the hon. Gentleman's Government, and they did not want it to happen.
Mr. Atkinson: There was a recession at that time and the south suffered, but I do not understand what bearing that has on what I am saying. Government policies, such as the increase in petrol duty in an area that depends on the motor car, are strangling local enterprise. The hotel and tourism industry is already having to deal with a strong pound; why be handicapped by making our petrol the most expensive fuel in Europe?
The countryside depends on agriculture—look what the Government have done to it. Agricultural incomes are the lowest that they have ever been. The beauty and prosperity of rural Britain depend on the prosperity of farming. More smoke and mirrors emerged from the Select Committee on Agriculture only yesterday, when it was announced that the Government's aid package to farmers would amount not to £500 million, as was trailed, but to £1 million.
We also have some of the highest council taxes in the country. Is it not idiocy that a person living in an average, three-bedroomed semi-detached house in Newcastle upon Tyne pays more council tax than someone who owns a £35 million house in Kensington? That situation has arisen because we have inefficient local authorities, which have been responsible for so much of the trouble in towns in the north-east. Local councillors in the north-east prefer to spend their time squabbling with one another and stabbing one another in the back, rather than getting on with cleaning up the cities and dealing with the sink schools and low educational expectation that we have in Newcastle.
Dr. David Clark: The hon. Gentleman is not being fair to the councillors in the north-east. Does he not concede that for two years running the best unitary authority anywhere in England has been in the north-east, in South Tyneside? In spite of the highest unemployment in the UK and worse than average deprivation, the north-east has some well-run local authorities, of which South Tyneside is a good example.
Mr. Atkinson: One has only to look at the evidence of one's own eyes and of the reports to see the low

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educational achievements—the local authority is responsible for the schools—and one has only to walk around Newcastle, which is one of the most spectacular cities in England, to see the litter blowing around and the dereliction in part of the west end, which was once one of the finest residential areas in the city. Local authorities have considerable responsibility for some of the conditions in the north-east.
I also wish to mention the health tax that has now been imposed on us. As we see in the report, the northeast has some of the worst health problems in the country. Health action zones have recently been set up, which we hope will improve that situation. However, with sleight of hand, the Treasury has changed the way that health authorities are funded; they now have to carry all the burden of their drug costs. That will cost my local authority perhaps £2 million a year from its budget and that will be reproduced throughout the north-east, which will mean that we will not be able to develop the health action zones, which have already been set up, unless they receive extra funding.
Mr. Cousins: It is a pity that you are using this occasion to make a lot of rather unfortunate local party political points. Would you not accept that the 20 years of Conservative government, which underpins so much of the information in the report, so much of the dereliction of Newcastle's west end, for example, and so much of the social stress that constitutes the poor health experience of the region, might also have something to do with the problems that we are discussing?
Mr. Deputy Speaker: May I just say before we proceed that the hon. Gentleman's use of "you" implies that he is speaking to the Chair? Even his hon. Friend the Member for Blyth Valley (Mr. Campbell) did not involve the Chair in his arguments about the Scots.
Mr. Cousins: I apologise, Mr. Deputy Speaker. The atmosphere is so much like an urban district council that I am reverting to type.
Mr. Atkinson: I agree. It has been called the Westminster parish council; I do not know whether that is a little unfair.
I agree in part with what the hon. Gentleman says, but many of the conditions of the city have been made substantially worse by the housing policies operated over the years by Newcastle city council. I think that that is self-evident. The north-east has also not been helped by the planning system and by ministerial delays on planning. One of the things that developers and entrepreneurs in the region complain about is how hard it is to get planning applications through. The classic example is the one in my constituency with the plan to build a virtual reality centre at Stannington in Northumberland, which was lost because of the Minister's refusal to make a decision on the planning application. By the time that the Minister had decided to go against the decision of the inspector who had recommended approval for the plan, the funding for the project, which could ultimately have created 2,000 jobs, had gone and the scheme was dropped.
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How do the Government's abolition of the Northumberland and Tyneside training and enterprise councils and their creation of something called skills and learning councils help the region? The Northumberland TEC has been at the forefront of introducing new skills in its area, but it has been abolished and replaced with a body on a sub-regional basis. How does that help? The creation of the regional development agencies was also damaging for the region. Before them, we had the development councils, which were specialist bodies in areas such as the north-east that needed special treatment and special development. The whole country now has regional development agencies and it is obvious that the chairman of the regional development agency in the south-east is saying, "We have problems down here and we want to keep more of our money at home and not spread it around the country." The regional development agency will ultimately do more to harm than to help the region. I imply by that no criticism of Dr. John Bridge, for whom I have the highest admiration, who is the chairman of the regional development agency in the north-east, but I would have preferred him to stay at the Northern Development Company, which did a first-class job for the north-east.
The north-east also has poor road infrastructure. We have had no news about taking the MI up to Newcastle, and we still have the threat in the countryside of a pesticides tax and an aggregates tax, which will damage quarrying, opencast mining and farming.
I urge on the Minister some solutions to the problems. First, I urge him not to increase the price of petrol, because that would be extremely damaging in a region such as the north-east of England. Secondly, I ask him to introduce a scheme to provide some relief for hauliers on the duty that they pay. In rural areas, transport is everything, and increasing diesel costs increases all costs. He should also follow the advice of the Leader of the Opposition to abolish RDAs and replace them with a new development company, returning to the idea of the Tyne and Wear and the Teesside development corporations. Hon. Members have interrupted me to refer to the Government's record. The creation and funding of those two development corporations—I realise that local councillors did not approve of them—by the Conservative Government, by short-circuiting local government in the north-east, did more than any other measure to improve the environment of the north-east.
Proper funding should be provided to deal with sparsity. Time and again—I accept that when we were in government it was the same—we have not succeeded in making the case that sparsity, especially in education, roads and social services, should be properly funded. That would help. We should also have more enterprise zones—another successful Conservative innovation which continues to prove extremely successful—and less regulation which strangles the farming industry and new enterprise. We do not have enough local businesses. The north-east of England needs more service industries. Every time that the Government introduce a measure such as the working time directive, the national minimum wage or the social chapter, they increase the burden on business and make it increasingly hard to develop the necessary new industries.
We need some commitment from the Government, who have produced six Cabinet Ministers who represent the north-east—the three Bs: Brown, Blair and Byers;

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and the three Ms: Mandelson, Mowlam and Milburn. When the Conservatives were in power, we did not have even one, but the Conservative Government were more committed to the north-east than are the current Labour Government with their six Cabinet Ministers.
10.2 am
Dr. Ashok Kumar: I congratulate my hon. Friend the Member for Newcastle upon Tyne, Central (Mr. Cousins) on securing the debate. Debate on the north-south divide has been going on for as long as I can remember.
I shall say a few words about the definition of poverty and the appropriate political instrument for tackling poverty, which have a bearing on the broader issue of regional disparities. I shall also outline the structural nature of some of those disparities and how they affect my constituents.
The Cabinet Office report released last week was timely, foreshadowing a detailed study conducted by the Joseph Rowntree Foundation on patterns of poverty in this country that are linked to social and geographical circumstances. I hope that we shall have an opportunity some time in future, perhaps in this new innovative debating Chamber, to discuss the Rowntree report and its implications for tackling social exclusion and powerlessness.
My right hon. Friend the Prime Minister was correct in adducing that pockets of poverty exist in the southeast and that problems are experienced in parts of London. As my hon. Friend the Member for Newcastle upon Tyne, Central said, estates and communities just a few miles from this place have levels of unemployment equivalent to some of the worst in the areas that we represent in the north-east.
Unemployment and poverty must be tackled and eradicated wherever they occur, and I support any initiative to breathe new life into such communities in areas such as north Kent or the estates of Southwark, Newham and Hackney which suffer from joblessness. However, the problem is that we are not comparing like with like. I accept that there is high unemployment in the Medway towns, for example, but Kent has benefited as a centre for logistics following the opening of the Channel tunnel. Similarly, there is high unemployment in some of east and south London's inner-city estates, but they are located a short bus or tube journey from two of the greatest generators of jobs and investment in the United Kingdom—the cities of London and Westminster. Government programmes for those areas should therefore be geared to job connect schemes and employability projects—to fitting the unemployed to jobs that match their aspirations, to heightening people's competence to fit those jobs and to creating intensive, intermediate labour-market projects, schemes that will flower and help people achieve employed status, and schemes that contract with private companies based in the heart of the city.
For our region it is different. Although pockets of prosperity exist, they are small pockets in a very large overcoat. Quite simply, for our unemployed people, jobs remain unavailable in any real quantity. Indeed, the jobs that are available are, as often as not, poorly paid, and too often of low quality.
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Over the years, job-hunting agencies have achieved much. New plants in the region, such as those created by firms such as Samsung, Nissan and LG, are welcome, but must be set against an employment topography that has been affected by the death of the coal mining industry, as my hon. Friend the Member for Blyth Valley (Mr. Campbell) mentioned, and vast job losses in the steel, shipbuilding and heavy engineering industries. Indeed, some of the newer industries in our region have yet to achieve critical mass. Although Nissan is probably the UK's leading-edge car manufacturer, firms such as Samsung have yet to achieve the full employment potential that was promised.
On the Tyne and the Tees, many former shipyard workers found work with the arrival of new orders for the offshore industry, which needed their skills and talents. However, that industry, too, is no longer in good shape. Years of low oil prices and the gradual depletion of the North sea oil fields have left many yards without orders. Many yards have been mothballed, and the men have been laid off.
Throughout the north-east, and especially in my region of Teesside, we still bear the scars of our past. Those scars are deep, and were formed under a previous Government. They affect entire communities. In many—indeed, most—communities we may have lower unemployment figures than two or three years ago. However, the figures for people deemed "economically inactive"—people who are unemployed, ill or drawing incapacity benefit—show that, in many communities, such people constitute the largest minority. Such communities co-exist with other communities in which joblessness is lower and other social factors are better, but even those communities fare far worse than many of their southern equivalents. Areas such as the north-east need a regional strategy to create jobs and train people for those jobs. The south needs a regional strategy to overcome unsustainable overheating and help jobless people adapt to a vigorous labour market. Those are two different approaches for two distinct areas. They are not in competition, but complementary.
There is a lot of loose talk about the north-south divide. It does exist, and anyone who tries to pretend otherwise is flying in the face of bitter reality. I refer to two recently published sets of indicators. First, the Government map of areas for which industries can benefit from assisted area status shows a swathe of red across the entire country except the vast majority of the south-east. Secondly, the new map of areas that benefit from European structural funds mirrors almost exactly the assisted areas map.
Overheating in the south helps no one: indeed, it does the economy of the south a disservice. It distorts the national labour market and leads to public spending to relieve congestion and the other effects of growth that is urgently needed elsewhere. Again, that problem highlights the need for balanced regional policy throughout the UK.
We must congratulate the Government on having done more for the English regions in a little more than two years than the previous Administration did in 18. I take immense pride in the fact that fully fledged regional development agencies have been created for all the regions. However, to be effective, they need to be properly resourced. Their funding formula needs to be reassessed after their first year of operation to enable

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them to operate according to the scale of the problems that they face. The Government have already made a start by granting a more generous allocation than anticipated, and for that they must be congratulated.
Mr. Peter Atkinson: I am grateful for the hon. Gentleman's words on regional development agency funding, but is it not the case that the RDA, for what it plans, will have a smaller sum than it would have once had, even with the extra money?
Dr. Kumar: The Government have corrected that. We made representations to the Government, and they listened, unlike the Government whom the hon. Gentleman supported. That is the difference between this Government and the previous Government.
Mr. Atkinson: Time will tell.
Dr. Kumar: Okay. It must be recognised that our RDA in the north-east should receive additional assistance. Given the historically low land values and a large land bank inherited from English Partnerships which involves remediation problems, we cannot assume that capital receipts will be easily obtained in the early years.
RDA resources need to be partnered by other regional boosts. Unlike the south, we do not have our fair share of innovative sunrise industries. Indeed, a correspondent in The Sunday Times noted that 66 per cent. of the companies featured in its list of the 100 top innovators came from below the historic line from the Wash to the Exe.
In my own area of Teesside, we are anxious that that technological imbalance be corrected. An example is ICI's long retreat from bulk chemicals, which means that its large manufacturing site at Wilton is now home to a range of spun-out or disposed former ICI concerns. Wilton is the site of some of the biggest names in the world chemical industry, yet without research and development there is a danger that the complex could become what we in the north-east call a screwdriver plant. That means a place where manufacturing processes occur without the added value of research and development or technological advance. For that reason, we are backing a project to transform the Wilton research and development centre into a new form of innovation park where applied research and development can be carried out for site operators by a trust working in collaboration with prestige universities.
Regional policy for the north-east simply must recognise the strengths of our region and grasp the opportunities that are present. However, it must be honest enough to recognise the structural weaknesses of the region and flexible enough to allow the RDA and other agencies to apply innovative new progammes to correct those weaknesses. That is the mirror image of the policies that have to be designed for the south-east. The problems that we face must be recognised. If we are serious about devolution, the Government must be adult enough to accept that we must have programmes devised and carried by the region for the region.
Thank you for allowing me the privilege of speaking in this new, innovative Chamber, Mr. Deputy Speaker. I hope to exercise that privilege again.
10.13 am
Mr. Alan Campbell: I commend my hon. Friend the Member for Newcastle upon Tyne, Central (Mr. Cousins) not only for securing the debate, but for the measured way in which he made his case. That stands in some contrast to the hon. Member for Hexham (Mr. Atkinson). I am sure that he did not want to give the impression, but he nevertheless did, that he was not in the House when his Government presided over the BSE crisis or when they introduced the automatic fuel escalator that our Government have abolished.
I welcome the report and the opportunity to debate it. In many ways, the report and the debate grew out of what is happening in the north-east. I want to refer to those concerns and to the impact of Government policy on my region.
The report describes in graphic detail the differences between regions, and goes a long way to confirm what many of us already believe. The differences did not begin on 1 May 1997; indeed, some of the statistics in the report describe what happened in the later stages of the previous Government. I hope that the report does not add to any stereotype about the north-east or to any sense of fatalism, because both would be entirely misplaced. The north-east has enormous potential that we can achieve, provided we tackle the fundamental issues faced by the region.
Solutions will not be found by encouraging or promoting inequality between or within regions. The future of the north-east does not lie in a low-pay, low-skill, low-investment economy, nor is it entirely within the grasp of central Government.
I almost find myself agreeing with some of the points made by the hon. Member for Hexham, although I shall try to steer clear of doing so if possible. The north-east, like many other parts of the north, has suffered over the past two decades by being opened up to a global economy that exposed the weaknesses of the traditional industries on which it so heavily depended. That global economy continues to set the pace and is defining new regions. It is redefining the nature of national economies and is casting new doubt on the effectiveness of national economic policy.
The global economy cruelly exposed the weaknesses that we suffer in education and skills not only in the north-east, but across the regions. I am one of the last people whom anyone would find being critical of the excellent teachers in the north-east. However, we have a long way to go if we are attain the standards needed. As has already been said and is confirmed by the report, the north-east has the lowest level of attainment at GCSE and the highest proportion of the work force without qualifications outside Northern Ireland.
We have not created or sustained sufficient small businesses in the past because, like the rest of the UK, we have been too slow to invest and to see the potential of markets. As a Government, we inherited a generation of people in the north-east, too many of whom never knew about work. Some families have been out of work not only in one generation, but in two. Alongside that is a level of poverty in the north-east that helps to explain why we have such unacceptable levels of ill health and crime.

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The report is therefore welcome because it is a stark reminder of how far we have to go, but I have one regret about the way in which it was put together and published. It is not to do with the speed with which the exercise was carried out, but to do with the fact that we have its results now. I wish that the study in the report had been carried out two years ago. If we had audited the region then, we would have had a clear view of what was going on in the north-east and we could have given a more measured response as to the success of the Government's policies in the regions.
Mr. Ronnie Campbell: LG is an example of what you are talking about. It came to the north east for a site in my constituency.
Mr. Deputy Speaker (Mr. Frank Cook): Order. The practice is for remarks to be addressed to the Deputy Speaker, not to those in the Chamber.
Mr. Ronnie Campbell: I am sorry, Mr. Deputy Speaker.
There were 1,000 jobs in the factory at £2,000 a job. However. LG went to Scotland, which offered £27,000 a job. That is the sort of competition that we had in those days, simply because of the Barnett formula.
Mr. Alan Campbell: My recollection is that LG went to Wales, but my hon. Friend is right to say that the region has not been able to compete at that level, and obviously that important issue needs to be addressed. He is right to draw attention to inward investment as well, as I want to do in a moment.
Central to achieving the needed prosperity, before we can share it out, is the concept of getting people into work. We must face facts. Unemployment in the northeast is too high. It is too high as long as anyone in any family who wants work is deprived the opportunity of it. To put that into context, it is sometimes overlooked that in the two years since the election we have created more jobs than have been lost. There has been a net gain in jobs in the north-east. The new deal has been crucial in tackling long-term unemployment. In my constituency, 130 young people are now in work as a result of it. Longterm youth unemployment has halved.
Between 1981 and 1997, 110,000 jobs were lost, most of them in primary industries or in manufacturing. The economy of the north-east continues to change. Inward investment has had an important part to play in that. In the past three years, 128 projects have created or safeguarded 50,000 jobs. We now have micro-electronic and automotive sectors. We also have a growing service sector in business services, call centres and retail services. If we are to move towards a high-technology economy in the north-east, we must continue to attract inward investment. If inward investors are to come to the UK and, hopefully, to the north-east, they must have a stable economic framework in which to invest, which means having the lowest possible interest rates that can be achieved, and low inflation.
I am pleased that the north-east has attracted a higher than average amount of regional selective assistance. We need more small businesses. There are signs that the situation is improving. Figures suggest that more new small businesses are being created and that they are
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surviving longer. Unlike new small businesses in many regions, they are putting more resources into research and development.
I said earlier that the north-east had the lowest attainment rate at GCSE. However, there are signs of improvement. Education is probably one of those areas in which it is hard to see quick improvement. However, the north-east has more under-fives in education than any other region; we also have the fewest under-eights in classes of more than 30. That is a direct result of the Government's policy. But we need to go further. As well as promoting a knowledge-based enconomy and entrepreneurship, we must ensure that that prosperity is shared.
It is important that 1,600 people in my constituency of Tynemouth benefit from the minimum wage. I am pleased in one way, but not surprised, that the hon. Member for Hexham has again confirmed that his party would abolish it. It is important to my constituency that 2,000 families now find that work pays because of the working families tax credit. It is important that 3,000 pensioners benefit from the minimum income guarantee. Such policies are based on need and, as a result, they not only redistribute within a region, but redistribute between regions.
Mr. Peter Atkinson rose—
Mr. Campbell: I think that the hon. Member for Hexham is about to confirm his remarks. I will give way to him in a moment.
All the beneficiaries will find it incredible at the next general election that a sensible Opposition would remove each of those policies.
Mr. Atkinson: It is kind of the hon. Gentleman to give way. He referred to 1,600 families in his constituency. What would he say to my constituents who lost their jobs in the catering and hotel industry because of the national minimum wage?
Mr. Campbell: I hope that the hon. Gentleman can provide evidence of that—or is it simply one of the scare stories that were put about by the Opposition when the minimum wage was debated? They talked about the devastating effect that it would have on the economy, but they have produced no evidence of that. If the hon. Gentleman is willing to provide me with some, I shall be happy to receive it. My constituency has a tourism, hotel and catering industry and I have not received one letter, phone call or complaint about the effect on it of the national minimum wage. In fact, the good employers in my constituency welcome it.
Although unemployment may be falling in the region, I am not complacent, because it is still too high. I shall finish my speech by referring to three courses of action that fall within the Government's remit. First, they can be a purchaser and bring extra spending to a region over and above the normal public expenditure that is allocated to areas. Shipyards on the River Tyne are facing a lack of orders, yet some companies are showing extraordinary faith in the region, because they are investing in new resources and taking on apprentices. I hope that the Ministry of Defence will show such faith, too. I want it to put work into the shipyards of the

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north-east. Shipbuilding is not a sunset industry. We shall continue to need warships, and the best ones are built on Tyneside. There is also a growing market for ferries, and Tyneside could become a world centre of excellence for that.
The second course of action that I want the Government to consider is the dualling of the Al. It would open up a huge area for investment and create jobs. I cannot understand the reluctance of successive Governments in tackling that issue. Whoever wrote the report and said that the north-east has "relatively limited traffic congestion" has not travelled north of Newcastle on the Al.
My final point concerns the regional development agency. I welcome the commitment of additional resources and the continued commitment of more than our fair share of single regeneration budget money. The RDA has a specific role to play in regeneration. We have to complete the schemes that are under way. As a Member of Parliament who represents a declining seaside town, I shall be knocking on the RDA's door because we need regeneration, too. The Opposition will come to rue the day when they proposed to get rid of the regional development agency.
The report demonstrates that we have a long way to go. The north-east may well have further to go than other regions. It illustrates the stark differences between the regions. It also demonstrates differences within regions. Tackling poverty and exclusion wherever they occur is central to the Government's actions, and I have every confidence that they will continue along that path.
10.27 am
Ms Dari Taylor: I also congratulate my hon. Friend the Member for Newcastle upon Tyne, Central (Mr. Cousins) on the very measured manner in which he introduced the debate. The document "Sharing the Nation's Prosperity" has produced a focused response to the problems in our regions. It has sharpened our knowledge and it clearly ensures that we must define a direction for Government spending.
The document stated that there are disparities within regions. However, the disparity within my constituency in the north-east is as great as that between regions, north and south. Within my constituency are leafy suburbs and people who benefit significantly from being involved in the new technology industries, whether it be communications or whether they are part of the university of Durham, the biochemical industries or the pre-medicine industries, all of which have developed since the Labour Government came to power. The small engineering companies—the Samsungs—are features of my constituency and of Stockton, North, your constituency, Mr. Deputy Speaker. They offer many of our suburbs tremendous opportunities.
There is serious disparity within my constituency, such as in the Thornaby area, where the shipbuilding and ship repair industry used to be. It was a fine heavy engineering concern, which, I remind the hon. Member for Hexham (Mr. Atkinson), was flattened by his Government. Mrs. Thatcher proudly stood on Teesdale, waved her handbag and said, "Look at what I have achieved." I can tell her what she achieved: the closure
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of some fine engineering companies and high unemployment, which has translated into unemployability.
I shall be concentrating on those aspects in my comments today because I want the Government to concentrate their thinking. Areas such as the Thornabys and the Parkfields in the north-east are in desperate need of support—significantly more than many of the leafy suburbs.
In conclusion, there are disparities within regions, and there is a serious problem in the north. I hope that people will concentrate their minds and acknowledge that the disparities within constituencies are seriously problematic. That should be the focus of future Government spending.
10.31 am
Mr. Don Foster: It may be of interest to know that although I represent a south-west constituency, I was born in the north and still care passionately about it. Anyone who has read the report will have been flabbergasted by the spin that the Prime Minister put on it. There is no doubt that the Prime Minister accepts that there is a north-south divide, but in all of his utterances when he launched the report in Manchester, he went out of his way to obscure that. I suspect that he did that to try to placate many of the Labour Members in the north-east who are rightly worried about what is happening. I congratulate the hon. Member for Newcastle upon Tyne, Central (Mr. Cousins) on his excellent speech. It is clear from that and from the speeches of the hon. Members for Blyth Valley (Mr. Campbell) and for Tynemouth (Mr. Campbell) that the Prime Minister has not pulled the wool over their eyes. There is undoubtedly a north-south divide.
My right hon. Friend the Member for Berwick-upon-Tweed (Mr. Beith)—who, sadly, has had to go off to Committee—would no doubt have pointed out more eloquently than I can that the figures make the north-south divide very clear indeed. We know that unemployment in the north-east is almost three times higher than in the south-east. Disposable income per head is almost a third lower in the north-east than in the south-east. The Office for National Statistics makes it clear that the south-east is 7 per cent. wealthier than the European Union average while, by constrast, the northeast is 15 per cent. below the European average. By contrast, the north-east has the highest proportion of low-income families in the country. I could go on, but hon. Members know those statistics only too well.
It is a pity that the Prime Minister, who was quoted earlier by the hon. Member for Newcastle upon Tyne, Central, made no reference in all his remarks to the buffeting that the north-east suffered as a result of the decline of steel, shipbuilding and coal. The Prime Minister was right to point out that there are variations within regions, but those variations are huge and we ignore them at our peril. Surely our knowledge of those regional variations should influence the many different aspects of policy. The new Labour Government fight shy of the word redistribution, but surely that is the Government's role if we want to ensure that we share the nation's prosperity, as the title of the report says. Regional redistribution must be one way of targeting help on those who are most in need.

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Reference has been made to the Barnett formula. It is perfectly possible to have that type of arrangement to identify the needs of regions and to ensure that we have a target formula against which we can make judgments on whether we are sharing the nation's prosperity fairly.
Mr. Derek Foster: I am grateful to my honourable namesake for giving way. He mentioned the Barnett formula. I know that the Government do not want us to mention it; they would prefer us to keep silent about it. However, by pointing out the complexities of the economics and geography of poverty, the report makes an incontrovertible case for reviewing the Barnett formula. People from every English region are clamouring for such a review. Does the hon. Gentleman agree with me?
Mr. Don Foster: Of course. I have made that clear, but I am grateful to the right hon. Gentleman for giving me the opportunity to repeat it. I am sure that all hon. Members will be interested in a written answer that was given by the Secretary of State for Scotland, who seems to be perfectly happy with the Barnett formula with regard to Scotland. He states:
"I have had no discussions with the Treasury about the Barnett formula."—[Official Report. Westminster Hall, 14 December 1999; Vol. 341, c. 130W1-1]
Time is brief and I know that other hon. Members wish to speak. I have just one dimension to add to a debate that has not taken place. The report shows other interesting statistics. In many respects, under the Labour Government, Britain "isn't getting fairer". During the first years of the Labour Government, the number of people on very low incomes—less than 40 per cent. of average earnings—rose by more than 1 million to a record 8.4 million. Information from other sources, such as the growing concern about the problem of coronary heart disease among unskilled workers compared with professionals, or the evidence showing that educational standards of children from middle-income groups are improving faster than those of children from the worst-off homes, tells a similar story.
I do not believe that Government action is helping in those issues. If we want to help children who are doing least well—those from the less well-off families—it is bizarre that the Government have set targets for the most able 80 per cent. of pupils, but have set no targets for the bottom 20 per cent. If we want to target financial aid on those who are less well-off, I cannot understand the Government's bidding formula of funds for education. For example, Cornwall, where 15 per cent. of pupils are eligible for free school meals, receives £308 per head from the bidding process, whereas Rutland, which is considerably wealthier, with only 6 per cent. being eligible for free school meals, receives £1,006 per head. That will hardly help to tackle the problems of the disadvantaged.
There are many other areas in which the Government have not got it right. A client of the Plymouth citizens advice bureau has recently been disentitled to benefit for not taking a job with a weekly wage of only £101 because it would have cost £40 a week to take it.
I welcome the fact that we now have the social exclusion unit and that we have joined-up thinking on the work of different Government Departments to
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tackle some of the problems of poverty. It is a pity that the work of that unit is reported only to the Prime Minister and that there is no opportunity for parliamentary involvement in its activities. I worry about the fact that the staff has increased threefold without any discussions in Parliament. We have no idea whether it will increase still further. However, at least it is the beginning of joined-up thinking.
The debate has clearly illustrated that the Government must look seriously at the real divide that exists between the north and the south, and the variations between regions. There is an urgent need for a new approach to regional funding and support to the regions. The Government are very fond of their phrase "the new deal". The time has now come for a new deal for the regions.
10.39 am
Mr. Andrew Lansley: I congratulate the hon. Member for Newcastle upon Tyne, Central (Mr. Cousins) on securing the debate, which has proved interesting. I want to add a perspective that goes to the heart of the north-east's problems and also focus on wider problems in the country as a whole. The title of the report is "Sharing the Nation's Prosperity", which means not just sharing out, but sharing in that prosperity. Realising the potential in regions will help to solve regional differences and inequalities; it is not just a matter of dealing with areas of deprivation. There are sound arguments for focusing on creating prosperity, rather than addressing inequalities, but I also accept the view of the Joseph Rowntree Foundation report that economic growth and rises in employment do not necessarily resolve poverty and inequality. We need economic growth, but we also need separate and different measures to deal with poverty and inequality.
I shall not delay the House by discussing the context of the report, but it would not be unduly cynical to say that the exercise was more about presentation than substance. The analysis is limited, as I will show. Anyone examining the structure of relative disadvantage reflected in the report's figures would see immediately that it is about peripherality, rurality, sparsity, distance from markets and access to markets.
It was argued earlier that market forces were not so important, but market forces are crucial in the long run. It is also a question of whether market forces are given an opportunity to exploit the potential in regions. There is great potential in many regions that are relatively economically disadvantaged at present and it is important for market actors to gain access to regions in order to exploit their potential. That is as true in parts of the south-east and the south as it is in the north.
Referring to differences within regions is partly valid. In the south-east, unemployment is highest in Thanet, and in the eastern region it is highest in Great Yarmouth. Those places are peripheral to their regions. Of course, it remains the case that the generalities of regions involve inequalities, but there is an important theme running through the argument—a theme, as I said, of peripherality, infrastructure, and accessing markets and services.
When one looks at the structure, one sees a pattern, which I would not dispute. There is a north and south

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pattern. However, if one examines local authority districts with more than one third of non-agricultural employment in manufacturing, 12 are in the north-west, 10 in the east midlands, six in Wales and four in the north-east. There are none in London, the east, the south-east or even in Scotland. The Government have neglected manufacturing, and 190,000 jobs have been lost. There is also a pattern of relative disadvantage in regions that are more dependent on manufacturing. That will be exacerbated as a result of the climate change levy, for example. My hon. Friend the Member for Hexham (Mr. Atkinson) provided another example when he referred to the costs to hauliers of taking manufactured goods to markets in more peripheral manufacturing locations.
My key point and contribution to the debate is to stress the importance of dealing with the infrastructure consequences of peripherality. The document "Sharing the Nation's Prosperity" suggests that the picture is highly complex, as differences within regions obscure a more general pattern. In fact, the general pattern is clear, but the statistics in the document are not well compiled to illustrate it. Page 5 of the document states:
"In the North West, GDP per head in 1995 ranged from 119 in Halton and Warrington to 61 in Sefton…where the UK average is 100".
But a more careful study would show that the residence of corporations is the key factor. Warrington is more industrialised, but not much industry is resident in Sefton, which is more of a commuter area. Similarly, in the south-east, the fact that per capita GDP is high in Berkshire but relatively low in East Sussex has much to do with the residence of pensioner populations. The figures do not tell the whole story, even of the extent of genuine relative economic disadvantage in those regions.
It might be said that the flaw in my argument about peripherality is London. Nine local authorities have an unemployment rate of more than 10 per cent.—five are in London and four in the north-east. I do not want to embarrass the hon. Member for Middlesbrough, South and Cleveland, East (Dr. Kumar) too much by agreeing with him. We need to examine the particular circumstances of London. The general point is that local authority districts with high unemployment rates in London are none the less subsisting within a travel-towork area with relatively low unemployment rates. Areas such as Hartlepool and Middlesbrough in the north-east have high unemployment rates with respect to both local authority residents and the travel-to-work area. We need to take jobs to those areas.
London's relative deprivation is sometimes the result of ethnicity, discrimination or educational disadvantage, which produces a lack of jobs for people often living in an otherwise strong job market. In the north-east, joblessness leads over time to relative economic disadvantage. The solution in London is to help the people; in the north-east, it is to help the regions—a very big difference. The same economic policy cannot deliver solutions to both areas. I look forward to hearing the Minister's reply.
If the Prime Minister wants to deal with these problems, I would advise him to consider several issues. It is clear from his response to the report that he has not
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done so. First, it is crucial to focus on infrastructure. It has been mentioned several times—not least by my hon. Friend the Member for Hexham—with respect to access to the north-east. Infrastructure is critical for access to markets. Secondly, we must recognise such factors as sparsity, rurality, decline in farm incomes and relative dependence on manufacturing with respect to local government distribution of spending, for example. I know how relatively underfunded Northumberland and Cambridgeshire are in that regard.
I recommend a change in the Government's attitude to manufacturing. They should drop any proposals further to increase fuel duty levels in real terms and they should drop the climate change levy. The spatial impact of policies across the board must be recognised. Reorganising expenditure into a regional development agency will not be the answer, when £330 million has been taken out of the Highways Agency budget in two years. That will not deliver the infrastructure that is required for regions that need to be brought closer to their markets in order to realise their economic potential.
10.48 am
The Parliamentary Secretary, Cabinet Office (Mr. Graham Stringer): May I first congratulate my hon. Friend the Member for Newcastle upon Tyne, Central (Mr. Cousins) on securing the debate? He and other hon. Members made valuable contributions and made a telling case on behalf of their constituents in the north east. It is rather like being invited to a meeting of the North East Labour group—not a pleasure that I have enjoyed before.
I want to make it clear that the Government fully accept that there are regional disparities within this country. One of those disparities is between the north of England and the south-east of England. Some comments in the press have suggested that the Government do not recognise regional disparities, but that is not the case. The report's statistics on the nation's prosperity make that quite clear. I accept some of the points made by the hon. Member for South Cambridgeshire (Mr. Lansley) about the incompleteness of working only on the basis of GDP per head. London is much richer than elsewhere; the figures on disposable income also show that London is more prosperous than the north-east.
One of the interesting points in the report is that regional disparities in this country are less substantial than in some other European countries. I did not realise that before reading the report and wonder whether other hon. Members were aware of it. That means that it is not easy to solve the problem on its own, and we must bear that in mind when we discuss it.
There is also the issue of complexity, to which several of my hon. Friends and other hon. Members referred. We are talking not simply about a north-south divide, but about rich and poor and about poverty existing side by side with wealth. That is a complicated issue. Some of the highest unemployment in England is on the south coast, and the hon. Member for South Cambridgeshire mentioned Great Yarmouth. Towns such as Dover and Southend also have extremely high levels of unemployment. It probably surprises many people that Plymouth has a higher unemployment rate than Greater Manchester.

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Peripheriality is one factor in regional disparities, but it is not the only one. Depending on which measures one uses, Cheshire is between the second and fifth most affluent county in the country. Cornwall is, by most measures, the poorest. The issue is complicated, and the average regional figures often hide more than they reveal. If we concentrate on average figures, we often miss the differences between regions and the pockets of poverty.
To explain that, I want to go back to a debate in which I was fortunate enough to take part with my hon. Friend the Member for Newcastle upon Tyne, Central about 12 months ago. We both represent northern, urban constituencies that are some considerable distance from London. We talked about the decay in housing and the problems of crime and drugs that are associated with it.
I want to ask my hon. Friend a question to get to grips with the difficulty of the problem that we are discussing. Let us imagine that he could, by magic, increase the prosperity of Newcastle, Manchester or Leeds to the level of that in London. Does he really think that that would deal with the problem that he so graphically described in that earlier debate? What effect would it have on some of the people who live in terraced houses? They are socially excluded and are sometimes associated with crime and sometimes victims of it. Often, they are associated with the drugs culture. Would they be affected by an increase in the general level of prosperity if the Government did not take several of the initiatives that they are currently taking to deal specifically with the problems that I mentioned? I suspect that my hon. Friend would agree that we must recognise that regional disparities exist as well as dealing with problems within, and sometimes without, urban areas.
The contribution by the hon. Member for Hexham (Mr. Atkinson) was extraordinary—he has obviously been injected with the same drug that has given the rest of the Conservative party amnesia. His contribution was extraordinary, given that we are considering problems in Newcastle and other parts of the country. The Conservative party was in office for 18 years and tripled child poverty, doubled the number of people who were living in poverty, decimated the steel industry, the coal industry and shipbuilding and introduced the fuel duty escalator for good measure. It left us with those problems, but now opposes many of the solutions, such as the creation of regional development agencies or measures to do something directly about poverty by introducing welfare tax benefits and the minimum wage or increasing child allowances.
The hon. Gentleman's contribution was also extraordinary given that several Opposition speakers mentioned what could be done through local initiatives. From my own experience, I know that the Conservative Government largely centralised control and took power
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away from local democracy in the regions while they were decimating the industries that I mentioned. They took power to the centre and stopped local initiatives.
An important comparison can be made with Europe where it has been possible to take initiatives in regional government and in the government of cities. Barcelona and Catalonia are the most obvious examples of that. They were poorer than many cities and regions in northeast England in the early 1970s, but now form one of the most affluent parts of Europe. That happened because of local initiative, which the previous Government stifled. That is precisely why this Government have introduced regional development agencies, which are now setting out their plans to help develop the regions. That is why the new Local Government Bill, which is before Parliament, contains a provision to enable local government to take the lead in the local community. It also gives local government powers to take a direct interest in the economic benefit of an area. That is in stark contrast to what happened previously.
To put it quite simply, the Government's purpose and objective is not only to recognise regional disparities and the north-south divide, but to approach the problems of social exclusion and poverty wherever they exist.
Mr. Cousins: I thank my hon. Friend for giving way. Earlier, he asked me whether I could solve the problems that I had described by magicking away the difference in GDP per head between London and Newcastle. My answer is that I would rather not rely on magic for anything. The Cabinet Office produced the report, but will it produce others to enable us to measure regional needs and problems and examine regional spending, or is the present report just a one-off?
Mr. Stringer: None of us must rely on magic, but my hon. Friend's question is an interesting analytical tool for getting at the heart of the problem. The Cabinet Office's responsibility and purpose is to produce reports that will help the Government and Parliament to tackle the problems of poverty and social exclusion. That is why we have a social exclusion unit. I look forward to many more debates on this issue and to being supported by many more facts, which will set out the statistics and the causes of problems.
We are coming to the end of an interesting debate. We aim to create an environment in which business can thrive. We want business to thrive and regions to survive. To answer one of the first questions that my hon. Friend the Member for Newcastle upon Tyne, Central asked, doing something about regional disparities is bound to help the prosperity of the whole country. We are wasting resources while regional disparities exist. Tackling that problem is the Government's policy.

Caribbean Banana Industry
11 am
Mr. Bowen Wells: I remind the House that the Caribbean islands entered the banana trade after the second world war under a Labour Government. At that time there was little money to invest in Britain, let alone its colonies. So, in 1947, the Labour Government decided to allocate the banana trade to the eastern Caribbean nations, including Surinam and, later, Belize. Europe—and Britain especially—had begun to indulge in a highly subsidised beet sugar industry, which competed with sugar cane grown in the Caribbean islands, so the allocation of the banana trade was a compensation for the loss of the Caribbean sugar trade to the European beet sugar trade, helping the islands to diversify into bananas.
The Caribbean islands are not ideally suited to the production of bananas, as they are largely mountainous and consequently have shallow soils. There are also problems with the amount of rainfall: bananas need a great deal of rain to produce a heavy tonnage per acre. Britain and Europe knew in the 1940s that Caribbean bananas would cost a great deal more to produce. The current cost of production per tonne is about double that generally achieved on the African coast and in central and Latin America.
That problem is fundamental in relation to the World Trade Organisation-compatible regime desired by the Government. It would be delightful to solve that problem, which the European Union has recently tackled on three occasions. I made a bet with the previous Minister of Agriculture, Fisheries and Food, the hon. Member for Copeland (Dr. Cunningham), whose officials and Deputy Minister—the hon. Member for Birmingham, Perry Barr (Mr. Rooker)—proclaimed in European Standing Commitee B—that their proposals were WTO-compatible. When the WTO found that they were not, the Minister handed me £5.
It is impossible to make the regime—or, indeed, any regime—produce a WTO-compatible result in the eastern Caribbean. I contend that we must go for a WTO waiver, which can be achieved only if we conduct proper negotiations with all parties concerned and work out an agreeable solution. There is an agreeable solution on the table, with which the United States would go along. Evidence from central and Latin American countries shows that they are sympathetic to it, and the eastern Caribbean would very much like to achieve it. However, ministerial determination, enthusiasm and persistence will be required if such a solution is to be successful.
I remind the House that we are dealing with the traditional African, Caribbean and Pacific countries: the Cote d'Ivoire, Cameroon, Surinam, Somalia, Jamaica, St. Lucia, St. Vincent and the Grenadines, Dominica, Belize, Cape Verde, Grenada and Madagascar. Their total production or allocation is 857,000 tonnes. The European Union consumes 4 million tonnes of bananas per annum; in that context, 857,000 tonnes does not seem that much.
Twenty per cent. of the bananas supplied to Europe come from its own production in the French overseas departments of Martinique and Guadeloupe; the Spanish Canary islands; and Somalian supplies to Italy.
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Eighty per cent. is imported from other countries, 21 per cent. of those imports coming from the traditional ACP countries that I listed and 3 per cent. from other ACP countries. The remaining 76 per cent. comes from central and Latin America. That region gets the lion's share of the trade, so one might ask—as I think we should—what is it complaining about?
I am especially interested in, and know well, Jamaica, St. Lucia, St. Vincent, Dominica, Belize, Grenada and Surinam, whose total production is 477,000 tonnes, or just over half the 857,000 tonnes that ACP countries supply to the European Union. It is not too difficult to create a regime permitting free access to the European market. However, price is another matter. As I said, costs of production in eastern Caribbean countries are roughly double those in central America. We must therefore produce a tariff that protects those countries from Latin American production: that will involve a tariff and quota regime. The United States, however, is proposing a tariff-only regime. Were such a regime be entered into—especially on the basis of the European Community's current proposals—banana growing in the eastern Caribbean would soon come to an end.
The Commission proposes that the regime takes a two-stage approach: a transitional regime allowing time for adaptation in the Caribbean and other ACP countries followed by a tariff-only regime. Unfortunately, the regime proposed for the transitional period would not allow the Caribbean industry to survive. The Caribbean Banana Exporters Association has advised me that an effective transitional regime and a much longer transitional period are essential if devastating damage to the Caribbean is to be avoided.
Mrs. Cheryl Gillan: I congratulate my hon. Friend on securing this Adjournment debate. I support everything that he has said; I am sure that I shall be in complete agreement with the rest of his argument. I was in St. Lucia this summer, and had the privilege of visiting Ellis Rupert Gajadhar's banana plantation. Mr. Gajadhar sent me a letter which confirms my hon. Friend's argument. He said:
"there will be serious social, economic and political dislocation in these islands if we were to lose the banana industry."
Does my hon. Friend agree with that? Will he comment specifically on the position in St. Lucia, as I know he is familiar with the island?
Mr. Wells: I am grateful to my hon. Friend, as I was about to discuss the devastation that will be caused if the banana industry goes out of production. I fear that it will do so within five years under the proposals.
St. Lucia has 126,000 inhabitants, of whom more than 50 per cent. rely on the banana industry for their income. If those people cannot grow bananas, what can they grow? There is certainly no other tropical agricultural product that can compete on the international market. The banana trade has had the advantage of preferential quota and tariff arrangements and all other tropical agricultural products are produced at much lower cost in many countries producing them. The St. Lucians would not be able to produce and distribute a sufficient quantity of such products to bear marketing and shipping costs, and cannot diversify into other crops.

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Unfortunately, one crop is being grown: marijuana. It grows extremely well as it has no known pests or diseases. It is being destroyed by the US Drug Enforcement Administration in and around the volcano of St. Vincent and in remoter areas of Dominica and St. Lucia. It is a very profitable product. If people are denied any other crop to sell to the export markets, they will undoubtedly grow more marijuana and we will be pushing them into it.
Mrs. Gillan: I thank my hon. Friend for being so generous in giving way. Will he also comment on the fact that the islands lend themselves to smuggling? Unfortunately, it is likely that drugs will pass from south America through the islands and on to the American mainland. Therefore, if you remove the livelihood from the islanders, the opportunities to move into illegal activity are so much greater by virtue of the islands' geography and their location between major drug-producing areas and a major drug-consuming area. That is highly dangerous.
Mr. Deputy Speaker (Mr. Frank Cook): Order. The Chair has no intention of removing anyone's livelihood. Remarks must be addressed through the Chair.
Mrs. Gillan: I apologise, Mr. Deputy Speaker.
Mr. Wells: My hon. Friend is right. Not only can the islands grow marijuana, but they lie on the line between Colombia, Europe and America. Many islanders are being tempted into drug trafficking. They are aiding the import and export of drugs and assisting their passage to Europe and America. Such corruption can lead not just to illegal activity, but probably to the downfall of democracy in those islands and their capacity to enforce the rule of law. We are dealing with serious problems. It could be said that it is not important, that they are tiny islands and that we can live with it, but I do not think that we can. They will become nests of serious corruption and serious human rights problems throughout the Caribbean.
Dr. Jenny Tonge: I thank the hon. Gentleman for giving way. Before he leaves the subject, does he not also think that it would be ironic if the actions of the big banana producers, working through the USA Government and the World Trade Organisation, brought a dangerous drug culture much nearer the mainland of the United States, as that is exactly what it is trying to fight at the moment?
Mr. Wells: I very much agree. The United States is misleading itself in fighting the regime so strongly and will pay a high price. Given the determination and enthusiasm of Ministers, the Government and indeed our Parliament, there is a possibility of persuading the United States that there is a reason to make a sensible agreement under WTO rules. I believe in free trade and I know that it enhances the development of the third world and developing countries, but because of its history, we must be flexible enough to make exceptions. However, one exception that we propose to make via the European Union will lead not to the continued prosperity of the banana regime, but to its closure.
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For the benefit of hon. Members, let me set out exactly what is proposed. It is a two-stage process. First, the Commission proposes to maintain a tariff-quota regime for the transitional period. However, the quota would not be allocated on past performance. That is a major problem. There will be three quotas. The first is for 2.2 million tonnes and the second is for 353,000 tonnes, both at a tariff of €75. The third tariff quota would be for 850,000 tonnes. The method of allocation for the first and second tariff quotas remains open, but it is likely to be on a first-come, first-served, or boat race method. The third tariff would be allocated by strike price auction, the auction being for the level of tariff payable. It is intended to meet the needs of these countries, the ACP traditional suppliers, because it provides a tariff preference of up to €275. It is designed to produce the price necessary to keep the Caribbean banana growers in business.
The Caribbean Banana Exporters Association concludes that it is difficult to think of an allocation system more likely to drive the Caribbean out of the market. The auction system places smaller operators at an immense disadvantage. It removes the certainty of access that is essential to economic shipping arrangements and to contracting for sales of bananas. The ability to contract for at least a year in advance, both for quality, reliable shipping and banana sales lies at the heart of a successful banana business. The strike price system would deny that essential need to the Caribbean and other ACP countries.
I remember why Jamaica and Trinidad went out of bananas. Trinidad was finally driven out by sikatoka disease, but the main reason was that their ships were only half filled with bananas. Sending a half-full refrigerated ship hugely increases the shipping costs and the cost per tonne landed in Britain. It would drive any banana producer out of the market. A viable industry is not possible, unless at even higher costs than now, with such a system. Ships must be full and that requires planning.
I agree with the CBEA. The present EU proposals are likely to produce the end of the Caribbean banana industry more quickly than any I have seen so far. The system will last only until 2006. If you put yourself in the position of a banana farmer who is faced with the possibility of replanting his farm, which he must do from time to time, reorganising his drainage because drainage is essential and has to be constantly cleared if bananas are to thrive, you will not put that kind of effort—
Mr. Deputy Speaker: Order. I remind the House once more that the Chair is not going to put himself in any position at the present time.
Mr. Wells: I was not putting—
Mr. Deputy Speaker: Order. We must be careful with the forms of expression we use for the purposes of the Official Report. I am sure that the hon. Gentleman understands that.
Mr. Wells: I will certainly try to adhere to your ruling, Mr. Deputy Speaker. I was trying to put us in the position of a banana farmer. When I used "you", I

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meant the banana farmer. If you were a banana farmer, you would not invest in a field of bananas if you knew that in 2006 the tariff arrangements would end and you would have to compete with a banana farmer in, shall we say, Ecuador which also has a series of small farms as opposed to the plantations where bananas are grown in Costa Rica, Honduras and Guatemala and other central American countries.
The farmer must make the decision to invest in the banana industry. If it is to go out of existence in 2006, he must find something else to do before that hits him in the face. Because these proposals create severe instability, and because banana farmers do not know how the market will develop, but that it will end in 2006, they will begin to move out of bananas straight away. If the Caribbean banana is to survive, it must become more productive. Becoming more productive means investing more in the banana fields. More roads will be needed to carry the bananas gently from the farms so that they do not become bruised or damaged. More irrigation will be needed: there must be a certainty of water supply and bananas must be given more water to counter the drought periods which occur in the Caribbean each year. That will require more money. It also means better shipping and putting the bananas in containers and so on, all of which involves capital investment. If the market is uncertain because the European Union proposals lack certainty—perhaps because the EU has not thought the position through—there will be no assurance for the banana producer to make the investment necessary to make himself productive and competitive.
Mrs. Gillan: Does my hon. Friend also agree that the EU has shown a complete lack of common sense by recently giving large grants to install and build the sheds for stacking and packing the bananas in St. Lucia? Large sums have gone into creating the right environment so that the bananas can reach their destinations in good condition. Was it not just a waste of money to have provided grants that effectively mean the death of the industry?
Mr. Wells: I could not agree more. Much effort has gone into increasing the quality of bananas from the east Caribbean, which is affected climatically by periods of drought. Bananas need special handling if they are not to become bruised and damaged and regarded as sub-quality when they reach the markets in the United Kingdom. They must compete with products from Latin American and central American countries on quality as well as price. The EU promised a great deal of aid of the type described by my hon. Friend. Supermarkets in this country—certainly Tesco, Sainsbury's, Safeway and Waitrose—have set up a scheme to adopt certain farmers to specify how they want bananas produced, wrapped and boxed and so on, to increase quality.
Banana farmers have reacted extremely well. When I went to Southampton to see some of the banana production, I found that quality has increased hugely as a result of investment in St. Lucia and other places in boxing plants, port terminals and elsewhere. More money is required. The Prime Minister of St. Lucia told me when I visited the island after the Commonwealth
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Parliamentary Association conference, which both of us attended, that the EU, as usual, had promised a great deal of money, but had not delivered it. He said that some of the banana farms—some of the smallest on the worst land and on the steepest slopes—must go out of production because they cannot produce the necessary quality and their prices are too high. The EU had promised investment in those villages to provide the farmers with alternative means of earning their living. None of that money, which was promised two years ago, has been delivered. It is all very well for the EU to promise huge aid in replacement of banana production but, given its current appalling record of delivering aid properly and on time, many St. Lucians and St. Vincentians, if they are foolish enough to depend on it, will find themselves poverty stricken. All that must lead to an essential discussion on the politics of the banana industry.
I should like the Minister to take special note of what I am about to say because I have checked this argument with several sources. As you know, Mr. Deputy Speaker, in the House we have to live in a world of mirrors and smoke to discover exactly what is happening in Government. The Prime Minister of St. Lucia put it most directly. He said that the British Prime Minister had abandoned the Caribbean, that he had decided that there should be no further support for the Caribbean position if that support would result in further disruption of trade between the United States and the EU, and he had given instructions accordingly. That is what the St. Lucian Prime Minister believes. I have checked that with members of delegations who have been to see Baroness Scotland, who is Dominican by origin, having been born in that country. She has the most tremendous sympathy for the Caribbean and knows a little about the banana industry and other matters. However, she also gave the impression that the Government were not prepared to do much more to support the Caribbean, especially if it would disrupt other trading arrangements which the UK considered to be more important.
The only reason we got a banana agreement in 1995 was that my right hon. Friend the Member for Suffolk, Coastal (Mr. Gummer), then Minister of Agriculture, Fisheries and Food, took up the matter with persistence and enthusiasm and a feeling that we owed those small islands a great deal and that there was a moral position for us to take to protect them from central American competition in the banana industry. Only by that action from my right hon. Friend did we win through, and win over the European nations—not all of them, because the EU is divided on the issue, but we got a majority. I believe that that is possible again.
Having had indications that the US recognises the problems that my hon. Friend the Member for Chesham and Amersham (Mrs. Gillan) and the hon. Member for Richmond Park (Dr. Tonge) pointed out, I believe that the US has an interest in the stability and democratic credibility of the islands and is prepared to consider a solution that at least will enable east Caribbean banana producers to survive. A tiny proportion of the trade in bananas is involved and most central and Latin American countries will not be greatly affected. Banana production and consumption in the UK and the EU is increasing, so the preservation of a small preferred area, however we do it, would be acceptable.

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I have also had indications from people who negotiate on behalf of the Ecuadorian Government. Ecuador's banana industry is interesting in that, like the east Caribbean industry, it is based on small farmers. It does not have the great plantations that I described earlier. The Ecuadorians are very sympathetic to the islands' position. They objected to the previous regime which gave preferential arrangements to distributors of bananas, but did not directly benefit the banana farmers. But, removing that from the equation, they believe that a sensible arrangement can be reached. Therefore, in my view, if this country goes after an agreement, there is every chance of getting it. I urge the Minister to do that. What a triumph it would be.
Finally, I wish to raise the matter of the WTO waiver. The Lomé convention is under WTO waiver, which lifts in February 2000. The Lomé succesor agreement was largely agreed in Brussels last week. I read that an application has been made to renew it. Strangely enough, the banana protocol never came under that waiver. I always thought that it should have done because we would therefore have avoided many problems.
We know that the WTO has to move by consensus. This reinforces what I said about trying to get an agreement. If we cannot, we shall fail to get a WTO waiver because it will be blocked by the dissenting party or parties. That in turn reinforces what I said about the need to reach an agreement between the parties, which I believe is possible. Despite all the legal advice given to the Minister or given in Europe, no regime could establish a banana protocol to preserve the east Caribbean banana industry unless there were a WTO waiver. Even if such a regime could be established, it would almost certainly drive the Caribbean out of production.
A WTO waiver is therefore the only way forward. A WTO waiver will be required for the Lomé convention anyway. If the banana industry were included, however, we would not obtain a waiver for the newly negotiated convention. Therefore, if we are determined to achieve a good result for the east Caribbean, we must reach a consensual agreement.
I beg the Minister to pursue the matter with determination and thoroughness, for which she is well known in Europe and in this country. She must persist, pursue, harry and hassle to get an agreement. That is the only way to prevent these countries from descending into poverty and drugs-related enterprises; otherwise, they will fall into a sorry, despicable and criminalised state.
This debate is not just about bananas; it is about human beings, their employment and their welfare. We have been associated with the countries concerned for 450 years—intermarriages and deep friendships have been established—and we owe them nothing less than our persistence and our insistence.
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Dr. Jenny Tonge: I congratulate the hon. Member for Hertford and Stortford (Mr. Wells) on bringing this issue to this Chamber. He took an interest in this matter as Chairman of the International Development Committee, of which I was a member. I was inspired by his interest to focus on this issue,
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which is difficult and complicated—perhaps that is why no Labour Member, with the exception of the Minister, is speaking on it this morning. That is a tragedy, as many thousands of people in this country have relatives in the Caribbean who depend on the banana industry. I appeal to Labour Members to take more interest in this issue, which is important to many constituents.
One of my earliest memories—if not the earliest—is eating my first banana. My mother came back from the greengrocer and said, "Hey, look, I've got some bananas." We had read about bananas in geography books, and seen photographs of them, but it was our first experience of this extraordinary fruit. If I may go off on a medical tack, I shall explain why it is such an excellent food.
Bananas contain a great deal of fibre, which is very good for the bowels, and lots of carbohydrate, which provides energy. They contain potassium in great measure, which is good for the heart and counteracts all the salt in our diet. They even contain an anti-depressant substance, which affects the brain and makes the eater feel good. The banana is nature's own comfort food. Furthermore, it comes in its own hygienic, pre-packed container, which is biodegradable. It is a dream of a food for doctors and environmentalists.
However, the dollar banana—the big, pale, yellow sort sold in supermarkets—is a different matter. It is a cheap banana grown in huge plantations by, in particular, Chiquita, Dole and Del Monte, which use near slave labour in Latin America. The big producers also use poisonous pesticides and herbicides, which are becoming less effective as the banana plant acquires immunity. I checked my facts with Kew Gardens in my constituency, and I was told that dollar banana plants are examples of monoculture, which will lead to the eventual extinction of the plant. Alternatively, the producers might use genetic engineering to produce a different sort of plant. Genetic modification is not a popular option at the moment.
Consumers are becoming increasingly worried about their food. They will soon learn that the dollar banana from the big plantations in central and Latin America is not decent food, and they will stop buying it. The Caribbean banana, however, is often smaller—it comes in child-size portions, which I have found useful for my children because there is less waste—and it is sweeter and tastier. It is grown on small farms in the Caribbean and Africa. Some are grown organically, and must be a healthier option and product.
Sales of the dollar banana have fallen in recent years, which might be why big companies such as Chiquita have become scared and aggressively protective of their business. I would argue that that is why Chiquita funds both political parties in the USA, and last year put pressure on the US Government to go to the World Trade Organisation and cry foul. It claims that the EU's protection of Caribbean and ACP bananas through the Lomé convention—which enables small farmers in those countries to export their crops—is not fair.
This is a timely debate, as the Caribbean banana industry currently faces a lethal threat from the European Commission's latest proposals. I did not previously believe that those proposals were intended to destroy the Caribbean industry, although the speech by the hon. Member for Hertford and Stortford has made

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me rethink my view on that—perhaps they are intended to destroy it. Whatever the intention, however, that will be the effect. The Caribbean growers would no longer have guaranteed access to the market, and would have to compete at auction for import licences for every tonne of bananas that they export.
The banana trade depends on the ability to contract a year ahead in shipping and sales. That requires certainty of access. Although the Commission proposes to give a substantial tariff preference to Caribbean countries, that will not suffice to ensure access for the Caribbean. The auction system would greatly favour the dominant traders in Latin America, which will have continued access, under a different allocation system, to the 2.5 million tonnes quota, at €75 tariff. They would also be free to compete in the auction for the 850,000 tonnes quota, which is intended primarily to meet Caribbean and ACP needs. They would be able to bid very competitively against the smaller banana countries for the quotas. That is partly because the main dollar quota is likely to be allocated on a first come, first served basis, which—as the hon. Member for Hertford and Stortford said—is otherwise known as the boat race. Traders bringing full ships over from Latin America will have every incentive to bid high for licences, which will enable them to dispose of bananas that they have failed to get in on the first come, first served basis.
The Government stated that they were willing to proceed on the basis of the Commission proposal, provided that Caribbean interests were safeguarded. However, it is not clear how that proviso can be met without radical changes to the proposal. Small-scale growers in the Caribbean need to know that there will be a market for their bananas. They cannot know that under the auction system, even with the proposed tariff preference. How can that system be reconciled with the repeated assurances to the Caribbean that its interests will be safeguarded? It does not add up. As has already been explained, an alternative system would be the allocation of quota on the basis of past performance. That is the preferred option of the Caribbean countries and the Commission, but it has not been proposed because the Commission has yet to secure agreement among interested parties on the details of such a system, particularly the reference period. The Commission really must try harder.
Another disturbing element in the Commission's proposals is the commitment to switch to a tariff-only system from 2006. The Caribbean must be granted sufficient time to restructure its industry and reduce the near total dependence of some states on a single product. The hon. Member for Hertford and Stortford has already told us about that, but I should say that it will prove an extremely difficult and time-consuming task. In three of the Windward Islands, bananas account for more than half of all export earnings and one third of all employment. They are equally vital to important regions of other Caribbean states. A massive economic adjustment will be necessary, and that cannot be made in only six years. The ACP states have asked for at least 10 years, and some European Union member states—but not the UK—have supported the granting of that longer period. I urge the Government to offer
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their support; otherwise, there will be disruption in the Caribbean and, as has been said, people will resort to growing drugs. Does the world really want that?
Mrs. Gillan: Has the hon. Lady read the Caribbean Banana Exporters Association report, which was written by Henry Gill and Anthony Gonzales? It forecasts that the loss of the banana industry would lead to significant unemployment and considerable social unrest, particularly in the Windward Islands, where 50 per cent. of the 30,000 people who farm bananas would quickly lose their jobs.
Dr. Tonge: I have read the report, and I thank the hon. Lady for bringing it to our attention. It makes it clear why we should show much greater interest in this issue, and I am saddened that so few hon. Members have attended this morning's debate. Although it may seem like a technical debate on trade, we are in fact discussing the future of the Caribbean: its direction, stability, democracy and economy. It is vital that the islands' economies remain stable, and that they have a product to export.
Mr. Wells: With regard to the disruption of social mores, some of the islands—particularly St. Lucia, but also Grenada and, to a lesser extent, St. Vincent and Dominica—could divesify into tourism. However, if the disorder, burglary and criminal activity to which the loss of the banana industry is likely to lead actually occur, tourism will simply switch off, and the islands will lose that industry as well.
Dr. Tonge: I absolutely agree with the hon. Gentleman—it is a serious problem. I speak to various groups in my constituency and throughout the country about how to prevent international unrest, instability and civil war, which always lead to the abuse of human rights. This is an extremely important issue for Caribbean countries. We must nip in the bud the destruction of a trade that supports those islands; its loss would lead to untold damage.
Mrs. Gillan: Does the hon. Lady also agree that the Government are sending out the wrong signals about offshore financial services industries, which are a potential source of employment? It appears that the Government will not support those industries in any form, even though they could eventually offer alternative employment for some of the smaller islands.
Dr. Tonge: I was about to deal with that matter in relation to diversification. Clearly, the Caribbean islands should not depend entirely on bananas for ever and ever, amen. We must urge the Government to consider all options, and the one that the hon. Lady mentions is very important.
The Commission has threatened to apply the tariff-only option immediately if the Council fails to agree on alternatives. To paraphrase a famous tennis player, I would like to think that it cannot be serious, given the devastating impact that such a step would have. If a tariff-only system were adopted now, the Caribbean banana industry would rapidly be destroyed. That could be averted only if the European Union extended to it a deficiency payment system comparable to that currently

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extended to EU banana growers, but the Commission insists that that would be politically and financially unacceptable. However, the destruction of the Caribbean economies is no less unacceptable.
Another option which is often discussed is aid for diversification. That is a welcome measure, but it is not a solution in itself. Payments to Governments for diversification will not keep Caribbean banana growers in business. Such payments will not ensure access to the market while diversification takes place, nor will they feed, clothe and educate the growers' children. The Caribbean needs aid, but with trade.
I realise that the Department for International Development stood up valiantly for the ACP during last week's discussion in Brussels on the successor to the present Lomé convention. The Lomé commitments are being ruthlessly whittled away, but there remains the EU commitment to take all necessary steps to ensure the continuing viability of the banana industries. That commitment is vital, and must not be further weakened.
Finally, I invite the Minister to confirm that the Government will oppose an auction system that cannot provide the assured duty-free access that is essential to the survival of the Caribbean. The Government must argue the historical basis for quota allocation, at least in respect of the 850,000 tonne quota that is proposed to meet the needs of the ACP. They must insist on a much longer transitional period before the introduction of a tariff-only system. As the hon. Member for Hertford and Stortford said, they must consider including the Caribbean banana trade in the WTO waiver. Unless those measures are adopted, there will be dire unrest in the Caribbean and we shall lose a superior product, the Caribbean banana, and the knowledge and expertise required to grow it. The dollar banana will eventually become extinct, and we shall then be able sincerely to say, "Yes, we have no bananas!"
11.49 am
Mr. James Paice: That should not be too difficult to follow. I congratulate my hon. Friend the Member for Hertford and Stortford (Mr. Wells) on securing this debate, and on the manner in which he conducted it. It is well known that he is the House's expert on such matters, and has many years' experience in Caribbean issues, particularly bananas. It is a pity that the Government have not initiated a debate on this issue. As the hon. Member for Richmond Park (Dr. Tonge) said, it is a shame that more people have not shown an interest. As recently as a year ago, a number of people attended a Commitee debate on Commission proposals, which suggests that there was some interest then. During that debate, my hon. Friend the Member for Hertford and Stortford challenged the former Minister about the WTO compatibility of those proposals. The then Government appeared to be convinced—albeit wrongly—that they were compatible.
My hon. Friend gave an introduction to the background of the problem, and to the sugar industry. We are approaching a reform of the sugar regime in the Community, but I do not believe that anyone connected with agricultural politics expects any opportunity for regeneration of the sugar cane industry in the Caribbean. Sugar cane is now grown in many parts of the world, using highly efficient industrialised processes. We should not be lulled into the belief that the sugar industry would provide an alternative to bananas.
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I shall not waste the House's time by going through the employment issues involved, as both my hon. Friend the Member for Hertford and Stortford and the hon. Member for Richmond Park have made those points admirably. The banana industry is the major part of the economy for most of the eastern Caribbean.
I endorse the comments made about the drug risk. We cannot underestimate the potential damage to those islands in terms of their culture and the effects of criminality on their tourism industry, and also to the United States and other countries in which the drug criminals seek to market their goods. In this country, we must stop at nothing to prevent such developments. It is all very well running anti-drug campaigns here, but if we are complicit in encouraging the development of a drug industry in the Caribbean, we shall do much to undermine all that good work. As my hon. Friend the Member for Hertford and Stortford said, no real alternative agricultural products are available to the islands. The banana industry is, and must remain, at least for the foreseeable future, a major part of their economy.
I turn to the World Trade Organisation, and, in particular, the role of the United States within it. Conservative Members recognise the importance and value of the WTO, and, as my hon. Friend said, we support the principles of a move towards free trade. I am less convinced that the European Union and the United Kingdom Government understand the implications for the Caribbean of accepting, almost without debate, some of the arguments put forward by the United States through the WTO.
We need to challenge the United States over several aspects of its approach to this debate, such as its hypocrisy over its overall levels of support for agriculture, which we know are far greater than it would have us believe. There is no banana industry in the United States. The hon. Member for Richmond Park reminded us of the financial support that the major American companies involved in the banana industry give to political parties, even though there is no indigenous industry for them to worry about. As my hon. Friend the Member for Hertford and Stortford said, those companies already have 76 per cent. of the import trade into the European Union. They are not exactly hard done by.
That brings me to the Commission's proposals. I preface my comments about them by saying that I am astonished that they have been put forward in their present form. That is because of what I have read in the document entitled "The Commission reports to the Council on consultations with a view to settlement of the banana disputes", dated 10 September 1999, issued by the Directorate-General for Trade. It is a recent document, which follows the WTO panel's dismissal of the previous system, but predates the proposals that we are discussing now. It makes a couple of statements that are remarkable given the present proposals. In reference to auctioning, it states:
"Auctioning continues to be questioned as to its WTO-compatibility. No operators were in favour of this system. Other conventional systems appear unlikely to provide a resolution of this issue."

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Given that no one was in favour of auctioning, and that there are questions about its WTO compatibility, it is remarkable that the Commission should introduce the measure as an integral part of its proposals to settle the dispute.
My hon. Friend mentioned waivers, and this same document refers to the fact that the Community regarded access under the tariff quota system as
"a volume limited tariff preference and hence covered the existing article 1 waiver. However, the WTO concluded that a tariff preference, which is limited in size, is by definition a tariff quota."
One does not need to be an Einstein to work that out. It is patently obvious, and I do not understand how the European Union could have been foolish enough to believe that that was covered. The document goes on to say:
"Unless such a quota respects article XIII GATT rules in terms in particular of erga omnes access and distribution, it requires a derogation (waiver) from that article. In GATT history, a waiver based on article XIII has only been granted once. Our numerous contacts have made it clear that complainants and parties involved are either not ready to grant such a waiver or only at a very high price."
I say that not directly to caution against my hon. Friend's proposition for a waiver, because he put forward a sound argument for it. However, there are obviously some doubts. Having said that, I quoted earlier the Commission's remarks about auctions, and it seems to have taken little heed of its own views on that subject. One might, therefore, have to counter the comments about waivers.
My hon. Friend has outlined the present proposals to the House, and I shall not repeat them. However, I want to mention the matter of the auction with a tariff preference of €275 for the third element of the quota, not only because of the remarks that I read out earlier on the unacceptability of auctioning to all the operators who were asked, but because of the huge disadvantage to the Carribbean operators of an auction-based system. The hon. Member for Richmond Park also referred to that.
Access to the European market is an essential part of the core business of the Caribbean banana producers. We are talking not about marginal tonnages, but about the producers' core business, yet the auctions would place the small operators at a significant disadvantage. However, the dollar banana producers, operating on a much greater international scale, could use their marginal costings basis to make higher bids and secure that extra tonnage to ensure that the boats were full. The marginal costings that they could use to supply existing markets would be better for them than seeking to open up new markets in, for example, central or eastern Europe. The Caribbean producers would, therefore, have no certainty of access and, given what I have said about the auction-based system, I am amazed that the Commission is proposing it. I look forward to the Minister's response on that subject.
A further aspect is the transitional period to the tariff-only regime. The banana industry in the Caribbean would have to carry out a huge amount of restructuring. Considerable structural change would be necessary, and it is highly unlikely that that could be achieved in the five years allowed under the proposals. The Caribbean banana producers have said clearly that they want at least a 10-year proposal.
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My hon. Friend the Member for Chesham and Amersham (Mrs. Gillan), our Front-Bench spokesman, is unable to make a speech on the subject, but her interventions showed the considerable knowledge and personal experience that she gained by visiting some of the producers. The questions that she raised bear repetition and I shall add to what she said.
I hope that the Minister of State, Ministry of Agriculture, Fisheries and Food will accept the Government's major responsibility to the Caribbean producers, for moral and historical reasons—the hon. Member for Richmond Park referred to the countless citizens of this country who can trace their roots back to that part of the world—for Commonwealth reasons and also for the selfish reason that we discussed: the potential of drugs to damage our country and our culture.
I hope that the Government will tell us what they are doing to get involved in discussions. Although negotiations with the WTO have ultimately to be conducted by the Commission, we cannot get away from the fact that Britain still enjoys a special relationship with the United States, which is the major spokesman for the three big companies involved. I hope that the Government are being proactive in arguing the case with the United States for the position that we have described and are not adopting the complacent attitude that the Commission will sort it out and that it will all be WTO-compatible. As we have already seen, that is not the case.
The Government have a duty of responsibility to be proactive in trying to pursuade the United States Government that it is in their interests, as well as in ours, that the Caribbean banana industry continues to have realistic access to the European market.
Will the Government tell us their stance on the third tranche of quota TRQ3 and the length of the transition period that would follow it? Do the Government support a strike auction-based system or, if the process is to be adopted, another way of allocating that element of the quota?
What are the Government doing about the action taken early this year by the United States to impose retaliatory duties on several products, and their withholding liquidation for many others in retribution for the European Union's stance on the arrangements?
This is a serious issue; it is a great shame that more Members from both sides of the House are not present to participate in the debate. It gets to the root of our international and historical responsibilities to parts of the world with which this country has been associated for many centuries. As my hon. Friend the Member for Hertford and Stortford reminded us, its fulfilment is the Lomé arrangement, which we hope will shortly be concluded. It would be absurd if, on one hand, we paid lip service to Lomé and the need to support the ACP countries through the European Union, and at the same time allowed an arrangement under which the key industry in the eastern Caribbean would eventually disappear. The European Union could set a tariff-only system at a high level which would protect the industry, but, as has been said, it would be subject to compensation under article XXVIII of the general agreement on tariffs and trade; therefore, it would cost a lot of money. We must accept that possibility.

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We do not necessarily have clear solutions to the proposition, not least because we are not in a position to do anything about it. However, I hope that, when the Minister responds to the debate, she will give us a clear assurance about the Government's position and their involvement in the matter. We want to know that the Government are not simply allowing the Commission to make all the running, because this country has a key role. It has more experience than virtually any other country in Europe in dealing with Caribbean issues and trade. I hope that that experience is being put to good use for the advantage of those islands, to which we owe a great duty. I hope that the Minister will give us the assurance that we seek.
I conclude by repeating my congratulations to my hon. Friend the Member for Hertford and Stortford on introducing the debate and on being a stalwart champion in the House of the banana industry in the eastern Caribbean. I hope that the rest of us will stand beside him in championing that cause.
12.6 pm
The Minister of State, Ministry of Agriculture, Fisheries and Food (Ms Joyce Quin): This has been an interesting and worthwhile debate. It is the first time that I have spoken in this Chamber, although, like you, Madam Deputy Speaker, I have spoken in the European Parliament. We should be more familiar than most with semi-circular Chambers.
I congratulate the hon. Member for Hertford and Stortford (Mr. Wells) on choosing the topic for debate and on being fortunate enough to raise it in this Chamber. The hon. Gentleman showed his interest in and knowledge of the Caribbean banana industry by giving us background information on the present situation, and he brought that knowledge to bear in his ideas on how we could proceed.
Other hon. Members spoke in the debate and voiced their concerns about safeguarding the interests of Caribbean suppliers. I shall try to respond to as many of the points raised as I can. Every hon. Member who spoke expressed regret at the poor attendance by both sides of the Committee—all three of the main parties were represented by Front-Bench spokespeople or by the hon. Member who introduced the debate—yet we all know that there is a wider interest in the issue in the House, as past debates and cross-party consensus on the matter have shown. If I have any complaint about this morning's contributions it is that they under-estimated the degree of consensus among all parties in the House on the importance of the Caribbean producers' position. We have their interests very much at heart and Members from all parties have been active in pursuing those interests. I hope to say more about how the Government have been active and, to pick up the point made by the hon. Member for South-East Cambridgeshire (Mr. Paice), proactive in trying to find satisfactory ways to safeguard the interests of Caribbean banana producers.
The United Kingdom has a long-standing commitment to maintaining such a major place in our market for the Caribbean producers. We are fully apprised of the importance of the banana industry, which is a significant world industry. The hon. Member for Richmond Park (Dr. Tonge) spoke amusingly about her first taste of a banana; over the years, the banana has
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become the most popular fruit in the United Kingdom. Its consumption has doubled in this country in the past 10 years and there is significant consumption all over the world. Given that it is such a popular fruit, most of us feel that it is reasonable for traditional suppliers in the Caribbean to continue to supply an important share of that market.
The Caribbean producers, particularly Jamaica, Belize and the four Windward Islands—Dominica, Grenada, St. Lucia and St. Vincent—are heavily dependent on sales to the United Kingdom. They depend on preferential access arrangements, which are defined in the EU banana regime. The need for that trading preference, which has been illustrated in the comments of hon. Members this morning, is at the heart of the problem now facing us.
I come to this debate as a Minister in the Ministry of Agriculture, Fisheries and Food, but I have come across the issue in other ministerial roles, particularly in the Foreign Office where the matter was mentioned many times in the General Affairs Council. I emphasise that the Departments concerned—MAFF, the Foreign Office and the Department for International Development—have worked closely together because the issue tends to be raised in the councils of which they are members. We need to liaise closely and have done so to ensure that our concerns about the matter are properly raised at every opportunity.
The hon. Member for Hertford and Stortford referred to the recent ACP-EU discussions. I am pleased that the draft declaration that was issued at the conclusion of those discussions includes a strong commitment to the ACP banana suppliers. The opening lines of the declaration state:
"The ACP and the EU recognise the overwhelming economic importance to the ACP banana suppliers of their exports to the EU market. In view of the vulnerability of the economies of these countries, the EU agrees to take all necessary measures to ensure the continued viability of their banana export industries."
I pay tribute to my hon. Friend the Under-Secretary of State for International Development who was very active in proposing ideas at that meeting.
The EU banana regime is complicated. It tries to reconcile international trade rules with differing interests and concerns within the EU and among our overseas suppliers. Not only does the regime give preference to Caribbean and African suppliers, but it provides support for EU producers in the island countries that are designated part of the EU and are particularly closely associated with France and Spain. To support and protect EU and ACP suppliers, the regime limits imports from other sources in Latin America by means of a system of quotas and licences, which has created a series of problems.
The WTO ruling in April requires the EU's regime to be changed. It does not require the removal of tariff preferences for ACP bananas—that is important—nor does it preclude a quota system. Nevertheless, the EU's response could have severe political and economic implications for our historic trading partners in the Caribbean. The Government have made it clear that, in seeking a solution to the dispute, the vulnerable position of the Caribbean states must be fully taken into account.
The WTO ruling has caused difficulties for United Kingdom and other EU exporters that are affected by

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WTO-authorised American sanctions. That is another reason why we need a satisfactory outcome to end the dispute once and for all. There have been some high-profile cases in which sanctions have had a dramatic effect, but some companies in the United Kingdom and other countries, which have been badly affected financially by sanctions, are also victims.
The European Commission's task is not easy. It is seeking a solution that will not be challenged by the WTO but respects the concerns of EU producers, budgetary constraints, the commitment to ACP suppliers, and ensures availability of supplies for consumers.
The Commission has made a proposal that it believes offers the best chance of resolving the dispute and meeting those concerns. As hon. Members have said, it consists of a transitional tariff-rate quota system, followed by a tariff-only regime by January 2006 at the latest. The level of the tariff and the tariff preference for the ACP would be subject to negotiation under procedures laid down by the WTO.
That is important, because the Caribbean countries will need a continuing trade preference to enable them to continue to send their bananas to our market. In turn, they need the agreement of other countries to a waiver from the normal WTO rules, as the hon. Member for Hertford and Stortford emphasised. Those other countries include rival banana producers in Latin America, which are also developing countries. The task facing the Commission is to persuade them to agree to the new waiver. That is a matter for negotiation and cannot be imposed unilaterally.
A tariff-only regime would be the simplest WTO-compatible regime, but the Caribbean industry would need time to adapt and to restructure. The Commission's proposal could provide that if it were adjusted to reflect their needs. That is the message that the Government and the Caribbean states are making clear.
Dr. Tonge: Does the Minister believe that six years is sufficient time for diversification to take place?
Ms Quin: We would have preferred a longer period. Six years is a compromise and we continue to work for a transitional period and accompanying measures to allow the necessary changes to take place.
The hon. Lady made some important points, but she also suggested differences between her perspective and that of the Government, which do not exist. There is much common ground in the approach of everyone in the House who has taken an interest in the matter.
Mr. Paice: The Minister said that the Government would have preferred a longer transitional period. Is she saying that, because the transitional period is a compromise, there is no possibility of the EU increasing that period and that it will be six years, take it or leave it?
Ms Quin: No, I am not saying that. Discussions are continuing in the EU among the Commission and member states, and the European Parliament must also give its opinion. The length of time and the support for
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Caribbean countries will be the subject of discussion among the European institutions. In response to the concerns that were expressed at the recent ACP-EU meeting, the Commission must take such matters into account.
Mrs. Gillan: I urge the Minister to reinforce that message with her colleagues. The men who work on the banana farms in, for example, St. Lucia—I have met many of them—face an end to their working life and to the means by which they support their family. This period is of great significance to them—they have to find the funds to re-skill themselves and an educator who can offer them the appropriate opportunities. If the industry comes to an end, they may no longer be able to support their family financially, and their family's honour and integrity may be threatened.
Ms Quin: I appreciate and sympathise with the hon. Lady's points. When we pursue arguments in the European Union, we need to stress the effects of the loss of the banana market on different countries. The ACPEU debates in the Council mean that many more issues have been aired, but it is still important to consider examples.
Several hon. Members said this morning that few alternatives are available to Caribbean producers and that it may be difficult for them to find an obvious area of diversification. There is also the threat that countries may diversify into the dangerous drug trade. The last thing that we want to do is to add to the problems that have already been caused by the drug trade in that part of the world and elsewhere—with the drugs trade, problems anywhere in the world become our problems.
I was interested in the comments on offshore financial development. We must consider all the possibilities, but we do not want to encourage countries to go down a route that will not be productive in the long term. There may be some room for manoeuvre in the financial services sector, but that would involve the well-trailed discussions in the European Union about finance havens. That issue also needs to be considered on a wider scale, in the Organisation for Economic Co-operation and Development and other organisations. We need to consider all the possibilities that are open to Caribbean countries, but we also need to be alert to the dangers of encouraging developments that might bring problems in the long term.
Almost all the interested parties have expressed a preference for a tariff-rate quota system at least for a transitional period, which offers the possibility of reaching an agreement. However, it is in the detail of the management of the quotas that views differ. Most could accept a system of licensing that is based on historical reference periods, although there are differences about which periods should be used. The WTO ruling requires agreement on the reference periods. Without that, an aggrieved party could again challenge the WTO's regime. All sides wish to avoid returning to the WTO. The Commission needs to embark on further discussions with third parties to establish whether common ground can be found, and it needs to do so with persistence and determination.
The UK Government are fully committed to helping the Caribbean countries to restructure their banana

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industries in a manner that ensures that those countries become less dependent on banana production and that their banana production becomes more competitive. Virtually all the aid that is available for restructuring and diversification of the banana industry comes from the EU. The UK takes an active role in shaping and monitoring EU assistance through its participation in the donor group. From next year, the main source of funding will be the new special framework of assistance. Under that framework, it is expected that each of the main banana-growing Windward Islands will receive between €6 million and €9 million per year and that Jamaica will receive about €5.3 million. We recognise the importance of providing effective aid.
Several hon. Members discussed the difficulties with EU aid schemes and the effectiveness—or lack of effectiveness—with which aid has been given. The UK Government seek to ensure that aid goes where it is most needed and that it is delivered effectively. There is much frustration with the way in which aid programmes are administered. However, if such programmes can be made effective, the amount of money that is available means that they can make a real difference.
Mr. Wells: The problem with such aid is that it goes not to banana farmers, but to the Governments of those countries, who can use it as they think fit. One does not necessarily target the banana farmer with such aid. We also need to be aware of difficulties with the European Community's aid programme, which is too slow, bureaucratic and unfocused. The Secretary of State for International Development is doing her best to correct that, but it is a serious problem in this context.
Ms Quin: I accept the hon. Gentleman's comments, and I am glad that he recognises that the Government
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are focusing on the matter. Such aid can be used for restructuring and diversification and for establishing social support programmes for displaced banana growers. We must ensure that the money that is in theory available is used for such purposes. We are seeking to ensure that aid programmes are as effective as possible by using our influence in the European Union and our contacts with Commission officials and the banana-growing countries.
Several hon. Members referred to the meeting of EU and ACP Ministers in Brussels on 7 and 8 December. At that meeting, my hon. Friend the Under-Secretary of State for International Development actively advanced the UK's concerns. We achieved several of our objectives for defining across-the-board trading arrangements with the ACP. Following a preparatory period to 2008, new WTO compatible trade arrangements will be introduced. They will comprise regional economic partnership agreements and a safety net for those who are unable to join them. I appreciate that this matter goes slightly wider than the terms of this morning's debate, but I am sure that the Select Committee on International Development will want to examine the agreement between EU Ministers and ACP Ministers to establish how to make progress.
We are encouraged by the fact that the European Commission is speaking to all parties in an effort to find a common way forward. We all want to end this dispute, but much depends on the detail. The Government therefore have to remain on their guard.
The hon. Member for Hertford and Stortford urged me to persist, harry and hassle, and to use every method—
Madam Deputy Speaker (Mrs. Gwyneth Dunwoody): Order. We must now move on to the next debate.

Financial Services (Rural Areas)
12.30 pm
Mr. Colin Breed: Even after decades of cheques and years of credit cards, debit cards and cheque cards, and now even internet settlements, more than 85 per cent. of financial transactions are conducted in cash. Access to real cash—notes and coins—remains essential to our everyday life. Those who live in towns and cities have a variety of ways of obtaining cash; they can go to their banks or building society offices, to post offices, to automatic cash machines and even to supermarkets, which are now willing to provide cash.
It must be acknowledged, however, that access to such financial services in rural areas has become progressively difficult. The general trend of declining rural services and the predominance of commuters and holiday-home owners in many rural areas have devastated the local customer base that is vital to sustain banks and post offices. For instance, in Common Moor in my constituency, the post office closed a year or so ago, and pensioners are now forced once a week to await the arrival of a mobile post office—sometimes in the wind and rain. We wonder how long even that will continue.
I shall highlight the problems experienced by many people in rural areas when attempting to gain access to all sorts of financial services, particularly cash. This is a pertinent time to discuss the matter, as the Government are proposing to alter the way in which benefits are paid. They want to use the automatic credit transfer system to transfer money to bank accounts rather than using the more traditional post office counter transactions. However, many bank branches in towns and rural areas are closing, partly due to mergers but mainly because they are now considered inviable.
Hon. Members are well aware of the problems, and the Government have given us assurances, but the Post Office estimates that nearly half the sub-post offices gain 40 per cent. or more of their custom through making benefit payments. Many sub-postmasters and sub-postmistresses are naturally extremely worried that they will be unable to continue in business if they can no longer pay benefits. If the Government go ahead with their proposals, those people will surely see their businesses close. Historically, post offices have been at the heart of rural communities. We must seriously consider the complete picture before we put them under threat, especially because they provide benefits to some of the poorest people.
The Government assure us that they are committed to maintaining a national network of post offices. They say that they intend to negotiate with the banks to allow people to gain access to bank accounts over the post office counter. I assume that nothing has so far been agreed, yet the Government seem committed to going ahead with the proposal. How does the Economic Secretary to the Treasury expect such a system to work? When will post offices find out whether they will be supported? That is particularly important to those who, even now, are contemplating selling up and retiring; they are unlikely to find many buyers until that matter is clearly settled.
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If we can take more business to rural post offices, perhaps allowing them to provide banking services to their communities, so much the better; but what are those services, and how financially beneficial are they likely to be? People in rural communities who so desperately need their post offices do not want sophisticated access to largely irrelevant financial services; they want payment of their benefits in cash. The people of Common Moor would be little impressed by a row of automatic telling machines miles away if they could not be paid their pensions when they needed them.
Access to banks is a great problem to many people in rural areas, and I applaud the efforts of some banks, including the Bank of Scotland, which have tried hard to improve accessibility. They have set up community-based banking schemes, installed ATMs in public areas and made bank officials available on certain days to dispense advice. Those schemes are good, but others, such as the Horizon project, have already cost a considerable sum and need further development. Nevertheless, such projects are essential to providing rural communities with better banking facilities.
Those who have a reasonable income and who maintain a healthy bank balance are usually able to look after themselves if banking services are provided. However, the Government-formed policy action team 14 report "Access to Financial Services" reveals some interesting figures. Apparently, 1.5 million households do not use any financial service. In one household in 10, no one has a bank account. Most interestingly the majority of those with no bank account are from low-income households, often on means-tested benefits and living in social housing. Many are over retirement age.
The Government are right to be concerned that such people do not have bank accounts. Access is one barrier, but other major barriers include the banks not wishing to give people accounts and people simply not wanting to have one. Studies show that the unbanked choose not to have an account for a variety of reasons. Some are women who have chosen to let their husbands hold the account. One of the major advantages of the current system of administering child benefit is that it is paid to the mother. How can that continue if the mother does not have a bank account? Would child benefit have to be paid to the husband or partner? The Government may jeopardise the right to choose. Furthermore, many poorer people have to watch every penny and budget in cash, not by bank statement. Many do not have a bank account, either because they do not trust themselves to stay out of debt or because the banks do not provide adequate local services. What can the banks offer them?
Even if choice accounts for some, we cannot ignore the fact that at least 1 per cent. of people are without accounts because they have been refused them. How does the Economic Secretary intend to change the banks' minds? Obtaining a bank account is by no means an automatic process. It is hardly an attractive business proposition to a bank to take on a customer whose account registers £40.70 at the beginning of the week and only a few pence the next day. That proposition will become even less attractive if the account starts to register unauthorised overdrafts or becomes an economic nuisance. Can such people's requirements be met by commercial banks? Banks are private companies, and surely cannot be forced to accept customers.

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"Access to Financial Services" notes some key principles. One is non-compulsion. The report states:
"People who do not want bank accounts should not be compelled to have them; and banks' selection of which sections of the market to serve should be left to their commercial judgement."
With that principle in mind, how will the Government achieve the sort of accessibility to benefits payments that is necessary to reach the most disadvantaged parts of rural communities? The Government have promised to talk with the banks, but do they expect to have widened bank account holding and improved access to banking facilities sufficiently by 2005, when the automatic credit transfer scheme should be fully in place? If not, what do they propose?
A further problem with increasing reliance on automatic bank services is that, as proper, manned bank branches continually close, access to other financial services will become much more difficult. An ATM may be able to do a great deal for an account holder in the day-to-day running of a bank account, but it cannot advise on mortgages or home insurance. The policy action team suggests that credit unions might be a way forward. However, even community credit unions may not be viable in sparsely populated rural areas. They are voluntary groups, at present in an embryonic state, and to function properly they require critical mass. That, too, is difficult to achieve in sparsely populated areas.
It seems clear to me that, in their headlong rush to reduce the social security costs of distribution, the Government have failed to consider the wider implications of their decision. Do they seriously expect the banks not to increase their charges when they enjoy a monopoly? Do they think that the possibility of new account holders is likely to stem the closure of rural bank branches? Do they not realise that the bank branches of those vulnerable people who rely on weekly benefits will close, probably because they are not viable, followed shortly by their post offices and perhaps the village shop? What will be the cost of access then—a bus ride into town, perhaps a charge to use a cash machine and greater inconvenience? A few pounds on a social security budget will be saved, but that saving may prove to be only temporary. Transferring the costs of distributing benefit from the Government to those who receive it is simply unacceptable.
Surely it is crystal clear that post offices should become the providers of financial services and continue to pay benefits; it is the banks that are likely to close. The rise of telephone banking services and the installation of automatic cash machines have dramatically reduced bank customers' need to go into their branches. Many of us might not have been inside our bank branch for many weeks or even months. Banks want to pull out of many places, and they will ultimately do so, but post offices want to stay in them. Post offices have a loyal customer base and can provide the low-level cash services that people need daily.
If the Government had any sense, they would use the commercial freedom of post offices and allow them to take over such bank functions. Post offices would start to generate alternative income from providing the banking services that the banks are regularly ceasing to provide. That might ultimately secure a reduced benefit bill to the Department of Social Security. If post offices had a wider range of income, and if they could maintain village stores and provide other services, their reliance
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on the income derived from benefit payments would be reduced. Vital rural post office stores would be maintained and banks could withdraw a little sooner, while providing their customers with an alternative. Surely that is the sensible way forward.
12.43 pm
The Economic Secretary to the Treasury (Miss Melanie Johnson): I am delighted to be able to respond to this debate. I understand that the hon. Member for South-East Cornwall (Mr. Breed) used to be a bank manager, so he speaks with considerable authority. I am somewhat distressed to hear that he may not have been inside a bank for some time. That may be part of the problem that the banks face.
As the hon. Gentleman said, better access to financial services is a vital element of rural development and is essential in achieving the Government's wider aims of eliminating social exclusion, which will remain at the top of the Government's agenda. Many people are not able to share the growing prosperity and all the life chances available in our society. Many of them live in deprived urban neighbourhoods, although we know that the problem of access to financial services affects rural as well as urban areas, and not only the poor.
Following the social exclusion unit report on deprived neighbourhoods, "Bringing Britain Together", which was published in 1998, the Treasury established policy action team 14—whose report the hon. Gentleman has referred to—to consider financial services. That report makes it clear that many of the problems of access to financial services are generic, but that they can be solved.
The way forward lies in developing new and alternative means of providing access to financial services, as well as ensuring that existing services can reach all rural and urban communities. The policy action team's report contains more than 40 recommendations, some of which I shall outline. The sheer number of recommendations shows that the problem has no single solution. "One size fits all" cannot be the right approach to the design of products or service outlets, because people's circumstances and preferences vary. Diversity and choice are the watchwords. The banks in particular have a major task ahead of them in extending services to low-income households and developing delivery channels that are accessible to people in areas away from major commercial centres or individual branches.
The Government's full response to the recommendations of all 18 policy action teams will be announced next year as part of the national strategy for neighbourhood renewal. However, I shall highlight the recommendations on this matter on which we are making progress.
First, as the hon. Gentleman said, we want to encourage the growth of credit unions, which are much less well developed in Britain then in other countries. Indeed, they are less developed in rural areas than in urban ones.
Mr. Breed: I applaud such encouragement. Will the Economic Secretary consider changing the name "credit

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unions"? It is a terrible misnomer, because they deal with savings rather than credit. Perhaps "community banks" would be better.
Miss Johnson: I am sure that that is a matter for the credit unions themselves, and that they will hear what the hon. Gentleman says.
One of the report's recommendations is the establishment of a new central services organisation to assist the growth of the credit union movement. That organisation will support new and existing credit unions and produce a bigger, stronger credit union movement, which will be assisted by the new supervisory framework and deregulation measures that were announced in November.
Ways will be found to improve the coverage of insurance with rent schemes. We shall work with the industry to develop challenging targets. We want to improve access to affordable credit—perhaps through the Department of Social Security social fund—as well as promoting wider access to debt counselling and refinancing for those who have problems. All those developments could benefit people in rural areas as much as those in towns and cities.
I shall now specifically deal with banking. We have heard about the difficulties faced by people in rural communities that have no bank branches nearby and the issues facing the Post Office. The banks can do much to remove unnecessary barriers, develop the right products, open new delivery channels and provide their customers with better information.
More informed and educated consumers will make better choices about financial services. That is why we have made promoting consumer awareness a statutory objective of the Financial Services Authority under the Financial Services and Markets Bill. Alternatives to conventional bank branches have existed for some time in this country. There is a huge and increasing range of alternatives, such as telephone, Internet, supermarket or post office banking, cash machines away from bank branches and banking via digital television.
The Post Office is particularly important in rural areas. In many communities, it is the only retail business and a focal point of village life. The Post Office has 19,000 branches—about 10 times as many as the largest high street bank. The development of banking at the post office is already providing benefits to untold numbers of people in rural communities and has the potential to serve many more in future. Customers of several banks now have the opportunity to carry out bank branch business—transactions that cannot be done over the telephone, such as paying in a cheque or drawing out cash—at the post office. Other banks and building societies could enter into similar partnerships. The decision to computerise the Post Office network, announced at the end of May by my right hon. Friend the Secretary of State for Trade and Industry, will enable the Post Office to provide an even broader range of services.
I shall now deal in more detail with some of the questions that the hon. Gentleman raised. It is important to point out that ACT will not be compulsory. I was not sure whether he was implying
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that it would be, but there is no Government proposal for anything other than a voluntary extension of existing arrangements through computerisation. That will enable people who want ACT to be paid benefits and pensions through a more modern, secure method, which I am sure the hon. Gentleman would agree can be only an advantage to the customer and to the Post Office. The Post Office will continue to pay benefits in cash.
There is a danger that the possible solution is construed—the hon. Gentleman in danger of so construing it—as the problem. We can extend access to banking. The hon. Gentleman referred to the problems of access to banking in rural areas, but the Post Office is part of the solution to that—via a closer relationship between Post Office Counters Ltd. and the banks and building societies, which will build on work being done in that regard. The upshot will be a better service to consumers and to those receiving benefit payments, while cash will still be available. We will ensure that the Post Office develops in a way that leaves it at the heart of rural communities.
On the hon. Gentleman's question about the future of the Post Office network, we said in our White Paper that we would publish access criteria, which the new regulator will have a duty to monitor, that aim to ensure that everyone in the UK has reasonable access to Post Office counter services. That is an appropriate method of dealing with the issue. In addition, the Prime Minister, who has taken a keen interest in the matter, has asked the performance and innovation unit to carry out an urgent study on the Post Office network. That will aim to identify the contribution made by post offices to the wider vitality of our rural and urban communities, consider how the Post Office network can best contribute to the Government's objectives for the future and, in the process, formulate objectives for the future of the network. Much work is therefore in hand and many answers lie in the changes that we face. The new technology can be a means of solving rather than creating problems. We believe that a better service will emerge out of all of this. As the hon. Gentleman said, it is important to look at the complete picture.
On the banks, which was another issue that the hon. Gentleman raised, we are, as he knows, looking at the development of basic accounts by all the main banks. We wish them all to offer basic accounts to all their customers and to ensure that the forms of identity demanded for opening accounts are appropriate and sensitive, so that passports or driving licences are not required if people do not have them. Because of anti-moneylaundering requirements, the banks much check people who are applying for accounts. The hon. Gentleman referred to the fact that some people who do not have bank accounts may not want them.
Mr. Breed: Does the Minister agree that banks sometimes use the demand for particular forms of identity as a means of discouraging potentially uneconomic account holders?
Miss Johnson: The banks have worked closely together, through the British Bankers Association, in drawing up a leaflet of advice about the forms of identity that banks will and can accept that do not in any way conflict with anti-moneylaundering legislation to which we are committed and are keen to see operating. That

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will enable people to open accounts with lesser forms of identity. The banks are making every effort to ensure that staff at branch level are aware of and operate those lesser requirements. If there has been a problem in the past, it may have been partly a question of identity documentation, to which we and the BBA have sought to find a solution.
It is also open to local authorities to make arrangements with banks to have cash machines on public premises, visits by mobile bank vehicles or premises for part-time use by service providers. There is considerable scope for initiative and for banks to come up with creative responses. The hon. Gentleman asked how we might change the minds of the banks. The banks are, as they are very well aware, under considerable public pressure on a number of fronts. We do not want to have to legislate, as some have urged, to compel the banks, or financial services, to serve all sections of the community, but if voluntary action and partnership do not lead to the kind of changes and development of options that we think necessary, we may, as we have said, have to consider other options.
Our policies on access to financial services will help people in rural areas as well as tackling the wider questions of financial exclusion in a number of our communities, but there are many other ways in which the Government's policies for rural areas are already making a difference. If I mention a few of them, it will help provide a more complete picture.
The Countryside Agency, which was created in April 1999, provides for an integrated approach to rural issues. We have set up a new Cabinet Committee to coordinate policies affecting rural areas, which will help to achieve a fully cross-departmental policy for the countryside. We have also provided an additional £1 million for the Countryside Agency to focus on rural needs, allowing it to do more to help mainstream programmes reflect such needs.
We have also provided for increased public expenditure on rural programmes, from £128 million last year to £146 million in 1999–2000 and £162 million in 2000–01, with a projected £174 million for the following year. We have introduced rate relief for village shops and post offices so that the sole shop or post office in a settlement of fewer than 3,000 people is eligible for 50 per cent. rate relief. We have provided an additional £170 million over three years for rural transport, including new support for rural bus services and encouragement for community transport initiatives.
The combined effect of that funding and of the other measures that I have mentioned is to promote the prosperity and enhance the life of our rural communities. We know that they play an important role and we need to look after those who live in them and meet their needs. We are confident that better access to financial services will be a part of that process.
Madam Deputy Speaker (Mrs. Gwyneth Dunwoody): Order. Since the Minister is present, we can go on to the next debate.

Driving Instruction Appeals
12.58 pm
Mr. Eric Illsley: I welcome the opportunity of raising the issue of the Driving Standards Agency appeals system, which arises from the case of one of my constituents, Ms Donna Kemp, who was indecently assaulted by her driving instructor.
The driving instructor, a Mr. Kevin Hanson, eventually admitted the offence, after being charged by the police. The police and the Crown Prosecution Service eventually saw fit to deal with the matter by administering a caution. Two conditions were attached to the offer of that caution to Mr. Hanson: first, that he admit the offence and, secondly, that the instructor's name be added to the sex offenders register. It was clear that Mr. Hanson's acceptance of the caution constituted an admission of guilt of the offence for which he had been charged.
The DSA informed the driving instructor that he was to be removed from the register of approved driving instructors. He was no longer considered fit and proper to be included in that register—a decision taken by the chief executive of the DSA. The driving instructor appealed against that decision. It was then considered by an appeal board, which recommended that the instructor should be reinstated in the register. In fact, his name was never removed. Even after he had been charged, while the case was being dealt with by South Yorkshire police and the Crown Prosecution Service and throughout the entire appeal process, Mr. Hanson's name remained on the register of approved driving instructors.
The chief executive of the DSA, with whom I raised the issue, told me in his earlier letter that the DSA had tried to remove the instructor, but
"As the Board's findings were not contrary to law or illogical … there was no alternative but to allow the appeal."
The law that applies in such circumstances should be changed. The appeal board's findings could have been classed as illogical. The Minister and the chief executive of the DSA need more powers to review appeal board findings.
The case has raised several issues that relate to the appeal board's findings and need urgent consideration by the Government, such as whether instructors should be allowed to continue to instruct after they have been charged with an offence or during an appeal against being removed from the register. The conduct of appeals boards needs to be examined, as does the evidence that they consider, in view of the paucity of the evidence presented to the appeals board in this case, to which I shall return in a moment. The conduct of the members of an appeal body should be reviewed, in view of the attitude of members of the appeal board in this case. The lack of a mechanism to review decisions made by an appeal body is a cause for concern.
The acting chief executive of the DSA, Laraine Manley, seems to support that view. She informed me in a letter of 15 November:
"There are various aspects about the way the ADI appeals system operates which also give rise for concern",
referring in particular to an instructor's being allowed to continue instruction during an appeal. I hasten to add that Ms Manley has only recently assumed the position

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of acting chief executive. The bulk of my correspondence on the case was with the former chief executive, a Mr. Bernard Herdan, who, I understand, now runs the Passport Office.
When I originally raised the issue with the DSA, I received a letter from Mr. Herdan, which stated that the appeal board had been influenced by the decision to administer a caution in relation to the charge and withdraw the case. However, the case was withdrawn on the basis that the instructor had accepted his guilt for the offence and the caution. Nevertheless, the chief executive said that the decision to withdraw the case had had some relevance.
Mr. Herdan went on to say that
"there was no alternative but to allow the appeal."
He continued:
"I have asked the Registrar to monitor the situation closely and should the Agency receive notice of any further complaints against Mr. Hanson or become aware of any subsequent offences, serious consideration would once again be given to his position on the Register."
In other words, the instructor seemed to have got away with it this time, but if he did it again, the process would start again with attempts to remove him from the register.
At that stage, I asked the chief executive for a copy of the appeal board's report. In his reply of 9 June, Mr. Herdan wrote:
"Because of the Data Protection implications and the confidentiality of the Appeal Board's report, I regret that it is not possible to provide you with a copy."
That was clearly not true, as I now have a copy that was faxed to me on Friday, offered by the acting chief executive, Laraine Manley, when she took over responsibility for the case. Why was I initially denied that report, when no data protection implications or confidentiality issues seem to surround the matter?
The chief executive continued, in the same letter:
"The Agency takes very seriously any offence committed by an instructor, particularly those which are of a sexual nature and you can be assured that prompt removal action will continue to be initiated by the Registrar where substantiated reports are received."
What caught my attention in that paragraph was the phrase
"where substantiated reports are received".
That paragraph gives the impression that the charges against Mr. Hanson were unsubstantiated—despite the fact that Mr. Hanson had already accepted the caution, admitted guilt for the offence and been placed on the sex offenders register. At that stage, I began to wonder exactly what the appeal board had been told when it considered the case and whether it was aware of the admission of guilt and the inclusion of the instructor's name on the sex offenders register. I began to question whether the appeal board had been aware that he had admitted the offence and the consequences of that.
I was also rather worried by the belief of my constituent, Ms Kemp, arrived at after she received a letter from the CPS, that the appeal board may have acted in the belief that a caution was administered to deal with the case because of a lack of evidence—in
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other words, because of the fear that a prosecution brought against the instructor might fail. However, the letter to my constituent from the chief Crown prosecutor in South Yorkshire is clear:
"An experienced Crown Prosecutor carefully considered the evidence. After confirming via the police that you"—
Ms Kemp—
"were willing to give evidence against him"—
the instructor—
"she was satisfied that the evidence was sufficient to provide a realistic prospect of conviction and that it was in the public interest to continue the prosecution."
Clearly, therefore, a substantial case existed against the driving instructor.
In fact, the possibility of dealing with the matter by way of a caution was raised by the driving instructor's own solicitors, who contacted South Yorkshire police and the CPS to ask whether that might be possible. At that point, the police, Ms Kemp and the CPS agreed that that would be a fair way of dealing with the matter. Again, however, I began to worry about whether the appeal board had missed that.
Ms Kemp clearly believes that she should not have agreed to the case being disposed of by a caution. Because the appeal board dismissed the offence as unimportant, she now feels that the admission of the caution diminished the offence and somewhat called her integrity into question.
I wrote again to Mr. Bernard Herdan, the chief executive, to ask whether he believed that the case was substantiated, in view of his reference to substantiated cases. On 28 June, he replied:
"The Registrar's initial decision to remove Mr. Hanson's name from the Register was based on the substantiated evidence against him.
However, as mentioned in my letter of 12 May, the decision to allow Mr. Hanson's name to remain on the Register was based on the recommendations of the Approval Board who heard his case against the Registrar's original decision, not on any re-examination of the evidence by myself or the Registrar."
In other words, the appeal board actually allowed the instructor to deny at the appeal an offence which he had already admitted. The appeal board went on to try a case that the instructor had refused to allow to come to court and he had sought to be dealt with by means of a caution.
By that stage, I had become increasingly concerned at the conduct of the appeal and the appeal body. I raised the issue again with the Driving Standards Agency and also sought this debate. On 15 November, the acting chief executive, Laraine Manley, wrote and offered to let me see the appeal board report, while also expressing her concern about the appeals procedure, as I have mentioned. The report was not enclosed with the letter and I received it on Friday.
The appeal board report makes interesting reading. Paragraph 2 refers to all charges against the driving instructor being withdrawn. The charges were withdrawn after Mr. Hanson had admitted the offence and accepted the caution.
Perhaps the most damning paragraph is the third, which states:
"We have not seen a copy of the charge, or the evidence put together by the Police and Crown Prosecution Service. We only have seen a press report of an interview given by the pupil after the charge had been dropped. We have heard evidence from Mr. Hanson."

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The appeal body does not even mention the papers prepared for it by the DSA that were referred to in correspondence to me. All it had seen was a press report—nothing from the Crown Prosecution Service and nothing from the police. I consider that evidence to be one-sided. Throughout the appeal, the body was influenced by a press report. Why did the appeal board not seek to interview or take a statement from Ms Kemp? Why did it not ask to see police documents or a report from the Crown Prosecution Service on the incident?
The fourth paragraph of the report begins:
"We are prepared to accept the following facts".
It goes on to say that the indecent assault was sufficiently minor, despite the fact that the Crown Prosecution Service believed that it had a case against the driving instructor that it was prepared to pursue. In paragraph 4(c), the appeal board accepts as fact a statement that the police interviewed more than 20 female pupils of Mr. Hanson. There is no way in which the appeal board could know that, let alone accept it as fact, but to ask Mr. Hanson itself, because it had no documentation from the police whatever. The paragraph states that
"Mr. Hanson's chance of maintaining his innocence must be rated as high",
despite the fact that he had accepted the caution and admitted guilt of the offence.
Paragraphs 4(c), (d), (e) and (f) of the report are all about evidence given by Mr. Hanson to the appeal body during the hearing; he was the only person before it apart from his partner. Paragraph 4(f) refers to Ms Kemp contacting the newspaper having discovered that the instructor was to be cautioned. The idea of the newspaper article runs throughout the appeal.
Paragraph 5 begins:
"Mr. Hanson maintained his innocence to us, denying most vehemently that he had even attempted to indecently assault Ms Kemp".
It would appear that the appeal board accepted that denial and that it tried Mr. Hanson's case, basically accepting that he was not guilty. If Mr. Hanson had been so sure of his innocence, why did he not let the case come to trial?
Paragraph 7 states that, where impropriety with a pupil is alleged, careful consideration must be made about removing an instructor's name. Impropriety was not alleged in this case: the driving instructor had admitted it. The allegation had gone from a charge to an acceptance of a caution. Paragraph 8 finally states that the board believed that not removing
"Mr. Hanson's name from the Register will not bring…the Agency into disrepute".
I wonder how wrong the board thinks that it was.
The appeal board's report was accepted by the chief executive, despite its one-sided nature. The appeal body did not take evidence other than that from the instructor, which it believed and referred to as fact. It obviously did not believe anything that my constituent said or did in relation to the incident. It believed that a caution lessened the offence of indecent assault, ignored the instructor's admission of guilt and allowed him to deny the offence and basically try the case in the appeal hearing. The appeal board members were obviously
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influenced by a newspaper article rather than official documentation that could have been made available to them.
I believe that the case highlights major deficiencies in the running of the Driving Standards Agency, in which there appears to be no clear policy in relation to such incidents. It also highlights deficiencies in the appeal system. The registrar and the Minister should have clear guidelines with regard to the removal of an instructor's name from the register of approved driving instructors. I hope that my hon. Friend the Minister will consider those issues.
1.18 pm
The Parliamentary Under-Secretary of State for the Environment, Transport and the Regions (Mr. Chris Mullin): I am grateful to my hon. Friend the Member for Barnsley, Central (Mr. Illsley) for raising this important matter, which affects wider issues than the case to which he referred. I entirely share his concern about the way in which the case, which has not appeared previously before Ministers, has been handled, and I understand why he and Ms Kemp are extremely unhappy.
My hon. Friend asked why he was originally told that he could not have a copy of the appeal board judgment. That was based on a misunderstanding of data protection legislation, and has been rectified by the fact that he has now received it.
Before I deal with the case raised by my hon. Friend, I should explain the background to the regulation of driving instructors. For road safety and consumer protection reasons, anyone offering paid car-driving instruction must have his or her name entered on the register of approved driving instructors, as has been the case since 1970.
The registrar, an official of the Secretary of State, administers the register on behalf of my Department. The function is now part of the Driving Standards Agency, which is an executive agency of the Department.
To be accepted as registered instructors, applicants must satisfy the registrar that they are of good character and must pass a three-part qualifying exam. That consists of a theory test and practical tests of driving and instruction ability. On payment of a £200 registration fee, a successful applicant is accepted on to the register for four years. At the end of the four-year period, instructors can apply to renew the registration. Standards supervision is an important part of maintaining public confidence in the register. Instructors are required to take regular check-tests every two to four years depending on the standard shown at the previous test.
Failing a check-test does not lead automatically to exclusion. The system is intended to help instructors identify and overcome weaknesses. Following an unsatisfactory test, the examiner who conducted it offers the instructor a briefing and the opportunity to take remedial training to rectify the faults identified. A second check-test is conducted after an interval, usually of three to six months. If that second test proves unsatisfactory, a more senior examiner, who is given no details about why the instructor failed the two preceding tests, conducts a third test. Only if the instructor's performance on the third test in unsatisfactory are removal proceedings started.

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Some 48,000 check-tests have been conducted over the past four years and only 254 of the instructors who failed the initial test were subsequently unsuccessful in their efforts to raise standards and were removed from the register. The failure rate for check-tests is about 8 per cent. on the first attempt, but falls to about 1 per cent. on the third attempt. Currently, 29,000 instructors are on the register, with a further 18,500 people in the process of qualifying.
The conduct regime applies as long as an instructor is registered. The registrar needs to ensure that behaviour that would bring the register into disrepute is not tolerated. Obviously motoring offences are relevant, but so are matters of personal conduct of the type to which my hon. Friend the Member for Barnsley, Central referred today. We should not forget that driving tuition occurs in relatively isolated circumstances in a car and often involves vulnerable young people. Any system of supervision and enforcement needs to strike a balance.
Driving instructors have a right to expect that their supervision arrangements are fair and proportionate. They have a right to expect an independent appeals handling process when their livelihood is threatened. Equally, the public have a legitimate expectation that driving instructors should deliver a reliable and satisfactory standard of tuition. They also expect swift and decisive action in cases of personal misconduct by instructors.
The registrar's decision to deregister an instructor is subject to an independent appeals procedure. Instructors can ask for their case to be reviewed by an appeal board, which is chaired by a person with a legal background who is approved by the Lord Chancellor's Department. The board makes recommendations to the Secretary of State. Once an appeal has been made, an instructor can continue to offer tuition until the Secretary of State issues his decision. Since 1992, the chief executive of the Driving Standards Agency has had delegated authority to determine appeal cases without reference to Ministers when there is no intention to depart from the appeal board's recommendations. We are conscious that different interests have expressed several concerns about the supervision and appeal arrangements. As I said at the outset, I share those concerns, given the experience of my hon. Friend's constituent.
Some instructors have complained that it is difficult for an instructor who fails a check-test to challenge the examiner's assessment and the appeals systems does not command confidence. However, the instructor's position is protected by the triple check-test procedure, which I have just outlined. Even if the instructor's standards are found wanting on three successive occasions, the instructor can still appeal to an independent appeal board. There are also public concerns that the current arrangements are not tough enough when dealing with instructors whose performance is unsatisfactory, either in the quality of the instruction or in their conduct. There has also been criticism that current arrangements allow instructors to continue operating while they drag out the appeals procedure, a point referred to by my hon. Friend.
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In the case to which my hon. Friend referred, the driving instructor was charged with indecent assault on a pupil during a lesson and he accepted a formal caution from the police. When the registrar became aware of the case, he wrote to the instructor advising him that, in view of the offence, his removal from the register was proposed. The instructor appealed. At the appeal board, the instructor pleaded that he had accepted a caution only to avoid the cost, publicity and anxiety of fighting the case. That, together with testimonials from other female pupils and his employer, persuaded the board to recommend that the instructor should not be removed from the register. The board's view was that allowing the appeal would not bring the register into disrepute.
The recommendation was accepted. The then chief executive of the Driving Standards Agency accepted the board's recommendation and the instructor was notified that his name would be allowed to remain on the register. In accordance with agreed procedures, the case was not referred to Ministers. I recognise that my hon. Friend has been expressing his concern to the Driving Standards Agency since that decision was issued earlier this year and I deeply regret the distress that has been caused to his constituent. The outcome of the case is no reflection on her integrity. However, as due process has been followed and the decision has been taken and issued—however unsatisfactorily—I regret to say that the case cannot be re-opened.
I reassure hon. Members that the Government are not complacent about the matter. We are working to avoid the risk of instructors concealing their misconduct. The registrar now requires them to provide references when applying for registration, but the system is still too reliance on self-declaration. The registrar can check records for motoring offences at the Driver and Vehicle Licensing Agency, but he has no access to the police national computer to check for other types of conviction. That will be remedied when the Criminal Records Bureau becomes operational. At that point, the registrar can require applicants to supply certificates showing an absence of relevant convictions.
Most of the complaints that the registrar receives from members of the public about instructors relate to relatively minor matters, and may be misunderstandings. The registrar seeks to act as honest broker in such cases. To avoid problems, the registrar has worked in partnership with the national Driving Instructors Association to develop a code of practice and has invited all instructors to sign up to its principles. About 4,000 instructors have done that so far. The Government also want the appeals process modernised.
All parties have an interest in the prompt resolution of cases. Obviously, an instructor facing loss of livelihood should be able to expect his or her appeal to be resolved speedily and effectively. Equally, the appeals system should not leave the public at risk by enabling failing or undesirable instructors to ply their trade for longer than necessary. Others in the profession must also be able to expect that the registrar will act promptly, and thus help maintain public confidence in the system.
To ensure swift action, the Driving Standards Agency has adopted active case management for appeals, with an internal target for issuing the decision within 13 weeks from the date of receipt of the appeal. The Government are also considering whether an instructor convicted of serious offences, but who wishes to appeal

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against deregistration, should be able to offer driving lessons while the appeal is being considered—a matter that my hon. Friend raised. However, perhaps conviction for some offences should constitute an absolute bar to registration.
We are considering whether it would be better for appeal boards to decide appeals cases, instead of just making recommendations with recourse to the courts on any point of law. Many of the ideas that I have floated in this debate would require legislation and that must depend on the competing pressures for legislative time. The details will need to be carefully thought through. They will need to fit in with our broader plans to modernise driving training for different sectors.
I am sorry to say that I cannot offer my hon. Friend further reassurance about the case that he has raised, beyond saying that I share his dissatisfaction. He has, however, highlighted some issues that will be addressed. If they require legislation—some of them will—that will depend on legislative time. I am grateful to my hon. Friend for raising the issue and I repeat that I share his dissatisfaction about the way in which this particular case was handled.

Special Educational Needs
1.29 pm
Mr. David Prior: It is one of the great privileges of being a Member of Parliament that, every now and again, one comes across an issue of profound importance that one would not have come across had one pursued a more conventional career.
There is such an issue in my constituency. I am referring to the Edinburgh Road special school in Holt. It is special in a number of ways—because of the children, parents, teachers and staff. There are about 35 children at the school, the youngest of whom is three and the oldest 19. They all have statements of special educational need. The majority have severe learning difficulties and approximately one third have profound and multiple learning difficulties. A further 34 children attend special schools in Norwich because there is no room at Edinburgh Road, although they live closer to Holt.
These children are among the most vulnerable and fragile in our society. Many of them will be wholly dependent on others throughout their life, and will never enjoy a quality of independent life that most of us take for granted. They deserve the best that we can give them. Society has an obligation to provide the best possible education and surroundings, to give them the best possible chance in life.
We are letting down these children at the Edinburgh Road school, and have been doing so for a number of years. We are also letting down the staff, who have a record of commitment and dedication second to none; they have worked wonders with generations of children in very difficult circumstances. We are also letting ourselves down because it is in our power to make a difference and to make the school better.
The 1996 Office for Standards in Education report summarises the problem when it states:
"The quality of education provided is affected by the inadequate accommodation. The school building is too small for the number and range of pupils on roll. There is a lack of specialist teaching areas and very little space for storage. There are too few toilets and changing rooms. The school does not have suitable outdoor areas for play, sport or recreation. As a result, education decisions are often driven by accommodation problems, rather than by the needs of pupils."
Those words are inevitably rather dry and impersonal, so I shall give the Minister more of a flavour of the problems at the school.
There is only one toilet area, within which there is no privacy. Many of the children have to be helped extensively, often using a hoist, and many are incontinent. No privacy means no dignity. There is no playground worth the name, nowhere for the children who can walk to let off steam and play, and certainly no room for those in wheelchairs, of whom there are many. The confined space may lead to more behavioural problems. Jill Measures, the head of the school, who is one of the unsung heros of Norfolk, describes the position as sometimes akin to a pressure cooker.
The age range of the children—between three and 19—makes them difficult to teach, and would do so even if they did not have special needs. The conditions would not be tolerated in a mainstream school. There is no medical room for when a child feels ill. There is no quiet

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room in which a child may calm down. There is no music room, or a room for indoor drama. There is no staff room. There is no communal dining area, so the older children have to eat in a caravan, which is parked outside the school, and which is also used for speech therapy.
The corridors are narrow and virtually impassable, with wheelchairs parked along both sides. The staff talk openly of the school breaching health and safety regulations and posing a fire hazard. The children have to travel to off-site facilities for swimming or physical education. The nearest high school is five miles away, which makes any meaningful inclusion with a mainstream school impractical. The building was never designed to be a school, let alone one for children with special needs. Originally, it was a junior training centre.
The children, their parents and teachers are getting a raw deal, which is starting to tell on their morale. The teachers do a wonderful job in Dickensian surroundings, but it is not fair and it is not right to expect them to do so. It would not be acceptable in a mainstream school, so why should it be acceptable for a special school?
At the end of 1997, the Government produced a Green Paper, "Excellence for All Children". It was followed in November 1998 by a programme for action. This year's Queen's Speech promised legislation to improve the education of children with special educational needs. I applaud those initiatives, and the commitment, which I hope is real, that the Minister has made to backing them up with financial support. I especially support the Government's commitment to inclusion and shall quote from the section in the Green Paper entitled "Increasing Inclusion". It states:
"The ultimate purpose of SEN provision is to enable young people to flourish in adult life. There are therefore strong educational, as well as social and moral, grounds for educating children with SEN with their peers. We aim to increase the level and quality of inclusion within mainstream schools, while protecting and enhancing specialist provision for those who need it. We will redefine the role of special schools to bring out their contribution in working with mainstream schools to support greater inclusion."
The Green Paper's vision for the future of special schools and the encouragement of greater co-operation with mainstream schools is one that I hope we all share. It has inspired the Norfolk education authority, the Edinburgh Road school, the local schools at Sheringham and many others to develop a new future for Edinburgh Road special school. The matter has been in the melting pot for five years, which has meant five years of disappointment, frustration and false starts.
However, a firm proposal is with the Minister today, which envisages a new, purpose-built special school for five to 16-year-olds on the same campus as Sheringham primary school and high school. There will be room for 70 children, who will share many facilities with the primary and the high school. If feasible, children from the special school will be included in mainstream lessons and activities. Staff in the special and mainstream schools will be trained so that they can all help each other.
The benefits of co-location will be a two-way process. The special school will seek to become a centre of excellence, used by all the local schools. There will be
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provision for 10 nursery-age children with SEN. They will be taught on a fully inclusive basis in the nursery in the primary school. Staff from the specialist school and the primary school will work together in the nursery. There will also be provision in the sixth form for 10 post16-year-old students with SEN, using independent accommodation attached to the high school, but there will be full inclusion when possible.
I hope that I have given the Minister a flavour of the vision of the future of Edinburgh Road school. It is a flagship project for Norfolk, representing a great commitment to these special children. "Excellence for All Children" is the title of the Green Paper, but it is our vision too. We want inclusion when possible, and specialist separate accommodation when it is not.
In my letter to the Minister on 7 December, I concluded as follows:
"This is one of those opportunities which dwarfs the normal cut and thrust of politics. It is an opportunity to give a better chance in life for thousands of severely disabled children, and by bringing them into mainstream schools, where possible, to enrich the education and increase the understanding of other children. In the long run, this is the best possible way to establish the rights of disabled people as equal partners in our society."
That is an objective that we all share.
The status quo at Edinburgh Road school is unsustainable, unfair and unacceptable. A firm proposal has now been framed and it is in tune with the Government's philosophy of excellence in education for all. I hope that the Minister will support it.
1.40 pm
The Parliamentary Under-Secretary of State for Education and Employment (Jacqui Smith): I congratulate the hon. Member for North Norfolk (Mr. Prior) on securing the debate and raising an issue that is so important to his constituency. I agree with him that the Government have inherited much work that will be necessary to provide the requisite standards of education for children with special educational needs.
One of the first issues tackled by the Government after the election was the education of children with special educational needs. As the hon. Member for North Norfolk mentioned, within months of October 1997 we published the Green Paper "Excellence for All Children" and followed that in November 1998 with "Meeting Special Educational Needs: A Programme of Action". We have continued to work hard to put in place a system for children with special educational needs that will enable them to receive the education that they deserve, as part of the Government's overall drive to improve standards for all children. I am pleased to note the hon. Gentleman's broad welcome of what we are trying to achieve in our broader programme of action.
The hon. Gentleman made clear his concern about the future of Edinburgh Road special school and, in particular, his strong support for the recent proposal by Norfolk local education authority to relocate the school to a new site in Sheringham. I am grateful to the hon. Gentleman for spelling out that proposal. I would also like to take this opportunity to commend the head teacher, the staff, parents and children for the work that is going on in that school when the circumstances of the accommodation are so difficult.

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The hon. Gentleman will be aware that the general position on formal proposals to open, alter or close a special school is that, with effect from 1 September, responsibility for considering such proposals transferred from the Secretary of State to local school organisation committees, provided the local education authority had an agreed schools organisation plan in place. Norfolk LEA had not agreed a school organisation plan by early November: hence the proposals for the Edinburgh Road special school will be decided by my right hon. Friend the Secretary of State.
It might help if I explained the timetable of consideration for such proposals—
Mr. Laurence Robertson rose—
Madam Deputy Speaker (Mrs. Gwyneth Dunwoody): I assume that the hon. Gentleman has permission to speak from the hon. Member for North Norfolk, who proposed the Adjournment.
Mr. Prior indicated assent.
Mr. Robertson: I am grateful to the Minister, but I may have missed her point about transferring the responsibility for closing special schools. Will mainstream schools remain the responsibility of the Secretary of State and the transfer apply only to special schools, or am I wrong on that?
Jacqui Smith: The hon. Gentleman is wrong. Under the new arrangements for statutory proposals from 1 September, responsibility for the development of school organisation plans is given to local education authorities and responsibility for decisions about individual proposals and specific plans is given to school organisation committees. The hon. Gentleman will recall that, when he intervened in Education questions, I pointed out that school organisation committees will include some special schools representatives when statutory proposals are discussed.
The position in Norfolk is different because the school organisation plan had not been agreed by the time that the particular plan for the school was proposed. The proposal was published on 22 October and a statutory period of two months follows in which objections can be made. The LEA then has a further month for my Department to receive copies of any objections, together with its comments on those objections. If there are objections to the Edinburgh Road school proposal, we would expect to receive the LEA's comments by 22 January.
My right hon. Friend the Secretary of State also receives advice from Her Majesty's inspectorate on all such reorganisation proposals and he will need to consider that advice, the case made by the LEA and the points, if any, made by objectors. He will also need to take account of advice from the Department's professional architects on the capital building proposals.
I have described the standard procedures for dealing with proposals. The hon. Member for North Norfolk will appreciate that the procedure takes time, but helps to ensure that the Department gives thorough consideration to all proposals and enables people or
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organisations to comment. I am afraid that, at this stage, I cannot give any indication of my right hon. Friend the Secretary of State's view of the Edinburgh Road school proposal, which could be viewed as prejudicing his decision. I can say, however, that he hopes to announce his decision by next spring. I recognise that the hon. Member for North Norfolk not only is anxious for the Secretary of State to approve the Edinburgh Road proposal, but wants to ensure that the Department makes available a capital allocation to Norfolk to cover the costs of the proposed building work.
The position is not completely straightforward, but I shall attempt to explain it. LEAs are required to bid for capital cover in the annual capital guidelines round, as Norfolk LEA has done regarding the Edinburgh Road school proposals. However, an allocation for such a project would be made only if the Secretary of State had approved the statutory proposal that was linked to it.
The hon. Member for North Norfolk will know that capital allocations for 2000–01 were made earlier this week and Norfolk's allocation did not include cover for this project. The Department has nevertheless retained a capital reserve on a national basis, which can be released during the year to LEAs whose proposals are approved later. The hon. Gentleman will understand from all that I have said that I cannot comment specifically on the Edinburgh Road school proposals because I cannot preempt the Secretary of State's decision. I can gladly assure the hon. Gentleman that in reaching his decision, my right hon. Friend will take fully into account his comments today and those set out in his recent letter to my noble Friend the Minister for Education and Employment.
Mr. Prior: How big is the capital reserve set aside for projects that were not framed in time for the earlier allocation?
Jacqui Smith: I shall come to the issue of funding later.
It may be useful to reiterate the Government's general policy on the education of children with special educational needs, which is also relevant to the particular application. We are firmly committed to promoting inclusion by choice—a cornerstone of our strategy for raising standards of achievement and meeting the educational needs of all children. We are determined to maintain the progress to which the hon. Member for North Norfolk alluded, which enables more parents to feel confident that their child's needs can and will be met in a mainstream school. We intend to use the Special Educational Needs Bill announced in the Queen's Speech to strengthen the right to a mainstream place.
Our approach has been practical, not dogmatic, and the key objective must be to safeguard the interests of all children and to ensure that they achieve their full potential. When parents want a mainstream setting for their child, it is our policy to try to provide it. Equally, where more specialist provision is sought, it is important and right that parents' wishes are respected.

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We have emphasised that there is a continuing and vital role for specialist provision, often within special schools. The Government have stressed in the past, and it is worth repeating in this context, that inclusion is not an agenda for the wholesale closure of special schools. We want them to become outward-looking centres of excellence that work hand in hand with their mainstream partners to support pupils who would benefit from a mainstream place. The right of parents to make a positive choice and to express a preference for a special school place will be fully maintained.
We acknowledge that, as the hon. Member for North Norfolk noted, a mainstream place might never be right for some children. For those whose needs cannot be met within the main stream, there must be a range of high-quality provision. There must also be strong links between special schools and neighbouring mainstream schools so that pupils in special schools have ample opportunities to mix with their peers and friends in mainstream schools. We are encouraging local authorities to consider innovative ways of joining up mainstream and specialist schools.
The importance that we attach to promoting inclusion and developing provision for children with special educational needs is underlined by a range of initiatives that are designed to help schools to develop their practice and become more inclusive. Those initiatives are also designed to build the links that I described between special and mainstream schools.
For example, a special mainstream links working group was established in September and draws together a range of special and mainstream head teachers and other interested parties. I am pleased to tell the hon. Member for North Norfolk that one of its members comes from Norfolk. The group is producing an interactive CD-Rom package that is aimed at teachers. The idea is that it will be a starting point, and that it will encourage discussion and then action to develop stronger links between the two sectors and to support inclusion. It will focus on a range of issues, including the new outreach role that we want special schools to develop, dual registration and reintegration. The package will be launched next summer at a series of seminars to be organised jointly by the National Association for Special Educational Needs and my Department.
The SEN regional co-ordination projects, which are being expanded to cover the whole of England by early next year, are also helping to establish better links between mainstream and special schools. The projects bring together groups of local authorities and other local partners. Through collaborative planning and working, they aim to redress variations in access to and quality of provision and services for pupils with special needs. Norfolk is part of the eastern project, which will come on stream fully in April. We are beginning to evaluate the projects, and we aim to publish details of initial good practice towards the end of the summer term 2000.
The hon. Member for North Norfolk rightly raised the importance of funding to support special educational needs provision, and I want to outline the Government's commitment in that respect. I reiterate
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that the Government fully recognise that all the relevant initiatives will require funding. We are supporting expenditure of £35 million in the current financial year under the SEN element of the standards fund. That will increase to £55 million in the financial year 2000–01. We plan a further large increase for the following year.
Part of the standards fund's purpose is to support innovative local inclusion and emotional behavioural difficulties projects. Some £8 million has been made available this year. That will be nearly doubled to £15 million in 2000–01. Many of the projects aim to join up the mainstream and specialist sectors to better meet pupils' needs. The standards fund money is also being used to train staff to support parent partnership schemes and speech and language therapy projects.
Furthermore, I was pleased to be able to announce earlier this week that we are making £30 million available under the schools access initiative in 2000–01. That represents a 50 per cent. increase on the previous year's funding. The money has been allocated to improve access to education for children with special needs, including disabled children and those with sensory impairments. Over the three-year programme to 2002, we expect to allocate £100 million for access projects.
I have also announced increased support for capital projects to improve facilities for pupils with special educational needs. Funding will increase from £16 million in the current year to £21 million in 2000–01. I can tell the hon. Member for North Norfolk that the capital reserve for special educational needs projects stands at £15 million.
The hon. Gentleman mentioned the forthcoming Special Educational Needs Bill, which was announced in the Queen's Speech. It will take forward the Government's proposals, which were set out in our programme of action. It is designed to raise the standards of achievement of all children with special needs. It will impove services to parents by establishing better parent partnership arrangements and introduce new conciliation procedures to resolve disputes between parents and local education authorities. It will reinforce the powers of the special educational needs tribunal and promote inclusion by strengthening the right of children with special educational needs to be educated in mainstream schools, where that is in accordance with their parents' wishes. It will also introduce changes to the SEN code of practice.
I hope that I have convinced the hon. Member for North Norfolk that the Government take the education of children with special educational needs seriously. It is something that we have taken seriously, acted on and funded. There are no easy answers, and I am sorry that I have been unable to give a direct response to the specific proposal that has been made. However. I hope that I have shown that the measures that I described will go a long way to ensure that the requirements of children with special educational needs will be met effectively under this Government.
Question put and agreed to.
Adjourned accordingly at three minutes to One o'clock.